Good morning, ladies and gentlemen, and welcome to Veru Inc’s Investor 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 call over to Mr. Sam Fisch, Veru Inc’s, Executive Director of Investor Relations, and Corporate Communications. 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 Dr. Gary Barnett, Chief Scientific Officer; Michele Greco, the Chief Financial Officer and CIO; Michael Purvis, Executive VP, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Veru is a biopharmaceutical company focused on developing novel medicines for COVID-19 and other viral and ARDS related diseases, and for the management of breast and prostate cancers. The company has a commercial sexual health division called Urev, which includes two FDA approved products ENTADFI, a new treatment for 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 multi-billion dollar premium market opportunities. This morning, we will provide an update on the COVID-19 Sabizabulin and clinical program and franchise, the clinical development of our oncology drug pipeline and the commercialization of our products. We will also provide financial highlights for our third quarter fiscal year 2022. First, I will update you on the status of our investigational drug candidate Sabizabulin for the treatment of hospitalized COVID-19 patients at high risk for ARDS. We conducted a successful Phase III COVID-19 clinical trial, which was a double-blind multicenter, multinational randomized two to one placebo-controlled study evaluating daily oral 9 milligram dose of Sabizabulin for up to 21 days versus placebo in 204 hospitalized moderate to severe COVID-19 patients with high risk for ARDS and death. Both the placebo and Sabizabulin treated groups were allowed to receive standard of care which could include Dexamethasone, Remdesivir, anti-IL6 receptor antibodies and JAK inhibitors. Moderate to…

Thank you, Dr. Steiner. As Dr. Steiner indicated, we have a lot of activity at Veru. Let's start our highlights with the third quarter results for the three months ended June 30, 2022. Overall, net revenues were $9.6 million compared to $17.7 million in the prior year third quarter. The prescription business net revenue decrease from $13.5 million in the prior year third quarter to $6.7 million. The reduction is due to business challenges experienced by our telemedicine customers during the quarter, which resulted in a slowdown in orders during the current quarter. Global public sector net revenues were $2.9 million compared to $4.2 million in the prior year third quarter. The decrease in sales in the global public sector during the third quarter is due to the timing of tenders. In the prior year, we sold 2.8 million units to Brazil for tenders which have ended and therefore did not repeat in the current year. Gross profit was $7.1 million or 74% of net revenues compared to $13.9 million or 79% of net revenues in the prior year third quarter. The reduction in gross profit and gross margin is driven primarily by the reduction in sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased to $28.9 million compared to the prior year quarter of $16.7 million. The increase of $12.1 million is primarily due to research and development costs, which increased $6.9 million to $18.1 million compared to $11.2 million in the prior year quarter, and the increase in selling general and administrative expenses of $5.2 million from $5.6 million to $10.8 million in the current period. The increase in research and development costs is due to the increased number of clinical trials. This quarter, we had four Phase III clinical trials and two Phase…

Thank you, Michele. In summary, we continue to advance our core deep late clinical stage, breast cancer and prostate cancer programs with three actively enrolling Phase III clinical studies and we have significant revenue generated more base sexual health business and have authorized, we expect to have substantial future revenue, Sabizabulin, 9 milligrams for hospitalized COVID-19 patients at risk ARDS. Being opportunistic and successful in developing Sabizabulin to COVID-19 has led to the most eventful and transformative period in Veru’s history. We are preparing for the U.S. and global commercial launch of Sabizabulin and 9 milligrams for the treatment of hospitalized moderate to severe COVID-19 patients with high risk ARDS. As you can see from our balance sheet, we have the resources with these launch activities in the U.S. and global, if granted emergency use authorization. Again, we believe this will be an opportunity for significant near term revenue for Veru. With that, I'll now open the floor -- the call to questions. Operator?

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

Hi. Thanks for taking my questions and congratulations on all the progress. Just from me, I guess, first up the multi-part question. Can you just elaborate on the order for these clinical sites and how typical of this is any sort of EUA approvals? Any indication at this stage that the two upcoming ex U.S. sites orders would be the last or do you believe the agency may look to continue to order additional facilities? And then within that, were these facilities picked randomly, granted the FDA, picked it, but if any commentary, or are there any data outlier that may have driven the selection of these orders?

Okay. And make sure I understand the first question. So -- say it again, it relates to clinical trials. Are you talking about the new additional ones?

Yeah. The clinical sites. So the

Clinical sites…

Okay. Fine.

Okay. No, your first question. So it always about clinical science.

Okay. My bad as they say. So, no, I don't -- so first of all, our expectation is that the FDA after they audit these two sites, there's no indication that they're going to be auditing additional sites. They've been pretty clear. As it relates to why they picked these sites. There is no indication at any particular site as an issue. This is done under GACP. We have an excellent CRO called World Clinical Trials, and the impression that we get is that the FDA is checking their boxes as they go through this very important review. And so, I see this as routine. I do have with me Dr. Gary Barnette, who is our Chief Scientific Officer and do you want to add comments to that?

