Veru Inc. Q4 FY2021 Earnings Call

Good morning, ladies and gentlemen. Welcome to Veru Incorporated's Investor Conference Call. All participants will be in a listen-only mode. Please note that this event is being recorded. I would now like to turn the call over to Mr. Sam Fisch, Veru Incorporated's Executive Director of Investor Relations and Corporate Communications. Please go ahead.

Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include but are not necessarily limited to, statements of the company's plans, objectives, expectations or intentions regarding its business operations, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings, as well as in our press releases from time to time. I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's Chairman, CEO and President.

Good morning. With me on this morning's call are Michele Greco, the CFO and CAO; Dr. Gary Barnette, the Chief Scientific Officer; Michael Purvis, Executive Vice President, General Counsel & Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Fiscal year 2021 was an exciting and a very productive year for Veru. We have successfully transformed our company into a late stage oncology biopharmaceutical company. We are developing novel medicines for the management of two of the most prevalent cancers, breast cancer and prostate cancer. One of our anti-cancer drugs, sabizabulin has dual anti-viral and anti-inflammatory effects and it is also being developed for the potential treatment of hospitalized COVID-19 patients at high risk with acute respiratory distress syndrome, which remains a global dire unmet medical need. The company has a commercial sexual health division, which includes a drug candidate ENTADFI, formerly referred to as TADFYN, a new treatment for benign prostatic hyperplasia and a commercial product, the FC2 Female Condom, an FDA approved product for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections. Revenue from the sexual health division is being used to largely fund the clinical development for our late-stage drug candidate assets, which aim to address multi-billion dollar premium market opportunities. This morning, we will discuss Veru's business strategy, the clinical development of our drug pipeline and the commercialization of our products. We will also provide financial highlights for the fourth fiscal quarter and record fiscal year 2021. As you're aware, we're still in the middle of the COVID-19 pandemic with no end in sight. Countries in Europe and other continents are now back in lockdown. The Centers for Disease Control and Prevention have recently reported that in the U.S., COVID-19 has killed 377,883 people in 2020 and 401,117 people in 2021, and the year is not yet over. A new potentially more troubling COVID-19 variant called Omicron has emerged in South Africa and a case has just been confirmed in California. This new virus variant appears to have mutations that make it more contagious and may infect people that have been previously vaccinated, rendering the current COVID-19 vaccines and antibody drugs less effective. The mechanism of the drug action of sabizabulin is that it disrupts the microtubule intracellular transport of the coronavirus, a process that will still be required by new variants of COVID-19, including Omicron to cause infection. While there have been recent developments evaluating the Merck drug, molnupiravir and the Pfizer drug, paxlovid for the treatment of unhospitalized patients with mild to moderate COVID-19 who are at relatively low risk of dying, sabizabulin in contrast is being developed for hospitalized patients who have a high risk of death. In our positive Phase 2 clinical study in hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome, sabizabulin treatment resulted in an 82% relative reduction in deaths compared to placebo. If our Phase 2 clinical study results are replicated to any significant degree in our global Phase 3 clinical study, we believe sabizabulin will fulfill a significant unmet medical need for hospitalized patients. In May of 2021, we initiated the Phase 3 clinical study which is a double-blind multicenter, multinational randomized 2:1 placebo-controlled study, evaluating daily oral doses of 9 milligrams sabizabulin for up to 21 days versus placebo standard of care in 300 hospitalized COVID-19 patients who are high risk for acute respiratory distress syndrome. 200 subjects will be treated with sabizabulin and 100 subjects will receive placebo. The primary efficacy endpoint will be the proportion of patients who die on study up to day 60. Secondary endpoints will include the proportion of patients without respiratory failure, days in the ICU, WHO ordinal scale for Clinical Improvement change from baseline, days on mechanical ventilation, days in hospital, and viral load. The study is being conducted in the U.S., Brazil, Argentina, Mexico, Colombia, and Bulgaria. The company has sufficient clinical drug supply on hand to complete this Phase 3 clinical study. To help fund the commercial drug supply for the needs of the U.S. population, assuming confirmatory positive clinical results and FDA approval, we are seeking funding from BARDA and other agencies. The Company anticipates having results for the Phase 3 clinical trial in the first half of the calendar year 2022. As for our oncology drug portfolio, we initiated our expansive metastatic breast cancer program this year, with two of our drug candidates, Enobosarm and Sabizabulin. We are developing treatments against both hormone receptor positive and triple-negative metastatic breast cancers. Enobosarm is an oral selective androgen receptor targeted agonist which has shown efficacy in Phase 2 studies in a heavily pre-treated hormone receptor positive metastatic breast cancer patient population, with an excellent safety profile, without causing unwanted masculinizing adverse side effects. Enobosarm represents the first new and novel endocrine therapeutic approach to breast cancer in decades. Our second drug candidate, sabizabulin is an oral cytoskeleton disruptor that targets unique binding sites and crosslinks microtubules, a well-validated cancer target, resulting in promising efficacy and a favorable safety profile. Furthermore, chronic oral daily administration of sabizabulin is feasible. Our clinical development strategy allows us to potentially become an important treatment option for a variety of large market opportunities in both hormone receptor positive and triple-negative metastatic breast cancer. In the third line treatment setting for hormone receptor positive metastatic breast cancer, we are actively enrolling a global Phase 3 ARTEST registration clinical study to evaluate enobosarm monotherapy with a third-line treatment of Androgen Receptor Positive, Estrogen Receptor Positive and Human Epidermal Growth Factor 2 Negative metastatic breast cancer. Enobosarm targets the androgen receptor, which has tumor suppressor activity in AR+, ER+, HER2- metastatic breast cancer, without causing unwanted masculinizing side effects. Enobosarm has extensive non-clinical and clinical experience having been evaluated in 25 separate clinical studies in over 2000 patients. This means we have a thorough understanding of the favorable safety profile with Enobosarm. As for efficacy, there were two Phase 2 clinical studies conducted in women with AR+, ER+, HER2- metastatic breast cancer where Enobosarm demonstrated significant antitumor activity in heavily pretreated cohorts that experienced tumor progression after receiving estrogen-blocking agents, chemotherapy, and/or a CDK4/6 inhibitor. Again, in