Veru Inc (VERU) 2020 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to Veru's Inc., Investor Conference Call. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Mr. Sam Fisch, Veru's, Inc., Director of Investor Relations. Go ahead.

Good morning. The statements made in this conference call that are not historical in nature are forward-looking statements. Such forward-looking statements reflect the company's current assessment of the risks and uncertainties related to our businesses. Our actual results and future developments could differ materially from the results or developments in such forward-looking statements.

Factors that may cause actual results or developments to differ materially include such things as the risks related to the development of the company's product portfolio, risks related to the ability of the company to obtain sufficient financing on acceptable terms we need to fund development and company operations, risks related to competition, government contracting risks and other risks detailed in the company's press releases, shareholder communications and Securities and Exchange Commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings.

I would now like to turn the conference 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; Phil Greenberg, Executive Vice President, Legal; and Sam Fisch, Director of Investor Relations. Thank you for joining our call.

Veru is an oncology and urology biopharmaceutical company with a focus on developing novel medicines for the management of prostate cancer. Before I provide the update on the clinical development of our drug pipeline and the commercialization of our products as well as provide financial highlights for the third quarter fiscal year 2020, it is important to reflect on the great progress we have made transforming our company into an oncology biopharmaceutical company that is supported in part by a growing revenue cash-generating sexual health business.

Not only are we planning for 2021, 2 Phase III registration trials, one for VERU-111, our novel oral tubulin targeting agent, to treat metastatic castrate-resistant prostate cancer, and the other for VERU-100, our 3-month GnRH antagonist long-acting depot, to treat hormone-sensitive advanced prostate cancer, but also we expect to continue to grow our base sexual health business.

In fact, we have had 10 quarters of continued significant growth for FC2 and PREBOOST, known by the brand name, Roman Swipes. And we plan to submit an NDA for TADFIN, the combination of tadalafil and finasteride for BPH late this year to continue the prospects for even more revenue. The model is working. The transformation is near complete.

Now let's focus on the significant progress we have made on the advancement of our drug pipeline. VERU-111 is a novel oral, first-in-class tubulin-targeting agent that cross-links and disrupts alpha and beta-tubulin subunits of microtubules. VERU-111 is in its clinical development to treat metastatic castration and novel androgen receptor targeting agent, which is enzalutamide or abiraterone-resistant prostate cancer, but prior to IV chemotherapy, a growing unmet medical need in advanced prostate cancer.

The Phase Ib clinical study enrolled 39 subjects from 7 clinical sites in the United States. A standard 3+3 design was used to establish the maximum tolerated dose to select a recommended clinical dose for Phase II study and to assess preliminary evidence of antitumor activity. The maximum tolerated dose of VERU-111 was determined to be 72 milligrams as 3 of 11 of these men had reversible grade 3 diarrhea. No grade 3 diarrhea was observed with doses of 63 milligrams or less per day.

At doses of VERU-111 of 63 milligrams or lower per day, the most common adverse events were mild-to-moderate nausea, vomiting, diarrhea and fatigue. There were no reports of neurotoxicity, and no neutropenia observed at 63 milligrams and lower for the continuous oral 21-day daily dosing cycle. We have seen evidence of antitumor efficacy with PSA declines in objective tumor responses. 10 men or 25% of the study subjects received at least four 21-day cycles of oral VERU-111. The study is ongoing as subjects are still on study without tumor progression. The median duration of treatment without progression so far is 10.5 months with a range of 5.5 to 16 months.

To better understand the clinical relevance of these preliminary findings, it is important to note that all patients with metastatic castrate-resistant prostate cancer, at the time of enrollment into the Phase Ib, had evidence of disease progression with at least one of the novel androgen receptor targeted agents, either abiraterone or enzalutamide. In fact, 44% of the subjects in the Phase Ib have failed both enzalutamide and abiraterone.

In contemporary studies, recently reported in the scientific literature for the similar population of men, the median observed time to cancer progression while being treated with an alternative androgen blocking targeting agent was approximately 3.6 months and even less, like 2.5 months for men that have failed both the androgen receptor targeting agents, abiraterone and enzalutamide.

We're also near completion in the enrollment of our approximately 40 men in the open-label Phase II portion of the clinical trial in 14 U.S. centers. The patient population for this portion of the trial is men with metastatic castration and novel androgen blocking agent resistant prostate cancer and prior to any IV chemotherapy. And we're using the recommended dose and schedule selected from the Phase Ib, which is a 63-milligram oral daily dosing for continuous 21 days per cycle. Like the Phase Ib, we have already observed significant PSA declines in the Phase II clinical study.

We have the clinical, safety and antitumor efficacy data necessary from the Phase Ib clinical study to move forward to select the patient population, VERU-111 dose and schedule for the Phase III registration trial. By late fall, we will have additional clinical data on the 63-milligram oral daily for 21 continuous days per cycle in almost all of the Phase II subjects.