Yeah. This is generally a standard practice under NDA review where they go into these clinical sites and they pick the clinical sites, the review team selects the clinical sites for things like the number of patients that they put in the study and that kind of thing. So the two in the U.S. have been completed without any findings, adverse findings, the two outside. It does take a little longer for the FDA to schedule sites outside the United States for audit because of all the political things that have to go on with that. But we expect these sites to do very well in those audits. But as Mitch mentioned, do not believe that there'll be any additional audit to clinical sites after these.

Great. I appreciate the additional color. And then maybe just should you receive an EUA. How should we think about how quickly you can get the product into the hands of the hospitals?

Yeah. Great question. So we have done a lot of work. Thanks to the internal team and we quickly assembled a team, but it's a robust team. And for things that we can't do internally, i. e., bring -- we brought in sort of the Chiefs. We're contracting out with very reputable groups. One of the things that we've also done is, we've also signed up a very reputable and massive distribution wholesaler. And because that's really -- that's the way the hospitals work. That's where you need to drop ship your product and that distributor is the one that gets it to all the hospitals and it's very routinely done and very efficiently done. The one that we picked also is a big player with government contracts as well. And so it's pretty robust. So with that said, if we get the EUA -- when we get the EUA and we get the word, go, we believe it will be somewhere between nine days to 14 days that we will have the drug available with dispense in hospitals in the U.S.

Thanks, Mitch. That's very helpful and best of luck and congrats.

Great. Thank you.

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

Hi. Good morning, Mitch. Thanks for taking my questions. It must be very busy days here at Veru. Few questions from me. First, just again with respect to FDA activities heading into the EUA decision, you'd mentioned there had been an inspection of one of the manufacturing facilities. If you could just remind us how many others there may be and if there have been inspections scheduled for those and how critical those would be for the EUA because you already have one that's been inspected, and I've got a couple more? Thanks.

Sure. So to answer your question, we have essentially -- it's really three buckets. So we have the API, which is manufactured by Olon Ricerca and they have a facility in Italy and in the U.S. Olon Ricerca has clearly been audited by the FDA on numerous occasions and this is the same API group that made -- makes Molnupiravir for Merck. And so usually FDA doesn't go back to a site that's been recently inspected. They're happy. And so this site, we do not believe, will be further inspected by FDA. The second facility is CoreRx, which is the group that puts together the drug product (ph) and puts into capsules. That group was out of Clearwater, Florida and they have eight commercial products including our product ENTADFI, and so we know they've been recently audited and inspected, I should say, and they did great. And so we're not expecting another audit -- another inspection because they just been recently inspected. So we're not expecting FDA to go to that group. We have a packaging manufacturing facility called Athena in the U.S. and they have not been inspected by the FDA recently. And so the FDA chose that site to do a preapproval inspection. And as I mentioned in my comments, that went well. And so from a manufacturing standpoint, I think, it was set.

Okay, Great. And then with options for the most severe patients in the hospital at high risk with COVID-19 remaining limited, and given the compelling Phase III data, I want to ask as you have discussions with both private and public entities out there that would be interested in getting hold of [indiscernible] deal and can you comment on any interest in securing certain amounts upfront? could we see any ATAs event (ph) purchase agreements or any other such agreements to secure supplies of Sabizabulin and perhaps materializing for the EUA?

Yeah. So to answer the question, just so we're clear, in the U.S. hospital-based COVID-19 products are handled differently than non-hospital based COVID-19 products or vaccines. So vaccines and drugs like PAXLOVID and Molnupiravir because it's Part D, D as an dog, Medicare they're handled by government purchases that are then, distributed by government, okay. In the hospital setting, it’s much, much more efficient to work through the hospital system. So when you look at all of the hospital based EUA drugs, they're managed by a DRG, a DRG payment to that, what they call an NCTAP, which is basically a new technology, COVID technology added payments to Medicare, and they have all other kinds of sweeteners to help hospitals deal with the complicated DRGs, complicated patients, COVID-19 patients, that obviously the DRG alone is not going to cover it. So they have additional sweeteners. It seems to work. I mean, if you look at the Remdesivir, which is under the system last year, they brought in almost $4.56 billion in the system. And so I could see why mess with the distribution system. By the way, that's part A as an alphabet. So that means the hospitals and there's an important point that means that the hospitals have to seek reimbursement, not the company. So the company provides product to the wholesaler. When we do that, we book the sale, the wholesaler sells it into the hospital. the hospital gets their reimbursement for the DRG, not for the drug itself. And so once it leaves our hands and we can book it. So it's very interesting system. Ex U.S. however, there is -- I mean, in the ex U.S. there is definitely an advanced purchase agreement system where government, whether it's hospital base and whether it's out of the…

Great. With that Phase II having been in, up and running for some time probably may see data from that trial around this time. Just wondering if you could just share any thoughts or expectations as to when we may see data from that, that's for the VERU-100? Thanks.

