Veru Inc. Q3 FY2025 Earnings Call

Good morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. All participants will be in 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 call over to Mr. Michael Purvis, Veru Inc. General Counsel and Executive Vice President of Corporate Strategy. Please go ahead.

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

Thank you, Michael. Good morning. With me in this morning's call are Doctor Gary Barnett, Chief Scientific Officer, Michele Greco, the Chief Financial Officer and Chief Administrative Officer, and Michael Purvis, the General Counsel and Executive Vice President of Corporate Strategy. Thank you for joining our Q3 fiscal year 2025 earnings call. Veru is a late clinical-stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of two clinical-stage drug candidates, Inovasaram and cebisibulin. Inovasaram is an oral selective androgen receptor modulator, also known as SARM, being developed as a novel drug that makes GLP-1 receptor agonist weight loss more tissue-selective by preserving lean mass while causing greater fat loss in older patients who are overweight or have obesity. Cebisibulin is an oral microtubule disruptor being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation and slow the progression of atherosclerotic cardiovascular disease. This morning, we'll focus our update only on our chronic weight loss management program. As defined by the FDA, obesity is a disease of excess body adiposity or fat. Therefore, the medical objective to treat obesity by weight reduction drug or drugs in combination should be to reduce the excess body fat, not lean mass, to improve the morbidity and mortality associated with obesity. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, the weight loss is tissue nonselective, and the indiscriminate loss of both fat and lean mass. Of the total weight loss, up to 50% of the total weight loss is attributable to lean mass. We must do a better job of getting rid of fat tissue only. As we previously presented the clinical data as they became available for our Phase 2 program, I will now present a summary of all of these important findings. Now we have demonstrated in the Phase 2b quality study that Innovus Army is a next-generation drug that makes GLP-1 receptor agonist weight loss more tissue-selective for fat loss while preserving lean mass and physical function. In January 2025, the company announced positive top-line and efficacy data results from the Phase 2b quality clinical study, which is a multi-center, double-blind, placebo-controlled, randomized, dose-finding clinical trial designed to evaluate the safety and efficacy of Innovus Arm three milligrams, and Innovus Arm six milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in one hundred and sixty-eight older patients greater than 60 years of age receiving semaglutide for chronic weight management. The Inovasaram plus semaglutide group met the primary endpoint of the study with a statistically significant 100% average preservation of total lean mass compared to placebo plus semaglutide group at sixteen weeks, and that p-value is less than 0.001. Inovasaram plus semaglutide treatment resulted in a dose-dependent greater loss of fat compared to placebo plus semaglutide, with the Inovasaram six milligram dose having a 42% greater relative loss of fat mass compared to the placebo semaglutide group at sixteen weeks and that p-value is 0.017. The Inovasaram three milligram group also showed a 12% greater fat loss. Even with having preserved the lean mass, the Inovasaram plus semaglutide treatment resulted in a similar mean body weight loss as semaglutide alone at sixteen weeks. The tissue composition of the total body weight loss is 34% lean mass and 66% fat mass for the placebo with semaglutide group, whereas it was 0% lean mass and 100% fat mass for the Inovasaram three milligrams with semaglutide group. Physical function was measured by the stair climb test. Responders analysis was conducted using greater than a 10% decline in stair climb power as a cutoff at sixteen weeks, which represents approximately seven to eight years loss of stair climb power that naturally occurs with aging. The Phase 2b quality clinical trial is the first human study to demonstrate that older patients