Good morning, ladies and gentlemen, and welcome to the Veru Inc.'s Investors Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Mr. Michael Purvis, Veru Inc.'s Executive Vice President, General Counsel and Corporate Strategy. Please go ahead.

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

Good morning. With me on this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the CFO and Chief Administrative Officer; Michael Purvis, the Executive Vice President, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q1 fiscal year 2024 earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing innovative medicines for high-quality weight loss, oncology and ARDS. The company's drug development program includes two late-stage novel orally administered small molecules, enobosarm and sabizabulin. The weight loss pipeline leads off with enobosarm, also known as ostarine, MK-2866, GTx-024, S-22 and VERU-024. These are all the identical same molecule enobosarm, which is an oral selective androgen receptor modulator. Enobosarm is being developed as a treatment in combination with weight loss drugs to augment fat loss and to avoid muscle loss in overweight to obese patients for chronic weight management. In our oncology pipeline, we're developing enobosarm as a treatment for androgen receptor positive, estrogen receptor positive and human epidermal growth factor 2 negative, metastatic breast cancer in the second-line setting. In our infectious disease pipeline, which is pending additional external funding or pharma partnership is sabizabulin, a microtubule disruptor, which is being developed as a Phase III clinical trial for the treatment of hospitalized patients with viral-induced ARDS. The company also has an FDA-approved commercial product, the FC2 Female Condom, Internal Condom, for the dual protection against unplanned pregnancy and sexually transmitted infections. This morning, we'll provide an update on our company's primary focus the development of enobosarm and oral SARM in combination with weight-loss drugs like Glucagon-like peptide-1 receptor agonist, which we're going to refer to as GLP-1 receptor agonist. These are being used to avoid enobosarm in combination is used to avoid muscle loss and physical function loss to augment fat loss and potentially result in higher quality weight loss. We'll also provide financial highlights for our first quarter fiscal year 2024. The GLP-1 receptor agonist like Ozempic, Wegovy, Zepbound and Mounjaro are very effective weight loss drugs. Unfortunately, clinical studies have shown that up to 50% of the total weight loss comes from muscle, which is problematic as muscle is necessary for metabolism, strength and physical function. Loss of muscle may be also one of the reasons why patients on GLP-1 drugs reach a weight loss plateau, meaning they cannot lose any more weight while taking the GLP-1 receptor agonist drug. According to the CDC, 41.5% of older adults have obesity in the United States and could benefit from a weight loss medication. Up to 34.4% of these obese patients over the age of 60 have sarcopenic obesity. This large subpopulation of sarcopenic obese patients is especially at risk when taking a GLP-1 receptor agonist drugs for weight loss as they already have critically low amounts of muscle due to age-related muscle loss. Further loss of muscle mass when taking a GLP-1 receptor agonist medication may lead to muscle weakness, leading to poor balance, decreased gait speed, mobility, disability, loss of independence, falls, bone fractures and increased mortality. This can lead to a condition similar to age-related frailty. Because of the magnitude and speed of muscle loss while on a GLP-1 receptor agonist therapy for weight loss, GLP-1 receptor agonist drugs may accelerate the development of frailty in obese and overweight elderly patients. We believe there is an urgent unmet medical need for a drug when given in combination with GLP-1 receptor agonist that can prevent loss of muscle while preferentially reducing fat and not only for all overweight or obese patients, but especially for the large subpopulation of sarcopenic or overweight elderly patients who are at risk for developing muscle atrophy and muscle weakness leading to frailty. We believe that enobosarm, our novel oral selective androgen receptor modulator may be the best drug candidate to address this unmet medical need. Enobosarm has been previously studied in five clinical studies involving 960 older men and postmenopausal women, as well as older patients who have muscle wasting because of advanced cancer. Advanced cancer simulates a starvation state where there's significant unintentional loss or wasting of both muscle and fat mass like what is observed for the GLP-1 receptor agonist treatment. The totality of the clinical data from