this population, Enobosarm was well tolerated with a favorable safety profile. In October of this year, we initiated the Phase 3 multicenter international open-label, randomized 1:1 ARTEST registration clinical trial to evaluate the efficacy and safety of enobosarm monotherapy versus an active comparator, either exemestane +/- everolimus or a SERM for the treatment of AR+,ER+,HER2- metastatic breast cancer in approximately 210 patients with greater than or equal to 40% AR expression in breast cancer tissue after receiving a nonsteroidal aromatase inhibitor, fulvestrant, and a CDK4/6 inhibitor. In patients with less than 40% AR expression, we have a planned Phase 2b study to evaluate sabizabulin monotherapy for the third-line treatment of ER+, HER2- metastatic breast cancer. This Phase 2b clinical study will be an open-label multicenter and randomized 1:1 study evaluating the efficacy and safety of sabizabulin 32 milligrams monotherapy versus an active comparator, either exemestane +/- everolimus or SERM, for the treatment of ER+, HER2- metastatic breast cancer in approximately 200 patients with less than 40% AR expression in breast cancer tissue after having received a nonsteroidal aromatase inhibitor and CDK4/6 inhibitor. We just received the safe to proceed letter from the FDA this month and the Phase 2b study is expected to commence in calendar Q1 2022. We're also moving Enobosarm earlier in the treatment sequence to the second-line treatment of AR+, ER+, HER2- metastatic breast cancer by targeting patients with AR breast cancer expression greater than or equal to 40% in the Phase 3 ENABLAR-2 clinical study. CDK4/6 inhibitor and estrogen-blocking agent combination has become the first-line therapy for patients with ER+, HER2- advanced breast cancer. Unfortunately, almost all patients will develop drug resistance and eventually experience breast cancer progression. Based on the positive Phase 2 clinical data and the preclinical data supporting the use of Enobosarm in combination with the CDK4/6 inhibitor in patients who are CDK4/6 inhibitor resistant along with an estrogen-blocking agent, we plan to conduct a Phase 3 multicenter open-label randomized 1:1 active control registration clinical study named ENABLAR to evaluate the efficacy and safety for Enobosarm plus abemaciclib combination therapy versus an alternative estrogen-blocking agent in subjects with AR+ ER+ HER2- metastatic breast cancer who failed first-line therapy with palbociclib, a CDK4/6 inhibitor, and an estrogen-blocking agent, and who have greater than or equal to 40% AR expression in breast cancer tissue. We plan to enroll approximately 186 subjects in this Phase 3 clinical study, which is expected to commence in calendar Q1 2022. There will also be a scientific presentation on Enobosarm's anti-tumor activity in estrogen-blocking agent CDK4/6 inhibitor resistant human metastatic breast cancer models at the upcoming San Antonio Breast Cancer Symposium, which will be held December 7 through 10, 2021, presented by Dr. Elgene Lim of the Garvan Institute of Medical Research and the Kinghorn Cancer Centre and St Vincent Hospital in Sydney, Australia. Although the presentation is under embargo, we cannot share the exciting scientific data until next week. What I can say is that these scientific results clearly demonstrate the anti-tumor synergy of the combination of Enobosarm and a CDK4/6 inhibitor to treat patients who develop tumor progression after receiving estrogen-blocking agents and a CDK4/6 inhibitor. Finally, for AR+ metastatic triple-negative breast cancer patients, we will be conducting a Phase 2 single-arm study evaluating Enobosarm plus Sabizabulin combination therapy. As previously mentioned, Sabizabulin is an oral first-in-class new chemical entity that targets and inhibits microtubules to disrupt the cytoskeleton. Overexpression of P-glycoprotein is a common mechanism that leads to taxane and other chemotherapy resistance in metastatic triple-negative breast cancer. As Sabizabulin is not a substrate for P-glycoprotein, Sabizabulin significantly inhibited cancer proliferation, migration, metastases, and invasion of triple-negative breast cancer that became resistant to paclitaxel in preclinical models. Furthermore, in a Phase 2 study conducted by Merck, 18 heavily pretreated women with AR+ metastatic triple-negative breast cancer treated by Enobosarm plus pembrolizumab combination demonstrated promising evidence of efficacy, including a 25% clinical benefit rate, which is the complete response added to the partial response and stable disease at 16 weeks and objective tumor responses when they showed one complete response and one partial response. Thus, the combination of the two oral agents, Sabizabulin and Enobosarm may provide a new treatment option for women who have AR+ metastatic triple-negative breast cancer. We intend to commence a single-arm Sabizabulin plus Enobosarm combination therapy Phase 2 clinical study in approximately 111 women with AR+ metastatic triple-negative breast cancer who have tumor progression after receiving at least two systemic chemotherapies in calendar Q1 2022. We are partnered with Roche Ventana, a major global diagnostics company to develop a companion diagnostic androgen receptor test. In the Phase 2 801 study, we have determined that the presence and the amount of androgen receptor expression in breast cancer tissue are important for Enobosarm's targeted anti-tumor activity. In fact, we have identified that patients who have greater than or equal to 40% androgen receptor nuclei staining by immunohistochemistry, which is a measure of AR expression in their breast cancer tissue are the patients that are most likely to respond to Enobosarm. Based on this observation, the FDA has recommended that we develop the companion diagnostic test to determine the patient's AR expression status. Consequently, we are partnering with Roche Ventana Diagnostics, a world leader in oncology companion diagnostic tests, who will develop and if approved commercialize this companion diagnostic AR test. The companion diagnostic test will be developed in parallel with the Phase 3 ARTEST clinical study. In fiscal year 2022, we will have an expansive breast cancer program and plan to conduct four late-stage clinical studies for the treatment of different large and important populations with significant unmet medical need in metastatic breast cancer. Also in fiscal year 2021, our prostate cancer program has made great progress. We have late clinical-stage studies addressing three separate indications. Our first indication is evaluating Sabizabulin for the third-line treatment of metastatic prostate cancer in the Phase 3 Veracity study. Over the past eight years, several novel androgen receptor-targeting agents have been approved for castration-resistant prostate cancer, including abiraterone, enzalutamide, and apalutamide. Unfortunately, most men with metastatic castration-resistant prostate cancer will develop tumor progression while receiving an androgen receptor-targeted agent. 