Hi, good afternoon, everyone. Thank you for joining us. My name is Edward Nash. I'm a senior biotech analyst here at Canaccord Genuity in the Equity Research Department. I have the pleasure of having Mitch Steiner with me today. He is the CEO of Viru. Viru is a name we cover with a buy rating and involved in the obesity space with a very unique and important approach, which we'll get into. But thank you very much for joining us, Mitch.

Thanks for having me. I appreciate it.

And maybe we could start off just to kind of maybe give us a 10,000-foot view of Viru as a company and your focus.

Yeah, absolutely. So Viru is a late-stage clinical pharmaceutical company, and we had done a hard pivot back in October of 2023 to focus on GLP-1 muscle wasting that occurs, the loss of muscle, and our drug, Enobus Arm, is a drug that came from a previous company I had called GTX, and it's been through six studies in muscle, and so we know it builds muscle, we know it burns fat, we know it's good on bone. And so the best way to put it is, the reason we did a hard pivot, because the GLP-1s took everybody by storm. And essentially, losing 40% lean mass and losing 60% fat is a problem. And so it means for every 10 pounds you lose, 4 pounds of it's lean. And we thought for older patients that may be a big problem. And since our previous work and those six other trials were in frail patients and cancer-wasting patients, we had the best experience with that. Even though the company started in 2016, the leadership of the company, scientific and otherwise, comes from the former company. So we have about 20 to 25 years' experience in the muscle field. And so that comes to bear, as we'll talk today, how are we thinking about having a commercial product that would actually be used in combination with a GLP-1 so that you can preserve muscle? and the real question is, okay, which patients are you going to treat and how do you work backwards? What is the commercial drug going to look like and what is that label going to look like because that's what your trials need to look like. Don't pay attention to people that are out there now trying to combine with all patients and not measuring the right endpoints. You know, 25 years of going back and forth to the FDA for other indications in muscle, they have a pretty good idea what they're going to want.

Got it. So you guys started the Phase IIb Plateau study in March of this year. By July, you were already fully enrolled. Prior to the Plateau study, the company had conducted another Phase IIb study. Could you maybe talk a little bit about the difference between those two trials and why the reason for this Phase II that's ongoing now?

I'd be happy to. So since we were focusing on older patients, the Phase IIb quality study was 168 patients starting semaglative time for the first time with and without an ovus arm. And the idea was look at the primary endpoint of lean body mass and physical function by stair climb. It was a short study, 16 weeks. Why did you do a short study? We did a short study because in all of the other studies that we've done with stair climb, 16 weeks is plenty of time. The FDA told us when we met with them for the first time that they're not quite sure incremental weight loss could be an end point. And if that's the case and you do physical function, then the physical function needs to be your end point. And that's what we did. And that study was a beautiful study. We ended up showing that we were able to preserve lean mass 100 percent, we burned additional fat, that the weight that was lost was 100 percent fat, 0 percent lean, and we were also able to show for the first time that patients over the age of 60 taking a GLP-1, 44% of them had a declined stair climb. The reason that's important is stair climb links you to balance problems, gait problems, falls, fractures, and mortality. And so essentially what you're saying is the patient's trying to get a cardiovascular benefit by losing weight, but the problem is they're going to trade it for a hip fracture, and that's a mortality endpoint. So that study was very, very laser focused on what would happen if you take a low-calorie state and add an anabolic agent. Nobody knew. And what we showed essentially is even though the brain is telling you not to eat, the drug like a nomosome was able to tell muscle not to lose it. So even though the muscle didn't see calories, it held on to muscle and fat burned more to make up for the weight loss to be similar if not greater. Second study, the plateau study, builds from that. Because we go back to the FDA, and the FDA says, you know what? We may entertain incremental weight loss. 5% or greater, that's good. But if you're less than 5%, that's okay too if you show a functional benefit. And so I said, okay. And furthermore, you need to show that functional benefit for a year because all the weight loss drugs are looking for a year. So I said, okay, that makes sense. So we went back into the plateau study, 239 patients fully enrolled now. And even though we're using incremental weight loss, again, if we hit incremental weight loss at greater than 5%, that's great. That helps us with a phase 3. If it's less than 5%, that's fine. We're measuring a whole bunch of physical function endpoint. And stair climb is in there, but also functional limitations, questionnaires, and all kinds of other things to look at function. And the reason for that is that's what we are. What we bring to the table is improving the weight loss, but most important is dealing with the physical function problem, which I just told you, 44% of patients in just 16 weeks had greater than 10% loss of function in their climb. And again, the reason that's important, because that represents about seven to eight years of loss of power that would have happened with age. So the difference between the trials is the Phase IIB plateau study is meant to look more like what a phase three would look like. And the phase two, the quality study was to ask the proof of concept that can we actually reverse the loss of muscle? Is this going to be something that's going to happen in the low-calorie state? You have no calories, how can you hold on the muscle? And we proved that that's not the case.

