Veru Inc. (VERU) Q2 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc.'s Executive Director, Investor Relations and Corporate Commute.

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, regulatory interactions, 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, Vera Inc.'s Chairman, CEO and President.

Good morning. With me on this morning's call are Dr. Gary Barnette, the Chief Scientific Officer; Michelle Greco, the Chief Financial Officer and Chief Administrative Officer; Phil Greenberg, General Counsel; and Sam Fisch, the Executive Director of Investor Relations and Corporate Communications. Thank you for joining our second quarter fiscal year 2020 and earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing innovative medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 novel small molecules, enobosarm and sabizabulin. The first one on enobosarm is an oral selective androgen receptor modulator, SARM and is being developed as a next-generation drug that when combined with GLP-1 receptor agonist makes weight reduction more tissue selective for fat loss and preservation of lean mass and physical function, which is intended to lead to greater weight loss compared to a GLP-1 receptor agonist treatment alone with a focus on older patients with obesity. Our second asset, sabizabulin is a microtubule disruptor and it's being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression or promote the regression of atherosclerotic cardiovascular disease. This morning, we'll focus on an update of the clinical development progress of enobosarm in our obesity program. We will also provide financial highlights for fiscal 20,262nd quarter ended March 31, 2026. GLP-1 receptor agonist have been shown to produce significant weight loss in patients who have -- are overweight or have obesity. Unfortunately, this weight loss is tissue nonselective with the significant indiscriminate loss both lean mass and fat mass. Of the total weight loss up to 50% is attributable to lean mass. Although GLP-1 receptor agonist treatments have resulted in substantial weight loss for many patients. The strategy for the next generation of obesity drugs should be a combination therapy with a GLP-1 receptor agonist to cause patients who own and lose that while preserving lean mass and physical function and bone real density with the highest quality weight reduction. And Veru has focused the clinical development of enobosarm for weight loss on older patients who have obesity. More specifically, the focus has been on older patients who have sarcopenic obesity, which means they have both obesity and low muscle mass and are potentially at the greatest risk for reaching a critically low muscle mass, which may lead to physical function decline, taking the currently approved GLP-1 receptor agonist. According to the European working group on Sarcopenia and older people too. Sarcopenia is defined by reduced muscle strength and function as the primary diagnostic criteria on confirmed by low muscle quantity of quality, while the impaired physical performance reflects disease severity. As you can see, the working group emphasis is on physical strength and function. Thus, muscle loss alone does not define sarcopenia. As a consequence, we have chosen to also objectively evaluate and measure physical function by stair climb test in the Phase II quality clinical study. And Veru's completed the Phase IIb quality clinical trial was a multicenter, double-blind, placebo-controlled randomized dose-finding clinical trial designed to evaluate safety and efficacy of enobosarm 3 milligrams, enobosarm 6 milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in 168 older patients that's greater than equal to 60 years of age, receiving semaglutide for weight reduction. After the efficacy dose-finding active weight loss portion of the Phase IIb clinical trial was completed at 16 weeks. Participants continued into a Phase IIb maintenance extension study where all patients discontinue semaglutide treatment, but continue to receiving either placebo, enobosarm 3 milligrams and enobosarm 6 milligram, as monotherapy in a double-blind fashion for 12 weeks. Phase IIb quality clinical trial was a positive study that demonstrated that preserving lean mass and physical function with enobosarm plus semaglutide led to greater fat loss. As I mentioned, Veru focused on the impact of weight loss on physical function, not just lean mass and older patients with obesity in the Phase IIb quality clinical study. Physical function was measured by the stair climb test, which is a common activity of daily living. Declines in physical function, as measured by the stair climb test we predict in older patients at high risk of mobility disabilities, gate difficulties, falls and bone factors, hospitalizations and mortality. It has been reported that stair climb power declined by 1.38% annually with aging. Now it should be noted that the Phase IIb quality clinical study is the first human study to demonstrate that the weight reduction in older patients who have obesity receiving a GLP-1 receptor agonist puts them at a higher risk for accelerated loss of lean mass with physical function decline. A prespecified responder analysis was conducted using a greater than 10% decline in stair climb power as a cutoff at 16 weeks, which is a significant loss as it represents loss of stair climb power that would naturally occur with aging over a 7- to 8-year period in older patients. In a Phase IIb quality study, the loss in lean mass matter, as 44.3% of patients on placebo for semaglutide group had at least a 10% decline in stair climb power physical function at 16 weeks. And what happened to the study group that received enobosarm combination with the GLP-1 receptor agonist. In the Phase IIb quality clinical study, enobosarm treatment preserved lean mass, which translated into a reduction in the proportion of patients that had a clinically significant stair climb physical function decline when compared to patients receiving a GLP-1 receptor alone. More specifically, the enobosarm 3-milligram plus semaglutide group had a statistically significant, clinically meaningful 59.8% relative reduction in proportion of patients that lost at least 10% stair climb power compared to the placebo plus semaglutide group, and that value is 0.0006. In the enobosarm 6 milligram