60% to 70% of patients progress within 12 to 18 months, and 30% to 40% of men have no benefit at all. New effective and well-tolerated treatment alternatives that do not target the androgen receptor and have an easy mode of administration are greatly needed. Sabizabulin is a member of a novel class of drugs that disrupt the cytoskeleton by targeting unique binding sites on microtubules, which results in an improved safety profile. In preclinical models, there was no evidence of significant liver toxicity, neurotoxicity, or neutropenia with Sabizabulin treatment. This more tolerable safety profile was also confirmed in the first-in-man Phase 1b/2 study in prostate cancer patients. At a recent presentation by the European Society for Medical Oncology Congress that was held September 16 to 21, 2021, we provided an updated analysis of 80 patients enrolled in both the Phase 1b and Phase 2 portions of the study. These subjects were heavily pretreated and had tumor progression while receiving at least one novel androgen receptor-targeted agent. Approximately 40% of the subjects had tumor progression after receiving at least two androgen receptor-targeted agents. In terms of safety, 54 men were treated at the recommended Phase 2 dose of Sabizabulin 63 milligrams oral daily dosing in the Phase 1b/2 combined study. Sabizabulin was well tolerated with no clinically relevant neutropenia or neurotoxicity and the most common adverse events were gastrointestinal related, including diarrhea, nausea, and fatigue, which were predominantly low Grade 1 and 2. In terms of efficacy among patients from both the Phase 1b and 2 studies who received 63 milligrams Sabizabulin daily and had measurable metastatic disease at baseline, the median radiographic progression-free survival is estimated to be 7.4 months, with a range of 3.2 to over 35 months, as there are still five patients on the study, two of whom have been on Sabizabulin without tumor progression for almost three years. In the Phase 1b/2 study population with measurable disease at baseline per resist 1.1, the overall response rate was 21%. Based on this Phase 1b/2 study, Sabizabulin demonstrated a safety profile similar to what has been reported in the literature for the novel androgen receptor-targeted agents and shows promising evidence of efficacy, comparable to or better than IV chemotherapy. These updated findings from our Phase 1b/2 clinical study continue to support the potential role of Sabizabulin in addressing significant unmet medical needs. In June, the company initiated an open-label randomized 2:1 multicenter Phase 3 Veracity clinical study evaluating Sabizabulin versus an alternative androgen receptor-targeted agent for the treatment of chemotherapy-naïve men with metastatic castration-resistant prostate cancer who had tumor progression after receiving at least one androgen receptor-targeted agent. The primary endpoint is radiographic progression-free survival, and enrollment for the Phase 3 Veracity clinical study is on track; we expect to enroll approximately 245 patients from 45 clinical centers in the U.S. A second clinical study is evaluating VERU-100, a GnRH Antagonist 3-Month Depot formulation in a Phase 2 dose-finding clinical study for the treatment of hormone-sensitive advanced prostate cancer. Androgen Deprivation Therapy remains the mainstay primary therapy for advanced prostate cancer, but current androgen deprivation therapy products have several important clinical shortfalls. LUPRON, ELIGARD, and ZOLADEX are LHRH agonists whose initial administration leads to a testosterone surge that lasts up to 21 days. FIRMAGON, a GnRH antagonist, is a large volume subcutaneous injection formulation designed for only a single month release. Relugolix is an oral GnRH antagonist that has potential patient compliance concerns. In contrast, VERU-100 has a target product profile that addresses a number of these important clinical shortfalls of the currently commercial androgen deprivation therapy products. VERU-100 is a long-acting GnRH antagonist designed to be administered as a small volume, subcutaneous three-month depot injection. VERU-100 drug products are expected to immediately suppress testosterone with no testosterone surge. The long-acting injection of VERU-100 would ensure patient compliance while on treatment. Furthermore, as a class, GnRH antagonists have been shown to have fewer cardiovascular adverse events than LHRH agonists. In June, the company initiated the Phase 2 dose-finding clinical study of VERU-100 androgen deprivation therapy in 35 men with hormone-sensitive advanced prostate cancer. Although the study is ongoing, the preliminary clinical data are promising and support the expected target product profile. The Phase 3 registration clinical study design has already been agreed upon with the FDA. It will be a single-arm study enrolling approximately 100 men, with maintenance of castrate blood concentration of testosterone as the primary endpoint. After the Phase 2 dose-finding study is completed, we will initiate the Phase 3 clinical study, which is anticipated to begin in the calendar first half of 2022. In our third late-stage clinical study, we are advancing Zuclomiphene for the treatment of hot flashes caused by androgen deprivation therapy. Upon further evaluation of the clinical data from a positive Phase 2 Zuclomiphene clinical study, we decided that because of Zuclomiphene's excellent safety profile, we should optimize its efficacy to treat hot flashes by further increasing the dose in a planned Phase 2b clinical study. In summary, we will have three late-stage clinical studies for the management of metastatic prostate cancer in fiscal year 2022. Veru has a base commercial sexual health division that includes a commercial product, the FC2, an FDA approved product with dual protection against unplanned pregnancy and the transmission of sexually transmitted infections, and the drug candidate ENTADFI, which is Tadalafil 5 milligrams and Finasteride 5 milligrams capsule, a new treatment for Benign Prostatic Hyperplasia with an FDA PDUFA date this month. We have built the infrastructure to allow for broad access to FC2 across the United States. As a result, FC2 is now available through multiple sales channels. In particular, we have partnered with fast-growing, highly reputable telemedicine platform companies to bring the FC2 product to patients in a cost-effective and highly convenient manner. Though Ms. Greco will provide the full financial results in Veru's commercial segment, which is FC2 and drug commercialization costs, I'm happy to report that we've achieved another record fiscal year. In fact, our revenue increased 44% to $61.3 million, which significantly exceeded the revenue of $42.6 million we had in fiscal year 2020. Our strategy is to continue to drive robust FC2 sales not only by seeking additional telemedicine and pharmacy services partners, but also by creating our own dedicated direct-to-patient telemedicine pharmacy services platform, both to brand our company and to further drive sales growth. We plan to also brand our new name UREV for our women's health business. We have also developed ENTADFI, a novel treatment for Benign Prostatic Hyperplasia; the co-administration of Tadalafil and Finasteride has shown to be more effective in treating Benign Prostatic Hyperplasia than Finasteride alone, without causing sexual adverse side effects. The PDUFA date is in December of 2021. If approved, ENTADFI is expected to be marketed and distributed by our own direct-to-patient telemedicine and telepharmacy platform. We have also partnered with GoodRx, a U.S.-based digital resource for healthcare to reach their almost 20 million monthly visitors, which include both consumers and healthcare providers and offers a unique cash price to ensure that our treatment is more affordable and accessible. We plan to augment our marketing and sales efforts by seeking partners in the U.S. and ex-U.S. We expect to begin commercialization if approved in early calendar year 2022. I will now turn the call over to Michele Greco, CFO, and CAO to discuss the financial highlights.

