Veru Inc (VERU) 2025 Q3 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 call over to Mr. Michael Purvis, Veru Inc.'s General Counsel and Executive Vice President of Corporate Strategy. Please go ahead.

The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations or intentions regarding its business, operations, regulatory interactions, finances and development and product portfolio.

Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings, as well as in our press releases from time to time. I would now like to turn the conference call over to Dr.

Mitchell Steiner, Veru Inc.'s Chairman, CEO and President.

Thank you, Michael. Good morning. With me on this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the Chief Financial Officer and Chief Administrative Officer; and Michael Purvis, General Counsel and Executive Vice President of Corporate Strategy. Thank you for joining our Q3 fiscal year 2025 earnings call.

Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 clinical stage drug candidates, enobosarm and sabizabulin.

Enobosarm is an oral selective androgen receptor modulator, also known as SARM, is being developed as a novel drug that makes GLP-1 receptor agonist weight reduction more tissue selective by preserving lean mass in muscle while causing greater fat loss in older patients who overweight to have obesity.

Sabizabulin is an oral microtubule disruptor being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation and slow the progression or promote the regression of atherosclerotic cardiovascular disease. This morning, we'll focus our update only on our chronic weight loss management program.

As defined by FDA, obesity is a disease of excess body adiposity or fat. Therefore, the medical objective to treat obesity by weight reduction drug or drugs in combination should be to reduce the excess body fat, not lean mass, to improve the morbidity and mortality associated with obesity. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who overweight or have obesity. Unfortunately, the weight loss is tissue nonselective and the indiscriminate loss of both fat and lean mass. Of the total weight loss, up to 50% of the total weight loss is attributable to lean mass.

We must do a better job of getting rid of fat tissue only. As we previously presented the clinical data as they became available for our Phase 2 program, I will now present a summary of all of these important findings. Now we have demonstrated in the Phase 2b QUALITY study that enobosarm is a next-generation drug that makes GLP-1 receptor agonist weight loss more tissue selective for fat loss while preserving lean mass and physical function.

In January of 2025, the company announced positive top line and efficacy data results from the Phase 2b QUALITY clinical study, which is a multicenter, double-blind, placebo-controlled randomized dose-finding clinical trial designed to evaluate the safety and efficacy of enobosarm 3 milligrams, enobosarm 6 milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in 168 older men -- excuse me, older patients greater than 60 years of age, receiving semaglutide for chronic weight management. Enobosarm plus semaglutide group met the primary endpoint of the study with a statistically significant 100% average preservation of total lean mass compared to placebo plus semaglutide at 16 weeks and that p-value is less than 0.001.

The enobosarm plus semaglutide treatment resulted in a dose-dependent greater loss of fat compared to placebo plus semaglutide with the enobosarm 6 milligram dose having a 42% greater relative loss of fat mass compared to the placebo semaglutide group at 16 weeks and that p-value of 0.017. The enobosarm 3 milligram group had a 12% greater fat loss.

Even with having preserved the lean mass, the enobosarm plus semaglutide treatment resulted in a similar mean body weight loss as semaglutide alone in 16 weeks. And the tissue composition of the total body weight loss was 34% lean mass and 66% fat mass for the placebo plus semaglutide group, whereas it was 0% lean mass and 100% fat mass for the enobosarm 3 milligrams for the semaglutide group. Physical function was measured by the stair climb test.

Responders analysis was conducted using greater than the 10% decline in stair climb power as the cutoff at 16 weeks, which represents approximately 7 to 8 years loss of stair climb power that naturally occurs with aging. The Phase 2b QUALITY clinical trial is the first human study to demonstrate that older patients who are overweight will have obesity receiving semaglutide or at higher risk for accelerated loss of physical function as 44.8% of the placebo plus semaglutide group had at least a 10% decline in stair climb power physical function at 16 weeks.

Enobosarm treatment preserved the lean mass, which translated into a reduction in the proportion of patients that had a clinically significant stair climb physical function decline with 17.6% of the enobosarm 3-milligram plus semaglutide group having at least a 10% decline in stair climb power function in 16 weeks, which is a 59.8% relative reduction in the proportion of patients that lost at least 10% stair climb power compared to placebo semaglutide group, and that p-value was 0.006.

In May of 2025, the company announced that enobosarm and semaglutide combination had a positive safety profile in the Phase 2b QUALITY clinical trial. Now after the trial participants completed the efficacy dose finding portion of the Phase 2b QUALITY clinical trial, 148 participants continued to the Phase 2b Maintenance Extension study.

This is a double-blind study, where all patients discontinued semaglutide treatment but continued receiving placebo, enobosarm 3 milligrams or enobosarm 6 milligrams as monotherapy for 12 weeks. In June of 2025, the company announced positive top line efficacy and safety results in the maintenance extension portion of the Phase 2b QUALITY clinical study that showed that enobosarm significantly reduced body weight regain, prevented fat regain and preserved lean mass after semaglutide discontinuation.