Recently, we have received positive FDA input, agreement and regulatory clarity for our proposed Phase III registration trial program. The Phase III trial is designed to be an open-label, single pivotal randomized clinical study to evaluate the efficacy and safety of VERU-111 versus an alternative androgen receptor targeting agent in men with metastatic castration-resistant prostate cancer who have developed cancer progression while receiving 1 androgen receptor targeting agent. The primary endpoint will be radiographic progression-free survival.

By having radiographic progression-free survival as the primary endpoint, the sample size of the Phase III study could be potentially between 200 and 300 men, which is substantially smaller-sized study -- clinical study that might, otherwise, have been required if the primary endpoint was overall survival. We plan to submit the final Phase III clinical registration study protocol to FDA in the fourth quarter of calendar year 2020. We anticipate starting the global Phase III pivotal registration clinical study in the first quarter of calendar year 2021. We also plan to meet with the European Medicines Agency to obtain their input as well.

This preclinical -- excuse me, this pre-chemotherapy space in men who have metastatic castration and androgen receptor targeting agent resistant prostate cancer is currently one of the fastest growing unmet medical need segments in advanced prostate cancer. There are currently no FDA-approved drugs for this indication. According to our IQVIA, oral drugs, abiraterone and enzalutamide, for advanced prostate cancer had over $6 billion in 2018 global annual sales and $3.1 billion in the U.S. Men who have failed these novel androgen receptor targeted agents are the same patients that VERU-111 is currently targeting, which we estimate represents about a $5 billion annual global market.

In summary, the objective with respect to the clinical development of VERU-111, which has a unique drug mechanism of action as it does not target the androgen receptor, is to position VERU-111 as the next go-to drug in men who have metastatic castrate-resistant prostate cancer and who have developed prostate cancer progression while being treated with an androgen receptor targeting agent like abiraterone or enzalutamide but prior to using IV chemotherapy. An advantage of VERU-111, an oral medication with a favorable safety profile, is that it can also be prescribed not only by the medical oncologists but also the urologists. The results from the VERU-111 clinical program firmly positions Veru as an oncology-focused biopharmaceutical company.

The results from the Phase Ib/II clinical study of VERU-111 have been accepted for oral presentation at the prestigious European Society for Medical Oncology, ESMO, Virtual Congress in 2020 to be held September 19th through 21st. Mark Markowski, MD, PhD, Assistant Professor of Oncology of the Johns Hopkins Sidney Kimmel Comprehensive Cancer Center, will be the presenter.

Next, I will update you on VERU-100, our proprietary peptide drug candidate for the treatment of hormone-sensitive advanced prostate cancer, an established multibillion-dollar global market. The target product profile for VERU-100 is commercially and scientifically compelling as having a number of anticipated advantages over currently available androgen deprivation therapies. VERU-100 is a long-acting gonadotropin-releasing hormone antagonist, also known as a GnRH antagonist. This formulation was designed to be administered as a small volume subcutaneous 3-month depot injection without a loading dose. As a GnRH antagonist is intended to immediately suppress testosterone with no testosterone surge upon initial or repeated administration and no testosterone micro increases, which may adversely affect patient outcomes, a problem which potentially occurs with the approved LHRH agonist drugs like Lupron, Zoladex and Eligard.

As previously mentioned, we've received agreement from FDA that the development program for VERU-100 may follow an expedited pathway. Based on this FDA input, the company plans to commence a single open-label multicenter dose-finding Phase II clinical trial in approximately 35 men, followed by a single open-label multicenter Phase III registration clinical trial in only approximately 100 men.

Veru has made great progress in scaling up the GMP manufacturing of the drug product for the clinical trials of VERU-100. The company intends to submit an investigational new drug application by the end of 2020 so that we can commence the open-label Phase II clinical study by Q4 calendar year 2020. The Phase III registration study is expected to start in the second half of calendar year 2021.

Androgen deprivation therapy is a $2.8 billion global market that appears to be moving towards supporting GnRH antagonist over LHRH agonists like Lupron and leuprolide, Eligard, Zoladex. The LHRH agonists, as a class, have a black box warning for an increased risk of cardiovascular events, including heart attacks and stroke. The GnRH antagonist class does not have the same black box warning.

Recently, a randomized Phase III study in 930 men that compared an LHRH agonist to a GnRH antagonist confirmed that the incidence of cardiovascular events was significantly lower in men receiving GnRH antagonist. Based on this study published by Dr. Neal Shore and his colleagues in the New England Journal of Medicine in 2020, the incidence of adverse cardiovascular events was 54% lower for an antagonist versus an agonist.

Furthermore, in men who have a history of adverse cardiovascular events, the incidence of new adverse cardiovascular events was 80% lower with an antagonist versus an agonist. Therefore, it appears that GnRH antagonist may become the drug of choice for ADT because of their better safety profile. Currently, there are no GnRH antagonist injectable treatments commercially approved for beyond 1 month, making VERU-100, if approved, the only commercially available long-acting GnRH antagonist 3-month depot.

