Veru Inc (VERU) 2021 Q1 法說會逐字稿

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 over to Mr. Sam Fisch, Veru Inc.'s Director of Investor Relations. Please go ahead.

Good morning. 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 the company's business, operations, finance and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and the company's 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 this -- in the company's 10-Q and 10-K SEC filings.

I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc.'s Chairman, CEO and President.

Thank you, Sam, and good morning. With me on this morning's call are Michele Greco, CFO and CAO; Dr. Gary Barnette, Chief Scientific Officer; Phil Greenberg, Executive Vice President, Legal; and Sam Fisch, who you've met, Director of Investor Relations. Thank you for joining our call.

Veru is a late clinical stage oncology biopharmaceutical company focused on developing novel medicines for the management of 2 of the most prevalent cancers, prostate cancer and breast cancer. We continue to invest cash generated from our sexual health commercial business into the clinical development of our high-value oncology drug candidates so that our current shareholders can realize the maximum value of our oncology biopharmaceutical company.

This morning, we will discuss another record quarter from our sexual health business, the progress of our prostate cancer and breast cancer drug pipelines, VERU-111 for the treatment of COVID-19, the upcoming NDA submission for TADFIN, and then we will provide financial highlights for our record first quarter fiscal year 2021.

Let's now focus on some of the financial highlights of Veru's sexual health business. We had net revenues in the US FC2 prescription business in Q1 of fiscal year 2020 of $9.1 million compared to $6.1 million in Q1 of fiscal year 2020, which is up 50%. That should be Q1 fiscal year 2021 up $9.1 million compared to $6.1 million in Q1 fiscal year 2020, which is up 50%. Gross profit for Q1 fiscal year 2021 was $10.8 million compared to Q1 fiscal year 2020 of $7.3 million, which is up 49%. Operating income was $19.2 million, which includes a gain of $18.4 million on the sale of the PREBOOST business and the adjusted operating income, which excludes the sale -- the gain on the sale of PREBOOST was $800,000 in Q1 fiscal year 2021 compared to an operating loss of $1.8 million in Q1 fiscal year 2020.

In fact, to give you a sense of our continuation of the growth trajectory, for Q1 fiscal year 2020, we sold 81,000 units of FC2 in the U.S. prescription market; while in Q1 fiscal year 2021, we sold 116,000 units of FC2 in the U.S. prescription market, an increase of 43%. TADFIN, which is tadalafil 5 milligrams and finasteride 5 milligrams combination capsule, is being developed to treat lower urinary tract infections caused by benign prostatic hypoplasia. It contains both tadalafil, which is also approved for the treatment of erectile renal dysfunction; and finasteride. We expect to submit the NDA for TADFIN next week.

We also received a waiver for the PDUFA -- FDA PDUFA fees for this NDA submission in the approximate amount of $2.4 million. We plan to launch TADFIN, if approved, via third-party telemedicine channels, and when launched, will be a near-term source of additional revenue for Veru.

In oncology, we are focused on providing new and novel oral therapies with favorable safety profiles following resistance to endocrine therapy, but prior to proceeding to IV chemotherapy for both advanced prostate and breast cancers. We're excited to advance our prostate cancer drug candidates VERU-111 and VERU-100 as well as our breast cancer drug candidates, enobosarm and the additional indication for VERU-111 into registration and clinical studies. Veru anticipates registration clinical trials for 4 oncology indications and the additional registration clinical trial for VERU-111 for COVID-19, making a total of 5 potential registration clinical trials in all to commence in calendar year 2021.

In prostate cancer, the company continues to make strong clinical progress advancing VERU-111 as a treatment for metastatic castration and androgen receptor targeting agent resistant prostate cancer; and for VERU-100, for androgen deprivation therapy for advanced prostate cancer.

VERU-111 is an oral first-in-class new chemical entity that targets, cross-links and disrupts the alpha-beta tubulin subunits of microtubules to disrupt the cytoskeleton. VERU-111 is being evaluated in an open-label Phase Ib and Phase II clinical studies in men with metastatic castration and androgen receptor-targeting agent-resistant prostate cancer. The Phase Ib clinical study completed enrollment of 39 men and is ongoing. The Phase Ib study has yielded promising efficacy and safety clinical results. Based on the Phase Ib study results, the recommended Phase II dose is 63 milligrams oral daily continuous dosing for 21-day cycles.

Daily chronic drug administration appears feasible and safe. At the recommended Phase II dose, there were no reports of neutropenia, neurotoxicity or Grade 3 diarrhea. The efficacy results show PSA declines and responses as well as objective and durable tumor responses. Furthermore, median radiographic progression-free survival in the men who have had at least 4 cycles of VERU-111 is 12.4 months. There are still 3 men on the study, with 2 patients approaching 2 years without prostate cancer progression.

In September of 2020, the Phase II clinical study has completed enrollment of approximately 40 men with metastatic castration-resistant prostate cancer, who have also become resistant for the androgen receptor targeting agents but prior to proceeding to IV chemo. Although the study is still ongoing, daily chronic drug administration also continues to be feasible and safe. At 63 milligrams daily continuous dosing, there were no reports in neutropenia, there's a single report of minor neurotoxicity and manageable and fewer cases of diarrhea. Like the Phase Ib, we have observed efficacy results, including PSA declines and responses as well as objective and durable tumor responses, including complete and partial responses. Thus, in the Phase II clinical study, VERU-111 continues to show objective antitumor activity and a good safety profile.

We will be presenting updated clinical results for the Phase Ib as well as the Phase II clinical trials at the ASCO Genitourinary Cancer Symposium taking place February 11 through 13, 2021. And the abstract is 325053: Clinical study of VERU-111, an oral cytoskeleton disruptor in metastatic castration-resistant prostate cancer who have failed an androgen receptor targeted agent. And this presentation will be done by Dr. Mark Markowski, who is Assistant Professor of Oncology at Johns Hopkins Kimmel Comprehensive Cancer Center and the principal investigator on this study.

