Earnings Call
Veru Inc. (VERU)
Earnings Call Transcript - VERU Q1 2021
Operator, Operator
Good morning, everyone, and welcome to Veru Inc.'s Investors Conference Call. After our discussion this morning, there will be a chance for questions. Please be aware that this call is being recorded. I would now like to hand it over to Mr. Sam Fisch, Director of Investor Relations at Veru Inc. Please proceed.
Sam Fisch, Director of Investor Relations
Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include but are not necessarily limited to, statements of the company's plans, objectives, expectations, or intentions regarding the company's business operations, finances, and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and the company's 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 the company's 10-Q and 10-K SEC filings. I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's Chairman, CEO, and President.
Mitchell Steiner, CEO
Thank you, Sam, and good morning. With me on this morning's call are Michele Greco, CFO and CAO; Dr. Gary Barnette, Chief Scientific Officer; Phil Greenberg, Executive Vice-President, Legal; and Sam Fisch, as you've met, Director of Investor Relations. Thank you for joining our call. Veru is a late clinical-stage oncology biopharmaceutical company focused on developing novel medicines for the management of two of the most prevalent cancers, prostate cancer and breast cancer. We continue to invest cash generated from our sexual health commercial business into the clinical development of our high-value oncology drug candidates so that our current shareholders can realize the maximum value of our oncology biopharmaceutical company. This morning we will discuss another record quarter from our sexual health business, the progress of our prostate cancer and breast cancer drug pipelines, Veru-111 for the treatment of COVID-19, the upcoming NDA submission for TADFIN, and then we will provide financial highlights for a record first quarter of fiscal year 2021. Let's now focus on some of the financial highlights in Veru's sexual health business. We had net revenues in the US FC2 prescription business in Q1 of fiscal year 2021 of $9.1 million compared to $6.1 million in Q1 of fiscal year 2020, which is up 50%. Gross Profit for Q1 fiscal year 2021 was $10.8 million compared to Q1 fiscal year 2020 of $7.3 million, which is up 49%. Operating income was $19.2 million, which includes a gain of $18.4 million on the sale of the PREBOOST business, and the adjusted operating income which excludes the gain on the sale of PREBOOST was $800,000 in Q1 fiscal year 2021, compared to an operating loss of $1.8 million in Q1 fiscal year 2020. In fact, to give you a sense of our continuation of the growth trajectory for Q1 fiscal year 2021, we sold 116,000 units of FC2 in the US prescription market, an increase of 43%. TADFIN, which is tadalafil 5 mg and finasteride 5 mg combination capsule, is being developed to treat lower urinary tract infections caused by benign prostatic hyperplasia. It contains both tadalafil, which is also approved for the treatment of erectile dysfunction, and finasteride. We expect to submit the NDA for TADFIN next week. We also received a waiver for the FDA PDUFA fees for this NDA submission in the approximate amount of $2.4 million. We plan to launch TADFIN, if approved, via third-party telemedicine channels, and when launched, it will be a near-term source of additional revenue for Veru. In oncology, we are focused on providing new and novel oral therapies with favorable safety profiles following resistance to endocrine therapy but prior to proceeding to IV chemotherapy for both advanced prostate and breast cancers. We are excited to advance our prostate cancer drug candidates Veru-111 and Veru-100, as well as our breast cancer drug candidates Enobosarm and the additional indication for Veru-111 into registration clinical studies. Veru anticipates registration clinical trials for four oncology indications and the additional registration clinical trial with Veru-111 for COVID-19, making a total of five potential registration clinical trials in all to commence in calendar year 2021. In prostate cancer, the company continues to make strong clinical progress advancing Veru-111 as a treatment for metastatic castration and androgen receptor-targeting agent-resistant prostate cancer and for Veru-100, which is the androgen deprivation therapy for advanced prostate cancer. Veru-111 is an oral first-in-class new chemical entity that targets crosslinks and disrupts the alpha and beta-tubulin subunits of microtubules to disrupt the cytoskeleton. Veru-111 is being evaluated in an open-label Phase 1b and Phase 2 clinical studies in men with metastatic castration and androgen receptor-targeting agent-resistant prostate cancer. The Phase 1b clinical study completed enrollment of 39 men and is ongoing. The Phase 1b study has yielded promising efficacy and safety clinical results based on the Phase 1b study results, the recommended Phase 2 dose of 63 milligrams oral daily continuous dosing for 21-day cycles appears feasible and safe. There were no reports of neutropenia, neurotoxicity, or grade 3 diarrhea. The efficacy results show PSA declines in responses as well as objective and durable tumor responses. Furthermore, median radiographic progression-free survival in the men who have had at least four cycles of Veru-111 is 12.4 months. There are still three men on the study, with two patients approaching two years without prostate cancer progression. In September 2020, the Phase 2 clinical study completed enrollment of approximately 40 men with metastatic castration-resistant prostate cancer who have also become resistant to the androgen receptor-targeting agents, but prior to proceeding to IV chemo. Although the study is still ongoing, daily chronic drug administration also continues to be feasible and safe. At 63 milligrams daily continuous dosing, there were no reports of neutropenia. There was a single report of minor neurotoxicity, which was manageable, and fewer cases of diarrhea. Like the Phase 1b, we have observed efficacy results, including PSA declines and responses as well as objective and durable tumor responses, including complete and partial responses. Thus, in the Phase 2 clinical study, Veru-111 continues to show objective antitumor activity and a good safety profile. We will be presenting updated clinical results of the Phase 1b as well as the Phase 2 clinical trials at the ASCO Genitourinary Cancer Symposium taking place February 11th through 13th in 