Good morning, ladies and gentlemen, and welcome to Veru Inc. Investor Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference 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 the meeting this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the CFO and CAO. Michael Purvis, EVP, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you all for joining our call. Veru Inc. is a late-stage clinical -- late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of breast cancer and for SARS-CoV-2 and other viral acute respiratory distressed syndrome ARDS-related diseases. Our drug development program includes enobosarm, a Selective Androgen Receptor Agonist for the management of advanced breast cancer and sabizabulin, a Microtubule Disruptor for the treatment of hospitalized COVID-19 and other viral-related ARDS. The company also has an FDA approved product, commercial product, the FC2 Female Condom, internal condom for dual protection against unplanned pregnancy and sexually transmitted infections. The revenue from the sexual health program is being used to partially 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 prioritization strategy, the progress of the breast cancer and viral ARDS drug pipeline as well as the commercialization of our FC2 product. We will also provide financial highlights for our Second Quarter Fiscal Year 2023. This past quarter, we implemented a prioritization strategy to focus our drug development efforts on those drug candidates, which we believe have the best opportunity to lead to long-term success and shareholder value creation and conserve cash, including a reduction in personnel and certain other measures to reduce costs further. The refocused research and development strategy includes the following: plans for our ongoing Phase IIb/III study of enobosarm and abemaciclib combination in second-line metastatic setting for AR+ ER+ HER2- metastatic breast cancer. With the company's…

Thank you, Dr. Steiner. As Dr. Steiner indicated, we continue to have a lot of ongoing activity at Bureau. Let's start with the second quarter results for the 3 months ended March 31, 2023. Overall, net revenues were $6.6 million compared to $13 million in the prior year second quarter. The company reported quarterly sales for its U.S. prescription business of $4.1 million compared to $11.6 million in the prior year second quarter. The decrease in the prescription business is due to lower volume from our customers as a result of ongoing business challenges which includes changes in strategy, the impact from a rebranding, a reduction in marketing spend and the recent bankruptcy filing of The Pill Club and important FC2 customer, all resulting in a slowdown of orders in recent periods. Net revenue from the global public sector business for the quarter was $2.4 million compared to $1.4 million in the prior year's quarter. The increase in the public sector business is because the company began shipping to South Africa under the most recent tender during the quarter and because the company is seeing increased orders in the U.S. public sector resulting from 2 contracts executed last year. Overall, gross profit was $4.1 million or 62% of net revenues compared to $11.2 million or 86% of net revenues in the prior year quarter. The decrease in gross profit and gross margin is driven primarily by decreased sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased to $43.5 million compared to the prior year's quarter of $22.9 million. The increase is primarily due to research and development costs, which increased $7.4 million to $22.9 million compared to $15.5 million in the prior year quarter and the increase in selling, general and administrative expenses of $5.4 million…

Thank you, Michele. As Ms. Greco said, the main reason for the increase in the net loss relates to the large expense of preparing for potential loss of sabizabulin for COVID-19 in the U.S. and outside the U.S. This required building a commercial team, engaging vendors to assist in the commercial launch and manufacturing drug product for launch upon EUA approval as required by FDA. These activities have ceased. We've hit the reset button. As for our cash burn and cash position, we have been able to also significantly cut costs by prioritizing our spend, restructuring our clinical development to focus only on the most promising near-term programs. We have strategically positioned Veru on late-stage clinical programs in both advanced breast cancer with enobosarm in virally induced ARDS infectious disease program with sabizabulin, both areas of great unmet need, and these are major premium market opportunities. Our cash and cash equivalents were $23.5 million as of March 31, 2023, and subsequent to the company's fiscal year 2023 second quarter, as previously disclosed, Frost Gamma Investments Trust acquired $5 million of company common stock in a private placement. The company sold ENTADFI product to Blue Water Biotech for $20 million and up to $80 million in additional sales milestones and Veru has also entered into a common stock purchase agreement for a purchase of up to $100 million with Lincoln Park Capital Fund. Under the terms of the agreement, Lincoln Park is committed to purchasing up to $100 million of Veru's common stock at Veru's sole discretion from time to time over a 36-month period. We're pleased to enter into this transaction with Lincoln Park Capital, and we believe that this agreement allows us to access capital in a very efficient manner. We believe this purchase commitment further enhances our financial…

[Operator Instructions] Our first question will come from Yi Chen with H.C. Wainwright.

