Veru Inc. (VERU) Q3 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 call over to Mr. Sam Fisch, Veru Inc.'s Executive Director, Investor Relations and Corporate Communications. Please go ahead.

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, Veru Inc.'s Chairman, CEO and President.

Good morning. With me on this morning's call are Dr. Gary Barnette, our Chief Scientific Officer; Michele Greco, Chief Financial Officer and Chief Administrative Officer; Phil Greenberg, our General Counsel; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining us in our third quarter fiscal year 2026 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 two novel small molecules: enobosarm and sabizabulin. The first one, enobosarm, is an oral selective androgen receptor modulator SARM and is being developed as a next-generation drug that when combined with a 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 is 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 will focus on the update of the clinical development progress of enobosarm in our obesity program. We will also provide financial highlights of fiscal 2026 third quarter ended June 30, 2026. GLP-1s have been known to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, this weight loss is tissue non-selective with a significant indiscriminate loss of both lean mass and fat mass. Of the total weight loss up to 50% is attributable to lean mass loss. Although GLP-1 receptor agonist treatment has resulted in substantial weight loss for many patients, the strategy for the next generation of obesity drug should be a combination therapy with GLP-1 receptor agonists to cause patients who only lose fat while preserving lean mass and physical function and bone mineral density for the highest quality weight reduction. Veru has focused on the clinical development of enobosarm for quality weight loss in older patients who may have sarcopenic obesity. This means these patients have both obesity and low muscle mass and are potentially at the greatest risk for reduction to a critically low muscle mass, which may lead to physical function decline when taking a currently approved GLP-1 receptor agonist. In muscle, mass loss -- as muscle mass loss alone does not define sarcopenia, we chose to objectively evaluate and measure physical function by stair climb test, which is a common activity of daily living. Veru completed the Phase IIb quality clinical study, which was a multicenter, double-blind, placebo-controlled randomized dose-finding clinical trial designed to evaluate the 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 greater or equal to the age of 60, receiving semaglutide, which is Wegovy, for weight reduction. As we noted, that the Phase IIb QUALITY clinical trial was the first human study to demonstrate that weight reduction in the older patients who have obesity receiving a GLP-1 receptor agonist put them at higher risk for accelerated loss of lean mass with physical function decline. Further, enobosarm treatment preserved lean mass muscle, which translated into a reduction in the proportion of patients that have a clinically significant stair climb physical function decline when compared to patients receiving a GLP-1 receptor agonist alone. Based on this short-term Phase IIb QUALITY study, we believe there's an urgent unmet need for a drug that prevents the loss of muscle and physical function as well as augments the loss of fat for greater weight loss and at risk older patients with sarcopenic obesity receiving a GLP-1 receptor agonist for weight reduction. Now a common and serious clinical and therapeutic challenge with GLP-1 receptor agonist treatments is that 88% of patients after 1 year on a GLP-1 receptor drug hit what's called 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 had clinical obesity at the time they reach this weight loss plateau of 1 year. One explanation might be that the non-selective loss of muscle caused by weight loss may have reached a point that now stimulates appetite in patients receiving a GLP-1 receptor agonist where they consume more calories, which in turn may cause patients to stop losing weight and hit their weight loss plateau. The clinical issue may be potentially more problematic in older patients that start out with low muscle reserves and who lost further muscle mass with weight loss but remain obese when they hit the weight loss plateau. It has been shown in previous studies that enobosarm directly burns fat and preserves muscle and physical function, which should burn even more calories thus retaining muscle, and appetite stays suppressed while more calories are burned, which could help to break through the weight loss plateau, leading to incremental weight reduction. We are currently conducting and have fully enrolled the Phase IIb PLATEAU clinical trial which is a double-blind placebo-controlled study to evaluate the effect of enobosarm 3 milligrams on total body weight, fat mass, lean mass, physical function, bone mineral density and safety in approximately 200 older patients age greater or equal to 65 who have obesity with a BMI greater or equal to 35 and are initiating semaglutide, Wegovy, GLP-1 receptor agonist treatment for weight reduction. The primary efficacy endpoint of the study is the percent change from baseline in total body weight at 68 weeks, and interim analysis will be conducted at 32 weeks to assess the percent change in baseline lean body mass and total fat mass as measured by DEXA scan. The key secondary endpoints for the overall study are total fat mass, total lean mass, physical function with the stair climb test, mobility disability assessment, bone mineral density and a patient-reported outcome questionnaire on