who are overweight and have obesity receiving semaglutide are at higher risk for accelerated loss of physical function, as forty-four point eight percent of the placebo plus semaglutide group had at least a 10% decline in stair climb power function at sixteen weeks. Inovasar treatment preserved the lean mass, which translated into a reduction in the proportion of patients that experienced clinically significant stair climb physical function decline, with seventeen point six percent of the Inovasar three milligram plus semaglutide group having at least a 10% decline in stair climb power function at sixteen weeks, which is a 59.8% relative reduction in the portion of patients that lost at least 10% stair climb power compared to the placebo semaglutide group, and that p-value was 0.006. In May 2025, the company announced that Inovasaram and semaglutide combination had a positive safety profile in the Phase 2b quality clinical trial. Now after the trial participants completed the efficacy dose-finding portion of the Phase 2b quality clinical trial, 148 participants continued to the Phase 2b maintenance extension study. This is a double-blind study, where all patients discontinued semaglutide treatment but continued receiving placebo, Inovasaram three milligrams, or Inovasaram six milligrams as monotherapy for twelve weeks. In June 2025, the company announced positive top-line efficacy and safety results in the maintenance extension portion of the Phase 2b quality clinical study that showed that Inovasaram significantly reduced body weight regain, prevented fat regain, and preserved lean mass after semaglutide discontinuation. As a point of reference, at the end of the Phase 2b quality study active weight-loss period of sixteen weeks, body weight loss was similar across treatment groups with semaglutide plus placebo group losing an average of about 11.88 pounds. After the twelve-week maintenance extension period, where all treatment groups discontinued semaglutide, the placebo monotherapy group regained 43% of the weight that was previously lost during the Phase 2b quality study for a mean percentage change of 2.57%, which is five pounds compared to 1.41%, which is 2.73 pounds for the three-milligram group, and that p-value is 0.038 and 2.87%, which is 5.29 pounds for the six-milligram Inovasaram group. This means that the three-milligram Inovasaram monotherapy significantly reduced the body weight regained by 46% after discontinuation of semaglutide. The mean tissue composition of the body weight regained was 100% lean mass in both the three-milligram and six-milligram groups, whereas it was 28% fat and 72% lean mass in the placebo group. Inovasaram plus semaglutide followed by Inovasaram monotherapy regimen was more effective in preserving lean mass and causing and maintaining greater loss of fat by the end of the study. The placebo plus semaglutide followed by placebo monotherapy group experienced loss of lean mass, while the Inovasaram plus semaglutide group followed by Inovasaram monotherapy group significantly preserved more than 100% of lean mass, with the Inovasaram three milligram p-value less than 0.001 and Inovasaram six milligrams p-value equals 0.004. The Inovasaram plus semaglutide followed by Inovasaram monotherapy patients had a 58% greater loss of fat, with Inovasaram three milligrams p-value of 0.085 and 93% greater loss of fat with Inovasaram six milligrams, and that p-value is 0.008 compared to placebo plus semaglutide followed by placebo monotherapy. Now, let's discuss adverse events and adverse events of special interest in this double-blind Phase 2b maintenance extension trial. Those on monotherapy had a positive safety profile. After discontinuation of semaglutide, there were essentially no gastrointestinal side effects, no evidence of drug-induced liver injury, and no increases in obstructive sleep apnea observed at any dose of Inovasaram compared to placebo monotherapy. There were no adverse events of increases in prostate-specific antigen in men, and there were no adverse events related to masculinization in women, and there were no reports of suicidal ideation observed. In summary, the Phase 2b quality maintenance extension clinical trial confirms that preserving lean mass with Inovasaram plus semaglutide