group, plus semaglutide. There was a 44.1% relative reduction in the proportion of patients with at least a 10% decline in stair climb power from baseline first placebo plus semaglutide group, and that found 0.051. Based on the results of this short-term study, we believe there is an urgent unmet need for a drug that prevents a loss of muscle and physical function as well as augment a loss of fat for greater weight loss and at risk older patients with sarcopenic obesity receiving a GLP-1 receptor agonist for weight reduction. The next important question is can you potentially have greater weight loss by adding enobosarm to a GLP-1 receptor agonist treatment. First of all, as the Phase IIb quality clinical studies demonstrated Patients receiving enobosarm had greater fat loss. Plus, if you're able to preserve muscle and physical function with enobosarm, while taking a GLP-1 receptor agonist, we would expect and more calories will be burned, which is expected to result of greater weight loss compared to GLP-1 receptor agonist alone, especially in the long study. Now let's turn to the current progress of our Phase IIb plateau clinical study. A common clinical and therapeutic challenge with GLP-1 receptor agonist treatments is that 88% of patients after 1 year on a GLP-1 receptor agonist hit a weight-loss plateau where they stop losing additional weight. Based on the SURMOUNT-1 study conducted by Eli Lilly & Company, 62.6% of these patients, unfortunately, still have clinical obesity at the time it reaches weight loss Plateau in 1 year. One explanation might be that the loss of muscle caused by nonselective tissue weight loss may reach a point that now stimulates the appetite in patients receiving a GLP-1 receptor agonist, so they consume more calories, which in term cause patients to stop losing weight to hit that wind loss plateau. Again, enobosarm shown clinical studies to directly burn fat and to preserve muscle to increase physical function and burn more calories. Thus by preserving muscle, appetite stay suppressed while more calls of burn, which can help to break through the weight loss plateau leading to incremental reduction. Now let's turn to the design of the Phase IIb plateau clinical study. Which is a double-blind, placebo-controlled study to evaluate the effect of enobosarm 3 milligrams of total body mass -- excuse me, total body weight, fat mass, lean mass and physical function, bond metal density and safety in approximately 200 older patients, age greater than or equal to 65, we have obesity BMI greater or equal to 35% and are initiating semaglutide GOVI GLP-1 receptor agonist treatment for weight reduction. The primary efficacy endpoint of the study is the percent change for baseline in total by way at 68 weeks. Interim analysis will be conducted 36 weeks to assess the percent change from baseline in lean body mass and total fat mass as measured by DXA scan. The key secondary endpoints to the overall study, a total fat, total lean mass, physical function again measured by sterilants, mobility, disability assessment bone meal density and patient-reported outcome questionnaires for physical function, HbA1c and insulin resistance. The objective of the Phase IIb plateau clinical trial is to focus on the effect of longer-term GLP-1 receptor agonist treatment in older patients who have obesity. The Phase IIb plateau clinical study will also assess the ability of enobosarm to break through the white loss plateau. Observed in patients receiving a GLP-1 receptor agonist treatment to achieve clinically meaningful incremental weight reduction as well as to preserve muscle mass and physical function by 68 weeks. The interim analysis of the clinical study will occur when all patients have been treated for 36 weeks. Now semaglutide was selected as a GLP-1 receptor agonist for the Phase II study to build on Veru's previous clinical experience using enobosarm in combination with semaglutide in the positive Phase II quality clinical study. Further, the clinical data from the Phase IIb plateau clinical study using injectable semaglutide may support the use of oral semaglutide and oral enobosarm fixed-dose combination in future Phase III clinical studies. In contrast, there are no approved oral formulations which is apatite. On March 9, 2026, we announced the enrollment the first patient in the Phase IIb plateau clinical study. I'm very pleased with the current enrollment rate, and we're on track for results of the 36 interim analysis, which is expected in Q1 calendar year 2027. Now Veru is targeting the at-risk older patients with sarcopenic obesity. So how large is that market? How about the total market for obesity? The Wall Street Journal reported last week that there are more than 1 billion people in the world with obesity. The World Health Organization estimates that there are 2.5 billion adults globally, either overweight or obese with the rate of adult obesity more than doubling since 1990. And right now, we're only 2 companies, Lilly and Novo Nordisk that together are treating less than 2% of them. Hope of the total market for sarcopenic obesity. The overall prevalence of obesity and low muscle mass is almost 30 million adults in the U.S. How about the total market of the patients who are 65 years and older with obesity. The prevalence of obesity in patients who are 65 years and older is 41.5% among the 47.4 million patients enrolled in Medicare Part D plans, and that's about $20 million potential patients. As you can see, taken together, the market opportunity for enobosarm in combination with GLP-1 receptor agonist in older patients with sarcopenic obesity is very large. I will now turn the call over to Michele Greco, CFO and CEO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. Let's review the results for the 3 months ended March 31, 2026. Research and development costs decreased to $3.1 million from $3.9 million in the prior quarter. The decrease is primarily due to wind down of the Phase IIb quality clinical study for enobosarm as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. Personnel costs also decreased primarily due to the reduced share-based compensation expense. Selling, general and administrative expenses were $4.1 million compared to $5.2 million in the prior quarter. The decrease is primarily due to a decrease in the share-based compensation