Veru Inc. Q4 FY2025 Earnings Call

Good morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. Please note that this event is being recorded. I would now like to turn the conference call over to Mr. Sam Fisch, Veru Inc. Executive Director, Investor Relations and Corporate Communications. 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 of 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. Joining me on this call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, Chief Financial Officer and Chief Administrative Officer; Philip Greenberg, General Counsel; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. We appreciate your participation in our year-end fiscal year 2025 earnings call. Veru is a biopharmaceutical company in late-stage clinical trials dedicated to developing innovative treatments for cardiometabolic and inflammatory diseases. Our development program includes two new chemical entity small molecules, enobosarm and sabizabulin. Enobosarm is an oral selective androgen receptor modulator being developed as a next-generation drug that aims to enhance fat loss while preserving lean mass when used alongside GLP-1 receptor agonist drugs. This approach is focused on older patients with obesity to achieve improved weight loss and physical function compared to GLP-1 receptor agonist treatment alone. Our second asset, sabizabulin, is a microtubule disruptor being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation and slow the progression of atherosclerotic cardiovascular disease. Today, we will primarily discuss updates on our obesity program and financial highlights for our year-end fiscal year 2025. To begin, let's review the recent FDA guidance on obesity drug development. The FDA recognizes obesity as a disease characterized by excess body fat, indicating that treatment should focus on reducing excess fat while preserving lean mass. While GLP-1 receptor agonists have demonstrated considerable weight loss in obese patients, this weight loss is nonselective, leading to a loss of both fat and significant lean mass. Up to 50% of weight lost can come from lean mass. Moving forward, next-generation obesity treatments should aim for a combination therapy with GLP-1 receptor agonists that focuses solely on fat loss while maintaining lean mass and physical function, ensuring quality weight reduction. When we initiated our Phase IIb clinical trial evaluating enobosarm as a muscle-preserving agent for patients with obesity on GLP-1 treatment about two years ago, it was uncertain how any muscle anabolic drug would perform in this specific patient group. At that time, other companies such as Lilly, Versanis, Scholar Rock, and Regeneron were developing injectable myostatin inhibitors, while Veru was advancing an oral enobosarm from a different SARM class. Today, all involved companies, including Veru, have shared their Phase II clinical results. Notably, Veru was the first to report its data in January 2025 and received FDA guidance by September 2025 to further develop enobosarm combined with GLP-1 receptor agonists for muscle preservation and enhanced fat loss. Our successful Phase IIb trial has shown that oral enobosarm may be the next-generation treatment that allows for fat loss while preserving lean mass and physical function in older patients with obesity, all while maintaining a positive safety profile. Regarding the Phase IIb trial results with the enobosarm 3-milligram dose being prepared for our next trial, I will now highlight the outcomes from the 16-week active weight loss phase with enobosarm 3 milligrams or placebo alongside semaglutide. The enobosarm plus semaglutide group successfully met the primary goal of preserving total lean mass, with a statistically significant preservation of 100% lean mass compared to the placebo plus semaglutide group at 16 weeks. Additionally, the enobosarm group experienced a greater loss of fat mass than the placebo with a 12% increase in fat loss at 16 weeks. Despite preserving lean mass, the average weight loss in the enobosarm plus semaglutide group was comparable to that of semaglutide alone at 16 weeks. However, among participants with a baseline BMI of 35 or higher, 4.7% weight loss was achieved with semaglutide compared to 5.58% with the enobosarm plus semaglutide combination. Furthermore, the proportion of patients losing at least 5% of their body weight at 16 weeks was 47.4% for semaglutide versus 65.4% for the enobosarm group. This weight loss occurred while