Our next product candidate is zuclomiphene, a novel proprietary oral nonsteroidal estrogen receptor agonist, being evaluated for treatment of hot flashes, the most common side effect in men with androgen deprivation therapy for advanced prostate cancer and a major reason why men want to stop androgen deprivation therapy. The next step is to have an end-of-Phase II meeting with FDA for the zuclomiphene program and to obtain agreement on the Phase III clinical program design that will be acceptable for approval. We will provide details of the design and the timing of the study after we have met with the FDA.

Although Veru is focused on prostate cancer and oncology, due to the urgency of the current global pandemic, the fact that no effective therapies have been found and that VERU-111 has the potential to treat both the SARS-CoV-2 infection and the associated reactive severe lung inflammation in COVID-19 patients at high risk for acute respiratory distress syndrome, the company is evaluating VERU-111 18 milligrams for this COVID-19 indication.

Drugs that target microtubules have broad antiviral activity by disrupting the intracellular transported viruses such as SARS-CoV-2 along the microtubules. Microtubular trafficking is critical for viruses to cause infection. And furthermore, microtubule depolymerization agents that target alpha and beta-tubulin subunits of microtubules like colchicine have had evidence of strong anti-inflammatory effects, including the potential to treat the cytokine release syndrome, also known as a cytokine storm, induced by the SARS-CoV-2 viral infection that seems to be associated with the high COVID-19 mortality rates.

In fact, we recently reported the results of an in-vitro study conducted by a team of researchers at the University of Tennessee Health Science Center to determine if VERU-111 can suppress toxic shock levels of these key cytokines of the cytokine storm. The effects of VERU-111 on cytokine production was assessed by stimulating isolated mouse spleen cells with an endotoxin that causes shock, and this is called lipopolysaccharide that we just call LPS. The cells were stimulated with LPS for 1 hour and then incubated overnight with VERU-111 to mimic the clinical cytokine release situation -- clinical situation and the cytokine levels were then analyzed. And a concentration that represents blood levels of VERU-111 observed in clinically dosed patients, VERU-111 at 40 nanomolar significantly reduced, at a p-value less than 0.001, the production of key cytokines known to be involved with the COVID-19 cytokine storm. TNF alpha was minus 31%, IL-1 alpha was minus 123%, IL-1 beta was minus 97%, IL-6 was minus 85% and IL-8 homologue was minus 96%. This reduction was similar to or greater than, depending on the specific cytokine to what's been observed with dexamethasone at 10 nanomolar, which is a steroid and a known inhibitor of toxic shock cytokine production. Suppression of these key cytokines may be an effective way to prevent clinical deterioration of patients with COVID-19 to ARDS.

Veru is currently enrolling a double-blind, randomized, one-to-one, placebo-controlled Phase II clinical trial evaluating daily oral doses of VERU-111 18 milligrams versus placebo for 21 days in 40 hospitalized patients who have tested positive for SARS-CoV-2 virus and who are at high risk for ARDS. The primary endpoint -- the primary efficacy endpoint will be the proportion of patients that are alive without respiratory failure at day 22. Secondary endpoints for this trial include the measured improvements in the WHO disease severity scale, which is an 8-point ordinal scale, which compares COVID-19 disease symptoms and signs, including hospitalization, to progression of pulmonary symptoms, to mechanical ventilation as well as death.

Based on VERU-111 having antiviral activity confirmed -- and also confirmed in this in vitro study that VERU-111 may have ability to suppress key cytokines in the COVID-19 patients, we're even more hopeful that in the Phase II study with COVID-19 patients at high-risk ARDS that VERU-111 will improve patient outcomes. As an aside, this current cytokine study also further supports the use of VERU-111 in prostate cancer as cytokines IL-6, IL-1 and IL-8 appear to play key roles in the promotion of prostate cancer progression, metastasis and drug resistance as well. The ability of VERU-111 to suppress these cytokines may benefit men who have metastatic castrate-resistant prostate cancer, which is the primary indication that VERU-111 is being developed for.

There's really no downside to conducting this small study, especially if we can get non-dilutive funding for future clinical testing. And if VERU-111 shows efficacy for this indication, the upside will be substantial for patients.

Veru's ability to advance the clinical development of our proprietary prostate cancer drugs that address unmet medical needs in large markets is being substantially supported by the sexual health business which currently is comprised of 2 commercial sources for revenue. The FC2 Female Internal Condom as well as PREBOOST Roman Swipes, which is the 4% benzocaine wipes for premature ejaculation. The company also expects a third source of revenues from TADFIN, for which an NDA is expected to be submitted in late 2020 or early 2021. And this will provide additional resources to support the company's clinical development programs.

As you can see from the earnings release in Q3 fiscal year 2020 and year-to-date fiscal year 2020, we continue to have significant growth in revenue from these commercial products. Although Ms. Greco will cover the detailed financial results highlights in a few moments, I would like to make a few comments. We, again, have the pleasure of reporting robust growth in fiscal year 2020 and expect further increases in FC2 sales in both U.S. prescription sales and public sector for the rest of the year.

