Veru Inc. Q4 FY2020 Earnings Call

Good morning, ladies and gentlemen, and welcome to Veru, Inc.'s Investors Conference Call. All participants will be in listen-only mode. [Operator Instructions] After this morning's discussion, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fisch, Veru, Inc.'s Director of Investor Relations. Please go ahead.

Good morning. The statements made on 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 when needed 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. We have made several important and exciting announcements this morning. It's been a busy quarter. We actually released two separate press releases this morning, our earnings release and an update on our oncology drug pipeline. This morning we will discuss these new announcements and their impact on Veru’s business strategy, the clinical development of our drug pipeline, and the commercialization of our products. We will also provide financial highlights for our record fourth fiscal quarter and record year-end fiscal year 2020. Veru has made the transformation into a late-clinical-stage oncology biopharmaceutical company focused on developing novel medicines for the management of two of the most prevalent cancers: prostate cancer and breast cancer. We continue to invest cash generated from our sexual health commercial business into the clinical development of our high-value oncology drug candidates, so our current shareholders can realize the maximum value of our oncology biopharmaceutical company. In fiscal year 2017, the year that the Female Health Company acquired Aspen Park Pharmaceuticals to create Veru, the annual revenues were $13.7 million. And this year, I'm pleased to report that we had a record year of $42.6 million in revenue. In fact, we expect fiscal year 2021 revenue generation will continue to grow robustly to what could be another record year. We accomplished this significant company milestone by setting a new commercial strategy for FC2 and launching PREBOOST. We focused on creating an FC2 commercial sector in the U.S. And in the U.S., we launched FC2 as a prescription product to retail pharmacies and partnered with multiple telemedicine and internet pharmacy partners. We decreased our reliance on the volatile and inconsistent global public sector. We launched PREBOOST, which is marketed online in the United States through a distributor arrangement under the Roman Swipes brand name by Roman Health Ventures Inc. Roman is a leading telemedicine company that sells men's health products via the internet at www.getroman.com. PREBOOST is also marketed in the U.S. through the brick-and-mortar retail channel by Playboy Enterprises International as Playboy's intimate wipes. Now let's focus on some of the financial highlights on Veru's commercial segment, which is made up of FC2, PREBOOST, Roman Swipes, Playboy Intimate Wipes, and drug commercialization costs. We had net revenues in the United States from the FC2 prescription business in Q4 fiscal year 2020 of $8.7 million compared to $4.7 million in Q4 fiscal year 2019, which is up 87%. Net revenues for fiscal year 2020 were $42.6 million compared to $31.8 million in fiscal year 2019, which is up 34%. In fact, gross profit for fiscal year 2020 was $30.8 million compared to fiscal year 2019 of $21.7 million, which was up 42%. Operating loss was $14.7 million, which includes a $14.1 million impairment non-cash charge. Operating loss before adjustment for impairment was only $600,000 for all of fiscal year 2020 compared to the loss of $6.4 million in fiscal year 2019. In fact, the operating profit for Q4 fiscal year 2020 before adjustment for impairment was $2.8 million. Our compound annual growth rate since fiscal year 2017 has been 46%, and we're still growing this segment of our business. To give you a sense of our growth trajectory, for all of fiscal year 2019, we sold 159,000 units of FC2 in the U.S. prescription market, while in fiscal year 2020, we sold 342,000 units of FC2 in the U.S. prescription market, an increase of 115%. I'm pleased to report that we announced today that we sold our PREBOOST business to Roman Health Ventures for $20 million, further strengthening our financial balance sheet. The sexual health business continues to generate record revenues and we expect robust and growing revenues from the sexual health business for another record year in fiscal 2021, which further enhances its potential value as a standalone business if the company were to decide to monetize this asset like we did with PREBOOST to streamline the company into a pure oncology biopharmaceutical company with significant cash resources. TADFIN, which is tadalafil 5mg finasteride combination capsule, is being developed to treat lower urinary tract symptoms caused by benign prostatic hyperplasia. The company had a successful pre-NDA meeting with FDA, and the required one-year stability testing on three manufacturing commercial batches is being completed. Consequently, we expect to submit the NDA for TADFIN in early calendar year 2021, with a launch, if approved, via telemedicine channels in late 2021. This will be another near-term source of additional revenue for Veru. Consequently, I am pleased to report that based on current clinical development plans, we expect that the company will have sufficient resources generated from our sexual health business and existing sources of cash to fund the clinical development of all of the oncology drug programs that I will discuss without the need for new equity financing through the end of fiscal year 2022. By progressing our own pipeline and recently acquiring the worldwide rights to a Phase 3 ready novel breast cancer drug, Veru has made the transformation into a late clinical stage oncology biopharmaceutical company focused on developing novel medicines for the management of two of the most prevalent cancers globally: prostate cancer and breast cancer. Prostate cancer is the most commonly diagnosed cancer in men with an estimated 191,930 new cases and 33,330 deaths expected for 2020 in the United States. One in nine men is expected to develop prostate cancer in their lifetime. Prostate cancer has become a chronic disease with new challenges as prostate cancer develops resistance to current drugs and spreads through the body while the patient suffers the long-term side effects of prostate cancer treatments like hot flashes, bone loss and fractures, loss of libido, erectile dysfunction, loss of muscle strength, and frailty. Breast cancer is the most commonly diagnosed cancer in women, with an estimated 276,480 new cases and 42,170 deaths expected for 2020 in the United States. One in eight women is expected to develop invasive breast cancer in their lifetime. There are many different types of breast cancer with diverse clinical molecular characteristics. The most common type is hormone receptor positive, where estrogen is one of the main drivers of breast cancer, proliferation, tumor progression, and metastasis. Treatments that target the estrogen receptor are the mainstay of breast cancer therapy, but unfortunately, almost all women will eventually develop resistance to endocrine therapies and alternative treatment approaches will be required, including IV chemotherapy. Another form of breast cancer that occurs in 15% of all breast cancers is called triple-negative breast cancer. Triple-negative breast cancer does not have an estrogen receptor or progesterone receptor, and does not make something called human epidermal growth factor 2, also known as HER2. As a consequence, triple-negative breast cancer is an endocrine-resistant, aggressive cancer that grows and spreads faster than hormone receptor positive breast cancers. Triple-negative breast cancer also develops resistance to the currently used chemotherapy drugs like Taxanes, and as such, alternative treatment options for triple-negative breast cancer are very limited. Accordingly, we are dedicated to the development and commercialization of drug candidates to address unmet medical needs for prostate and breast cancer management, and we have made great progress. We are excited to advance our prostate cancer drug candidates VERU-111, VERU-100, as well as our breast cancer drug candidates, recently acquired enobosarm and a new additional indication for VERU-111 into registration clinical studies. VERU anticipates the potential for four registration clinical trials before oncology indications commencing in calendar year 