As a point of reference, at the end of the Phase 2b QUALITY study active weight loss period of 16 weeks, body weight loss was similar across treatment groups with the semaglutide plus placebo group losing an average of about 11.88 pounds.

After the 12-week Maintenance Extension period where all treatment groups discontinued semaglutide, the placebo monotherapy group regained 43% of the body weight that was previously lost during the Phase 2b QUALITY study for a mean percentage change of 2.57%, which is 5 pounds compared to 1.41%, which is 2.73 pounds for the 3-milligram group and that p-value of 0.038 and 2.87%, which is 5.29 pounds for the 6-milligram enobosarm group. This means that the 3-milligram enobosarm monotherapy significantly reduced the body weight we gained by 46% after discontinuation of semaglutide.

By the way, the mean tissue composition of the body weight regained was 100% lean mass in both the 3-milligram and 6-milligram groups, whereas it was 28% fat and 72% lean mass in the placebo group. Enobosarm plus semaglutide followed by enobosarm monotherapy regimen was more effective in preserving lean mass and causing and maintaining greater loss of fat by the end of the study.

So the placebo plus semaglutide followed by placebo monotherapy group experienced loss of lean mass, while the enobosarm plus semaglutide group followed by enobosarm monotherapy group significantly preserved more than 100% of lean mass with the enobosarm 3-milligram p-value less than 0.001 and enobosarm 6 milligrams, a p-value equals 0.004.

The enobosarm plus semaglutide followed by enobosarm monotherapy patients had a 58% greater loss of fat with enobosarm 3 milligrams, a p-value of 0.085 and 93% greater loss of fat with enobosarm 6 milligrams and that p-value is 0.008 compared to placebo plus semaglutide followed by placebo monotherapy. Now adverse events and adverse events of special interest in this double-blind Phase 2b Maintenance Extension trial, enobosarm monotherapy had a positive safety profile.

After discontinuation of semaglutide, there's essentially no gastrointestinal side effects, no evidence of drug-induced liver injury by Hy's law and no increases in obstructive sleep apnea observed at any dose of enobosarm compared to placebo monotherapy.

And there were no adverse events of increases in prostate-specific antigen in men, and there was no adverse events related to masculinization in women, and there were no reports of suicidal ideation observed. In summary, the Phase 2b QUALITY Maintenance Extension clinical trial confirms that preserving lean mass with enobosarm plus semaglutide led to greater fat loss during the active weight loss period.

And after semaglutide was discontinued, enobosarm monotherapy significantly prevented the regain of both weight and fat mass during the maintenance period such that by the end of the study, there's greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group. On August 11, 2025, the company announced the selection of a novel modified release oral formulation for chronic weight management -- chronic weight loss management following a pharmacokinetic clinical study.

A single-dose open-label pilot study evaluated the plasma concentration versus the time profile of a proprietary patentable modified release formulation of enobosarm 3 milligrams. The new formulation demonstrated the intended distinct target product release profile, which includes a reduction in maximum plasma concentration, which is called Cmax, a delayed time to maximum plasma concentration called Tmax and a distinct secondary peak concentration and a similar extent of absorption, which is called AUC, compared to historical values for enobosarm immediate-release capsules.

The novel modified release oral enobosarm formulation is planned to be available for the Phase 3 clinical study and for commercialization. The novel enobosarm oral formulation's unique manufacturing process is protected by issued global patents with protection through 2037. And the new patents on the novel modified release oral enobosarm formulation itself have been filed and if issued, expiry is expected to be in 2046.

Now, we expect regulatory clarity for the GLP-1 receptor agonist and enobosarm combination Phase 3 program as we have had an end of Phase 2 FDA meeting scheduled this quarter. So we'll hear it this quarter. The proposed indication is enobosarm is a selective androgen receptor modulator indicated as an adjunct to GLP-1 receptor agonist therapy, a reduced calorie diet, and increased physical activity and chronic weight management for greater reduction in fat mass, preservation of physical function and preservation of lean mass in older, greater than 60 years of age adult patients with obesity.

Now, during our previous pre-IND FDA meeting, FDA provided general comments about the regulatory path forward for enobosarm as a drug that improves body composition during chronic weight management, including input on the Phase 3 clinical program design. So we have some preliminary information -- previous information that we received from the FDA when we started with our pre-IND meeting.

Some of these FDA comments from the pre-IND meeting were: Enobosarm in combination with an approved incretin drug, so like a GLP-1 needs to show that there is some stabilization in lean mass that's clinically meaningful; imaging-based changes in lean mass would need to be directly linked to improvements in how a patient feels, functions and survives in order to support an indication related to preservation of lean mass; improvement in stair climb performance measure is clinically meaningful, so that's one way to do it; and would need to be linked to observed improvements in lean mass rather than weight loss itself.