I'm sorry if I missed this during your prepared remarks, my line was a little choppy. But any color on if you have to rehire or rebuild a commercial team following the potential positive pivotal study results from sabizabulin and also any learnings from your previous efforts?

To make sure understand the questions, so the question is, would we consider building a commercial team for our drugs going forward?

Yes. Any learnings from what…

Learnings, yes, absolutely. Absolutely. Yes. Thank you for that question. Yes, I'll tell you what the learnings are. And again, the purpose of this is to get as much candor as we can. And we were told by both the European authorities and U.S., that we have to have drug ready to go, commercially ready to go, and we also need to have the ability to distribute ready to go. And so we invested and heavily because we waited 9 months, we were under the impression that this would be short-term, that's why they call it Emergency Use Authorization and turn out to be much longer than that. And for 9 months, we sat there burning cash. So the learnings, the next time is either you have a partnership with a group that already has a commercial team ready to go and you can incrementally add to that commercial team or you just wait. You handle the manufacturing piece because you have no choice, you have no drug to release, but maybe the public will get made to us if we don't launch quickly, but I'd rather have the public get mad at us not launching quickly, then sitting here for 9 months, burning cash with a group that was ready to launch in July. So the learnings is, going forward, until I see in black and white at the FDA or any of the other regulatory authorities have approved or authorized the product, we're going to sit tight. And -- or like we're doing now, pursue partnerships with commercial organizations that are in this space that know how to commercialize. And so in which case, then it's not a big incremental expense for them to be ready and being idle. But for a company of our size, it's focused on clinical development and it was a major learning. Now in all fairness, we're in the middle of a public crisis. It was an emergency. People are dying at some point, 700 to 1,000 patients a day. At one point, it was 2,500 patients a day. And so it felt like things were going to move quickly and but hindsight 2020. And if we had to do it again, I would wait until I see something from the FDA that says you're officially authorized and then the delay should be the company not getting the drug out fast enough, not that the FDA took the 9 months delay and the company getting lost a lot of money in that process.

Our next question will come from Leland Gershell with Oppenheimer.

Rohan Here speaking on behalf of Leland Gershell. Just a couple of questions from me, could you update us on some of the ongoing discussions with European and ex-U.S. authorities on ongoing sabizabulin reviews? And have there been any communications around the confirmatory Phase III trial and if that might satisfy their request for additional data? And secondly, do you have a sense for what kind of spend will be needed to fund the additional ARDS studies, particularly the influenza trial?

Yes. So right now, we have some -- as soon as the FDA made the decision that they were going to decline the Emergency Use Authorization at this time, all the agencies talk. There's no question as these agencies talk across the world. But they all came back with sort of different kind of take on it. So for example, the Article 18 with the European Union, the EMA, they took the position that they cannot issue a negative opinion. I mean, because we got data, I mean. And so what they said instead, was if you can provide this with additional clinical information doesn't necessarily have to be a Phase III clinical study, although the Phase III clinical study certainly would suffice, they would be willing to review that as a way forward to get to a positive opinion. But we have to meet with them, find out what kinds of data they want and short of a Phase III. But if the Phase III is done, we feel that, that will easily suffice for Europe. The other major group is the Access Group. We're still in discussions with them. And -- but again, our sense is that we can provide them additional clinical information. And certainly, if it's a Phase III clinical trial, that would be appropriate. I think all the agencies know already that we're committing to the Phase III study. And so they know that's forthcoming and as it relates to -- and so those are the conversations that we have with them. And we do believe that the confirmatory Phase III study that the agency has reached agreement with the company, all the elements of that study, which suffice not only for U.S., if we're successful, but outside the U.S. as well. So all that's…

[Operator Instructions] Our next question will come from Brandon Folkes with Cantor Fitzgerald.

