Good morning ladies and gentlemen and welcome to Veru Inc.'s investors conference call. All participants will be in listen-only mode. [Operator Instructions]. After this morning's discussion, there will be an opportunity to ask questions. Please note, this event is being recorded. The statements made on this conference call that are not historical in nature, are forward-looking statements. Such forward-looking statements reflect the company's current assessment of the risks and uncertainties related to our businesses. Our actual results and future developments could differ materially from the results or developments in such forward-looking statements. Factors that may cause actual results or developments to differ materially include such things as the risks related to the development of the company's product portfolio, risks related to the ability of the company to obtain sufficient financing on acceptable terms when needed to fund development and company operations, risks related to competition, government contracting risks and other risks detailed in the company's press releases, shareholder communications and Securities and Exchange Commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Dr. Mitchell Steiner, Veru Inc's Chairman, CEO and President. Please go ahead.

Thank you operator and good morning. This is Dr. Mitchell Steiner. I am the Chairman, President and CEO of Veru Inc. And joining me are Michele Greco, CFO and CAO and Phil Greenberg, Executive Vice President, Legal. Thank you for joining our call. Veru is a urology and oncology biopharmaceutical company focusing on prostate cancer novel medicines and urology specialty pharmaceuticals. Today, we will update you on the clinical development of our drug pipeline and on the commercialization of our products as well as provide financial highlights for the third fiscal quarter 2018. Let's start with the novel medicines being developed for prostate cancer and prostate cancer supportive care. Zuclomiphene, also known as VERU-944 and zuclomiphene citrate is an oral estrogenic agent being evaluated for the treatment of hot flashes in men who are in hormone therapy, also known as androgen deprivation therapy to treat their advanced prostate cancer. Currently, there are no drugs approved by FDA for the indication. Androgen deprivation therapy includes drugs like Lupron, Eligard, Firmagon and Zoladex. Over 600,000 men are on andro deprivation therapy for the treatment of their prostate cancer in the U.S. Andro deprivation therapy works by lowering testosterone levels to very low castrate levels in order to stop the progression and spread of prostate cancer. In men, we make estrogen from testosterone. Low testosterone then means low estrogen levels as well. Normal estrogen levels are important for men too. By lowering estrogen levels, we are converting these men essentially into postmenopausal women since these men have essentially the same estrogen deficiency symptoms of hot flashes, loss of bone mineral density, bone fractures and loss of libido. In fact, hot flashes are one of the most common side effects of andro deprivation therapy. Up to 80% of these men experienced treatment related hot…

As Dr. Steiner indicated, we were encouraged to see the sales in the public sector recover during the third quarter to volumes closer to historical averages. This quarter marks the highest unit volumes since the third quarter of fiscal 2016. In the global public sector, we provide training and work on the demand creation in the various countries through affiliation and working with governments who are committed to sustainable female condom program. This integrated approach has resulted in increased ordering patterns. With the near-term potential for substantial South Africa orders, when the large tender is awarded soon, we may be able to exceed this historically unit volumes. In the U.S. FC2 prescription market, we saw an increase in unit sales during the third quarter of 11% compared to the units sold during the first two quarters of this fiscal year. We continue to see significant increases in the U.S. FC2 high-margin prescription market. As an example, in July, we added a new sales channel, another telemedicine company, however this one also has a pharmacy. We have already seen recurring orders placed by this customer. During the third quarter in the U.S., we changed our sales and marketing efforts whereby we eliminated our fixed costs internal sales force and instead contracted an independent sales force, which resulted in one-time severance cost of approximately $500,000, which were recorded during the quarter. Let's review our third quarter results. Our unit sales totaled $10 million, which is an 18% increase from the $8.5 million from the third quarter of 2017. Net revenues for the quarter totaled $5.5 million, an increase of 28% from the prior year quarter. Gross profit increased 34% to $3.1 million for a margin of 56% compared with $2.3 million for a margin of 53% in the prior year quarter. Net…

Thank you Michele. We have transformed our company to a biopharmaceutical company focused on prostate cancer novel medicines and urology specialty pharmaceuticals as well as we are well-positioned to offer numerous oncology and urology drugs to take advantage of the multibillion dollar market. Zuclomiphene and VERU-111 will be the foundation of our high-value large market oncology and cancer supportive care franchise. And our urology specialty pharmaceuticals will initially consist of four products, tamsulosin granules and capsules, tadalafil/finasteride combination tablets and Solifenacin DRG granules. Through these urology specialty pharmaceuticals, we are in the near-term position to file several NDAs as well as to launch and partner, when appropriate, multiple urology drugs over the next two-and-a-half years. With that, I will now open the call to questions. Operator?