Stair climb test has been accepted by the FDA, again, as a point of reference for previous drug approvals and pivotal trials. So for the treatment of Duchenne muscular dystrophy and also pivotal Phase 3 cancer cachexia studies that -- for the 504 and 505 lung cancer studies have used stair climb as a primary endpoint in a Phase 3 program.

Finally, we're focusing our Phase 3 clinical program on an older population that could benefit from a weight reduction drug for chronic weight management, but who are at higher risk for muscle weakness and falls because of age-related loss of muscle. Now in general, there's 47.4 million patients over the age of 60 enrolled in Medicare Part D, of which 41.5% of them could benefit from a drug for overweight or obesity.

Furthermore, up to 34.4% of patients over the age of 60 with obesity in the United States have what's called sarcopenic obesity. Sarcopenic obesity means these are patients who have obesity and low muscle mass at the same time and are potentially at the greatest risk for developing critically low muscle mass when taking a currently approved GLP-1 receptor agonist.

Although older patients represent a large market alone, success in this patient population could be a segue into the combination of enobosarm and GLP-1 treatment in younger patients who have obesity, as well as diabetic and frailty populations. We're looking forward to receiving the FDA regulatory clarity for this novel unmet medical need soon.

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

Thank you, Dr. Steiner. On August 8, 2025, the company effected a 1-for-10 reverse stock split of its issued and outstanding common stock. As a result of the reverse split, each 10 shares of issued and outstanding common stock were automatically converted into 1 share of common stock. The reverse stock split did not change the total number of shares authorized or par value per share.

The reverse stock split was approved by the company's shareholders on July 25, 2025. All share and per share amounts presented in our financial statements as of June 30, 2025, have been retroactively adjusted for all periods presented. There were no fractional shares issued in connection with the reverse stock split. Now reviewing the results for the 3 months ended June 30, 2025. Research and development costs decreased to $3 million from $4.8 million in the prior quarter.

The decrease is due primarily to the wind down of the company's Phase 2b QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, which was completed during the quarter ended June 30, 2025. The company initiated the Phase 2b QUALITY clinical study during the quarter ended June 30, 2024. Selling, general and administrative expenses were $5 million compared to $5.8 million in the prior quarter. The decrease is primarily due to a decrease in share-based compensation. We recognized a gain on sale of ENTADFI assets of $485,000 compared to $110,000 in the prior quarter.

The gain represents nonrefundable consideration received related to promissory notes due to Veru. The bottom line result for continuing operations was a net loss of $7.3 million or $0.50 per diluted common share compared to a net loss of $10.3 million or $0.71 per diluted common share in the prior year's quarter.

Net loss from discontinued operations net of taxes related to the FC2 Female Condom business, which was sold on December 30, 2024, was $9,700 or $0.00 per diluted common share compared to a net loss of $629,000 or $0.04 per diluted common share in the prior quarter. The net loss from discontinued operations during the current quarter represents changes in an estimate made at the time of the FC2 business sale, while the net loss for the prior year quarter represents the operations of the FC2 business during that period. Now turning to the results for the 9 months ended June 30, 2025.

Research and development costs increased to $12.7 million from $9.5 million in the prior period. The increase is due to $4.5 million incurred related to the company's Phase 2b QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, partially offset by a decrease in expenditures related to the company's other drug development programs that were terminated in previous years.

Selling, general and administrative expenses were $15.4 million compared to $18.4 million in the prior period. The decrease is primarily due to a decrease in share-based compensation. We recognized a gain on sale of ENTADFI assets of $2.2 million compared to a gain of $1 million in the prior period, which is based on nonrefundable consideration received related to promissory notes due to Veru.

In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the SWK Holdings residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million, which included an embedded derivative for the change of control provision at fair value of $4.7 million. The bottom line results for continuing operations was a net loss of $17 million or $1.16 per diluted common share compared to a net loss of $26.7 million or $2.04 per diluted common share in the prior period.

Net loss from discontinued operations net of taxes related to the FC2 business was $7.2 million or $0.49 per diluted common share, including the $4.3 million loss on the sale of the FC2 business compared to a net loss of $2.6 million or $0.20 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $4.6 million is due to the loss on the sale of the FC2 Female Condom business of $4.3 million and the increase in the loss from the change in fair value of derivative liabilities of $3.2 million, partially offset by a decrease in selling, general and administrative expenses of $3.9 million.

The purchase price for the sale of the FC2 business was $18 million in cash, subject to adjustments as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 Female Condom business were approximately $16.3 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK Holdings pursuant to a residual royalty agreement for a 2018 financing transaction.

The loss on the sale of the FC2 Female Condom business is approximately $4.3 million. The difference between the estimated net proceeds of $16.3 million and the total carrying value of the FC2 business of $20.6 million. The sale of the FC2 Female Condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development.

