Veru Inc. (VERU) Q1 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions] After this morning's discussion, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc's, Director of Investor Relations. Please go ahead.

Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include but are not necessarily limited to, statements of the company's plans, objectives, expectations, or intentions regarding the company's business operations, finances, and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and the company's actual results may differ significantly from those projected, suggested, or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in the company's 10-Q and 10-K SEC filings. I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's Chairman, CEO, and President.

Thank you, Sam, and good morning. With me on this morning's call are Michele Greco, CFO and CAO. Dr. Gary Barnette, Chief Scientific Officer; Phil Greenberg, Executive Vice-President, Legal; and Sam Fisch, you've met, Director of Investor Relations. Thank you for joining our call. Veru is a late clinical-stage oncology biopharmaceutical company focused on developing novel medicines for the management of two of the most prevalent cancers, prostate cancer and breast cancer. We continue to invest cash generated from our sexual health commercial business into the clinical development of our high-value oncology drug candidates so, that our current shareholders can realize the maximum value of our oncology biopharmaceutical company. This morning we will discuss another record quarter from our sexual health business, the progress of our prostate cancer and breast cancer drug pipelines, Veru 111 for the treatment of COVID-19, the upcoming NDA submission for TADFIN. And then we will provide financial highlights for a record first quarter of fiscal year 2021. Let's now focus on some of the financial highlights in Veru's sexual health business. We had net revenues in the US FC2 prescription business in Q1 of fiscal year 2020 of $9.1 million compared to $6.1 million in Q1 of fiscal year 2020 which is up 50%. That should be Q1 fiscal year 2021 of $9.1 million compared to $6.1 million in Q1 in the fiscal year 2020 which is up 50%. Gross Profit for Q1 fiscal year 2021 was $10.8 million compared to Q1 fiscal year 2020 of $7.3 million, which is up 49%, operating income was $19.2 million, which includes a gain of $18.4 million on the sale of the PREBOOST business and the adjusted operating income which excludes the sale, the gain on the sale of PREBOOST was $800,000 in Q1 fiscal year 2021, compared to an operating loss of $1.8 million in Q1 fiscal year 2020. In fact, to give you a sense of our continuation of the growth trajectory for Q1 fiscal year 2020, we sold 81,000 units FC2 in the US prescription market, while in Q1 fiscal year 2021; we sold 116,000 units of FC2 in the US prescription market, an increase of 43%. TADFIN which is tadalafil 5 mg, finasteride 5 mg combination capsule is being developed to treat lower urinary tract infections caused by benign prostatic hyperplasia. It contains both tadalafil which is also approved for the treatment of erectile dysfunction and finasteride. We expect to submit the NDA for TADFIN next week. We also received a waiver for the PDUFA -- FDA PDUFA fees for this NDA submission in the approximate amount of $2.4 million. We plan to launch TADFIN if approved via third-party telemedicine channels and when launched will be a near-term source of additional revenue for Veru. In oncology, we are focused in providing new and novel oral therapies with favorable safety profiles following resistance to endocrine therapy but prior to proceeding to IV chemotherapy for both advanced prostate and breast cancers. We are excited to advance our prostate cancer drug candidates Veru-111 and Veru-100, as well as our breast cancer drug candidates Enobosarm and the additional indication for Veru-111 into registration clinical studies. Veru anticipates registration clinical trials for four oncology indications and the additional registration clinical trial with Veru-111 for COVID-19 making a total of five potential registration clinical trials in all to commence in calendar year 2021. In prostate cancer, the company continues to make strong clinical progress advancing Veru-111 as a treatment for metastatic castration and androgen receptor targeting agent-resistant prostate cancer and for Veru-100 the androgen deprivation therapy for advanced prostate cancer. Veru-111 is an oral first-in-class new chemical entity that targets crosslinks and disrupts the alpha and beta-tubulin subunits of microtubules to disrupt the cytoskeleton. Veru-111 is being evaluated in an open label Phase 1b and Phase 2 clinical studies in men with metastatic castration and androgen receptor targeting agent-resistant prostate cancer. The Phase 1b clinical study completed enrollment of 39 men and is ongoing. The Phase 1b study has yielded promising efficacy and safety clinical results based on the Phase 1b study results, the recommended Phase 2 dose of 63 milligrams oral daily continuous dosing for 21-day cycles. Daily chronic drug administration appears feasible and safe. The recommended Phase 2 dose, there were no reports of neutropenia, neurotoxicity, or grade 3 diarrhea. The efficacy results show PSA declines in responses as well as objective and durable tumor responses. Furthermore, median radiographic progression-free survival in the men who have had at least four cycles of Veru-111 is 12.4 months. There are still three men on the study with two patients approaching two years without prostate cancer progression. In September 2020, the Phase 2 clinical study completed enrollment of approximately 40 men with metastatic castration-resistant prostate cancer who have also become resistant to the androgen receptor targeting agents, but prior to proceeding to IV chemo, although the study is still ongoing daily chronic drug administration also continues to be feasible and safe. At 63 milligrams daily continuous dosing there were no reports of neutropenia. There is a single report of minor neurotoxicity and manageable and fewer cases of diarrhea. Like the Phase 1b, we have observed efficacy results including PSA declines and responses as well as objective and durable response -- tumor responses including complete and partial responses. Thus in the Phase 2 clinical study Veru-111 continues to show objective antitumor activity and a good safety profile. We will be presenting updated clinical results of the Phase 1b as well as the Phase 2 clinical trials at the ASCO genitourinary cancer symposium taking place February 11th through the 13th in 2021 and the Abstract is 325053, clinical study of Veru-111 an oral cytoskeletal disruptor in metastatic castration-resistant prostate cancer who have failed an androgen receptor targeting agent and the presentation will be done by Dr. Mark Markowski who is Assistant Professor of Oncology; Johns Hopkins Kimmel Comprehensive Cancer Center and the principal investigator on the study. As we already have enough safety and efficacy data at selected dose with Veru-111 and proceed to a Phase III, the Company had an FDA meeting in July of 2020 and received positive input from FDA on the pivotal Phase III trial design for VERU-111. The Company received regulatory clarity that the indication of treatment in men with metastatic castration-resistant prostate cancer who have failed one androgen receptor targeting agent prior to IV chemotherapy was acceptable, that an open label randomized study using an alternative androgen receptor targeting agent as an active control is reasonable and that the primary endpoint may be radiographic progression-free survival. By allowing radiographic progression-free survival as the primary endpoint the sample size of the Phase 3 study is planned for approximately 240 men. The Phase 3 pivotal clinical study will evaluate Veru-111 for men with metastatic castration-resistant prostate cancer who have also become resistant to one androgen receptor targeting agent and will be called the VERACITY Phase 3 study. The Company has submitted the Phase 3 protocol design to FDA for its input, and anticipate starting the VERACITY Phase 3 study in first quarter of calendar year 2021. It is interesting to note that we have a real opportunity for VERU-111 to be the leader in the pre-chemotherapy space in metastatic prostate cancer by pursuing the indication of the treatment of metastatic castration and androgen receptor-targeted agent-resistant prostate cancer. Use of androgen-receptor targeted agents have moved earlier in the treatment sequence of advanced prostate cancer. The two currently approved indications for the androgen-receptor targeted agents are for hormone-sensitive metastatic prostate cancer and for non-metastatic castration-resistant prostate cancer. When patients progress or fail and androgen-receptor-targeted agents both these settings they will now have metastatic castrate resistant and androgen-receptor-targeted agent-resistant prostate cancer the very indication we're pursuing in the Phase 3 clinical trial. So, all roads lead to this indication. Next, I will update you on Veru-100 as androgen deprivation therapy for the palliative treatment of advanced prostate cancer. Veru-100 is a novel proprietary long-acting gonadotropin-releasing hormone, GnRH antagonist peptide, three month subcutaneous depot formulation designed to address the current limitations of commercially available androgen deprivation therapies known as ADT. Androgen deprivation therapy is currently the mainstay of advanced prostate cancer treatment and is used as a foundation of treatment throughout the course of the disease. Furthermore, ADT is continued even as other endocrine chemotherapy or radiation treatments are added or stopped. There are no GnRH antagonist depot injectable formulations commercially approved for the treatment beyond one-month duration. If Phase 2 study to evaluate Veru-100 