[Operator Instructions]. Our first question today will come from Jason McCarthy of Maxim Group. Please go ahead.

Hi Mitch. Thanks for taking the question. Congratulations on the progress. Just a question around 111. There was some news about a month ago around label expansion for Xtandi moving towards earlier lines of therapy as you know. Can you discuss a little bit about how that impacts the potential for 111 in the prostate cancer space? And just then to add on to that, the Phase 1B/2 study:, what are the expectations of the target drop and PSA that you would consider to be significant and how that outlines the path forward for 111 development?

Great. Thank you for the question. So that the first question is actually an interesting one and I will frame it and then the second question is for the PSA reductions, what when will we consider a success. And a lot of it depends on the patient populations. So I will come back to that. So Jason, you bring up a very important point. And I was sitting at the ASCO, it's called GU ASCO meetings in San Francisco when apalutamide, which is a different flavor of enzalutamide, got approved by Johnson & Johnson for a very interesting space, which I will talk about in a moment. And then as you mentioned, a few weeks ago enzalutamide, which is also an AR blocking agent also got approved for the same space. Now why is this important for VERU-111? Well, it turns out, as I mentioned in my comments that the only two agents that have shown activity. Significant activity in prostate cancer have been hormone therapies, which enzalutamide and enzalutamide are examples of. And the others are the antitubulins like the taxanes, docetaxel and cabazitaxel and VERU-111, which is an oral agent. And what has happened is that because urologist have been treating PSA's and we are not treating necessarily metastatic disease, we have actually created a new class of patients. So all these new drugs, the five or six that have been approved have been all approved for what's called metastatic castration resistant prostate cancer. That means they will put on androgen deprivation therapy, because they are present with metastatic disease. Their PSA's went up and now nothing can work except these new AR blocking agents. The problem with these new AR blocking agents is if you use one you can't use another. So for example, if you treat…

Great. Thank you so much Mitch.

[Operator Instructions]. Our next question will come from Kumar Raja of Brookline Capital Markets. Please go ahead.

Hi. Good morning. Thanks for taking my question. So my question is on VERU-944. Obviously, there is a wide spectrum of patients with hot flashes, including infrequent, mild or severe who might have about six to 10 flashes a day. So in terms of patient selection, is there a specific number of hot flashes these patients need to have for being selected into the trial? And also in terms of effectiveness, obviously the female hormones are very effective, but the side effect profile is onerous. So what is the expectation in terms of the side effect profile?

Okay. So I will answer the second question first. And so the question that you are asking is, the side effect profile that we are expecting for zuclomiphene?

That is right, yes.

Yes. So here is the interesting thing. So zuclomiphene is cis-clomiphene, which is one of the isomers that is part of Clomid. As I mentioned, Clomid has been around since 1967. So we know that men have been getting the drug Clomid for off label use for infertility and hypogonadism. If you give Clomid by itself, you actually get hot flashes. So that's why it's important to pullout zuclomiphene by itself as a separate entity, so there is no danger of Clomid, which has been around since 1967, to be used in place of the pure zuclomiphene to treat hot flashes. So that's not an issue, but what you do learn is a lot of information about safety because if 88,000 men are getting Clomid, of which Clomid is half to 30% zuclomiphene, then in some ways you have got an insight to what the safety looks like in many men over long periods of time. So it appears to be incredibly well tolerated, whereas potent steroidal estrogens tend to be not so well tolerated in men and it's dose dependent. So the higher dose, the more you are going to see trouble. The trouble that you tend to see is gynecomastia which is painful breasts and enlargement of breast due to the estrogen. And second is what's called VTE. VTE is venous thromboembolic event. So blood clots is a big issue. And you see that in the advertisements for estrogens for women with birth control pills. And so you would see the same thing but it is dose dependent. For some reason, you don't see that with Clomid in big numbers and we are seeing zuclomiphene in there. So we do know that a weak estrogen is different. Now with that said, is a weak estrogen going to be…

Maybe I can sneak in a question on the gross margin improvement. Obviously this is driven by the sales mix in the U.S. Maybe you can talk a little bit about how your efforts to increase the sales in U.S. are fructifying? And how should we think about the growth margins going forward?

I am going to have Michele answer that.

