Veru Inc. Q2 FY2022 Earnings Call

Good morning, ladies and gentlemen, and welcome to Veru Incorporated Investor Conference Call. All participants will be in a listen-only mode. 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 Incorporated, Executive Director, Investor Relations and Corporate Communication. 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 our 10-K SEC filings, as well as in our press releases from time to time. I'd 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 Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the CFO and CAO; Michael Purvis, EVP, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Veru is a biopharmaceutical company focused on developing novel medicines for COVID-19 and other viral and ARDS related diseases, and for the management of breast and prostate cancers. The company has a commercial sexual health division called Urev, which includes two FDA approved products ENTADFI, a new treatment for benign prostatic hyperplasia and the FC2 female condom, an internal condom for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections. The revenue from the sexual health division is being used to largely fund the clinical development of our late-stage drug candidate assets, which aim to address multi-billion dollar premium market opportunities. This morning we will provide an update on the COVID-19 Sabizabulin clinical program and franchise, the clinical development of our oncology drug pipeline and the commercialization of our products. We will also provide financial highlights for our second quarter fiscal year 2022. While there have been recent emergency use authorizations for antiviral drugs issued from Pfizer for the treatment of un-hospitalized patients with COVID-19 with less than five days of symptoms who have relatively lower risk of dying, Sabizabulin in contrast is being developed for hospitalized moderate to severe COVID-19 patients who have a high risk of acute respiratory distress syndrome and death. Patients for whom there is currently no clearly effective treatment and the population which the antiviral agent for Merck did not demonstrate efficacy. Sabizabulin disrupts intracellular transport of coronaviruses along the microtubules. This is a highly conserved biologic process that's required by all variants of COVID-19, including Omicron, to cause infection. We conducted a Phase III COVID-19 clinical trial, which was a double-blind multicenter, multinational randomized two to one placebo-controlled study evaluating daily oral nine milligram dose of Sabizabulin for up to 21 days versus placebo in approximately 210 hospitalized moderate to severe COVID-19 patients with high risk for ARDS and death. Both the placebo and Sabizabulin treated groups were allowed to receive standard of care which could include Dexamethasone, Remdesivir, anti-IL6 receptor antibodies and JAK inhibitors. Moderate to severe COVID-19 symptoms in this study means patients that were hospitalized and required supplemental oxygen, forced oxygen or mechanical ventilation. Furthermore, one of the inclusion criteria is that patients must have a peripheral capillary oxygen saturation of less than or equal to 94% on room air. This is a very sick patient population and high risk to ARDS and death. The pre-specified primary efficacy endpoint is the proportion of patients who die on study up to day 60, not up to day 29 like other studies reported in the literature. Our day 60 endpoint allowed us to capture a more accurate number of deaths caused by COVID-19 infection. Secondary endpoints included 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 the hospital and viral load. The study was conducted in the United States, Brazil, Argentina, Mexico, Colombia, and Bulgaria, and COVID-19 infections in the study included the Delta and Omicron variants. In January of 2022, the FDA granted Fast Track designation to the Phase III COVID-19 registration program. Fast Track designation aims to expedite the development and review of new drugs intended to treat serious or life-threatening conditions and demonstrate the potential to fill unmet medical need. Filling an unmet medical need is defined as providing a therapy where none exists or providing a therapy that may be potentially better than an available one. Thus, having Fast Track is a distinction that underscores the urgent need for novel and effective therapies to be used alongside vaccines to combat this COVID-19 pandemic. On April 8, 2022, the Independent Data Monitoring Committee conducted a planned interim analysis in the first 150 subjects randomized in the Phase III COVID-19 study. After reviewing the unblinded data, the Independent Data Safety Monitoring Committee unanimously recommended that the Phase III study be halted early due to overwhelming efficacy. They also remarked that no safety concerns were identified. The pre-specified primary endpoint was death at or before day 60. Sabizabulin treatment resulted in a clinically and statistically meaningful 55.2% relative reduction in death, p-value equal to 0.0043 in the intent-to-treat population. The placebo group had a 45% mortality rate compared to the 20% mortality rate in the Sabizabulin treated group. At day 29, the death rate in the placebo group in our study was 35%, which is