dosing is anticipated to begin in the first half of calendar year 2021, and the Phase 3 registration study in approximately 100 men is anticipated to start in the second half of calendar year 2021. Next, I will discuss the progress of our breast cancer drug pipeline, which includes enobosarm and Veru-111. The most common type of breast cancer is ER-positive breast cancer with estrogen as one of the main drivers of proliferation, tumor progression, and metastasis. Consequently treatments that target the estrogen receptor are the mainstay of breast cancer therapy. Typically women are treated with several lines of estrogen-receptor targeted agents like selective estrogen receptor modulators SERMs which includes tamoxifen non-steroidal aromatase inhibitor like letrozole and anastrozole, selective estrogen receptor degraders like fulvestrant and these standards of care now include treatment with CDK 4/6 inhibitors. Unfortunately, almost all of women being treated will eventually develop resistance to estrogen receptor targeted endocrine and CDK 4/6 inhibitor therapies and alternative treatment approaches with different mechanisms of action will be required including IV chemotherapy. Interestingly, like the estrogen receptor, the androgen receptor is found in over 85% of breast cancers. What is androgen receptors function in breast cancer, that it stimulated inhibit [ph] breast cancer growth. The recent publication in Nature Medicine of an international study headed by Dr. Hickey and her team has provided scientific evidence establishing that the androgen receptor is a tumor suppressor in estrogen-receptor positive breast cancer. This means the androgen receptor is activated by androgen. It's strongly suppresses estrogen receptor positive breast cancer growth. This explains why historically when synthetic antigens were used to treat breast cancer they demonstrated good activity but unfortunately the masculinization side effects, increase in hematocrit, liver toxicity has prohibited their use as a viable treatment. Contrast enobosarm an oral first-in-class new chemical entity is a selective androgen receptor targeted activating agent and is being developed for the treatment of AR positive, ER positive, HER2 negative metastatic breast cancer but prior to IV chemotherapy. Enobosarm represents a new advancement in endocrine therapy for advanced breast cancer in decades. Enobosarm has extensive non-clinical and clinical experience having been evaluated in over 25 separate clinical studies involving more than 2,100 subjects, including five prior Phase 2 clinical studies in advanced breast cancer involving more than 250 patients. In addition to suppressing androgen receptor, estrogen receptor breast cancer cell proliferation and tumor growth enobosarm has other potential beneficial clinical properties. In preclinical studies enobosarm has demonstrated "builds and heals" and trabecular bone and therefore has a potential to treat osteoporosis and skeletal-related events and cancer. Enobosarm has also been shown to reduce fat to build muscle to improve physical function in clinical studies involving elderly subjects and patients with cancer cachexia including breast cancer patients. And furthermore, because of its tissue selectivity enobosarm has a favorable side effect profile with no masculinization and so facial hair and acne, no increase in hematocrit, and no liver toxicity. The science supporting the efficacy of enobosarm and the targeting of the androgen receptor ER positive advanced breast cancer was also the subject in Nature Medicine study published this month by an independent group of breast cancer experts led by Dr. Hickey and in their study they showed that using breast cancer tissue for patients who have resistance to estrogen receptor targeted and CDK 4/6 inhibitor therapies. Enobosarm monotherapy exhibited significant anti-tumor activity. The combination of enobosarm and a CDK 4/6 inhibitor demonstrating even greater anti-tumor activity. The data suggests that enobosarm restores sensitivity of a CDK 4/6 inhibitor resistant breast cancer tissue to suppression by CDK 4/6 inhibitor. Two positive Phase 2 studies involving 150 women with androgen receptor positive, estrogen receptor positive metastatic breast cancer was conducted. We will focus on the second of these two studies. The G200802 Phase 2 study, which is a two-arm study evaluating 9 mg and 80 mg of enobosarm daily oral dosing in 136 women with AR positive, ER positive, HER2 negative advanced breast cancer. The patients in the study were heavily pretreated having failed around three endocrine-treatments and 88% received prior chemotherapy. The primary investigator for the study was Dr. Beth Overmoyer, Founder and Director of the Inflammatory Breast Cancer Program at Dana-Farber Cancer Institute in Boston, Massachusetts, and Assistant Professor of Medicine at Harvard Medical School. The completed Phase 2 study results were recently presented as a spotlight presentation at the San Antonio Breast Cancer Symposium this past December by Professor Carlo Palmieri, Professor of Translational Oncology and Medical Oncology at the University of Liverpool. The Abstract 811 entitled efficacy and safety of enobosarm a selective androgen receptor modulated to target the androgen receptor in women with advanced ER positive, AR positive breast cancer final results from an international Phase 2 randomized study. According to this study enobosarm therapy strongly establishes the relevance of targeting the androgen receptor with a selective androgen receptor activating agent as women with heavily pretreated estrogen receptor targeted resistant AR positive, ER positive metastatic breast cancer have favorable clinical benefit rates and objective and durable tumor responses. In fact, the presence of the androgen receptor was required as enobosarm's anti-tumor activity was not seen in AR negative, ER positive advanced breast cancer subjects. AR staining [ph] status will be a critical inclusion criteria in the Phase 3 clinical trial design to enrich the study for population -- patient population who most likely to benefit from enobosarm therapy. These subset analysis of AR staining in enobosarm anti-tumor activity from the Phase 2 clinical study will be presented at upcoming scientific meetings. Enobosarm appears safe and was well tolerated in this day without virilizing effects, increase in hematocrit, or liver toxicity and also quality of life measurements demonstrated overall improvement including mobility, anxiety, depression, and pain. The 9 mg dose was selected for Phase 3 as a 9 mg cohort had similar tumor responses with slightly better toxicity profile than the 18 mg dose cohorts. We also performed a post-hoc subset analysis of the Phase 2 clinical data to understand whether enobosarm had any anti-tumor efficacy in patients that had AR-positive, ER-positive metastatic breast cancer who are also resistant to both an estrogen receptor targeting agent and a CDK 4/6 inhibitor. In the nine women who fit these criteria enobosarm treatment resulted in objective tumor responses of 33%. We had two complete responses and one partial response in these nine women. Clinical benefit rate at 24 weeks of 60% and a radiographic progression-free survival of 7.7 months. Although small numbers, one can conclude that Enobosarm has anti-tumor activity in women with AR-positive, ER-positive metastatic breast cancer that's resistant to estrogen receptor targeting agents and CDK 4/6 inhibitors. These subset analysis of CDK 4/6 inhibitor resistance and enobosarm antitumor activity from the Phase 2 clinical study will also be presented at upcoming scientific meetings by targeting the androgen receptor in ER-Positive metastatic breast cancer enobosarm introduces a novel endocrine therapy to patients with breast cancer, that have exhausted endocrine therapies targeting the estrogen receptor but prior to IV chemotherapy. In October of 2020, the Company met with the FDA to discuss the enobosarm clinical breast cancer program. The FDA agreed to the Phase 3 registration clinical trial to study, to evaluate the efficacy and safety of enobosarm 9 mg versus an active control, which can be either exemestane to tamoxifen. For the treatment of AR positive, ER positive, HER2 negative breast cancer and patients who have failed a non-steroidal aromatase inhibitor fulvestrant and a CDK 4/6 inhibitor. The Phase 3 study will be called the ARTEST study and the primary endpoint will be radiographic progression-free survival. It should be noted that we and key breast cancer experts in the field were intrigued by the preclinical study results reported in Nature Medicine that showed the combination of enobosarm with a CDK 4/6 inhibitor actually restored CDK 4/6 inhibitor sensitivity and suppressing AR positive, ER positive metastatic breast cancer that was resistant to both an Estrogen Receptor Targeted Agent and a CDK 4/6 inhibitor, which is, as you know the target population in our planned Phase 3 ARTEST clinical study. Consequently, the Phase 3 ARTEST trial is now designed to have three treatment arms. Enobosarm alone, enobosarm in combination with a CDK 4/6 inhibitor, and an active control with either exemestane or tamoxifen. The trial sample size will remain approximately 240 women. The pivotal Phase 3 open label randomized active control ARTEST study is anticipated to commence next quarter. Next, I will update you on the Phase 2b clinical study evaluating Veru-111 for the treatment of taxane resistant metastatic triple-negative breast cancer. Metastatic triple-negative breast cancer is an aggressive form of breast cancer that is present in approximately 15% of all breast cancers. This form of breast cancer does not express the estrogen receptor, the progesterone receptor, or HER2 and is resistant to endocrine therapies. The first line of treatment usually involves IV taxane chemotherapy and almost all women will eventually develop taxane resistance. Preclinical