these five clinical trials demonstrate that enobosarm treatment leads to dose-dependent increases in muscle mass with improvements in physical function, as well as significant dose-dependent reductions in fat mass. The patient data that were generated in these five enobosarm clinical trials in both elderly patients and in patients with a cancer-induced starvation-like state provide strong clinical rationale for enobosarm. Our hypothesis is that enobosarm in combination with a GLP-1 receptor agonist would potentially augment the fat reduction and total weight loss while avoiding muscle loss. In addition, enobosarm has a large safety database, which includes 27 clinical trials involving 1,581 men and women dosed with enobosarm with the duration of treatment in some patients for up to three years. In this large safety database, enobosarm was generally well tolerated with no increase in gastrointestinal side effects. This is important, and there's already significant and frequent gastrointestinal side effects with the GLP-1 receptor agonist treatment alone. As for our enobosarm clinical program for high-quality weight loss, this week, I'm happy to report that the FDA has cleared our investigational new drug application for our Phase IIb multicenter double-blind, placebo-controlled, randomized dose-finding clinical trial designed to evaluate the safety and efficacy of enobosarm 3 milligrams, 6 milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in approximately 90 randomized sarcopenic, obese or overweight elderly patients receiving semaglutide who have risk of developing muscle atrophy and muscle weakness. The purpose of the Phase IIb trial is to select the optimal dose of enobosarm in combination with the GLP-1 receptor agonist that best preserves muscle and reduces fat after 16 weeks of treatment to advance as a Phase III obesity overweight clinical trial. The primary endpoint to the Phase IIb clinical trial will be the change in lean body mass from baseline to 16 weeks. Key secondary endpoints will include the change in baseline to 16 weeks in total fat mass, insulin resistance, total body weight and physical function as measured by stair climb tests. We plan to initiate the Phase IIb clinical study in April 2024, and the clinical study will be conducted in approximately 15 clinical sites in the United States. The top line clinical results for the Phase IIb clinical trial are expected by the end of calendar year 2024. We believe that assessing the effect of enobosarm and lean body mass and fat mass in 16 weeks should be adequate to demonstrate significant loss of muscle in the semaglutide plus placebo cohort. Support comes from the STEP 1 study reported by Wilding et al. in the New England Journal of Medicine publication, which evaluated semaglutide for weight loss in overweight and obese patients and showed that 49% of the total weight loss in the 68-week study actually occurred by week 16, and 40% of the total weight loss was attributable to muscle loss. After completing the 16-week efficacy dose-finding portion of the Phase IIb clinical trial, it is planned that participants will then continue into an open-label extension trial where all patients will receive 6 milligrams of enobosarm monotherapy for 12 weeks to determine the ability of enobosarm to rescue, which is to reverse the muscle loss and prevent fat and weight rebound after stopping a GLP-1 receptor agonist. The results of this separate Phase IIb open-label extension study are expected in calendar Q2 2025. In summary, our Phase IIb clinical program is designed to provide clinical data to support the development of enobosarm for high-quality weight loss for two possible patient populations. The first population, enobosarm dose finding will be evaluated in the large at-risk subpopulation of obese overweight patients who are sarcopenic or obese or overweight elderly patients receiving GLP-1 receptor agonist for weight loss. The enobosarm and GLP-1 receptor agonist combination therapy has the potential to augment weight loss by preferentially increasing fat loss while preventing muscle loss and improving physical function potentially leading to higher quality weight loss. The second population includes enobosarm monotherapy treatment for at-risk sarcopenic obese overweight elderly patients who discontinue a GLP-1 receptor agonist. In this case, enobosarm may rescue the patient by increasing muscle mass and improving physical function while preventing the rebound weight and fat gain that typically occurs when GLP-1 receptor agonist is stopped. We believe we have sufficient financial resources on hand, which includes the recent financing of net proceeds of $35.2 million to complete and provide results from both the Phase IIb clinical trial and the open-label extension clinical trial.