the same death rate as reported in the Lancet publication in May 2021 for the placebo group of a similar hospitalized patient group, consisting of 2094 patients from the Tocilizumab recovery study. Furthermore, one could expect the death rate in the placebo group at day 60 to be higher than the day 29 death rate. The placebo group at day 60 had a death rate of 40%, and our study underscores how sick these patients were. Moreover, patients in the Phase III COVID-19 study were allowed to receive standard of care, which was balanced between the Sabizabulin and placebo groups, with approximately 80% receiving Dexamethasone and about 30% receiving Remdesivir. Thus, high death rates in the placebo group demonstrate the inadequacy of the current standard of care. We plan to publish the secondary efficacy endpoints in peer-reviewed medical journals, and in practical Sabizabulin treatment was well tolerated in this patient population with no clinically relevant safety observations in the Sabizabulin treated group compared to placebo. We had a pre-emergency use authorization meeting with the FDA on May 10 to discuss next steps, including the submission of an Emergency Use Authorization application. The outcome of this meeting is as follows. The FDA agreed that no additional efficacy studies are required to support an EUA or a full NDA. The FDA agreed that no additional safety data is required to support an EUA and collection of safety data under the EUA will satisfy the safety requirement for a full NDA. Therefore, the FDA agreed that the request for EUA is supported by efficacy and safety data from our positive Phase III COVID-19 study in hospitalized moderate to severe COVID-19 patients at high risk for ARDS, and no additional clinical studies are required to support an NDA submission. We plan to submit the EUA application in this quarter. Furthermore, we have scaled up manufacturing processes to produce a commercial drug supply to address the anticipated drug needs following a potential FDA authorization in the US and a potential subsequent authorization in other countries and territories. We are also making progress building out our own US commercial infectious disease franchise, and we are actively seeking an advanced purchase agreement with the US government. In fact, we’re meeting with government officials; usually an advanced purchase agreement is awarded after emergency use authorization is received. We're also moving forward to submit a regulatory application to the MHRA in Britain, and to the COVID-19 European Medicines Agency Pandemic Task Force for the European Union, as well as other countries. We are in discussions with numerous potential distribution partners. COVID-19 global cases, hospitalizations and death rates are on the rise again. We have reached a sad milestone; over 1 million Americans have died from COVID-19. We must reduce the risk of death in COVID-19. New variants of COVID-19 are brewing. COVID-19 surges will happen; vaccines are not enough, and some of the antibody drugs are not effective against the Omicron variant BA1 or BA2. As I've already pointed out, antiviral drugs generally target the pre-hospital population who have experienced less than five days of symptoms, creating a narrow window of opportunity. It is clear that an effective and safe oral therapeutic that prevents deaths in hospitalized patients with mild-to-severe COVID-19 infection with high risk to ARDS and death is desperately needed. We strongly believe that Sabizabulin, with its dual anti-viral and anti-inflammatory properties, can be the greatly needed oral therapy for hospitalized moderate-to-severe COVID-19 patients as a new standard of care. We will continue to update you on the regulatory progress towards EUA in the US and other countries, manufacturing additional clinical data releases and publications, BARDA and other government agency discussions, US and global distribution plans, and partnership discussions. Furthermore, given these exceptional clinical efficacy and safety results, we plan to initiate new clinical studies against other viruses that cause ARDS, including influenza A virus, which causes up to 52,000 deaths and 710,000 hospitalizations each year, and Respiratory Syncytial Virus, also known as RSV, which causes 14,000 deaths and 177,000 hospitalizations each year in the United States. These new clinical studies will allow us to expand Sabizabulin to other large serious infectious disease indications. I will briefly discuss the progress of our oncology drug portfolio focused on breast and prostate cancers. For patients with greater than or equal to 40% AR expression, we are actively enrolling a global Phase III ARTEST registration clinical study in approximately 210 patients to evaluate Enobosarm monotherapy for the third-line treatment of AR positive, ER positive HER2-negative metastatic breast cancer. In January of 2022, the FDA granted Fast Track designation to our Phase III ARTEST registration program. We're also moving Enobosarm therapy earlier in the treatment sequence into the second-line treatment setting for AR positive ER positive HER2-negative metastatic breast cancer. We are actively enrolling the Phase III multicenter open-label randomized one-to-one active control registration of the ENABLAR-2 