studies and triple in human triple-negative breast cancer grown in animal models demonstrate that Veru-111 significantly inhibits cancer from proliferation migration, metastases, and invasion of triple-negative breast cancer cells and tumors that have become resistant to paclitaxel, which is a taxane. Using the safety information from the Phase 1b and Phase 2 Veru-111 prostate cancer clinical studies in the total of approximately 80 men, we plan to meet with FDA in the first half of calendar year 2021 to discuss the Phase 2b clinical trial design for possible accelerated approval for Veru-111 versus an active control Trodelvy, for patients with taxane-resistant triple-negative breast cancer, making the proposed trial a potential registration trial. The Phase 2b clinical study is planned to commence in the second half of clinical year -- calendar year 2021 and as I mentioned, this would represent a second major clinical oncology indication the Veru-111. We announced this past Monday, positive results from the Phase 2 clinical trial evaluating Veru-111 for the treatment of hospitalized patients with COVID-19 who had high risk for acute respiratory distress syndrome. Veru-111 in this setting is a novel once a day orally dosed small molecule with both broad antiviral and anti-inflammatory activities, which may serve a two-pronged approach to the treatment of COVID-19 virus infection and the subsequent debilitating inflammatory effects that lead to ARDS and death. We conducted a double-blind, randomized, placebo-controlled Phase 2 clinical trial evaluating daily oral once-a-day dosing of the Veru-111 18 mg versus placebo in approximately 40 hospitalized COVID-19 patients who had high risk with acute respiratory distress syndrome. This trial was conducted in five sites across the United States, patient received either Veru 111 18 mg or placebo, as well as standard of care for 21 days or until they were released in the hospital. The primary efficacy endpoint was the proportion of patients that were alive without respiratory failure at day 29. Here are the highlights of some of the clinical efficacy and safety results. For the primary endpoint in a modified intent-to-treat, mITT population Veru-111 treatment compared to placebo had a statistically significant and clinically meaningful improvement in a proportion of patients alive without respiratory failure of 94.4% in Veru-111 treated group 18 and 70% the placebo group 20 at day 29. And this represents an 81% relative reduction and treatment failures of p-value of 0.05. Here are some of the secondary endpoints in the ITT population Veru-111 reduced the proportion of patients who died on the study from 30% with 6 out of 20 in the placebo group 2, 5.3% which is 1 of 19 in the Veru-111 treated group, this is an 82% relative reduction in mortality in the Veru-111 treated group, P-value there is 0.044. The miTT population Veru-111 showed a clinically meaningful reduction in average days in ICU, Veru-111 patients three days versus placebo 9.5 days, and that P-value of 0.04. Veru-111 had a clinically meaningful reduction in days on mechanical ventilation from an average of 5.4 days in the placebo group to 1.6 days in the Veru-111 treated group. During the study the standard of care included the treatment with either Remdesivir and/or dexamethasone under an Emergency Use Authorization. A subgroup analysis of patients that receive standard of care was conducted in patients that received standard of care Veru-111 treatment resulted in a clinically meaningful reduction and average days in the ICU Veru-111 was for 1.43 days versus in the placebo 8.83 days P-value of 0.024. And average days on mechanical ventilation Veru-111 had 0 days, versus placebo 6 days with P-values 0.0427. In the Veru-111 group that also receive standard of care no patient required mechanical ventilation on this small study. Furthermore Veru-111 was well tolerated and had a very good safety profile. Company has been granted and expedited end of Phase 2 meeting with FDA to discuss next steps, including a Phase 3 clinical registration trial design Veru-111 COVID-19 program. The company expects that this confirmatory study will have a similar trial design as a completed Phase 2 study to evaluate daily oral doses Veru-111 versus placebo with a primary efficacy endpoint of proportion of patients that are alive without respiratory failure at day 29. We expect the Phase 3 clinical trial will be conducted in approximately 200 hospitalized patients who have COVID-19 and/or at high risk for acute respiratory distress syndrome. Company is expected to have sufficient clinical drug supply on hand to complete this Phase 3 clinical study once agreed upon by FDA the Phase 3 is expected to commence in April 2021, and is anticipated to be completed by the Fourth quarter of calendar year 2021. We will seek funding from the Biomedical Advanced Research and Development Authority of the US Department of Health and Human Resources -- and Human Services BARDA and other agencies to try to fund the estimated amount of commercial drug to supply the needs of the US population assuming confirmatory part of the results and FDA approval. Due to the unprecedented urgency of the global pandemic and the fact that COVID-19 continues to mutate into virus forms that may not be substantially mitigated by current vaccines or by any of the currently approved antibody drugs of therapeutic we are in need of an effective broad-spectrum antiviral drugs. Veru-111 has the potential to be both that broad-spectrum antiviral agent and that anti-inflammatory agent. The strength of the study, whether it was blinded, placebo controlled randomized study that also allowed standard of care for both the treated and placebo groups in hospital patients at high risk for ARDS. Based on the strength of these promising clinical results. The company continues to be duty bound during this persistent global pandemic to pursue this COVID-19 indication even though it's not the primary focus of the company. We are committed during the deadly pandemic to push ahead with Veru-111 clinical development as a treatment against COVID-19 and we have the resources to conduct our planned Phase 3 without impacting the cancer drugs, clinical development. I will now turn the call over to Michele Greco, CFO, CAO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. As Dr. Steiner indicated we started the fiscal year with a record-breaking first quarter. On December 8th, the Company sold PREBOOST business for $20 million, $15 million in cash and $5 million in notes receivable due over an 18 month period. The sale of PREBOOST resulted in an $18.4 million pre-tax gain. Overall net revenues were up 38% to a record $14.6 million from $10.6 million in the prior-year quarter, due to the growth in our US FC2 prescription business. The company recorded continued FC2 sales growth in its prescription business with net revenues up 50% to $9.1 million from $6.1 million in the prior year quarter. Net revenues for the public sector business also increased to $4.7 million from $4.4 million in the prior year quarter. Net revenues for PREBOOST through the sale date were $863,000 compared to $153,000 in the prior year quarter. Overall gross profit was $10.8 million or 74% of net revenues compared to $7.3 million or 69% of net revenues in the prior year quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our US FC2 prescription business. Operating expenses for the quarter increased to $10.1 million compared to the prior year quarter of $9.1 million. Research and development costs were $5.7 million compared to $5.3 million in the prior year quarter. The operating income for the quarter was $19.2 million compared to an operating loss of $1.8 million in the prior year quarter, an increase of $21 million. The increase is primarily due to the gain on the sale of PREBOOST of $18.4 million; excluding the gain we had operating income of $780,000 for the quarter. Non-operating expenses were $1.9 million compared to $1.6 million in the prior-year quarter and primarily consisted of interest expense and change in the fair value of the derivative liability related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018. For the quarter, we recorded a tax expense of $78,000 compared to a tax benefit of $77,000 in the prior year quarter. The effective tax rate for the quarter is minimized due to reduction of the pre-tax income related to warrants exercised in the utilization of net operating loss carry-forwards in the US. The bottom line results for the quarter with net income of $17.2 million or $0.023 per diluted common share, compared to a net loss of $3.3 million or $0.05 per diluted common share in the prior year quarter. The company has net operating loss carry-forwards for US Federal Tax purposes of $41.7 million with $13.5 million expiring in years through 2038 and $28.2 million, which can be carried forward indefinitely and our UK subsidiary has net operating loss carry-forwards of $61.3 million, which do not expire. Now looking at the balance sheet as of December 31, 2020, our cash balance was $30.9 million and our accounts receivable balance was $4.2 million. Through our sale of PREBOOST we added $15 million in cash during December and have $5 million as notes receivable, which will be collected over the next 18 months. Our net working capital was $30.5 million at December 31, 2020. Compared to $12.3 million at September 30, 2020. Overall, we're delighted to see the continued increases in sales in both the US FC2 prescription business and the global public sector, health sector business. These revenue sources continue to be important sources of funds to invest in our promising pharmaceutical clinical development program. As we continue to transform our company into an oncology biopharmaceutical company with a focus on developing novel medicines for the management of prostate and breast cancers. Now, I will turn the call back to Dr. Steiner.