2021. In prostate cancer, the company continues to make strong clinical progress, advancing VERU-111 as a treatment for metastatic castration and androgen receptor-targeting agent resistant prostate cancer and VERU-100 for androgen deprivation therapy for advanced prostate cancer. First, an update on VERU-111 for the treatment of men with metastatic castration-resistant prostate cancer, who've also become resistant to the androgen receptor targeting agent. VERU-111 is an oral first-in-class new chemical entity that targets cross-links and disrupts alpha and beta tubulin subunits of microtubules to disrupt the cytoskeleton. We're calling it a cytoskeleton disruptor. VERU-111 is being evaluated in an open-label Phase 1b and Phase 2 clinical studies in men with metastatic castration and androgen receptor-targeting agent resistant prostate cancer. The Phase 1b clinical study completed enrollment of 39 men and is ongoing. The Phase 1b study has yielded promising efficacy and safety clinical results. Based on the Phase 1b study results, the recommended Phase 2 dose is 63 milligrams oral daily continuous dosing for 21 days. Daily chronic drug administration appears to be feasible and safe. At the recommended Phase 2 dose, there were no reports of neutropenia, neurotoxicity, or Grade 3 diarrhea. The efficacy results show PSA declines and responses, as well as objective and durable tumor responses. Furthermore, the median treatment duration without cancer progression in men who have had at least four cycles of VERU-111 is greater than 11 months. We still have patients from the study. In September of 2020, the Phase 2 clinical study completed enrollment of approximately 40 men with metastatic castrate-resistant prostate cancer, who've also become resistant to androgen receptor-targeting agents such as abiraterone, enzalutamide, or apalutamide but prior to proceeding to IV chemo. Although the study is still ongoing, daily chronic drug administration appears to be feasible and safe. At 63 milligrams daily continuous dosing, there were no reports of neutropenia, a single report of minor neurotoxicity, and manageable cases of diarrhea. Like the Phase 1b, we have observed efficacy results including PSA declines and responses, as well as objective and durable tumor responses. We plan to report the results of the Phase 2 study in the first half of 2021. As we have already enough safety and efficacy data selected dose for VERU-111 and to proceed to a Phase 3, the company had an FDA meeting in July of 2020 and received positive input from the FDA on the pivotal Phase 3 trial design for VERU-111. The company received regulatory clarity that the indication of treatment in men with metastatic castration-resistant prostate cancer who have failed one antigen receptor targeting agent but prior to IV chemotherapy was acceptable, that an open-label randomized study using an alternative androgen receptor targeting agent as an active control is reasonable, and that the primary endpoint may be radiographic progression-free survival. By allowing radiographic progression-free survival as a primary endpoint, the sample size of the Phase 3 clinical study could potentially be around 200 men. The Phase 3 pivotal clinical study will evaluate VERU-111 for men with metastatic castration-resistant prostate cancer and will be called the VERACITY Phase 3 study. Company anticipates starting the VERACITY Phase 3 study in the first quarter of calendar year 2021. Next, I will update you on VERU-100 as an androgen deprivation therapy for the treatment of advanced prostate cancer. VERU-100 is a novel proprietary long-acting gonadotropin-releasing hormone, GnRH antagonist peptide, three-month subcutaneous depot formulation, designed to address the current limitations of commercially available androgen deprivation therapies also known as ADT. Androgen deprivation therapy is currently the mainstay of advanced prostate treatment, used as a foundation of treatment throughout the course of the disease. Furthermore, ADT is continued as other endocrine chemotherapy or radiation treatments are added or stopped. Specifically, VERU-100 is a chronic long-acting GnRH antagonist peptide, administered as a small volume three-month depot subcutaneous injection without a loading dose. VERU-100 is expected to immediately suppress testosterone with no testosterone surge upon initial repeated administration, a concern that occurs with currently approved luteinizing hormone-releasing hormone agonists used for ADT. There are no GnRH antagonists depot injectable formulations commercially approved for treatment beyond a one-month duration. A Phase 2 study to evaluate VERU-100 dosing is anticipated to begin in early in the first quarter of calendar year 2021, and the registration Phase 3 study in approximately 100 men is anticipated to start in the second half of calendar year 2021. We have been opportunistic and added a new late clinical stage breast cancer drug pipeline, which includes enobosarm and VERU-111. Enobosarm is a selective androgen receptor targeting agonist being developed for the treatment of androgen receptor positive, estrogen receptor positive, and HER2- metastatic breast cancer but prior to IV chemotherapy. Veru has exclusively in-licensed full worldwide rights to enobosarm from the University of Tennessee Research Foundation and the Ohio State Research Foundation. Enobosarm is an oral first-in-class new chemical entity, selective androgen receptor targeted agent. Our first indication for the clinical development of enobosarm will be for the treatment of ER+, HER2- metastatic breast cancer but prior to IV chemotherapy. Enobosarm by targeting the androgen receptor, which is present in up to 90% of advanced hormone receptor positive breast cancers, represents the first new class of targeting endocrine therapies in advanced breast cancer in decades. Enobosarm has extensive non-clinical and clinical experience, having been evaluated in over 25 separate clinical studies in more than 2,100 subjects, including five prior Phase 2 clinical studies in advanced breast cancer involving more than 250 patients. Enobosarm binds to the androgen receptor of breast cancer tissue to inhibit AR/ER+ cancer cell proliferation and tumor growth, as seen in Phase 2 human clinical studies and animal models. Unlike testosterone, enobosarm cannot be aromatized to estrogen, and enobosarm has additional selective clinical properties that could have potential benefits in women with hormone receptor positive metastatic cancer. More specifically, preclinical studies have shown that enobosarm builds and heals cortical and trabecular bone with a potential to treat hormone treatment-induced osteoporosis and skeletal-related cancer events. Enobosarm has also been shown to build muscle to reduce fat, improve physical function, and in clinical studies involving elderly subjects and patients with cancer cachexia, including breast cancer. Furthermore, the tissue selectivity of enobosarm also results in a favorable side effect profile, with no virilization, facial hair or acne, no increase in hematocrit, and no liver toxicity. The science supporting the efficacy of enobosarm and targeting the androgen receptor in hormone receptor positive advanced breast cancer will imminently be published in Nature Medicine by an independent group of breast cancer experts. In the two Phase 2 clinical studies evaluating enobosarm in advanced AR+ ER+/HER2- breast cancer, enobosarm is an oral endocrine therapy that demonstrated significant anti-tumor efficacy in heavily pretreated cohorts and was very well tolerated with a favorable side effect profile. The first Phase 2 clinical study, G200801, was a single-arm study evaluating a 9-milligram oral daily dose of enobosarm in a heavily pretreated endocrine-resistant cohort of 22 patients with AR+, ER+/HER2- advanced breast cancer. The patients participating in the study on average had three previous lines of endocrine therapy, and 68% had previous chemotherapy. The clinical benefit rate at six months was 35.3%, and the six-month Kaplan-Meier estimate for radiographic progression-free survival was 43.8%. Enobosarm was well tolerated without evidence of virilization, no increases in hematocrit, and no liver toxicity. The second Phase 2 clinical study, G200802, was a two-arm study evaluating 9 milligrams and 18 milligrams of enobosarm daily oral dosing in a 136 women cohort with ER+, HER2- advanced breast cancer. The patients in