Good morning, ladies and gentlemen, and welcome to 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. Sam Fisch, Berrinks, 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, Chief Scientific Officer; Michele Greco, Chief Financial Officer and Chief Administrative Officer; Michael Purvis, the General Counsel and Executive Vice President of Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q3 fiscal year 2024 earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing innovative medicines for high-quality wave loss, oncology and acute respiratory distress syndrome. The company's drug development pipeline includes 2 late-stage novel oral small molecules in enobosarm and sepisabululin. In our weight loss pipeline, we have Enobosarm, also known as Austria-MK-2866 GTX-024 and VR-024, which is an oral selective angio-receptor modulator, SARM for short. Enobosarm being developed as a treatment in combination with a weight loss drug like glucagon-like peptide-1 receptor agonist, also known as a GLP-1 receptor agonist to augment that loss and to avoid muscle locks and overweight or obese patients for chronic weight management. In our oncology pipeline and pending additional external funding or pharmaceutical partnership, we have a Enobosarm combination with abemaciclib as a second line treatment of angel receptor positive, estrogen receptor positive and human epidermal growth factor II negative metastatic breast cancer in our infectious and inflammatory disease pipeline and similarly pending additional external funding of pharmaceutical partnership, we have sabizabulin, a microtubule disruptor, which is a planned 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 dual protection against unplanned pregnancy and sexually transmitted infections. This morning, we'll provide an update on the current focus of our company, which is the development of Enobosarm, an oral SARM in combination with Wegovy , which is semaglutide, a…

Thank you, Dr. Steiner. Let's start our highlights with the third quarter results for the 3 months ended June 30, 2024. Overall, net revenues were $4 million compared to $3.3 million in the prior year's third quarter. The company's quarterly sales for its U.S. prescription business were $552,000 compared to $863,000 in the prior year's third quarter. Net revenue from the Global Public Sector business for the quarter was $3.4 million compared to $2.5 million in the prior year's quarter. The increase in the public sector business is for increased shipments under our contracts with UNFPA and USAID. Overall, gross profit was $1.3 million or 34% of net revenues compared to $1.2 million or 37% of net revenues in the prior year quarter. Gross profit increased due to an increase in units sold. The decrease in gross margin is due to the change in sales mix with the U.S. prescription business, which has a higher profit margin, comprising a smaller percentage of total net revenues. Operating expenses for the quarter decreased to $12.4 million compared to the prior year's quarter of $19.7 million. The decrease is primarily due to research and development costs, which decreased to $4.9 million compared to $8.8 million in the prior year quarter and the decrease in selling, general and administrative expenses of $3.4 million from $10.9 million in the prior year quarter to $7.5 million in the current quarter. The decrease in research and development costs is due to our drug development strategy to focus development efforts on those drug candidates with the best opportunity for long-term success and shareholder value creation while matching available funding. During the quarter, we initiated the Phase IIb quality clinical study. The decrease in selling, general and administrative expenses is primarily due to significant costs incurred in the prior…

Thank you, Michele. All of the GLP-1 receptor agonist was mainly by creating a low caloric starvation state by reducing appetite that results in the nonselective loss in both muscle and fat tissues to cause weight loss. Using a muscle preserving drug that can also decrease fat mass like enobosarm in combination with the glucagon receptor agonists may allow for the enhanced reduction of fat mass higher-quality precision weight loss in not only older patients who are overweight or obese, but also for all patients who overweight Orbis. This is truly an unmet medical need. We believe that enobosarm the best investigational drug candidate to address the muscle loss caused by glucagon receptor agonist drugs. Enobosarm the first in class arm has a once a day oral dosing has demonstrated tissue selectivity, utilizes a well-known mechanism of action to antigen receptor to favorably change by the composition. Activation of the ante receptor increases muscle mass, improves physical function and decreases fat mass to potentially achieve a higher quality of weight loss. enobosarm has a favorable safety profile and would not add to the gastrointestinal side effects that are already observed with a glucagon-receptor agonist treatment alone. The global obesity and overweight drug market is projected by many research analysts to be $100 billion annually by 2030. The combination of enobosarm with glucagon receptor agonist potentially represents a multibillion-dollar opportunity. I should note that we also have new clinical data that we generated from reexamination of the clinical data from some of the previous 5 clinical muscle studies evaluating enobosarm that further support the potential of enobosarm for the preservation of total lean body mass and the reduction of fat mass to improve body composition for higher-quality weight loss in patients who obese overweight. The company will be presenting an abstract of the obesity week 2024, and that's in November 2 through 6 in San Antonio, Texas. Furthermore, we've been invited to present keynote lectures at the fourth edition of the World Obesity and Wake Management Congress being held October 24 to 26 in Baltimore, Maryland, in the 17th International Conference of the Society of sarcopenia, cachexia-wasting disorders being held December 6, 8 in Washington, D.C. I've also been invited to co-chair a session entitled body composition changes induced by glycine receptor agonist and obesity therapy at the International Conference of the society and sarcopenia cachexia and wasting disorders. We are very excited about the prospects of enobosarm to address this new and important unmet medical need, and we are looking forward to the top line results of this important and timely Phase IIb quality clinical study. With that, I'll now open the call to questions. Operator?