Can you just perhaps dive a little bit deeper and elaborate on some of these assumptions that go into the statement of being able to fund the company for the next 12 months? Any additional details you can provide on the stock purchase agreements. Just is that something that can be used pretty quickly and heavily in the near-term? And then similarly, I heard sort of your prior commentary on the cost of the COVID-19 trial. But how much more can OpEx come down and how quickly? And then similarly, how quickly do you expect the FC2 investments to have an impact? Just any color on the cash burn in the next few quarters would be helpful?

Yes. So I'm going to have Michele comment in a moment as well. I'm going to -- I'll give you from a high level, the stock purchase agreement as I understand it. And so as you know, we had one with Aspire Capital over the last, I don't know, 5 years or so, and we sparingly used it. It was always there when we needed additional cash to keep things moving, if we could not get non-dilutive cash. So our goal is always to get non-dilutive cash and that's why we're active in partnership discussions. We're active. We're trying to get BARDA to provide money, and we're active in investing in our FC2 efforts because the FC2 efforts will allow us to gain non-dilutive cash. And finally, we sold in ENTADFI for $20 million, of which all of that will come in the same time period that we're running the COVID-19 clinical study in the ENABLAR study to get to clinical data. So the gap that we need to make up depends on what FC2 does. And -- but the goal is to have readily available funding in the event that we want -- that we needed. And so the stock purchase agreement basically means that Veru sole discretion, we can ask Lincoln Park Capital, who's been -- who's agreed to buy up to $100 million of Veru's stock over the next 3 years. So it's very different than ATM. And ATM means that you have to go to the bank and the market has to be -- it's basically a market-driven transaction, and you have to have -- the market has to be ready to accept that stock or you can't do the deal. With a purchase agreement like this, it's not based on market conditions at all. It's…

Yes. I would just like to comment a little bit about OpEx and the use of cash. Last quarter, we did talk about the fact that we were cutting back on expenses. We were still waiting for the FDA. All signs have been pointing to an EUA approval. So we did not pull the plug on all of our commercialization efforts until the last minute when the FDA formally said no. And so one of the things that we had started to do was work with our vendors and push out some of our payment dates. And so we're still seeing that you're seeing that in our cash burn. We've pushed out payments related to building up the drug supply that the FDA said, we needed to have on hand. And the same thing as we terminated all the vendors related to the commercialization efforts, we had payments due with them. We worked on pushing those payments out as well. So our spend, our cash burn has been a lot higher now. It's going to start to come back down in our next quarter. It's not going all the way down to the level it was a year ago, but it's going to get much closer. It's going to -- if these go down by half of what we just saw, if not a little bit more. And as Mitch indicated, until we have the cash in place for the confirmatory trial, we're not going to be going ahead with it. But just to give you a little bit of color on our OpEx and our cash spend.

That's very helpful. And then one follow-up, if I may. On the Phase III confirmatory trial design for COVID-19, is that designed to meet the NDA standard or the EUA standard here in the U.S. And then similarly ex-U.S., should we think about you continuing to pursue EUA equivalents or for approvals post that Phase III confirmatory trial?

It's a great question. And so to answer that question, the idea is that this trial -- and the FDA also agrees and is guiding us towards this is that -- and the quote that I used in my prepared comments was then we would have 2 well-controlled studies. And if you have 2 well-controlled studies -- successful studies, then the FDA views that as the standard for an NDA. So we will have -- we are setting ourselves up in the U.S. to do the EUA and NDA together. And you say, Mitch, why would you do that? Well, the NDA takes time. And even at a fast track designation, you get a 6-month review. And in the EUA, they can go much quicker and get you to market. But the standard that we're going to hit with a successful trial is going to be an NDA standard. So we should be able to easily blow away in EUA standard. But the EUA standard, let's we get on the market in weeks, whereas an NDA gets you on the market in 6 months plus. So we think from a timing standpoint, if the EUA is still available, which we would apply for that and simultaneously we apply for the NDA. Ex-U.S. is kind of the same way, because the approval takes longer, we would take advantage of the shorter route, but also have the longer route in play as well. So it's still the same way to think of it. So no, we're not going to be just an EUA standard. With this trial behind us when it's completed, it would be an NDA standard.

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

Thank you. I appreciate everybody who joined our call today, and I look forward to updating you all on our progress in our next investors call. Thank you for being with us today.

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