Good morning, ladies and gentlemen. And welcome to Veru Incorporated Investor Conference Call. All participants will be in a listen-only mode [Operator Instructions] Please note that this event is being recorded. I'd now like to turn the conference call over to Mr. Sam Fisch, Veru Incorporated's Executive Director of Investor Relations and Corporate Communications. 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 its business operations, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties and our 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 our 10-Q and 10-K SEC filings, as well as in our press releases from time to time. I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's, Chairman, CEO and President.

Good morning. With me on this morning's call are Michele Greco, the CFO and CAO; Dr. Gary Barnette, the Chief Scientific Officer; Michael Purvis, Executive Vice President, General Counsel & Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Fiscal year 2021 was an exciting and a very productive year for Veru. We have successfully transformed our company into a late stage oncology biopharmaceutical company. We are developing novel medicines for the management of two of the most prevalent cancers, breast cancer and prostate cancer. One of our anti-cancer drug, sabizabulin has dual anti-viral and anti-inflammatory effects and it is also being developed for the potential treatment of hospitalized COVID-19 patients at high risk with acute respiratory distress syndrome, which remains a global dire unmet medical need. The company has a commercial sexual health division, which includes a drug candidate ENTADFI, formerly referred to as TADFYN, a new treatment for benign prostatic hyperplasia and a commercial product, the FC2 Female Condom, Internal Condom an FDA approved product for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections. Revenue from the sexual health division is being used to largely fund the clinical development for our late-stage drug candidate assets, which aim to address multi-billion dollar premium market opportunities. This morning, we will discuss Veru's business strategy, the clinical development of our drug pipeline and the commercialization of our products. We will also provide financial highlights for the fourth fiscal quarter and record fiscal year 2021. As you're aware, we're still in the middle of the COVID-19 pandemic with no end in sight. Countries in Europe and other continents are now back in lockdown. The standard for Disease Control and Prevention have recently reported that the US COVID-19…

Thank you, Dr. Steiner. As Dr. Steiner indicated, we had another great year. Last December, the company sold PREBOOST for $20 million, resulting in a gain on sale of $18.4 million. In February, the company completed an equity raise, which resulted in $108 million in net proceeds after deducting underwriting commissions and costs. And for the fiscal year, the company achieved record level net revenues of $51.3 million and record level gross profit of $47.9 million. Let's start with highlights of our fourth quarter results for fiscal year 2021. Overall, net revenues were up 33% to $15.6 million from $11.7 million in the prior year fourth quarter due to the growth in our U.S. FC2 prescription business. The company reported significant FC2 sales growth in its prescription business with net revenues up 55% to $13.6 million from $8.7 million in the prior year fourth quarter. Gross profit was $12.3 million or 79% of net revenues compared to $9.6 million or 81% of net revenues in the prior year fourth quarter. The increase in gross profit is driven primarily by increased sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased by $7.4 million to $14.2 million compared to the prior year fourth quarter of $6.7 million. Research and development costs were $8.3 million compared to $3.3 million in the prior year quarter due to the commencement of several new phases in our clinical trials. During the fourth quarter of fiscal 2020, we recorded a noncash impairment charge of $14.1 million related to in-process research and development associated with the acquisition of Aspen Park Pharmaceuticals in fiscal 2017. Operating loss for the quarter was $1.9 million compared to the prior period of $11.3 million, which included a non-cash impairment charge of $14.1 million. Nonoperating expenses were $2.8 million…

Thank you, Michele. We've enjoyed a record year, which has allowed us to significantly advance our clinical oncology programs. In fact, we are now entering our fifth year of growth in our FC2 U.S. prescription business. We had a record year of $61.3 million in revenue. We plan to commercially launch ENTADFI approved via telemedicine portal and potential licensing deals, which will provide even more revenue, adding to the already growing revenues from FC2. We expect another record year in fiscal year 2022. With resources in place, we will continue to advance our expansive late clinical stage breast cancer and prostate cancer programs as well as Phase 3 COVID-19 clinical study is expected to have results in the first half of 2022. We anticipate a steady flow of important positive news for Veru over the next few months to 1 year. In summary, we have evolved into an oncology biopharmaceutical company solidly dedicated to developing treatments in breast cancer and prostate cancer. Our strategy to advance the clinical development of our drug candidates by investing revenues generated by our Sexual Health division is working. As a stand-alone business, our women's health business, UREV is valuable, profitable and growing, which provides optionality to Veru's shareholders. I am proud of the hard working, dedicated and talented team we have assembled to execute our clinical and commercial strategy. We are committed to driving shareholder value by developing commercial novel medicines, addressing significant unmet medical needs that the management of breast cancer and prostate cancer and being opportunistic by developing sabizabulin for hospitalized COVID-19 patients and high-risk for acute respiratory distress syndrome and death. With that, I'll now open the call to questions. Operator?