Thank you, Dr. Steiner. As Dr. Steiner indicated, we had another great year. Last December, the company sold PREBOOST for $20 million, resulting in a gain on sale of $18.4 million. In February, the company completed an equity raise, which resulted in $108 million in net proceeds after deducting underwriting commissions and costs. For the fiscal year, the company achieved record level net revenues of $51.3 million and record level gross profit of $47.9 million. Let's start with highlights from our fourth quarter results for fiscal year 2021. Overall, net revenues were up 33% to $15.6 million from $11.7 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 up 55% to $13.6 million from $8.7 million in the prior year fourth quarter. Gross profit was $12.3 million or 79% of net revenues compared to $9.6 million or 81% of net revenues in the prior year fourth quarter. The increase in gross profit is driven primarily by increased sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased by $7.4 million to $14.2 million compared to the prior year fourth quarter of $6.7 million. Research and development costs were $8.3 million compared to $3.3 million in the prior year quarter due to the commencement of several new phases in our clinical trials. During the fourth quarter of fiscal 2020, 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. Operating loss for the quarter was $1.9 million compared to the prior period of $11.3 million, which included a non-cash impairment charge of $14.1 million. Non-operating expenses were $2.8 million compared to $1.7 million in the prior year fourth quarter and primarily consisted of interest expense and a change in the fair value of the derivative liabilities related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018. For the quarter, we recorded a tax benefit of $356,000 compared to a tax benefit of $1.1 million in the prior year fourth quarter. The effective tax rate for this quarter is 7.7% and 8.6% 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 pretax loss for the period. The bottom line results for the fourth quarter of fiscal 2021 was a net loss of $4.3 million or $0.05 per diluted common share compared to a net loss of $11.8 million or $0.17 per diluted common share in the prior year fourth quarter. Now turning to the results for the fiscal year ended September 30, 2021. Total net revenues for fiscal year 2021 were up 44% to a record high of $61.3 million from $42.6 million in the prior year. The company reported growth in FC2 sales in the U.S. prescription business and in the global public health sector business. Net revenues from the U.S. prescription business were up 71% to $46.5 million from $27.1 million in the prior year. Net revenue for the global public health sector business was $13.9 million for the fiscal year. Overall, gross profit was $47.9 million or 78% of net revenues compared to $30.8 million or 72% of net revenues in the prior year. The increase in gross profit and gross margin is due primarily to the increase in the U.S. prescription business. Operating expenses increased to $53.3 million compared to the prior year of $31.4 million. The increase is primarily driven by research and development costs, which increased to $32.7 million from $16.9 million in the prior year and increases in personnel, insurance, and commercialization costs. During the prior year, the company received a 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. During the first quarter of fiscal 2021, we sold PREBOOST, resulting in a pretax gain of $18.4 million. During the fourth quarter in the prior year, there was a non-cash impairment charge of $14.1 million. Operating income for the year was $13 million, which includes the $18.4 million related to the gain on sale of PREBOOST compared to an operating loss of $14.7 million in the prior year, which includes the non-cash impairment charge of $14.1 million. Non-operating expenses were $8.7 million compared to $5.3 million in the prior year, primarily consisting of interest expense and change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the year, we recorded a tax benefit of $3.1 million compared to $1.1 million in the prior year. The tax benefit primarily relates to an increase in U.K. tax rates from 19% to 25%, effective in fiscal 2023. This change in tax rates increases the value we expect to derive from our net operating losses in the U.K. The company has net operating loss carry-forwards for U.S. federal tax purposes of $39.1 million, with $30.5 million expiring in years through 2040 and $8.6 million which can be carried forward indefinitely. Our U.K. subsidiary has net operating loss carry-forwards of $63.5 million, which do not expire. The bottom line results for fiscal year 2021 was net income of $7.4 million or $0.09 per diluted common share compared to a net loss of $19 million or $0.28 per diluted common share in the prior year. Now turning to the balance sheet. As of September 30, 2021, our cash balance was $122.4 million, and our accounts receivable balance was $8.8 million. Our net working capital was $136 million on September 30, 2021, compared to $12.3 million on September 30, 2020. Due to the sale of PREBOOST in December 2020, we added $15 million in cash and $5 million in notes receivable, $2.5 million of which will be collected this month and the remaining $2.5 million, which will be collected over the next six months. In February, we completed an underwritten public offering that resulted in net proceeds of $108 million. During the fiscal year ended September 30, 2021, we used cash of $15.6 million for operating activities. Overall, we're delighted to see the continued increases in sales in the FC2 business. This revenue source, together with our strong balance sheet, continues to be the source of funds we use to invest in our promising pharmaceutical clinical development programs as we continue to transform our company into a premium oncology biopharmaceutical company seeking large market opportunities in breast and prostate cancers as well as being opportunistic by joining the global efforts to find effective treatments for COVID-19. Now, I'd like to turn the call back to Dr. Steiner.