preserving 84% of lean mass in those taking semaglutide and enobosarm 3 milligrams. When analyzing the tissue makeup of the overall weight loss, the placebo plus semaglutide group's composition was 34% lean mass and 66% fat mass, whereas the enobosarm plus semaglutide group reported 0% lean mass and 100% fat mass. To assess physical function, we utilized the stair climb test, marking a 10% decline in stair climb power over 16 weeks as significant, reflecting a natural decline in power typical with aging. In the placebo group with semaglutide, 44.8% of participants had a significant decline, while only 17.6% of the enobosarm group experienced this decline, leading to a 59.8% relative reduction in deterioration among those receiving enobosarm. In the maintenance phase of the study, where participants stopped semaglutide but continued with placebo or enobosarm 3 milligrams for 12 weeks, the placebo group regained about 43% of the weight lost during the active phase, while the 3-milligram enobosarm group only gained back 1.41% of their weight. This indicates that 3-milligram enobosarm treatment significantly helped reduce weight regain by 46% post-semaglutide discontinuation, with regained weight being primarily lean mass rather than fat. Overall, the enobosarm plus semaglutide combination proved to be more effective in maintaining lean mass and achieving greater fat loss compared to the placebo. As for safety, during the 16-week trial, the combination of enobosarm and semaglutide demonstrated a positive safety profile without additional gastrointestinal issues compared to semaglutide alone. In the maintenance phase following semaglutide cessation, enobosarm also showed a favorable safety profile, with minimal gastrointestinal side effects and no indications of liver injury or sleep apnea, and no adverse events related to masculinization in women or prostate-specific antigen increases in men were noted. In summary, our Phase IIb trial reaffirms that combining enobosarm with semaglutide leads to significant fat loss while preserving lean mass and physical function, and after stopping semaglutide, enobosarm monotherapy effectively limits body weight and fat mass regain, resulting in a more favorable weight loss outcome compared to the placebo. Now, I will provide an update on our enobosarm development plan. The regulatory landscape for muscle preservation drugs in obesity treatment is evolving, with the FDA indicating two regulatory pathways for enobosarm and GLP-1 receptor agonist development based on incremental weight loss. One pathway involves achieving a 5% or greater placebo-corrected weight loss at 52 weeks, while the other could accept clinically significant physical function preservation if the weight loss difference is under 5%. With this FDA feedback, we aim to pinpoint the optimal obesity patient population for enobosarm and GLP-1 receptor agonist therapy. Many patients undergoing GLP-1 receptor agonist treatment experience a weight loss plateau after about a year, as seen in Eli Lilly’s SURMOUNT-1 study, where 88% of patients reached such a plateau, with a significant proportion still clinically obese at that point, particularly those starting with a BMI of 35 or higher. Many are considering bariatric surgery as an option. Our next study will focus on addressing this weight loss plateau population by combining a GLP-1 receptor agonist to reduce appetite with enobosarm, which targets fat burning and muscle preservation to overcome the plateau for better weight management outcomes. The planned Phase IIb PLATEAU clinical trial will assess the effects of enobosarm 3 milligrams on weight, physical function, and safety in approximately 200 older patients with obesity (BMI 35 or higher) starting GLP-1 treatment for weight loss. The primary efficacy measure will be the percentage change from baseline in total body weight over 72 weeks, with an interim analysis at 36 weeks to evaluate changes in lean and fat mass via DEXA scan. We will continue focusing on enobosarm's role in muscle preservation, with secondary endpoints including various physical function assessments and body composition measures. Financially, as of September 30, 2025, we had $15.8 million in cash and equivalents. After that date, we completed a public offering that netted approximately $23.4 million. We anticipate commencing the clinical study in the first quarter of 2026, with the interim analysis on lean and fat mass expected in the first quarter of 2027.

