Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions] 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 Barnette, the Chief Scientific Officer; Michele Greco, the Chief Financial Officer, Chief Administrative Officer; Michael Purvis, Executive Vice President and General Counsel of Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of advanced breast cancer and for acute respiratory distress syndrome related to viral lung infections. Our drug development program includes enobosarm as directive antigen receptor agonist for the treatment of second-line hormone receptor-positive HER2-negative metastatic breast cancer and sabizabulin, a microtubular disruptor for the treatment of [indiscernible] COVID-19 and other types of viral-related ARDS. The company also has an FDA-approved commercial product, the FC2 Female Condom, internal condom, put a 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 multibillion-dollar premium market opportunities. We've had a very busy and productive third quarter fiscal year 2023. This morning, we will provide an update on the clinical development of breast cancer and viral ARDS drug candidates as well as the good progress on the commercialization of our FC2 product. We'll also provide financial highlights for our third quarter fiscal year 2023. Now as regard to our oncology program, the company's oncology drug pipeline is focused on the clinical development of enobosarm for the treatment of metastatic breast cancer. Enobosarm is a different and new class of endocrine therapy for advanced breast cancer. Enobosarm is an oral new chemical entity, selective antigen-receptor agonist that activates the androgen receptor in angio-receptor positive s-receptor positive HER2-negative metastatic breast cancer to suppress…

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 3 months ended June 30, 2023. Overall, net revenues were $3.3 million compared to $9.6 million in the prior year third quarter. The prescription business net revenues decreased from $6.7 million in the prior year third quarter to $863,000. The reduction in the prescription business net revenues is due to not having any revenues from the Pill Club in the current period due to the Pill Club's Chapter 11 bankruptcy filing. Global Public Sector net revenues were $2.5 million compared to $2.9 million in the prior year third quarter. Gross profit was $1.2 million or 37% of net revenues compared to $7.1 million or 74% of net revenues in the prior year third quarter. The reduction in gross profit and gross margin is driven primarily by the change in the sales mix with our US FC2 prescription business representing 26% of net revenues in the current period compared to 70% in the prior period. Operating expenses for the quarter decreased to $13.8 million from the prior year's quarter of $28.9 million. The decrease of $15.1 million is primarily due to research and development costs, which decreased $15.2 million to $2.9 million compared to $18.1 million in the prior year quarter and is offset by a small increase in selling, general and administrative expenses of approximately $100,000 from $10.8 million to $10.9 million in the current period. The decrease in research and development costs is primarily due to the company's recently announced updated strategy to refocus its development efforts on drug candidates with the best opportunity to lead to long-term success and to create value for the shareholder. On April 19, we sold our…

Thank you, Michele. So the key takeaways from this past quarter are, we have focused on obtaining regulatory clarity on 2 major Phase III clinical trials, and we've received FDA clarity for the Phase III ENABLAR-2 study, evaluating enobosarm monotherapy, enobosarm plus abemaciclib combination therapy versus nestin-blocking agent active control as second-line treatment for hormone receptor HER2- metastatic breast cancer. If the Stage 1 portion of the Phase III demonstrates significant improvement in ORR, the primary end point by either enobosarm alone or in combination with abemaciclib then we'll meet with the FDA for potential accelerated approval pathway. We will also quickly initiate the Stage 2 confirmatory portion of the Phase III study with progression-free survival as the primary endpoint. So remember, enobosarm is a new and different hormone agent that targets the angioreceptor metastatic breast cancer with potential improvements in quality of life without the unwanted massing effects and increasing thematic atypically associated with androgens. Given the current COVID-19 landscape and the large unmet medical need to have a treatment available with a potential mortality benefit against all types of viral-induced ARDS, the company will meet with the FDA in September to gain agreement to expand the evaluation of sabizabulin and beyond COVID-19 into Phase III confirmatory study that would include all types of viral-induced lung infections, influenza, RSV, COVID-19 and other viruses in hospitalized patients requiring supplemental oxygen who had risk for ARDS. This expanded Phase III study would help us with more certainty in the timing of patient enrollment and offers a larger market opportunity. The Influenza emerging infectious disease division of BARDA is planning a large multicenter placebo-controlled clinical trial to evaluate the safety and efficacy of 3 novel threat-agnostic and host-directed therapeutics and hospitalized adult patients with ARDS. Veru is selected as one of the…

[Operator Instructions] Our first question comes from Dennis Ding with Jefferies.