clinical study to evaluate the efficacy and safety of Enobosarm and Abemaciclib in combination therapy versus an alternative estrogen-blocking agent in subjects with AR positive ER positive HER2-negative metastatic breast cancer who have failed first-line therapy with palbociclib, a CDK4/6 inhibitor, plus an estrogen-blocking agent and who have greater than or equal to 40% AR expression in a breast cancer tissue. We plan to enroll approximately 186 subjects in this Phase III clinical study. We recently announced that we've entered into a clinical trial collaboration and supply agreement with Lilly for the ENABLAR-2 Phase III clinical study. Under the terms of the non-exclusive clinical trial collaboration and supply agreement, Veru is responsible for conducting the clinical trial, while Lilly will supply Abemaciclib for the study. Veru maintains full exclusive global rights to Enobosarm. We've also made great progress in our prostate cancer programs. Our first indication is evaluating Sabizabulin for the third-line treatment of metastatic castration-resistant prostate cancer in the VERACITY Phase III study. We will be presenting final clinical data from the positive Phase 1b/2 study of Sabizabulin in 80 men with metastatic castration-resistant prostate cancer who have progressed on at least one novel androgen receptor targeted agent at the ASCO Conference being held in June of 2022 in Chicago, Illinois. We are actively enrolling an open-label randomized two to one multicenter Phase III VERACITY clinical study evaluating Sabizabulin 32 milligrams versus an alternative androgen receptor targeted agent for the treatment of chemotherapy naive men with metastatic castrate-resistant prostate cancer who had tumor progression after previously receiving at least one androgen receptor targeted agent. The primary endpoint is radiographic progression-free survival. Enrollment for the Phase III VERACITY clinical study is on track and we expect to enroll approximately 245 patients from 45 clinical centers in the US. Our second clinical study in prostate cancer is evaluating VERU-100 GnRH antagonist 3-month depot formulation in a Phase II dose-finding clinical study for the treatment of hormone-sensitive advanced prostate cancer. We are conducting the Phase II dose-finding clinical study VERU-100 androgen deprivation therapy in 45 men with hormone-sensitive advanced prostate cancer. Although this study is ongoing, the preliminary clinical data are promising. The Phase III registration clinical study design has already been agreed upon with the FDA. It will be a single-arm study that will enroll approximately 100 men. Maintenance of castrate blood concentrations of testosterone is the primary endpoint. After the Phase II dose-finding study is completed, we will initiate the Phase III clinical study. Veru has a commercial sexual health division called Urev, which includes two FDA approved products, the FC2 for dual protection against unplanned pregnancy and transmission of sexually transmitted infections and the recently FDA approved ENTADFI, which is tadalafil and finasteride capsule, a new treatment for benign prostatic hyperplasia. We have built the infrastructure to allow for broad market access to FC2 across the US. 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 our FC2 product to patients in a cost-effective, highly convenient manner. Our strategy to continue to drive robust FC2 sales is not only to seek additional telemedicine and internet pharmacy service partners, but also to create our own direct-to-patient telemedicine and internet pharmacy services platform. This telemedicine platform is now up and running and is expected to be a new source of revenue. We've also developed ENTADFI, a new treatment for BPH. The most common side effects of currently prescribed BPH medicines include sexual adverse events, including impotence. ENTADFI has been shown to be more effective for the treatment of BPH than finasteride alone without causing impotence. ENTADFI was approved by the FDA in December of 2021. The plan is to officially launch ENTADFI next quarter. We are waiting for the FDA to sign off on the manufacturing release criteria for the ENTADFI commercial products. ENTADFI is expected to be marketed and distributed by a third-party direct-to-patient telemedicine and internet pharmacy services platform partnership. We have also partnered with GoodRx, a US-based digital resource for healthcare, to reach their almost 20 million monthly visitors, which include both consumers and healthcare providers to build awareness about ENTADFI. There are over 45 million prescriptions filled annually for drugs to treat BPH. We plan to augment our marketing and sales efforts by seeking additional partners in the US and outside the US. 