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. I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc.'s Director of Investor Relations. Please go ahead.

Good morning. The statements made in 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 we need 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 view its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Dr. Mitchell Steiner, Veru Inc.'s Chairman, CEO and President.

Thank you, Sam, and good morning. With me on this morning's call are Michele Greco, CFO and CAO; Phil Greenberg, Executive Vice President, Legal; and Sam Fisch, Director of Investor Relations. Thank you for joining our call. Veru is an oncology and urology biopharmaceutical company with a focus on developing novel medicines for the management of prostate cancer. Today, we will update you on the clinical development of our drug pipeline and the commercialization of our products as well as provide financial highlights for the second quarter fiscal year 2020. Here is a brief update on the advancement of the prostate cancer drug pipeline. VERU-111 in prostate cancer; we have made significant progress in the clinical development program for VERU-111, a novel proprietary first-in-class, oral targeted antitubulin agent for men who have metastatic castration-resistant prostate cancer and have also become resistant to a novel androgen blocking agent, enzalutamide or abiraterone but prior to IV chemotherapy, also referred to as the pre-chemotherapy stage. Unfortunately, there is a large number of these affected men. According to published scientific reports, about 15% to 25% of men who have metastatic castration-resistant prostate cancer and started treatment with a novel androgen blocking agent will not respond at all to this therapy, and about 75% to 85% of men will initially respond to treatment with an androgen blocking agent, but their cancer will start progressing in about nine to 15 months. So essentially, within 12 months, the majority of these men will have tumor progression and a new orally available drug with a different mechanism of action that could be prescribed by urologists and medical oncologists, like the investigative drug VERU-111 is greatly needed for these men. The Phase 1b portion of the Phase 1b/2 clinical study enrolled 39 subjects from 7 clinical sites in the…

Thank you, Dr. Steiner. As Dr. Steiner indicated, we started off the year with two great quarters. Let's start our highlights with the second quarter results for the three months ended March 31, 2020. FC2 unit sales totaled $6.9 million compared to $9.8 million in the prior year second quarter. Total net revenues were up 43% to $9.9 million from $7 million in the prior year second quarter. The Company reported quarterly sales growth in its U.S. prescription business and in PREBOOST. Net revenue from the U.S. prescription business was up 168% to $7 million from $2.6 million in the prior year second quarter. Gross profit was up 61% to $7.4 million from $4.6 million in the prior year second quarter. Gross margin increased to 75% from 66% in the prior year second quarter. The increase in gross margin is driven primarily by the increase in the U.S. prescription business. These financial results do not reflect the new tender orders that will be coming from South Africa. We previously announced that we won 75% of the South African tender, representing up to $120 million units over three years for the total tender. This translates to approximately 30 million units per year for our Company and potentially $10.4 million in revenue per year for a total of approximately $30 million over three years. We expect these new orders from South Africa to ship in greater volumes during the third quarter of this fiscal year. Operating expenses for the quarter increased by $1 million to $7.7 million compared to the prior year second quarter of $6.7 million, due to the increase in research and development cost of $1 million. Non-operating expenses were $644,000 compared to $1.9 million in the prior year second quarter and primarily consisted of interest expense and the change…