Focusing now on Veru's commercial segment, which is the sexual health business, currently comprising of FC2 and PREBOOST Roman Swipes and drug commercialization costs, the company's net revenues increased again. In fiscal year-to-date 2020, it was $30.8 million compared to fiscal year-to-date 2019 of only $23.1 million, representing an increase of 33%. Our income from operations for this segment of the business was $17.6 million for fiscal year-to-date 2020, up from $11.4 million in fiscal year-to-date 2019, an increase of 54%. In fact, to give you a sense of our growth trajectory for all of fiscal year 2019, we sold 159,000 units of FC2 into the U.S. prescription market, while we sold just in the first 3 quarters of fiscal year 2020, 234,000 units of FC2 into the U.S. prescription market.

As you can see, our base commercial business is doing very well and as a stand-alone business would be quite valuable as we're experiencing significant growing revenue and income from operations. It should also be noted that we do not have a sales force and minimally spend on marketing and selling these products. This continued revenue growth and profit and positive cash flow from the base commercial business has allowed us to substantially invest in the development of our prostate cancer clinical programs which enhances the value of Veru for our shareholders.

We intend to continue this revenue growth trajectory with not only the current growth of revenues from FC2 and PREBOOST but also from the revenues that we expect to generate from the commercialization of the company's proprietary tadalafil and finasteride combination capsule for the treatment of symptoms of BPH called TADFIN. We're collecting 12-month stability data on TADFIN manufacturing batches and expect to submit to NDA by the end of 2020 or early 2021. In the U.S., we're exploring the eventual commercial launch of TADFIN through telemedicine channels. As you have seen, we have had great success with our other products using this sales channel. We expect TADFIN to add substantial near-term revenues with high gross margins to the existing and growing revenues from FC2 and PREBOOST Roman Swipes.

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

Thank you, Dr. Steiner. As Dr. Steiner indicated, we are off to a great first 3 quarters of fiscal year 2020. Let's start with the highlights of our third quarter results for the 3 months ended June 30, 2020.

Overall, net revenues were up 6% to $10.3 million from $9.7 million in the prior year third quarter due to the growth in our U.S. FC2 prescription business. The company reported significant FC2 sales growth in its prescription business with net revenues up 23% to $5.4 million from $4.4 million in the prior year third quarter. While overall FC2 unit sales declined slightly by 3% to 10.5 million units from 10.9 million units in the prior year third quarter, we are pleased with the overall net revenue increase despite the slight decline in overall FC2 units sold. Net revenues for the public health sector business was $4.3 million compared to $4.9 million in the prior year third quarter.

Gross profit was $6.5 million, or 63% of net revenues, compared to $6.6 million, or 68% of net revenues, in the prior year third quarter. The decrease in gross profit and gross margin is driven primarily by increased cost of sales recognized during the third quarter due to the temporary shutdown of the company's manufacturing facility in Malaysia as a result of the COVID-19 pandemic.

Additionally, we have seen an increase in labor and equipment maintenance costs as we have ramped up production to meet demand. We are pleased to report that our FC2 Malaysian manufacturing facility is back up and running, with volumes consistent with volumes prior to COVID-19 pandemic Malaysian government ordered shutdown.

These financial results for the third quarter reflect shipment of 3.6 million units under the new tender orders from South Africa. We previously announced that we won 75% of the South African tender, representing up to 120 million units over 3 years for the total tender. This translates to approximately 30 million units per year for our company and potentially $10.4 million in revenue per year for a total of approximately $30 million over 3 years. We started shipping these orders from South Africa during the third quarter of fiscal year 2019 and to date have shipped 10,080,000 units. We continue shipping South Africa orders during the current fiscal fourth quarter.

Operating expenses for the quarter decreased by $501,000 to $7.9 million compared to the prior year third quarter of $8.4 million, primarily due to the decrease in research and development costs, which fluctuate due to timing of drug development activities. Additionally, the company received a potentially forgivable loan of approximately $540,000 under the Paycheck Protection Program of the CARES Act. The forgivable loan was treated like a government grant and recognized as reduction in operating expenses during the quarter. As a result, we recorded a reduction to selling, general and administrative expenses of approximately $420,000 and a reduction to payroll-related research and development costs of approximately $120,000.

Nonoperating expenses were $1.4 million compared to $933,000 in the prior year third quarter and primarily consisted of interest expense and change in 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 $241,000 compared to a de minimis tax benefit in the prior year third quarter. The effective tax rate for this quarter is 8.6% and for the prior year quarter is basically 0 due to recording a valuation allowance against the net operating loss generated for the quarter in the U.S., which is the majority of the pretax loss for the period.

The bottom line result for the third quarter of fiscal 2020 was a net loss of $3 million or $0.05 per diluted common share compared to a net loss of $2.8 million or $0.04 per diluted common share in the prior year third quarter.

