Good morning, ladies and gentlemen, and welcome to the Veru Inc.'s Investors Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Michael Purvis, Veru Inc.'s Executive Vice President, General Counsel and Corporate Strategy. Please go ahead.

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, Chief Scientific Officer; Michele Greco, the CFO and Chief Administrative Officer; Michael Purvis, the Executive Vice President, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q1 fiscal year 2024 earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing innovative medicines for high-quality weight loss, oncology and ARDS. The company's drug development program includes 2 late-stage novel orally administered small molecules, enobosarm and sabizabulin. Weight loss pipeline leads off with enobosarm, also known as ostarine, MK-2866, GTx-024, S-22 and VERU-024. These are all the identical same molecule enobosarm, which is an oral selective antigen receptor modulator, enobosarm is being developed as a treatment in combination with weight loss drugs to augment fat loss and to avoid muscle loss in overweight to obese patients for chronic weight management. In our oncology pipeline, we're developing enobosarm as a treatment for antigen receptor positive, estrogen receptor positive and human epidermal growth factor 2 negative, metastatic breast cancer in the second-line setting. In our infectious disease pipeline, which is pending additional external funding or pharma partnership is sabizabulin, a microtubule disruptor, which is being developed as a Phase III in a Phase III clinical trial for the treatment of hospitalized patients with viral-induced ARDS. The company also has an FDA-approved commercial product, the FC2 Female Condom, Internal Condom, for the dual protection against unplanned pregnancy and sexually transmitted infections. This morning, we'll provide an update on our company's primary focus the development of enobosarm and oral SARM in combination with weight-loss drugs like Glucagon-like peptide-1 receptor agonist, which we're going to refer to as GLP-1 receptor agonist. These are being used to avoid enobosarm in combination…

Thank you, Dr. Steiner. Overall, net revenues were $2.1 million compared to $2.5 million in the prior year's first quarter. The U.S. prescription channel net revenues increased to $634,000 from $163,000 in the prior year's first quarter as a result of increasing sales through our telehealth portal. Global Public sector net revenues decreased to $1.5 million compared to $2.3 million in the prior year's first quarter due to the timing of orders and shipments. Gross profit was $1.2 million or 54% of net revenues compared to $702,000 or 28% of net revenues in the prior year's first quarter. The increase in gross profit and gross margin is driven primarily by the change in the sales mix. With our U.S. FC2 prescription channel, representing 30% of net revenues in the current period compared to 7% in the prior period. Sales in our U.S. prescription channel have a higher profit margin. On December 18, 2023, we completed an underwritten public offering of our common stock, which included the exercise in full of the underwriters' option to purchase additional shares. Net proceeds to the company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs incurred by the company. All the shares sold in the offering were offered by the company. As of December 31, 2023, our cash balance was $40.6 million compared to $9.6 million on September 30, 2023. We believe our current cash balance will be adequate to fund the planned operations of the company as we continue to focus on developing enobosarm for high-quality weight loss. Now I'd like to turn the call back to Dr. Steiner.

Thank you, Michele. It has only been recently that the significance of clinical need to avoid adverse effect of significant muscle wells caused by GLP-1 receptor agonist has been appreciated. All the GLP-1 receptor agonist work by creating a starvation state that nonselectively reduces both muscle and fat tissues to cause weight loss. Using a muscle preserving drug in combination with GLP-1 receptor agonist would potentially allow for a higher quality weight loss. I want to emphasize that enobosarm is not competing with GLP-1 receptor agonist drugs that are already on the market or under development for weight loss. The expectation is that enobosarm may be potentially combined with any one of the many GLP-1 receptor agonist drugs to avoid muscle loss and to augment fat loss. This is truly a new indication. We believe enobosarm is the best investigational drug candidate to address the muscle loss caused by GLP-1 receptor drugs for weight loss. Enobosarm is a first-in-class, has oral once-a-day dosing has demonstrated tissue selectivity and utilized a well-established known mechanism of action, the androgen receptor, favorably changed body composition. Activation of the androgen receptor increases muscle mass, improved physical function and decreases fat mass to potentially achieve a higher quality weight loss. Enobosarm has favorable safety profile would not add to the gastrointestinal side effects that are already observed with a GLP-1 receptor agonist treatment. Global obesity and overweight drug market is projected to be $100 billion by 2030. It should be emphasized that enobosarm may potentially be combined with any one of the GLP-1 receptor agonist weight loss drugs, not only for older or overweight at-risk patients, but also all overweight or obese patients who want to avoid muscle loss while taking a GLP-1 receptor agonist for weight loss. The combination of enobosarm with a GLP-1 receptor agonist potentially represents a multibillion-dollar global opportunity. We're very excited about the prospects of enobosarm to address this new and important unmet medical need. With the FDA go ahead. We're looking forward to the initiation of this important and timely Phase IIb clinical study. With that, I'll now open the call to questions. Operator?