Yes. So VERU-100 continues to go well. The challenge there is, it turns out the reason nobody else has figured it out because it's very complicated biologically. You have to -- it turns out for GnRH antagonist that you give as a depo. You have to have a certain level to cause the castration and you have to have another blood level that maintains that castration. And the different and we're asking a single injection to do both. And I'm happy to report we can do that. So now we're just optimizing the dose and I feel very confident that this is going to be a very interesting product for prostate cancer because we know the agonists have their issues. And so we can have an antagonist that can go beyond one month. And we have patients clearly beyond one month, approaching -- we have some approach three months. So that's why I said that my comments its promising, but we're optimizing so that this way when we go to the 100 patients in the Phase III, every one of those patients will castrate immediately and maintain their castration for three months. So sit tight, I'll be able to provide more clarity. I hope over the next few weeks.

Okay. Thanks for taking the questions.

Thank you.

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

Great. Thanks so much for taking the questions. I guess, two from me. One would be with respect to the kind of distribution and government assistance with respect to COVID-19 in the United States. I guess how should we be thinking about the status of the public health emergency? And what are some of the influences that we can expect in terms of the categorization of those things and the viability of path forward for the EUA and those reimbursement parameters that you discussed earlier, Mitch? And then the second question that I have would be related to your capital strategy. Obviously, the female condom business has been excellent and certainly cash producing a little bit of a slowdown that we detect this quarter. So just wondering if you have any updates in terms of prioritization in terms of cash deployment given that observation?

Yes. All right. So let me answer the first question. So the first question is basically that's great, you've got the sweeteners in, and the hospital setting it works for Remdesivir and other hospital based products. Essentially, what you have is a DRG that has an outlier payment, has 20% sweetener for COVID. And then on top of that, you have this NCTAP, which is a COVID added payment that is also provides more resources so that hospitals can get close to 75% plus covered and that's wonderful. I'm glad we have that, but the question -- and it works. And the question is what happens when the emergency goes away? So first of all, the first fact is that these programs will stay in place until the end of that calendar year. So we're going into this fall and the winter and we're commercializing the product. The programs will stay in place until the end of that calendar year. If it turns out that the emergency gears are then pushed into the next year and we've been in this for 2.5 years and it just doesn't feel like it's going away and the death rate is pretty close to its been year one, year two. So it feels like it'll continue, then that will mean if it goes into January of next year, then they'll be required to pay until the end of January of 2023. The reason they do that is there are other programs that you can transition into like instead of NCTAP, this is called NTAP. So NTAP has been in place and again its new technology added payment. And NTAP will only work if you have a full approval. So we will be doing full approval through an NDA. So obviously, we will be doing…

I would agree. Thank you so much, Mitch for the -- taking the questions and congratulations.

Thank you.

[Operator Instructions] Our next question comes from Yi Chen from H. C. Wainwright. Please go ahead.

Thank you for taking my question. Just to clarify, has the UK MHRA already started reviewing package for Sabizabulin?

To clarify, when we do first, the way the process works, is you have to meet with their COVID-19 task force. So we have to submit the materials to begin that process. And so when we met with them, as we said in the press release, they were so excited about the medicine that the entire task force basically said, you submit because there's a process in MHRA, you submit and we're going to support it for expedited review and they're the only ones do that. And however, you have to submit. And so what we were waiting for before we submit to the U.K. is the entire data set for all 204 patients, which we've now received. And so as we speak now, the application is being prepared for submission and then they can start the clock. Once they start the clock, and again, the clock is unclear at this point, but once we have more clarity, I'll be able to share that with you, but that's in place.

So the UK MHRA's review process and EMA's review process are completely independent from FDA's EUA review process, correct? They will now wait for FDA's decision to affect their own decision, right?

Yeah. So if you look at the Emergency Use Authorizations for Molnupiravir, it turned out that MHRA approved -- had the emergency use authorization done before U.S. So they are very independent. And so just to be very clear, MHRA is independent. EMA, independent. FDA is independent. And if any one of those three organizations authorize Sabizabulin and about 80% of the countries in the world will take that as a trigger to authorize in their country.

Got it. Thank you.

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

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

The digital replay of the conference call will be available beginning approximately noon Eastern Time today, August 11, by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You'll be prompted to enter the replay access code, which will be 1902173. Please record your name and company when joining. The conference call is now concluded. Thank you for attending today's discussion.