this study were also heavily pretreated, having failed an average of four endocrine treatments, and 88% had received prior chemotherapy. The primary investigator for the study was Dr. Beth Overmoyer, Founder and Director of the Inflammatory Breast Cancer Program at Dana-Farber Cancer Institute in Boston, Massachusetts, and Assistant Professor of Medicine at Harvard Medical School. The completed Phase 2 study results will be presented as a spotlight presentation at the San Antonio Breast Cancer Symposium tomorrow, December 10th, at 2:15 p.m. by Professor Carlo Palmieri, Professor of Translational Oncology and Medical Oncology — he's a medical oncologist at the University of Liverpool. The abstract is number 811, and it's entitled The Efficacy and Safety of enobosarm, a selective androgen receptor modulator to target the androgen receptor in women with advanced ER+ AR+ breast cancer, final results from an international Phase 2 randomized study. Overall, these metastatic breast cancer clinical studies with enobosarm in heavily pretreated subjects with hormone receptor positive breast cancer strongly establish the relevance of targeting the androgen receptor with a selective androgen receptor agonist, both with efficacy and safety and with additional other benefits. Owing to its high tissue selectivity, enobosarm increases muscle and physical function, decreases fat, improves bone strength, and lacks the androgenic adverse effects, including virilization, liver toxicity, and increases in hematocrit. By targeting the androgen receptor in hormone receptor positive metastatic breast cancer, enobosarm introduces a novel endocrine therapy to patients with breast cancer that have exhausted endocrine therapies targeting the estrogen receptor but prior to IV chemotherapy. The company met with the FDA in October of 2020 to discuss the enobosarm Clinical Breast Cancer Program. The FDA has agreed to the Phase 3 registration clinical trial study to evaluate the efficacy and safety of enobosarm versus inactive control, which will be either exemestane or tamoxifen at the physician's choice for the treatment of metastatic ER+/HER2 breast cancer in approximately 240 women that have failed a non-steroidal aromatase inhibitor, anastrozole or letrozole, fulvestrant, and a CDK4/6 inhibitor. The Phase 3 study will be called the ARTEST study, A-R-T-E-S-T study. The primary endpoint is radiographic progression-free survival. The pivotal Phase 3 open-label randomized active control study is anticipated to commence in the first half of calendar year 2021. It should be noted that enobosarm has strong intellectual patent protection with U.S. composition of matter patents that expire in 2029, with a potential for a five-year patent extension for an NCE to 2034, and with method of use patents that will expire as early as 2033. Enobosarm presents a large market opportunity as it represents the first new class of targeted endocrine therapy in hormone receptor positive advanced breast cancer in decades. Enobosarm targets the androgen receptor and ER+/HER2- metastatic breast cancer as a potential second-line and/or third-line oral daily dosing endocrine therapy option in breast cancer patients that have exhausted endocrine therapies targeting the estrogen receptor but prior to IV chemotherapy. The global annual market for an oral agent in an ER endocrine resistant setting is expected to be $6 billion. Next, we have made a decision to advance VERU-111 into a Phase 2b clinical study for the treatment of taxane-resistant metastatic triple-negative breast cancer. As I mentioned, metastatic triple-negative breast cancer is an aggressive form of breast cancer that's present in approximately 15% of all breast cancers. This form of breast cancer does not express the estrogen receptor, the progesterone receptor, or HER2, and is resistant to endocrine therapies. The first line of treatment usually includes IV taxane chemotherapy. Almost all women will eventually develop taxane resistance. Overexpression of P-glycoprotein pumps that cancer drug back out of the cancer cell to avoid cancer cell death. This is a common mechanism that results in taxane resistance and triple-negative breast cancer. VERU-111, on the other hand, is an oral cytoskeleton disruptor and cannot be pumped out of the cancer cell by the P-glycoprotein drug resistance protein. Preclinical studies in human triple-negative breast cancer grown in animal models demonstrate that VERU-111 significantly inhibits cancer proliferation, migration, metastasis, and invasion in the triple-negative breast cancer cells and tumors that have become resistant to paclitaxel, which is a taxane. In fact, a poster is being presented this morning at 9 a.m. Eastern at the San Antonio Breast Cancer Symposium virtual meeting on the preclinical efficacy data entitled, VERU-111 as an orally available tubulin inhibitor suppressing both taxane-sensitive and taxane-resistant triple-negative breast cancer, and this will be presented by Dr. Wei Li from the University of Tennessee Health Science Center. Using the safety information from the Phase 1b and Phase 2 VERU-111 prostate cancer clinical studies in a total of 80 men, we will meet with the FDA in the first half of calendar year 2021 to discuss the Phase 2 clinical trial design for possible accelerated approval for VERU-111 versus active control Trodelvy for patients with taxane-resistant triple-negative breast cancer, making the proposed trial a potential registration trial. The Phase 2b clinical study is planned to commence in the second half of calendar year 2021. As I mentioned, this would represent a second major clinical oncology indication for VERU-111. The number of new U.S. breast cancer cases in 2020 totaled 276,480, with triple-negative breast cancer accounting for 10% to 15% of approximately 41,472 patients. The majority of women will receive IV chemotherapy including taxanes, and almost all of these women will develop taxane resistance and will be candidates for VERU-111. The annual U.S. market for taxane-resistant metastatic triple-negative breast cancer is estimated to be over $1 billion. The company's other indications include VERU-111 for the treatment of SARS-CoV-2 in subjects at high risk for acute respiratory distress syndrome. VERU-111 is being evaluated in the Phase 2 clinical trial to assess the efficacy of VERU-111 in combating COVID-19 to prevent ARDS. VERU-111, by targeting microtubules, may have broad antiviral and strong anti-inflammatory effects, including the potential to treat cytokine release syndrome that's associated with high COVID-19 mortality rates. Veru is currently enrolling a double-blind randomized placebo-controlled Phase 2 clinical study, evaluating daily doses of VERU-111, 18 milligrams versus placebo for 21 days in 40 hospitalized patients who tested positive for the SARS-CoV-2 virus and are at high risk for ARDS. The primary endpoint is the proportion of patients that are alive and without respiratory failure at day 22. Secondary endpoints include the measured improvements in the WHO disease severity scale, which is an 8-point ordinal scale and captures COVID-19 disease symptoms and signs including hospitalization, progression of pulmonary symptoms, mechanical ventilation, as well as death. We expect enrollment to be completed this month. If the clinical results of the Phase 2 clinical trial are positive, the company intends to apply for grant funding from third-party agencies. As you know, COVID-19 is now worse than ever, and no effective treatments have been found. As for Zuclomiphene and the other drugs that are not in the oncology treatment pipeline, now that we have four late clinical stage studies for three drugs in four premium oncology treatment indications, the company has even further focused and reprioritized resources to maximize shareholder value. Zuclomiphene citrate is an oral non-steroidal receptor agonist being developed to treat hot flashes, a common side effect caused by ADT in men with advanced prostate cancer. The company's planning an end of Phase 2 meeting with the FDA to assess the next steps after that meeting. In light of the promising progress of the prostate cancer and breast cancer late clinical stage programs to achieve the company's strategic objectives, we do not plan to further develop tamsulosin DRS, VERU-722, and VERU-112 drug candidate assets. I will now turn the call over to Michele Greco, CFO, CAO to discuss the financial highlights.

