Good morning, ladies and gentlemen, and welcome to Veru Inc. 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, 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, 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 Barnett, Chief Scientific Officer; Michele Greco, the CFO, CAO; Michael Purvis, EVP, General Counsel and Corporate Strategy; and Sam Fisch, the 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 oncology. The company has its commercial sexual health program, called Urev, which includes two FDA approved products; ENTADFI, a new treatment for benign prostatic hyperplasia; and FC2 Condom -- internal condom, for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections. The revenue from the sexual health program is being used partially to fund the clinical development of our late-stage therapeutic candidates, which aim to address multi-billion dollar premium market opportunities. This morning, we will provide an update on our COVID-19 sabizabulin clinical program, the clinical development of our oncology drug pipeline, and the commercialization of our products in the Urev program. We will also provide financial highlights for our first quarter fiscal year 2023. First, I will update you on the status of sabizabulin, an investigational drug candidate for the treatment of hospitalized adult COVID-19 patients and high-risk for ARDS, which is the lead indication for our infectious disease program. We reported positive results from the Phase III COVID-19 clinical trial, which is a double-blind, multicenter, multinational randomized 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 who had high risk for ARDS and death. On April 8th, 2022, the Independent Data Monitoring Committee conducted a planned interim efficacy analysis in the first 150 patients randomized in the Phase III COVID-19 study. After reviewing…

Thank you, Dr. Steiner. As Dr. Steiner indicated, we continue to have a lot of ongoing activity at Bureau. Let's review the first quarter results. Overall net revenues were $2.5 million, compared to $14.1 million in the prior year quarter. The US prescription business net revenues decreased to $163,000 from $11.6 million in the prior year period. The reduction is due to some business challenges experienced by our telemedicine customers in recent quarters, which results in a slowdown in orders. Net Revenue for the global public health sector business was $2.3 million, compared to $2.6 million in the prior year period. Overall, gross profit was $700,000 or 28% of net revenues, compared to $11.8 million, or 84% of net revenues in the prior year period. The decrease in gross profit and gross margin is driven primarily by decreased sales in our US FC2 prescription business. Operating expenses for the quarter increased to $36.3 million, compared to the prior quarter of $16.8 million. The increase of $19.5 million is primarily due to research and development costs, which increased $8.7 million to $18.7 million from $10.1 million in the prior year period, and the increase in selling, general, and administrative expenses of $10.8 million from $6.7 million in the prior year period to $17.5 million in the current period. The increase in research and development costs is due to the increased costs associated with the multiple in process, research and development projects, mainly for the Phase 3 Sabizabulin COVID-19 registration trial and manufacturing costs of $8 million for pre launch inventory, and increased personnel costs resulting from increased headcount and an increase in the fair value share based compensation. The increase in selling, general, and administrative expenses is primarily due to commercialization costs of $8.4 million, related to preparations for the potential…

Thank you, Michele. In January of 2023, the Los Angeles Times published an article by Doyle McManus entitled "Biden said the pandemic is over, but the pandemic won't cooperate." McManus further states, "But the pandemic isn't over. We're just pretending it is". So last month WHO, so the World Health Organisation, has concluded that COVID-19 remains a public health emergency of international concern. This declaration underscores that the COVID-19 virus and its resulting impacts warrant long term public health action as we enter the fourth year of this COVID-19 pandemic. According to the CDC in the United States, there have been 1,106,824 deaths related to COVID. Currently, the weekly average for new deaths is 3,452 people or approximately 500 deaths per day. The weekly average for new primary COVID-19 hospitalizations is 24,213 Patients or 3,459 new admissions per day. COVID-19 is the third leading cause of death in the United States behind heart disease and cancer. COVID-19 is a serious disease. And an effective and safe oral therapeutic to treat hospitalized moderate-to-severe COVID-19 patients who had high-risk for ARDS that prevents death is desperately needed. We strongly believe that sabizabulin, an oral therapy with dual antiviral and anti-inflammatory properties can serve as this new treatment modality that addresses and overcomes the threat of death that hospitalized moderate-to-severe COVID-19 patients continue to face. We have pivoted our company to establish an infectious disease program with sabizabulin as the lead drug candidate. In a Phase 3 study, sabizabulin demonstrated clear clinical benefit in hospitalized moderate-to-severe COVID-19 patients high-risk for ARDS and death and because of sabizabulin’s mechanism of action, it has the potential to treat other virally induced ARDS. ARDS remains a worldwide unmet serious medical need. In addition, we continue to advance our late -- core late clinical stage breast cancer…

Yes, thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] And the first question comes from Brandon Folkes with Cantor Fitzgerald.