Now looking at our balance sheet. As of June 30, 2025, our cash, cash equivalents and restricted cash balance was $15 million compared to $24.9 million as of September 30, 2024. The restricted cash as of June 30, 2025, was $354,000 related to the sale of the FC2 Female Condom business. Our net working capital was $9.5 million on June 30, 2025, compared to $23.4 million on September 30, 2024. The company is not profitable and has had negative cash flow from operations.

We will need additional capital to support our drug development candidates. Based upon the company's current operating plan, our cash as of the issuance date of these financial statements is not sufficient for the company to fund operations for the next 12 months. However, we have sufficient capital to take the company into the next calendar year, which is beyond obtaining regulatory clarity from the FDA end of Phase 2 meeting for the enobosarm clinical program.

During the nine months ended June 30, 2025, we used cash of $24.6 million for operating activities compared with $17.3 million used for operating activities in the prior period. We generated cash from investing activities of $18.9 million for the nine months ended June 30, 2025, compared to $15,000 from investing activities in the prior period.

The cash generated in the current year relates to proceeds from the sale of the FC2 Female Condom business of $16.3 million, proceeds of $2.2 million from the sale of the ENTADFI assets and proceeds of $393,000 from the sale of Onconetix equity securities. We used cash in financing activities for the 9 months ended June 30, 2025, of $4.2 million related to the change of control payment pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 Female Condom business. In the prior period, we generated $36.8 million from financing activities. Now I'd like to turn the call back to Dr. Steiner.

Dr. Steiner?

Thank you, Michele. With that, I'll now open the call to questions. Operator?

(Operator Instructions) Dennis Ding, Jefferies.

This is Anthea on for Dennis. I have two questions, if I may. On the modified release formulation of enobosarm, could you talk a little bit about if this new formulation still allows for fixed dose combinations, particularly with oral GLP-1s potentially down the road? And then on partnering ex-US, any updates there? And have you presented potential partners or had conversations about the novel formulation given there is a stronger IP there?

Great. Thank you for the question. So yes, the answer is, we're a small molecule. As you know, Lilly with orforglipron has a small molecule, and they like small molecules because of the fact they're easy to make, not dealing with cold storage, like you do with proteins, they got into trouble. Both Lilly and Novo Nordisk got into trouble because they couldn't keep up with demand with a protein where small molecules can easily plug that into contract manufacturers to get their supply.

So there is a lot -- and so the idea is at some point, pricing can be more competitive, you get to more patients. So there is a real push to go into oral weight loss. Oral weight loss drugs, GLP-1 drugs, GLP-1 receptor agonist targets also have the problem of muscle loss. So you could imagine a fixed combination with enobosarm. And yes, the answer is, it can be done and could add additional patent life.

So you have additional patent life you just having the formulation itself. But to have that formulation with a fixed combination with a GLP-1 could be very interesting. So yes, it definitely can be done. As it relates to partnership discussions, yes, we have been -- as I mentioned before, we have been talking to partners. The way to think about it is really two buckets of partners.

One is the -- interestingly, there's a lot of noise about the market, but really on the market, it's only 2 main players, Novo Nordisk and Lilly. All the others are trying to get their product approved or further down the pipeline in development. So with that said, yes, we are talking to partners in the marketplace and also the second bucket of partners, potential partners, big pharma trying to get into the space.

And third, potential partners that we're reaching out and having discussions of partners that the 70 companies plus that are working on a GLP-1 of some sort. And there's -- most of them don't have much to differentiate themselves.

And again, all of them will have the same issue with lean mass. And so, maybe oral will differentiate them, maybe a long-acting GLP-1 receptor agonist once a week, once a month or something like that could be interesting. But really to differentiate themselves, if they could have a combination therapy with our drug so that they can address the lean mass loss and have the GLP-1 benefits could be interesting as well. So that's another bucket of folks that we're talking to as well. So we're very active.

And our position at this point is to keep those discussions going along so that we can secure nondilutive dollars for funding the future studies.

Gary Nachman, Raymond James.

Mitch, what are your expectations for the end of Phase 2 meeting with FDA and the Phase 3 design that you'll propose to them that you outlined before, where there might be any pushback if there is any, if it would be on the functional endpoint or patient population or maybe something else? And then how will you communicate the outcome of that meeting? Will you wait for the minutes first? Or will you talk about it sooner with the investment community? And then I have a follow-up.

Great. So I'm going to ask Dr. Gary Barnette to address your first question about our expectations for what we consider a win for the FDA meeting, and he's our Chief Scientific Officer, who heads up our regulatory. So Gary, would you like to comment?

Sure. Yes. As you know, the key to all discussions and interactions with the FDA is obtaining clarity. The FDA has given us clarity before we want to confirm that clarity on the endpoint, the population, the dose, et cetera. I think that the -- I think the FDA is going to continue to present to us and tell us that a physical function measurement is going to be required.