Thank you, Michelle. We have enjoyed another record financial quarter which has allowed us to significantly advance our clinical programs with the robust performance of the sexual health business, plus the prospects of additional revenue from TADFIN. We believe that we are able to substantially invest in the continued clinical development of our prostate and breast cancer drug product candidates, as well as Veru-111 COVID-19 Phase 3 study. As a consequence, the Company expects to have sufficient resources generated from our sexual health business and existing sources of cash to fund clinical development of all of our currently planned registration clinical trials. We plan to continue to generate robust growing revenues from the sexual health business, which is a standalone business is very valuable. We are expecting another record year in fiscal year 2021 and we could have options to monetize the business as we did with the PREBOOST business. We have successfully transformed our company into a late clinical stage oncology biopharmaceutical company supported by growing revenue cash generating sexual health business. We have a duty to expeditiously advanced Veru-111 into a Phase 3 clinical study in hospitalized patients with COVID-19 with high risk ARDS. If we confirm these promising results observed in the completed Phase 2 clinical study we expect to seek emergency use authorization for this indication. With that, I'll now open the call for questions. Operator?

Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] First question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Hi, thanks for taking my questions and congratulations on another good quarter. Mitch, may be just firstly, coming back to COVID-19 a little bit. Can you help us think, how you are thinking about Veru-111 position in the market? and maybe obviously you just try frame which is early to go through Phase 2 trial, but the market opportunity for the Veru-111 there obviously. Well, I think earlier line treatments vaccine. So, how do we, how should we think about that market opportunity for 111 in COVID if we are successful there? And then secondly, we pulled back potential Veru-111 to be effective again mutant strain? do you think the FDA will ask you for an inclusion criteria which includes some of the mutant strain in the Phase 3 trial and then lastly you talk about having the financial flexibility to fund all your program obviously, you've got -- you've got a lot going on, sort of, probably running trials about 600 patients, if my math is correct this year with the manufacturing scale-up of TADFIN, can you just give us some color in terms of how much wiggle room do you have in that statement? Thank you.