Hi, thanks for taking my question. So, maybe the first one from me. What gives you confidence that HHS won't follow the White House in winding down the COVID emergency? Have they been public about anything? Is there any precedence -- obviously that's a tough one there? And then secondly maybe just on the cash situation can you just elaborate when you paused spending? Was this post quarter end or during the quarter? And then any color on the magnitude of the spend you've been able to reduce and maybe just the urgency to either pour some of the clinical trials or shore up the capital situation? Thank you.

Thank you. So, make sure I understand your first question is around HHS correct?

Correct.

Yes. So, HHS as I mentioned in my remarks, they're a separate group and they govern the FDA and they declare their own declaration of emergency. And so based on that, the FDA came out the same day the Biden administration made the comment they're going to stop the national and public health, which more has to do with policy and payments and that kind of stuff in May 11th, 2023. The FDA stated that in no way are they going to not be able to continue to issue new EUAs and furthermore, EUAs that are in effect remain in effect until HHS decides otherwise. So, everything I've seen at this point, if you go back, it's called -- 524 is the name of the public health declaration and they have very, very specific times that for example HHS decides that they want to pull the declaration then Medicare and Medicaid and some of these other things will continue until the end of that calendar year. Also interestingly the Omnibus bill that was passed also contains provisions to help transition from emergency use national declaration by the government to a non-emergency. So, for example, for COVID drugs and they mentioned specifically Part D that they can go until the end of 2024 and actually be paid for. And so even though May 11 is the date, so there are transition provisions to not lose anything that we've done that has been helpful and not go back into chaos. As it relates to your second question, our biggest spend was as you would imagine in the first few months after we heard about the go-ahead and submit your EUA. And as you know when we met with the FDA, we submitted the EUA very, very quickly and then we went on…

I would just add that as Mitch indicated, we needed to ramp up. I mentioned during my comments we spent $8 million during the quarter to get enough drug in place. And as we've been working on our prioritization and pushing back on cash that started, we believed we were going to be hearing soon. So that we start talking about that making lists, prioritizing things towards the end of our quarter and now into this quarter here. So a lot of the spend takes time for it to come through and materialize but we're actively working on this.

Okay. Thank you.

Thank you. And the next question comes from Leland Gershell with Oppenheimer.

Good morning. Thank you for taking my questions. Just wanted to ask as you control the spend, as we await the potential EUA, with respect to spend on the enrollment in the oncology trials. Are you kind of pulling back there? Is that enrollment now expected to take a bit longer? If you could just kind of let us know what the timelines may be for updates on the oncology trials. Thanks.

Yes. So the answer to that is that as soon as we have a better understanding of what's coming in and what's coming out and we're evaluating, as I said, actively evaluating. I mean we did not expect to be sitting here seven to eight months later and not hearing from the FDA. Now there is precedent. There's a company called Sobi Pharmaceuticals that submitted their EUA to the FDA back in January of 2022 and it took them 11 months and it was not until November of 2022 they heard that they have the EUA. So we're completely at the mercy of the regulatory bodies to make a decision. And so what we have done now that we've entered this phase where we're still waiting and they're still reviewing that – and you can see we still have sufficient cash but we want to make sure the cash lasts. And as you know, because we have cash coming in and as I mentioned our second quarter, fiscal year second quarter numbers are starting to move towards where we would expect them to be after having a little bit of headwinds over the last three quarters then we got own money coming in too. And as you know, we've done very well matching our expenses with what we bring in but we just have to spend a little bit more time and then we'll roll out what we're thinking.

Great. Thank you.

Thank you. [Operator Instructions] And the next question comes from Yi Chen with H.C. Wainwright.

Thank you for taking my questions. So without waiting for FDA response? Can the company advance Sabizabulin into a clinical trial for hospitalized patients with ARDS but excluding COVID-19 patients?