Thank you, Michele. We've enjoyed a record year, which has allowed us to significantly advance our clinical oncology programs. In fact, we are now entering our fifth year of growth in our FC2 U.S. prescription business. We had a record year of $61.3 million in revenue. We plan to commercially launch ENTADFI approved via telemedicine portals and potential licensing deals, which will provide even more revenue, adding to the already growing revenues from FC2. We expect another record year in fiscal year 2022. With resources in place, we will continue to advance our expansive late clinical stage breast cancer and prostate cancer programs as well as Phase 3 COVID-19 clinical study expected to have results in the first half of 2022. We anticipate a steady flow of important positive news for Veru over the next few months to a year. In summary, we have evolved into an oncology biopharmaceutical company solidly dedicated to developing treatments in breast cancer and prostate cancer. Our strategy to advance the clinical development of our drug candidates by investing revenues generated by our Sexual Health division is working. As a stand-alone business, our women's health business, UREV is valuable, profitable, and growing, which provides options for Veru's shareholders. I am proud of the hard-working, dedicated, and talented team we have assembled to execute our clinical and commercial strategy. We are committed to driving shareholder value by developing commercially novel medicines, addressing significant unmet medical needs in the management of breast cancer and prostate cancer and being opportunistic by developing Sabizabulin for hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome and death. With that, I'll now open the call to questions.

