Veru Inc. (VERU) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc.'s Executive Director, Investor Relations and Corporate Communications. Please go ahead.

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 its business, operations, regulatory interactions, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time. I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc.'s Chairman, CEO and President.

Good morning. With me on this morning's call are Dr. Gary Barnette, the Chief Scientific Officer; Michele Greco, the Chief Financial Officer and Chief Administrative Officer; Michael Purvis, the EVP, General Counsel and Corporate Strategy; and Sam Fisch, the Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. We have successfully navigated through one of the most challenging years in the history of the biotech sector, coupled with the waning of the COVID-19 pandemic threat, resulting in a loss of regulatory urgency. Few did so by cutting costs and by prioritizing clinical programs to pivot and to transform Veru into a late clinical stage biopharmaceutical company, focusing on the development of novel medicines for the treatment of obesity and oncology. Why did we pivot into obesity? Glucagon-like peptide-1 receptor agonist, and I'll refer to as GLP-1-receptor agonist, like Ozempic, which is semaglutide, Wegovi, which is semaglutide, Zebbound and Mounjaro, which is [indiscernible] are very effective drugs that result in significant weight loss. Fortunately, up to 50% of total weight loss comes from muscle, which is problematic, as muscle is necessary for metabolism, strength and physical function. According to the CDC, 41.5% of older adults have obesity in the United States and could benefit from a weight loss medication. Up to 34.4% of these of these patients over the age of 60 have sarcopenic obesity, which means patients overweight or obese and also have age-related low muscle mass. Sarcopenic obese patients are potentially at the greatest risk for developing critically low amounts of muscle mass when taking a GLP-1 receptor agonist medication for the treatment of obesity. Patients with critically low muscle mass may experience muscle weakness, leading to poor balance, decreased gait speed, [indiscernible] disability, loss of independence, falls, bone fractures and increased mortality. We believe there is an urgent unmet medical need for a drug when given in combination with GLP-1 receptor agonist that could prevent the loss of muscle, while preferentially reducing fat in not only overweight or obese patients, but especially for sarcopenic obese overweight elderly patients who had risk for development muscle atrophy and muscle weakness, leading to frailty. We pivoted because we believe that enobosarm, our novel small molecule oral selective antigen receptor modulator, may be the best drug candidate to address this unmet medical need. Enobosarm has been studied in 5 clinical studies involving 968 older men and postmenopausal women, as well as older patients who have muscle wasting because of advanced cancer. Advanced cancer simulates a starvation state with a significant loss of weight in both muscle and fat mass, similar to what is observed with the GLP-1 receptor agonist treatment. These clinical trials include 2 Phase II clinical trials and 168 healthy older or sarcopenic subjects in 1 Phase IIb clinical trial and 2 Phase III clinical trials in 800 subjects, who have lost muscle loss caused by cancer. The totality of the clinical data from these 5 clinical trials demonstrates that enobosarm treatment leads to dose-dependent increases in muscle mass with improvements in physical function, as well as significant dose-dependent reduction in fat mass. Although these 5 clinical trials were not specifically conducted in an obese population, an ad hoc subset analysis we performed on obese patients, who had a BMI of greater than 30, who were enrolled in the Phase III placebo-controlled 505 clinical study, which is the one that evaluated enobosarm 3-milligram treatment in metastatic lung cancer patients on chemotherapy. Even though a small sample size of 29 subjects, notable difference is consistent with an obesity drug that preserves muscle and decreases of fat were observed. At 12 weeks, enobosarm 3-milligram treated subjects had a 4.96% increase in total lean body mass as muscle compared to placebo and a 5.77% reduction in fat mass compared to placebo. By 21 weeks, enobosarm 3-milligram treatment resulted in a 14.4% loss in total fat mass and a 4.51% loss of total body weight compared to placebo, while maintaining total lean body mass. It should be noted that these results were from the short-term treatment of enobosarm alone. The expectation is that enobosarm in combination with a GLP-1 receptor agonist, would potentially augmented the fat reduction and weight loss while avoiding muscle loss. In addition, enobosarm has a large safety database, which includes 27 clinical trials involving 1,581 men and women dosed with a duration of treatment in some patients for up to 3 years. In this large safety database, enobosarm is generally well tolerated with no increase in gastrointestinal side effects. This is important as there are already significant and frequent gastrointestinal side effects with the GLP-1 receptor agonist treatment alone. Although these studies were previously conducted by GCX or Merck, Veru owns all of this clinical data as part of our Enobosarm exclusive global in-license agreement. Because of these key clinical attributes, we believe that enobosarm may address this unmet medical need. The patient data that were generated from these 5 enobosarm clinical trials in both elderly patients and in patients with cancer induced servation-like states, provide strong clinical rationale for enobosarm to address 2 possible populations. First population, enobosarm GLP-1 receptor agonist combination treatment will initially be studied in an at risk sarcopenic obese or overweight elderly patient subpopulation. The enobosarm GLP-1 receptor agonist