Thank you, Dr. Steiner. As Dr. Steiner indicated, we had a record-breaking fourth quarter and a record-breaking year. Let's start with our fourth quarter results for fiscal year 2020. Overall net revenues were up 35% to $11.7 million from $8.7 million in the prior year fourth 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 of 87% to $8.7 million from $4.7 million in the prior year fourth quarter. We are pleased with the overall net revenue increase, despite the decline in FC2 unit sales to 5.3 million units from 9.8 million units in the prior year fourth quarter, due to a decline in low-margin public health sector unit sales. Net revenues for the public health sector were $2.2 million, compared to $3.8 million in the prior year fourth quarter. Overall, gross profit was $9.6 million or 81% of net revenue, compared to $5.8 million or 67% of net revenues in the prior year fourth quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our U.S. FC2 prescription business, partially offset by an increase in labor and equipment maintenance costs as we have ramped up production to meet demand. During the fourth quarter, we recorded a non-cash impairment charge of $14.1 million related to in-process research and development associated with the acquisition of Aspen Park Pharmaceuticals in fiscal 2017. The charge is primarily a result of the deferred development timeline and the decision to cease development work in tamsulosin DRS, VERU-722 for male infertility and VERU-112 for Gout, in response to management's strategic decision to prioritize the development of our premium oncology drug product candidates, which are highly differentiated unique new chemical entities or formulations, that protect on drugs under development addressing larger and potentially more profitable markets. The impairment charge results in a book value of zero for these in-process research and development assets. The remaining book value of other in-process research and development assets acquired in the ATP acquisition is $3.9 million as of September 30, 2020. There was no impairment charge reported in fiscal 2019. Operating expenses for the quarter increased by $13.5 million to $20.8 million, compared to the prior year fourth quarter of $7.3 million, primarily due to the non-cash impairment charge of $14.1 million. Excluding the effects of the impairment charge for the fourth quarter, we had operating expenses of $6.7 million, a reduction of $600,000 compared to the prior year period of $7.3 million. Operating loss for the quarter was $11.3 million, excluding the effect of the impairment charge adjusted operating income was $2.8 million for the quarter, compared to the operating loss in the prior year fourth quarter of $1.5 million. Non-operating expenses were $1.7 million, compared to $2 million in the prior year fourth quarter, and primarily consisted of interest expense and changes in the fair value of the derivative liability related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018. For the quarter, we recorded a tax benefit of $1.1 million compared to a tax benefit of $421,000 in the prior year fourth quarter. The effective tax rate for this quarter is 8.6% and 12.1% for the prior year quarter due to recording a valuation allowance against the net operating loss generated for the quarter in the U.S., which is most of the pre-tax loss for the period. The bottom-line results for the fourth quarter fiscal 2020 was a net loss of $11.8 million, or $0.17 per diluted common share compared to a net loss of $3.1 million, or $0.05 per diluted common share in the prior year fourth quarter. Turning to the results for the fiscal year ended September 30, 2020. Net revenues for fiscal year 2020 were up 34% to a record $42.6 million from $31.8 million in the prior year. Overall FC2 unit sales totaled 32.8 million compared to 37.9 million units in the prior year. Net revenue from the U.S. prescription business was up 93% to $27.1 million, from $14.1 million in the prior year period. Net revenue for the public health sector business was $13.4 million, compared to $16.8 million in the prior year. Net revenue for PREBOOST increased to $2 million from $884,000 in the prior year. Gross profit was up 42% to $30.8 million from $21.7 million in the prior year. Gross margin was 72% compared to 68% in the prior year. Gross profit and gross margin increased compared to the prior year despite the increases in cost of sales resulting from increased labor transportation and equipment maintenance costs, and increased cost incurred due to the temporary manufacturing shutdown in Malaysia at the end of the second quarter, as a result of the COVID-19 pandemic. FC2 unit sales for fiscal year 2020 includes 5.8 million units to South Africa under the tender award announced in August 2018, for a total of 120 million units. We started shipping these orders from South Africa during the third quarter of fiscal year 2019, and through the end of fiscal year 2020, we have shipped 10.1 million units. We will continue shipping South Africa orders during fiscal year 2021. Operating expenses increased to $45.5 million compared to the prior year of $28.1 million, primarily due to the non-cash impairment charge of $14.1 million. Excluding the effect of the impairment charge for the year, operating expenses were $31.4 million, an increase compared to the prior year $28.1 million, with $3.2 million due to increased research and development costs. During the third quarter, 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 a reduction in operating expenses. In November, we were notified the loan was forgiven in full by the U.S. Small Business Administration. Operating loss for the year was $14.7 million, excluding the effect of the impairment charge, operating loss was $647,000 compared to the operating loss in fiscal 2019 of $6.4 million. Non-operating expenses were $5.3 million, compared to $5.9 million in the prior year, which primarily consisted of interest expense and changes in the fair value of the derivative liability related to the synthetic royalty financing. For the year we recorded a tax benefit of $1.1 million compared to $304,000 in the prior year. The effective tax rates for this year were 5.4% compared to 2.5% in the prior year, and it's due to recording a valuation allowance against the net operating loss generated during those years in the U.S., which represents the majority of the pre-tax loss for the years. The company has net operating loss carry forward to U.S. federal tax purposes of $41.7 million, with $13.5 million expiring in years through 2038, and $28.2 million which can be carried forward indefinitely. Our UK subsidiary has a net operating loss carry forward of $61.3 million, which do not expire. The bottom-line results for fiscal year 2020 were a net loss of $19 million or $0.28 per diluted common share, compared to a net loss of $12 million or $0.19 per diluted common share in the prior year. Now looking at the balance sheet. As of September 30, 2020, our cash balance was $13.6 million and our accounts receivable balance was $5.2 million. Our net working capital was $12.3 million at September 30, 2020, compared to $2.8 million at September 30, 2019. Added to the balance sheet at the year-end was $15 million in cash from the recently announced sale of PREBOOST, with another $5 million in notes receivable to be collected over 18 months. Overall, we are delighted to see the continued increases in sales in the U.S. FC2 prescription business and look forward to increasing FC2 sales in both the prescription and global public health sector businesses. These revenue sources continue to be important sources of funds to invest in our promising pharmaceutical clinical development program, as we continue to transform our company into an oncology biopharmaceutical company with a focus on developing novel medicines for the management of prostate and breast cancers. Now I'll turn the call back to Dr. Steiner.