Our first question comes from Brandon Folkes from Cantor Fitzgerald. Please go ahead.

Hi. Thanks for taking my questions. And congratulations on all the progress. So the two questions from me, maybe just on Sabizabulin and COVID, can you remind me what control arm is able to be dosed with? And then along those lines, how active are you in the dialogue with the respective agency on those endpoints just as sort of COVID treatments evolve? I guess my second question, I'll just ask upfront on Sabizabulin again in the third line monotherapy and breast, you noted you received the safe to proceed letter from the FDA. So can you just let us know, are there any other hurdles yet to overcome between now and starting the Phase 2b? Was it now just - are you just really setting up the study and getting it running in the first quarter of next year? Thank you.

First of all, Brandon, thank you for being on the call and I'm going to answer your second question first; that's an easy one. So, the safe to proceed letter is typically what you do technically after you file. This had to be filed as a separate IND because it's a different drug. With that said, the safe to proceed letter is the official green light from the FDA to move forward. There are no other hurdles. So all we are doing now is we have to do - we've got everybody engaged. We have a CRO ready and ready to go. And just a pause for a moment, let me tell you why this is unique and maybe it didn't come across in the call. What we're doing is we're actually asking - if you look at the population of the patients in the greater than 40 and less than 40, the same population of patients, these are patients that have received at least two estrogen-blocking agents and a CDK4/6 inhibitor; they are all third line. So when they come into the study, then the companion diagnostic or in this case will be a CLIA test, looking for the AR status. If their AR status is greater than or equal to 40%, then they go on to the AR Test study. If it's less than 40%, then they go to the Phase 2b study. So in some ways, they're sister companion studies. We're being incredibly efficient with money. Because that same patient, instead of being told, you can't be in the study and you chalk that up as a screen failure, we have an opportunity to capture that patient in one or the other study. With that said, there are no hurdles. In fact, we're starting to collect patients for recruitment because if your test study is up and running, and we do have patients that are less than 40. So it will be pretty efficient. So our thinking was that since we know the less than 40s and not going to respond the same way the greater than 40s do, let's take advantage with another one of our assets. As it relates to your second question, I'll frame the question. We're very fortunate to have here Dr. Gary Barnette who will answer the question. That was basically for the COVID-19 study, looking at the control arm. Just to remind you again what that control arm was in the Phase 2b and then what the control arm is in the Phase 3. The other part of your question was about the dialogue with the FDA regarding that endpoint and how comfortable they are with that endpoint. Gary?