combination therapy has the potential to augment weight loss by preferentially increasing fat loss while preventing muscle loss and improving physical function. Second is the enobosarm monotherapy for treatment of at-risk sarcopenic obese overweight elderly patients who discontinued the GLP-1 receptor agonist therapy. In this case, enobosarm may rescue the patient by increasing muscle mass, improving physical function while preventing the rebound weight and fat gain that typically occurs when the GLP-1 receptor agonist is stopped. Now how about the enobosarm clinical program for obesity? Our current Phase II clinical program is designed to provide clinical data to support the development of enobosarm for these 2 possible patient populations. The IND for enobosarm for obesity is expected to be submitted to the FDA today. Subject to receiving clearance of our IND, we plan to conduct a Phase IIb multicenter double-blind placebo-controlled randomized dose-finding clinical trial designed to evaluate the safety and efficacy of enobosarm 3 milligrams, enobosarm 6 milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in approximately 90 randomized sarcopenic obese overweight elderly patients receiving a GLP-1 receptor agonist, who had risk for developing muscle atrophy and muscle weakness. The primary endpoint of the Phase IIb clinical trial will be the change in lean muscle mass for baseline to 3 months. Key secondary endpoints would be the change in baseline in 3 months until fat mass, insulin resistance, total body weight, physical function that's measured by [indiscernible] tests. The primary 3-month clinical data from the Phase IIb clinical trial is currently expected in calendar year Q4 2024. The purpose of the Phase IIb clinical trial is to select the optimal dose of enobosarm in combination with a GLP-1 receptor agonist that best preserves muscle and reduces fat after 3 months of treatment to advance into the Phase III obesity or overweight clinical trial. After completing the 3-month efficacy dose-finding portion of the Phase IIb clinical trial, participants will then be allowed to continue into an open label extension trial, where all patients will receive 6 milligrams of enobosarm for 3 months to determine the ability of enobosarm to rescue or reverse muscle loss and prevent fat and weight rebound after stopping a GLP-1 receptor agonist. Now on the intellectual property. Enobosarm is one of the most well-studied SARMs, having been evaluated in over 27 clinical studies. For the overweight or obesity indication, we believe enobosarm has strong intellectual property, in addition to potential regulatory protection. Enobosarm is a novel small molecule that has not been approved for any indication anywhere in the world. We hold an exclusive worldwide license to 16 issued U.S. patents, 6 pending U.S. patent applications, 74 patents and patent applications in countries outside the U.S. and one pending PCT application, including issued molecule and polymorph composition of matter and method of use patents in the U.S., EU and Japan, relating to our enobosarm drug candidate related compounds, the use in breast cancer and patents related to enobosarm related compounds, having statutory exploration dates from 2024 to 2034. In addition, we are prosecuting a method of use patent application related to the use of enobosarm in combination with or following a GLP-1 receptor agonist in obese or overweight adult patients to increase the preserved muscle of bone, as well as the use of SARMs in general for treatment of obesity and chronic weight management. If issued, this patent will be expected to expire in 2044. In connection with this patent application, we've engaged an independent third-party search firm to perform a prior art search, and this independent firm identified no prior art likely to prevent the issuance of the claims of this patent application. Next, for regulatory protection. We expect that enobosarm, as a new chemical entity, would qualify for patent term extensions that could result in later expiration dates, with a maximum 5-year patent term extension in the U.S., enobosarm would qualify for 10 years of regulatory market exclusivity in the European Union countries and 7.5 years of regulatory market exclusivity in Japan. Finally, to further solidify these intellectual property and regulatory protections, we plan to develop a new modified release enobosarm tablet with a novel release pharmacokinetic profile that utilizes patented technology. We expect to file a patent application for this new formulation and such patent issues, it would likely serve to provide additional formulation composition to matter patent exclusivity until 2044. How do we stack up? What's the competitive landscape? Though the competitive landscape for GLP-1 receptor agonist containing weight loss drugs has been rapidly expanding, it has only been recently that the significance and desire to avoid the adverse effect of significant muscle loss caused by GLP-1 receptor agonist has been appreciated. All GLP-1 receptor agonists work by creating a starvation state that non selectively reduces both muscle and fat tissues to cause the weight loss. Using a muscle preserving drug in combination with a GLP-1 receptor agonist would be a new indication. There are no human clinical data currently available with any potential muscle preserving drugs in combination with any GLP-1 receptor agonist. Consequently, no drugs are approved by the FDA for the indication of chronic weight management, the preservation of the muscle, either alone or in combination with GLP-1 receptor agonist. There are at least 2 classes of drugs that have at least Phase II muscle data in other conditions that are being developed as a combination therapy with a GLP-1 receptor agonist to address the muscle loss and provide incremental higher loss of fat. The first class of the myostatin inhibitors, which has a novel mechanism of action, and there are no approved drugs that utilize this mechanism. Currently, myostatin