As we already have enough safety and efficacy data selected dose with VERU-111 to proceed to Phase III, the company had an FDA meeting in July of 2020 and received positive input from FDA on the pivotal Phase III trial design for VERU-111. The company received regulatory clarity that the indication of treatment in men with metastatic castration-resistant prostate cancer who have failed one androgen receptor targeting agent, but prior to IV chemotherapy was acceptable, that an open-label randomized study using an alternative androgen receptor targeting agent as the active control is reasonable and that the primary endpoint may be radiographic progression-free survival.

By allowing radiographic progression-free survival as the primary endpoint, the sample size of the Phase III study is planned for approximately 240 men. The Phase III pivotal clinical study will evaluate VERU-111 for men with metastatic castration-resistant prostate cancer who have also become resistant to one androgen receptor targeting agent and will be called the VERACITY Phase III study. The company has submitted the Phase III protocol design to FDA for its input and anticipate starting the VERACITY Phase III study in the first quarter of calendar year 2021.

It is interesting to note that we have a real opportunity for VERU-111 to be the leader in the pre-chemotherapy space in metastatic prostate cancer by pursuing the indication of the treatment of metastatic castration and androgen receptor targeted agent resistant prostate cancer. Use of androgen receptor targeting agents have moved earlier in the treatment sequence of advanced prostate cancer. The 2 currently approved indications for the androgen receptor targeting agents or for hormone-sensitive metastatic prostate cancer and for non-metastatic castration-resistant prostate cancer. When patients progress or fail and androgen receptor targeted agent in both these settings, they will now have metastatic castrate-resistant and androgen receptor targeted agent resistant prostate cancer, the very indication we're pursuing in the Phase III clinical trial. So all roads lead to this indication.

Next, I will update you on VERU-100 as androgen deprivation therapy for the palliative treatment of advanced prostate cancer. VERU-100 is a novel proprietary long-acting gonadotropin-releasing hormone, GnRH antagonist peptide, 3-month subcutaneous depot formulation designed to address the current limitations of commercially available androgen deprivation therapies known as ADT. Androgen deprivation therapy is currently the mainstay of advanced prostate cancer treatment and is used as the foundation of treatment throughout the course of the disease. Furthermore, ADT has continued even as other endocrine chemotherapy or radiation treatments are added or stopped. There are no GnRH antagonist depot injectable formulations commercially approved for the treatment beyond a 1-month duration.

A Phase II study to evaluate VERU-100 dosing is anticipated to begin in the first half of calendar year 2021. And the Phase III registration study in approximately 100 men is anticipated to start in the second half of calendar year 2021.

Next, I will discuss the progress of our breast cancer drug pipeline, which includes enobosarm and VERU-111. The most common type of breast cancer is ER+ breast cancer, where the estrogen is one of the main drivers of proliferation, tumor progression and metastasis. Consequently, the treatments that target the estrogen receptor are the mainstay of breast cancer therapy. Typically, women are treated with several lines of estrogen receptor targeted agents like selective estrogen receptor modulator serums, which includes tamoxifen, nonsteroidal aromatase inhibitors like letrozole and anastrozole, selective estrogen receptor degraders like fulvestrant, and these standards of care now include treatment of CDK4/6 inhibitors. Unfortunately, almost all of the women being treated will eventually develop resistance to an estrogen receptor targeted endocrine and CDK4/6 inhibitor therapies. And alternative treatment approaches with different mechanisms of action will be required, including IV chemotherapy.

Interestingly, like the estrogen receptor, the androgen receptor is found in over 85% of breast cancer. What is the androgen receptors' function in breast cancer? Does it stimulate or does it inhibit breast cancer growth? A recent publication in Nature Medicine of an international study headed by Dr. Hickey and her team has provided scientific evidence establishing that the androgen receptor is a tumor suppressor in estrogen receptor positive breast cancer. This means when the androgen receptor is activated by androgens, it strongly suppresses estrogen receptor positive breast cancer growth. This explains why historically, when synthetic androgens were used to treat breast cancer, they demonstrated good activity. But unfortunately, the masculinizing side effects, the increase in hematocrit or liver toxicity has prohibited their use as a viable treatment.

In contrast, enobosarm, an oral, first-in-class new chemical entity, is a selective androgen receptor-targeted activating agent and is being developed for the treatment of AR+/ER+/HER- metastatic breast cancer prior to IV chemotherapy. enobosarm represents a new advancement in endocrine therapy for advanced breast cancer in decades. enobosarm has extensive nonclinical and clinical experience, having been evaluated in over 25 separate clinical studies involving more than 2,100 subjects including 5 prior Phase II clinical studies in advanced breast cancer involving more than 250 patients.

In addition to suppressing androgen receptor, estrogen receptor breast cancer cell proliferation and tumor growth, enobosarm has other potential beneficial clinical properties. In preclinical studies, enobosarm has demonstrated it builds and heals cortical and trabecular bone and, therefore, has the potential to treat osteoporosis and skeletal-related events in cancer. enobosarm has also been shown to reduce fat, to build muscle and to improve physical function in clinical studies involving elderly subjects in patients with cancer cachexia, including breast cancer patients. And furthermore, because of its tissue selectivity, enobosarm has a favorable side effect profile with no masculinization, that's no facial hair and acne, no increase in hematocrit and no liver toxicity.

The science supporting the efficacy of enobosarm and the targeting of the androgen receptor ER+ advanced breast cancer was also the subject of Nature Medicine's study published this month by an independent group of breast cancer experts led by Dr. Hickey. And in their study, they showed that using breast cancer tissue from patients who had resistance to estrogen receptor targeted and CDK4/6 inhibitor therapies, enobosarm monotherapy exhibited significant antitumor activity. The combination of enobosarm in a CDK4/6 inhibitor demonstrated even greater antitumor activity. The data suggests that enobosarm restores sensitivity of a CDK4/6 inhibitor resistant breast cancer tissue to suppression by CDK4/6 inhibitor.

Two positive Phase II studies involving 150 women with androgen receptor positive, estrogen receptor positive metastatic breast cancer was -- were conducted. We will focus on the second of these 2 studies, the G200802 Phase II study, which is a 2-arm study evaluating 9 milligrams and 18 milligrams of enobosarm daily oral dosing in 136 women with AR+/ER+/HER- advanced breast cancer. The patients in this study were heavily pretreated, having failed around 3 endocrine treatments, and 88% have received prior chemotherapy.