Thank you, Michele. We have enjoyed yet another strong financial quarter which has allowed us to significantly advance our clinical programs. In fact, we now have had 10 straight quarters of growth in our FC2 U.S. prescription business. Looking forward to the rest of fiscal year 2020 and early fiscal year 2021, we expect our revenues to continue to be strong and growing towards a record year. With the improving performance of the commercial business, we believe that we'll be able to substantially invest in the continued clinical development of our prostate cancer and other cancer drug product candidates as well as to submit the NDA, and if approved, commercially launch TADFIN through Internet sales, which would provide even more revenue, adding to the already growing revenue from FC2 and from PREBOOST/Roman Swipes. We are creating a very valuable commercial business, which includes both the urology specialty pharmaceuticals and the female health company divisions. With the new clinical data from the VERU-111 prostate cancer program, we must prioritize and focus our efforts towards the execution of the Phase III registration program for this unmet need in prostate cancer. This begins by obtaining regulatory clarity from both FDA and EMA on the clinical trial design. We have reached an important Company clinical milestone that well positions VERU as an oncology biopharmaceutical company. We anticipate a steady flow of important positive news with VERU over the next few months to a year; one, for VERU-111 our oral selective antitubulin, we'll report an open label efficacy and safety clinical results from the Phase II VERU-111 and we will meet with the FDA and report on the Phase III clinical trial program. For VERU-100, our novel peptide GnRH antagonist three-month depot formulation, we will complete GMP manufacturing of clinical supply, submit the IND, and we will initiate the Phase II clinical trial. For the Zuclomiphene our oral estrogen receptor agonist, we will have a face-to-face meeting with the FDA -- face-to-face end of Phase II meeting with FDA. We plan to initiate and complete the Phase 2 clinical program for COVID-19 in subjects with high risk to acute respiratory distress syndrome. We'll submit the NDA for TADFIN. We would have secured partnerships with some of our drug products and we plan to continue to demonstrate robust growing revenues for our commercial products FC2 and PREBOOST/Roman Swipes. We're committed to driving shareholder value by transforming Veru into an oncology company. We will initially focus our efforts to providing substantial benefits to the prostate cancer patients by developing and commercializing VERU-111 as well as our other oncology products to address unmet medical needs in the management of the disease. With that, I now open the call to questions, operator?

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

Hi, thanks for taking my questions and congratulations on all the progress. On VERU-111, granted you haven't met with the regulatory agencies, could you perhaps just elaborate about how you are thinking about the Phase III design? Anything you can say maybe around the size, the number of patients, and then how are you thinking about what is the hurdle you think physicians in practice will want to see in that Phase III to use VERU-111 in practice? And then, lastly, maybe just on COVID-19, should we think of this as a potential revenue-generating opportunity for the company or is this going to be similar to what we've seen from other companies where it's really just a public duty type thing? Thank you.

Thank you. All excellent questions. So, let's start at the Phase III design for the -- for VERU-111. So, what I can do is I can refer you to the Alaparib, that's A-L-A-P-A-R-I-B study that's in front of the FDA as we speak. It's very instructive in terms of how we're thinking about our clinical trial. So, this is one, I believe, will get approved. This is a patient population that's similar to our patient population. These are patients with metastatic castration-resistant prostate cancer that have failed an androgen blocking agent. Some of them had chemo, but just some, but it's mostly the same patient population. And the reason I bring that up is because it is a registration trial and the FDA has allowed them to use as an active comparator, patients are placed on an alternative androgen blocking agent. So that means, if you think of our patient population, as they fail castration -- so they are castration-resistant, they are put on an androgen blocking agent either enzalutamide or abiraterone, and then they get randomized to alternative androgen blocking agent. It means that if they start out with abiraterone, they get put on enzalutamide; if they start with enzalutamide, they get put on abiraterone. That's what I mean by alternative androgen blocking agent, okay. And that's your comparator arm, the FDA has allowed that in three of the non-metastatic studies that have been approved, and it's being allowed in this study, so that's why we feel pretty good. The endpoint of that study, just like those other three clinical studies were non-metastatic is progression free survival -- radiographic progression-free survival or imaging-based progression-free survival. Another way of saying that is when cancer progresses and you can see it on either a bone scan or a CT scan, that's…

Great. Thank you very much and congratulations again on every -- all the progress.

Thank you.

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

Hey, good morning, Mitch.

Good morning.

Thanks for taking my questions and congratulations. It's really great to hear of all the terrific progress that you are making, particularly with 111. And wanted to ask about, as you think about that overall development program, in addition to growing into those who are refractory to the most novel androgen blockers, wanted to ask about your thoughts in terms of moving that earlier in the paradigm before you're trying to squeeze that last bit of sort of androgen blocking ability out with those agents. It's harder and harder to get to benefit as you get further down the kind of androgen access with compounds. Wanted to ask about how you might move 111 to be earlier in the treatment paradigm for advanced prostate cancer. Also wanted to ask, in terms of the dose you are going to be using in the COVID-19 program, would that be the same as a 63 milligram that you have for oncology? Thanks.