It won't be an incremental weight loss. I think that will be a win. I think that the population, if I had to pick one area where the FDA would want to expand is, and they've already told us this one time is that, if you are retaining muscle in this patient population, all subjects lose muscle on GLP-1 or lose lead mass on GLP-1 RA treatment. I think we have focused on the older population, the greater than 60 because we believe, and I think the FDA does as well that this patient population is the highest risk. However, we also do understand that younger patients could benefit from maintaining lean mass and physical function.

And I think that would be the biggest pushback from the agency is really to expand this because they do and have said that they believe that enobosarm could benefit all the patient population -- the entire patient population, not just the older population.

Yes. And as a result of how we plan to communicate the feedback from the FDA, as you know, you have your meeting preliminary comments and then you have an opportunity to have further discussion. And then based on that further discussion, you have to wait for them to put it back officially in writing.

So I would say I would guide everybody that September time frame, end of August, September time frame is probably the time frame that we should be looking for the FDA clarity. And as you know, once we get the FDA clarity, then we'll have a much better understanding of Phase 3 design and what that means in terms of capital needs and that kind of stuff.

So at this point now, the good news is, we have great data, and we've got great data in the relevant population. And we have -- the FDA meeting has been granted. The package has been sent way back when, so everything is cooking. And we are the first. I mean, I know that you've seen results from Scholar Rock and from Regeneron and also from Versanis, which is part of Lilly.

And what you saw in those results is lean mass is kind of hard to hold on to. These GLP-1s are pretty powerful and incremental weight loss doesn't occur in at least six months or sooner. If you go to a year, 72 weeks, you'll see incremental weight loss. But sooner than that, you don't. You hold on to lean mass, you burning more fat to keep the same weight loss.

So we've learned a lot of information. And now we're just waiting for the regulatory part so that we can have full understanding how to take a drug like this into this massive market. I think you said you had a follow-up.

Yes. Just on the modified release formulation, with the reduction in Cmax and delayed Tmax, would you arguably have an even better side effect profile than the current formulation? And how are you confident it will have the overall same efficacy as the IR? And then just what do you have to show FDA for them to allow that new formulation in the Phase 3?

Gary, can I ask you to address that?

Yes, sure. The safety profile of enobosarm is very good. But as we all know, reducing Cmax and delayed Tmax is something the FDA looks at. So if anything, it will have a better safety profile, but it's hard to make better on what we already have. So what we're doing is, we run the pilot study, and we're running -- we will be conducting a formal relative bioavailability study.

That is what the FDA is going to look at. And as far as the efficacy goes, efficacy in general for this kind of molecule is dependent on the extent of absorption. That means the area under the plasma concentration time curve, that is the key piece, and we are similar between the immediate release capsule formulations in our current modified release formulation. So we believe efficacy is going to be similar with, if anything, a better safety profile due to the lower Cmax levels.

And you're able to bridge by the study that shows that the AUCs are similar.

That's right.

Okay. And you'll show that the bioavailability study to them at the end of Phase 2 meeting, I presume.

Well, we will be showing it to them as time goes on. The end of Phase 2 meeting is really focused on the trial design or the meeting we're having with the agency is really focused on the trial design with follow-up discussion on the formulation.

William Wood, B. Riley Securities.

Congrats on the quarter, team. I have -- just thinking about the sort of the Phase 3 design. I know this will come up more at the end of Phase 2 meeting this quarter. But it looks like based on at least the proposed 68-week trial design, it's incorporating sort of 2 RCTs that are sort of combined together, incorporating a dropout portion and then what may be also described as an add-on portion will patients come on or off enobosarm, testing what happens after these sort of changes occur.

So I mean, I guess, could you just discuss this plan, maybe where this sort of -- maybe where you sort of came up with this and what you've incorporated from any peers' learnings thus far and into these designs and endpoints and maybe what endpoints you'll be focused on, including cardiometabolic that may be incorporated in this test?

So I'll make a comment, and then I'll have Dr. Barnette answer the bulk of those questions since he's a gentleman that came up with, I think, a brilliant trial design. In general, the idea was we had a very successful Phase 2b study and in 168 patients.

And the idea for the Phase 3 is, especially the physical function being the primary endpoint, let's not change too many things because we had a very successful physical function endpoint. And as you know, physical function has been a real problem for other compounds, particularly myostatin inhibitors show function.

So the lean mass that they put on may not be as functional as a lean mass you put on using the androgen receptor, which is how testosterone puts on lean mass, and we know testosterone improves performance and enobosarm does the same. So it's no surprise.

So we want to take advantage of our strength, no pun intended, and make sure that the trial design matches as much as possible what we've already done. With that said, there are some other features that Gary built into the -- Dr. Barnette built into the study that I think will help us understand the efficacy and safety a lot better.