The primary investigator for the study is Dr. Beth Overmoyer, Founder and Director of the Inflammatory Breast Cancer Program, a Dana-Farber Cancer Institute in Boston, Massachusetts and Assistant Professor of Medicine to the Harvard Medical School. The completed Phase II study results were recently presented as a spotlight presentation at the San Antonio Breast Cancer Symposium this past December by Professor Carlo Palmieri, Professor of Translational Oncology and Medical Oncology at the University of Liverpool, the abstract 811 entitled "Efficacy and safety of Enobosarm, a selective androgen receptor modulator, to target the androgen receptor of women with advanced ER+/AR+ breast cancer - final results from an international Phase II randomized study."

According to this study, an enobosarm therapy strongly establishes the relevance of targeting the receptor with a selective androgen receptor activating agent as women with heavily pretreated estrogen receptor-targeted resistant, AR+/ER+ metastatic breast cancer had favorable clinical benefit rates and objective and durable tumor responses. In fact, the presence of the androgen receptor was required as enobosarm anti-tumor activity was not seen in AR-/ER+ advanced breast cancer subjects. AR-staining status will be a critical inclusion criteria in the Phase III clinical trial design to enrich the study for a population -- a patient population who are most likely to benefit from enobosarm therapy. These subset analysis of AR staining and enobosarm antitumor activity from the Phase II clinical study will be presented in the upcoming scientific meetings.

Enobosarm is safe and was well tolerated in the study without virilizing effects, increasing hematocrit and liver toxicity and also quality of life measurements demonstrated overall improvement, including mobility, anxiety, depression and pain. The 9-milligram dose was selected for Phase III as the 9-milligram cohort had similar tumor responses with slightly better toxicity profile than the 18-milligram dose cohort.

We also performed a post hoc subset analysis of the Phase II clinical data to understand whether enobosarm had any anti-tumor efficacy in patients that had AR+/ER+ metastatic breast cancer who are also resistant to both an estrogen receptor targeting agent and a CDK4/6 inhibitor. In the 9 women who fit these criteria, enobosarm treatment resulted in objective tumor responses of 33%. We had 2 complete responses and 1 partial response in these 9 women, clinical benefit rate of 24 weeks of 60% and a radiographic progression-free survival of 7.7 months. Of those small numbers, one can conclude that enobosarm has antitumor activity in women with AR+/ER+ metastatic breast cancer that's resistant to estrogen receptor targeting agents and CDK4/6 inhibitors. These subset analyses of CDK4/6 inhibitor resistance and enobosarm antitumor activity from the Phase II clinical study will also be presented in upcoming scientific meetings.

By targeting the receptor in ER+ metastatic breast cancer, enobosarm introduces a novel endocrine therapy to patients with breast cancer that have exhausted endocrine therapies targeting the estrogen receptor, but prior to IV chemotherapy. In October of 2020, the company met with FDA to discuss the enobosarm clinical breast cancer program. The FDA agreed to the Phase III registration clinical trial of the study to evaluate the efficacy and safety of enobosarm 9 milligrams versus an active control, which can be either exemestane or tamoxifen for the treatment of AR+/ER+/HER2- breast cancer in patients who have failed a non-steroidal aromatase inhibitor, fulvestrant and a CDK4/6 inhibitor. The Phase III study will be called the ARTEST study, and the primary endpoint will be radiographic progression-free survival.

It should be noted that we and key breast cancer experts in the field were intrigued by the preclinical study results reported in the Nature Medicine that showed the combination of enobosarm with a CDK4/6 inhibitor actually restored CDK4/6 inhibitor sensitivity and suppressing AR+/ER+ metastatic breast cancer that was resistant to both an estrogen receptor-targeted agent and the CDK4/6 inhibitor, which is, as you know, the target population in our planned Phase III ARTEST clinical study. Consequently, the Phase III ARTEST trial, is now designed to have 3 treatment arms. enobosarm alone, enobosarm in combination with a CDK4/6 inhibitor and an active control with either exemestane or tamoxifen. The trial sample size will remain approximately 240 women. The pivotal Phase III open-label randomized active control ARTEST study is anticipated to commence next quarter.

Next, I will update you on the Phase IIb clinical study evaluating VERU-111 for the treatment of taxane-resistant metastatic triple-negative breast cancer. Metastatic triple-negative breast cancer is an aggressive form of breast cancer that is present in approximately 15% of all breast cancers. This form of breast cancer does not express the estrogen receptor, the progesterone receptor or HER2 and is resistant to endocrine therapies. The first line of treatment usually involves IV taxane chemotherapy. And almost all women will eventually develop taxane resistance. Preclinical studies in human triple-negative breast cancer grown in animal models demonstrated that VERU-111 significantly inhibits cancer proliferation, migration, metastasis and evasion, of triple-negative breast cancer cells and tumors that have become resistant to paclitaxel, which is a taxane.

Using the safety information from the Phase Ib and Phase II VERU-111 prostate cancer clinical studies in a total of approximately 80 men, we plan to meet with FDA in the first half of calendar year 2021 to discuss the Phase IIb clinical trial design for a possible accelerated approval for VERU-111 versus an active control Trodelvy for patients with taxane-resistant triple-negative breast cancer, making the proposed trial a potential registration trial.

The Phase IIb clinical study is planned to commence in the second half of clinical year -- calendar year 2021. And as I mentioned, this would represent a second major clinical oncology indication for VERU-111.

We announced this past Monday positive results from the Phase II clinical trial evaluating VERU-111 for the treatment of hospitalized patients with COVID-19 who are at high risk for acute respiratory distress syndrome. VERU-111 in this setting is a novel once-a-day orally dosed small molecule with both broad antiviral and anti-inflammatory activities which may serve a two-pronged approach to the treatment of COVID-19 virus infection and the subsequent debilitating inflammatory effects that lead to ARDS and death.