Yes. So in the Phase 2 study and in the Phase 3 study, we do allow standard of care. These are both blinded studies. Ethically, we need to allow them to have standard of care, things like dexamethasone, remdesivir, and other products that have been approved by the FDA through the EUA process. Then we have a blinded study, where the patient is randomized to sabizabulin or to placebo. That's how the studies work. The Phase 3 study is identical in that way to the Phase 2 where we showed the benefit. As far as the endpoint, the FDA, obviously, mortality or death is the gold standard endpoint for just about every clinical trial you have or you could have. Now we don't use it much because most of the time, we're trying to do something else. The FDA is very comfortable with death as the primary endpoint. Based on the Phase 2 data and the data we're seeing in the literature, we feel very comfortable that's where we should be.

I think the other statement I will make is that it's been - and the reason I brought it up, the Merck and the Pfizer drugs are not for hospitalized patients. In fact, the Merck drug failed in hospitalized patients. So they're for pre-hospitalized patients. This patient group will have a much lower overall death rate. In the hospitalized patients, one of the concerns we had running the study was that perhaps with this standard of care - dexamethasone, remdesivir, with a drug antibody cocktails that the death rate would be at a point that it's much lower than we would need a huge study. That's not the case. What we're learning is that patients are coming in, WHO 5s and 6s, and quite frankly, 4s; these - the death rate is the same if not higher than what we saw in the Phase 2. So we can say that in aggregate. We feel pretty good that there is a significant difference between going after patients in a pre-hospitalization standpoint versus a hospitalized standpoint because the hospitalized patients are definitely sicker. That's why we think we have a position with our drive at this point now, there really have been no effective oral drugs that have been approved in this space or any coming anytime soon. So we really own this space, and that's why we've got to push it pretty hard. Okay. Next question.

Next question is from Leland Gershell from Oppenheimer. Please go ahead.

Morning, Mich. Thank you for taking my question. Just one question. It's on sabizabulin. There's another compound being developed elsewhere, Plinabulin, which also binds approximate to the colchicine binding site on tubulin. Additionally, it's been recently published that this compound may play an immuno-oncologic role as it releases immune defense protein GEF-H1. I'm just wondering if on work you've done on Sabizabulin if you've seen other elements of activity that may be along those lines in addition to the known activity with the disruption of microtubules? Thank you.

Thank you. So yeah, from a mechanistic standpoint, let me just pause for a moment and tell you what I think is happening with Plinabulin. From a mechanistic standpoint, Plinabulin started out as a colchicine binding compound. I don't know, quite frankly, what it does on the alpha subunits of tubulin. With our compound, what makes it different is that it looks like - I have not seen another compound that has hydrogen bonding on the beta subunit and the hydrogen bonding on the alpha subunit of tubulin. That's why we're saying it's crosslinking, because those bonds are so strong that it causes the microtubules not only to not be able to polymerize but also to cause them to depolymerize. Now with that said, and we think this is the reason for the safety. We do think there's some overlap. Plinabulin clinically shows a reduction in neutropenia. They had a very successful Phase 3 that showed the reduction in neutropenia; however, the agency usually requires two clinical studies. So even though Plinabulin showed great success and proof-of-concept in a Phase 3 setting that it can reduce the neutropenia induced by chemotherapy, the agency asked them for a second one. It's similar to what we're doing with our product. From the outside looking in, the agency usually wants two studies. In this case, treating side effects of chemotherapy-induced neutropenia, similar situation is true for treating the side effects of androgen deprivation therapy-induced hot flashes; the FDA has made it very clear they would like two pivotal studies, Phase 2b and the 3. So it's similar. As far as other things, sabizabulin has already shown us that it has activity as an antiviral and anti-inflammatory. We have actually presented data in press releases about the anti-inflammatory activity across multiple cytokine proteins that are downregulated or inhibited by sabizabulin. Thus, it would not be surprising to have immunomodulating activities. Participants have not yet been tested for specifics along those same lines, so I can't provide a definitive comparison. In general, what we can say about sabizabulin's preclinical studies show neutropenia and neurotoxicity, in the preclinical models didn't occur in the clinical trials. We feel confident moving forward in breast cancer that we should maintain the favorable side effect profile of sabizabulin.

Thank you.

Thank you. Next question please.

Next question comes from Yi Chen from H.C. Wainwright. Please go ahead.

Thank you for taking my questions. Just to clarify the Companion Diagnostic AR Test being developed, is the test that you use in the ARTEST study to measure the AR expression; is that correct? Are there any other currently available tests to measure AR expression level?

The question is basically, are we using the Companion Diagnostic tests being developed with Roche Ventana currently to measure androgen receptor expression for patients entering the ARTEST study? The short answer is no, we're using an AR CLIA test. What we plan to do during the ARTEST Phase 3 is to begin bridging into the commercial test that's being developed by Roche Ventana. So this is not unusual. This is done often. We're using an AR CLIA test way before it gets to the FDA approval. The concept is that the AR Test would be ready to be filed with the clinical data for the ARTEST study. This could open up the companion diagnostic being used across all AR studies. Ventana Roche currently does about 85% of the initial testing for breast cancer in the molecularly characterized tissue for breast cancer, and hopefully, one day everyone will know their AR status from the start. One matter of interest is that ER is done by immunohistochemistry while HER2 does has a companion diagnostic that has to be approved. So FDA has made it clear they want a companion diagnostic; okay? So when we're in the middle of it all, we'll switch over to companion diagnostic. It is also correct that we have plenty of samples from the ARTEST study.