Thank you for the question. I'll answer the last question first. It's really more like if you added all our programs together and they -- and they took place over the next 2.5 years, you are probably close to about 250 patients and 300 patients a year, and so that's what, if you do [indiscernible] patients which is really the high end, that's $30 million a year and we're generating more than that from our business. So, I think we got a lot of wiggle room as it relates to funding. So, even though each of these trials have numbers, it's not all coming in this year. They start this year and then we are going to move as quickly as we can to get it done. As it relates -- as it relates to your second question about what the FDA is going to ask us do a mutant strain let me just remind everybody how Veru-111 works, the way Veru-111 works is it disrupts the Microtubule trafficking system within the cell. So, think of it as a highway. And the reason it works both in the phlegm [ph] inflammation and in viral replication is as follows. The virus will bind to the outside of the sale and gets internalize and it just doesn't flow around. It actually gets -- it gets pulled along the microtubules the highway into the nucleus where it makes more virus, and when it makes a whole bunch of new virus it's got -- that payload has to be brought back out to the outside of the cells so, it could be dumped out so it can infect other cells and the way it does that is again the highway. So, the highway will actively transport it, whether it's the virus coming in as a bunch of new virus is making it's way out. Also the trafficking system and we crosslinks alpha and beta tubulin that causes deep linearization [ph] it breaks down the highway. So, as far as the highway is concerned it doesn't care if it is a blue car, red car, a Porsche, a bus, it doesn't matter. They all use the same highway system. So, there is a lot of -- that's why we refer to it as broad-spectrum anti-virus just because it's not focused, for example, on epitope on the spike protein that you have to hit. So, it's much, much broader than that, but interestingly inflammation follows the same way because these vacuoles in the cell that contain cytokines, interleukins and interferons. They don't just float around. The vacuoles don't just float around. They actually moved around the cells of the same highway system, and so, if you want to get something from inside or outside and dump it out, you have to go through the highway system, we disrupt that. We showed that in preclinical studies literally every cytokine we've looked at and monocytes from the spleen, we stopped the secretion of those cytokines, so, that's why we believe we have preclinical evidence and now the Phase 2 supports that acting as an anti-inflammatory, acting as an antiviral. So, from that standpoint, if the FDA asked us to look at additional strains I would argue by definition, just I have to look at the map of the United States and see we already have strains all over the place already, so, we're not going to have to actively look for COVID-19 strain -- mutant strain, it's already here. And so, what we'll do is we'll collect the information and we'll know from the patients that come in the study, whether they have it or not but it's not required at least at this point. Again, the FDA can do -- until we have our discussion with the FDA as the meeting has been granted at this point now. I think we'll be fine no matter what they ask. As it relates to your first question, we should think about that for a moment, when we started out everybody said to us, why would you want do COVID-19 phase 2, this is going to be like all the other viruses, it's going to come and go. And if you remember my comment was maybe it will come and go. But at some point there will be COVID-20, COVID-22, COVID-24. The Spanish flu was around the three or four years. And so, I'm not quite sure it will be gone. But I'd be honest, I didn't know. And if I would have told you that the number of hospitalizations and the number of deaths and the number of cases exceed what we saw in March, you would think I was crazy but that is what happened and the death rate -- we have 85,000 to 120,000 hospitalizations in this country. And interestingly, that has also changed meaning that it was anybody who have low oxygen, anybody that had COVID, they were brought into the hospital. That's not happening anymore. What's happening now is you have to have a WHO severity of a certain number. If you are on oxygen -- they already know who is going to get into trouble, who is not. And so what's happening now is that hospitals are being -- patient population is being admitted into the hospitals of being rich with a more severe patients that have the risk factors that we're concerned about potentially progressing to ARDS, which lead to death and multi-organ failure. So with that said, what I can tell how we are positioning in this now, is if you just do the numbers and you look at 85,000 to 100,000 and by the way go back and look the websites, the internet is filled with people keeping track of these statistics and you will see that it is pretty much between 85 and 160,000 hospitalization a week and it is not really -- every time it goes down 20%, it is like, yes, but it goes right back up and particularly after the Superbowl and Superbowl parties and any of these things that take place and so just to round it out and say you got about 100,000 and even it goes to 85 we put in our numbers 40% of those patients being at high risk. I'm talking about market now 40% of those patients being high risk for ARDS. And it doesn't take long before we realize we're going to need 37 million doses per year, because we have to treat 21 days, so that is 21 doses per patient, 37 million and that's 40%. What happens if the number goes from 85 to 40. I would argue that even it goes from 85,000 patients to 40,000 patients, those patients are going to be more likely to be 60%, 70% or 80% patients that are going to be more likely to go onto ARDS. So, as the hospital system understands which patients are going to get in trouble, those patients are high risk are going to be exactly the patients that we believe our drug can work now. The other thing we think, is if we went into the lion's den and we were able to see this kind of activity on top of standard of care, because you remember it is placebo controlled and was double-blinded, which means that no one knew who is on our drug and who was on placebo. So, they got dexamethasone, they got convalescent plasma, they got Remdesivir, they got whatever kitchen sink they threw at them, and still in that noise we were able to see these differences. So, what would happen if we decide to go a little bit earlier. And of course the issue we had was Veru-111 was being developed as a prostate cancer product, breast cancer product, but what we've learned 18 mg is incredibly well tolerated. And so we, so we've answered that question. And the additional study we do in the Phase 3 will further answer the question for safety, and if it turns out the safety is what it appears, then I think as part of our plan, we would try to go earlier meaning maybe go after patients that have less severity, maybe go into patient can you imagine having an oral antiviral broad spectrum agent that has this kind of activity. Now, influenza many of the other viruses use the same microtubule trafficking system so trafficking system not only pertains to different mutants of Coronavirus, but it also pertains to different virus types completely that cause disease and I do think we're going to end up in the situation that we're going to coexist with COVID, we're not going to cure it, just like we coexist with influenza. 60,000 people still die from influenza a year. So, I think the market is not going to go away. I don't know what the size is going to be, but unlike last time when everybody told us well don't waste your time because it will be gone in three months I would argue at this time, I don't know. My crystal ball is not clear and I think -- I think until we get a handle on having effective vaccines, effective antibody drugs, and effective oral therapeutics, I think we have to keep pushing.