Yes. As I mentioned, we changed out our sales strategy this quarter and we have gone to an outsourced sales group. We are also looking at new sales channels in the U.S. We have brought on a new customer. We started to see the pickup in reordering patterns happening here in July and looking like they are continuing into August. The U.S. prescription market has lot higher-margin here. We are also seeing the benefit of a lot of work we have been doing over the past 18 months in expanding our global public sector. So both of those are going to be contributing but the increase in the U.S. prescription channel is going to contribute significantly to an increase in our margins.

Thank you so much.

And just to add to that is that, the telemedicine customer has been incredibly impressive. I mean they literally just this, what do we say, July and they already have two recurring current orders and they are large orders. So there is a real market out there and we are tapping into it. And so we do believe that the future for the FC2 business is going to be U.S. sales.

Our next question will come from Peter McMullen of Tiger Management. Please go ahead.

Hi Mitch.

Hi Peter. How are you doing?

Tip-top. Thank you. Tamsulosin, you seem to tweaking the formula a bit and I just wondered, are you there yet? It was little delayed, probably in the low but how do you fuel about that at this point in time? And then I have a follow-up.

Sure. So the tamsulosin, what we are doing is, we are trying to convert, it's basically an alpha blocker into a slow release granular formulation. We have done two bioequivalency studies. The last one, we hit the formal definition of bioequivalence for what's called AUC, which is drug levels and we showed again that we didn't have a food effect. The Cmax, which is how fast the drug gets in, was a little bit higher than we liked and we know that we can tweak the formulation to fix that. We have tweaked the formulation and we have several formulations that will release it slower. The problem that we have is, because we don't have our own internal manufacturing and that we outsourced it, that we are at the mercy of the outsourced manufacturer and the outsourced group to get in their queue to run these studies. So something would take a few weeks to a few months ends up taking a lot longer than we would like and the trade-off is, we don't want to pay for the overhead of having, owning the manufacturing plant and owning all the people. So that's the trade-off. So the good news is, we do have formulations that we can move forward with to the bioequivalency study. The bad news is, it's taking a little bit longer to get it through the system so that we can actually run the study. So that's on that point. In terms of and so the only other comment I want to make is that another product that we are making which is the male pill which is tadalafil/finasteride, that one is moving faster than expected. And so that one, I don't know, it's going to be head-to-head on both of those bioequivalency studies showing up here soon. And we are looking for those studies again here in 2018. So, I don't know which one will come out first, but we are looking for both of those. And so now we have a situation. We have two NDAs to file for three different products almost on top of each other. So that's the latest. And you said you had a follow-up question?

Yes. I just wondered with the cash loss in the quarter and the $5 million or whatever it is, in cash and then you collected some in July, how you feel about the cash burn and will you be able to dipsy-doodle through the thing without resorting to some financing?

Yes. Good question. So as you know, we have been, what do you call it dippy-doodling or whatever?

Dipsy-doodling. It's a Canadian expression.

Dipsy-doodling. I love it. We have been dipsy-doodling though this whole process and dipsy-doodling means that we do, is we take the cash that's coming in, we match it with the program. And we have been able to do that now and the idea behind it is that the programs that we are running now are not very expensive. So for example, other than the Phase 2 study that's about to start, all these bioequivalency studies, you are looking at 36 patients. They are done over a two to three week period. So that's not a lot of money. And then the Phase 2 program, as I said, that's about $3.5 million, $4 million, we are just starting that. And then you have the Phase 1B/2 in Hopkins and other sites, again that's a small 15 patients then going to expanding that up to 20 to 30 patients. So the good news is, we have been able to move forward without having to do significant investment. Now we will have to do significant investment in the future and people expect that because you are going to be now in Phase 2/3s and Phase 3 trials and launching products and all that stuff. So we are hoping to have a slew of good news before that, which would translate to a higher stock price. We are also expecting, now since the time we have taken the company has moved from the Female Health Company to Veru, we are now going to start seeing the governments that order large amounts of FC2 come back into the game. And so, as I mentioned in my comments and Michele mentioned in her comments, we are expecting to hear any day now from South Africa and Brazil will be a little bit later. And those…

I appreciate it. Thank you.

Thank you.

[Operator Instructions]. Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dr. Mitchell Steiner for any closing remarks.

Thank you. I appreciate you joining us on today's call and I look forward to updating you all on our progress at our next investors call. Thank you. I turn it back to you, operator.

Thank you. The digital replay of the conference will be available beginning approximately noon Eastern Time today, August 14, by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 10122133. Please record your name and company when joining. The conference has now concluded. Thank you for attending today's discussion.