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

Assuming positive results coming out of the Phase IIb quality study, how soon can you advance the candidate to the next step and whether you plan to find a partnership for a potential registration study.

Thank you,. So assuming we have a positive study, which means that now that we have complete enrollment, we can now have a little bit more certainty, have a lot more certainty in terms of how the trial will progress in terms of information. So the expectation is the last patient will complete the study, the 16-week portion of the study in December give us some time here to clean up the data and look at the data and get the top line results, call it, January. So in January of 2025, we will have the Phase IIb quality clinical trial data. The reason I say that way is the extension trial is not required for us to move forward with talking to the FDA on potentially talking to partners. So really, it's the data that we get in January that will start to borrow rolling from a standpoint of moving forward. So moving forward, means collect the information, go back to the FDA and start having further discussions now with real data in hand. I mean this data really represents the first muscle drug, and we have competition with, for example, myostatin inhibitors, but this data will be the first muscle drug to be given in combination of GLP1 to see what the results look like. I mean all these other drugs pretty much have no clinical data in combination with GLP1 and the data that they use to move forward to the Phase IIs just like us is data showing muscle preservation reduction in fat and other conditions, not in combination with GLP1 so with that said, we have a real opportunity to meet with the FDA and understand what the Phase III clinical program will look like. With that said, also, this is also an ideal time with data on hand to begin to have discussions for potential partnerships. As I mentioned in previous calls, we have talked to the major players. As you would expect, the expectation is for us to get this study done so we'll have real data, so we can have real discussions. And so that's the way to think of it is after January, it gives the company an opportunity to begin moving on the regulatory front and moving on the partnership front.

And the next question comes from Leland Gershell with Oppenheimer. Mitch.

Just a question actually on safety. In the trials that you referenced in the 5 studies that you referenced with the enobosarm, I think the high dose was 3 milligrams. I know you're testing up to 6 in the current quality study. Just wanted to ask kind of what gives you confidence that you'll be okay to expect to liver at 6? And are there any considerations with respect to the types of patients in the study, i.e., overlay obese, therefore, may have bad accumulation in the liver could that put them in for the risk of having tiering? And also, is there any provision for our alcohol cessation during the study, which also could be affected.

So the answer to the first, I'm going to answer a couple of those questions and then I'm going to ask Dr. Gary Barnette, our Chief Scientific Officer, to answer some of those questions. So as it relates to the database, you're absolutely right, the database that we have for muscle as an end point goes up to 3 milligrams. Of course, we have a single ascending dose and multiple ascending dose studies that were done at much higher doses as high as 100 milligrams. But I need to remind everybody that we also have done almost 250 patients at 9 milligrams or 18 milligrams in our breast cancer program. And some patients have been taking those doses for as high as long as 2-year loss. So we do have data for safety above the 6 milligram and again, with no evidence of liver toxicity defined as drug-induced liver injury. As it relates to triglycerides, one of the things that we did see in a different patient population, the older patients, men over the age of 60 and women postmenopausal is we did see about a 30% reduction in triglyceride. So one of the mechanisms for if you worry about overweight patients or these patients that may have fatty liver, we may be able to reduce the triglycelides, which is the source of the fatty liver. As it relates to alcohol, I'm going to have to ask Dr. Gary Barnette what we're doing in a clinical protocol.

Yes. We are not excluding alcohol. We do monitor the alcohol history in the alcohol intake as we go forward. Of course, we're excluding patients with alcohol-associated cirrhosis, alcohol associated hepatitis, alcohol-associated sodaliver. If we know those things, they're excluded from the study. But we don't exclude the intake of alcohol during the study, but we do monitor that.

And the next question comes from Gary Nachman with Raymond James.

Pages on for Gary. Congrats on the quarter. So my first question is, can you just talk about how you're expecting the Phase IIb to progress now that you're fully enrolled? And if we should expect any incremental updates before you report top line in January? And on that safety question, are you pleased with everything you're seeing with the safety committee thus far in that current trial? And then I also have a follow-up.