Great, thank you very much.

Thank you.

The next question comes from Yi Chen of HC Wainwright, please go ahead.

Hi, good morning. Thank you for taking my questions. FC2 sales, could you tell us whether the record quarter was primarily driven by US prescription sales? or it is also driven by FC2 international sales? and do you expect the trend to continue? Thank you.

Michele, would you like to answer that?

Sure. It was primarily driven by the FC2 US prescription sales and both sales increased 50% to $9.1 million from $6.1 million last quarter -- last year same quarter. The global public sector sales also increased, not at the same -- not at the same percentage though so we are seeing increases in both.

Second question, could you comment on your expectation for TADFIN sales once it is commercially launched?

Yes. So, let me just backtrack somebody just remind me, I kept using the number of 100,000 for COVID-19 to make sure everybody understands that 100,000 -- 85,000 to 100,000 hospitalizations a week. Okay, so, that's where that number comes from. So back to your question for TADFIN. The way with FC2 for example, we launched everything through telemedicine. Telemedicine is really a brand new animal right now in terms of the sales channel and the reasons this is a new animal is you end up with numbers that you just didn't expect. So, I'll give you an example. Typically, when you launch a product through traditional specialty pharma sales was which we do not have and we are not investing in the specialty sales force, you end up with some kind of uptick, 300 prescriptions a month and that goes to maybe I mean, it could have some number, but it's not 10s of thousands, not hundreds of thousands and but the power of telemedicine is that you can reach hundreds of thousands in the short period of time because it's all Internet-based and it's all based on how many states that telemedicine company has access to. It's completely a brand new world in that regard and that's why we've been successful with FC2, because we just broke away from the old and just had you know how many details are you making to an OB-GYN office, the CV and sell FC2 that if you go back and look at those metrics a most the single person can do is 4-6 details a day and with internet it's unlimited. It really is an incredible blue ocean. So, our expectations right now is that we just don't know. All we know is that we know that there are approximately 29 million prescriptions, four finasteride when you get into Cialis but if you look at, for example, tamsulosin and finasteride, when you start looking at BPH prescriptions. It's somewhere between 23 and 29 million prescriptions a year and it's a big number. And as you know BPH is prevalent and I can tell you as urologists is a disease that men over 50 will have. So, right now we just don't know. I wish I can give you a number, except I think we are looking at it now we're going to, because of the brand new world we have not given guidance yet in terms of what we think the actual numbers will be. What I will tell you is, it feels big but let us test it.