2021, and the abstract is 325053, a clinical study of Veru-111, an oral cytoskeletal disruptor in metastatic castration-resistant prostate cancer who have failed an androgen receptor-targeting agent, and the presentation will be done by Dr. Mark Markowski, who is an Assistant Professor of Oncology at Johns Hopkins Kimmel Comprehensive Cancer Center and the principal investigator on the study. As we already have enough safety and efficacy data at selected dose with Veru-111 and proceed to a Phase III, the Company had an FDA meeting in July of 2020 and received positive input from the FDA on the pivotal Phase III trial design for Veru-111. The Company received regulatory clarity that the indication of treatment in men with metastatic castration-resistant prostate cancer who have failed one androgen receptor-targeting agent prior to IV chemotherapy was acceptable, that an open-label randomized study using an alternative androgen receptor-targeting agent as an active control is reasonable, and that the primary endpoint may be radiographic progression-free survival. By allowing radiographic progression-free survival as the primary endpoint, the sample size of the Phase 3 study is planned for approximately 240 men. The Phase 3 pivotal clinical study will evaluate Veru-111 for men with metastatic castration-resistant prostate cancer, who have also become resistant to one androgen receptor-targeting agent, and will be called the VERACITY Phase 3 study. The Company has submitted the Phase 3 protocol design to the FDA for its input and anticipates starting the VERACITY Phase 3 study in the first quarter of calendar year 2021. It is interesting to note that we have a real opportunity for Veru-111 to be the leader in the pre-chemotherapy space in metastatic prostate cancer by pursuing the indication of treatment of metastatic castration and androgen receptor-targeted agent-resistant prostate cancer. The use of androgen receptor-targeted agents has moved earlier in the treatment sequence of advanced prostate cancer. The two currently approved indications for the androgen receptor-targeted agents are for hormone-sensitive metastatic prostate cancer and for non-metastatic castration-resistant prostate cancer. When patients progress or fail an androgen receptor-targeted agent in both these settings, they will now have metastatic castrate-resistant and androgen receptor-targeted agent-resistant prostate cancer, the very indication we're pursuing in the Phase 3 clinical trial. So, all roads lead to this indication. Next, I will update you on Veru-100 as androgen deprivation therapy for the palliative treatment of advanced prostate cancer. Veru-100 is a novel proprietary long-acting gonadotropin-releasing hormone (GnRH) antagonist peptide, three-month subcutaneous depot formulation designed to address the current limitations of commercially available androgen deprivation therapies known as ADT. Androgen deprivation therapy is currently the mainstay of advanced prostate cancer treatment and is used as a foundation of treatment throughout the course of the disease. Furthermore, ADT is continued even as other endocrine chemotherapy or radiation treatments are added or stopped. There are no GnRH antagonist depot injectable formulations commercially approved for the treatment beyond one-month duration. A Phase 2 study to evaluate Veru-100 dosing is anticipated to begin in the first half of calendar year 2021, and the Phase 3 registration study in approximately 100 men is anticipated to start in the second half of calendar year 2021. Next, I will discuss the progress of our breast cancer drug pipeline, which includes Enobosarm and Veru-111. The most common type of breast cancer is ER-positive breast cancer with estrogen as one of the main drivers of proliferation, tumor progression, and metastasis. Consequently, treatments that target the estrogen receptor are the mainstay of breast cancer therapy. Typically, women are treated with several lines of estrogen receptor-targeted agents, such as selective estrogen receptor modulators (SERMs), which include tamoxifen, non-steroidal aromatase inhibitors like letrozole and anastrozole, and selective estrogen receptor degraders like fulvestrant. These standards of care now include treatment with CDK 4/6 inhibitors. Unfortunately, almost all women being treated will eventually develop resistance to estrogen receptor-targeted endocrine and CDK 4/6 inhibitor therapies, and alternative treatment approaches with different mechanisms of action will be required, including IV chemotherapy. Interestingly, like the estrogen receptor, the androgen receptor is found in over 85% of breast cancers. The recent publication in Nature Medicine of an international study headed by Dr. Hickey and her team has provided scientific evidence establishing that the androgen receptor is a tumor suppressor in estrogen-receptor-positive breast cancer. This means the androgen receptor, when activated by androgens, strongly suppresses estrogen-receptor-positive breast cancer growth. This explains why historically, when synthetic androgens were used to treat breast cancer, they demonstrated good activity but, unfortunately, the masculinization side effects, increase in hematocrit, and liver toxicity have prohibited their use as a viable treatment. Contrast this with Enobosarm, an oral first-in-class new chemical entity that is a selective androgen receptor-targeting activating agent and is being developed for the treatment of AR-positive, ER-positive, HER2 negative metastatic breast cancer but prior to IV chemotherapy. Enobosarm represents a new advancement in endocrine therapy for advanced breast cancer in decades. Enobosarm has extensive non-clinical and clinical experience having been evaluated in over 25 separate clinical studies involving more than 2,100 subjects, including five prior Phase 2 clinical studies in advanced breast cancer involving more than 250 patients. In addition to suppressing androgen receptor and estrogen receptor breast cancer cell proliferation and tumor growth, Enobosarm has other potential beneficial clinical properties. In preclinical studies, Enobosarm has demonstrated the potential to build and heal trabecular bone and therefore has a potential to treat osteoporosis and skeletal-related events in cancer. Enobosarm has also been shown to reduce fat and to build muscle to improve physical function in clinical studies involving elderly subjects and patients with cancer cachexia, including breast cancer patients. Furthermore, because of its tissue selectivity, Enobosarm