Thank you, Dr. Steiner. On December 30, 2024, Veru sold the FC2 Female Condom business to Clear Future Inc. The purchase price was $18 million in cash, subject to adjustment as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 Female Condom business were approximately $16.5 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK Holdings pursuant to a residual royalty agreement for a 2018 financing transaction. The loss on the sale of the FC2 Female Condom business was approximately $4.1 million. The difference between the estimated net proceeds of $16.5 million and the total carrying value of the FC2 business of $20.6 million. On December 30, 2024, the carrying value of the FC2 Female Condom business was comprised primarily of deferred income tax assets of $12.3 million, accounts receivable of $4.6 million, and inventory of $3.4 million, partially offset by accrued expenses and other current liabilities of $1.5 million. Liabilities associated with the residual royalty agreement, which totaled $9.9 million at September 30, 2024, were extinguished. 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 and also affects how we present our operations and financial results. In our financial statements, all direct revenues, costs, and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations net of tax in the statement of operations. On October 31, 2025, the company completed an underwritten public offering of 1.4 million shares of our common stock, prefunded warrants to purchase up to 7 million shares of our common stock, accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per common share of stock and the accompanying Series A and B warrants. Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting discounts and commissions and costs paid by the company. Now let's review the results for the fiscal year ended September 30, 2025. Research and development costs increased to $15.6 million in fiscal 2025 from $12.8 million in the prior year. The increase is due to an increase in expenses incurred related to the company's Phase IIb QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, partially offset by a decrease in expenditures related to the company's other drug development programs that were terminated in previous years and a decrease in personnel costs. Selling, general and administrative expenses were $19.9 million in fiscal 2025 compared to $24.6 million in the prior year. The decrease is primarily due to a decrease in the expense related to share-based compensation. We recognized a gain on sale of ENTADFI assets of $10.8 million in fiscal 2025 compared to a gain of $1.2 million in the prior year, which is based on nonrefundable consideration received related to promissory notes due to Veru. During the year, the company entered into a settlement agreement with Onconetix, whereby the company received a cash payment of $6.3 million in Series D preferred stock and a warrant, which had a combined fair value of $2.5 million. In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million, which included an embedded derivative for the change of control provision at fair value of $4.7 million. The loss associated with the change in fair value of equity securities in fiscal 2025 was $0.3 million compared with $0.2 million for fiscal 2024. This is due primarily to the change in the fair value of the shares of Onconetix common stock we previously held, which were sold during fiscal 2025. The bottom line result from continuing operations for the fiscal year was a net loss of $15.7 million or $1.07 per diluted common share compared to a net loss of $35.3 million or $2.61 per diluted common share in the prior year. For fiscal 2025, net loss from discontinued operations, net of taxes related to the FC2 business was $7 million or $0.48 per diluted common share, including the $4.1 million loss on the sale of the FC2 business compared to a net loss of $2.5 million or $0.19 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $4.5 million is due to the loss on the sale of the FC2 Female Condom business of $4.1 million, a reduction in gross profit of $4.3 million, and an increase in the loss from the change in fair value of the derivative liabilities of $2.9 million, partially offset by a decrease in operating expenses of $5.5 million. Now looking at the balance sheet. As of September 30, 2025, our cash, cash equivalents and restricted cash balance was $15.8 million compared to $24.9 million as of September 30, 2024. The restricted cash as of September 30, 2025, was $54,000 related to the sale of the FC2 Female Condom business. Subsequent to September 30, 2025, we completed a public offering that resulted in net proceeds to the company of approximately $23.4 million. Our net working capital was $11.1 million on September 30, 2025, compared to $23.4 million on September 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 on the company's current operating plan, our cash as of the issuance date of these financial statements is sufficient for the company to fund operations through the interim analysis in the Phase IIb PLATEAU clinical study to assess the percent change from baseline in lean body mass and fat mass as measured by DEXA scan. During the year, we used cash of $30 million for operating activities compared with $21.7 million used for operating activities in the prior year. We generated cash from investing activities of $25.1 million for fiscal 2025 compared with $0.1 million from investing activities in the prior year. The cash generated in the current year relates to net proceeds from the sale of the FC2 Female Condom business of $16.5 million and proceeds of $8.3 million from the sale of the ENTADFI assets. We used cash in financing activities for fiscal 2025 of $4.2 million 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 year, we generated $36.8 million from financing activities.