[Operator Instructions] Our first question comes from Brandon Folkes from Cantor Fitzgerald. Please go ahead.

Hi. Thanks for taking my questions. And congratulations on all the progress. So the two questions from me, maybe just on Sabizabulin and COVID, can you remind me what control arm is able to be dosed with? And then along those lines, how active are you in dialog with the respective agency on those end point just as sort of COVID treatments evolve? I guess my second question, I'll just ask upfront on Sabizabulin again in the third line monotherapy and breast, you noted you received the safe to proceed letter from the FDA. So can you just let us know, are there any other hurdles yet to overcome between now and starting the Phase 2b? Was it now just - are you just really setting up the study and getting it running in the first quarter of next year? Thank you.

First of all, Brandon, thank you for being on the call and I'm going to answer your second question first, that's an easy one. So, safe to proceed letter is typically, what you do technically after you file. This had to be filed as a separate IND because it's a different drug. And with that said, safe to proceed letter is the official green light from the FDA to move forward. There are no other hurdles. And so all we are doing now is we have to do - we've got everybody engaged. We have a CRO ready and ready to go. And just a pause for a moment, let me tell you why this is unique and maybe it didn't come across in the call. What we're doing is, we're actually asking - if you look at the population of the patients in the greater than 40 and less than 40, the same population of patients, these are patients that have received at least two estrogen-blocking agent and a CDK4/6 inhibitors, they are all third line. So when they come into the study, then the companion diagnostic or in this case will be CLIA test, look for the AR status. If their AR status is greater than 40, greater and equal to 40, then they go on to the AR test study. If it's less than 40, then they go to the Phase 2b study. So in some ways, they're sister companion studies. And so we're being incredibly efficient with money. Because that same patient, instead of being told, you can't be in the study and you chalk that up as a screen failure, whatever you call that. Now we have an opportunity to capture that patient in one or the other study. So it really is a very efficient way to fill that study. So maybe that didn't come across as loudly as I would like it to. But with that said, there are no hurdles. And in fact, we're starting to collect patients for recruitment because if your test study is up and running, and we do have patients that are less than 40. So it will be pretty efficient. So our thinking was that since we know less than 40s and not going to respond the way to greater than 40s do, let's take advantage with another one of our assets. As it relates to the second question, I'll frame the question. We're very fortunate to have here Dr. Gary Barnette will answer the question. And that was basically for the COVID-19 study, looking at the control arm. Just to remind you again what that control arm was in the Phase 2b and then what the control arm is in the Phase 3. And then the other part of your question was dialogue with the FDA in relation to that endpoint and how comfortable they are with that endpoint. Gary?

Yes. So in the Phase 2 study and in the Phase 3 study, we do allow standard of care. These are both blind - the Phase 2 is a blinded study. This is a blinded study. We -- ethically, we need to allow them to have standard of care, things like dexamethasone, remdesivir, the other products that have been approved by the FDA through the EUA process. And then on top of that, we have a blinded - either the patient is randomized to sabizabulin or to placebo. That's how the studies work. And the Phase 3 study is identical in that way to the Phase 2 where we showed the benefit. The - as far as the endpoint, the FDA, obviously, mortality or death is the gold standard endpoint for just about every clinical trial you have or you could have. Now we don't use it much because most of the time, we're trying to do something else. So the FDA is very comfortable with death as the primary endpoint. And based on the Phase 2 data, we are and the data we're seeing in the literature, we feel very comfortable that, that's where we should be.

I think the other statement I will make is that it's been - and the reason I brought it up, the Merck and the Pfizer drugs are not for hospitalized patients. In fact, the Merck drug failed in hospitalized patients. So they're in pre-hospitalized patients. And this patient group will have a much, much lower overall death rate. And in the hospitalized patients, one of the concerns we had running the study was that perhaps with this standard of care dexamethasone, remdesivir with a drug antibody cocktails and that kind of stuff that the death rate would be at a point that it's much lower than we would need a huge study. And that's not the case. What we're learning is that patients are coming in, WHO 5s and 6s, and quite frankly, 4s, these - the death rate is the same if not higher than what we saw in the Phase 2. And so we can say that in aggregate. And so we're feeling pretty good that there is a big difference between going after patients and a pre-hospitalization standpoint versus a hospitalized standpoint because the hospitalized patients are definitely sticker. So that's why we think we have a position with our drive at this point now, there really have been no effective drugs, oral drugs that have been approved in the space or any coming anytime soon. So we really own this space, and that's why we've got to push it pretty hard. Okay. Next question.