Thank you, Michele. We have enjoyed a record financial quarter and a record year which has allowed us to significantly advance our clinical oncology programs. In fact, we are now into our third year of growth in our FC2 prescription business. With the improving performance of our sexual health business, we believe that we'll be able to substantially invest in the continuous clinical development of our prostate and breast cancer drug product candidates, as well as to submit the NDA and, if approved, commercially launch TADFIN which would provide even more revenue, adding to the already growing revenues from FC2. We have created a very valuable sexual health business. We had a profitable Q4 fiscal year 2020, before the adjustment for impairment, record revenue fiscal year 2020 and sold PREBOOST for $20 million. Looking forward to fiscal year 2021, we expect our revenues to continue to be strong and growing towards yet another record year. Consequently, the company expects to have sufficient resources generated from our sexual health business and existing sources of cash to fund the clinical development of all of our currently planned registration clinical trials, without the need for new equity financing through the end of fiscal year 2022. With resources in place, we will continue to advance our late clinical programs to and through the highest value point, which is enrolling Phase 3 clinical studies and having Phase 3 positive clinical results. Registration oncology clinical studies are ideal, as they typically are single clinical studies with premium large global markets. As such, we anticipate a steady flow of important positive news for Veru over the next few months to one year. We have four registration studies planned to commence in calendar year 2021. For VERU-111 for the metastatic castration resistant prostate cancer, we will report open-label efficacy and safety clinical results for the Phase 2b clinical trial. We plan to submit the Phase 3 pivotal trial protocol and start the VERACITY Phase 3 registration clinical trial in calendar year Q1, 2021. For VERU-100, our novel peptide showing GnRH antagonist three-month depot formulation for advanced prostate cancer, we will initiate the Phase 2 clinical study in early calendar year 2021, and by the second half of the calendar year 2021 we will start a Phase 3 pivotal registration clinical study. For enobosarm, the AR targeting agent without the unwanted virilization adverse side effects and our newest drug asset to treat ER+/HER2- metastatic breast cancer, we plan to commence the ARTEST Phase 3 clinical registration study in the first half of calendar year 2021. For VERU-111, its second indication in triple-negative breast cancer, we will meet with the FDA in the first half of calendar year 2021 to discuss a Phase 2b trial design for possible accelerated approval for VERU-111 versus Trodelvy for patients with taxane resistant triple-negative breast cancer. The Phase 2b clinical study is planned to commence in the second half of calendar year 2021. Additional milestones will include, we plan to complete the Phase 2 clinical program for COVID-19 in subjects at high risk for ARDS, submit the NDA for TADFIN, and we'll continue to explore partnerships to license and/or distribute and sell our drug products. We plan to continue to generate robust growing revenues for the sexual health business, which, as a standalone business is very valuable. Coming off a record year of $42.6 million in revenue with gross margins of 72%, and expecting another record year in fiscal year 2021, we could have options to monetize the business as we did the PREBOOST business. We have successfully transformed our company into a late clinical stage oncology biopharmaceutical company, supported by a growing revenue cash-generating sexual health business. With that, I’ll now open the call for questions. Operator?