has a favorable side effect profile with no masculinization effects, no increase in hematocrit, and no liver toxicity. The science supporting the efficacy of Enobosarm and the targeting of the androgen receptor in ER-positive advanced breast cancer was also the subject of a Nature Medicine study published this month by an independent group of breast cancer experts, led by Dr. Hickey. In their study, they showed that using breast cancer tissue from patients who have resistance to estrogen receptor-targeted and CDK 4/6 inhibitor therapies, Enobosarm monotherapy exhibited significant anti-tumor activity. The combination of Enobosarm with a CDK 4/6 inhibitor demonstrated even greater anti-tumor activity. The data from that study suggests that Enobosarm restores sensitivity of CDK 4/6 inhibitor-resistant breast cancer tissue to suppression by a CDK 4/6 inhibitor. Two positive Phase 2 studies involving 150 women with androgen receptor positive, estrogen receptor positive metastatic breast cancer were conducted. We will focus on the second of these two studies, the G200802 Phase 2 study, which is a two-arm study evaluating 9 mg and 18 mg of Enobosarm as daily oral dosing in 136 women with AR-positive, ER-positive, HER2 negative advanced breast cancer. The patients in the study were heavily pretreated, having failed around three endocrine treatments, and 88% received prior chemotherapy. The primary investigator for the study was Dr. Beth Overmoyer, Founder and Director of the Inflammatory Breast Cancer Program at Dana-Farber Cancer Institute in Boston, Massachusetts, and Assistant Professor of Medicine at Harvard Medical School. The completed Phase 2 study results were recently presented as a spotlight presentation at the San Antonio Breast Cancer Symposium this past December by Professor Carlo Palmieri, Professor of Translational Oncology and Medical Oncology at the University of Liverpool. The abstract 811 entitled efficacy and safety of Enobosarm, a selective androgen receptor modulator to target the androgen receptor in women with advanced ER-positive, AR-positive breast cancer, presents the final results from an international Phase 2 randomized study. According to this study, Enobosarm therapy strongly establishes the relevance of targeting the androgen receptor with a selective androgen receptor activating agent, as women with heavily pretreated, estrogen receptor-targeted resistant, AR-positive, ER-positive metastatic breast cancer have favorable clinical benefit rates and objective and durable tumor responses. In fact, the presence of the androgen receptor was required, as Enobosarm's anti-tumor activity was not seen in AR-negative, ER-positive advanced breast cancer subjects. AR staining status will be a critical inclusion criterion in the Phase 3 clinical trial design to enrich the study for the patient population who is most likely to benefit from Enobosarm therapy. These subset analyses of AR staining in Enobosarm's anti-tumor activity from the Phase 2 clinical study will be presented at upcoming scientific meetings. Enobosarm appears safe and was well tolerated in this study without virilizing effects, increase in hematocrit, or liver toxicity, and also, quality of life measurements demonstrated overall improvement, including mobility, anxiety, depression, and pain. The 9 mg dose was selected for Phase 3 as the 9 mg cohort had similar tumor responses with a slightly better toxicity profile than the 18 mg dose cohort. We also performed a post-hoc subset analysis of the Phase 2 clinical data to understand whether Enobosarm had any anti-tumor efficacy in patients that had AR-positive, ER-positive metastatic breast cancer who are also resistant to both an estrogen receptor-targeting agent and a CDK 4/6 inhibitor. In nine women who fit these criteria, Enobosarm treatment resulted in objective tumor responses of 33%. We had two complete responses and one partial response in these nine women. The clinical benefit rate at 24 weeks was 60% and a radiographic progression-free survival of 7.7 months. Although small numbers, one can conclude that Enobosarm has anti-tumor activity in women with AR-positive, ER-positive metastatic breast cancer that is resistant to estrogen receptor-targeting agents and CDK 4/6 inhibitors. These subset analyses of CDK 4/6 inhibitor resistance and Enobosarm's anti-tumor activity from the Phase 2 clinical study will also be presented at upcoming scientific meetings. By targeting the androgen receptor in ER-positive metastatic breast cancer, Enobosarm introduces a novel endocrine therapy to patients with breast cancer that have exhausted endocrine therapies targeting the estrogen receptor but prior to IV chemotherapy. In October of 2020, the Company met with the FDA to discuss the Enobosarm clinical breast cancer program. The FDA agreed to the Phase 3 registration clinical trial to evaluate the efficacy and safety of Enobosarm 9 mg versus an active control, which can be either exemestane or tamoxifen, for the treatment of AR-positive, ER-positive, HER2-negative breast cancer in patients who have failed a non-steroidal aromatase inhibitor, fulvestrant, and a CDK 4/6 inhibitor. The Phase 3 study will be called the ARTEST study, and the primary endpoint will be radiographic progression-free survival. It should be noted that we, and key breast cancer experts in the field, were intrigued by the preclinical study results reported in Nature Medicine that showed the combination of Enobosarm with a CDK 4/6 inhibitor restored CDK 4/6 inhibitor sensitivity and suppressed AR-positive, ER-positive metastatic breast cancer that was resistant to both an estrogen receptor-targeted agent and a CDK 4/6 inhibitor, which is, as you know, the target population in our planned Phase 3 ARTEST clinical study. Consequently, the Phase 3 ARTEST trial is now designed to have three treatment arms: Enobosarm alone, Enobosarm in combination with a CDK 4/6 inhibitor, and an active control with either exemestane or tamoxifen. The trial sample size will remain approximately 240 women. The pivotal Phase 3 open-label randomized active control ARTEST study is anticipated to commence next quarter. Next, I will update you on the Phase 2b clinical study evaluating Veru-111 for the treatment of taxane-resistant metastatic triple-negative breast cancer. Metastatic triple-negative breast cancer is an aggressive form of breast cancer that is present in approximately 15% of all breast cancers. This form of breast cancer does not express the estrogen receptor, the progesterone receptor, or HER2, and is