So Gary?

Yes. In enobosarm, we have really there's two buckets of efficacy parameters. One is the shorter term, the lean mass, the physical function, the fat mass, the changes in body composition. Then there's a longer-term. The 2 longer-term assessments are incremental weight loss, which you asked about what we've learned from others.

Certainly, we see that from Versanis Lilly bimagrumab product showed incremental weight loss after 72 weeks, not so much in the earlier point. And then the other is bone. We believe that enobosarm is going to have a positive effect on bone mineral density, and it takes 9 to 12 months for that to be -- to really be seen.

So as Mitch said, we want to keep the shorter term, the lean mass, the physical function, the fat mass, those parameters this short-term study to mimic and replicate what we've already done in the Phase 2, which is very successful. But we also want to have this longer-term assessment for bone incremental weight loss and also safety.

So the design we've come up with is a implement that. So we have the double-blind, randomized, placebo-controlled first part up to the efficacy portions for lean mass, fat mass and physical function. Then we rerandomize the subjects so that we have really, I would say, we have two groups, one group continuing enobosarm plus GLP-1 for the entire 12-plus months, one group on placebo plus GLP-1 for the entire 12-plus months. Then we have two other groups. One is a dechallenge group.

So imagine, if you will, you have patient population that is on enobosarm plus GLP-1 for the first part of the study. We see maintenance of lean mass, maintenance of physical function, increased fat mass and then you take the enobosarm away. What happens? I believe that the patient will start losing lean mass, et cetera, and that's what we're going to show with the dechallenge. And that's -- if you look at the FDA's guidances and rules and so on and so forth, that's one of the parameters or one of the ways you assess efficacy is to dechallenge a patient.

The other one is, what I'm going to call a rescue. So in the placebo group, you have patients that in the first part of the studies have lost lean mass, lost fat mass, of course, and lost physical function. Now we're going to take some of that, a proportion of those patients and actually add enobosarm, so to rescue the population. So this would mimic population that's already on lean mass or already on the GLP-1s have a deficit of some sort. And now we're going to give them enobosarm instead of de novo patients, give them enobosarm and then rescue them.

We expect to see increase in lean mass, further decreases in fat mass, hopefully further decreases in -- we believe further decreases in body weight and then maintenance or return of physical function. That's the design we've come up with and proposed to the agency. It really encapsulates the short-term efficacy, the long-term efficacy and safety and then this dechallenge and rescue portions that I think is innovative. And if you think about how this administration is trying to optimize drug development, make drug development more streamlined, more and more informative, I think this study does all those things.

Appreciate that extra color. And just one more, if I may. In terms of expectations on where we may expect the full data from both the induction and the maintenance trials, I'm assuming that's going to be upcoming at a conference later this year or maybe if you could sort of point us in the direction on where we might be expecting that and then what additional color we may gain at these -- at those presentations?

Yes. So at this point now, we're targeting ObesityWeek. So abstracts have been submitted. We have not heard back yet because it's still later in the fall, I think it's November or something like that. And so that will be able to provide more data that we have not provided yet because that will be in the format in a scientific meeting.

And then, of course, beyond that will be publications. But I think the next major data point will be in a scientific meeting will be ObesityWeek.

Leland Gershell, Oppenheimer.

Mitch, congrats on the progress you've been making. I just have a couple of questions on the new formulation. Just as we await issuance of the patents from those applications, just wanted to know if you could share sort of the degree to which -- what your observations were novel and unanticipated based on the technology involved and I guess, speaking to the confidence that you'll get those patents allowed and also speaking to the defensibility of those patents against potential generic pilots down the road.

So Gary Barnette and myself have to double team on that one, too. I would say that one of the beautiful things about having a novel formulation and a novel formulation formed by existing patents and new patents because of the formulation gives you a lot of -- almost like a composition of matter type patent because the delivery of the drug is different.

And because it's different, two things. One is the fact that people have to -- you're referring to generics have to match that up and the technology was used almost like a 3D printing technology, where you have multiple, multiple layers of drug being applied to makes it almost impossible for someone to design around that. And so, that's the power of that technology.

And we use a very reputable company called Laxxon Medical, and this is what they do. And so, we knew that to really button up our patent portfolio, which is just to remind everybody, we do have composition matter for polymorphs that run out in 2034 if you had the PTO. We have method of use patents that will run out in 2044. And we have gotten some preliminary feedback from International Patent Office that their search showed that the claims are novel and there's no prior art. So it feels pretty good.

And that can be highly defensible. I mean, Verona Pharma and also Chinook had those kinds of patents, and they were taken out for multibillion dollars. And then finally, the formulation patents, which I think are key, especially since we plan to use them only in Phase 3 and in commercial. So that's the key point. And maybe, Gary, you can comment on what makes it different from a patent protection standpoint.