[Operator Instructions] The first question today comes from Brandon Folkes of Cantor Fitzgerald. Please go ahead.

Hi, thanks for taking my questions and congratulations on all the progress and the deal. Sorry if I missed this, but can you just maybe elaborate a little bit on the economics of the premium oncology deal? Any color on the upfront royalty milestones? And then, just any color on the size of the trial you're thinking for that product. And then maybe just one sort of clarification question, does cash runway through the end of 2022 -- does that just contemplate FC2 sales and the cash flow generation from that or do you contemplate any sale of assets in net cash run rate? Thank you.

Okay, good. So the first part has to do with enobosarm and whether we disclosed any of the deal terms. The answer is, it's undisclosed, but it was - enobosarm is a late-stage asset from the University of Tennessee and Ohio State. So, what I can tell you is that it's a very favorable deal for the company that includes reasonable milestones and a low-single-digit royalty on net sales. It's a very good deal for our company, but we haven't disclosed the rest of it. It's a good deal for the company, given the size of the market and where we're going. I think everybody's going to be very, very happy once we get past this next trial, which leads to your next question. We believe that the size of the enobosarm ER+/HER2- metastatic trial in endocrine resistant women will be about 240 patients. 240 patients is the number, and it's a one to one randomization. So it's not a huge study. Again, the single open-label study should be sufficient for the successful approval, so that's why we're excited about it. Interestingly, with the other trials, to comment on the other 25 studies, all the studies that you would expect for Phase 1, like the drug-drug interaction studies, the QT studies, renal impairment, liver impairment studies, all that's been done. There's no QT issues or side effects. I mean, it's a really nice clean profile on this drug. For a cancer product having that kind of clean profile, this could be very, very attractive as another endocrine therapy for women that want to avoid the toxic IV chemo. As it relates to cash runway, the cash runway includes cash on hand, and we just sold PREBOOST for $20 million, which gives us $15 million. We’ve already closed it. We have $15 million in cash added to our balance sheet, plus we're going to get another $5 million in notes receivable to be collected over 18 months. We don't have to hit anything to get that money over the next 18 months, of which we'll get $2.5 million within a year and another $2.5 million six months after that. So within the next 18 months, we get a full $20 million. When you put those numbers together plus the growing FC2 business, yes, the answer to your question is we feel comfortable running all of our clinical developments including the potential for registration trials through the end of fiscal year 2022. I wish we could guide beyond that, but that's where the auditors told us we can stop. But yes, we’re going to still have money coming from the business, and we’re still — clinical trials are expensive, but if you think about it, we have four — let’s say all four registration trials are going on. The enobosarm one I just told you is 240 patients, the VERU-100 is 100 patients, the VERU-111 is around 200 patients, and then triple negative breast cancer probably about 100 to 150 patients. If you add those together, it is still going to be less than 500 patients before trials, around 500 to 600 patients. You're not getting them all at once because these trials will be done over 18 months to two years. It’s very manageable, particularly with the revenues that we have coming in and cash on hand. I think that answers your question.