Thank you, Dr. Steiner. Overall, net revenues were $2.1 million compared to $2.5 million in the prior year's first quarter. The U.S. prescription channel net revenues increased to $634,000 from $163,000 in the prior year's first quarter as a result of increasing sales through our telehealth portal. Global public sector net revenues decreased to $1.5 million compared to $2.3 million in the prior year's first quarter due to the timing of orders and shipments. Gross profit was $1.2 million or 54% of net revenues compared to $702,000 or 28% of net revenues in the prior year's first quarter. The increase in gross profit and gross margin is driven primarily by the change in the sales mix, with our U.S. FC2 prescription channel representing 30% of net revenues in the current period compared to 7% in the prior period. Sales in our U.S. prescription channel have a higher profit margin. On December 18, 2023, we completed an underwritten public offering of our common stock, which included the exercise in full of the underwriters' option to purchase additional shares. Net proceeds to the company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs incurred by the company. All the shares sold in the offering were offered by the company. As of December 31, 2023, our cash balance was $40.6 million compared to $9.6 million on September 30, 2023. We believe our current cash balance will be adequate to fund the planned operations of the company as we continue to focus on developing enobosarm for high-quality weight loss.

Thank you, Michele. It has only been recently that the significance of clinical need to avoid adverse effects of significant muscle loss caused by GLP-1 receptor agonists has been appreciated. All the GLP-1 receptor agonists work by creating a starvation state that nonselectively reduces both muscle and fat tissues to cause weight loss. Using a muscle-preserving drug in combination with GLP-1 receptor agonists would potentially allow for a higher quality weight loss. I want to emphasize that enobosarm is not competing with GLP-1 receptor agonist drugs that are already on the market or under development for weight loss. The expectation is that enobosarm may be potentially combined with any one of the many GLP-1 receptor agonist drugs to avoid muscle loss and to augment fat loss. This is truly a new indication. We believe enobosarm is the best investigational drug candidate to address the muscle loss caused by GLP-1 receptor drugs for weight loss. Enobosarm is first-in-class, has oral once-a-day dosing, has demonstrated tissue selectivity and utilized a well-established known mechanism of action, the androgen receptor, favorably changing body composition. Activation of the androgen receptor increases muscle mass, improves physical function and decreases fat mass to potentially achieve a higher quality weight loss. The global obesity and overweight drug market is projected to be $100 billion by 2030. It should be emphasized that enobosarm may potentially be combined with any one of the GLP-1 receptor agonist weight loss drugs, not only for older or overweight at-risk patients, but also all overweight or obese patients who want to avoid muscle loss while taking a GLP-1 receptor agonist for weight loss. The combination of enobosarm with a GLP-1 receptor agonist potentially represents a multibillion-dollar global opportunity. We're very excited about the prospects of enobosarm to address this new and important unmet medical need. With the FDA go ahead, we're looking forward to the initiation of this important and timely Phase IIb clinical study. With that, I'll now open the call to questions. Operator?

Our first question comes from Dennis Ding with Jefferies.

And congratulations on all the progress. Just one for me around the obesity program. Given various GLP-1s have different levels of weight loss as well as muscle wasting, what's a clinically meaningful level of muscle preservation and what's clinically meaningful additional weight loss that you guys are looking for in your Phase IIb? And how do you define success from that trial?

Good question. The first question pertains to our perspective on muscle loss, particularly concerning our Phase II study. It's true that all GLP-1 medications are associated with muscle loss due to their mechanism, which is based on low calorie intake. This leads to both muscle and fat loss, not specific to one tissue type, with a range of around 20% to 50%. The extent of muscle loss is influenced by the potency of the GLP-1 receptor agonist; stronger ones result in more muscle loss. Our goal at the 16-week mark is to demonstrate that we can maintain muscle mass, knowing that semaglutide typically results in about 40% muscle loss. We specifically chose only one GLP-1 receptor agonist for our Phase IIb study to eliminate concerns about variations in muscle loss among different agonists. We are using semaglutide, or Wegovy. Based on the STEP 1 study, we anticipate that about 40% of the muscle loss associated with the initial 50% weight loss in the first 16 weeks will occur. We define success as halting the decline in muscle mass, measuring the difference between what we've maintained and what has been lost. Maintaining function and preventing any decline is seen as a success as well. Additionally, significant fat loss correlates with overall weight loss by week 48. We've chosen to assess changes at 16 weeks using DEXA scanning, which serves as a biomarker. We believe that if we maintain muscle at 16 weeks, it will carry through to 48 weeks. If we achieve more fat loss at 16 weeks, we expect even greater fat loss by 48 weeks. The approach is to gather relevant information at this stage rather than waiting the full 48 weeks. Our goal is to ensure lean body mass is preserved with substantial fat loss at the 16-week mark. In scenarios where total weight loss is similar in both groups, that would be ideal, indicating that one group lost only fat while maintaining muscle. In contrast, the treated group with enobosarm would maintain muscle while also losing fat, achieving the same weight loss, representing a high-quality result. The expectation is that maintaining muscle could lead to more significant weight loss. Concerns arise based on existing studies showing that after 16 to 20 weeks on GLP-1 receptor agonists, many experience a plateau in weight loss. This plateau occurs because sufficient muscle mass loss triggers a rebound in appetite. Thus, resistance exercises and protein intake are often recommended. Most studies encounter this plateau. The solution is to maintain muscle for deeper weight loss since in obese individuals, the fat compartment is disproportionately larger than the muscle compartment. Achieving comparable weight loss with a different body composition at 16 weeks could suggest increased weight loss at 48 weeks, which is what our Phase III studies will examine. Regulatory agencies have indicated they will focus on total weight loss over 48 weeks, with an expectation for an incremental increase that is about 5% higher than the control group's total weight loss. Success would be reaching that benchmark or higher while maintaining muscle, indicating the majority of weight loss was from fat. I hope this answers your question.