led to greater fat loss during the active weight loss period and after semaglutide was discontinued. Inovasaram monotherapy significantly prevented the regain of both weight and fat mass during the maintenance period such that by the end of the study, there was greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group. On 08/11/2025, the company announced the selection of a novel modified release oral formulation for chronic weight management following a pharmacokinetic clinical study. A single-dose open-label pilot study evaluated the plasma concentrations versus time profile of the proprietary patentable modified release formulation of Inovasaram three milligrams. The new formulation demonstrated the intended distinct target product release profile, which includes a reduction in maximum plasma concentration, which is called Cmax, a delayed time to maximum plasma concentration called Tmax, and a distinct secondary peak concentration and a similar extent of absorption, known as AUC, compared to historical values for Inovasaram immediate release capsules. The novel modified release oral Inovasaram formulation is planned to be available for the Phase III clinical study and for commercialization. The novel Inovasaram oral formulation's unique manufacturing process is protected by issued global patents with protection through 2037, and the new patents on the novel modified release oral Inovasaram formulation itself have been filed, with an expected expiry in 02/1946 if issued. We expect regulatory clarity for the GLP-1 receptor agonist and Inovasaram combination Phase III program as we have a scheduled end of Phase II FDA meeting this quarter. So we'll hear it this quarter. The proposed indication is Inovasaram as a selective androgen receptor modulator indicated as an adjunct to GLP-1 receptor agonist therapy, a reduced calorie diet, and increased physical activity for chronic weight management in older patients greater than 60 years of age with obesity. During our previous pre-IND FDA meeting, FDA provided general comments about a regulatory path forward for Inovasaram as a drug that improves body composition during chronic weight management, including input on the Phase III clinical program design. Some of these FDA comments from the pre-IND meeting suggested that Inovasaram in combination with an approved grade such as GLP-1 needs to show that there is some stabilization of lean mass that is clinically meaningful. Imaging-based changes in lean mass would need to be directly linked to improvements in how patients feel, function, and survive to support the indication related to preservation of lean mass. Improvement in stair climb performance measures is clinically meaningful. So that's one way to do it. We need to be linked to observing improvements in lean mass rather than just focusing on weight loss itself. The stair climb test has been accepted by the FDA as a reference for previous drug approvals and pivotal trials. Our Phase III program has established metrics based on findings from pivotal Phase III cancer detection studies and other relevant studies. Finally, we're focusing our Phase III clinical program on an older population that could benefit from a weight reduction drug for chronic weight management but who are at high risk for muscle weakness and falls due to age-related loss of muscle. There are 47.4 million patients over the age of 60 enrolled in Medicare Part D, of which 41.5% could benefit from the drug for overweight or obesity. Furthermore, up to 34.4% of patients over the age of 60 with obesity in the United States have what is called sarcopenic obesity. Sarcopenic obesity means these are patients who have obesity and low muscle mass simultaneously and are at the greatest risk for developing critically low muscle mass when taking a currently approved GLP-1 receptor agonist. Although older patients represent a large market alone, success in this patient population could lead to the combination of Inovasaram and GLP-1 treatment in younger patients who have obesity as well as in diabetic and frailty populations. We're looking forward to receiving the FDA regulatory clarity for this novel unmet medical need. I will now turn the call over to Michele Greco, CFO, CAO to discuss the financial highlights.