Got it. Last question; what do you expect to report top line results from the Phase 2 trial of Veru-111 in prostate cancer? And when results come out will that have any impact on the Phase 3 trial? Thank you.

Here we are heading into year two with the Phase 1b. So, I don't know, maybe my druthers will be another year and half from now, right. But I'm just joking. But it's true. And so, I think what we're going to do is just like we are doing with the Phase 1b is we're going to be for it as long as patients are on study and but I can tell you that they are mirroring each other quite well. The Phase 1b and Phase 2 a mirroring each other, meaning that we're seeing PSA declines, PSA responses, partial responses and the Phase 2 is having a complete response. So, you're seeing tumor activity and we're focused on safety, making sure we have the right recommended dose, 63 looks like it's playing out very nicely, and so that's the kind of information you want from your Phase 1b and Phase 2. So, the answer is, there is nothing in the 1b or the Phase 2 at this point because even we combined the information it is so similar that will change the course of how we're thinking about the Phase 3. So, that's why we feel comfortable starting the Phase 3, we do not believe we're going to learn any more information about dose, any more information about the efficacy we expect in that dose, any more information on the safety. And so, if that's the case then what we -- the only thing I would add to that comment, is it the patients that we used in the Phase 1b and the Phase 2 is sicker patients meaning that in the Phase 1b they were allowed to have chemo, 44% in the Phase 1b also got more than one targeted androgen receptor targeted agents that's not our Phase 3 design. And then, the Phase 2, the same thing; we have half the patients had more than one androgen receptor target agent in some cases, there are three or four. That's not the patient population in Phase 3. Phase 3 are patients that failed androgen and deprivation therapy and they failed one androgen receptor-targeted agent so, we think that that's going to have, if anything, the result will be better not worse and so we're pretty happy with the results that we see now so. So, we're thinking that's going to give us some upside. So, I think the answer to your question is that we will continue to update with a different scientific meetings, just like we're going to be doing this week and you'll see more data on the Phase 1b but right now we're just waiting on those three patients that have just taken this drug at home every day, every day, chronic, it's feasible, and it's well-tolerated, and that's critical, because if you look at some of these oral taxanes, they still have some of the same side effects as the IV taxane and urologists if they're going to give this drug, they're not going to be interested in dealing with neutropenia and sepsis and giving Neulasta and GM-CSF support and now we just don't, I mean we won't be able to give a patient a pill and manage the side effects by telephone and not having to management side effects as a medical oncologist would, because that's where the specialty is. So, we think the tremendous value would be Veru-111 brings in prostate cancer and hopefully the breast cancer is that it's the fact that the safety will allow patients to take this at home and not be worried about the right cell dropping to a point and have to be put into the ICU.

Got it. Thank you.

Thank you.

Next question comes from Kumar Raja of Brookline Capital Markets. Please go ahead.

Congratulations on the progress. And thanks for taking my questions. First, with regard to the COVID-19, what kind of impact are you guys seeing in terms of the days these patients are staying in the hospital? are you seeing any impact there? And with regard to FC2 how much inroads do you guys think you have made in terms of the US prescription market? And in terms of the gross margins where do you guys see this going from where you are right now?

Okay. Right. So, I'm going to go backwards. All right. So, the answer to question, how many -- how much inroads, so, we had about I don't know 350,000 prescriptions this past year and we just mentioned, we have 116,000 prescriptions. There is about 40 million women that could take this product so, we're just barely scratching the surface. It is huge, huge of blue ocean for us and all you have to do is to look on the Internet and see how many new sexual health telemedicine groups are opening up. And so, this telemedicine there's tremendous growth in telemedicine right now. And the only way to get to that Blue Ocean is to take advantage of the Internet, the fact that the Affordable Care Act, covers the prescription, the fact that women are no longer, I mean they are not in colleges anymore, they're sitting home using the telephone to order what they need to order including prescriptions and for sexual health. So, we think it's still a blue ocean, we just don't know. We think, we think we can't even tell you how big it can be because of the fact, and the other interesting point is that you know the male condom business compared to the Female condom business were still less than 1%, 2% and with the me too movement and empowerment and this is the only FC2 is the only birth control and sexually transmitted disease protection, dual protection that a women can initiate and control, I think there is real opportunity. Now, the gross margin is dependent on whether we sell ex-US or in US. We have a nice margin in the US and we don't spend money on marketing and selling very minimal. That's all done by the telemedicine groups. So, we expect, as you saw this quarter, we expect to continue to see our gross margins for this product go up as the mix of sales continue to be growing and dominated in terms of the numbers in the US versus ex-US. And so, we are looking forward to that as it relates to the COVID-19 question, what's the impact of hospitalizations and I know we've looked at top line data and I have not seen the hospitalizations.

Yes. So, the patients in our -- this is Gary Barnette. The patients in our study are very sick and obviously hospitalization -- duration of hospitalization is highly variable but when you look at the days on study, days of dosing, specifically, the days of dosing. We do see, and this is capped at 21 days, the placebo group had about a little over 11, average 11 days of dosing. And in the treated group it was a little under nine days of dosing. So, we are seeing and that would correlate the hospitalization, but the topline data that's what we got and have in the top line data. So, I do expect to see some reduction, but due to the variability I'm not sure exactly how strong it will be.

Okay. Maybe finally a question with regard to Veru-111 [ph] interaction with the EMA, where do we stand there. Thanks.

For Veru-111; so, I'll be honest. We've been so focused on US right now that we have not initiated. I think the EMA at this point, I think what we need to do is get our as I mentioned in my comments we've been granted an expedited meeting with the FDA, we already have that on the books, we're getting ready for that. We've already said, our meeting package that we've moved along, and we're looking forward to understanding the Phase 3 design and once we get that up and going, then we can probably reach out to the EMA, but I'll be honest with you, I think if we can get the FDA under control and while that's going on deal with EMA then that will take care 80% of the regulatory authorities across the world that would take one or the other; that's where we are.