Turning to the results for the 9 months ended June 30, 2020. For the first 9 months of fiscal 2020, net revenues were up 34% to $30.8 million from $23.1 million in the prior year period. As a reminder, total net revenues for all of fiscal year 2019 were $31.8 million. Overall, FC2 unit sales totaled 27.5 million compared to 28.1 million units in the prior year period.

Net revenue from the U.S. prescription business was up 95% to $18.4 million from $9.4 million in the prior year period. It's also worth noting that all of fiscal year 2019 U.S. prescription revenues were $14.1 million.

Net revenue for the public health sector business was $11.2 million compared to $13 million in the prior year period. Net revenue for PREBOOST Roman Swipes increased to $1.2 million from $623,000 in the prior year period.

Gross profit was up 34% to $21.2 million from $15.8 million in the prior year period. Gross margin was flat at 69% due to an increase in cost of sales, resulting from increased labor, transportation and equipment maintenance costs and increased costs incurred during the temporary manufacturing shutdown in Malaysia as a result of the COVID-19 pandemic, which offset the increase in the U.S. prescription business.

Operating expenses increased to $24.7 million compared to the prior year period of $20.8 million, primarily due to the increase in research and development costs. Nonoperating expenses were $3.6 million compared to $3.9 million in the prior year period, which primarily consisted of interest expense and change in the fair value of derivative liabilities related to the synthetic royalty financing.

For the 9 months, we recorded a tax expense of $30,000 compared to $117,000 in the prior year period. The effective tax rate for both 9-month periods is close to 1% and is due to recording a valuation allowance against the net operating loss generated during those 9-month period in the U.S., which represents the majority of the pretax loss for the period.

The company has net operating loss carryforwards for U.S. federal tax purposes of $42.6 million with $14.4 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 $61.7 million, which do not expire. The bottom line results for the first 9 months of fiscal 2020 was a net loss of $7.1 million or $0.11 per diluted common share compared to a net loss of $9 million or $0.14 per diluted common share in the prior period.

Looking at the balance sheet. As of June 30, 2020, our cash balance was $15.4 million and our accounts receivable balance was $4.1 million. Our net working capital was $9.5 million at June 30, 2020, compared to $2.8 million at September 30, 2019. During the 9 months ended June 30, 2020, we used cash of $1.6 million in operations and we received net proceeds from financing activities of $10.8 million, primarily due to $13.4 million that relates to the sale of shares under the 2020 purchase agreement and the 2017 purchase agreement with Aspire Capital.

Overall, we're delighted to see the continued increases in sales in the U.S. FC2 prescription business and the increasing sales in PREBOOST Roman Swipes to Roman Health Ventures and look forward to increasing FC2 sales in the global public health sector business in the fourth quarter. These revenue sources continue to be important sources of funds we use to invest in our promising pharmaceutical clinical development programs as we continue to transform our company into an oncology and urology biopharmaceutical company with a focus on developing novel medicines for the management of prostate cancer.

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

Thank you, Michele. We have enjoyed yet another strong financial quarter which has allowed us to significantly advance our clinical programs. In fact, we now are into our third year of growth in our FC2 U.S. prescription business.

Looking forward to the rest of fiscal year 2020, we expect our revenues to continue to be strong and growing towards a record year. With the improving performance of the sexual health business, we believe that we will be able to substantially invest in the continuous clinical development of our prostate cancer drug candidates as well as to submit the NDA and, if approved, commercially launch TADFIN which will provide even more revenue, adding to the already growing revenue from FC2 and PREBOOST Roman Swipes.

We anticipate a steady flow of important positive news for Veru over the next few months to 1 year. For VERU-111, our oral tubulin-targeting agent, we will report open-label efficacy and safety clinical results for the Phase II clinical trial for VERU-111 in patients with metastatic castration and androgen receptor targeting agent resistant prostate cancer. We plan to submit the Phase III pivotal registration trial protocol in calendar year Q4 2020 and start the Phase III registration clinical trial in calendar year Q1 2020 -- excuse me, 2021.

For VERU-100, our novel peptide GnRH antagonist 3-month depot formulation, we will complete GMP manufacturing of clinical supply of VERU-100, submit the IND and initiate a Phase II clinical trial. And by the second half of calendar year 2021, we will initiate a Phase III pivotal registration clinical trial.

For zuclomiphene, our oral estrogen receptor agonist, we'll have a face-to-face end-of-Phase II meeting with FDA. We plan to complete the Phase II clinical program for COVID-19 in subjects with high risk to ARDS, submit the NDA for TADFIN. We plan to continue to demonstrate robust growing revenues for our commercial products, FC2 and PREBOOST Roman Swipes. And we will also have secured partnerships with some of our drug products.

We have substantially transformed our company into an oncology biopharmaceutical company, supported in part by a growing revenue, cash-generating sexual health business. The model is working. The transformation is near complete.

With that, I now will open the call to questions. Operator?

(Operator Instructions) Our first question is from Brandon Folkes from Cantor Fitzgerald.