Yes. So as it relates to the Phase 2 and what to expect. So as I promised, we would announce when we fully enrolled the study. And so that's probably the last announcement in terms of progress because the last patient out will be December. And so the next report will be the actual top line data. As it relates to safety, we're pleased with what we're seeing so far. But we enrolled 150 patients in 3 months. And so many of these patients are still just starting their part of their first month. So it's still early times. But again, the 3-milligram dose we've used in 5 clinical trials and other trials, and we've used 9 milligrams and 18 milligram. So we're not expecting anything strange, but that's why we run the study, and that's where we're going to follow. And so it's hard to say much more about safety at this point, except there's no surprises. And then as it relates to I think we're going to ask you another question after that, you said.

Yes. I just wanted to ask a little bit more about some of the secondary endpoints in the Phase IIb? And then how do you take them to trend? And specifically on the home IR. Can you talk a bit more about the significance of that and what you're hoping to show?

Yes. So home IR, we have mistakenly put on our slide that we will be measuring home IR in this patient population. We have measured homeware in previous patient populations and show the benefit of insulin resistance. For this Phase II, given how short it is, we've decided to move the home IR into the next study to the Phase III study. So that won't be one of the data points that you'll see. You will see, again, the body mass, fat mass, which will be the body composition endpoints. We'll have total weight, body weight, so we'll see that. And then from a functional endpoint, we'll be measuring physical function by Steroclime. The reason that's important is to sterling power Steroclime test is a sensitive measure of Quadriceps strength and sensitive to testosterone and androgen anabolic stimulation. And it's also a test that the FDA told us in writing is the acceptable function endpoint. To pause for a moment. As you know, there are many of you may have heard, like Grip strength and leg press and Chess press, the FDA told us those are not acceptable functional endpoints. So the functional endpoint that we've chosen in the study, Seraphim Power is accepted by FDA. In fact, TavoPharma with F had the muscular dystrophy drug approved. I guess about 6 months ago, and so I think that's key. The other thing that's key in those 5 clinical studies that we did in almost 968 patients, about 900 of those patients, we did sterclimb. So we know how to do stair-climb we've learned a lot on how to execute on that endpoint. Dr. Barnette, do you want to add to anything to that?

No, yes, that's exactly right. And we're looking for changes in lean mass. We're looking for maintenance of lean mass in our treated group versus a loss in mass in the placebo group, and we're looking to assess how much we can offer it to fat loss. That's the main focus of this study.

And the next question comes from William with B. Riley Securities.

Congratulations on the quarter. Just looking for a little extra color here on what we might expect in January for the top line data. Is this going to be like simply lean mass loss being reported? Or will you provide any extra details on the body weight loss and/or the fat loss war specifically the functional improvements?

Yes. Great question. So the question because you're a little garbled, but I think the basic question is that I heard is that when you report in January, what can we expect in terms of top line data and the kinds of top line data that we'll get. And the answer is, for sure, and I say it this way because the rock depends on or concern that if you report too much information, then all of a sudden now you can't get all the societies and stuff you don't want you to, I mean, you have to have a scientific meeting with new information. So with that said, the most important thing about the trial is reporting out on body composition. So certainly, the primary endpoint of lean body mass and total fat mass. So you have a clear understanding of our dose response or the right dose to pick for the right preservation of muscle and reduction of fat compared to placebo. So we'll have that for sure. And then we'll just we'll just have to see how the societies and additional scientific meetings and that kind of stuff, what we can report. But as you know, in the spring time in the winter time, there are a lot of meetings that will be going on. So it's not right on the top line data happening in January, it'd be shortly thereafter in one of the major meetings.

Got it. Very helpful. And maybe actually just a quick question. I believe you mentioned that you're going to have a presentation at obesity week. You mentioned the abstract. Is this going to be, I would say, unseen data from past clinical trials? Or is it going to be a little bit of what we've been seeing or potentially what we've seen already?

It will be additional data that you have not seen. It's another analysis looking at data. So it's not repeat data that we've already shown. So it will be new data from the old studies.

Okay. Helpful.

[Operator Instructions] And the next question comes from Dennis Ding with Jefferies.

This is Anthea on for Dennis. 2 from us. On Star claim Power, could you talk a little bit about what the MCID is for the measure and what would be a successful outcome in Phase II? And on the Phase III, you've spoken previously about moving forward in elderly patients only versus the broader obesity population. Can you just let us know your thinking there and how the Phase 2 informed that decision.