Great, thank you.

The next question comes from Leland Gershell of Oppenheimer. Please go.

Hey, good morning. Thanks for taking the questions. Want to ask the question on -- the patients in the -- one who has been prostate cancer studies who has been [indiscernible] because patient able to continue with those reduction or it was just business the patient with the neurotoxin.

There was slight tingling in the fingers that went away with time, still stay on dose. So, did not require a dose reduction and they went away on the high dose and it was just a grade one, sorry, grade one.

Grade one. Got it, okay. And then, the question in terms of positioning of this with the oral taxanes and IV taxane, IV chemo there is obviously the oral formulation you've got the better toxicity profile meeting with some who may say. Well, I'm kind of all that efficacy and I want to see this, I want to use more effective agent upfront and then if 111 is not effective even though it may not be head to head. But if it doesn't appear effective maybe would reserve that for later, even with the earlier Kimmel agents have more tolerability, how would you kind of answer that to somebody who may be made more focused, hard-nosed efficacy comparison.

Yes. So, the way I would answer that is, as you know cancer has become a marathon. So, the issue, there is no longer hitting hardest thing you can hit them with and lose hair and you know, and just be thankful we picked up a couple of days as a surge and we used to do that, everything was radical. So, I think the approach to cancer care now, if you start with things that have right benefit risk profile and you start early and you're getting to choose something that has good efficacy and good safety and then you are going to work your way to the compounds, the agents that have efficacy and worse safety to a point you get to compounds that have some efficacy and maybe very bad safety. So, in this situation the way we see it and the way we're positioning as a pre-chemo agent, is that we just do not require a pre-medication with prednisone and with antihistamines as we not taking up a chair the patients not having to get the last if for GM-CSF support like the neutropenia, and you're not having to manage the toxicities with all kinds of agents, from vomiting on. And so, and the efficacy, again it's not head to head. But if you look at the efficacy of Veru 1-11 compared to some of the IV taxanes and the signals they saw in the Phase 1b setting where comparable for sure without to safety. So, I would say, less than the way that the way to think of it is that we want to be in the pre-chemo space and the best way to be in the pre-chemo space is to have safety that's more like an andro-receptor targeting agent, then having safety is more like a taxane or worse when that I mean the agents all wonderful agents, i will give around but worsening the toxicity could be worse.

Thanks, great progress.

Thank you.

Your next question comes from Peter McMullin of Peter McMullin CSA Consulting. Please go ahead.

Good morning, Dr. Mitch, and congratulations to you and the team for a tremendous progress quick Two questions on FC2, you do have an exclusive in the US, there are competitors out there, what's is there any rumblings that somebody else might try to get FDA approval? And just the second part would be on the international sales with everybody being at home, is were there any tenders coming up of significance that you could comment?

Yes. So, I'm going to have Michele comment on the international sales because she's closer to that. And then as it relates to the US when we're actually hearing no rumblings at this point, in terms of others. As you know because we, because with the market leader in the US and is a lot of brand loyalty and so, we're kind of Coca-Cola and why would anybody want RC? But with that said, there is no rumblings that I know of at this point and we've been watching it very closely. And so, we're still the market leader in the U.S. Ex-U.S., Michele, do you want to comment on tenders and what it's looking like?

Sure. We announced that we won the Brazil tender. So, we're working on supplying that this year, Peter. So, that will be supplied this year and into next fiscal year. And then the South Africa, the tender that we had announced that we won the government has extended the timeline for that. So, instead of delivering product over three years, it's going to be over a five-year timeframe and we're just waiting to see what the ordering is going to be in South Africa. So, that preserves us in those Two main markets.

But nothing outside of that at this point in time?

They're not big tenders in the other countries. We supply that mainly through UNFPA, USAID and now also through DKT, another distributor.

Okay, thank you.

Thank you, Peter.

And the last questioner today will be Brandon Folkes with a follow-up from Cantor Fitzgerald. Please go ahead.

Hey, Mitch. Sorry, just one thing I wanted to follow-up and it's a little bit segues from the last question. Can you just talk about the barriers [ph] to entry on the FC2 business?

Yes, I'll be happy to. So, the barriers entry is, one is we still have patent coverage in the U.S. Although it's just for a couple of more years or so, but we do. Second, even though it's a Class 2 device now instead of a Class 3, it still requires special controls, which means that pregnancy studies, tolerability studies, studies proving that you can prevent STI -- so, there is a whole host of immunogenicity studies and all the stuff and so. This probably in the order of about $6 million to $12 million worth of stuff and it can take you three to six years to do. And so that's a varied [ph] entry. It took us, I don't know, 18 months to build the infrastructure to sell by prescription in the U.S. That's not trivial. So, that has to be done and you have to get all the contracts with the big distributors to do that. We also have brand loyalty, which is also a barrier to entry [ph]. People want the FC2, they know the FC2, by way of the comparison. Ex-U.S. is a ton of competitors. They've been there for many years. But we've always maintain about 90% to 95% market share and that's the wild wild west outside the U.S. And that's because again, brand loyalty. People like it. And the other thing we have that's the only feature that the FC2 has, is night trial [ph] and so, the night trial is stronger and night trial is also hypoallergenic and so, you're not dealing with the latex allergies that you would see, which can occur at 10% of patients, particularly indwelling internal condom as opposed to an external condom. And then you can argue, 'Well, it's just 10%. 90% is fine.' No, you just don't know which 10% it is. So, that's the problem. So, to do a lot of barriers to entry and we've had the product now since the Female Health Company acquired Aspen Park and you could see the sales have gone up. There's a lot of room to grow the asset in the OTC markets and we are working very, very hard also in the U.S. public sector, ex-U.S. publishers [ph]. So the asset is incredibly valuable asset that's growing.

Thanks. That's very helpful.

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 in today's call and I look forward to updating all of you on our progress at our next Investors' call. Thank you again. Operator?

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