Congratulations on all the progress during the quarter. Firstly, on 111, when we see the Phase Ib data presented in September, will there be any new data? And if so, what do you think are going to be the most pertinent part of the data we see from that Ib, given that we've seen some of it, later in the year?

And then secondly, just as a follow-on, on -- staying on 111, I think -- as you've spoken in the past, you've talked about having a very good indication of what you believe the FDA wants to see from a Phase III protocol and it sounds like that's been further confirmed with the dialogue. But maybe just as the Phase II progresses, do you envision any amendments to the Phase III protocol? And what are some of the factors there that you're watching in the Phase II that could still meaningfully affect the Phase III protocol?

Good. Okay. So really, the first question is basically, you're going to be presenting data at ESMO in the fall, is there anything new that you're going to be presenting? And the answer is yes. What we presented to date was just sort of highlights of what we had in the study. And so you'll see more details. Now interestingly, which is kind of unusual for a Phase Ib/II, we were selected for an oral presentation. So unlike a poster where we can display everything out, the oral presentation is going to be limited but will be highlighted. So Dr. Mark Markowski is going to go through additional efficacy and additional safety data that has not been presented before. And so I think that's going to be important to look at. And so as I said, you'll see some more safety and you'll see why we're excited about the safety. And remember safety is critical if a urologist is going to give the medicine over a medical oncologist. And if it's an IV product, it's a no-go for urologist, of course. But this is oral and, I think, you'll find it interesting. And then, I think, there'll be some additional tumor pictures that you'll be able to see tumors that have shrunk and so you can see further evidence of objective tumor responses. And that's about as much as I can say without giving you more data.

As it relates to the second question, which is -- and we're excited about it, okay? And that's the reason we went to the FDA and that's why we accelerated our discussions with the FDA because we were able to pick a dose based on safety and efficacy and we know our patient population. And so that's the reason why we went forward to the FDA. We picked the dose of 63 milligrams oral daily dosing for 21 days continuously and we have enough patients in the Phase Ib to give us a very good indication of the efficacy and safety around that dose. The Phase II program is just going to be further confirmation of the safety and the efficacy around the 63-milligram dose, and that's how I would view that study.

The difference between the 2 is the other one we're doing a 3+3 design, and this one, everybody is synchronized, starting at the 63 and not having other doses. And so we're going to see what happens with just 63. And I can tell you at this point now, I'm not expecting anything in that study to change what we've presented to FDA, mainly because most of the stuff that we spoke to the FDA about was around clinical trial design. So progression-free -- radiographic progression-free survival, which was an important endpoint to get, that's not going to change. And that's going to dictate what size study. The patient population, well, that's not going to change because the patient population of patients who have metastatic castration-resistant prostate cancer that have progressed on at least one androgen receptor or -- one androgen receptor targeting agent. So that won't change.

And so really, it's going to be -- and that's the reason why we -- as I said, that's the reason why we went to the FDA sooner rather than later. So the Phase II can -- if the Phase Ib is still going on, and we got patients at 16 months and 12 months and they're going to continue, another way to look after 1.5 years to 2 years is what is happening with the Ib potentially, the same thing is going to happen in the Phase II.

So that's the reason why we don't want to wait another 2 years, is you're not going to gain any additional information for patients that traditionally, if they were on one androgen blocking agent and they failed and they go to an alternative one, you're looking at progression-free survival of about 3.7 months. And if they had both abiraterone and enzalutamide and failed, it's more like 2.5 months. And here we are with 25% of our patient population in a Phase Ib that's certainly beyond that.

So that's why, I think, what you're going to see is the Phase III is going to be -- final protocol will be submitted in October irrespective of the Phase II, and the study will start at the beginning of the calendar year 2021. And the Phase Ib and the Phase II are going to still be going on in the background because we're expecting patients to continue to respond to the medicine for a long period of time.

So I'm not expecting any amendments or anything of that sort. I think once we get some of the nonclinical and some of the other stuff pulled together, that's all -- October is when we're going to put the final protocol in. And then of course, we'll report back after the FDA has had a chance to review the final protocol to see what tweaks we need to make.

Great. It's very comprehensive. Look forward to seeing the data in September. Maybe just one more, if I can sneak in and I'll hop back in the queue. On the COVID program, if you succeed from the Phase II, do you think there's a chance of getting emergency use authorization for that product?

If we -- we had that debate internally. To be fully transparent, we had that debate internally. Some of the folks at Veru feel that it's possible. I don't -- I think we're going to have to do more work. And so I'm thinking we're going to get non-dilutive funding and we'll do a Phase III study, and we'll see. But a lot of it depends on what are the outcomes and how dramatic they are. And if they're dramatic, then your chances are that you may be able to move forward. If they're need to be confirmed, then you'll do the Phase III. So it's really hard to say. But I wouldn't rule out emergency use. I just think it's more likely that we'll move to a Phase III. I wanted to be clear that if we do move to a Phase III, that will be with non-dilutive dollars. We have to get funding support for that. My guess is, given the current environment, and if our data supports going to Phase III, we should be -- we should find -- we should be successful in getting that non-dilutive money.