physical function, HbA1c and insulin resistance. The objective of the Phase IIb PLATEAU clinical trial is a focus on the effects 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 treatment to potentially break through the weight loss plateau observed in patients receiving GLP-1 receptor agonist treatment to achieve a clinically meaningful incremental weight reduction as well as reserve muscle mass and physical function by 68 weeks. We recently announced we have completed full enrollment of the Phase IIb PLATEAU clinical trial with 239 patients enrolled. This puts us on track for a near-term milestone, which is reporting the results of the 32-week inter-analysis which is expected in Q1 calendar year 2027. Semaglutide was selected as a GLP-1 receptor agonist for the Phase IIb PLATEAU study to build on Veru's previous clinical experience using enobosarm in combination with semaglutide in the positive Phase IIb QUALITY clinical study. Further, the clinical data from the Phase IIb PLATEAU clinical trial using injectable semaglutide may support the use of oral semaglutide and oral enobosarm fixed-dose combination in future Phase III clinical trials. The choice for selecting semaglutide was also a strategic one. On June 2, 2026, Veru entered into a supply agreement with Novo Nordisk for this Phase IIb PLATEAU clinical trial. In this agreement, Veru is solely responsible for conducting and sponsoring the Phase IIb plateau clinical study. Novo Nordisk will supply Wegovy to Veru at no charge as required for the conduct of the Phase IIb clinical study. Novo Nordisk provides Wegovy solely for the use within the study under the supply agreement. In return, Veru will provide Novo Nordisk with insights into obesity and weight management trial design, methodology and clinical conduct, including regular clinical study updates, protocol changes and safety updates. While Veru maintains full global development and commercialization rights to enobosarm, Veru has granted Novo Nordisk a right of first negotiation if Veru in the future intends to develop, commercialize or license enobosarm's intellectual property in combination with any Novo Nordisk GLP-1 product, including Wegovy for any indication. For further information, please see Veru's Form 8-K filed with the SEC on June 4, 2026. As for developments regarding enobosarm's intellectual property, the company recently announced they have received from the United States Patent and Trademark Office a notice of allowance for key methods of use U.S. patent application title, compositions comprising selective androgen receptor modulator compounds in combination with weight loss drugs and use thereof for quality of weight loss. The notice of allowance encompasses treatment regimens, where one, enobosarm is concurrently given with semaglutide with the said co-therapy continuing; two, enobosarm is added to initial semaglutide monotherapy with said co-therapy continuing; and three, enobosarm continues to be initiated after semaglutide therapies discontinue. The allowed claims are directed to: one, preservation, restoration and gaining of lean body mass and muscle mass; two, enhancement of fat mass loss, including reducing abdominal subcutaneous and intramuscular fat accumulation to improve body composition and lower body fat content and lower fat mass; three, preservation, restoration and improvement of physical function and the corresponding prevention and treatment of a number of conditions that can result from decreased physical function, such as reducing or treating muscle weakness and poor balance, decreased gait speed, mobility disability, loss of independence, increased risk of falls, loss of physical function, physical disability, poor quality of life, high hospitalization rates and/or increased mortality; four, preservation, restoration or gaining of bone and a corresponding prevention and treatment of bone fractures; five, overcoming and improving insulin resistance; six, improving HbA1c; seven, reduction or treatment to prevent total body gain rebound after discontinuing semaglutide; eight, reduction of or treatment to prevent fat mass gain rebound after discontinuing semaglutide; and nine, treatment to prevent or restore lean mass loss during the rebound after discontinuing semaglutide. When issued, the U.S. patent will have a patent expiry of at least October 3, 2044 prior to the potential application of any patent term adjustment or patent term extension. These allowed claims after the company's worldwide portfolio of patent applications directed to the method of use of enobosarm in combination of weight loss drugs for higher-quality weight loss and incremental weight loss including already issued in enobosarm-specific polymorph competition of matter patents as well as a number of other patent users of selective androgen receptor modulator compounds alone or in combination with weight loss drugs for quality weight loss in chronic weight management patent applications. The company continues to prosecute a number of pending patent applications worldwide covering a number of different weight loss drugs beyond semaglutide. In addition, the patent portfolio of Veru includes patent applications directed to a novel oral modified release enobosarm formulation which if such a patent were to issue will provide patent protection until at least May of 2046. Now Veru is targeting enobosarm for the at-risk older patients with sarcopenic obesity, which is a very large market. The prevalence of obesity in patients who are 65 years or older, is 41.5% and among the 47.4 million patients enrolled in Medicare Part D clients, which is about 20 million potential patients. Reimbursement for weight loss drugs continues to improve