We conducted a double-blind randomized placebo-controlled Phase II clinical trial evaluating daily oral once-a-day dosing of VERU-111 18 milligrams versus placebo in approximately 40 hospitalized COVID-19 patients who had high risk for acute respiratory distress syndrome. This trial was conducted in 5 sites across the United States. Patients received either VERU-111, 18 milligrams of placebo as well as standard of care for 21 days or until they were released from the hospital. The primary efficacy endpoint was the proportion of patients that were alive without respiratory failure at day 29.

Here are the highlights of some of the clinical efficacy and safety results for the primary endpoint. In a modified intent-to-treat in mITT population, VERU-111 treatment compared to placebo had a statistically significant and clinically meaningful improvement in a proportion of patients alive without respiratory failure of 94.4% in the VERU-111-treated group with an N of 18 and 70% in the placebo group, treated group N=20 at day 29. And this represents an 81% relative reduction in treatment failures with a p-value of 0.05.

Here are some of the secondary endpoints. In the ITT population, VERU-111 reduced the proportion of patients who died on the study from 30%, which is 6 out of 20, in the placebo group to 5.3%, which is 1 out of 19 in the VERU-111-treated group. This is an 82% relative reduction in mortality in the VERU-111-treated group. The p-value there is 0.044.

In the mITT population, VERU-111 showed a clinically meaningful reduction in the average days in ICU. VERU-111 patients, 3 days versus placebo at 9.55 days and that p-value is 0.04. VERU-111 had a clinically meaningful reduction in days on mechanical ventilation from an average of 5.4 days in the placebo group to 1.6 days in the VERU-111-treated group.

During the study, the standard of care included the treatment with either remdesivir and/or dexamethasone under an emergency-use authorization. A subgroup analysis of patients that received standard of care was conducted in patients that received standard of care, VERU-111 treatment resulted in a clinically meaningful reduction. In average days in the ICU, VERU-111 was 1.43 days versus in a placebo, 8.83 days, p-value is 0.024. In average days on mechanical ventilation, VERU-111 had 0 days versus placebo at 6 days. The p-value is of 0.0427. In the VERU-111 group that also received standard of care, no patient required mechanical ventilation on this small study. Furthermore, VERU-111 was well tolerated and had a very good safety profile.

The company has been granted an expedited end-of-Phase-II meeting with FDA to discuss next steps, including a Phase III clinical registration, trial design, the VERU-111 COVID-19 program. The company expects that this confirmatory study will have a similar trial design as a completed Phase II study to evaluate daily oral doses of VERU-111 versus placebo with the primary efficacy endpoint of proportion of patients that are alive without respiratory failure at day 29. We expect the Phase III clinical trial will be conducted in approximately 200 hospitalized patients who have COVID-19 and/or at high risk of acute respiratory distressed syndrome.

The company is expected to have sufficient clinical drug supply on hand to complete this Phase III clinical study. Once agreed upon by FDA, the Phase III is expected to commence in April of 2021 and is anticipated to be completed by fourth quarter of calendar year 2021.

We will seek funding from the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services, BARDA and other agencies to try to fund the estimated amount of commercial drug to supply the needs of the U.S. population, assuming confirmatory positive result and FDA approval.

Due to the unprecedented urgency of the global pandemic and the fact that COVID-19 continues to mutate into various forms that may not be substantially mitigated by current vaccines or by any of the currently approved antibody drugs or other therapeutics, we're in need of an effective, broad spectrum antiviral drug. VERU-111 has the potential to be both that broad spectrum antiviral agent and that anti-inflammatory agent. The strength of the study, whether it was blinded, placebo-controlled, randomized study that also allowed standard of care for both the treated and placebo groups in hospital patients that are high risk for ARDS. Based on the strength of these promising clinical results, the company continues to be duty bound during this persistent global pandemic to pursue this COVID-19 indication even though it's not the primary focus of the company.

We are committed during this deadly pandemic to push ahead with VERU-111 clinical development as a treatment against COVID-19. And we have the resources to conduct our planned Phase III without impacting the cancer drug's clinical development.

I will now turn the call over to Michele Greco, CFO, CAO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. As Dr. Steiner indicated, we started the fiscal year with a record-breaking first quarter. On December 8, the company sold PREBOOST business for $20 million, $15 million in cash and $5 million in notes receivable due over an 18-month period. The sale of PREBOOST resulted in an $18.4 million pretax gain. Overall, net revenues were up 38% to a record $14.6 million from $10.6 million in the prior year quarter due to the growth in our U.S. FC2 prescription business.

The company recorded continued FC2 sales growth in its prescription business with net revenues up 50% to $9.1 million from $6.1 million in the prior year quarter. Net revenues for the public sector business also increased to $4.7 million from $4.4 million in the prior year quarter. Net revenues for PREBOOST through the sale date were $863,000 compared to $153,000 in the prior year quarter.

Overall, gross profit was $10.8 million or 74% of net revenues compared to $7.3 million or 69% of net revenues in the prior year quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our U.S. FC2 prescription business.

Operating expenses for the quarter increased to $10.1 million compared to the prior year quarter of $9.1 million. Research and development costs were $5.7 million compared to $5.3 million in the prior year quarter. The operating income for the quarter was $19.2 million compared to an operating loss of $1.8 million in the prior year quarter, an increase of $21 million. The increase is primarily due to the gain on the sale of PREBOOST of $18.4 million. Excluding the gain, we had operating income of $780,000 for the quarter.

Nonoperating expenses were $1.9 million compared to $1.6 million in the prior year quarter and primarily consisted of interest expense and change in the fair value of the derivative liabilities related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018.

For the quarter, we recorded a tax expense of $78,000 compared to a tax benefit of $77,000 in the prior year quarter. The effective tax rate for the quarter is de minimis due to reduction of the pretax income related to warrants exercise and the utilization of net operating loss carryforwards in the U.S.

The bottom line results for the quarter was net income of $17.2 million or $0.23 per diluted common share compared to a net loss of $3.3 million or $0.05 per diluted common share in the prior year quarter. The company has net operating loss carryforwards for U.S. federal tax purposes of $41.7 million, with $13.5 million expiring in years through 2038 and $28.2 million, which can be carried forward indefinitely. And our U.K. subsidiary has net operating loss carryforwards of $61.3 million, which do not expire.