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're having a great year. Let's start our highlights with the second quarter results for the three months ended March 31, 2022. Overall, net revenues were $13 million compared to $13.3 million in the prior year second quarter. The company reported quarterly sales for its US prescription business of $11.6 million, an increase of 12% from $10.3 million in the prior year second quarter. Overall gross profit was $11.2 million or 86% of net revenues, compared to $10.9 million or 82% of net revenues in the prior year quarter. This was our highest gross margin for any quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our US FC2 prescription business. We saw a decrease in sales in the global public sector during the quarter due primarily to 2.8 million units sold to Brazil in the prior-year period for tenders, which have ended, and therefore did not repeat in the current year. Operating expenses for the quarter increased to $22.9 million compared to the prior year quarter of $12.4 million. The increase of $10.5 million is primarily due to research and development costs, which increased $7.9 million to $15.5 million compared to $7.6 million in the prior year quarter. The increase in research and development costs is due to the increased number of clinical trials. This quarter, we had four Phase III clinical trials and two Phase II clinical trials ongoing. While in the prior year period we had two Phase III clinical trials ongoing. The operating loss for the quarter was $11.8 million, compared to $1.5 million in the prior year quarter. Non-operating expenses were $2.4 million, compared to $1.4 million in the prior year second quarter, and primarily consisted of interest expense and the change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the quarter, we recorded a tax benefit of $27,000 compared to a tax expense of $22,000 in the prior year second quarter. The bottom line results for the second quarter of fiscal 2022 was a net loss of $14.2 million or $0.18 per diluted common share, compared to a net loss of $2.8 million or $0.04 per diluted common share in the prior year second quarter. Now turning to highlights for the results for the six months ended March 31, 2022. For the first six months of fiscal 2022, total net revenues were $27.2 million, compared to $28 million in the prior year period. Net revenue from the US prescription business was up 19% to $23.2 million from $19.4 million in the prior year period. Overall gross profit was $23 million or 85% of net revenues, compared to $21.7 million or 78% of net revenues in the prior year period. The increase in profit and gross margin is due primarily to an increase in the US prescription business. We saw a decrease in sales in the global public sector during the first half of the year due primarily to 6.9 million units sold to Brazil and 1.8 million more units sold to South Africa in the prior-year period for tenders, which have ended and therefore did not repeat in the current year. Operating expenses increased by $17.3 million to $39.7 million compared to the prior-year period of $22.4 million. The increase was primarily driven by research and development costs, which increased by $12.3 million to $25.6 million from $13.3 million in the prior year period. The increase in research and development costs is due to the increased number of clinical trials, which I previously discussed. Operating loss for the period was $16.7 million compared to an operating income of $17.7 million in the prior year period. The change of $34.4 million is primarily due to the gain on sale of PREBOOST of $18.4 million in the prior year period and the increase in research and development cost during the current year period. Non-operating expenses were $3.7 million compared to $3.2 million in the prior year period, and primarily consisted of interest expense and the change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the six-month period, we recorded a tax expense of $87,000 compared to $100,000 in the prior year period. The company has net operating loss carry-forwards for US federal tax purposes of $38.6 million, with $29.5 million expiring in years through 2040 and $9.1 million, which can be carried forward indefinitely. Our UK subsidiary has net operating loss carry-forwards of $63.5 million, which do not expire. The bottom line results for the first six months of fiscal 2022 was a net loss of $20.6 million or $0.26 per diluted common share compared to net income in the prior period, which included the gain on sale of PREBOOST of $14.4 million or $0.18 per diluted common share. Turning to our balance sheet. As of March 31, 2022, our cash balance was $112 million, our accounts receivable were $8.1 million, and our note receivable related to the sale of PREBOOST was $2.5 million. Our net working capital was $119.3 million on March 31, 2022 compared to $136 million at September 30, 2021. During the six months ended March 31, 2022, we used cash of $12.6 million for operating activities compared with $1.9 million used for operating activities in the prior period. The expected future revenues from Sabizabulin for COVID-19, the continued revenue from sales in the US FC2 prescription business, and the global public sector business, coupled with the expected future revenue from the launch of ENTADFI and added to our strong balance sheet should continue to be the source of funds we use to invest in our promising pharmaceutical clinical development program as we continue to transform our company into a premium biopharmaceutical company focused on developing novel medicines for COVID-19 and other viral and ARDS related diseases, and for the management of breast and prostate cancers. Now I'd like to turn the call back to Dr. Steiner.