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

The first question today comes from William Wood with B. Riley Securities.

Congrats on a successful year. I'm just kind of curious, in your press release for PLATEAU, you noted that there's going to be an inclusion of GLP-1; whereas at least in the past, you've spoken of using only tirzepatide, which is highlighted in your most recent deck. During PLATEAU, there's the potential for 2.4 mg semaglutide, 7.2 mg semaglutide, 25 mg oral semaglutide, and obviously also tirzepatide to all be approved. So I'm just curious, will any GLP-1 be allowed in your Phase IIb? Or will it be limited to just tirzepatide? And curious how we should sort of view the potential to achieve this 5% weight loss bar when placed with various agents. Do you feel that remains the same or is sort of lower or higher initial weight loss better to sort of set you up for success?

Great question. Thank you for the question. So basically, the question is, we're seeing GLP-1 receptor agonists. We're putting tirzepatide in the placeholder in the study and raised the question, are you going to allow both semaglutide and tirzepatide, which are the 2 approved GLP-1 receptor agonists that are out there right now? And the answer is we have to pick one because they are different. And the last thing you want to do is add variability to the study by having tirzepatide and semaglutide together. We're in the process of chatting and trying to secure one or the other. Based on that, we'll determine ultimately which one it will be. At this point, the placeholder is tirzepatide, but it could be semaglutide. But in either case, it should be one or the other and not allowing for both.

Got it. That's helpful. When considering the transition from Phase I to Phase III, do you have any insight on the FDA's stance? I know you mentioned that if the 5% bar is not achieved, they would permit the inclusion of a functional improvement, such as strength, specifically stair climb. How does this work in Phase III? Will it consist of a dual endpoint where we need both, or can it be just a functional endpoint? How should we understand this?

I'll explain how to approach this. It's an important question. We decided not to proceed to Phase III because we wanted to address certain aspects first before entering an expensive Phase III trial. The plan is to conduct a Phase IIb trial focusing on incremental weight loss as the primary endpoint. This will allow us to understand how these agents are likely to perform in a Phase III setting. The trial will include a titration period and a maintenance period lasting 52 weeks, following the same criteria that the FDA expects for Phase III. Essentially, this is a smaller version of Phase III. After this, we'll have a clear understanding of the incremental weight loss over time. Additionally, we aim to emphasize body composition and functional improvements, with key secondary endpoints focused on understanding outcomes at 72 weeks. This includes analyzing the results from the titration and maintenance periods, allowing us to predict what we might observe in a Phase III trial using insights from this Phase II study. We will identify important metrics, such as stair climbing ability, clinical outcomes, bone mineral density, and improvements in mobility or limitations. We’re gathering valuable data about what occurs at 16 weeks and extending that to 72 weeks. It's important to note that the FDA's feedback has been very encouraging, offering us flexibility that could include incremental weight loss and relevant functional improvements being captured meaningfully. If we find that achieving incremental weight loss is difficult, we still have the option to highlight our physical function endpoints as the primary endpoint in Phase III.

Yes. No, that's helpful. And I guess just actually one quick last one. I know you've mentioned in the past again that you were going to sort of go for all comers but stratify. It looks like you're only targeting the greater than 65 patient population now in PLATEAU, and that's actually sort of up from the greater than 60 years old in QUALITY. So maybe just clarify what population you're targeting? And was that more FDA guidance or Medicare reimbursement dynamics or just sort of the most in-need population?