Yes. So it's not an immediate release formulation we've used in the past. We specifically designed this control release formulation that optimizes where the molecule or the enobosarm is released in the GI tract, et cetera, and how long it's retained there and have, what I believe is, optimized the pharmacokinetic profile for optimal efficacy and safety. So as we've talked about before. So that's novel.

It's new. It's not consistent with any of the -- it's different, I should say, from the immediate release formulations that we've used. However, from an efficacy standpoint, it's not different from an AUC standpoint, which I've talked about before, which is the key to the efficacy of this type of molecule.

So for the FDA, AUC is important. For generics, it's a whole PK profile because they have to match the Cmax and they have to match the AUC exactly, and they have certain parameters that have to hit it. And by changing that and actually including a second peak and changing the Tmax, which is how things get released and the time they get released, then it becomes really difficult to crack that nut.

Got it. Okay. That's very helpful. And then just a question on the Phase 3. Presumably, you'll be building in open-label extension beyond the Phase 3b.

Just wondering if there's any need, do you think from a regulatory standpoint for any additional safety exposure work or if that's pretty much buttoned up with the Phase 3 and the prior work you've done with enobosarm?

Gary?

Yes. No, at this point in time, we have not designed in an open-label monotherapy extension to the study. We believe if you look at the FDA's requirements for non-life-threatening, non-acute dosing, we believe that we will be in compliance with their safety database that they have documented in their guidances and regulations. So we do not believe that there is a need for an open-label extension for safety reasons. Now, we might add something in later on to -- right now, the design does not include.

We could add some sort of an extension later if there's a need from a commercial standpoint, a potential partner or the FDA asks us to. But right now, we've not designed anything like that.

Yi Chen, H.C. Wainwright.

This is Eduardo on for Yi. I had a quick question again on the Phase 3 trial. You mentioned the particular benefit among patients that could be sarcopenic or have osteoporosis. I'm curious if you have any target benchmark for including a specific fraction of the patient population to have those specific comorbidities. Or if you're just hoping by happenstance, naturally by recruiting from this population, you'll get some fraction of them?

I'll make a comment and then I'll invite Gary to make a comment as well. Initially, we thought about that, then it became -- we said this may be really super screened patients for patients that have sarcopenia or mobility disability as a screening inclusion/exclusion type criteria. Then we realized that hold on, that may not be fair because we do know that patients over the age of 60 lose muscle. And as they age, they lose even more muscle. So this is not our first rodeo.

Previously, we've done studies in our former company, a former company where Gary Barnette and myself and others have been involved where enobosarm originated where we did work in frailty, we did work in cancer wasting. So we have a pretty good understanding of the patient population, particularly frail patient population. So we took a bet that we would be able to see detriment in the GLP-1 in a patient population. All we did was pick patients over the age of 60 that took a GLP-1. And we learned a lot.

The first thing we learned is that, GLP-1s are pretty toxic to muscle, period. And there's a lot of clues to that, that we'll publish on because I think that's very, very important. I mean, so much so that even the competitors of myostatin inhibitors, the best they can do is about 50%, 60% present in lean, and we were able to hit 100%. It's tough in a low calorie state to hold on to lean. And again, enobosarm is able to do that.

So what we've learned in our patient population is that, 44% of these patients had a decline in stair climb power of greater than 10%. So essentially, they lost seven to eight years of stair climb power in 16 weeks. So I think we have the right patient population as it relates to muscle without having to cut the patient population even tighter. With bone, same thing. Again, we already know the patients over the age of 60 start to lose bone.

And we also have some clues from the WEGOVY label that if you're over the age of 75, that they saw a four to fivefold increase in hip fractures and pelvic fractures. So it's not just loss of bone, but the next bad thing that can happen and the whole reason you worry about loss of bone is it falls in fractures and pelvic fractures and hip fractures are unfortunately, a kiss of death for older patients. So I think the patient population is ideal. But I'll let Gary answer what does he think.

Yes. So I would answer the muscle and the bone differently. The muscle, what we're really talking about here is drug-induced loss of lean mass and so on and so forth. So we believe that with lean mass, we're talking about changes from baseline. So a patient that may not be completely sarcopenic and remember, there's various definitions of sarcopenia that may not be completely sarcopenic at baseline, they go on GLP-1, they become sarcopenic.

That's what we're trying to prevent with the study and with the drug. So we believe that if we stratify the populations correctly based on age and gender and maybe some other things that we can account for that and gain enough population of each different, meaning patients that have sarcopenia coming in versus not, et cetera, to be able to analyze it meaningfully.

From a bone perspective, remember, about 70%, the FDA requires that 70% of our study be female or meaning one of the genders, at least 30% of each gender. So 70% of our population is going to be female. That's the way it worked out in our Phase 2, and I believe that's the way it will work out in the Phase 3.