Great, two good questions. So I'll answer the second -- the second question first. The dose that we're using in the COVID-19 is 18 milligrams. So it's really much lower than the 63 milligrams. We know we get good drug levels with that, but there is a big difference of trying to be an antiviral versus being an anti-cancer drug. So, for anti-cancer drug, you tend to get as close as you can to the maximally tolerated dose. And with an antiviral, we got plenty of drug around the 18 milligrams. And so it will differentiate those two doses. As it relates to your question related to, can you go earlier in the treatment paradigm for prostate cancer? And the answer is definitely, yes. But let me tell you why this is -- what we've learned in the Phase 1b that is critical; critical as you think about going earlier. If we were an oral cytotoxic drug that had a side effect profile similar to other ones like platinum-based and taxane based, and just thinking -- just think of all those IV outside of toxic agent, those drugs are given by medical oncologist for a reason. They're given to the medical oncologists because the patients have to be pre-medicated with anti-histamines and prednisone because of the hypersensitivity reactions that can threaten their life. The dose limiting toxicities for those kinds of drugs had neutropenia, which means that if you have neutropenia, you have sepsis and ICU visits and unfortunately patients can pass away from the -- from the sepsis. You have neurotoxicity, you have -- basically aside of adverse side effects and a series of side effects that really need to be managed by the medical oncologists, okay. So, in that setting, even if you want to go earlier, you…

Thank you.

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

Thank you for taking my -- Hi, thank you for taking my questions. So my first question is, for the trial -- for the -- for the trial in COVID-19, do you plan to enroll patients who have received Remdesivir or any other drugs, who are currently being evaluating the clinical trial, but did not respond?

Yes. At this point, no, because that's, that would be -- first of all, for a couple of reasons. First of all, there is tons of patients out there, unfortunately. Even though New York has shown a flattening, I don't say a reduction but a flattening of the curve. What we're seeing in the rest of the country between those areas because that's where we're running the clinical trial, where they have a CRO in place. We've already done the feasibility. So we have a real keen sense of what's really happening in the country, and this has not gone away. I don't care what Trump is saying about, let's reopen the schools and all that stuff. I'm not trying to be political here, I'm just trying to be realistic here. Just go look at the newspapers, those numbers are still pretty damn scary. So they will not be a shortage of patients and so if you want to study to be informative, it's best to do it in patients that will give you the information. And so the idea would be that, we would take patients that have been deemed by the critical care specialist to be at high risk for acute respiratory distress syndrome and we know who those patients are. It's based on age, it's based on co-morbidities. They've already started to show they're moving down the path of trouble and they're hospitalized. And so that's going to be the patient population that -- quite frankly, if that patient population is addressed, then we're going to feel much more comfortable reopening schools and reopening businesses and that kind of stuff. And so that's the ones we're focusing. Remdesivir, and quite frankly, if you take a step back, Hydroxychloroquine and azithromycin combination has been shown over and over…

His line had disconnected. I'm sorry. So...

No worries. He'll call back.

So, we can go to next questioner if he come -- comes back reckons back, right, to Peter McMullin of Peter McMullin Consulting. Please go ahead.

Hey, good morning, Mitch. How are you?

Good morning, Peter.

Two quick questions. One, I think Malaysia has done a pretty good job of controlling COVID-19. Can you give us a status report on the factory or your source of cash flow? And is it open? Will it open? Is it producing female condoms? Second question is -- second question, just you got both VERU-111 is making great progress, there is other people developing competing drugs out there, some of which have better balance sheets. Can you just talk about how you feel about the competitive profile in the future?