resistant to endocrine therapies. The first line of treatment usually involves IV taxane chemotherapy and almost all women will eventually develop taxane resistance. Preclinical studies in human triple-negative breast cancer grown in animal models demonstrate that Veru-111 significantly inhibits cancer from proliferation migration, metastasis, and invasion of triple-negative breast cancer cells and tumors that have become resistant to paclitaxel, which is a taxane. Using the safety information from the Phase 1b and Phase 2 Veru-111 prostate cancer clinical studies in a total of approximately 80 men, we plan to meet with the FDA in the first half of calendar year 2021 to discuss the Phase 2b clinical trial design for possible accelerated approval for Veru-111 versus an active control, Trodelvy, for patients with taxane-resistant triple-negative breast cancer, making the proposed trial a potential registration trial. The Phase 2b clinical study is planned to commence in the second half of calendar year 2021, and as I mentioned, this would represent a second major clinical oncology indication for Veru-111. We announced this past Monday, positive results from the Phase 2 clinical trial evaluating Veru-111 for the treatment of hospitalized patients with COVID-19 who were at high risk for acute respiratory distress syndrome. Veru-111 in this setting is a novel once-a-day orally dosed small molecule with both broad antiviral and anti-inflammatory activities, which may serve a two-pronged approach to the treatment of COVID-19 virus infection and the subsequent debilitating inflammatory effects that lead to ARDS and death. We conducted a double-blind, randomized, placebo-controlled Phase 2 clinical trial evaluating daily oral once-a-day dosing of the Veru-111 18 mg versus placebo in approximately 40 hospitalized COVID-19 patients at high risk of acute respiratory distress syndrome. This trial was conducted in five sites across the United States; patients received either Veru-111 18 mg or placebo, as well as standard care for 21 days or until they were released from the hospital. The primary efficacy endpoint was the proportion of patients that were alive without respiratory failure at day 29. Here are the highlights of some of the clinical efficacy and safety results. For the primary endpoint in a modified intent-to-treat (mITT) population, Veru-111 treatment compared to placebo had a statistically significant and clinically meaningful improvement in the proportion of patients alive without respiratory failure: 94.4% in the Veru-111 treated group, 18, and 70% in the placebo group, 20, at day 29. This represents an 81% relative reduction in treatment failures with a p-value of 0.05. Here are some of the secondary endpoints in the ITT population: Veru-111 reduced the proportion of patients who died in the study from 30% (6 out of 20) in the placebo group to 5.3% (1 of 19) in the Veru-111 treated group. This is an 82% relative reduction in mortality in the Veru-111 treated group, with a p-value of 0.044. In the mITT population, Veru-111 showed a clinically meaningful reduction in average days in ICU: Veru-111 patients had 3 days versus 9.5 days in the placebo group, with a P-value of 0.04. Veru-111 had a clinically meaningful reduction in days on mechanical ventilation from an average of 5.4 days in the placebo group to 1.6 days in the Veru-111 treated group. During the study, the standard of care included treatment with either Remdesivir and/or dexamethasone under an Emergency Use Authorization. A subgroup analysis of patients that received standard of care was conducted; in patients that received standard of care, Veru-111 treatment resulted in a clinically meaningful reduction in average days in the ICU: Veru-111 was for 1.43 days versus 8.83 days in the placebo group with a P-value of 0.024. And average days on mechanical ventilation: Veru-111 had 0 days versus placebo 6 days with P-values of 0.0427. In the Veru-111 group that also received standard of care, no patient required mechanical ventilation on this small study. Furthermore, Veru-111 was well tolerated and had a very good safety profile. The company has been granted an expedited end-of-Phase 2 meeting with the FDA to discuss next steps, including a Phase 3 clinical registration trial design for the Veru-111 COVID-19 program. The company expects that this confirmatory study will have a similar trial design as a completed Phase 2 study to evaluate daily oral doses of Veru-111 versus placebo, with the primary efficacy endpoint of the proportion of patients that are alive without respiratory failure at day 29. We expect the Phase 3 clinical trial will be conducted in approximately 200 hospitalized patients who have COVID-19 and/or are at high risk for acute respiratory distress syndrome. The company is expected to have sufficient clinical drug supply on hand to complete this Phase 3 clinical study once agreed upon by the FDA. The Phase 3 is expected to commence in April 2021, and is anticipated to be completed by the fourth quarter of calendar year 2021. We will seek funding from the Biomedical Advanced Research and Development Authority of the US Department of Health and Human Services (BARDA) and other agencies to try to fund the estimated amount of commercial drug supply needed for the US population, assuming confirmatory part of the results and FDA approval. Due to the unprecedented urgency of the global pandemic and the fact that COVID-19 continues to mutate into virus forms that may not be substantially mitigated by current vaccines or by any of the currently approved antibody drugs or therapeutics, we are in need of effective broad-spectrum antiviral drugs. Veru-111 has the potential to be both that broad-spectrum antiviral agent and that anti-inflammatory agent. The strength of the study, whether it was blinded, placebo-controlled randomized study that also allowed standard of care for both the treated and placebo groups in hospital patients at high risk for ARDS. Based on the strength of these promising clinical results, the company continues to be duty-bound during this persistent global pandemic to pursue this COVID-19 indication even though it's not the primary focus of the company. We are committed during this deadly pandemic to push ahead with Veru-111 clinical development as a treatment against COVID-19, and we have the resources to conduct our planned Phase 3 without impacting the cancer drugs' clinical development. I will now turn the call over to Michele Greco, CFO, CAO, to discuss the financial highlights. Michele?
