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

Thank you, operator, and good morning. This is Dr. Mitchell Steiner, President and CEO of Veru Inc. And joining me are Michele Greco, CFO and CAO; and Kevin Gilbert, Senior Vice President, Corporate Development and Legal. Today, we will provide an update on the clinical development of our drug pipeline; commercialization of our products, as well as provide financial highlights for the first fiscal quarter 2018. We are making good progress as Veru transitions to a urology and oncology biopharmaceutical company. Our strategy for revenue growth is to have several near-term and mid-term drugs under clinical development progressing at the same time to ensure that in the near-term we file several NDAs and commercial multiple drugs in urology and oncology. Over the next 18 months, we expect to file three NDAs for four drugs. First, we have the proprietary new slow release granule formulation of Tamsulosin in two drug products, Tamsulosin DRS, extended release granules for oral suspension and Tamsulosin XR capsules. These two new drug formulations address two important clinical challenges that are found in current branded and generic FLOMAX formulations. First, FLOMAX is only available in a capsule form. And according to FDA package insert, FLOMAX capsules should not be crushed, chewed or opened, because it may lead to serious side effects of low blood pressure and dizziness. The new slow release granule formulation, Tamsulosin DRS, may be given to the 60% of men in long-term care and 15% of men in the community who have difficulty or cannot swallow pills and cannot take FLOMAX, as instructed by FDA. A second clinical challenge with FLOMAX is that it has a food effect, meaning that a greater amount of Tamsulosin drug gets rapidly absorbed, resulting in higher drug blood levels when given on an empty stomach, and must be…

Thank you, Dr. Steiner. This quarter, we experienced the decline in the public sector volumes. This decline is primarily driven by the timing of public sector tenders and orders from two main customers, Brazil and South Africa, and is also in part impacted by the U.S. political and geopolitical donor uncertainty resulting in a downturn in our order frequency and in the order size from some customers such as UNFPA and USAID. For the first quarter of fiscal 2018, the FC2 unit sales totaled 4.4 million compared to 6.4 million units in the prior year first quarter. Net revenues for the first quarter totaled $2.6 million compared to $3.2 million in the prior year quarter. Gross margin was 51% for both quarters. Operating expenses increased by $5.2 million to $8.8 million compared to the prior year quarter. Included in operating expenses is $3.8 million related to the settlement agreement we entered with our Brazilian distributor, Semina, during December of 2017. Excluding the settlement agreement, the increase in operating expenses is primarily driven by the increased research and development costs of $1.9 million. For the quarter, we recorded a tax benefit of $3.2 million, compared to tax benefit of $530,000 in the prior year quarter. The bottom line results for the first quarter of fiscal 2018 was a net loss of $4.3 million or $0.08 per diluted common share compared to a net loss of $1.4 million or $0.04 per diluted common share in the prior period. Looking at the balance sheet. As of December 31, 2017, our cash balance was $3.6 million and our accounts receivable balance was $3 million. Our net working capital was $4 million at December 31, 2017 compared to $4.8 million at December 31, 2016. During the quarter, we generated $300,000 from operating activities, compared with $1.2 million in the prior period. We continue to make significant progress on our clinical programs. We are very optimistic about the U.S. market, for FC2 and expect the global public sector to return closer to historical volume. Now, I’d like to turn the call back to Dr. Steiner

Thank you, Michele. We have established the foundation to make Veru a leading urology and oncology biopharmaceutical company. We have several near-term and mid-term products progressing at the same time to have multiple shots to have drugs filed and launched in urology and oncology. We aspire to file at least one NDA each year for the next five years. This will provide the engine for growth as we continue to develop and commercialize existing drugs in our portfolio. We are excited about VERU-111 as a noble targeted oral therapy for multiple types of cancer and look forward to starting the clinical trial this year and sharing the preclinical data at multiple scientific meetings. We will continue to seek non-dilutive ways to finance clinical development and commercialization in part through PREBOOST and FC2 sales. We will drive shareholder value through a lower cost and expedited clinical development for large market opportunities in urology and oncology. We are committed to becoming a leading urology and oncology biopharmaceutical company. With that, I’ll now open the call to questions. Operator?