Now looking at the balance sheet. As of December 31, 2020, our cash balance was $30.9 million, and our accounts receivable balance was $4.2 million. Due to our sale of PREBOOST, we added $15 million in cash during December and have $5 million of notes receivable which will be collected over the next 18 months. Our net working capital was $30.5 million at December 31, 2020, compared to $12.3 million at September 30, 2020.

Overall, we're delighted to see the continued increases in sales in both the U.S. FC2 prescription business and the global public sector health sector business. These revenue sources continue to be important sources of funds to invest in our promising pharmaceutical clinical development programs as we continue to transform our company into an oncology biopharmaceutical company with a focus on developing novel medicines for the management of prostate and breast cancers.

Now I'll turn the call back to Dr. Steiner.

Thank you, Michele. We have enjoyed another record financial quarter, which has allowed us to significantly advance our clinical programs. With a robust performance of the sexual health business plus the prospects for additional revenue from TADFIN, we believe that we're able to substantially invest in the continued clinical development of our prostate and breast cancer drug product candidates as well as VERU-111 COVID-19 Phase III study.

As a consequence, the company expects to have sufficient resources generated from our sexual health business and existing sources of cash to fund clinical development of all of our currently planned registration clinical trials. We plan to continue to generate robust growing revenues from the sexual health business, which is a stand-alone business, is very valuable. We're expecting another record year of fiscal year 2021, and we could have options to monetize the business as we did with the PREBOOST business.

We have successfully transformed our company into a late clinical stage oncology biopharmaceutical company supported by growing revenue, cash-generating sexual health business. We have a duty to expeditiously advance VERU-111 into a Phase III clinical study in hospitalized patients with COVID-19 with high risk for ARDS. If we confirm these promising results from the -- observing the completed Phase II clinical study, we expect to seek emergency-use authorization for this indication.

With that, I'll now open the call for questions, operator.

(Operator Instructions) The first question comes from Brandon Folkes with Cantor Fitzgerald.

Congratulations on another good quarter. Mitch, maybe just firstly, coming back to COVID-19 a little bit. Can you help us think how you're thinking about VERU-111's position in the market and maybe, obviously, you just try frame -- obviously, it's early before we get through the Phase II trial, but the market opportunity for VERU-111 there, obviously -- well, I think, earlier line treatments, vaccines. So how do we -- how should we think about that market opportunity for 111 in COVID if we're successful there?

And then secondly, we talked about potential for VERU-111 to be effective against mutant strains. Do you think the FDA will ask you for an inclusion criteria to include some of these mutant strains in the Phase III trial?

And then lastly, maybe I'll just ask this one of [TADFIN]. Can you talk about having the financial flexibility to fund all your programs? Obviously, you've got -- going to have -- you've got a lot going on, sort of probably trials of about 600 patients, if I heard correct, this year. You've got the manufacturing scale-up for TADFIN. So can you just give us some color in terms of how much wiggle room do you have in that statement?

Thank you for the question. I'll answer the last question first. It's really more like if you added all our programs together and they took place over the next 2.5 years, you're probably close to about 250 patients or 300 patients a year. And so that's why -- if you do 100,000 of patients, which is really the high end, that's $30 million a year, and we're generating more than that from our business, so I think we got a lot of wiggle room as it relates to funding. So even though each of these trials have numbers, it's not all coming in this year. They start this year, and then they -- and we're going to move as quickly as we can to get it done.

As it relates to your second question about whether the FDA is going to ask us to do a mutant strain, let me just remind everybody how VERU-111 works. The way VERU-111 works is it disrupts the microtubular trafficking system within the cell. So think of it as a highway. And the reason it works both in inflammation and in viral replication is as follows.

The virus will bind to the outside of the cell and it gets internalized. And it isn't -- it just doesn't float around. It actually gets -- it gets pulled along the microtubules, the highway into the nucleus, where it makes more virus. And when it makes a whole bunch of new virus, it's got -- that payload has to be brought back out to the outside of the cell, so it can be dumped out, so it can infect other cells. And the way it does that is, again, the highway. So the highway will actively transport it, whether it's the virus coming in or the bunch of new viruses making its way out, all through the trafficking system. And we cross-link alpha and beta tubulin. That causes deep polymerization. It breaks down the highway.

So as far as the highway is concerned, it doesn't care if it's a blue car, a red car, a sport -- a Porsche, a bus, it doesn't matter. They all use the same highway system. So there's a lot of -- that's why we refer to it as the broad spectrum antivirus is because it's not focused, for example, on an epitope on the spike protein that you have to hit. So it's much, much broader than that.

But interestingly, inflammation follows the same way because these vacuoles in the cell that contain cytokines, interleukins and interferons, they don't just float around. They're in vacuoles. And vacuoles don't just float around. They're actually move around the cell through the same highway system. And so if you want to get something from inside the cell outside and dump it out, you have to go through the highway system. We disrupt that.

And we showed that in preclinical studies. Literally, every cytokine we looked at in monocytes and from the spleen, we stopped the secretion of those cytokines. So that's why we believe we have preclinical evidence. And now the Phase II supports that, acting as an anti-inflammatory or acting as an antiviral.

So from that standpoint, if the FDA asks us to look at additional strains, I would argue, by definition, just all you have to do is just look at the map of the United States and see we already have strains all over the place already. So we're not going to have to actively look for a COVID-19 strain -- a mutant strain. That's already here.

And so what we'll do is we'll collect the information. And we'll know from the patients that come into the study, whether they have it or not, but it's not required, at least at this point. And again, the FDA can do -- until we have our discussion with the FDA. As you know, the meeting has been granted. At this point now, I think we'll be fine no matter what they ask.

As it relates to your first question, let's think about that for a moment. When we started out, everybody said to us, "Why would you want to do COVID-19 Phase II? This is going to be like all the other viruses that's going to come and go." And if you remember, my comment was, maybe it will come and go, but at some point, there'll be COVID-20, COVID-22, COVID-24. The Spanish flu was around for 3 or 4 years. And so I'm not quite sure it will be gone, but I'd be honest with you, I didn't know.