With 70% of that population being female, I believe that with the prevalence and incidence of osteopenia and osteoporosis in that population, even in the obese population, I believe that we'll have sufficient numbers to evaluate bone mineral density changes and the effect of enobosarm in that population, if that makes sense.

Yes. Just to add to that, if you go -- again, go back to the WEGOVY label, and I made the comment that males over the age -- patients over the age of 75, males over the age of 75 with hip fractures. The other group that has a fivefold increase in hip fractures and pelvic fractures are just women. So women in general. So they start out with less bone mineral density.

And so, I think -- again, I think the issue here is that, GLP-1 is inducing the loss of lean and inducing bone loss. And so, we're trying to stop what's happening from baseline as opposed to going after patient population that is full risk. So does that make sense?

Yes. No, that's really helpful. And regarding those comorbidities, fractures and falls, are you also going to be monitoring that hospitalizations, fractions associated with these falls to see if there's any more robustness of health attributed to the increase in the mass or possible bone density?

Gary?

Yes. We, obviously, any kind of fall fracture would be considered an adverse event. But as we go in the longer study, we will certainly monitor those things, and it will be most likely, in my opinion, will be an adverse event of special interest.

Robert Sassoon, Water Tower Research.

I have a question -- a couple of questions. The 17% of the population in the 3 milligram enobosarm group that reported a clinically significant decline, physical function loss. Were there any sort of characteristics, obviously, outside of -- given that, that group was generally preserved lean mass. Is there anything -- any particular characteristics of that population, subpopulation that think you caused that statistic?

To understand the question. So the question is you still have 17% of your patients in the 3 milligram group that had a greater than 10% decline in stair climb power. So is there something about that group that makes them different? And I would say, I don't know at this point, except maybe time. So in other words, looking at 16 weeks, would you be able to go to 83%?

So can you go to -- can you reduce that by another 50% if you go another month? So it's hard to say, except that people start muscle mass at different levels, right? Some have more, some have less. And so we may be getting those patients have less muscle mass coming in. But I do think with time is muscle mass, we've seen some internal consistencies that when lean mass comes back, function comes back.

So stay tuned.

And on your Extension study to the Phase 2, you have some pretty robust results when enobosarm became a monotherapy. It seems like that there is quite a large suite of populations. I think I read something like 11% of the adult population in the United States has non-obese sarcopenia. Is that a group of people that you would consider using enobosarm as a monotherapy at some point?

Yes, it's a great question. So it starts out with -- the strategy is as follows, and we'll see how it plays out. Strategy is to start out with a higher-risk patient population, older patients over the age of 60 that are obese, but not diabetic. And that's the first patient population. The second patient population is younger patients that are obese.

And then the third population are going to be older patients, younger patients with diabetes because as you know, diabetes, GLP-1s are indicated. And they may not be obese, they may be taking it for diabetes and they could get into trouble.

And then the other special populations would be, for example, osteoporosis because at this point now, enobosarm could be potentially used for monotherapy with osteoporosis and for frailty. But the point I'm trying to make is, there's so many populations that we can go into. So if we can start out with the population that we're doing right now, which has a very defined clinical benefit risk population, that's why we selected them.

And we selected them because we felt that it will be more informative in terms of function. So in other words, if you took 32-year-old linebackers that want to lose weight, and you're looking for function detriment. It's going to take a little bit more time to show detriment than, for example, a 75-year-old male that has baseline loss of muscle with age. So we picked the older population to be informative. And guess what, they were informative.

It turns out 44% of them did have accelerated loss of lean and accelerated loss of physical function. So that's key because to this date, up to date, most of the data has been in all patients, including young patients. And I think you're going to mask the full effect of the problem until you look at the right patient at the right time. And I think that's what we did.

One more question. How much -- when you go -- when you start to execute on Phase 3, how much capital do you think you need to -- do you estimate you need to raise?

Well, at this point now, I think we're so close to getting FDA feedback. I think we should wait and get their feedback because that will sort out what we think the absolute capital raise -- capital needs will be. And what we said and what we proposed is based on effect size in our Phase 2b, and assuming the effect size will drive -- dropouts will drive your Phase 3 development, that we believe that the Phase 3 will be in the neighborhood of about 400 patients, 200 per arm. And if that's the case, then we're looking at $40 million over 18 months. But we just don't know at this point until we talk to the FDA.

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

I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress in the next investor call. And of course, when we get the FDA feedback, we'll make sure we communicate that as well. Thank you so much for being on today's call.

The digital replay of the conference call will be available beginning approximately 12:00 p.m. Eastern Time today, August 12, by dialing 1 (877) 344-7529 in the U.S. and 1 (412) 317-0088 internationally. You will be prompted to enter the replay access code, which will be 2184944. Please record your name and company when joining.

And with that, the conference call has now concluded. Thank you for attending today's discussion. You may now disconnect.