Thank you, Doctor Steiner. On 08/08/2025, the company executed a one-for-10 reverse stock split of its issued and outstanding common stock. As a result of the reverse split, each 10 shares of issued and outstanding common stock were automatically converted into one share of common stock. The reverse stock split did not change the total number of shares authorized or par value per share. The reverse stock split was approved by the company's shareholders on 07/25/2025. All share and per-share amounts presented in our financial statements as of 06/30/2025 have been retroactively adjusted for all periods presented. There were no fractional shares issued in connection with the reverse stock split. Now reviewing the results for the three months ended 06/30/2025, research and development costs decreased to $3,000,000 from $4,800,000 in the prior quarter. The decrease is primarily due to the wind down of the company's Phase 2b quality clinical study for Inovasaram as a treatment to augment fat loss and to prevent muscle loss, which was completed during the quarter ended 06/30/2025. The company initiated the Phase 2b quality clinical study during the quarter ended 06/30/2024. Selling, general and administrative expenses were $5,000,000 compared to $5,800,000 in the prior quarter. The decrease is primarily due to a decrease in share-based compensation. We recognized a gain on the sale of entire assets of $485,000 compared to $110,000 in the prior quarter. The gain represents non-refundable consideration received related to promissory notes due to Veru. The bottom line result for continuing operations was a net loss of $7,300,000 or $0.50 per diluted common share compared to a net loss of $10,300,000 or $0.71 per diluted common share in the prior year's quarter. Net loss from discontinued operations net of taxes related to the FC2 Female Condom business, which was sold on 12/30/2024, was $9,700 or $0.00 per diluted common share compared to a net loss of $629,000 or $0.04 per diluted common share in the prior quarter. The net loss from discontinued operations during the current quarter represents changes in an estimate made at the time of the FC2 business sale, while the net loss for the prior year quarter represents the operations of the FC2 business during that period. Now turning to the results for the nine months ended 06/30/2025. Research and development costs increased to $12,700,000 from $9,500,000 in the prior period. The increase is due to $4,500,000 incurred related to the company's Phase 2b quality clinical study for Inovasaram as a treatment to augment fat loss and to prevent muscle loss, partially offset by a decrease in expenditures related to other drug development programs that were terminated in previous years. Selling, general and administrative expenses were $15,400,000 compared to $18,400,000 in the prior period, which is primarily due to a decrease in share-based compensation. We recognized a gain on sale of NTAPI assets of $2,200,000 compared to a gain of $1,000,000 in the prior period, which is based on non-refundable consideration received related to promissory notes due to Veru. In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on the extinguishment of debt of $8,600,000 related to the termination of the SWK Holdings residual royalty agreement. This represents the difference between the change of control payment of $4,200,000 and the net carrying amount of the extinguished debt of $12,800,000 which included embedded derivative for the change of control provision at fair value of $4,700,000. The bottom line results for continuing operations was a net loss of $17,000,000 or $1.16 per diluted common share compared to a net loss of $26,700,000 or $2.04 per diluted common share in the prior period. Net loss from discontinued operations net of taxes related to the FC2 business was $7,200,000 or $0.49 per diluted common share, including the $4,300,000 loss on the sale of the FC2 business compared to a net loss of $2,600,000 or $0.20 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $4,600,000 is due to the loss on the sale of the FC2 female condom business of $4,300,000 and the increase in the loss from the change in fair value of derivative liabilities of $3,200,000, partially offset by a decrease in selling, general and administrative expenses of $3,900,000. The purchase price of the sales of FC2 business was $18,000,000 in cash, subject to adjustments as set forth in the purchase agreement for the transaction. Net proceeds from the sale of FC2 female condom business were approximately $16,300,000 after selling costs and other purchase price adjustments but before a change of control payment of $4,200,000 owed to SWK Holdings pursuant to a residual royalty agreement for 2018 financing transaction. The loss on the sale of FC2 female condom business is approximately $4,300,000. The difference between the estimated net proceeds of $16,300,000 and the total carrying value of the FC2 business of $20,600,000. The sale of the FC2 female condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development. Now looking at our balance sheet, as of 06/30/2025, our cash, cash equivalents, and restricted cash balance was $15,000,000 compared to $24,900,000 as of 09/30/2024. The restricted cash as of 06/30/2025 was $354,000 related to the sale of the FC2 female condom business. Our net working capital was $9,500,000 on 06/30/2025 compared to $23,400,000 on 09/30/2024. The company is not profitable and has had negative cash flow from operations. We will need additional capital to support our drug development candidates. Based upon the company's current operating plan, our cash as of the issuance date of these financial statements is not sufficient for the company to fund operations for the next twelve months. However, we have sufficient capital to take the company into the next calendar year, which is beyond obtaining regulatory clarity from the FDA end of Phase II meeting for the Inovasaram clinical program. During the nine months ended 06/30/2025, we used cash of $24,600,000 in operating activities compared with $17,300,000 used for operating activities in the prior period. We generated cash from investing activities of $18,900,000 for the nine months ended 06/30/2025 compared to $15,000,000 from investing activities in the prior period. The cash generated in the current year relates to proceeds from the sale of the FC2 female condom business of $16,300,000, proceeds of $2,200,000 from the sale of the Intati assets, and proceeds of $393,000 from the sale of Onkinetics equity securities. We used cash in financing activities for the nine months ended 06/30/2025 of $4,200,000 related to the change of control payment pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 female condom business. In the prior period, we generated $36,800,000 from financing activities. Now I'd like to turn the call back to Doctor Steiner. Doctor Steiner?