Michele Greco, CFO, CAO
Thank you, Dr. Steiner. As Dr. Steiner indicated, we started the fiscal year with a record-breaking first quarter. On December 8th, the Company sold PREBOOST business for $20 million, $15 million in cash and $5 million in notes receivable due over an 18-month period. The sale of PREBOOST resulted in an $18.4 million pre-tax gain. Overall, net revenues were up 38% to a record $14.6 million from $10.6 million in the prior-year quarter, due to the growth in our US FC2 prescription business. The company recorded continued FC2 sales growth in its prescription business, with net revenues up 50% to $9.1 million from $6.1 million in the prior year quarter. Net revenues for the public sector business also increased to $4.7 million from $4.4 million in the prior year quarter. Net revenues for PREBOOST through the sale date were $863,000 compared to $153,000 in the prior year quarter. Overall, gross profit was $10.8 million or 74% of net revenues compared to $7.3 million or 69% of net revenues in the prior year quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our US FC2 prescription business. Operating expenses for the quarter increased to $10.1 million compared to the prior year quarter of $9.1 million. Research and development costs were $5.7 million compared to $5.3 million in the prior year quarter. The operating income for the quarter was $19.2 million compared to an operating loss of $1.8 million in the prior year quarter, an increase of $21 million. The increase is primarily due to the gain on the sale of PREBOOST of $18.4 million; excluding the gain, we had an operating income of $780,000 for the quarter. Non-operating expenses were $1.9 million compared to $1.6 million in the prior-year quarter, which primarily consisted of interest expense and change in the fair value of the derivative liability related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018. For the quarter, we recorded a tax expense of $78,000 compared to a tax benefit of $77,000 in the prior year quarter. The effective tax rate for the quarter is minimized due to reduction of the pre-tax income related to warrants exercised in the utilization of net operating loss carry-forwards in the US. The bottom line results for the quarter show net income of $17.2 million or $0.023 per diluted common share, compared to a net loss of $3.3 million or $0.05 per diluted common share in the prior year quarter. The company has net operating loss carry-forwards for US Federal Tax purposes of $41.7 million, with $13.5 million expiring in years through 2038 and $28.2 million, which can be carried forward indefinitely. Our UK subsidiary has net operating loss carry-forwards of $61.3 million, which do not expire. Now looking at the balance sheet as of December 31, 2020, our cash balance was $30.9 million and our accounts receivable balance was $4.2 million. Through our sale of PREBOOST, we added $15 million in cash during December and have $5 million as notes receivable, which will be collected over the next 18 months. Our net working capital was $30.5 million at December 31, 2020, compared to $12.3 million at September 30, 2020. Overall, we're delighted to see the continued increases in sales in both the US FC2 prescription business and the global public sector, health sector business. These revenue sources continue to be important sources of funds to invest in our promising pharmaceutical clinical development program. As we continue to transform our company into an oncology biopharmaceutical company with a focus on developing novel medicines for the management of prostate and breast cancers. Now, I will turn the call back to Dr. Steiner.
Mitchell Steiner, CEO
Thank you, Michele. We have enjoyed another record financial quarter, which has allowed us to significantly advance our clinical programs with the robust performance of the sexual health business, plus the prospects of additional revenue from TADFIN. We believe that we are able to substantially invest in the continued clinical development of our prostate and breast cancer drug product candidates, as well as the Veru-111 COVID-19 Phase 3 study. As a consequence, the Company expects to have sufficient resources generated from our sexual health business and existing sources of cash to fund the clinical development of all of our currently planned registration clinical trials. We plan to continue to generate robust growing revenues from the sexual health business, which is a standalone business that is very valuable. We are expecting another record year in fiscal year 2021, and we could have options to monetize the business as we did with the PREBOOST business. We have successfully transformed our company into a late clinical-stage oncology biopharmaceutical company, supported by a growing revenue cash-generating sexual health business. We have a duty to expeditiously advance Veru-111 into a Phase 3 clinical study in hospitalized patients with COVID-19 with high risk for ARDS. If we confirm these promising results observed in the completed Phase 2 clinical study, we expect to seek emergency use authorization for this indication. With that, I'll now open the call for questions.
Operator, Operator
Ladies and gentlemen, we will now begin the question-and-answer session. The first question comes from Brandon Folkes with Cantor Fitzgerald. Please proceed.