Got it. That was a great overview. I appreciate that. So one of the great things about covering the name also as an analyst is that you're going to give us an interim readout at 34 weeks in the first quarter of next year from this phase 2B plateau study. So for us inpatient analysts and investors, I appreciate that. What should we be looking for in that phase 2B data?

So first of all, it's now 32 weeks. So why 32, not 34? It just has to do with the way patients come in to visit. If you can bring them halfway in a month, that costs more money than a whole bit. So 32 weeks. And what you're looking for is the primary endpoint is, again, weight loss. scale weight loss that's going to happen at 68 weeks. You need that full time to see the incremental break so that you're at 5% or greater. So at 32 weeks, it's too early to look for weight loss, but it's plenty of time to get a temperature check on what's happening to lean body mass and fat mass. And what you want to see is you hold on to lean body mass and you're making it up with the fat mass loss. If you see that, remember, if you add fat mass to lean mass, that's total mass. That gives you a good clue of what's going on without jeopardizing the primary endpoint. So that's what we should be looking for.

And then you mentioned the 68-week is the primary endpoint. Are we on track for that?

Yes, yes. Because of the fact that we have a fully enrolled trial now. So when I say first quarter of 2027 we'll get the 30-week readout, we're getting the 32-week readout. And 68 weeks will happen because we have the patients already enrolled. So that's the good news.

So the agency, from your earlier description between the two-phase 2B trials, clearly the agency's view and understanding of the drug and the real benefit has evolved quite a bit. Do you feel, is the agency going to, do you really think that as you get through this trial, they're going to still be on board with what they're requiring for these primary endpoints?

I think so. I think so, because this has evolved to a point where it's kind of back where we started. And so, for example, we're getting almost a toggle. So you get incremental weight loss at 5% or greater, or you're less than 5%, and you have a functional benefit. Functional benefit needs to meet the criteria for a claim. So every endpoint that we're looking at is an endpoint that we want to see in a label because that's what's going to make us different. Just to pause for a moment on why this is important. You know, at this point now, you have two big players, Novo and Lilly. And they've kind of staked their claim, right? You're between 15% and 28% weight loss. That's where you are right now. So Novo's got between the pill and shots and Lilly between the pill and shots, you've got that covered. If you come in with an agent that's less than 15%, you're kind of dead in the water, okay? You come in with an agent because there's 80 companies working in this space now. If you're greater than 28%, that's wonderful, but is that really going to happen? So then you're between 15% and 28%. So that's where everybody's going to end up. If they end up there with just weight loss, they're generic because they haven't offered anything different than the two big players have. So you need something different. And so that's why we're spending all this time on the function part whether we hit on incremental weight loss or not, it's the function part that's going to make us different.

So, you know, one of the things that surprises me is there's just a very small number of companies that are working in this space with you in trying to address this. In your experience, how has been interacting with the physician community who are treating patients with obesity, How is their outlook and their feelings on lean muscle mass preservation of obesity?