Great. Thank you very much.

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

Hi, thank you for taking my questions and congratulations for in-licensing of the new candidate. My first question is, could you give us some more color on the existing population of the ER ER+/HER2- breast cancer patients in the U.S. and the new occurrences every year? And my second question is related to the sales of FC2, could you provide us with some breakdown in terms of private prescription sales versus public sales? Thank you.

Yes, I'm going to have Michele answer the second question, which is FC2 breakdown, RX versus public. You want public global or public U.S. or both?

Both. Thank you.

Both, okay. While Michele is getting that, I'll answer your first question. We have not said much about the market size except to say that the market size is very similar to the CDK4/6 inhibitors, because CDK4/6 inhibitors are an endocrine therapy that's done in combination with the endocrine therapies. I will tell you that 85% of women, so if you go back and look at the number of women with breast cancer that I quoted in my presentation, 85% of those women are going to have ER+ disease. So, automatically that's our patient population. 15% will have triple negative breast cancer, which will be ER negative. That’s 276,480 new cases a year, which 85% of those cases will be ER+. I would say, we're going to continue to do the market research, but it ends up by the time you take in the metastatic cases, you end up at about, by our estimate, 30,000 to 40,000 cases a year. The good news is they’re not dying, with endocrine therapy you're continuing to treat them. They're looking for the next thing, and the next thing they're looking for is usually IV chemo. We're trying to take a step before that. We will continue to give you more granularity on the market size, except to tell you that if we price like a CDK4/6 inhibitor, which is a surrogate for that market, that's a $6 billion worldwide market right now. We're going after those patients that fail a non-steroidal lung patient inhibitor, which is usually what they get first and then fulvestrant for the second line. So we could be either second-line or third-line. So that's still a big piece of the pie. Who would not want to take another endocrine therapy that has some potential benefits besides treating the tumor and not be virilizing to avoid IV chemo? I think it's going to be a very attractive area. Michele, would you like to answer the question on the FC2?

Sure. In the U.S. prescription channel, as we've indicated, revenues are $27.1 million. In the public sector, the U.S. we had about $1.2 million, the rest of the world we had about $12.2 million for a total of $13.4 million. As we saw, we had sales of around $2 million for PREBOOST for the year. So that's our $42.6 million.

Got it. Thank you.

Okay.

[Operator Instructions]. The next question comes from Leland Gershell of Oppenheimer. Please go ahead.

Hey, good morning, Mitch. Thanks for taking my question. I wanted to ask, as the company continues to refine its profile and with the sale of PREBOOST and also as recognized by the impairment charge shifting strategy away from some other assets. I want to ask about any thoughts of perhaps monetizing the FC2 business through a similar type transaction and the interest you have had there. And then I have follow-up. Thanks.

Yes. Good question. As I mentioned a couple of times during the prepared comments, the PREBOOST model is a great model. We were able to monetize PREBOOST and see those resources for what's important to us, which is as a company strategy: to be in clinical development of premium drugs, big markets with a single study. You can access those big markets globally. That’s what we need to do. The smaller products don't make sense to put the resources behind because the oncology products dwarf it in terms of the potential. Putting our bet and our confidence in the two prostate programs and two breast cancer programs makes the most sense. With that said, we have also been able to do this. The model works; we've been able to do that with primarily the money we're generating on our own or like we just monetized PREBOOST, so it makes perfect sense that here we are now with $42.6 million in revenue. The gross profit is about 72%. This is a very valuable business. I think our market cap is reflecting just the base business. Forget about the enterprise value of the drugs. There's so much potential here. To unlock that potential, we have to take a serious look at how to take the base business and create enough cash and resources so that we would be completely independent as we move forward, financially, as we move forward with going into these markets. I mean, Immunogenic just sold their product Trodelvy. They have accelerated approval with 108 patients. They are finally just confirming their Phase 3, one single product in triple negative breast cancer is $21 billion. There are many examples; I think it's a new set point now for oncology products. You're not seeing a $1 billion, $2 billion deals anymore, you're seeing $14 billion, $20 billion deals. So the neighborhood just got expensive for us to have four drugs that are going for that neighborhood; that kind of real estate in that neighborhood is a big deal. It makes sense to monetize the FC2 business in a way that allows us to preserve holding on to as much as possible the drugs and do that. Another way to say it is, we're always going to consider maximizing shareholder value and by unlocking the potential of FC2, the standalone pharmaceutical company versus pure pharma play, biotech play, because that's what we are. We've got the new chemical entities and we have the data and the trials to show that. It's an exciting time for us and we have to seriously consider how do we uncouple and unlock the value of the assets that we have.