To understand our approach, if we achieve our targeted weight loss in patients over 65, we expect similar results in those under 65 as well. Our main focus is on physical function, particularly in the older demographic in our Phase IIb QUALITY study, which includes patients who likely have significant sarcopenia and existing physical limitations. This group provides the most valuable insights for understanding physical function. Comparing this to the STEP 1 and SURMOUNT studies, where results are more favorable for younger patients around 50 years old, it's evident that there are no studies specifically isolating those 65 and older to address the same questions we have. The purpose of our Phase II study is to identify the most at-risk patient population. According to FDA guidance, if we select physical function and body composition as primary endpoints, simply being over 65 or even under it does not automatically indicate a beneficial outcome. Achieving weight loss and aiming for physical function as a secondary endpoint requires us to specify the patient demographics in advance as outlined in the guidance. For instance, a 32-year-old athlete may lose weight easily without addressing functional limitations, which wouldn't yield meaningful results for this analysis. Thus, even with successful weight loss aimed at a secondary endpoint like physical function, we can focus on a defined subset, specifically those over 65. Through the Phase IIb PLATEAU study, we'll gather specific insights about this patient group. If we see weight loss in broader patient groups while explicitly targeting older patients, we can effectively measure functional outcomes. However, if we don’t achieve weight loss, we must recognize that age alone does not signify disease; we need to factor in functional limitations or challenges in daily activities for those over 65. This Phase IIb study will provide critical data to ensure that if physical function is our primary endpoint, we are targeting the appropriate patient population. Our strategy allows us to explore all potential options. When comparing the Phase IIb QUALITY and PLATEAU studies, we believe this will significantly reduce risks for various pathways we can pursue. We aim for incremental weight loss with physical function as a secondary endpoint in the right patient population or make physical function our primary endpoint with weight loss as a related consideration. Our goal is to assist those sarcopenic obese patients over 65 who may be hesitant to use GLP-1 medications. This population is substantial, with 44 million Americans on Part D of Medicare, and about half could see benefits from a weight loss medication. While we wait for the next question, I want to share a few thoughts. As we look back on the year, it’s worth mentioning some personal insights. We ventured into entirely uncharted territory. Although we had data from cancer patients and older patients, we questioned whether those with pharmacologically induced low-calorie situations would be different. As it turns out, they are indeed different. The myostatin inhibitors from other companies have shown that it’s challenging to maintain lean mass. You’ll observe this in both the six-month and yearly data. This unique patient population is significant. That said, enobosarm performed exceptionally well. We demonstrated 100% lean mass gain, fat reduction, and improved physical function. Concerns about safety arose, and it took us some additional time to obtain safety data as the study was still blinded. Fortunately, safety results were excellent, with indications that we may actually reduce gastrointestinal toxicity related to GLP-1 use, which is very encouraging. Reflecting on the year, I believe we achieved our objectives with the trial. In terms of competition, companies like Scholar Rock, Regeneron, Versanis, and Lilly reported their progress, which was quite beneficial. Remember, our product is oral, while theirs are injectable, each with their distinct safety profiles. We’re still learning about myostatin inhibitors since they are widespread. A key takeaway was the feedback I received repeatedly: If you maintain muscle, which weighs more than fat, people could gain weight on anabolic agents. There was a notion that we might have to settle for less weight loss, but that did not happen—neither for us nor for them. When using an anabolic agent, there hasn’t been a case of reduced weight loss. In fact, data from Versanis and Lilly shows that at 72 weeks, participants experienced a 6.4% increase in weight loss. This supports the idea that maintaining metabolic muscle, which burns more calories than other tissues, leads to better overall weight loss outcomes. Regarding regulatory clarity, the situation is evolving. The FDA revised its stance, realizing that conducting a 16-week study while using incremental weight loss as a primary endpoint didn’t align with reality. They indicated that we should focus on functional endpoints, which we did. We chose the 16-week timeline because previous studies involving 1,000 patients confirmed that it was sufficient—and it proved to be the case. The FDA has now opened the door for us, recognizing that weight loss can indeed happen with anabolic agents, especially since we observed it in some obese cancer patients. This shift in FDA regulations has provided us the opportunity to incorporate various ways to include physical function data in our labeling, and I find that very encouraging. Our new trial design has been outlined to create multiple avenues for us to define what the Phase III program may look like. We want to focus on a broad spectrum—from patients with physical function issues to those who are significantly affected and cannot use GLP-1 therapies due to sarcopenic obesity. This is a large demographic, creating vast potential for our approach.

The next question comes from Rohan Mathur with Oppenheimer.

This is Rohan on for Leland. Thanks for the update, just one question for me. As you think about the different outcomes from the PLATEAU study and the obvious benefits of the enobosarm, do you expect there to be any flexibility around regulatory discussions that would follow when it comes to showing a certain degree of weight loss from muscle function?

Yes. So the degree of weight loss, this stake in the ground looks like 5% or greater placebo-corrected weight loss gets you the incremental weight loss. And if you have the incremental weight loss and all the secondary stuff will come in based on clinical meaningfulness. And so that gets to the next question, that is for a part of our homework in the Phase IIb PLATEAU study, and you can see we put a lot of options on physical function. We did physical function tests, which is stair climb test, and function tests. They don't like strength tests. We're doing clinical outcomes questionnaires that have been used in many of these STEP 1 and SURMOUNT studies as well. So we have data there. And if we can show an older patient population, there's an improvement. And in terms of clinical meaningfulness. And then what's interesting and new one is this mobility disability assessment. It turns out that there's an ICD code to diagnose clinicians use to diagnose frailty in older patients and for mobility disability that contains 2 questions. Question one is, can you walk through city blocks? And question two is, can you climb stairs, something like that. And so to assess patients coming into our Phase IIb PLATEAU study, and to show that we can make people with functional limitations coming into study better, that could be interesting. And so there's multiple ways to come back and present our case for the best way to measure physical function. One of those or all of those.

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

Great. Thank you, operator. I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress in the next investors call. Thank you for being with us.

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