This is [ Anthea ] on for Dennis. Two questions from us, if I may. First one on cash, how much flexibility do you have on OpEx to potentially extend the run rate beyond your guidance of 12 months? And second, on breast cancer, can you comment on the status of DTS mono trial and if we will see data from that?

So a question about cash. I'm going to ask Michele to answer. So Michele, can you answer that question, please?

Sure. The question beyond a 12-month runway, the answer is no different than what I said for currently. Right now, based on cash, based on all the changes we're making with the FC2 and the improvements we're seeing with the FC2 portal, the increases we're seeing in our U.S. public sector based also on our global public sector space for the FC2 product, coupled with the fact that we have payments due from the sale of Entadfi. We continue to flex our operating expenses. We continue to look in ways to make improvements. And so again, we -- I don't see any issue as we look out beyond the 12-month time period.

Thank you, Michele. I just want to add to that. So again, we're very excited about this base business. The base sexual health business has continued to be there for us. I mean, to refresh everybody's memory, I mean we had a peak year of $60 million, and then we went to $34 million. And prior to that, it was $30 million to something $45 million and then $30 million and $18 million. It generates real money. And that's been our success, so we don't dilute our shareholders. And I'm a big shareholder, and as a result, very, very sensitive to dilution. For that reason, we have found -- I mean, the Internet has been in an incredible way. I mean that growth of our business happened not -- yes, we got business from global public sector. Yes, we've got more business in U.S. public sector. But really, it's the U.S. prescription business, Affordable Care Act and the growing demand for nonhormonal birth control that women have control over. So we just happen to be at the right business at the right time. And so we -- based on our numbers, numbers are going to go up. And so we see 2024 being a better year. I mean we're good for the next 12 months, but 2024, the latter part of 2024 as you move into 2025, I mean, the portal should be doing a pretty good job at helping -- the FC2 ports did a pretty good job in helping us with cash for us to continue to develop our 2 main Phase III programs. As it relates to your second question, which is about our test. So just to be clear, our test is enobosarm monotherapy in what is a later line patient population than ENABLAR-2. Later-lines they failed a CDK4/6 inhibitor and at least to estrogen blocking agents. And what we found is, in some cases, they were on 4 or 5 or more. There's approximately 50 patients that enrolled in that monotherapy study, and there's patients still on the study as we speak. And so in order for us to report data, we need to have the completed clinical study report. And so once we get this clinical study before we have access to the data, then yes, we're going to look at that data very, very carefully to make sure that we can make some conclusions about enobosarm monotherapy in a much later-stage patient population, but we're encouraged. And so we're looking forward to seeing that to report that.

Our next question comes from Yi Chen with H.C. Wainwright.

This is [indiscernible] on behalf of Yi Chen. The first question on ENABLAR. Do you anticipate a certain range -- a minimum range of overall response rate that you would like to see from the Stage 1 portion of the study in order to receive an accelerated approval?

Yes, it's good. So as long as we stay hypothetical, I'm happy to see hypothetical. So the question basically is what do we think our ORR rates could be? And so if you look at the 5 arms, then you start with the active, again, this is based on the literature. So if you have this second patient -- the second line patient population, patient population has failed CDK4/6 inhibitor and lessen blocking agent the expectation for the estrogen active control is going to be around 4%, 4% to 5% ORR. And that is actually based on the most recent study that came out with the SERD elacestrant and I look at their control group because elacestrant was given their active control where patients have failed CDK4/6 inhibitor in estrone blocking agents and were given the alternative at blocking agent, the ORR is about 4%. So that's probably the most recent large study that we can point our finger to say that's 4%. As it relates to abemaciclib in combination with enobosarm, abemaciclib alone is around 9%, and that's in that population is probably not exactly like this one, but close. And so 9% by itself. But we don't have abemaciclib by itself. We have plus enobosarm. So our expectation is that abemaciclib plus enobosarm can be pretty interesting, considering we've got our first 3 patients have 2 partial responses in stable disease and we're just getting started. So our expectation is it's going to be much, much higher than the active control. And then when you look at enobosarm by itself, well, we have to go back to the Phase II study that was done in patients where only 10% to 12% were on a CDK4/6 inhibitor. This is 136 women and the basis for why we licensed the…

And lastly, I'm sorry if I missed this earlier in your prepared remarks, but could you provide FC2's prescription revenue for the quarter, please?

What's the question? Prescriptions for the FC2 prescriptions for the quarter. Yes. So I just said $4,400.

Got you.

Sure. and 4,400 and -- yes, so that's pretty good. That's -- I'm very happy with that because that means we're on that slope going up and we get good price for that.