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

And the first question comes from Dennis Ng with Jefferies. Please go ahead.

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

Great. Thank you for the question. Yes, the answer is, we're a small molecule. As you know, Lilly or forglipine has a small molecule, and they like small molecules because they're easy to make, without the complications of cold storage that proteins require. Lilly and Novo Nordisk have had issues maintaining supply with protein-based drugs. Therefore, there is a genuine push to transition to oral weight loss drugs. GLP-1 drugs also have the challenge of muscle loss. So you could imagine a fixed combination with Inovasaram. Yes, it can be done and could add additional patent life just by having the formulation itself. The combination with a GLP-1 could be very interesting. Regarding partnership discussions, yes, we are in discussions with partners. There are mainly two types of partners to consider: those currently in the market, like Novo Nordisk and Lilly, who are focusing on establishing their products, and those from big pharma looking to enter the weight loss space. Additionally, there are over 70 companies exploring GLP-1s of some sort, many of which lack differentiation. A combination therapy with our drug could help them address the lean mass loss concern while still providing GLP-1 benefits. So we're very active, and our strategy is to keep those discussions ongoing to secure non-dilutive funding for future studies.

Great. Thank you.

And your next question comes from Gary Nachman with Raymond James. Please go ahead.

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

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

Sure. Yes. As you know, the key to all discussions and interactions with the FDA is obtaining clarity. The FDA has provided us clarity before, and we want to confirm that clarity on the endpoint, the population, the dose, etcetera. I think the FDA will continue to insist that a physical function measurement is going to be required. It won't be just incremental weight loss. I think that will be a win. I think if I had to pick one area where the FDA may want to expand, and they have discussed this previously, it could involve retaining muscle in this patient population, as all subjects lose muscle on GLP-1 or lose lean mass on GLP-1 RA treatment. We have focused on the older population, those over 60, because we believe—and I think the FDA does as well—that this patient population is at highest risk. However, we also understand that younger patients could benefit from maintaining lean mass and physical function. That could be the significant pushback from the agency, wanting to expand the patient population.

Yes. Regarding how we plan to communicate the feedback from the FDA, you know you have your preliminary comments right after the meeting, and then you have the opportunity for further discussions, but you must wait for them to provide it in writing officially. I would suggest that we look towards the September timeframe—August or September— for the FDA clarity. Once we receive that, we'll have a much better understanding of the Phase III design, capital needs, etc. The good news is we have great data from our relevant population, and the FDA meeting has been granted. The application was submitted a while ago, and everything is progressing well.

Yes, just on the modified release formulation with the reduction in Cmax and delayed Tmax, would you arguably have an even better side effect profile than the current formulation? How are you confident it'll have overall the same efficacy as the IR? What do you have to show the FDA for them to allow that new formulation in the Phase III? Thanks.

Gary, can I ask you to address that?

Yes, sure. The safety profile of Inovasaram is very good. As we all know, reducing Cmax and delaying Tmax is something the FDA looks at. Consequently, it will likely have a better safety profile; however, it's hard to improve on what we already have. We have completed the pilot study, and we will be conducting a formal relative bioavailability study. The FDA will look at both the safety profile and the efficacy, which is typically dependent on the extent of absorption, meaning the area under the plasma concentration-time curve (AUC). We believe that the efficacy will align closely with our current immediate release formulation, with improved safety due to the reduced Cmax levels.

You're able to bridge the study that shows that the AUCs are similar?

That's right.

And you'll show that bioavailability study to them at the end of the Phase II meeting, I presume?

Well, we will present it over time. The end of Phase II meeting primarily focuses on trial design, with follow-up discussions about the formulation.

Thank you for taking our questions and congrats on the quarter, team. I'm considering the Phase III design, I know this will come up more at the end of the Phase II meeting this quarter. But it seems based on the proposed sixty-eight week trial design, it will involve two RCTs that are combined, incorporating a dropout portion. Could you discuss this plan, including where this idea came from and what you incorporated from peer learnings into these designs and endpoints? What endpoints will you be focused on, including cardiometabolic endpoints in the trial?