with patients over 65 years of age. And according to medicare.gov starting July 1, 2026, Medicare coverage of these GLP drugs, Foundayo tablet, Wegovy injection or tablet and Zepbound to QuickPen only. I will now turn the call over to Michele Greco, CFO and CAO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. Let's review the results for the 3 months ended June 30, 2026. Research and development costs increased to $4.4 million from $3 million in the prior quarter. The increase is primarily due to the increased expenses related to the ongoing Phase IIb PLATEAU clinical study and the wind down of the Phase IIb QUALITY clinical study for enobosarm which was completed during fiscal 2025. This increase was partially offset by a decrease in personnel costs, primarily due to reduced share-based compensation expense. General and administrative expenses decreased to $3.4 million from $5 million in the prior quarter. The decrease is primarily due to a decrease in share-based compensation for corporate personnel and a reduction in third-party consulting expenses. We recognized a gain on the sale of ENTADFI assets of $485,000 in the prior year's quarter, which is based on nonrefundable consideration received related to promissory notes previously due to Veru. 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 Inc. which included payment of Series D preferred stock and warrants. During the current period, the increase in the fair value of the equity securities received was $546,000 due to the realized gain from the conversion of the preferred stock and the sale of the underlying common stock and the change in the fair value of the remaining warrants. Favorable antidilution provisions triggered by the Onconetix reverse stock split during the period contributed to the increase in the fair value. The net loss was $7 million or $0.30 per diluted common share compared to a net loss of $7.3 million or $0.50 per diluted common share in the prior period. Now turning to the 9 months ended June 30, 2026. Research and development costs decreased to $8.8 million from $12.7 million in the prior period. The decrease is primarily due to wind down of the Phase IIb quality clinical study for enobosarm, which was completed during fiscal 2025. Personnel costs also decreased due primarily to the reduced share-based compensation expense. General and administrative expenses decreased to $11.5 million from $15.4 million in the prior period. The decrease is primarily due to a decrease in share-based compensation for corporate personnel and a reduction in third-party consulting expenses. We recognized a gain on the sale of ENTADFI assets of $2.2 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 period, the company recorded a gain of $4.4 million from the increase in the fair value of Onconetix equity securities compared to a loss from the decrease in fair value of Onconetix equity securities of $0.3 million in the prior period. The increase in fair value of the equity securities during the current period is the result of a realized gain from the conversion of the Onconetix preferred stock and the sale of the underlying common stock and a change in the fair value of the remaining warrants. Favorable antidilution provisions triggered by the Onconetix reverse stock split during the period contributed to the increase in fair value. During the period, the company recognized an additional gain on sale of the FC2 business of $351,000 for the net proceeds received from Clear Future in the settlement of the dispute related to a pre-closing tax receivable and liability, which resulted in income from discontinued operations. In the prior period, there was a net loss from discontinued operations of $7.2 million which relates to the operations of the FC2 business during the period and the loss on the sale of the business. The net loss was $15.1 million or $0.68 per diluted common share compared to a net loss of $24.2 million or $1.65 per diluted common share in the prior period. Looking at the balance sheet, as of June 30, 2026, our cash, cash equivalents and restricted cash balance was $23.9 million compared to $15.8 million as of September 30, 2025. On both June 30, 2026 and September 30, 2025, there was $54,000 of restricted cash related to the sale of the FC2 Female Condom business. Our net working capital was $21.1 million on June 30, 2026 compared to $11.1 million on September 30, 2025. The company is not profitable and has had negative cash flow from operations. Based upon the company's current operating plan, our cash, as of the issuance stated in these financial statements, is expected to be sufficient for the company to fund operations beyond the interim analysis in the Phase IIb PLATEAU clinical study. During the 9 months ended June 30, 2026, we used cash of $20.6 million for operating activities compared with $24.6 million used for operating activities in the prior period. We generated cash from investing activities of $5.3 million for the 9 months ended June 30, 2026 compared to $18.9 million in the prior year period. The cash generated in the current period represents proceeds from the sale of Onconetix equity securities of $5 million and $0.4 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 $2.2 million from the sale of the ENTADFI assets and proceeds of $0.4 million from the sale of equity securities. Net cash provided by financing activities for the 9 months ended June 30, 2026, was $23.3 million which was the proceeds from the underwritten public offering, net of commissions and costs. We used cash and financing activities for the 9 months ended June 30, 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. Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