Next question is from Leland Gershell from Oppenheimer. Please go ahead.

Morning, Mich. Thank you for taking my question. Just t actually one question. It's on sabizabulin. That's kind of a mechanistic one. There's another compound being developed elsewhere, Plinabulin, which also binds approximate to the colchicine binding site on tubulin. And in addition to that, it's been recently published that, that compound may play in immuno oncologic role as it releases immune defense protein GEF-H1. I'm just wondering if on work you've done on Sabizabulin if you've seen other elements of activity that may be along those lines in addition to the known activity with the disruption of microtubules? Thank you.

Thank you. So yeah, from a mechanistic standpoint, let me just pause for a moment and tell you what I think is happening with Plinabulin. So first of all, from a mechanistic standpoint, Plinabulin started out as a colchicine binding compound. Colchicine binding site compound on the beta subunit tubulin. And what I don't know, quite frankly, is what does it do on the alpha subunits of tubulin. So the alpha subunit, the binding site on the alpha tubulin and subunit, I don't know, okay? With our compound, what makes it different. And that's why I keep saying we're a novel class is that it looks like - I have not seen another compound that has hydrogen bonding on the beta subunit and the hydrogen bonding on the alpha subunit tubulin. And so that's why we're saying it's crosslinks because those bonds are so strong. That's actually crosslinking, causing the microtubules not only to not be able to polymerize, but also they cause them to depolymerize. And so it's a little different. Now with that said, and we think this is the reason for the safety. We do think there's some overlap. So Plinabulin clinically shows a reduction in neutropenia and the story. And they had a very successful Phase 3 that showed the reduction in neutropenia. But as you know, when you go after side effects of chemotherapy, the agency usually requires two clinical studies. And so even though Plinabulin showed great success, and proof-of-concept in a Phase 3 setting that it can reduce the neutropenia induced by chemotherapy, the agency ask them for a second one. So it's not shocking from my point of view. And I don't know -- I've not read the regulatory documents or anything like that. But from the outside looking in, they usually…

Thank you.

Thank you. Next question please.

Next question is from Yi Chen from H.C. Wainwright. Please go ahead.

Thank you for taking my questions. Just to clarify the Companion Diagnostic AR Test being developed, is the test that you use in the ARTEST study to measure the AR expression, is that correct? Are there any other currently available test to measure AR expression level?

Yeah. So let me answer that question. So the question is basically, are we using Companion Diagnostic tests, being developed with Roche Ventana currently to measure androgen receptor expression, the patients entering the ARTEST study? That's question one. And the answer is no, we're not. We're using a AR CLIA test. And what we plan to do during the ARTEST, Phase 3, is to begin to bridge into the commercial test that's being developed by Roche Ventana. So this is not unusual. This is done often. And so we're using AR CLIA test versus - CLIA test means it is a laboratory developed test. It's done with all the controls and everything. It's done with the same antibody. It's done with the - so it's done the same way but it's not designated commercial tests and not designated an FDA approved test. So we're doing that and bridge into the ARTEST study. We have plenty of samples between the ARTEST study in the other three studies that are being done in ENABLAR study is a Phase 3 and the Phase 2b less than 40. And so we have plenty of sample. So we feel very, very comfortable that Ventana Roche is an expert in developing the diagnostic tests. We're not. So we are having a global diagnostic company do it for us. We will focus on drug development. So the short answer, the long answer, is that, yes and no, what's going to happen towards the tail of the study is probably by the time we were in the middle of it all, would have switched over to companion diagnostic. And so we'll have plenty of information. As a result -- and so the concept would be that the AR Test would be ready to be filed -- submitted to…

Got it. And based on current enrollment status, when do you expect the ARTEST study and the VERACITY study to completing enrollment?

Gary?

Yeah, obviously, we are actively we're on track on both of them. We expect toward the end of 2022 into 2023, that's our target.

So we're targeting data readout and again this is -- we're not trying to guide or anything, but we're certainly targeting data readout in sort of mid 2023 quite frankly for both studies, they're really close.

Got it. Thank you.

Thank you. Next question please?

Our next question comes from Chris Howerton from Jefferies. Please go ahead.

Hey, great. Thanks so much for taking the questions. Mitch, I may have missed it, but I just was wondering if there was any updated strategy for the FC2 business? I know there were some thoughts of divestiture, but obviously it's been doing pretty well. So that would be one question. And then the follow-up to that would be, could you provide some guidance or some thinking with respect to that business for the next fiscal year, please. Thank you.