Sure. So the first question has to do with, how did COVID-19 affect our supply chain, so to speak? So when we saw -- when we saw that things were to starting to -- I mean, remember this happen rapidly where all of a sudden in February, everybody is sitting in a picnic and then by March the bottom falls out of the market. And what we saw was -- we saw that, and as you know, our number one area of high margin business is the U.S. So the first thing we did is we stockpiled FC2 prescription in 12 count supply. 12 pack supply in the U.S. and we did so that we end up stockpiling of what we thought we would need for the whole year. So we really dodged a bullet there. So there was no interruption at all in the U.S. business. In the ex-U.S. business, we were able to meet the needs of most of the large governments, but some of the large governments shut down. So South Africa and Brazil, I mean just read the newspapers, they're freaked out and having some real issues. So even though we made it, we couldn't ship it because they couldn't have -- they didn't have the people at work to do the testing to bring the product in. So you'll see for Q3, our fiscal year Q3, we had a slight decrease in units. We had a decrease in units outside the U.S., but the units in the U.S. will allow us -- allowed us to make our money; and so we have a good quarter. And so, next quarter, we're going to see an overabundance and over representation of public sector because now they're opening up and taking product. As it relates to the factory,…

Thank you.

All right, thank you.

And we have a follow-up from Yi Chen from H.C. Wainwright. Please go ahead, sir.

Thank you for taking my follow-up question. I just wonder, are there any more data published on the antiviral property of VERU-111. And also, do you think, based on the mechanism of 111 that it can treat moderately ill COVID-19 patients as well.

Yes. So the first -- I think the first -- I think the first part of your question was whether there is any -- VERU-111 animal data for COVID-19?

Yes, thank you.

Yes. So, no, the answer is no. And we do have -- what we do have is not for COVID-19 specifically, but we have done and -- but there are data showing that colchicine has antiviral and anti-inflammatory activity and there are data that show that the way colchicine works is that it works by microtubule depolymerization agents. So it binds to microtubulin in the, guess what, colchicine-binding sites and that's why they named in that. And so, the primary mechanism of action is inhibiting microtubules. We have done in vitro and in vivo; in vivo in cancer models but in vitro, we have done those assays where we compete against colchicine and we bind to the colchicine-binding site. We have more -- we have, in the in the published data we show that we are -- we're more potent than colchicine in preventing microtubules polymerization in vitro. We also have molecular data showing where our -- where our VERU 111 binds to alpha and beta tubulin. So we've done mass spec and molecular modeling, and we know exactly how it fits in the microtubule and we fit exactly where colchicine fits. So it's not surprising that we're basically a derivative colchicine and more potent with a better side effect profile because of drug-drug interaction. So I don't think we're making a big leap from that standpoint. So that's why I think it's worth testing it. As it relates to your second question, which is -- so again, strong, strong rationale and I do think it's the anti-inflammatory component that's going to win the day here. As it relates to your second question; yes, I mean our situation is that we have a cancer program and we've been developing VERU-111 as a cancer product. And so it makes sense that the first place to start is in patients that are severely ill and -- or potentially could become severely ill. But as in most antivirals and drugs of this sort, once you've demonstrated in that patient population, then it makes sense to go earlier. And so we would do the same thing. But we would start with getting a signal in a patient population that are heavily dependent on whether an inflammatory reaction occurs because of the underlying virus infection and in an endpoint that's not ambiguous that you can clearly say it's related to the drug. If we can do that, then I think the program will take off on its own.

Thank you. And just lastly, I just want to confirm, you currently do have enough drug to support both prostate cancer and COVID-19 trials, right?

Correct. We have plenty of drug. But we do not have enough drug to support the United States or the world in the event we're successful. With that said, it's not -- it doesn't take long. It is a small molecule, so there is nothing complex about it. And we've already identified sources that can help us do that and help us scale up. So we are ready for it, in the event that we get news back this summer that we have activity and in which case you do -- you do scale up at the same time you're doing your Phase III, because when the Phase III is done, you have to be ready for distribution. You saw how quickly Remdesivir had to get distributed, but we're not going to make that decision until we see signal and usually you don't make -- you don't do the expansion unless you find non-dilutive money from government agencies that will help you do that. So that's how we're thinking about it.

Got it. Thank you very much.

Okay.

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. I appreciate you joining us on today's call and I look forward to updating all of you about our progress in our next investors call. Thank you.

The digital replay of the conference will be available beginning approximately noon Eastern Time today, May 13 by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You will be prompted to answer the replay access code which will be 10143040. Please record your name and company when joining. The conference has now concluded. Thank you for attending today's discussion. You may now disconnect.