And if I would have told you that the number of hospitalizations and the number of deaths and the number of cases exceed what we saw in March, you would think I was crazy, but that's what happened. And the death rate, when -- we have 85,000 to 120,000 hospitalizations in this country. And interestingly, that has also changed, meaning that it was -- anybody that had a low oxygen, anybody that had COVID, they were brought into the hospital. That's not happening anymore.

What's happening now is you have to have a WHO severity of a certain number. If you're on oxygen or they already know who's going to get into trouble and who's not. And so what's happening now is the hospitals are being -- the patient population that's being admitted into the hospitals are being rich for the more severe patients that have the risk factors that we're concerned about potentially progressing to ARDS, which leads to death and multi-organ failure.

So with that said, what I can tell you how we're positioning this now is, if your -- if you just do the numbers and you look at 85,000 to 100,000 hospitalizations -- and by the way, I -- go back and look at the websites. The Internet is filled with people keeping track of these statistics. And you'll see that it's pretty much between 85,000 and 160,000 hospitalizations a week. And it's not really kind of -- I mean, every time it goes down 20%, it's like, yey, but it goes right back up particularly after the Super Bowl and Super Bowl parties and any of these things that take place. And so just round it out and say you got about 100,000, and even it goes to 85,000.

We put in our numbers. 40% of those patients being at high risk, I'm talking about market now, 40% of those patients being high risk for ARDS, and it doesn't take long before we realize we're going to need 37 million doses per year because we have to treat 20 -- we're a 21-day course. So that's 21 doses per patient, 37 million. And that's at 40%. But what happens if the number goes from 85,000 to 40,000? Well, I would argue that even if it goes from 85,000 patients to 40,000 patients, those patients are going to be more likely to be 60%, 70% or 80% patients that are going to be more likely to go on to ARDS.

So as the hospital system understands which patients are going to get in trouble, those patients who are high risk are going to be exactly the patients that we believe our drug can work.

Now the other thing we think is if we went into the lion's den, and we were able to see this kind of activity on top of standard of care because remember, it was placebo-controlled and it was double-blinded, which means that the -- that no one knew who was on our drug and who was on placebo. So they got dexamethasone. They got convalescent plasma. They got remdesivir. They got whatever the kitchen sink they threw at them. And still in that noise, we'll be able to see these differences. So what would happen if we decide to go a little bit earlier? And of course, the issue we had was VERU-111 was being developed as a prostate cancer product, a breast cancer product. But what we've learned, the 18 milligram is incredibly well tolerated. And so we've answered that question.

And the additional study we do in the Phase III will further answer the question for safety. And if it turns out the safety is what it appears, then I think as part of our plan to -- if -- we would try to go earlier, meaning maybe go after patients that are -- have less severity, maybe go into patients. Can you imagine having an oral antiviral broad spectrum agent that has this kind of activity?

Now influenza, many of the other viruses use the same microtubular trafficking system. So this trafficking system does not only pertains to different mutants of coronavirus, but it also pertains to different virus types completely that cause the disease. And I do think we're going to end up in a situation that we're going to coexist with COVID. We're not going to cure it, just like we coexist with influenza. 60,000 people still die from influenza a year.

So I think the market is not going to go away. I don't know what the size is going to be. But unlike last time when everybody told us, well, don't waste your time because it will be gone in 3 months. I would argue this time, I don't know. The -- my crystal ball is not clear. And I think we need -- I think until we get a handle on having effective vaccines, effective antibody drugs and effective oral therapeutics, I think we have to keep pushing.

The next question comes from Yi Chen of H.C. Wainwright.

On FC2 sales, could you tell us whether the record quarter was primarily driven by U.S. prescription sales or it is also driven by FC2 international sales? And do you expect the trend to continue?

Yes. Michele, would you like to answer that?

Sure. It was primarily driven by the FC2 U.S. prescription sales. They -- those sales increased 50% to $9.1 million from $6.1 million last quarter -- last year same quarter. The global public sector sales also increased, not at the same -- and not at the same percentage though. So we're seeing increases in both.

Got it. Second question. Could you comment on your expectation for TADFIN sales once it is commercially launched?

Yes. So I'll -- so let me just backtrack. Somebody just reminded me I kept using the number of 100,000 for COVID-19. To make sure everybody understands 100,000, 85,000 to 100,000 hospitalizations a week. Okay. So that's where that number comes from.

All right. So back to your question for TADFIN, the way we're -- we -- with FC2, for example, we launched everything through telemedicine. Telemedicine is a really brand new animal right now in terms of a sales channel. And the reason it's a new animal is you end up with numbers that you just didn't expect.

So I'll give you an example. Typically, when you launch a product through traditional specialty pharma sales force, which we do not have and we are not investing in a specialty sales force, you end up with some kind of uptake, 300 prescriptions a month, and it goes to maybe 1,000 -- I mean it has some number. But it's not tens of thousands, not hundreds of thousands. And -- but the power of telemedicine is that you can reach hundreds of thousands in a short period of time because it's all internet-based, and it's all based on how many states that telemedicine company has access to. It's completely a brand-new world in that regard, and that's why we've been successful with FC2 because we just broke away from the old, well, we just had -- how many details are you making to an OB/GYN office. Let's see if you can sell FC2. That if you go back and look at those metrics, the most a single person can do is 4 to 6 details a day. And with Internet, it's unlimited. It really is an incredible blue ocean.

So our expectations right now is that we just don't know. All we know is that we know that there are approximately 29 million prescriptions for finasteride/ -- I wouldn't even get into CIALIS. But if you look at, for example, tamsulosin and the finasteride, when you start looking at BPH prescriptions, it's somewhere between 23 million and 29 million prescriptions a year, and it's a big number. And as you know, BPH is the #1 prevalent, and I can tell you as a urologist, disease that men over 50 will have.

So right now, we're -- we just don't know. I wish I can give you a number except I think the way we're looking at it now is we're going to -- because it's a brand-new world, we have not given guidance yet in terms of what we think the actual numbers will be. What I will tell you is it feels big, but let us test it.