Thank you, Michele. In summary, we continue to advance our deep late clinical stage breast cancer and prostate cancer programs with three actively enrolling Phase III clinical studies, and we will continue to grow revenue from our base sexual health business. If authorized, the future revenues from Sabizabulin for hospitalized COVID-19 patients at risk for ARDS represent a significant opportunity. Being opportunistic and successful in developing Sabizabulin in COVID-19 has led to the most eventful and transformative quarter in Veru's history. We are preparing for the global commercial launch of Sabizabulin nine milligrams for the treatment of hospitalized moderate to severe COVID-19 patients who have a high risk for ARDS. We have created an infectious disease franchise for this purpose. This is anticipated to be a worldwide multi-billion dollar opportunity. This will be a real chance for significant near-term revenue for Veru. I would like to directly respond to several criticisms that have been made about the Phase III COVID-19 clinical trial. Concern number one: the mortality rate is too high in the placebo group. That is not true. The placebo death rates in our Phase III study are consistent with what has been reported in the literature for similar patients at day 29. As mentioned previously, at day 29, the death rate in the placebo group in our study was 35%, which is the same death rate as reported in the Lancet publication for May 2021 for the placebo group of similar hospitalized patients, consisting of 2094 patients from the Tocilizumab study. Furthermore, one would expect the death rate in the placebo group at day 60 of our trial to be higher than the day 29 death rate. Concern number two: death rates were higher in the ex-US clinical sites than for the US clinical sites. That is not true. The death rates in the placebo group were higher in the US clinical sites compared to clinical sites outside the US. Furthermore, the reduction in the risk of death between the US and ex-US clinical sites by Sabizabulin was the same in the US compared to ex-US. This will be clear when our data is published in a peer-reviewed medical journal. Concern number three: our Phase III clinical trial had no standard of care requirements. Not true. Standard of care was allowed for both the placebo and treatment groups, and it was well balanced between the treatment and placebo groups. Approximately 80% received Dexamethasone and about 30% received Remdesivir. Other agents including anti-IL6 antibodies and JAK inhibitors were also allowed. Sabizabulin demonstrated clear benefit over standard of care. Concern number four: there is a high risk that the FDA will not accept an EUA application because our Phase III study was too small. Not true. As we have previously reported, we've had a pre-EUA meeting with the FDA on May 10, 2022. The FDA agreed that no additional efficacy studies are required to support an EUA or an NDA. The FDA agreed that no additional safety data is required to support an EUA, and that the collection of safety data under the EUA will satisfy the safety requirement for an NDA. Therefore, the FDA agreed that the request for EUA is supported by efficacy and safety data from our positive Phase III COVID-19 study in hospitalized moderate to severe COVID-19 patients with high risk for ARDS, and no additional clinical trials are required to support an NDA submission. Short-sellers might like to lob unfounded criticisms, but our audience is the FDA, who will help the study design and has now told us that the data are sufficient to proceed. As patients are waiting, we will work diligently to prepare and submit the EUA application now that we have received the green light and encouragement to do so from the FDA. With that, I'll now open the call to questions.