I'll make a comment and then I'll have Doctor Barnett answer the bulk of those questions since he's the one who developed this brilliant trial design. The general concept is based on our successful Phase 2b study, which involved 168 patients and the idea for Phase III is especially physical function being the primary endpoint. We want to keep as much the same as possible due to this success. It is essential to note that functional outcomes have been a significant challenge for other compounds, particularly myostatin inhibitors. The lean mass gained by these compounds may not enhance performance like that gained through androgen receptor modulation, as testosterone improves performance, so that's expected. We want to capitalize on our strengths, and Gary will add more details to this.

Yes, with Inovasaram, we have primarily two buckets of efficacy parameters. One bucket encompasses short-term outcomes like lean mass, physical function, fat mass, and changes in body composition. The second contains longer-term assessments, such as incremental weight loss, which has shown evidence from others that significant weight loss occurs after longer durations, sometimes up to 72 weeks. Incremental improvements in bone mineral density will require 9 to 12 months to be adequately evaluated. As Doctor Steiner mentioned, keeping our shorter-term parameters is crucial for replicating our successful Phase II results. However, we want longer-term assessments for factors like bone density, incremental weight loss and safety. The design we devised incorporates both. It begins with a double-blind randomized placebo-controlled first part focused on lean mass, fat mass, and physical function. Then, we plan to rerandomize subjects, creating two groups: one continuing on Inovasaram plus GLP-1 and the other on placebo plus GLP-1. We also have a dechallenged group, which means patients who were on Inovasaram plus GLP-1 during the first study phase will stop Inovasaram, and we will assess the impact of stopping treatment. Conversely, there will also be a rescue group for placebo patients who had lost lean mass and function, who will then receive Inovasaram. This structure will allow us to simulate a real-world population that might be taking GLP-1s but experience muscle loss. Such a trial design entails short-term efficacy, long-term efficacy and safety, along with both dechallenge and rescue parameters, which I believe is innovative. This study design not only aligns with FDA efforts to streamline drug development but also ensures thorough assessments of each potential outcome.

I appreciate that extra color. Just one more, if I may. Regarding expectations for data from both the induction and maintenance trials, I'm assuming that will be presented at a conference later this year? Where might we expect that and what additional insights might these presentations provide?

Currently, we're targeting obesity week for the next data presentation. Abstracts have been submitted, and we're still awaiting feedback. It should occur sometime in late fall, around November. This will allow us to provide detailed data that we've not shared yet. Beyond that, we aim for peer-reviewed publications, but the next significant data will be presented at obesity week.

Hey, good morning, Mitch. Thanks for the update and congrats on the progress you've been making. I have a couple of questions on the new formulation. Just as we await issuance of the patents, could you share details about how novel and unanticipated your observations are based on the technology involved, and how confident are you that you'll get those patents allowed? What about the defensibility of those patents against potential generic filers in the future?

Gary Barnett and I will tag-team this question. Having a novel formulation, formed through existing patents and new patents, grants you significant composition of matter type protection because of the distinct delivery of the drug. It presents challenges for anyone seeking to create a generic alternative. Our formulation utilized a advanced technology akin to 3D printing, which applies multiple layers of the drug, making it extremely hard for others to design around. We collaborated with a reputable company, Maxon Medical, which specializes in this. Furthermore, we have already solidified our patent portfolio. Composition matters will run out in 2034 if you add the PTO, while method of use patents expire in 02/1944. We've even received preliminary feedback from international patent offices indicating that their search has shown our claims are novel and feature no prior art, making us confident in our defensibility. Gary, would you like to expand on how this patent differentiates us?

The formulation is not an immediate release formulation we previously used. This controlled release formulation is specifically designed to optimize how the drug is released in the GI tract, which will maximize the pharmacokinetic profile for both efficacy and safety. This innovation sets it apart from our previous immediate release formulations.

For the FDA, the AUC is crucial for generics, as they must match both Cmax and AUC conditions. By altering these parameters, including introducing a secondary peak and changing Tmax, it makes it highly challenging to replicate.

