Good morning, ladies and gentlemen, and welcome to Veru Inc. Investor Conference Call. All participants will be in a 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'd now like to turn the conference over to Mr. Sam Fisch, Veru Inc's Executive Director, Investor Relations and Corporate Communications. Mr. Fisch, please go ahead.

Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include but are not necessarily limited to, statements of the Company's plans, objectives, expectations or intentions regarding its business, operations, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings, as well as in our press releases from time to time. I'd now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's, Chairman, CEO and President.

Good morning. With me on this morning's call are Michele Greco, CFO, CAO; Michael Purvis, Executive Vice President, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Veru is dedicated to the development of novel medicines for the management of two of the most prevalent cancers, breast cancer and prostate cancer. One of our anti-cancer drugs sabizabulin has dual antiviral and anti-inflammatory effects. So it is also being developed for the potential treatment of hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome, which remains a global dire unmet medical need. The company has a commercial sexual health division called UREV, which includes two FDA-approved products, ENTADFI, a new treatment for BPH, which is Benign Prostatic Hyperplasia and the FC2 female condom, internal condom for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections. The revenue from the sexual health division is being used to largely fund the clinical development of our late-stage drug candidate assets, which aim to address multibillion dollar premium market opportunities. This morning, we will discuss Veru's business strategy, the clinical development of our drug pipeline and the commercialization of our products. We will also provide financial highlights for our first quarter fiscal year 2022. COVID-19 global cases, hospitalizations and deaths are at the highest level since the start of the pandemic. Some of the antibody drugs are not effective against the Omicron variant. It is clear that an effective and safe oral therapeutic that prevents deaths in hospitalized patients with moderate to severe COVID-19 infection who are at high risk for acute respiratory distress syndrome is desperately needed. We strongly believe that sabizabulin with its antiviral and anti-inflammatory properties and a favorable safety profile can be…

Thank you, Dr. Steiner. As Dr. Steiner indicated, the company has a number of significant clinical development process. Let's review the first quarter results. Net revenues were $14.1 million compared to $14.6 million in the prior year quarter. The prior year quarter included net revenues of $863,000 related to PREBOOST, which the company sold on December 8, 2020. The company reported FC2 sales growth in its U.S. prescription business with net revenues up 27% to $11.6 million from $9.1 million in the prior year quarter. Net revenues for the public sector business were $2.6 million compared to $4.7 million in the prior year quarter. The prior year quarter included revenues related to the Brazil and South African tenders. Overall gross profit was $11.8 million or 84% of net revenues compared to $10.8 million or 74% of net revenues in the prior year quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our U.S. FC2 prescription business. This quarters 84% gross margin is the highest in the company's history. Operating expenses for the quarter increased to $16.8 million compared to the prior year quarter of $10.1 million. The increase is primarily driven by research and development costs, which increased to $10.1 million from $5.7 million in the prior year quarter and increases in personnel and related costs to prepare to commercialize ENTADFI. During the prior year quarter, the company sold PREBOOST for $20 million, $15 million in cash and $5 million in notes receivable due in two installments over an 18-month period. The sale of PREBOOST resulted in an $18.4 million pre-tax gain. The operating loss for the quarter was $5 million compared to operating income of $19.2 million in the prior year quarter. This change is primarily due to the gain on sale…

Thank you, Michele. In summary, we've had a highly productive financial first quarter, which has allowed us to significantly advance our clinical oncology programs. We've organized our FDA approved products into a sexual health division called UREV. We are now entering our sixth year of growth in our FC2 U.S. prescription business. We are executing on a solid plan to expand partnerships and to launch our own direct to patient telemedicine and Internet pharmacy services portal. We plan to commercially launch ENTADFI also be our own direct to patient telemedicine in international services portal. And we have partnered with GoodRx to drive awareness and prescription conversion. Both programs should allow us to continue the robust growth of revenue from the UREV sexual health division. Having these resources in place will allow us to continue to advance our deep late clinical stage breast cancer and prostate cancer programs, as well as a Phase III COVID-19 clinical study. We are quite pleased to have recently received Fast Track designation from FDA on two of the company's major drug development programs this past month. We anticipate a steady flow of important positive news for Veru over the next few months to one year. We are committed to driving shareholder value by developing commercializing novel medicines, addressing significant unmet medical needs for the management of breast cancer and prostate cancer and being opportunistic by developing sabizabulin for hospitalized COVID-19 patients and high-risk for acute respiratory distress syndrome and death. With that, I'll now open the call to questions. Operator?