Got it. Last question. When do you expect to report top line results from the Phase II trial of VERU-111 in prostate cancer? And when results come out, will that have any impact on the Phase III trial?

Here we are heading into year 2 with the Phase Ib, so I don't know. Maybe -- I mean, my druthers will be another 1.5 years from now, right? But it's -- I'm just joking, but it's true. And so I think what we're going to do is just like we're doing with the Phase Ib, is we're going to report as long as patients are on the study.

But I can tell you that they're mirroring each other quite well. The Phase Ib and the Phase II are mirroring each other, meaning that we're seeing PSA declines, PSA responses, partial responses, complete -- in the Phase II, we have a complete response. So you're seeing tumor activity. And we're focused, focused, focused on safety, making sure we have the right recommended dose. 63 looks like it's playing out very nicely. And so that's the kind of information you want from your Phase I being the Phase II.

So the answer is there's nothing in the Ib or the Phase II at this point because even when we combine the information that's so similar, that will change the course of how we're thinking about the Phase III. So that's why we feel comfortable starting the Phase III. We do not believe we're going to learn any more information about dose, any more information about the efficacy we expect from that dose, any more information on the safety. And so if that's the case, then will we -- the only thing I will add to that comment is that the patients that we used in the Phase Ib and the Phase II are sicker patients. Meaning that in the Phase Ib, they were allowed to have chemo. 44% in the Phase Ib also got more than 1 targeted androgen receptor targeted agent. That's not a Phase III design.

And then the Phase II, the same thing, we have -- half the patients had more than one androgen receptor target agent. In some cases, they have 3 or 4. That's not the patient population in the Phase III.

Phase III are patients that failed androgen deprivation therapy, and they failed one androgen receptor targeted agent. So we think that, that's going to have, if anything, the results will be better and not worse. And so we're pretty happy with the results that we see now. So we're thinking that's going to give us some upside.

So I think the answer to your question is that we will continue to update with the different scientific meetings just like we're going to be doing this week. And you'll see more data on the Phase Ib. But right now, we're just waiting on those 3 patients that are just taking this drug at home every day, every day, chronic, it's feasible, it's well tolerated. And that's critical because if you look at some of these oral taxanes, they still have some of the same side effects as the IV taxanes. And urologists, if they're going to give this drug, they're not going to be interested in dealing with neutropenia and sepsis and giving Neulasta and GM-CSF support. And no, we just don't. I mean we want to be able to give a patient a pill and manage the side effects by telephone and not be -- not having to manage the side effects that as a medical oncologist would because that's what their -- that's where their specialty is.

So we think the tremendous value that VERU-111 brings into prostate cancer and, hopefully, to the breast cancer is that it's the fact that the safety will allow patients to take this at home and not be worried about their white cell dropping to a point that they have to be put into the ICU.

The next question comes from Kumar Raja of Brookline Capital Markets.

Congratulations on the progress. First, with regard to COVID-19, what kind of impact are you guys seeing in terms of the days these patients are staying in the hospital? Are you seeing any impact there?

And with regard to FC2, how much inroads do you guys think you have made in terms of the U.S. prescription market? And in terms of the gross margins, where do you guys see this going from where you are right now?

Okay. All right. So I'm going to have to go backwards, all right? So to answer the question how many -- how much inroads, so we had about, I don't know, 350,000 prescriptions this past year. And we just mentioned we have 116,000 prescriptions. There is about 40 million women that could take this product, so we're just barely scratching the surface.

It's a huge, huge blue ocean for us. And the -- and all you have to do is look on the Internet and see how many new sexual health telemedicine groups are opening up. And so this telemedicine, there's tremendous growth in telemedicine right now. And the only way to get to that blue ocean is to take advantage of the Internet, the fact that the Affordable Care Act covers the prescription, the fact that women are no longer -- I mean they're not in oncologies anymore. They're sitting home using their telephone to order what they need to order, including prescriptions and for sexual health. So we think it's still a blue ocean. We just don't know. We think -- we can't even tell you how big it can be because of the fact.

And the other interesting point is that the male condom business compared to the female condom business, we're still less than 1%, 2%. And with the #MeToo movement and empowerment in women, this is the only -- FC2 is the only birth control and STI -- sexually transmitted disease protection, dual protection that a woman can initiate and control. I think there's real opportunity.

Now the gross margin is dependent on whether we sell ex-U. S. or in the U.S. We have a nice margin in the U.S., and we don't spend money on marketing and selling, very minimal. That's all done by the telemedicine groups. So we expect -- as you saw this quarter, we expect to continue to see our gross margins for this product go up as the mix of sales continue to be growing and dominated, dominated in terms of the numbers in U.S. versus ex-U. S., and so we're looking forward to that.

As it relates to the COVID-19 question, what's the impact on hospitalizations, I know we looked at top line data, and I have not seen the hospitalizations.

Yes. So the patients in our -- this is Gary Barnette. The patients in our study are very sick. And obviously, hospitalization -- duration of hospitalization is highly variable. But when you look at the days on study, meaning days of dosing, specifically the days of dosing, we do see -- and this is capped at 21 days.

The placebo group had about -- a little over 11 -- average 11 days of dosing. And in the treated group, it was a little under 9 days of dosing. So we are seeing -- and that would correlate to hospitalization. But the top line data, that's what we got -- we have in the top line data. So I do expect to see some reduction, but I'm not -- due to the variability, I'm not sure exactly how strong it will be, yes.

Yes. Okay. Maybe finally, a question with regard to VERU-111 and enobosarm and interaction with the EMA. Where do we stand there?

With EMA?

EMA for VERU-111. So I'll be honest with you, we've been so focused on the U.S. right now that we have not initiated anything with the EMA at this point. I think what we need to do is get our -- as I mentioned in my comments, we've been granted a -- an expedited meeting with the FDA. We already have that on the books. We're getting ready for that. We already set our meeting package. So we're -- we've moved along, and we're looking forward to understanding the Phase III design.

And once we get that up and going, then we can probably reach out to the EMA. But I'll be honest with you, I think if we can get the FDA under control and, while that's going on, deal with EMA, then that will take care of 80% of the regulatory authorities across the world that would take one or the other. So that's where we are.