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

And congratulations on all the progress. Just one for me around the obesity program. Given various GLP-1s have different levels of weight loss as well as muscle wasting, what's clinically meaningful level of muscle preservation and what's clinically meaningful additional weight loss that you guys are looking for in your Phase IIb? And how do you define success from that trial?

Good question. So the first question relates to how we're going to view muscle loss and particularly in the context of our Phase II. So you're absolutely right. All the GLP-1 have muscle loss associated with them because the mechanism is hypocaloric calorie. In other words, low calorie amounts, and that's why muscle waste and fat waste, it's not specific for one tissue type. They all do it, but the range is about 20% to about 50%. And a lot of it depends on the potency of the GLP-1 receptor agonist, more potent is more muscle you lose. With that success for us at 16 weeks is to show that we can basically maintain muscle because we know we're going to be losing about 40% of muscle with semaglutide. And we picked in our Phase IIb study, only 1 GLP-1 receptor agonist so that we don't have the confounding concern that each GLP-1 receptor agonist may have a different muscle loss amount. So we're using semaglutide, which is Wegovy. And so the expectation based on the STEP 1 study is about 40% of the muscle loss of the half of the 50% weight loss that occurs in the first 16 weeks will be at that point. We will define success as stopping the decline. And so the delta is going to be the difference between what we've maintained and what is lost. And if we can maintain and stop the decline in function and maintain function, that's considered a success. The other success and this is important, is that fat loss and total body fat loss correlates with weight loss ultimately week 48. We chose to go to 16 weeks because we're using this -- the DEXA scan. Think of this sort of a biomarker. We know if we maintain…

Yes, yes. And maybe a quick follow-up. Can you remind us some of the statistical assumptions from the Phase IIb and whether the study is powered to show [ StatSafe ]?

Yes. I'll be happy to do. I'm going to have Dr. Gary Barnette answer that question. So Gary, can you talk about the sample size and power?

Yes, it's Gary Barnette. The way we did is we look at the STEP 1 study. The STEP 1 study lost about 6 kilos of lean mass over a 68-week period that if you just do assume a linear loss of muscle that would be 0.102 kilos per week, multiply that by 16 weeks, you get approximately 1.6 kilos of loss of lean mass in the first 6 weeks in the control arm, meaning the GLP-1 plus placebo. And if we look at our data that we have in obese patients, obese patients with cancer. Cancer, as Mitch mentioned, cancer has a tendency to create a hypocaloric state, much like a starvation stage. We basically maintain lean mass in that patient population. So it's a 0.3 kilo loss to a 0.4 kilo increase. So what we did is we used alpha 0.05 2-sided, 80% power comparing a 1.6 kilo expected loss in the control arm versus a minus 3 kilo -- or minus 0.3 kilo loss in the treating group, and that's approximately 26 subjects per arm, we powered at 30. Now let me also say this, as Mitch mentioned, 49% of the loss of weight occurs in the first 16 weeks of GLP-1 treatment. So what happens if you use that that number and say that 49% of the muscle also is lost, that's over 3 kilos of lean mass we're expected to lose. But we're being conservative in our sample size calculation using negative 0.3 versus negative 1.6.

Right. So the expectations are going to have a much greater muscle loss than we put into the numbers to be conservative in the arm that's getting the semaglutide without enobosarm.

The next question comes from Leland Gershell with Oppenheimer.

If you could just review with us, how you're going to define the eligibility in terms of what it means to be sarcopenic for entry into the trial?