[Operator Instructions] Our next question comes from Leland Gershell with Oppenheimer.

I wanted to ask a couple of questions. With respect to ENABLAR-2, just to understand. So since those 3 initial patients, as you were evaluating the combination, have you been enrolling additional patients? Or as you -- are you now just starting to enroll patients into the Stage 1 as you work towards those type...

So this is what happened. We got the results. We have preplanned 3 patients to be in, call it, Stage 1A, which was the first time we'd look at the combination of the abemaciclib with the enobosarm to make sure there's no drug-drug interactions with the PK. So we picked the enobosarm 9 milligrams because that's what we did in the Phase II study as monotherapy, and we took the abemaciclib to the approved dose. And you put them together and you have 3 patients that come in with the second line position. And we got the data back and shows there's no drug-drug interactions, no new safety issues. And we basically showed -- even at the first scan, we showed 2 partial responses in the first 8 week scan. We show 2 partial responses in stable disease. And so we went to the FDA to get more clarity and the FDA came back and said, don't go higher, 9 looks good, basically, don't go higher than 9%, but we're very interested in dose optimization. For a registration program, they want you to have dose optimization sorted out. And we picked -- our dose was based on 9 milligrams and 18 milligrams that was done in the Phase II. So they said go lower. And so we were going to 3 milligrams in combination with enobosarm 1 milligram is a combination of enobosarm. And that will allow the agency in the enobosarm monotherapy, that will allow anybody to look at the abema and enobosarm -- enobosarm monotherapy and abemaciclib combination, and you can tease out what enobosarm's doing and what abemaciclib doing because you have a monotherapy. So all that took a little bit of time to get sorted out. I reset a couple of meetings with the FDA comments back on the -- actually 3 sets of comments back from the FDA to get clarity, and we wanted to make sure we did it right. And so where we are now is enrollment will pick up again next quarter when the 1 milligram and the 3 milligram enobosarm clinical supply is ready. So that's what we're waiting on.

Okay. Understood. And just with respect to the public side of the FC2, did you comment if you have additional payments remaining on the South African tender and also what you may see as the potential value of the Brazil tender.

Yes. So Michele is actually the expert. And so I'm going to have her comment on that. But she's going to tell you how to think about the tender in general and how much we can expect from the South African one. And then she'll tell historically what has happened in Brazil. Michele?

Sure. The South Africa tender just started. We won a significant portion of that tender. And so the sales have just started. It's a 3-year tender process, so a 3-year tender. So we have a lot of time with multiple distributors in South Africa to continue to supply product there. Brazil, you normally take a little bit of a break between tenders and the new tender and partially due to the change in government as well, the new tender is going to be coming out towards the end of this calendar year. And their tender normally is in the area of 20 million to 15 million units. It all depends on the government and how much they put out for bid. In most instances, they put a portion of the tender that is for non-latex and we fall into that category. So we get an opportunity to bid on a portion of the tender where other female condoms in the global public sector are located. And so that normally lasts about 18 months to supply that. And so like I said, the tender process should be announced towards the end of this year once it's a word we start distributing, that will be in our -- into our next fiscal year into the second half of that year. The South Africa tender is going to continue, though all of next year and the following year as well.

Yes. And the expectation is that we'll continue after that. It's been going on for 20 years. So it's going to keep going. It's just put new ones out, it would extend the current one. So in summer, the way to think of it is a U.S.-based business that's growing and it's palpable, and we're seeing it, and it feels good. prescription business, and that's our largest profit margin. The second largest profit margin is U.S. public sector. That went up 115%. Big departments of health that have not ordered in the past. It started ordering again. And then we picked up some new business, 50B and that kind of stuff. So that feels good. So our second biggest profit margin. And then all of a sudden, I attribute it to COVID. With COVID, everybody was using their dollars to go after vaccines and masks and all that stuff. Now that, that's kind of passed and people are kind of getting to the new normal, resources are being freed out, but that's why I think we see people going back to because very clear. The #1 reason public health is using the FC2 condom is probably more in line with the ability to stop sexually transmitted diseases than it is with birth control. And that's probably true and for sure, in Brazil and South Africa and USAID, which is a big organization that we work with, just the name tells you that's primarily related to sexually transmitted diseases.

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 remarks.

Thank you, operator. I appreciate everybody joining us on today's call. I look forward to updating all of you on our progress in our next investors call. Have a great afternoon. Bye.

[Operator Instructions] The conference call has now concluded. Thank you for attending today's discussion. You may now disconnect.