It's a great question, and it's evolving. And so it started out initially where people just didn't know, and then the pendulum swung the other direction and said, you know what, healthy dieting, you lose about 25% of lean anyway, so I don't know why we're worrying about it. Well, it's not healthy dieting. This is accelerated dieting. So instead of losing 5%, you lose 28%. You lose 20%, and 40% to 50% is lean. So absolute muscle that you're losing is a problem. Okay, but how about for the 32-year-old linebacker? Well, maybe not a problem. How about for the 76-year-old patient that has low muscle? That could be a problem. So where they've ended up is saying, okay, for the vast majority of patients, not vast majority because it turns out it's a big population, greater than 65. 65. For the patients less than 65, protein and exercise should be fine. Okay. But the problem with that is the exercise part is hard to do for this patient population. They don't mind eating the protein. So that's a problem. Okay. If you're greater than 65, same issue. You're having trouble taking protein. You're not really doing the exercise. That's where you need the help. Remember, that's the patient population that you're most worried about. They'll fall and break their hip and trade a fracture for a cardiovascular benefit. So physicians automatically focus on two things. One is they're not going after the number. I'm sorry, investors and companies are all looking for the best number they can hit. You know, 28% go for 30%, go 50%. That's wonderful. But the physician, and I'm a urologist, I'm a physician, is the quality of the weight loss. And actually the FDA in their guidance back in 2025 said the definition of weight loss drug is getting rid of fat. Why? Because the definition of obesity is excess fat. So the definition doesn't say get rid of fat and get rid of lean. So if you get rid of lean, that points against you. So these patients, you want to take advantage of them and help them and lose the fat. You want your weight loss drug or weight loss combination to focus on getting rid of only fat. So doctors want that from a quality standpoint. Also, another thing that's going on is what's happening to bone. And bone should be a problem. Remember bone, if you take a patient and put them in bed rest, they lose a lot of the bone. It's a problem. Why is that? Because the weight bearing that's on their bones goes away. If that happens, your body starts losing bone. Well, if you take, you know, 50 pounds off your body, you're going to start losing bone, okay? And you have a low calorie state, you're going to lose bone. And if you're aging from 65 and beyond, you're going to lose bone anyway. So the question is maybe that's why they're seeing an increase in hip fractures and pelvic fractures in patients. You know, could this be the tip of the iceberg? So bone is another thing that people need to be focusing on. So the physician's position right now is if you had a way to solve the issue of lean mass, because remember, lean mass is muscle. Muscle is what really is mechanically holding bone. That would help. And then, of course, if the agent like Inovus arm is able to benefit bone, that would be It's called Osterine because it's anabolic on bone. It's anti-resortive on bone.

So if we jump ahead and Nobisarm receives FDA approval, how do you envision the drug getting used initially? Is this going to be mainly those patients over 65 who are being put on a GLP-1 and that are basically meeting all the criteria you're talking about where they have significant chance of having muscle loss and sarcopenia associated?

Great question. I think the market and lining up with the FDA. So the FDA doesn't view loss of muscle by itself cosmetically a problem. You have to pick a patient population that that loss of muscle means something, and it can't be just a CAT scan or an MRI. So that sets the stage for who you treat. And so the way we're thinking about it, and the reason we're doing the Phase 2B plateau study, is what is that commercial patient population that you're going to go after? So why did we pick gradient 65? Because we learned in the quality study, patients greater than 60, if they're greater than 65, they had the most problem with physical function, had the best benefit with anovasol. And they lost incremental weight loss and all that stuff if their BMI was greater than 35. Okay, so the plateau study is greater than 35 BMI and an age of greater than 65 equal to greater than 65. So we're trying to find that patient population. So now we're measuring things like functional limitations, sarcopenia, how do they get better, and so that we can then tell the story of this is the patient that's at risk. Because your label has to say, this is what our drug does, and this is what we're going to treat, and this is what we want to see from that treatment. And so you can't do that by saying, I'm going to take a 32-year-old linebacker and just give them a drug to hold onto the muscle. What does that mean? And so the way to think of it is that we're working very, very hard in the next trial, the Phase II B Plateau study, to really hammer out what that commercial patient population could be. Now, with that said, some of the criticism I got was, well, you're slicing the pie. I get it. A small slice of a big pie is big. It's much bigger than that. And because we picked gradient 65, the data is pretty hard. Why is that? Medicare is gradient 65. So it turns out that there's 44 million Americans on Part D of Medicare, of which 40% of them can benefit from a weight loss drug. So you're looking at 20 million plus patients. It's a big, if we own that piece of the market, that's a big deal.

So before we get to that part, I'm going to jump back a little bit. It is, you know, with the data from the phase 2B plateau study, can you talk a little bit about, because we obviously know the size of trials needed in obesity for a direct obesity How big would a trial need to be for a phase 3 for a drug?

It'll be the same. Yeah, because you're using a weight loss endpoint, and so it'll be 4,500 patients. But to put that in perspective, a company like Novo, I mean, they did the select trial with 18,000 patients. And so in the cardiometabolic space, they're big trials. So that's why our strategy is to do the best phase 2B plateau study we can do so that we're in a position to take risk out of what a phase 3 program would look like and then use that to help us get the right partner.

So would a phase 3 need to be something similar with the obesity as also with type 2 diabetes? You need to have that trial as well or is that irrelevant? Irrelevant. So what other mechanisms are out there that you see as being competitors to Inobisarm, and how does Inobisarm differentiate?