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] And our first question will come from Yi Chen of H. C. Wainwright. Please go ahead.

Thank you for taking my question. My first question is, could you be able to tell us some -- some color on the design of the coming Phase 2 trial of VERU-111?

You mean the Phase 1/2 trial of VERU-111?.

Sorry. Yes, Phase 1/2 trial for 111.

Yes, I’d be happy to. So, VERU-111, we are in discussions with Johns Hopkins right now, and working with them to design the protocol. We chose them because, if you look at the literature on castration-resistant prostate cancer, one of the sub-types that’s most important is AR-V7, which is a splice variant that really does not see any benefit from the hormonal drugs and this marches right through. So, it’s a sub-type of cancer that these men have that of resistant from the beginning, quite frankly to secondary hormone therapy. So, the folks at Hopkins that actually identified and have written most widely on this sub class of cancer, prostate cancer are helping us. Okay? Now, with that said, we’re going to be broad, we’re going to go after men in a Phase 1/2 setting, first safety, where we do almost a 3 plus 3 design to make sure that as we escalate the oral doses of this medicine that it's safe. And then, the second part we’ll be looking for efficacy. And because the way that these men present with progressive prostate cancer is by an elevated PSA. Then, PSA is a perfect biomarker for us to determine whether the patient is going to respond to the medicine. And typically, we look at PSA response of greater than 50% reduction in PSA at 90 days or 12 weeks. And so, the design we’ll be looking at PSA responses, and of course, we’ll be looking at metastatic disease and all the other end points that you would expect for prostate cancer. So, the design is roughly -- we’re still working out the exact numbers, but somewhere between 16 to 24 patients in the initial safety portion, but we’ll be collecting efficacy data at the same time. So, if all goes…

Thank you. My next question is, will Tamsulosin DRS be marketed by separate sales team that is currently focused on FC2? Thank you.

Good question. So, the answer is -- the first question is, what is our strategy? So, the strategy at this point is to focus on long-term care. Long-term care is basically nursing homes, both short-term and long-term nursing home care, but it also means home health. Because it turns out, a lot of the older folks choosing to be taken care at home. And so, it's much bigger than what you and I are thinking about, just having a hospital facility. With that said, we do know that about three GPOs manage about 80% to 90% of these nursing home formularies. And so, think of the long-term care business is almost like the hospital based business. In the hospital based business, you can typically cover the entire United States between 12 and 18 account managers or salespeople. And so, it's not a big sales force. So, the idea is that the infrastructure that we have built to support FC2 as a prescription product, much of that infrastructure can also be used to help us support the launch of Tamsulosin DRS in long-term care. And part of the reason why we're moving to a contract sales force, where we don't have to pay them their salaries and bonuses, it’s all done by commission. So, there is no additional fixed cost for us it to allow us to take our 12 sales people that we have now and begin to cultivate them to help us with the Tamsulosin launch. And so, you don’t need a big number. And interestingly, Solifenacin DRS, which is the slow release granules with the overactive bladder drug would also go into that same channel. And so, you would be able to have these 18 account representatives that we would have in our Company going into long-term care, have two products in their bag, if you will, as they go and talk to long-term care facilities. As it relates to urology and primary care markets, which a large, our initial approach would be to see we can find a partner and co-promote that into those areas. We just have to see where our cash position is at the time and what is the best way to gain as much market share as possible. And initially, we’ll be focusing on long-term care and no additional headcount because we can use our existing headcount.

[Operator Instructions] Our next question comes from Peter McMullen, [ph] a Private Investor. Please go ahead.

Hello, Dr. Steiner, how are you?

Hey, Peter. Good to her your voice.

Yes. I got just a couple of questions here. First of all, on the write-down, it took -- does that mean Brazil doesn’t owe you the money or it will be just later than coming, can you just describe that little bit? And I guess, the second thing was the ambitious plans, just how you are going to finance the growth?