Thank you. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] The first question today comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Hi, thanks for taking my questions and congratulations on all the progress. Maybe just first on the COVID program, just given that to the near-term catalyst. How do you view the bar having shifted or not on the COVID endpoint, especially around mortality? And then along those lines, do you think that the secondary endpoints alone could support an approval here?

So just say the first part about mortality, again. So what about the primary endpoint?

Do you think that agencies have shifted their view on endpoints right versus so if you don't, if not successful on mortality? Do you think these secondary endpoints alone could still support an approval from the regulatory agencies?

Yes. Got you. So the answer is I don't think they're switching at all on the primary endpoint. I think that if you've seen some recent activity in some people reporting results and the reporting results now on their primary endpoint. So at the beginning of any clinical trial, you state your primary endpoint. I'm not saying this to you, but I'm just saying this for the people listening on the phone. You have to hit your primary endpoint. I mean, that's what - that defines success in the trial. And mortality, deaths, I mean, that's about the hardest endpoint, you can't fake a death and deaths is what we're trying to deal with in something as horrible as the pandemic. With that said, no, I do not think agencies are shifting on their desire to see an impact in mortality. And so I think we're good there. However having said that, let me just make one more comment. The other comment is well, let me make this next comment. Don't make the one I was about to make. So to answer your question, there are key secondary endpoints that if you miss mortality and you hit these other ones, there could be a discussion with FDA that these can stand on their own. But that's discussion with FDA. Now, one thing that gives us comfort is as you know, the space has gotten full crowded in pre-hospitalized patients. So patients that are not in the hospital, it's no longer than unmet medical needs. You got the Pfizer drug, Merck drug and others. And so in that setting, there are options. And in the hospitalized setting, what we're learning now the drug, in fact, the FDA has even said with the Omicron variant, that some of these drugs antibody – antibody drugs that are currently out there for people in hospitalized setting should not be used. And so the fact that we got Fast Track designation by FDA for hospitalized patients means it’s still unmet medical need. So in the advance that you have an unmet medical need and you have a secondary endpoint that's successful and you don't hit on mortality, that's a little different than there are other options out there. So in that setting, I think we have a lot of room to talk to FDA with the key secondary endpoints, if that's what you hit it in a setting of an unmet medical need. And again, the unmet medical need is not what we're saying. It's the fact that we just got FDA Fast Track designation means that they also because remember they see drugs in development and they see drugs that are approved. And so that that gives us some comfort and we continue to work in a very important area of unmet medical need.

Great. Thank you very much.

Thank you.

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

Hey, good morning. Thank you for taking my questions. I want to ask Mitch with respect to your developments in breast cancer being that the androgen receptor now appears to be a tumor suppressor in breast cancer. Want to know, as you divide between those with their expression above 40% and below 40%. How that breaks down with respect to the size of the fractions of the population with breast cancer with those levels of AR expression? Would that thinking be correct that more advanced ER+ HER2- breast cancer would be more enriched in the AR, given that those tumors are likely more resistant to therapy given their expression of AR? And also want to ask with respect to ENTADFI, to the extent your market research may indicate. What potential peak revenue might we expect for that product? And given that you're selling that through the telemedicine channels, your own that you're setting up and others kind of give us a sense of what your margins maybe on that product? Thank you.

So the first question basically is trying to understand the patient population of AR positivity. So the way to look at it is that had made this comment before that men and women are born with the same machinery to make breast tissue. So why is it that women develop breast tissue, men do not? And the answer is the same machinery means there is an estrogen receptor and there is an androgen receptor. So in women, estrogen and novel androgens develop breast; in men, androgens and novel estrogen, you don't get breast. So it's a tremendous suppressive growth. So it's not surprising enough to 90% of breast cancer tissue will have an androgen receptor expression. And so now the question becomes, and the question you're asking is the enrichment part, in other words, greater than 40%, less than 40%. So when you look at the numbers, and this is based on our Phase II, so about 85% of breast cancers are going to be ER+. And of those 85% that are ER+, about half of those will be AR+ greater than 40%. And so it's still a huge market and pretty prevalent target that we can have an opportunity to hit. So 50% would be AR less than 40 and less than 50% would be AR+ greater than 40%, and that's the reason why we have sabizabulin trial as the sister trial because we know when we go out there and start looking for patients with metastatic AR+ breast cancer, that half of them – roughly half of them are going to be candidates for enobosarm. And so we've got another active agent in breast cancer, so why not allow that patient to have a choice of door number one and door number two. So door number one, if…

Great. Thank you.