Our next question is from Leland Gershell from Oppenheimer.

Congrats on all the progress. I wanted to ask, you've been having great success with the commercial business growing revenue, obviously great margins. But you will be facing increased expenses with the Phase III, in prostate cancer probably the -- one of the more expensive if not most expensive trials you've run to date. So just wanted to ask in terms of how we should think about modeling. Would you expect that the commercial would be sufficient to fund than with your other operations? How should we think about potential capital financing that may occur perhaps in 2021? Then I have a follow-up.

Yes. So let's make some assumptions first. The first assumption is that if the commercial business continues to grow at this rate and that we're not using any money for marketing and selling for the most part and that all that gross profit is -- and the more we make and the fixed costs are going to take less of that, right, on a percentage basis. So every additional dollar that we get is pretty much going into drug development. And FC2 and PREBOOST, I'm telling you, 2021 looks very, very good. So again, continued growth.

And so if we're in the order of -- as we reported 3 quarters in and we're at $30.8 million in revenue and it looks like we're going to finish this year off with a record year and next year is supposed to be another record year, how does that magnitude of money match up with what we would potentially have to spend in a Phase III program? So we have 2 Phase III programs that we're facing for next year. One is the big one, big one -- bigger one, I should say, which is going to be between 200 and 300 patients. And from a money standpoint, that's probably in the order of about $20 million to $25 million.

And then we have a 100-patient study which is going to be the GnRH antagonist, and that one is more like the 100 patients in testosterones, the endpoint and all that expensive work with CT scans and all of it. We don't have to do that. And so that would be -- that study will be more in the range of about $10 million or something like that. So -- but that's not going to start till the second half of next year. So if you start looking at the money, you're between $25 million to $35 million of money that you need over the next 18 months. It's not a far stretch that our commercial business can help pay for a substantial amount of that. And so it puts us in a very, very good position to be opportunistic. And if people begin to realize the full value of the underlying sexual health business, which, on its own, clearly has more value than that we're trading at today, with that kind of cash, and it's continuing to grow in spite of COVID, that base business alone means that if anybody invests in our company, they're getting the drugs for free.

And so my thinking is that we will be opportunistic as it makes sense. And -- but if not, we are generating enough revenue and cash coming from the sexual health business that over 18 months we would be able to self-fund a substantial portion of it.

Okay. That's helpful. And then in that same theme, given the success you've had with the sexual health business, I know you'll have TADFIN coming down the pike and that will be a meaningful increment to that, would you -- or are you considering adding yet other products to the commercial business, just given how you don't need to really worry about sales force costs and things like that, you can kind of plug into the telemedicine channel and benefit from additional revenue? How should we think about those kinds of thoughts?

Yes. So let's take a step back. We started working in telemedicine 2.5 years ago. Is that right? 2.5 years? Something like that. And the reason I say that is everybody is comfortable with telemedicine post COVID and -- because COVID has forced everybody as a disruptor to start looking at telemedicine as an alternative to visiting doctors. And now people are not even -- doctors -- not only is family not allowed to come in when the patient comes to see a doctor, do you think they're going to let a sales rep in? So the world has changed, right? And so I feel sorry for the companies that are launching products in this current environment.

Now we chose telemedicine and the reason we did that is because it turns out that the new generation are very comfortable using their cell phones or their smartphones to order anything from bottled water they want that evening at their home to prescription products where they don't want to wait to get the prescription, they don't want to wait to stand in line at the pharmacy, they don't want to wait for the pharmacy to get it. They just push a button and they get it. And female contraception took the lead and we're able to attract folks to the website through their market -- through their marketing dollars. And now all of these women that were in colleges were sent home. And so instead of going to the infirmary to pick up their birth control, they now have to find alternative sources and guess what? They end up getting online and they're starting to move towards the telemedicine platforms. And just like you -- the first day that you went to Amazon and bought something, you said, "Boy, this is pretty cool." So you're not just going to buy that one product, you start to add other products.

So the telemedicine folks are beginning to realize they need to offer a portfolio of products. And so yes, I think what you're going to see in telemedicine, they're going to continue to grow and that the model is going to change. As it relates to us, we're kind of doing that, right? We started out with the female condom business, we put that into telemedicine. Then we did PREBOOST, put that into telemedicine. And took -- literally we removed it from a sales force that was your traditional marketing and selling, got rid of that sales force, whether it was a license that we no longer had, we got rid of or it was an internal group of people that we had to let go as we structured it into a different model.

And so TADFIN seems to fit that model as well because it's a BPH product, but it has other benefits. But BPH is immense health -- sexual health issue. And yes, we're in talks with telemedicine groups to help us launch that. And the power of telemedicine is that once the FDA makes the, assuming we get an approval, you push a button and you've got all these patients in your universe that for the telemedicine university, you can bring in, begin to consult and then provide a prescription. And it's just amazingly efficient.