Brandon Folkes, Analyst
Hi, thanks for taking my questions and congratulations on another good quarter. Mitch, to start, can you discuss Veru-111's position in the market in relation to COVID-19? It seems early to assess the Phase 2 trial, but what is the market opportunity for Veru-111 in this area? Considering earlier line treatments and vaccines, how should we view this market opportunity if we succeed? Also, you've mentioned the potential concerns regarding Veru-111's effectiveness against mutant strains. Do you believe the FDA will require inclusion criteria for mutant strains in the Phase 3 trial? Lastly, you mentioned having the financial flexibility to support all your programs. Given that you’re potentially managing trials with about 600 patients this year and scaling up TADFIN manufacturing, can you provide some insight on how much flexibility you have in that regard? Thank you.
Mitchell Steiner, CEO
Thank you for your question. Let me start with the last question. If we combine all our programs over the next 2.5 years, we expect to treat approximately 250 to 300 patients each year. If we target the upper end, that translates to around $30 million annually, which we are already generating from our business. Therefore, we have considerable flexibility regarding funding. Although each trial has specific patient numbers, not all will enroll this year; they will commence this year, and we aim to progress as quickly as possible. Regarding your second question about the FDA's potential requirements concerning mutant strains, it’s important to understand how Veru-111 functions. It disrupts the microtubule trafficking system within cells, serving as an effective method for both inflammation and viral replication. When a virus binds to a cell, it doesn't just linger; it is transported along the microtubules into the nucleus, where it replicates, and then the new viruses must exit the cell to infect others. This process relies on the same microtubule system. Our treatment affects all forms of virus transportation along this system, meaning we don't need to target specific types, like particular mutations of the spike protein. Thus, we consider it a broad-spectrum antiviral. Inflammation operates similarly; cytokines, interleukins, and interferons are packaged in vacuoles that also use this transportation system. Disrupting this system has shown promising results in preclinical studies where we demonstrated that we could suppress the secretion of these cytokines. Hence, we believe our Phase 2 study supports our treatment's potential anti-inflammatory and antiviral effects. If the FDA requests that we consider additional strains, it’s worth noting that various strains are already present across the country. We don’t need to actively seek out new COVID-19 variants; we will gather information to understand the strains present in our study participants. Although there are still open questions with the FDA, we feel confident moving forward. Now, regarding your first question, I recall when we initially considered our COVID-19 Phase 2 trial, many doubted it would be necessary, citing the temporary nature of viruses. However, I maintained that new COVID variants would emerge over time. The number of hospitalizations and deaths has even exceeded previous peaks, demonstrating that COVID remains a significant concern. Currently, we see approximately 85,000 to 120,000 hospitalizations in the country, which can fluctuate substantially. Recently, admission criteria have tightened, with hospitals focusing on patients at higher risk for severe complications. Given this context, we estimate needing around 37 million doses per year for patients requiring 21 days of treatment, reflecting our analysis of hospitalization rates, even at lower numbers. Those at risk for ARDS will be the very patients our drug is designed to help. Moreover, our clinical data indicate that even amidst standard care which includes treatments such as dexamethasone and Remdesivir, we still observed significant benefits. Looking ahead, if Veru-111 shows strong safety and efficacy, we may pursue earlier treatment options for less severe patients. Finally, our broad-spectrum antiviral approach could potentially address not only COVID but also other viruses utilizing the same microtubule trafficking system, similar to how we coexist with influenza. The market for our treatments is likely to persist, but the specifics remain uncertain. Until we have proven effective vaccines and therapeutics, we will continue to advance our research.
Brandon Folkes, Analyst
Great, thank you very much.
Operator, Operator
The next question comes from Yi Chen of HC Wainwright, please go ahead.
Yi Chen, Analyst
Hi, good morning. Thank you for taking my questions. FC2 sales, could you tell us whether the record quarter was primarily driven by US prescription sales, or it is also driven by FC2 international sales? And do you expect the trend to continue? Thank you.
Mitchell Steiner, CEO
Michele, would you like to answer that?
Michele Greco, CFO, CAO
Sure. It was primarily driven by the FC2 US prescription sales, and both sales increased 50% to $9.1 million from $6.1 million last year same quarter. The global public sector sales also increased, not at the same percentage, though, so we are seeing increases in both.
Yi Chen, Analyst
Second question, could you comment on your expectation for TADFIN sales once it is commercially launched?
Mitchell Steiner, CEO
Yes. Let me clarify that I have been mentioning hospitalizations due to COVID-19, specifying a range of 85,000 to 100,000 per week. Regarding TADFIN, we launched FC2 entirely through telemedicine, which is a new sales channel that yields unexpected results. For instance, in traditional pharmaceutical sales, a product launch typically generates a few hundred prescriptions monthly, but telemedicine allows for a much broader reach due to its internet-based nature and the number of states covered. This new approach has proven successful for FC2 by moving away from conventional methods typically limited to 4-6 daily visits to healthcare providers. Now, with telemedicine, the reach is virtually unlimited. Currently, we estimate around 29 million prescriptions for finasteride, especially when considering medications like Cialis. For conditions like benign prostatic hyperplasia (BPH), which affects men over 50, prescriptions range between 23 and 29 million annually, reflecting its prevalence. However, we are still uncertain about specific expectations for TADFIN sales. We are monitoring the situation closely and currently do not have guidance on projected figures, but we anticipate significant potential.
Yi Chen, Analyst
Got it. Last question: what do you expect to report top-line results from the Phase 2 trial of Veru-111 in prostate cancer? And when results come out, will that have any impact on the Phase 3 trial? Thank you.