expense. We recognized a gain on the sale of ENTADFI assets of $974,000 in the prior year's quarter. which is based on nonrefundable consideration received related to promissory notes previously due to Bureau. As the promissory notes are now settled, no additional gain is expected in future periods. During the prior fiscal year, the company entered into a settlement agreement with Onconetix, which included payment of Series D preferred stock and warrants. During the current period, the increase in fair value of the equity securities received was $3.9 million as a result of the realized gain from the conversion of the preferred stock and then sale of the underlying common stock and change in the fair value of the remaining preferred stock and warrants. Favorable antidilution provisions triggered by the Onconetix reverse stock split during the period contributed to the increase in the fair value. The bottom line result for continuing operations was a net loss of $3.1 million or $0.13 per diluted common share compared to a net loss of $7.9 million or $0.54 per diluted common share in the prior year's quarter. During the quarter, the company recognized an additional gain on sale of the FC2 business of $351,000 and for the net proceeds received from Clear Future in the settlement of the dispute related to a pre-closing tax receivable and liability, which is included as income from discontinued operations. In the prior year period, Veru sold the FC2 Female Condom business to Clear Future. In our financial statements, all direct revenues, costs and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations, net of tax, in the statement of operations. Net loss was $2.7 million or $0.12 per diluted common share compared to a net loss of $7.9 million or $0.54 per diluted common share in the prior quarter. Now turning to the results for the 6 months ended March 31, 2026. The Research and development costs decreased to $4.5 million from $9.6 million in the prior period. The decrease is primarily due to a wind down of the Phase IIb quality clinical study for Nova as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. Personnel costs also decreased primarily due to the reduced share-based compensation expense. Selling, general and administrative expenses were $8.2 million compared to $10.4 million in the prior period. The decrease is primarily due to a decrease in the share-based compensation expense. We recognized a gain on the sale of the ENTADFI assets of $1.7 million in the prior period. In conjunction with the sale of the FC2 Female Condom business during the prior fiscal year, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the SWK Holdings residual royalty agreement. During the current period, the company recorded a gain of $3.8 million from the increase in the fair value of equity securities compared to a loss from the decrease in fair value of equity securities of $0.3 million in the prior period. The increase in fair value of the equity securities during the current year period is the result of a realized gain from the conversion of the Onconetix preferred stock and sale of the underlying common stock and change in fair value of the remaining preferred stock and warrants. Favorable antidilution provisions triggered by the Onconetix reverse stock split during the period contributed to the increase in fair value. The bottom line results for continuing operations was a net loss of $8.4 million or $0.39 per diluted common share compared to a net loss of $9.6 million or $0.66 per diluted common share in the prior period. The net loss was $8.1 million or $0.38 per diluted common share compared to a net loss of $16.8 million or $1.15 per diluted common share in the prior period. Looking at the balance sheet. As of March 31, 2026, our cash, cash equivalents and restricted cash balance was $27.6 million compared to $15.8 million as of September 30, 2025, and on both March 31, 2026 and September 30, 2025, there was $0.1 million of restricted cash related to the sale of the FC2 Female Condom business. Our net working capital was $28 million on March 31, 2026 compared to $11.1 million on September 30, 2025. On October 31, 2025, Veru completed an underwritten public offering of 1.4 million shares of our common stock, prefunded warrants to purchase up to 7 million shares of our common stock. Accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per share of common stock and the accompanying Series A and Series B warrants. Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting discounts and commissions and costs paid by the company. The company is not profitable and has had negative cash flows from operations. Based on the company's current operating plan, our cash as of the issuance date of these financial statements is expected to be sufficient for the company to fund operations beyond the Interim analysis in the Phase IIb clinical study that would be performed to assess percent change from baseline in lean body mass and fat mass as measured by DXA scans. During the 6 months ended March 31, 2026, we used cash of $15.1 million for operating activities compared with $19.1 million used for operating activities in the prior period. We generated cash from investing activities of $2.5 million for the 6 months ended March 31, 2026, compared to $18.4 million in the prior year period. The cash generated during the current period represents proceeds from the sale of the on kinetics equity securities of $3.2 million and $0.3 million for the settlement of a dispute related to pre-closing tax matters related to the sale of the FC2 business. The cash generated in the prior period relates to proceeds from the sale of the FC2 Female Condom business of $16.3 million, proceeds of $1.7 million from the sale of entity assets and proceeds of $393,000 from the sale of equity securities. Net proceeds provided by financing activities for the 6 months ended March 31, 2026, was $23.4 million, which were the proceeds from the sale of common stock and warrants in an underwritten public offering net of commissions and costs. We used cash and financing activities for the 6 months ended March 31, 2025, of $4.2 million related to the change of control payment to SWK pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 Female Condom business. I'd now like to turn the call back to Dr. Steiner. Dr. Steiner.