Ladies and gentlemen, at this time we will begin the question-and-answer session. The first question today comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Thanks for taking my questions and congratulations on all the progress. Maybe just sort of two focused on the same thing for me. So you sound very confident on the manufacturing side. Can you just give us some additional detail in terms of how you thought about the addressable market? I guess what capacity do you need to satisfy the FDA on EUA? And then secondly, along those lines, with your partner are you putting any capital at risk for reservation of capacity or anything like that ahead of the EUA? Thank you.

Good. Thank you. So the first question is basically about manufacturing, and so I’m going to answer in two ways. One, I'm going to provide insight into what we think the patient numbers are going to be if this situation becomes more like an endemic. This doesn't include the surge, stockpiling, or any of that. So just to give you a benchmark, in the United States right now, when we did the analysis, we estimated the hospitalization rate at about 1,955 new admissions a day. That number, by the way, has risen to 2,597 as I looked at it this morning. But we're going to stick with the lower number, the 1,955. Approximately 52% of hospitalizations are patients that require supplemental oxygen, forced oxygen or ventilation. That translates to about 7,116 patients a week, or close to 28,464 patients for the month, assuming no surges. If you estimate that we need to hit around 30,000 patients, that will give you a feel for how well we've been able to accelerate our manufacturing. Now, I’m going to ask Dr. Gary Barnette to give you some insight into how robust our manufacturing processes are and how we will be ready. And there is no capital at risk; there is no capital at risk. Go ahead.

Yeah. So we've been planning for this EUA, and right now in the month of July, we would have approximately 50,000 patients' worth of drug. This is assuming a patient gets about 12 doses, which is approximately the average number of doses that each patient in the treated group received in our Phase III study. In August, we would have sufficient drug for an additional 100,000 patients, and then from September moving forward, up to approximately 250,000 patients' worth of drug every 30 days. We believe that this will satisfy and cover the addressable market in the United States, as well as the rest of the world.

And this will also allow for stockpiling, so that we can be prepared for any potential surge. As you've seen with the current surge, the rise in home testing makes it difficult to predict where hospitalizations may peak, and we will just have to watch that closely. But at this point, assuming that the authorization happens in sort of mid-summer, we will be ready.

Great. Thanks so much, and all the best for the submission.

The next question comes from Chris Howerton with Jefferies. Please go ahead.

Excellent. Thank you so much for taking the questions. And I will also offer my congratulations.

Thank you.

I wanted to follow up on the manufacturing question regarding the Sabizabulin program for COVID-19 to understand if any inspections might be necessary. The process of CMC evaluation for an EUA is a bit unclear to me. Could you clarify what procedural steps might take place on the CMC side for the review? That would be really helpful.

Yeah. We'll do that. So, Gary.

Yeah. The FDA has to have regulatory rigor in kind of authorization or approval. However, with what we believe to be the accelerated process of the EUA, we believe that the inspection piece will be minimal. Of course, the sites that we're using have a long record with FDA inspections and a history of quality. So we do believe that as we move forward to the NDA, the FDA will likely do a pre-approval inspection of our facilities. But right now we suspect that they will rely on the long history that they have with these facilities to support the application.

One of the interesting things I was able to take away from the meetings with the FDA is how they view this process as ultimately getting to a full NDA as a rolling process. This means, if you submit an NDA under normal circumstances, you must have everything completed and submitted at once. Subsequently, the full application comes in 75 days later, they review everything and they tell you if they're ready to proceed. With the Fast Track designation and the potential for the EUA, it's more about getting this reviewed as quickly as we can and getting it to patients swiftly. During the review process, you can keep sending new information and additional data. So it's really a rolling process. Inspections and other tasks will be completed in real-time as opposed to assembling everything and submitting it, and then holding your breath. This will be a very active process where success one will be the authorization, and ultimately success two will be a full NDA followed by the implementation.