Yes. So what we're doing to make sure we get the biggest patient population as possible is restricting it to age. So if you look at it, we say greater than the age of 60 -- greater than age of 60, puts you in that population of 42% of patients that could potentially use an obesity drug because they obese, overweight. So that gets you a wide net. We also know, and this comes from a previous experience in frailty, and I'm going to pause for a moment. I mean, Dr. Gary Barnette and myself and Domingo Rodriguez and Gary Bird, these are all people here. We work on -- we've been working on a space of frailty for at least 15 years with enobosarm in these patient populations that we have shared the data both in frailty patients, postmenopausal women and also cancer wasting patients that are older. The reason I bring that up is that we have to deal with all the endpoints that the FDA wants physical function. We had to understand the amount of muscle that somebody loses from the age of 60 to the age of 80. And what's that critical amount of muscle that gets you to a point that you have problems with functional limitations. You end up with functional limitations, mobility disability. So we bring all of that history with us as we look at this accelerated development of frailty that occurs in older patients. So the fact is you're 60, you're already beginning the decline in muscle and so the idea is rather than trying to come up with a sarcopenic population, sarcopenic definition for a population, which there are many, just allow patients over the age of 60. They're going to have reduced muscle mass, follow them along for the 16 weeks. And if you're going to lose as Dr. Barnette said, you could lose as much as 3 kilos, 3.5 kilos on the semaglutide alone, you're accelerating frailty, you're going to see problems. So we want to have a wide net. So the way to think of it is, we used greater than 60 as the eligibility and the overweight obese that patient population is enriched for the patients that will get into trouble.

And then just a follow-up, being that from what we understand, to maintain benefit from weight loss from the GLP-1 therapy 1 has to stay on that therapy for long term, effectively for life. How do you view the ultimate use of enobosarm assuming approval over time? Would it be used as well kind of the entire time that GLP-1 is used? Or would it be used only during the time that the weight loss is actually occurring then once the patient achieve their target weight or their plateau weight, they could go off and they wouldn't be losing any more mass, how should we think about that?

Yes. So part of the reason we're doing the Phase IIb, the way we're doing it is to get some questions answered to address that question. So for example, the first part, which is the primary study is in combination with a GLP-1, how does enobosarm work. We maintain muscle how much additional fat do we lose -- and so that gives you that information. And of course, physical function and seeing how we can prevent the decline of physical function. Second part, the open-label study. It's kind of addressing the question you're asking that is, if you stop the GLP-1 for the patient that did not take enobosarm in combination, and they've lost muscle. And the fear is, if you stop the GLP-1, you get the rebound weight gain, which is almost all fat, that you've actually made them worse because now they have less muscle and they have the same weight, but it's all fat and weaker. And so it will be nice to see, what the effect of enobosarm is in that situation to rescue and prevent the rebound weight gain, the fat gain. And those pieces of information will allow us to think more globally at a higher level, like you're thinking, and that is how we could use it. So you have some examples. One, could enobosarm, which by itself has a direct effect of reducing fat and maintaining muscle in combination with a GLP-1 receptor agonist be used in combination, so you can use less a GLP-1 receptor agonist. As you know, receptor GLP-1 receptor agonists have GI toxicity. And that's the reason why people have all kinds of gastrointestinal pain, nausea, vomiting, diarrhea and bloating and that kind of stuff, and we can decrease some of those with an agent like enobosarm that…

[Operator Instructions] Our next question comes from Yi Chen with H.C. Wainwright.

Just to clarify, because that enobosarm has the ability to preserve muscle mass that in the Phase IIb trial, it is possible that within the first 16 weeks of enobosarm plus GLP-1 drug combo versus GLP-1 drug alone that for the combo arm, we could see patients lose less total weight versus GLP-1 drug alone arm? Is that right?