Great. So I'm going to take the second question first and then Dr. Barnette will talk about Star Claim Power in terms of what's deemed a success. So in terms of the study, so to be very clear, the FDA has told us that the Phase III program that they're looking forward to us having the opportunity to develop the drug in all patients that have obesity or overweight. So in other words, all comers. And their belief is that a muscle preservation drug will have benefit in older, it has benefited all the patients will have benefit in younger patients, too. And so that's a positive sign that the FDA is well aware of body composition and how they're thinking about it. The FDA also said that one way forward would be to look for incremental weight loss, and this is now to about Phase III programs now, incremental weight loss the combination versus the Glp alone. The incremental weight loss, the FDA did not commit to how much weight loss, incremental weight loss you should demonstrate because their position is that because you have a muscle preservation drug that may benefit in other ways such as physical function, home IR, Gary Nachman brought up. There are other things, other benefits of having a muscle preservation drug that's beyond just the adding muscle or preserving muscle just for the sake of doing it. So showing function is important. And so in a Phase III program, having those endpoints as key secondary endpoints and the primary endpoint wave loss allows the FDA to look at the totality of the data for clinical benefit and clinical meaningfulness, which is good because at one point it was a direct cutoff on weight, and that was it. But now it's much more totality…

So in the Phase II study, I would believe the success really is being able to power and inform the design of the Phase III. That's the success. And success as far as numerically goes, I think any separation from between the placebo group and the Enobosarm Treaty Group would be a success meaning we can show an observational difference between the power exerted going up the steps between the 2 groups. I think that would be a success. Remember, we're looking at change from baseline. So we've got a baseline value. And then we have a value 16 weeks, and then we'll have another value at the end of the extension. And I really think that the definition of success would be that we could observationally see a difference. As far as the Phase III trial, I think we're going to propose to the FDA and what we're going to try to do is we're going to power the Phase III study on, with the overall, remember, the FDA basically has told us that they believe that weight, or excuse me, the muscle loss or a drug to preserve muscle or preserve lean mass would be beneficial regardless to age, but they certainly recognize that the most at-risk patients are the aged population, which were study in the Phase II. So we do want us to include the younger patients in the Phase III study. So I would probably propose at this point that we would have a body weight endpoint, total body weight endpoint as the primary in the overall population. And then I would power the subgroup, meaning the patients over the age of 60 for airtime power because that is the at-risk population. So we intend obviously, if these patient populations have already lost lean as just due to their advancing age, and then we accelerate that with a grip 1 or a diet like this, then I think that that's where the value of Enobosarm increasingly math, increasing physical function is going to be the most important from a patient outcome and quality of life.

And let me also add, Gary, that the Phase III program is going to be done like a typical Phase III program. As you know, we're looking at 16 weeks. And the reason we picked 16 weeks for Phase II is for 2 reasons. One is we know about half the total weight that's lost in a trial that goes on for 68 weeks happens in the first 16 weeks. And we also know from bariatric surgery data that in the first 3 months, the 55% of the muscle you lose in that whole year post surgery, it happens in the first 3 months. So we know there's a lot of activity going on in muscle in that first 16 weeks. And we've got between the STEP 1 data and now the bariatric surgery data that gives you clarity on what's happening earlier. So the Phase 2 will help us understand what we want to do Phase III. Time for the Phase III would be if we use semaglutide or tousepatide and probably use both. The first 16 weeks is what you need to titrate up and then you go on for another year. So it's about 68 weeks. So your Phase III program would be 68 weeks and your functional endpoint will be at the end of that 68 weeks. So you have a lot more time to maintain muscle and separate out the placebo group. And so the way to look at it is the Phase II is just the beginning. And the 1-year study will allow you to see the additional fat burning benefits of having a drug that directly reduces fat we're having a glucagon receptor agonist that it's not going to have a competing signal we clinched stop eating and the competing signal is going to be the muscle deprivation deficit tolling to bring to eat because that's self-preservation you get rid of that noise than the Glp one can work better. And finally, with more muscle, you lose more fat. So that's why we think weight losses and endpoint and particularly is a good endpoint. And particularly now the FDA is thinking about clinical benefit is not just weight loss. It's wage laws in our case, function. And so I think it puts us in a good position. Also, the label will reflect that because again, the FDA doesn't really see muscle loss for cosmetic reasons, they see muscle preservation for functional reasons. Long answer, but hopefully, I gave you some clarity.

Okay. Ladies and gentlemen, this concludes the 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 everyone who joined us on today's call. I look forward to updating all of you on our progress at our next investors call. Thank you again. Bye now.

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