So would we continue to grow the sexual health business with other products? The answer is yes, why will we not, even though our focus is prostate cancer and that kind of stuff, and then we're going to continue to be focused in prostate cancer. That's our core business. We will be opportunistic, particularly when it doesn't mean it costs our shareholders anything. If it's a matter of taking advantage of our contacts and growing the business and we can do a deal where the other party makes money, we make money, but we're not spending money. And 1 plus 1 equals 5 in the core sexual health business, do that all day long. And that's kind of what we're seeing now. I mean we hit a critical mass in which we're actually being called by these telemedicine groups to see if we have products for them. So this is a very interesting time and we're trying to adapt to it. And I think we've done a good job taking at least 2 products now and soon a third product and showing that this is real, and we did this pre-COVID. And now, I think, COVID-19 going forward has disrupted the whole field that we're kind of in the right place for that.

(Operator Instructions) Our next question is from Yi Chen from H.C. Wainwright.

The U.S. prescription sales of FC2 at $5.4 million in fiscal third quarter seems to be lower than $7.0 million in the fiscal second quarter and $6.1 million in the fiscal first quarter. So could you give us some additional color on the dynamics of the U.S. prescription market? And whether there's any seasonal trend or whether it is affected by COVID-19 at all?

Yes. Good question. So the question is, it looks like this quarter, there's a little dip in the U.S. prescription sales, even though over the fiscal year it's clearly -- we're way ahead. As I mentioned before, 159,000 prescriptions were written -- 159,000 12-pack units were dispensed in fiscal year 2019. And in just this first 3 quarters, we're 200 -- whatever the number is -- 239,000, whatever the number is. So it's big. And so that means this next quarter, even if it's an even quarter, it's going to be a very -- it's going to be a record year. So I want to make it very clear that the U.S. prescription business is robust and it is growing. What you're seeing is that the purchase orders that we get from the telemedicine groups don't necessarily fall with the quarters. And so some of that -- I think you're seeing some of that dislocation.

And COVID-19 -- I would argue that COVID-19 helped us with that dislocation rather than not, meaning that if there was some inventory -- the inventory was quickly used up because of the fact that women at home now using the Internet and what we've heard uniformly from the FC2 telemedicine providers or, as you say, the customers is that COVID-19 did indeed increase their business. And so I don't think COVID-19 is going away. So I think our next year is going to look robust as well. But I think some of that dislocation, again, is how the purchase orders come in.

But I'll let -- Michele, do you want to add a little color to that?

Sure. The other item that we did see was customers working on building inventory and so they were -- and figuring out how much inventory they wanted to keep on hand versus how quickly they place orders and turn it around and have a sell-through. And so we did experience some of that. And as Mitch said, our customers will put in a 3-month purchase order and then pull down from that as they see fit and that just doesn't coincide all the time with what we're seeing as we cut off our quarters.

Our next question is from Kumar Raja from Brookline Capital Markets.

With regard to the prostate cancer trial, what is your expectation of timing of meeting with the EMA? And how do you think the expectations of EMA would be different compared to the FDA? And do you think you can incorporate the requirements of both the agencies into the single Phase III trial you are planning?

Yes, good question. So the EMA for everybody is the European Medicines Agency, and we are going to be running a global Phase III and the intent is that the global Phase III would serve for registration, both in the U.S. and with the EMA. And so with that said, you have to -- you've got to pick and choose. And so the first step is to get FDA input. The FDA and EMA have tried very hard to harmonize their advice globally. But just to be safe, we want to make sure that they agree. And I will tell you that based on some of the other prostate cancer studies that have been done and have met with the EMA that what the FDA is allowing us to do is not specific to us. It seems to be what the FDA has settled in terms of endpoints in this space.

So we are going to meet with the EMA probably late this year. We're just starting the request. And part of that was we just met with the agency in July. So this is what you would do. And so now we're going to submit to EMA and get their advice. But the goal would be that in -- when we start our study in first quarter of calendar year 2021, that it would have input from both agencies and that it would serve as a single Phase III.

And with regard to VERU-100, what remains to be done before you can go ahead and file the IND?

So all we're waiting for that is the -- all the nonclinical is done, everything is done. The only thing that we're waiting on is GMP manufacturing. As you know, when you GMP manufacture a peptide, it's a little different. It takes a little bit more time, and you've got other issues all worked out. And so what we're doing now is just waiting for the final batch to be a manufacturer so that we can move forward. And you can't really file an IND until you have that CMC information. And so the CMC information, as soon as it's available, then we're filing the IND. And as you know, 30 days after that, you can start your trial.

So it's literally just waiting for the last parts of the manufacturing to be done on the GMP and then we'll start the Phase II, if not right at the end of the year, right at the beginning of the year, and that will be a small study, a single injection, and that will guide us in what we need to do for the Phase III. So we're close.

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

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 for joining us.

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