No, I don't think so. I think what you're going to see in this situation is what's missing in your characterization of enobosarm. Is enobosarm does 2 things. One, it preserves muscle and 2, it also augments the fat loss. So GLP-1 receptor agonist by itself, it's muscle and fat. And so if we have a situation where you maintain the muscle. Again, we're not trying to make Arnold Schwarzenegger, so we're not trying to pick a dose that you put so much muscle on that, that has the counteractive amount of fat that you've lost. Part of it is can you dial down the muscle part so that you maintain muscle, but you make it out by reducing the fat even more than a GLP-1 by itself. That's the idea. If you didn't have direct effects on that, I would say, okay, I don't know what's going to happen. But it has direct effects on fat. And so it could be possible that a higher dose of enobosarm, I mean you have the same muscle, a similar muscle maintained, but you have a greater fat loss. So we're going to learn that in the Phase IIb at 16 weeks. And so again, the key thing here is, can we maintain the muscle, get a deeper fat loss. And the semaglutide is going to take muscle and fat equally by 16 weeks or so you're starting to hit the plateau.

Would it be meaningful to have an arm receiving enobosarm alone in this trial?

So we thought about that because enobosarm alone would be very, very interesting. But we have, again, not in obese patients, but we have in patients that are normal postmenopausal elderly patients. So we know a lot about enobosarm in that setting as monotherapy. And we do have data from our 504 study in a subset of patients that were obese in the lung cancer study that pretty much falls in line with what I just said. And that is what we saw in that study where the cancer causes basically a starvation state that we saw we were able to maintain muscle. Muscle was about 0.3 kilos where the GLP-1 lost about, I guess, that study about 3 kilos or something of that story. And when you look at total weight at 21 weeks, there was a much greater weight loss in the enobosarm arm than the placebo arm in that patient population. What we saw the weight loss was due to the fat loss because you maintain the muscle. So we do have data like that. I think for purposes of this study here, we're not trying to make enobosarm by itself the weight-loss drug. I think where we need to get clarity, and again, no company out there at this point now has clinical data in combination with GLP-1 with their drugs, is to get that information because that's more important. Understanding what is the magnitude of the hypocaloric influence? And what is the dose we need to counter that? And then that allow us you ask additional questions later.

Got it. You mentioned that in your future Phase III trial, the endpoint could be measured at 48 weeks. Is that correct? And I also wonder, how many patients could be required for a future Phase III trial and whether Veru plans to conduct the trial by itself or potentially with a partner?

Yes. So the answer is we're absolutely seeking a partner. But the way we're designing this study is the way, we're thinking about it is we have a Phase III that is potentially an all-comers study, in which case, weight loss is your endpoint and the weight loss endpoint all you have to shows is 5% incremental increase, which means that would be, again, the standard endpoint of 48 weeks, the FDA wants you to be at least a year. However, embedded in that study of the patients that are in our Phase IIb, greater than 60 years of age. And the reason we picked that patient population is because physical function and potentially lean body mass could be interesting endpoints in itself. So depending on how our discussions go with the FDA, do we focus on a subpopulation in which the clinical benefit risk ratio is different and the endpoints are going to be different potentially or do you go after a weight loss population, and in which case, you're not worried about muscle, just get the muscle function because that will be something that you can put in your label, and I think that will be important. But get the endpoint of 5% better decrease in weight at week 48, and you get it. Gary, do you want to add to that?

No. I think the outcome of the study that we're running, we'll dictate that. We'll dictate where we go and how big that study will be, what the primary endpoint will be whether the FDA just purely looking at weight loss or whether they're looking at weight loss, as Mitch mentioned, as a -- with a component of body composition, increasing or maintenance of lean mass an increasing fat reduction would be, in my opinion, a very positive outcome for these patients. And that quality, what I'm going to term is quality rate loss would be very important for overall health benefit.

But the fact that we're measuring a physical function, we know the FDA likes outpatient feels, functions survives. And so that's why the stair climb test, which is a key component of the Phase IIb is important because I think that will also influence how we think about endpoints in the Phase II. Ultimately, we think enobosarm is a kind of a programmatic molecule meaning that you're looking at rescue, you're looking at decreasing doses of GLP-1, you're looking at being used in combination with the whole population used in combination with a at risk population, it could potentially be used in combination with a myostatin inhibitor, it can potentially be used. So I think this can be pretty interesting. And so we're active in trying to find a partner that test the resources to allow us to explore all these possibilities.

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

Thank you, operator. I appreciate everybody being -- who joined us on today's call. And we're very, very excited about the prospects of enobosarm. I look forward to updating you on our progress in the next investors' call. Thank you.

The digital replay of the conference call will be available beginning approximately noon Eastern Time today, February 8, 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 8260066. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.