So we really stand alone. So everybody else is, all the other studies, all the other companies are focusing around myostat inhibitors. So myosin inhibitors hold on to build muscle, hold on to muscle, burn fat, but the functional aspects of it with muscle function and the muscle that you're holding on to a building, whether that's functional muscle is still out. We're not quite sure. But that's the mechanism that they're using. Because of those drugs, they tend to be IV or sub-Q. And the companies in this space now really have not focused on function, which is the endpoint you're going to need for muscle. So you can't just say, okay, we hold on to muscle, so that'll be in our label. Your label is going to be only if you have a benefit in how a patient survives, functions, and feels. So it won't be in there unless you measure function. So if you're going to differentiate yourself in the 15% to 28% range, then you have to have secondary endpoints that the FDA agrees is good claims, and the good claims have to be in what that muscle preservation leads to, which is function. So I think, and we're oral. So since we're an oral agent, I think oral trumps IV. The other reason I like the fact we're an oral agent from a potential for partnership is because if you have an oral agent and you have an oral weight loss drug, you kind of put them together and do what's called a fixed combination. You pick up another 20 years of patent life, and it's a way for a big pharma company to avoid the drug just kind of being out there for everybody if they wanted to use our drug in combination with their drug just to promote their GLP-1, for example.

Got it. So, you guys mentioned in early June a supply agreement with Novo Nordisk. Maybe you could talk a little bit about, I guess, supply agreement pretty much defines what it is, but to what degree you can share with us what that entails and how does that benefit Novo? How does that benefit Viru?

Well, first of all, I'm very, very excited about that clinical supply agreement. And the reason for that, again, there's only two players, Lilly and Novo. And so if Lilly didn't want to work with us and Novo didn't want to work with us, then we're stuck working with a company that doesn't have an approved product and that has its own complications from speed to market. We're very fortunate that Novo did do a clinical supply agreement with us. Clinical supply agreement means that they will provide this drug free of charge, which is not cheap. It's between $5 and $6 million saving for us. they're not a dispensary they're not Walgreens so why would they do that they're doing that because they're keenly interested in the design and the results of the study which means we have direct access to NOVO's leadership that's watching what's going on with the clinical trial and furthermore they want to make sure that they have an opportunity to have a seat at the table because we granted them a first right to negotiation And it's not just for Wagovi, it's for any of the Novo products in combination with the Novosarm for any indication. So that doesn't sound like a dispensary. So I think that's exciting. Actually, another thing that's kind of exciting is that we've also just recently heard last week that we have an allowance, a notice of allowance in the patent office, U.S. Patent all of this, for the enobus arm in combination with Govy, but it's not just in combination. It's given together. It's given with semaglutide first, and if semaglutide causes a problem, you can add enobus arm, or when you stop semaglutide and you want to stop the rebound or build muscle somebody almost like a rescue. All that's covered for anything you can think of, for muscle, fat burning, bone, physical function, all the things related to the decline in physical function. It's a really nice method of use patent. It takes us to October of 2044. So that means that's probably the first patent, method of use patent, for a combination of the GLP-1. And we got it. So that That really helps cement the intellectual property around this brand new area.

I thought it was definitely a great deal. It was nice to see one of the two biggies in the space coming to you.

It doesn't mean that's the only one. What we did is we divided up the patents so that we would at least make sure that in a very quick way you got one. But the other ones are being prosecuted. So our expectation is any of the weight loss drugs will ultimately be covered by our patents.

Yeah, so you talked about the the population that you know the FDA wants to see clinical benefit So you have to pick a patient population to study then where you're going to see that clinical benefit Benefit and hence the old over 65 patient population but any reason why a 30 obese Obese not morbidly obese obese 30 year old 40 year old 50 year old wouldn't go in decide to be on a GLP-1 and the doctor are also put them on.

So I come from an oncology background as well. So in oncology, it's not unusual to pick one cancer type, get out there, start making money, and start going after the other cancer types. So sarcopenia, independent of age, is 30 million Americans. Okay? And those are, excuse me, to be very clear, 30 million Americans that have obesity and low muscle. That's a big number, independent of the grade of 65. So my point is that absolutely, you know, to be very clear, we think there's a benefit for patients less than 65, no question. But the primary approach should be to find the most at-risk patient that you can show clinical benefit so you get through the regulatory part, so it's a commercial product, and just blow it out to see where it can benefit other patients, which it should. Right. Yeah.

Well, it's definitely been a it's definitely been a really exciting story, especially in the in the period of time I've covered it. There's been a huge amount of progress, I think, in the story, just with the the first brainstorming of Plateau, getting Plateau out there and then this agreement with with Novo. So I think this is, you know, for those interested in the obesity space, I think this is one of the cheapest ways that could possibly be out there to get involved in it. given the size of the TAM for a drug like Anobisarm. So appreciate you taking the time to tell us the story. And yeah, we look forward to a great interim readout.

Thank you for being here. Appreciate it.