All right, great. And then another question just on TADFIN with that product on track to come to market in about a year's time. I wanted to ask about just how the company is going to approach, given that it's going to be going to telemedicine. And it's probably going to be seen as kind of a more convenient and better alternative to what are two generic drugs are taken together quite frequently. How is the company's new approach making that product visible and growing awareness? What will that look like? And how should we think about expenses?

Yes. Let me tell you how I'm thinking about that. It's a great question, okay. I think what we were able to tap into, and we've been successful with FC2 and with PREBOOST, is we tapped into the telemedicine market. The telemedicine market is growing exponentially now, particularly because of COVID-19. What would have taken 10 years is now happening in months. What it has done is a whole world has moved away from I want to go to CVS and take two generic drugs with a copay, two, if I can punch a number in my phone, it can show up by Amazon the next day discretely, then that would be wonderful. A lot of companies are taking basically generic erectile dysfunction products and selling them effectively. For some groups, they are seeing $200 million to $300 million in revenue. It's unbelievable for what you and I would have called a generic product. There is a completely untapped group of men, and in the case of TADFIN, if they have this available through telemarketing and it can be sent to their home discreetly, and we price it appropriately, it's a whole new universe. If I told you I went with FC2 when we did marketing and selling with 12 salespeople, and they ran around visiting OB-GYN doctors, we got 400 prescriptions a month for 12 people. In telemedicine, I don't know, we just reported 348,000 prescriptions this past year and the year before that 158,000 prescriptions. You don't realize the power of the internet. By the way, we don't spend anything, almost nothing on marketing and selling as a company. And so that money can go into drug development. Same thing with TADFIN. We don't have an appetite to set up a marketing and selling sales force for TADFIN. We think the advantage of TADFIN is going to be the discreteness, convenience, and being able to get it into telemedicine without using our marketing and selling dollars. I can tell you, we're an active partner to discussions around TADFIN, both internationally and nationally, and it'll be great for us. We've got to keep your eye on the ball, which is the $6 billion market, $3 billion market with our prostate cancer and breast cancer products, and we have to get those trials filled and get it done on time and hold bid. If TADFIN can add a little extra cash to the pile of cash that we're accumulating to keep this moving along, I think it's attractive. We also heard from the FDA that they are going to waive the fee; the PDUFA fee, I believe is the technical term for it. The NDA, because we're a small company. We're not going to spend that filing fee for this product. So it's upside for us.

Great. Thanks so much for the color, Mitch.

Thank you.

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

Congratulations on the licensing and thanks for taking my questions. For enobosarm Phase 3 trial, are you planning to go forward with the 9 milligram dose or the 18 milligram dose? What can you share with regards to the safety and efficacy profile for both those doses? And also, what needs to be done before you can start the Phase 3 trial? Do you have enough drug supply? And how easy or difficult is it to manufacture this drug?

Good. Thank you for both the questions. This refers to the new acquisition enobosarm. The Phase 2 study has 9 milligram and 18 milligram doses. Today the presentation will happen at 9, no tomorrow. Tomorrow is the presentation on that part of it, so stay tuned. I can't give you the exact details. But I can provide some general comments. General comments after being in 25 trials, this drug is very well tolerated. Naïve cancer drugs just as a quality of life drug, it’s amazingly well tolerated. We're going to announce the safety there, and things you might worry about with an agent of this sort would be increases in hematocrit, liver toxicity, and virilization in women, and we just don't see that. We will share the exact safety profile in the future right after that presentation. The presentation, that spotlight presentation at the San Antonio will have that information, and it will put it out subsequently so everybody can access it if they are not getting into the program. With that said, it's very well tolerated. Now with that said, the 9 milligram and 18 milligram doses, you’ll see the efficacy. I don't want to share much more than that, except to say that like the first Phase 2, that was done in 22 patients, it shows good activity, and you're going to see that. We are going to go with the 9 milligram and you’ll see the reason why after the presentation, and that's where we met with the FDA. The FDA agreed to the 9 milligram. The drug definitely has activity in a heavily pretreated patient population. When I say heavily pretreated, I mean patients who have had multiple lines of endocrine therapy and also chemotherapy. These patients will not be in our Phase 3 trial, in which they would not have had chemotherapy and they'll be even more likely to respond to enobosarm. As it relates to what we are waiting for, we had to meet with the FDA, we got that out of the way. The next respective thing, you're absolutely right, we do have to have the marketed drug product. We're doing that now. It's not hard to make, but the process of bridging from the new marketed forum into the form that was used in the other 25 trials. It’s not complicated but it just takes time. With all that's happening as we speak right now, we are on target to start in the first half; hopefully by early summer, we'll get started with the actual Phase 3 part of it. It will take a quarter, quarter and a half to do the GMP stuff.

Okay, thank you so much.

Thank you.

The next question comes from Peter McMullin of Peter McMullin Consulting. Please go ahead.

Congratulations, Mitch.

Thank you, Peter.

When you talk about maximizing assets and if you were to sell off FC2, for example, how would you propose to maximize the tax losses which are considerable going forward?

Yes, that's a great question. I'm going to let Michele answer that question. Michele, would you like to take that one on?

Sure. Peter, we would be selling the company in the UK, which holds the $63 million in NOL. We would take that into consideration when we look at the value that we're looking for if we were to sell the FC2 business.

Good thought. And what about the U.S. side?

The U.S. side, if we were to sell the FC2 business, the NOLs will be retained by Veru.

Okay. Thank you.

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

Thank you, Operator. Again, I appreciate everybody joining us on today's call and I look forward to updating all of you on our progress in our next investor call. Have a Merry Christmas, Happy New Year, and hopefully 2021 will look a lot different than 2020. Thank you.

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