The next question comes from Chris Howerton with Jefferies. Please go ahead.

Hi. Good morning and thanks for taking the questions. Really appreciate all the progress and the color this morning, Mitch. Maybe just two questions for me. One would be, could we get a little more color around the strategic decision to no longer pursue triple negative breast cancer with just competition in terms of like Trodelvy and other options make that less commercially viable at this point? Or I guess, what is some of the other thinking around pausing that program? And then the second one would be abemaciclib, could you just give us some thoughts around the market share and why that's the right partner for enobosarm and what that might mean for the commercial opportunity, let's say, second-line HER2+? Thanks.

Yes. Two very, very good questions. Okay. So let's start with the first one. The first one is purely a prioritization decision. So we still believe that triple negative breast cancer is a major market. If you look at Trodelvy, they developed a compound for patients with metastatic triple negative breast cancer that have failed two systemic chemotherapies. And that drug got bought by Gilead for $24 billion. So there's a market there, and we have two oral therapies enobosarm and sabizabulin, and we don't see the neutropenia and all the other stuff and the black box stuff that you see with Trodelvy. So we think there's a real opportunity, but we had to make a financial decision. And the financial decision was that, as I mentioned in the previous question answer is, I don't know what's happening out there in the biotech space. I think a lot of companies are going to be in trouble. They think the markets are wide open for them to raise money. So our thinking is we've got money in the bank, so that is a real reason why we need to be prudent with our resources and prioritize our resources because it's one thing to have no money in the bank and prioritize and nothing to have money in the bank and prioritize. And so if you look at our burn rate, “the cash we use”, it's small. Okay. Why is it small? Because we've offset it with revenue coming from our sexual health business. So in order to make sure until I see the things open up, then we've got a lot going on. We got three or four Phase III and we got a Phase IIb, and you've got the other ones that soon can be a Phase III. So we…

That makes a lot of sense. And I really appreciate it. Thank you, Mitch.

Thank you.

The next question comes from Yi Chen with H.C. Wainwright. Please go ahead.

Thank you for taking my questions. My first question is, could you tell us whether the enrollment speed for the ARTEST study and the VERACITY study is meeting your expectation?

Yes. The answer to your first question, the ARTEST and VERACITY studies are on – both of them are enrolling on track.

Got it. Thanks. And could you tell us what you expect to occur on expectation for revenue from ENTADFI for this fiscal year?

Yes. So thank you for the question. So I answered to somebody else, I think Leland, also asked that same question. We are not giving guidance, as what we think that revenue will be. What we have said is a couple things, we said that there are 45 million prescriptions filled each year for BPH. We know that almost all BPH products are going to cause some sort of sexual dysfunction. We know that the finasteride products have impotence. We know the combination of finasteride and tadalafil, which is ENTADFI does not – we do not see the impotence. And so we think there's a real opportunity to convert these patients to the combination therapy ENTADFI. But we also said that the BPH market looks like it's about a billion dollars and about 2% to 3% of that's branded products, which make up about, $300 million or $400 million of that $1 billion. And so if we were able to convert 1% or 2% of that market towards ENTADFI, it could be big.

Okay. And regarding the triple negative breast cancer program, do you think there's a chance you might reactivate the program in the future and how soon make that happen?

Yes. So as it relates to commitment and reactivating it, the answer is absolutely we're committed to reactivating it. So it's purely a timing and prioritization of resources under the current market conditions and the fact that we have so many Phase IIIs going on, particularly COVID-19, that we felt that for an organization our size that we probably should pause on that, not spend that money and keep our money spent very close to our revenue or not just revenue, the cash coming off the sexual health business so that we can – we go another year with impressive money in the bank. And so that was thinking, but things can change. If COVID-19 hits and or if we find ourselves in a situation that ENTADFI and FC2 continue to generate 30% to 40% growth in [indiscernible] year-after-year because we're going into our six-year and we see something like that, then it'll be pretty easy. I mean, the protocols written, it's ready to go. We have the drugs it's ready to go. So we can pretty quickly get it back on track. But this is purely a prioritization resources to keep us – keep our spend within our cash coming off as much as possible off the cash, coming off the revenue based business.

Got it. And lastly, are there any parties that are interested in purchasing the UREV Sexual Health Division from the group?