Got it. That’s very helpful. Regarding Phase III, will you likely implement an open-label extension beyond Phase IIIb? Do you see a need for additional safety exposure work from a regulatory perspective?

At this point, we haven't designed an open-label extension for the study. We believe that based on FDA requirements for non-life-threatening, non-acute dosing, we will be in compliance with their documented safety database. Therefore, we do not believe there’s a need for an open-label extension specifically for safety. We might consider adding something later if there's a need expressed by a commercial stakeholder or the FDA, but right now, there's nothing planned.

Hi, this is Eduardo on behalf of Yi. I have a quick question concerning the Phase III trial. You mentioned the potential benefits for patients with sarcopenia or osteoporosis. Do you have any target benchmark for including a specific fraction of the patient population with those comorbidities? Or are you hoping to discover that by recruiting from this demographic?

Let me make a comment and then invite Gary to add his perspective. Initially, we did consider super-screening patients for those with sarcopenia or mobility disabilities; however, we recognized that it might be unfair since we already understand that aging patients naturally lose muscle mass, and based on previous studies, we noted that over 60s generally lose muscle. Therefore, we have an understanding of this patient population based on our earlier experiences. We believe, and have seen evidence that GLP-1 can be harmful to muscle, and we'll be publishing important findings on this. In this study, we will include a broad demographic of older patients taking GLP-1, keeping in mind that about 44% of these patients experienced physical function declines. This patient population shows that even the healthiest individuals over 60 are at risk for declines in both lean mass and function when under GLP-1 treatment.

The muscle component we’re addressing primarily revolves around drug-induced loss of lean mass. For example, we can assess changes from baseline for patients who may have sarcopenia and watch for their functionality and overall muscle health. By stratifying the population based on criteria like age and gender, we can ensure meaningful analysis across different patient subsets.

These studies will also track falls and fractures, as they are essential topics, especially when viewed through the lens of chronic weight loss and aging. If any adverse events arise, we’ll be monitoring them closely.

Hi, good morning. I have a couple of questions. One percent of your population in the three milligram group reported clinically significant functional decline. Were there any particular characteristics in that segment of the population that could account for that statistic?

To answer your question, we did observe seventeen percent of our patients in the three milligram group experiencing a greater than ten percent decline in stair climb power at sixteen weeks. I'm not certain if specific characteristics define them. However, we suspect time is a factor. If the timeline extended, could we reduce that number more significantly? In examining patients, individuals indeed start with varying levels of muscle mass. Therefore, it is plausible that those with lower mass are vulnerable. However, with time, we've recognized that as lean mass increases, physical function also improves, so please stay tuned. Regarding Phase III, we believe the strategy involves targeting higher-risk patient populations—specifically, older patients with obesity but not diabetes, followed by younger patients who are obese. The next group might focus on older and younger patients who have diabetes, plus potentially osteoporosis patients. There are various opportunities in this space, but initially, we want to capture the target patient population known to respond effectively, ensuring usefulness and insight into potential physical function detriments. Selecting older patients, we observed significant information and effects that may not be identifiable in younger populations. Hence, we opted for the older demographic.

Thank you! One last question: regarding the onset of Phase III, how much capital do you estimate will be necessary?

At this moment, we are close to obtaining very valuable FDA feedback. I suggest we wait for that guidance since it will clarify our absolute capital requirements. Presently, our estimates indicate we expect $40 million over an eighteen-month period for Phase III, but this hinges on FDA conversations. I appreciate everyone who joined us on today's call. I look forward to updating you all on our progress in the next investor's call. Of course, when we obtain FDA feedback, we will communicate that promptly. Thank you for joining today's call.

The digital replay of the conference call will be available beginning approximately twelve p.m. Eastern Time today, August 12, by dialing 704-4529 in The U.S. and 8 internationally. You will be prompted to enter the replay access code, which will be 2184944. Please record your name and company when joining. And with that, the conference call has now concluded. Thank you for attending today's discussion. You may now disconnect.