Thank you, Michelle. With that, I'll now open the call to questions. Operator.

[Operator Instructions] Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question today comes from Leland Gershell with Oppenheimer.

A couple of questions from us. Assuming success in the plateau study, would you expect to need 2 Phase IIIs or could you perhaps get by with 1 pivotal and perhaps use plateau as supportives? And I also wanted to ask, in further studies with enobosarm given the development of evolving agents for obesity, some orals are putting through there's want to know if the design would after those as well as the delta labeled diagnostic to the primary weight loss agent? Would you need to study specific weight loss agents to have those reflected in the indication label for enobosarm.

So thank you, Leland. So the first question is basically, if we're successful, was the next step and you go to a Phase III. So let's be very clear what that means. As you know, the FDA has come back and told us that incremental weight loss of greater than 5% for the efficacy portion of the study is sort of the anchor, okay? So you have greater than 5%, that stands on its own. If you want to add the function benefits and the bone benefits, then you have to show those separately, but you -- at least you're moving forward with incremental weight loss. If you have -- if your incremental weight loss is less than 5% then you have 2 ways to move forward. One is physical function as a primary endpoint. And the reason the Phase IIb is so important is because we're doing a lot of work on physical function to make sure that we have a very clear understanding of the Phase III endpoint for physical function as a claim. And furthermore, we're collecting bone mineral density information, as you know, the FDA has recently reported back in December of 2025 that BMD alone can be a surrogate endpoint in place of fractures. And so that could be very interesting as we know GLP-1s can cause bone loss in this patient population undergoing this accelerated weight loss. So if the incremental weight loss is greater than 5%, then that will be the primary endpoint with function and BMD secondary endpoints. If incremental weight loss was less than 5%, then you have 2 ways forward. One is a functional endpoint and BMD or BMD alone. So we have some. That's why this trial is so critical. It's a perfect trial because it's measuring all these things and body composition that can inform us on what the Phase III programs would look like. And if you notice, all the competitors are still in Phase II, working out dose, working out safety, working out which direction they're going to take. So this is not just for enobosarm. Myostatin inhibitors, if you want to have incremental weight loss and function in BMD, you have to measure those all separately, and they have to be separate claims and you have to make sure you have the data to do that. And we're the only company that really is focused on function with the very objective measurement. So that's why this trial will be interesting. As you know, we've derisked a lot of it with the Phase II quality study that we've done -- but the palm of the quality study is 16 weeks and even more than that time to see weight loss, incremental weight loss. And so we're doing the definitive study to answer that question. To answer your second question, yes, the field is -- just to refresh everybody's memory, the second question is if we do move forward and we've got all these companies coming out with weight loss agents, orals and non-orals, is the claim going to be enobosarm with any GLP-1 receptor agonist or the studies have to be specific to the GLP-1 receptor agonist in the form of the formulation of that agonist. And the answer is, my understanding is that certainly initially, it's going to be based on the specific GLP-1 receptor agonist. So that's why it was important for us to focus on semaglutide initially. But I think since each of these have different -- each of these GLP-1 receptor agonists have different effects on weight loss that you're probably going to have to do whether it's us or anybody else is probably have to combine it with the specific weight loss agent initially. And then we'll see what happens in the field later. It may get some point that GLP-1 alone or GLP-1, GLP-1 alone. But initially, it's -- in my opinion, it's going to be specific to the GLP-1 receptor agonist. Now Gary Barnett is on the call. He's our Chief Scientific Officer. What do you think about that question, Gary?

Yes, it's a great question. I think that at some point, I can envision -- remember, the consequence that we're treating with enobosarm is weight loss and weight loss occurs with all of the GLPs and all of the incretins and all of them will have a similar issue with the loss of lean mass and the plateau that we're addressing in the Plateau study. I think that not to see a world where we include multiple different incretins as in our Phase II. But Mitch is exactly correct. The FDA's long-time mantra is you get in your label once you study in your Phase III. So right now, our plan is to really focus on 1 or 2 increases in the Phase III program.

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, operator. I appreciate everyone who joined us on today's call, and I look forward to updating all of you on our progress in our next investors call. Have a great day.

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