Yes. So, the first part is, just to give you a little color, when we started the -- when Aspen Park Pharmaceuticals was acquired by The Female Health Company approximately 16 months ago, we were looking at accounts receivables in Brazil of approximately $13 million to $14 million. Brazil then said to us that they planned to pay us half of that in calendar year 2017, and Brazil paid about half of that in calendar year 2017. Then, as you saw the political landscape became pretty unstable in Brazil, Temer was being vote of confidence and they found a corruption tape and the whole world was upside down. All the plans, formidable plans that Temer had, started to fall. And as you know with the Brazil politics, when a leader falls, then everybody doesn’t stay behind him. As a result, we started getting signals from Brazil that yes, we are going to pay because Brazil has never defaulted, but it may be delayed. And so, in our world, that delay is money. And so, is there a way for us to do something about it? So, our feeling was instead of leaving us a Brazilian overhang for accounts receivables, is there a way that we could settle, and so we settled and we settled. So, literally right now, as far as the accounts receivables are concerned, we’re settled. And when we go into the new tender, we’re going to be very, very aggressive to make sure that we’re not putt in this position again and the way that we handle with our distributor in Brazil and the way that distributor in Brazil is going to try to work with the government. 50 million units over a year coming from Brazil was a big deal for us. And so, again, Brazil ended up paying, but we got to figure out how we can get that money sooner rather than later. So, that’s kind of the story behind Brazil. And part of the reason why it looks like we have a bigger loss this quarter is because we had to take -- what's the word I’m looking for, we had to record that settlement in the way that it’s reflected. But really, it’s good for us because we end up getting the money now. Michele, do you want to add anything to that or…?

Sure. So, in the P&L, we took the loss of $3.8 million right before the end of the calendar year December 31st. They owed us the remaining $3.8 million, they paid $2.2 million and the remaining balance of $1.6 million is going to be collected before the end of this month and then we’ll be all settled with Brazil.

The second question has to do with how you -- gosh, guys, how you’re going to finance all this. Okay? And I can remember over a year ago when we started outlining this ambitious program, everybody said, my gosh, these guys are going to have to go out and raise lots and lots of money, and that was the mood out there in the investment community. We are now 16 months later, and we have not raised a red cent. And so, that’s not true. What we’ve been able to do is two things. One is, we have a product portfolio that does not require a lot of investment because we are doing-- three of our products have bioequivalence studies alone, and those are typically 36 patients, a non-expensive study. But the thing that’s important is that we can file NDAs and these are going after big markets. So, we went after products that we didn’t have to put big amounts of capital in to begin with. As you know that pathway is called the 505(b)(2) pathway where the FDA lets you reference a lot of the current existing information. So, for example, the Tamsulosin, for Solifenacin, for Tadalafil, CIALIS, we do not have to prove clinical efficacy or safety. It’s purely blood levels. Okay? With 944, which is a Phase 2 study, and I think I have said publicly that study is about a 120 patients; we have $4 million study over 18 months, not a big number. We do have to show efficacy and safety. And for VERU-111, which is the cancer product, that’s a Phase 1/2, that’s going to be a handful of patients. And any signal that we see there is going to change the enterprise value of our Company. So, we are being incredibly aggressive…

As this happens, don’t you have kind of a standby financing mechanism in place?

Yes, we do. And those, we haven’t touched it, and that’s -- we have Aspire Capital agreement of $15 million, basically it’s a put. And it's valuable to us, because it just means that we're being fiscally responsible in a sense that when we authorize new shares, second, we put a shelf up; I’ve touched it, but we put a shelf up; and finally, we put a mechanism in place that we can allow us to continue to finance internally, knowing that we're good in the future, if we need to be. And that can be opportunistic for us, because that's going to be an efficient way to do something if we need to. But, yes, so that's in place to another lever. So, our thinking is, let's focus on using our own resources coming from our own products and putting the mechanisms in place, by which to make it look strong going forward that we're able to finance without necessarily having to push those buttons, right now.

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. Thank you, operator. I appreciate everybody for joining us on today's call and I look forward to updating you all on our progress in our next investors call. Thank you so much.

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