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

[Operator Instructions] Our first question comes from Leland Gershell with Oppenheimer.

Glad to hear all the progress with the PLATEAU study and so forth. Just question from us on the IP, the new patent on the use of enobosarm -- in combination with enobosarm. I'm just wondering, obviously, that reflects of course, your development of the compound in the trials, but as the GLP-1 class broadens and delivery modes expand with now the orals, as you mentioned, Foundayo and other GLP-1 plus other mechanisms being incorporated in the same medication, just wondering about the ability for you to broaden that patent or have additional IP that could cover other agents as they come along, given that people will likely look to use enobosarm should it be approved with those other agents.

Yes. So first of all, it's a great question. So the first question is why is this patent so significant for our company, and then second, what does it mean for the other things that we're prosecuting at this point. So the first part is enobosarm in combination with semaglutide is a brand new -- the combination with a weight loss drug is a brand-new concept. The weight loss drugs took us by storm, and we immediately found out that weight loss drugs, you end up with a situation, where you lost lean and lost physical function, in comes enobosarm. So the first part was to elbow our way in to make sure that we had a method of use path going forward in combination with the enobosarm or with enobosarm being given after a patient stops a GLP-1 because they want to be [ rescued ]. And so we're very, very broad in the patent applications to include all weight loss drugs. If you look at the title of the application, the title of the application says weight loss drugs. But this is a one-two punch. The first punch is to get out there and show we can put a stake in the ground and get it, and that's why this is so significant. We've got a wonderful notice of allowance with semaglutide with all of the features that you would want to protect enobosarm in combination with semaglutide whether it's oral or whatever form and whatever related to body composition and whether you give it with semaglutide or before, or somebody is already on semaglutide, somebody stops semaglutide. These are all things that we just didn't know from a patent protection standpoint, we would get. We did. And it's no surprise that we have patent applications pending for the weight loss class beyond GLP-1s, and so it's not just GLP-1. So it takes time to prosecute patents, but this is the first major break to show that -- who thought that enobosarm in combination with a weight loss drug would have these kinds of effects. And the patent office clearly sees this is as novel and not obvious. And so that's a big breakthrough for us, so stay tuned as we get our patent portfolio more mature. But this is a big, big break because this is the first time we were able to pick up this whole area. And from a commercial standpoint, now you have a patent in a major market just waiting for the additional patents to make their way through the system. So yes, the idea is to be broadly used. But with that said, our -- as you said, our clinical development is with semaglutide at this point, and to have that all covered initially is important for the company. And that's why I'm happy the semaglutide one came first because we're doing semaglutide in our clinical development program at this point. Does that make sense?