It's a very good question. If we do that then that would have a – so – so far our discussions have been under the EUA and then if we did that that would go under an NDA. And technically it doesn't matter, right because you have to do a study before you can get into for example ARDS-related to influenza and that kind of stuff. And so you touched on a very important point. I mean the thing that we cannot lose sight of is that we have an agent that even after all of these COVID drugs have been tried over the last three years and whether they're new drugs, whether the drugs have been repurposed, whether they're biologics, at the end of the day here we are now in the fourth year of the pandemic and there's not much we can say. I mean in fact we have fewer drugs today than we had when we started because all the monoclonal antibody drugs have been pulled because they don't have activity against the current strain. And the best we can do is dexamethasone at 2.8% in baricitinib and tocilizumab and again they're marginal. And that's what we have. In comes Sabizabulin and Sabizabulin has a completely different profile, and it has a different absolute and relative risk reduction in the sickest patients. And we also know that the mechanism by which it happens is a similar mechanism that you see with influenza RSV and many of the viruses that use microtubules to get in and out of the cell, and also set off the cytokine storm that's responsible for ARDS. And right now we don't have great ARDS treatments. So in some ways the reason we pivoted to ARDS, is because it's such an unmet need people…

Got it. My next question is, do you expect the FC2 sales to return to the levels seen in the fiscal first and second quarter of 2022? And if so, how soon do you expect to return to that level?

It's a good question. I'll have Michele, answer that.

For this quarter, we're starting to see our revenues coming back to that level that we saw in our quarters, first quarter and second quarter. As we've said before, our customers experienced some headwinds as Mitch said, one of them had some issues. They had leadership changes. They had rebranding issues. They've rebranded again. And so it's taken them a while to fix some of their internal issues. Another customer had similar internal changes, and some other problems that they've been sorting through and it's taken them a while. It sounds like, they've worked all that out. We stay in close contact with these customers. We've pushed through some of the issues as we've developed our own portal. We've had some issues to tackle. We've been working on those and clearing those up so that we're starting to see, an increase. But our visibility right now is into the second quarter, where things look good for the third and fourth quarter, but a lot of it is still dependent on how quick that do you see their customers fix their issues but all signs are pointing to it coming back to those levels.

Thank you. And my last question is just to confirm that Veru, may terminate one of the ongoing breast cancer or prostate cancer trial, due to budgeting priority. Is that, correct?

Again, we have not made a decision and we're looking at all options sometimes, one other extreme is just modifications or that kind of stuff. That's why I said, it's just too early to say. But what I can tell you, is that we want to decrease our spend, we want to prioritize the ones that are closest to the finish line. We want to ensure that we do everything we can to focus on that, because at the end of the day what matters is data. So we've got to get the clinical data. And then we'll put a strategy in place to do that so that 2023 is sort of the year of enrollment and 2024 will be the year of data. Especially now that COVID-19, even though it's still around, it really impacted all clinical trials by all companies, because of all the rules that were put in place for COVID-19 management, the lockdowns and all that stuff, it affected everything. But now, it's kind of moving the other way. Even though the endemic numbers are pretty high, but we're definitely seeing that the world is starting to come back. And a lot of these sites were fatigued, because they were pulled to help with the pandemic. And you've heard over and over about the craziness that's going there. But again, that's kind of passing as well. So let us spend the time to come up with a plan to understand how we want to position our oncology program. What I can say for sure is Sabizabulin and infectious disease is here to stay. We have a real opportunity. Oncology, we're committed to oncology. That's our other core asset. We have unique assets that need to make their way through. And as it relates to sexual health business, it's always been a good source of revenue, so that we can partially fund our clinical development and we're not beholden to the marketplace. It feels good after seeing the Q2 numbers, the fiscal year Q2 numbers. As Michele said, it's kind of moving back to a position where a significant revenue will come in, and so that we can move these trials forward and offset some of that cost with what we bring in ourselves.

Thank you.

Okay.

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

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

Thank you. The digital replay of the conference call will be available beginning approximately noon Eastern Time today, February 9, by dialing 1-877-344-7529 in the US and 1-412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 9127050. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.