Got it. And based on current enrollment status, when do you expect the ARTEST study and the VERACITY study to complete enrollment?

Gary?

We're actively on track with both of them. We expect toward the end of 2022 into 2023; that's our target.

So we're targeting data readout, and we're certainly targeting data readout in sort of mid-2023 quite frankly for both studies; they're really close.

Got it. Thank you.

Thank you. Next question please?

Our next question comes from Chris Howerton from Jefferies. Please go ahead.

Hey, great. Thanks so much for taking the questions. Mitch, I may have missed it, but I just was wondering if there was any updated strategy for the FC2 business? I know there were some thoughts of divestiture, but obviously, it's been doing pretty well. So that would be one question. And then the follow-up to that would be, could you provide some guidance or some thinking with respect to that business for the next fiscal year, please? Thank you.

I'll address the second question first. As we have publicly stated, we are considering strategic options for the FC2 business, which does not necessarily mean we are looking to sell it. Our focus is on maximizing shareholder value. We're not in a rush; the product is generating significant revenue that supports its development, so there's no pressure to divest. I value this business and am focused on finding ways to achieve substantial growth. We have different shareholder expectations for our base business and our pharmaceutical business. It’s crucial for us to continue nurturing the FC2 business as if we will always have it, ensuring that we make informed decisions that promote revenue growth. At the same time, we are open to understanding the best next steps for the asset. This year marked our 50th year of growth, during which we achieved 44% revenue growth, outperforming competitors in women's health. The standalone revenue for this segment was $61.3 million, and we didn’t rely on a large salesforce or expensive advertising. Instead, we invested in our business to minimize dilution and accelerate our programs, aiming to establish a significant presence in breast and prostate cancer treatments. COVID-19 has reinforced that this issue is persistent, and we need to stay focused on completing studies to advance patient treatments. Regarding our strategy, we have developed a direct-to-patient portal, moving beyond merely supplying other telemedicine portals to having our own, which enhances the valuation of our base business. Our main competition is the male condom market, which holds less than 1% market share, revealing a vast opportunity for our product. Due to COVID, women are increasingly avoiding conventional healthcare visits and prefer convenient options, allowing us to tap into this surge effectively. Consequently, we anticipate that our FC2 business will perform better in fiscal year 2022 than it did in 2021, and we expect a strong year ahead.

Okay, well, thank you very much.

Thank you.

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

Thanks for taking my questions. And also congratulations on all the progress.

Thank you, Kumar.

With regard to the COVID-19 trial, what kind of variability are you seeing across the different regions? And do you expect that predominantly these patients are going to have that delta variant?

Make sure I understand the first part. What are we seeing across different regions in terms of strain? The death rate.

It's quite comparable. We are currently in the midst of recruitment and are closely monitoring the blinded data. We are observing very similar mortality rates in the United States and Brazil.

I would say that the FDA prefers to use death as an endpoint because it is an undeniable outcome. When a death occurs, it serves as a solid endpoint, and you don't have to worry about variations in standard care or hospitalization practices in different countries. This makes deaths a more reliable endpoint. Looking at deaths as an endpoint seems comparable across regions. Interestingly, I recently saw a graph indicating that the delta strain has become the dominant variant globally. The concern stems from the known 30-plus mutations in the spike protein that have been reported by Regeneron and others. With these changes, some monoclonal antibodies targeting specific sites on the spike protein may no longer be effective. We recognize the need for an oral agent that has a wider spectrum of action, which will work regardless of whether the strain is delta or omicron. We believe we are well-positioned and are gathering data on the strains present in patients to determine any differences between them, though we don’t anticipate significant variations. As of now, the predominant strain appears to be delta.

Okay. With regard to TADFIN, have you had labeling discussion? What are your expectations in terms of the label?

Okay. Regarding TADFIN, and just to clarify, if we are approved, the trade name will now be ENTADFI. The agency said there's another compound at the agency that could be confusing to use TADFIN. So we came up with ENTADFI. As it relates to the agency, what I can share at this point is we are going back and forth with the agency regarding the label. So I can't provide you with a full statement yet on what the label will say, but we're working on that. So stay tuned.

Thanks so much.

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

Thank you, operator. I appreciate you all joining us today, and I look forward to updating you all on the progress at our next investors' call. Thank you.

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