I'll answer the second - well let me answer the first question. So as we mentioned and publicly put out that we were exploring strategic options for the FC2 business and the strategic option doesn't always mean that you just go up and sell it off. It looks -- it means what's the best way to maximize shareholder value. And as I also said many times, is that we're not in the rush. We're making lots of money of the product and it's paying for a development. So it's not like we have to get rid of anything, I love the damn [ph] business, but it's -- we're just trying to figure out how we can get instead of 1 plus 1 equals 0.5, I would get a 1 plus 1 equals 10. So we've got very different shareholder base looking at the base business and we have a different shareholder base and their expectations could be pharmaceutical business. But with that said, what's important to us as we're running new business. And so what we're doing is we're continuing to understand the option that we have in the FC2 business. We're treating the business as if we're never going to get rid of it, so that we make sure we make the right decision to continue to grow the revenue. But at the same time, we've been very opportunistic in understanding what is the best next step with the asset. So stay tuned. As it relates to revenue as I mentioned in our call, we have put additional -- again, along those lines and in treating it like our own baby. We have put in some additional ways to continue to grow the business. I mean we're in our 50 year [ph] of growth now and this past year…

Okay, Well, thank you very much,

Thank you.

The next question comes from Kumar Raja from Brookline Capital. Please go ahead.

Thanks for taking my questions\ And also congratulations on all the progress.

The next question comes from Kumar Raja from Brookline Capital.

And also congratulations on all the progress. So first, with regard to the COVID-19 trial. What kind of variability, are you seeing across the different regions? And do you expect that predominantly these patients are going to have that delta variant?

Yeah. So make sure I understand the first part. So what are we seeing across different regions in terms of strain? A - A – K. Gary Barnette Death rate.

A death rate.

It's pretty comparable. Obviously we're in the middle of recruitment and we watch the blinded data very closely, but we're not -- we're seeing very, very similar for instance, very similar mortality rates in the United States versus Brazil.

Yeah. So I would say that's the reason why the FDA likes to use death as an endpoint because you can't fake it out. And so if the death happens, it's a pretty hard endpoint. And you're not worried about things like there may be different standard of care and hospitalizations or ICU stay in different countries, not because they're better or worse, but because if you have to make a decision, who goes in the ICU, you may take somebody out of the ICU that in the U.S. would stay in the ICU because you don't have enough ICU beds and you've got to just ration it and that has nothing to do with the virus. So that's why deaths probably the better endpoint. And when you look at deaths as a endpoint, it seems to be comparable from region to region. As it relates to the strains, interesting, I saw a recent graph where it looks like the delta strain has become the predominant strain across the world. And so the other ones have kind of gone away. And now the big fear is this Omicron strains coming in, and it's going to do the same thing. And what's going to -- the only reason people are getting scared is because we already know with 30-plus mutations in the spike protein that we're already seeing Regeneron already reported. And some of the other - I just saw a recent one with another antibody directed drug, we're going to see that these monoclonal antibodies that are going to very specific epitopes on the spike protein and then epitope, that spot has changed. The virus -- the antibody is not going to work. And we've seen that now. And so we - it is time for an oral agent that has a more - think of as sort of the broad spectrum antibiotic concept, where it's going to have activity in some basic, very well conserved mechanism, which is how does the virus move from outside the cell into the nucleus, replicate and gets the new virions, the new viruses to come back out of the cell. I mean that is highly regulated, highly conserved highway, the microtubules that they use. And so whether you're a delta strain or a Omicron strain, it doesn't matter, that's how it works. That's why I think we're in good shape. But we are -- as part of the determining whether they're COVID positive or not, we are getting information on what constrain the patient has. So we can go back, once we get the data set and see whether or not there's differences from strain to strain which we don't think we'll see. But we aren't collecting that information. But I would argue, I think most of the strain right now is delta. Kumaraguru Raja

Okay. And with regard to TADFIN, have you had labeling discussion? And what are your expectations in terms of the label?

Okay. In terms of TADFIN, and so just with the [regular] people are clear. So the FDA has agreed that the - if we're approved, the trade name will now be in TADFIN. And so I love TADFIN, but it turns out that the agency said there's another compound at the agency that could be confusing to use TADFIN. And so because of that, they asked us to come up with another name. So we came up with ENTADFI. And so that's it. As it relates to the agency, what I can tell you at this point is we are going back and forth with the agency now on label. And so I can't give you a full statement yet in terms of what the label will say. And -- but we're working on that. So stay tuned.

Thanks so much.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference – the call back over to Dr. Mitchell Steiner for any closing remarks.

Thank you, operator. I appreciate you all joining us today, and I look forward to updating you all on the progress at our next investors call. Thank you.

The digital replay of the conference call will be available beginning approximately noon Eastern time today, December 2, by dialing 1 (877) 344-7529 in the U.S. and -- excuse me, 1 (412) 317-0088 internationally. You will be prompted to enter the replay access code, which will be 10161217. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.