Yes, yes. And maybe a quick follow-up. Can you remind us some of the statistical assumptions from the Phase IIb and whether the study is powered to show statistically significant results?

Yes, I’ll be happy to do. I'm going to have Dr. Gary Barnette answer that question. So Gary, can you talk about the sample size and power?

Yes, it's Gary Barnette. The way we did is we looked at the STEP 1 study. The STEP 1 study lost about 6 kilos of lean mass over a 68-week period. If you just assume a linear loss of muscle that would be 0.102 kilos per week, multiply that by 16 weeks, you get approximately 1.6 kilos of loss of lean mass in the first 6 weeks in the control arm, meaning the GLP-1 plus placebo. If we look at our data that we have in obese patients, obese patients with cancer, cancer has a tendency to create a hypocaloric state much like a starvation stage. We basically maintain lean mass in that patient population. So it's a 0.3 kilo loss to a 0.4 kilo increase. We used alpha 0.05 2-sided, 80% power comparing a 1.6 kilo expected loss in the control arm versus a minus 3 kilo or minus 0.3 kilo loss in the treating group, and that's approximately 26 subjects per arm, we powered at 30. Let me also say this, as Mitch mentioned, 49% of the loss of weight occurs in the first 16 weeks of GLP-1 treatment. If you use that number and say that 49% of the muscle is also lost, that's over 3 kilos of lean mass we're expected to lose. But we're being conservative in our sample size calculation using negative 0.3 versus negative 1.6.

Right. So the expectations are going to have a much greater muscle loss than we put into the numbers to be conservative in the arm that's getting the semaglutide without enobosarm.

The next question comes from Leland Gershell with Oppenheimer.

If you could just review with us how you're going to define the eligibility in terms of what it means to be sarcopenic for entry into the trial?

To ensure we reach the largest patient population possible, we are focusing on age restrictions. Specifically, we are looking at individuals over the age of 60, which accounts for 42% of patients who may benefit from an obesity drug due to being overweight or obese. This approach casts a wide net. Our previous work in frailty has informed our understanding of the muscle loss that occurs between ages 60 and 80 and its impact on physical function. We know that significant muscle loss can lead to functional limitations and mobility disability. With this background, we aim to simplify eligibility criteria by including all patients over 60, who will have reduced muscle mass, allowing us to monitor their progress over a 16-week period. As noted, those on semaglutide alone may experience significant weight loss, which could exacerbate frailty. Therefore, by using the age of 60 as a cutoff, we are targeting a patient population that is likely to encounter challenges.

And then just a follow-up, being that from what we understand to maintain benefit from weight loss from the GLP-1 therapy, one has to stay on that therapy for long term, effectively for life. How do you view the ultimate use of enobosarm assuming approval over time? Would it be used as well kind of the entire time that GLP-1 is used? Or would it be used only during the time that the weight loss is actually occurring then once the patient achieve their target weight or their plateau weight, they could go off and they wouldn't be losing any more mass? How should we think about that?

Yes. Part of the reason for our Phase IIb study is to address key questions. For instance, the primary study examines how enobosarm works in combination with a GLP-1, specifically regarding muscle maintenance and fat loss. We want to gain insights on physical function and how to prevent its decline. The second part, an open-label study, addresses concerns regarding patients who stop GLP-1 after not using enobosarm in combination and may experience muscle loss. There is a risk that stopping GLP-1 could lead to rebound weight gain, primarily as fat, potentially worsening the patient's condition since they would have less muscle but the same overall weight. We aim to understand how enobosarm can help mitigate rebound fat gain in this scenario. This information will help us think strategically about how to utilize enobosarm. One possibility is that enobosarm could reduce fat and maintain muscle while being used alongside a GLP-1 receptor agonist, which may allow for lower doses of the GLP-1, thereby minimizing gastrointestinal side effects. As it stands, patients on GLP-1 often hit a plateau, particularly those who are sarcopenic or elderly with low muscle reserves. When muscle levels drop too low, the appetite mechanism kicks in, counteracting weight loss as the appetite drives rebound weight gain. We believe that if muscle is preserved, it may enable deeper fat loss and facilitate better weight management without hitting a plateau. Furthermore, patients may want to stop long-term GLP-1 due to side effects. In such cases, enobosarm could be used as a cycling option, allowing muscle maintenance and fat reduction without relying solely on GLP-1. Then, if needed, patients can resume GLP-1 treatment to reach their target weight more gradually, avoiding severe rebounds. In summary, we envision enobosarm working alongside GLP-1 for long-term use, potentially adjusting GLP-1 dosages. For those who did not start with enobosarm but used GLP-1, this approach can also help them recover muscle or prevent fat rebound if they decide to stop using GLP-1. The Phase IIb study aims to answer critical questions about how we plan to use enobosarm, particularly concerning its combination with GLP-1 and its potential to support individuals on GLP-1 therapy.