Mitchell Steiner, CEO
We are now approaching the second year of Phase 1b. While I may jokingly wish we could wait another year and a half, the reality is clear. We will continue the study as long as patients are participating, and I can assure you that the results from Phase 1b and Phase 2 are aligning well. We're observing PSA declines, PSA responses, and partial responses, with Phase 2 even showing complete responses. This indicates tumor activity, and our focus remains on safety and determining the appropriate dose; it appears that a dose of 63 is performing optimally. Thus far, we haven’t identified any new information from either Phase 1b or Phase 2 that would influence our approach to Phase 3. We are confident in initiating Phase 3 since we don’t anticipate learning more about dosage, efficacy, or safety from these phases. Additionally, the patients in both Phase 1b and Phase 2 were more severely ill; for example, 44% in Phase 1b also received multiple targeted androgen receptor therapies, which isn’t part of our Phase 3 design. Similarly, several patients in Phase 2 had received more than one agent, sometimes up to four, which doesn't reflect our Phase 3 patient population. In Phase 3, patients will have failed androgen deprivation therapy and one targeted agent, so we expect the results to be at least as good, if not better, than what we've seen so far. We think this could bring added benefits. We'll continue providing updates at various scientific meetings, such as the one scheduled for this week, where more data from Phase 1b will be shared. Currently, we are waiting on results from three patients who are administering the drug at home daily. It's feasible and well-tolerated, which is crucial. Many oral taxanes have side effects similar to intravenous ones, which could deter urologists from prescribing them due to concerns about complications like neutropenia and sepsis. It’s important that we can manage side effects remotely without the need for constant medical intervention typical in oncology settings. We believe Veru-111 has significant potential for prostate cancer and breast cancer, primarily due to safety that allows patients to self-administer the drug at home without severe risks.
Yi Chen, Analyst
Got it. Thank you.
Mitchell Steiner, CEO
Thank you.
Operator, Operator
Next question comes from Kumar Raja of Brookline Capital Markets. Please go ahead.
Kumar Raja, Analyst
Congratulations on the progress. And thanks for taking my questions. First, with regard to COVID-19, what kind of impact are you guys seeing in terms of the days these patients are staying in the hospital? Are you seeing any impact there? And with regard to FC2, how much inroads do you guys think you have made in terms of the US prescription market? And in terms of the gross margins, where do you guys see this going from where you are right now?
Mitchell Steiner, CEO
I'm going to answer your question about how much progress we've made in the US prescription market. This past year, we had around 350,000 prescriptions, and we currently have 116,000 prescriptions. With approximately 40 million women eligible for this product, we are only beginning to explore the market potential. There is significant opportunity for growth, especially considering the increase in sexual health telemedicine services. The rise of telemedicine is creating a large market for us. Additionally, the Affordable Care Act covers prescriptions, and many women are now using telephones to order what they need, including sexual health prescriptions. So, we believe there is still a large untapped market. It's hard to estimate just how big it could become. It's worth noting that the market for female condoms is still quite small compared to male condoms, and with the empowerment movements like Me Too, there is a growing chance for FC2 to be the only method of birth control and STD protection that women can control. Regarding our gross margins, they depend on whether we sell within the US or internationally. We have a good margin in the US, and we don't spend much on marketing; most of that is handled by telemedicine groups. As sales in the US continue to grow, we expect our gross margins for this product to increase as well. As for the impact of COVID-19 on hospitalizations, we have looked at the data but have not observed any significant effects.
Gary Barnette, Chief Scientific Officer
Yes. The patients in our study are very ill, and the duration of hospitalization varies greatly. When examining the days on study and specifically the days of dosing, which is capped at 21 days, the placebo group averaged a little over 11 days of dosing, while the treated group had a little under nine days. This suggests a correlation with hospitalization based on the top line data we have. I expect to see some reduction, but because of the variability, I am uncertain about the strength of that reduction.
Kumar Raja, Analyst
Okay. Maybe finally a question with regard to Veru-111 interaction with the EMA; where do we stand there? Thanks.
Mitchell Steiner, CEO
For Veru-111; so, I'll be honest. We've been so focused on the US right now that we have not initiated. I think the EMA at this point. I think what we need to do is get our, as I mentioned in my comments, we've been granted an expedited meeting with the FDA; we already have that on the books; we're getting ready for that. We've already sent our meeting package, and we've moved along, and we're looking forward to understanding the Phase 3 design. Once we get that up and going, then we can probably reach out to the EMA, but I'll be honest with you, I think if we can get the FDA under control and while that's going on, deal with EMA, then that will take care of 80% of the regulatory authorities across the world that would take one or the other; that's where we are.
Kumar Raja, Analyst
Great, thank you.
Operator, Operator
The next question comes from Leland Gershell of Oppenheimer. Please go.
Leland Gershell, Analyst
Good morning. Thank you for taking my questions. I would like to ask about the patients in the prostate cancer studies, specifically regarding those who have been involved. Were they able to continue with the treatment, or was it only the patient receiving the neurotoxin?
Mitchell Steiner, CEO
There was slight tingling in the fingers that went away with time; still stayed on dose. So, did not require a dose reduction, and they went away on the high dose, and it was just a grade one, sorry, grade one.
Leland Gershell, Analyst
Grade one. Got it, okay. And then, the question in terms of positioning of this with the oral taxanes and IV taxane, IV chemo; there is obviously the oral formulation you've got the better toxicity profile meeting with some who may say. Well, I'm kind of all that efficacy and I want to see this, I want to use more effective agent upfront, and then if 111 is not effective even though it may not be head to head. But if it doesn't appear effective maybe would reserve that for later, even with the earlier Kimmel agents have more tolerability, how would you kind of answer that to somebody who may be made more focused, hard-nosed efficacy comparison?