Yes, that's great.

In fact, and as I think about it, I think the patent is one of many things that happened this quarter that we should pay attention to and take notice. So for example, when we first started out, the idea was you would try to preserve muscle and burn more fat for all patients. And remember, we were the company with our previous experience in frailty and cancer wasting saying that the older patients will be more at risk, and that's what's happening. The field is moving in our direction where people are saying younger patients, we're not quite sure what it means, but it's non-selective weight loss, but everybody agrees that older patients is a problem. And of course, we have data that we've presented that shows that they have a 45% decline and greater than 10% stair climb power in patients on a GLP-1 alone if you're over the age of 60, so it's a real problem. And so we're seeing the fuel kind of move near our direction, which is important because at the end of the day, when you have a commercial product, you have to have a commercial product for a specific population, and so the specific population is now being defined by the clinical trials that we're doing, so you can almost see what the label will look like. I mean you're not going to have a situation where you're going to give a drug like this to everybody all the time. The FDA wants you to pick a patient population, that's where we're spending a lot of time defining. Now with that said, not only is the indication coming our direction, but also we have a near-term milestones now by having the trial completely enrolled with 239 patients. Our first milestone coming up is Q1 2027. We will have the interim look. And by the way, by Q4 2027, we'll have the final data, so this has gone from, oh, they're not going to have news, to we've got news coming up pretty soon, and this is important. Another thing that you have to take notice is we now have a clinical supply agreement with Novo Nordisk, which is a direct channel into the Novo Nordisk conglomerate, I guess, is the best way to say it. And as you know, there's two big players, it's Lilly and Novo, and everybody else is trying to get into the space and by now Novo and Lilly have staked out 15% weight loss to all way to 28% weight loss with their pills or their injectables. And anybody else coming in, the 80 companies or so that are developing have to do -- if they do less than 15% weight loss, they're dead in the water, and in between -- if they're greater than 28%, that's great, but if it's between 15% and 28%, they're not adding anything to what's already available commercially by Novo and Lilly. So you have to have something else, and something else is where enobosarm comes in because if you can make the weight loss between 15% and 28%, 100% fat and preserve muscle and improve physical function, then that could be interesting. Finally, as we mentioned in this call previously in the answer to your question, it's a big deal that we picked up a patent method of use patent in this space and it allows us to put a stake in the ground for enobosarm where the patent office considered it novel and non-obvious and it allows our patent portfolio to go to 2044 of just this asset with this patent. So 2044 is a long time, and again, we're very, very excited about that development. The market is still massive. People said, "Why are you slicing the market?" It's a massive market, as I said in my comments, prepared comments, 41.5% of the 47.4 million people in Part D of Medicare, part D is the oral part, and if you buy the drug in the pharmacy, and I guess injectables to fall in that same category if you buy it from the pharmacy, and that's 20 million-plus people. And Medicare is moving in a direction now that they're paying for the weight loss drugs. And so if we had a drug that preserves physical function and does the things that we're showing enobosarm can do, we would be in the same category, and it should be something that Medicare would want to pay for, so the big move is they've now swung in a direction to pay for obesity drugs, which is a big deal. So a lot of things happening to take notice, and we're ahead of the pack at this point. And we're highly focused on what is that commercial population that we need to understand the best benefit initially for enobosarm in combination with the GLP-1.

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 everybody who joined us on today's call, and I look forward to updating all of you on our progress on our next investors call. Thank you again.

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