Our next question comes from Yi Chen with H.C. Wainwright.

Just to clarify, because enobosarm has the ability to preserve muscle mass that in the Phase IIb trial, it is possible that within the first 16 weeks of enobosarm plus GLP-1 drug combo versus GLP-1 drug alone that for the combo arm, we could see patients lose less total weight versus GLP-1 drug alone? Is that right?

No, I don't think so. I think what you're going to see in this situation is what's missing in your characterization of enobosarm. Enobosarm does two things. One, it preserves muscle and two, it also augments the fat loss. So GLP-1 receptor agonist by itself, it's muscle and fat. If we have a situation where we maintain the muscle, we’re not trying to make Arnold Schwarzenegger, so we're not trying to pick a dose that you put so much muscle on that has the counteractive amount of fat that you've lost. Part of it is can you dial down the muscle part so that you maintain muscle, but you make it out by reducing the fat even more than a GLP-1 by itself. That’s the idea. If you didn't have direct effects on that, I would say, okay, I don't know what's going to happen. But it has direct effects on fat. It could be possible that a higher dose of enobosarm, I mean, you have the same muscle, a similar muscle maintained, but you have a greater fat loss. We’re going to learn that in the Phase IIb at 16 weeks. The key thing here is, can we maintain the muscle while getting a deeper fat loss. The semaglutide is going to take muscle and fat equally by 16 weeks, so you’re starting to hit the plateau.

Would it be meaningful to have an arm receiving enobosarm alone in this trial?

So we thought about that because enobosarm alone would be very interesting. But we have, again, not in obese patients, but we have in patients that are normal postmenopausal elderly patients. So we know a lot about enobosarm in that setting as monotherapy. We do have data from our 504 study in a subset of patients that were obese in the lung cancer study that pretty much falls in line with what I just said. In that study, where the cancer causes basically a starvation state, we were able to maintain muscle. Muscle was about 0.3 kilos where the GLP-1 lost about, I guess, that study about 3 kilos or something of that story. When you look at total weight at 21 weeks, there was a much greater weight loss in the enobosarm arm than the placebo arm in that patient population. What we saw was the weight loss was due to the fat loss because you maintain the muscle. So we do have data like that. I think for purposes of this study here, we're not trying to make enobosarm by itself the weight-loss drug. I think where we need to get clarity, and again, no company out there at this point now has clinical data in combination with GLP-1 with their drugs is to get that information because that's more important, understanding what is the magnitude of the hypocaloric influence? What is the dose we need to counter that? That allows us to ask additional questions later.

Got it. You mentioned that in your future Phase III trial, the endpoint could be measured at 48 weeks. Is that correct? And I also wonder, how many patients could be required for a future Phase III trial and whether Veru plans to conduct the trial by itself or potentially with a partner?

Yes. So the answer is we're absolutely seeking a partner. But the way we're designing this study is the way we're thinking about it is we have a Phase III that is potentially an all-comers study, in which case, weight loss is your endpoint. The weight loss endpoint, all you had to show is 5% incremental increase, which again would be the standard endpoint of 48 weeks. The FDA wants you to be at least a year. However, embedded in that study of the patients that are in our Phase IIb are greater than 60 years of age. The reason we picked that patient population is because physical function and potentially lean body mass could be interesting endpoints in itself. Depending on how our discussions go with the FDA, do we focus on a subpopulation in which the clinical benefit-risk ratio is different and the endpoints are going to be different potentially? Or do you go after a weight loss population, in which case, you're not worried about muscle, just get the muscle function because that will be something that you can put in your label. Ultimately, we think enobosarm is a kind of programmatic molecule meaning that you're looking at rescue, you're looking at decreasing doses of GLP-1, you're looking at being used in combination with the whole population, being used in combination with an at-risk population. It could potentially be used in combination with a myostatin inhibitor, it can potentially be used. So I think this can be pretty interesting. We're active in trying to find a partner that tests the resources to allow us to explore all these possibilities.

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. I appreciate everybody being here, who joined us on today's call. We're very, very excited about the prospects of enobosarm. I look forward to updating you on our progress in the next investors' call. Thank you.

The digital replay of the conference call will be available beginning approximately noon Eastern Time today, February 8, by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 8260066. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.