Excellent. Well, that's really helpful. Thank you. And then if I may, as a follow-up, how should we consider pricing for Sabizabulin in the context of COVID-19 and perhaps broader ARDS?

That's a great question. First, I will tell you that the numbers we've used—those you see on our website—are purely assumptions right now. We're conducting the formal work to accurately determine appropriate pricing. One thing that's interesting for ARDS in general is that no drug currently on the market has shown a reduction in death similar to what this drug demonstrated in our Phase III study. ARDS is a major cause of mortality for these patients. So, this is unique. For the first time, there's recognition of the antiviral and anti-inflammatory effects leading to unprecedented death reductions in ICU and critical care patients with ARDS—end of story. If you review the supportive care alone for ARDS caused by viruses, there isn't much available at all. We know that antivirals are relatively weak. For example, one antiviral being used in the pre-hospital setting showed no efficacy to the point that the independent data committee recommended termination of the study. Hence, the importance of our finding that ARDS is driven more by immune responses rather than just the viral load, which leads to the demise of the patient. What we aim to do is offer a fair price that considers the financial impact of a drug that can significantly reduce death risk in hospitalized patients, which in turn will lower overall costs for hospitals. We are navigating this carefully to establish a pricing structure that aligns with our drug's proven efficacy while also providing savings to the healthcare system.

Okay. All right. Well, thanks for those thoughts, Mitch. Really appreciate it. Thank you.

Thank you.

The next question comes from Leland Gershell with Oppenheimer. Please go ahead.

Good morning. Thanks for taking my questions. Mitch, I want to ask, as you prepare for the EUA request submission and the manuscripts that will detail the fuller data from the Phase III study, are there any pieces of data that you are still awaiting to collect from the site such as viral load data on the patients? I also wanted to ask, do you see the possibility of publishing the manuscript prior to what may be the EUA granted by the FDA, which presumably could be sometime in the next few months or over the summer? Thank you.

Yeah. To answer your first question, we just got the data a few weeks ago. Therefore, there will be a few outstanding items, such as PK and sparse sampling. However, regarding the EUA submission, as I mentioned earlier, that process allows for real-time submission of information. You don’t have to wait until everything is complete. You can submit your current data and supplement the application as more data comes in from the CRO. This is a significant point, which is why we have an aggressive timeline to submit the EUA request in this quarter because we have what we need. We are not going to hold this up. As for the manuscript, it is already written and completed, and we are in the process of reviewing it. My guess is it will be published online as soon as possible. Ideally, would coordinate the publication with the EUA authorization, so that everyone has access to the information at the same time. We are on track for that.

Great. And just a follow-up, as you see a potential NDA for Sabizabulin in COVID-19, given the performance of the drug in the Phase III population, are you considering similar benefit explorations for non-COVID patients with ARDS? This would be interesting to know if you are seeing any potential for further clinical development in non-COVID ARDS conditions. Thanks.

As I mentioned in my prepared remarks, absolutely. Upon reviewing the literature, I was shocked at how critical ARDS remains as an issue in critical care. Viral-induced ARDS is quite common, with influenza A and RSV being the two primary culprits. Influenza A is now recognized as endemic, accounting for about 52,000 deaths and several hundred thousand hospitalizations annually. This parallels COVID and points to significant market opportunities for addressing ARDS. Our studies have shown that influenza A follows a similar lifecycle as COVID-19, binding to cells, utilizing microtubules for penetration into the cells, and triggering cytokine storms causing ARDS. Therefore, we believe the protocols for developing clinical trials targeting ARDS will begin shortly. We are also discussing the feasibility of expanding studies into pediatric populations regarding RSV while maintaining responsible experimental practices. Overall, we see broad opportunities for Sabizabulin in virally induced ARDS as well as other inflammatory diseases.