Mitchell Steiner, CEO
Yes. So, the way I would answer that is, as you know, cancer has become a marathon. So the issue, there is no longer hitting the hardest thing you can hit them with and lose hair and just be thankful we picked up a couple of days as a surge. We used to do that; everything was radical. So, I think the approach to cancer care now, if you start with things that have the right benefit-risk profile and you start early and you're getting to choose something that has good efficacy and good safety, and then you are going to work your way to the compounds and the agents that have efficacy and worse safety to a point you get to compounds that have some efficacy and maybe very bad safety. So, in this situation, the way we see it and the way we're positioning as a pre-chemo agent is that we just do not require a pre-medication with prednisone and with antihistamines. As we're not taking up a chair, the patient is not having to get the last if for GM-CSF support like the neutropenia, and you're not having to manage the toxicities with all kinds of agents, from vomiting on. And so, the efficacy, again, it's not head to head. But if you look at the efficacy of Veru-111 compared to some of the IV taxanes and the signals they saw in the Phase 1b setting, they were comparable for sure without the safety. So, I would say the best way to think of it is that we want to be in the pre-chemo space, and the best way to be in the pre-chemo space is to have safety that's more like an androgen-receptor-targeting agent, then having safety is more like a taxane, or worse when I mean the agents are all wonderful agents; I will give around, but worsening the toxicity could be worse.
Leland Gershell, Analyst
Thanks, great progress.
Mitchell Steiner, CEO
Thank you.
Operator, Operator
Your next question comes from Peter McMullin of Peter McMullin CSA Consulting. Please go ahead.
Peter McMullin, Analyst
Good morning, Dr. Mitch, and congratulations to you and the team for your tremendous progress. I have two quick questions regarding FC2. First, you have an exclusive in the US, but there are competitors present. Is there any indication that someone else may pursue FDA approval? Secondly, about international sales — given that many people are at home, were there any significant tenders that you could discuss?
Mitchell Steiner, CEO
Yes. So, I'm going to have Michele comment on the international sales because she's closer to that. And then as it relates to the US, when we're actually hearing no rumblings at this point, in terms of others. As you know, we, because we are the market leader in the US, there's a lot of brand loyalty, and so we're kind of Coca-Cola and why would anybody want RC? But with that said, there are no rumblings that I know of at this point, and we've been watching it very closely. And so, we're still the market leader in the U.S. Ex-U.S., Michele, do you want to comment on tenders and what it's looking like?
Michele Greco, CFO, CAO
Sure. We announced that we won the Brazil tender, so we're working on supplying that this year, Peter. So, that will be supplied this year and into next fiscal year. And then the South Africa, the tender that we had announced that we won the government has extended the timeline for that. So, instead of delivering product over three years, it's going to be over a five-year timeframe, and we're just waiting to see what the ordering is going to be in South Africa. So, that preserves us in those two main markets.
Mitchell Steiner, CEO
But nothing outside of that at this point in time?
Michele Greco, CFO, CAO
There aren't big tenders in the other countries. We supply that mainly through UNFPA, USAID, and now also through DKT, another distributor.
Peter McMullin, Analyst
Okay, thank you.
Mitchell Steiner, CEO
Thank you, Peter.
Operator, Operator
And the last questioner today will be Brandon Folkes with a follow-up from Cantor Fitzgerald. Please go ahead.
Brandon Folkes, Analyst
Hey, Mitch. Sorry, just one thing I wanted to follow-up, and it's a little bit segues from the last question. Can you just talk about the barriers to entry on the FC2 business?
Mitchell Steiner, CEO
Certainly. The barriers to entry include our patent coverage in the U.S., which lasts for a couple more years. Despite being classified as a Class 2 device rather than a Class 3, it still mandates special controls, requiring various studies such as pregnancy and tolerability studies, as well as research demonstrating the prevention of STIs. This involves a range of immunogenicity studies, costing approximately $6 million to $12 million and taking three to six years to complete. Establishing the necessary infrastructure to sell by prescription in the U.S. took us around 18 months and is not an easy task, as it includes securing contracts with major distributors. Additionally, brand loyalty acts as a barrier; customers prefer the FC2 because they are familiar with it. Internationally, there are numerous competitors present for many years, but we consistently maintain a 90% to 95% market share due to brand loyalty. Our unique feature, the night trial, which is hypoallergenic, reduces the risk associated with latex allergies that can affect about 10% of users, especially with internal condoms. This factor is critical, as the exact group affected isn't identifiable. There are multiple barriers to entry, and since the Female Health Company acquired Aspen Park, we have seen a sales increase. There is expansive potential for growth in the OTC markets, and we are diligently working in the U.S. public sector and with international publishers. Overall, this asset is highly valuable and is on an upward trajectory.
Brandon Folkes, Analyst
Thanks. That's very helpful.
Operator, Operator
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.
Mitchell Steiner, CEO
Thank you. I appreciate you joining us on today's call, and I look forward to updating all of you on our progress at our next investors' call. Thank you again. Operator?
Operator, Operator
Thank you. The digital replay of the conference call will be available beginning approximately noon Eastern Time today, February 10, by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You will be prompted to answer the replay access code which will be 10151507. Again, 10151507. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion. You may now disconnect.