The next question comes from Leland Gershell of Oppenheimer.

I wanted to ask the question on the -- sorry, the patients in the 111 prostate cancer studies who had the neurotox, is that managed by dose reduction? Was that patient able to continue with dose reduction? What was disposition in the patient with the neurotox?

If it was slight tingling in the fingers that went away with time, still stay on dose. So it did not require a dose reduction, and it went away on the high dose. And it was just day 1.

Grade 1.

Grade 1. Sorry, Grade 1.

Grade 1. Got it. Okay. And then the question, in terms of positioning of this, with the oral taxanes and the IV taxanes and IV chemo, there's, obviously, the oral formulation. You've got the better toxicity profile.

And then you had some who may say, "Well, I'm kind of all about efficacy. And I want to see this. I want to use a more effective agent upfront. And then if 111 isn't as effective even though it may not be head-to-head, but if it doesn't appear as effective, maybe you would reserve that for later even if the earlier chemo agents have more tolerability issues." What -- how would you kind of answer that to somebody who may be more focused on benefit hard-nosed efficacy comparison?

Yes. So the way I would answer that is that, as you know, cancer has become a marathon. So it's -- the issue there is no longer hidden with the hardest thing you can hit them with and lose hair and just be thankful we picked up a couple of days. And as a surgeon, we used to do that -- everything was radical. So I think the approach to cancer care now is to start with things that have the right benefit-risk profile and you start early, and you're going to choose something that has good efficacy and good safety and then you're going to work your way to the compounds and the agents that have efficacy and worse safety to a point you get to compounds that have some efficacy and maybe very, very bad safety.

So in this situation, the way we see it and the way we're positioning it as a pre-chemo agent is that we just do not require a premedication with prednisone and with antihistamines. We're not taking up a chair. The patient is not having to get Neulasta for GM-CSF support for the right neutropenia, and you're not having to manage the toxicities with all kinds of agents from vomiting on.

And so I -- and so -- and the efficacy -- the efficacy, again, it's not head-to-head, but if you look at the efficacy of VERU-111 compared to some of the IV taxanes, and the signals they saw in the Phase Ib -- Phase I, Phase Ib setting were comparable for sure without the safety. So I would say, unless -- the way to think of it is that we want to be in the pre-chemo space. And the best way to be in the pre-chemo space is to have safety that's more like an androgen receptor targeting agent than having safety that's more like a taxane or worse. At worse, I mean, the agents are all wonderful agents, don't get me wrong. But worse mean the toxicity could be worse.

The next question comes from Peter McMullin of Peter McMullin CFA Consulting.

Congratulations to you and the team for tremendous progress. So quick 2 questions on FC2. You do have an exclusive in the U.S. There are competitors out there. What's -- is there any rumblings that somebody else might try to get FDA approval?

And just the second part would be on the international sales. With everybody being at home, is there any tenders coming up of significance that you could comment?

Yes. So I'm going to have Michele comment on the international sales because she's closer to that. And then as it relates to the U.S., we're actually hearing no rumblings at this point in terms of others. As you know, because we -- because of the -- because we're the market leader in the U.S. and there's a lot of brand loyalty, and so we're kind of Coca-Cola, and why would anybody want RC? But with that said, there's no rumblings that I know of at this point, and we've been watching it very closely. And so we're still the market leader in the U.S.

Ex-U.S., Michele, do you want to comment on tenders and what it's looking like?

Sure. We announced that we won the Brazil tender. So we're working on supplying that this year, Peter. So that will be supplied this year and into next fiscal year. And then -- in South Africa, the tender that we had announced that we won, the government has extended the time line for that. So instead of delivering product over 3 years, it's going to be over a 5- year time frame. And we're just waiting to see what the ordering is going to be in South Africa. So that just preserves us in those 2 main markets.

But nothing outside of that at this point in time?

They're not big tenders in the other countries. We supply mainly through UNFPA, USAID and now also through DKT, another distributor.

And the last questioner today will be from -- will be Brandon Folkes with a follow-up from Cantor Fitzgerald.

Sorry, just one thing I wanted to follow up, and it's a little bit kind of segue from the last question. Can you just talk about the barriers to entry on the FC2 business?

Yes, I'd be happy to. So the barriers to entry is, one is we still have patent coverage in the U.S., although it's just for a couple of more years or so. And -- but we do. Second, even though it's a Class II device now instead of a Class III, it still requires special controls, which means that pregnancy studies, tolerability studies, studies proving that you can prevent STIs, so there's a whole host of immunogenicity studies and all this stuff. And so there's probably in the order of about, I don't know, $6 million to $12 million worth of stuff, and it's going to take you 3 to 6 years to do. And so that's a barrier to entry.

It took us, I don't know, 18 months to build the infrastructure, to sell by prescription in the U.S., so that's not trivial. So that has to be done, and you have to get all the contracts with the big distributors to do that. We also have brand loyalty, which is also a barrier to entry. People want the FC2. They know the FC2. By way of the comparison, ex-U. S., there's a ton of competitors. They've been there for many years, but we've always maintained about 90% to 95% market share. And that's the Wild, Wild West outside the U.S. and that's because, again, brand loyalty, people like it.

And the other thing we have that's the only feature that the FC2 has, it's nitrile. And so the nitrile is stronger, and nitrile is also hypoallergenic, and so you're not dealing with the latex allergies that you would see, which could -- can occur in 10% of patients, particularly with an in-dwelling internal condom as opposed to an external condom. And then you can argue, well, it's just 10%, 90% is fine. No, you just don't know which 10% it is. So that's the problem.

So there are a lot of barriers to entry. And we've had the product now since we took -- since the Female Health Company acquired Aspen Park. And you can see the sales have gone up, and the -- and there's a lot of room to grow the asset in the OTC markets. And we're working very hard also in the U.S. public sector, ex-U. S. public. So the asset is an incredibly viable asset that's growing.

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. I appreciate you joining us on today's call, and I look forward to updating all of you on our progress at our next investors call. Thank you again. Operator?

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