Thank you, Mitch.

The next question comes from Yi Chen with HC Wainwright. Please go ahead.

Thank you for taking my questions. My first question is, once you obtain the EUA for Sabizabulin in the US, how easy would it be to obtain similar authorizations in other countries and territories?

Great question. If you look at Pfizer, I believe they have something like 60 EUAs granted. Typically, what happens is that the significant regulatory agencies look to do their work based on US and EU metrics. If we get US approval, around 80% of other countries will follow suit quickly, often expediting their approvals. Our strategy involves gaining rapid approvals in both the US and EU to set a precedent for other territories. We're actively engaging with authorities in Brazil and surrounding countries for expedited reviews similar to our approach in South Africa, a heavily impacted area with obtainable resources for therapeutics. Hence, we believe that securing a US EUA will significantly influence rapid authorizations in other regions.

Thank you. And my follow-up question is, recent news reports showed that patients who received Pfizer’s new COVID drug Paxlovid in the outpatient setting have had symptom rebounds after treatment, potentially showing that Paxlovid is not such an effective drug. Do you have any plans to use your drug to capture the outpatient population?

Yes, we believe Sabizabulin could have activity in the pre-hospital setting for the general population. The reason we initially pursued hospitalized patients is due to FDA guidance—suggesting that our benefit-risk ratio would be optimal in patients facing ICU mortality. Many drugs have tried and failed in this area, with our product being the first demonstrating a 55.2% relative reduction in death. However, as you noted, symptom rebounds are an issue observed with anti-virals like Paxlovid, where stopping medication can trigger prior viral proliferation. This context suggests a considerable opportunity may exist for targeting the general population with Sabizabulin, augmenting the preventive role of vaccines.

Got it. Thank you.

Thank you.

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

Thanks for taking my questions and also congratulations. It looks like you need to follow the patients for safety once you have the EUA. What are your expectations in terms of how many patients or how long they will have to be followed for the safety data regarding the potential NDA filing?

I will ask Dr. Gary Barnette, our Chief Scientific Officer, who handles our regulatory processes to clarify the details of EUA compliance.

Under the EUAs, you are obligated to collect what they call spontaneous reporting of adverse events. We believe that this aligns with the normal EUA process, carried out for NDA-approved drugs as well. This involves formal submissions through MedWatch forms, with serious events maintained closely. Although reporting tends to be sparse for approved drugs, under an EUA, compliance is prioritized. Our goal is to encourage our investigators to have robust tracking regarding any adverse events.

Moreover, I'd like to remind you that while this program revolves around COVID-19, Sabizabulin has an established history in oncology. We have observed significant tolerability, with nearly 250 patients exposed to doses up to 9 milligrams or more, and some cases in oncology have reached 32 milligrams daily for an extended period. Spontaneous reporting of safety data will encompass our ongoing work, which we were advised would suffice for our future NDA submissions.

That's great. In terms of negotiations regarding stockpiling, how does that process work as EUAs progress?

The good news is we've been incredibly proactive engaging with government officials. We initially connected with BARDA during the Phase II studies and have since developed strong rapport. We discuss updates with BARDA regularly; their Tech Watch group encompasses around 15 to 28 agencies, which we've informed regarding our advancements. Importantly, we appreciate that present budget discussions center on funds previously allocated for COVID—not isolated to new budget measures—creating an urgency for therapeutics. Once we receive EUA authorization, we expect a series of events to prompt additional governmental investments.

Okay, great. Thanks so much.

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

Thank you. I appreciate all of you joining us for today's call. I look forward to updating you all on our progress in our next investor call. We're excited about our advancements related to COVID-19 and look forward to continuing to update you specifically on Sabizabulin. Thank you.

The digital replay of this conference call will be available beginning approximately noon Eastern Time today, May 12 by dialing 1877-344-7529 in the US and 1412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 8215063. Please record your name and company when joining. The conference has now concluded. Thank you for attending today's discussion.