So the answer is, are there any party's interested in purchasing it. So the answer is, yes, there are parties interested in purchasing it. The real question for us is making sure that it's the right value for our shareholders and to make sure that we take advantage of, I mean, right now it's generating a lot of money for us and it feels good to have that revenue base right now. We think there are things that we can do to make the Sexual Health Division look even more attractive so that we can, it's even more valuable. And that is right now going from a women's health company to a sexual health company, instead of having a single product. Now we have two products and instead of using other telemedicine partners, we're going to become a telemedicine entity ourselves. So all of those things will add more value to the base business. And while we're enjoying the cash flow coming from the base business at the same time, we're also increasing the value of the base business so that when we're ready, we'll have some more options to monetize.

Great. Thank you.

Next question comes from Kumar Raja with Brookline Capital Markets. Please go ahead.

Thanks for taking my questions and also congratulations on all the progress. First with regard to COVID-19 patients, what are you seeing there? Is it fair to estimate that you are close completion of enrollment given that you are planning to release data in the first half?

So make sure the question. It's a COVID-19 study and the question is say, it's my phone breaking in and out. So I apologize.

In terms of hospitalization, what kind of transfer [Technical Difficulty], yes, given that you are planning data on the first half, is it fair to expect that you are close to completion of enrollment?

I see what you're saying. Yes. So the good news is that we're on track, as I said, in my, my formal comments, we're on track to have data, clinical trial results for this study in the first half of this year. I will tell you that the hospitalizations have increased tremendously across the world, unfortunately for the patients because we don't – of course, we don't want to see that, but that's, what's happening. As you know hospitalizations and death, lack behind new cases. And what's interesting is what we're seeing is that the cases that make it to the hospital and those ICU type patients, once they're on that slippery slope, you're finding the death rates in patients that are at risk, especially those with at risk of acute respiratory distress syndrome is similar to the other variants. It's just at the milder stuff, we see a lot of it, but the ones that finally make it to the hospital was a problem. As you know there was about 140,000 new hospitalizations a week. And so it's a – I mean, it's the highest ever in the pandemic. It's higher than all the other three waves. So with that said, it's put us in solid footing to enroll and to get the data in the first half of the year. So all I'm going to tell you is that, we believe that we will have clinical data in the first half of the year to in patients who are hospitalized, which as you know, now there's no medicine available and the Fast Track status from the FDA, it's further confirmation that's an unmet medical need. And if we can fill that unmet medical need with an oral agent, that's not a infusion that doesn't require cold storage, so that you can put it in backpacks and get it to the remote airings of the world, it's hospital based as opposed to pharmacy based. So that you can quickly get it mobilized into hospitals as opposed to trying to get it to every pharmacy in the country. So from a distribution standpoint, it would be a lot easier. So I think we're kind of in the right space, right time, but we're on track to provide data in the first half of this year.

Okay. And with regard to enobosarm and sabizabulin, what kind of interactions have you had with EMA and kind of the ongoing trials be leveraged for approval in…

So as it relates to the EMA, we have – all our interactions have been with FDA, our interaction with EMA for the international studies next year we file the appropriate paperworks that we can do the studies in Europe, which we have. But we have not gone to EMA to seek scientific advice lending in that sort mainly because our studies are pretty straightforward, but we will – as we get the enrollment going and we go back to EMA and go back to Japan. But at this point now, our thinking is focus in the U.S. and when we partner the opportunity, the partner will have with wherewithal and the ability to do Japan and Europe at the same time. But we're successful in the U.S., which is the premium market will be in good shape.

Okay. Finally, with regard to COVID-19 external funding, is the funding mostly for manufacturing?

Yes. And so as you know, we're essentially almost done with the clinical study, where we're going to need the most help, and it's going to be in procurement and distribution. I can't remember the number, but it was a big number, a billion or something, and Pfizer got a billion or something for procurement. So there's no risk to the government, once you get an EUA Emergency Use Authorization, then the issue becomes – the government needs to buy and get it out there. And so we are successful in our Phase III and we have in EUA, we feel pretty strongly and we believe that we should be able to get external funding to help us with scale up and distribution. And so that's been our focus. Interestingly, after the wave of vaccines and antibody drugs, BARDA has just gone silent in terms of funding these opportunities. But they're very, very active once you've shown efficacy and safety. And so we're going to take advantage of that window.

Thanks so much.

Thank you.

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

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

The digital replay of the conference call will be available beginning approximately noon Eastern Standard Time. February 9 by dialing 1 (877) 344-7529 in the U.S. and 1 (412) 317-0088 internationally. You will be prompted to enter the replay access code, which will be 3664461. Please record your name and company when joining. This conference has now concluded. Thank you for attending today's presentation.