inhibitors under development are administered intravenously and gastrointestinal adverse events appear to be common, especially diarrhea. Second class of drugs of the selective androgen receptor modulators, which enobosarm is a first-in-class small molecule that has tissue selective and well-established mechanism of action, which is using the androgen receptor to change body composition. Activation of the androgen receptor increases muscle mass, improves physical function, decreases fat mass. We know that. Enobosarm has been generally well tolerated without masculinizing effects in women and has similar frequency of gastrointestinal side effects as observed in the placebo-treated subjects. Again, this is important as there are significant and frequent gastrointestinal side effects with a GLP-1 receptor treatment for obesity alone. I want to emphasize, enobosarm is not competing with GLP-1 receptor agonist drugs that are already on the market or under development for weight loss. The expectation is that enobosarm may potentially be combined with any one of the many GLP-1 receptor weight loss drugs to avoid muscle loss and augment fat loss. Again, at this time, there are no clinical data with either myostatin inhibitors or SARMs in any combination -- in combination with any of the GLP-1 receptor agonist. This is truly a new indication. Enobosarm has the potential to have the ideal product profile in combination with a GLP-1 receptor agonist, that is an oral once-a-day dosing, potential to maintain and improve muscle mass, physical function, potential to directly reduce fat, decrease total weight and the potential to improve insulin resistance with a favorable side effect without adding to the gastrointestinal side effects that are observed in the GLP-1 receptor agonist treatment alone. Market. The market -- global market for obesity and overweight drugs is projected to be $100 billion by 2030. And this is from Barclays analyst in 2023. Drugs used for weight loss, such as Ozempic, Wegovi, Zebbound, Mounjaro and other GLP-1 receptor agonist caused a significant loss of both fat and muscle. Again, in the United States, 42% of older adults that is greater in the age of 60 have obesity, and 34% of these patients also have sarcopenia, a low muscle reserve. Accordingly, enobosarm is targeting the at risk older obese, overweight patients who may already have low muscle mass and at a risk further drop in muscle mass at these all important muscles, which will increase the risk of muscle weight -- weakness, functional limitations, mobility, disability, falls, higher hospitalizations, greater mortality. It should be emphasized that enobosarm may potentially be combined with any one of the many GLP-1 receptor agonist weight loss drugs, not only for old or overweight risk patients, but all overweight or obese patients who want to avoid muscle loss when taking a GLP-1 receptor agonist for weight loss. The combination of enobosarm with a GLP-1 receptor agonist potentially represents a multibillion dollar global opportunity. We're very excited about the prospects of enobosarm to address this new and important unmet medical need. Now to update you on the oncology program, our oncology drug pipeline is focused on the clinical development of enobosarm in AR-positive metastatic breast cancer. The design of our Phase III clinical trial evaluating enobosarm alone or in combination with abemaciclib, which is CDK4/6 inhibitor in patients with ER positive, HER2-negative metastatic breast cancer have tumor progression while receiving palbociclib which is a CDK4/6 inhibitor, plus an estrogen blocking agent. Primary endpoint for the Stage 1 portion of the Phase III trial was objective tumor response rates. As of August of 2023, we have completed the target enrollment of 3 patients in Stage 1a portion of the Phase III clinical trial to assess the safety and pharmacokinetics of the combination of abemaciclib and enobosarm. There are no reported drug-to-drug interactions with abemaciclib and enobosarm or new safety findings in 3 patients as of the data cutoff. Further, the early preliminary clinical results showed 2 partial responses, one stable disease in these first 3 patients based on local assessments. And also as of the cutoff date, these patients are on study at 9, 11 and 12 months from the first day of dosing to the disease progression that was determined by a blinded central assessment. In January of 2022, we entered into a clinical trial collaboration and supply agreement with Eli Lilly and a company that supplies abemaciclib for the ENABLE II study. As we have prioritized our clinical programs to focus on enobosarm for obesity, the continued clinical development of enobosarm for treatment of metastatic breast cancer is subject to availability of sufficient funding. In an infectious disease program, we are developing sabizabulin 9 milligrams, which has both host targeted antiviral and broad anti-inflammatory properties, is a two-pronged approach to the treatment of hospitalized patients with viral lung infection, high-risk ARDS and death. We have completed a positive Phase II and a positive Phase III COVID-19 clinical trials, which demonstrated sabizabulin treatment resulted in significant mortality benefit in hospitalized moderate to severe patients of COVID-19, viral infection and high-risk ARDS, death. Although in September of 2023, we have received positive feedback from the FDA on the design of a Phase III clinical trial broadly evaluating sabizabulin in any of the viral-induced ARDS. We will continue to seek external funding through government grants, pharmaceutical partnerships and similar sources to fund the clinical development program to be clear. Without such external funding, we do not plan to advance the development of sabizabulin as a treatment for viral-induced ARDS, and will not commence our Phase III clinical trial to evaluate sabizabulin in viral induced ARDS, until we have such external funding. Now let's turn to our financial position. As of September 30, 2023, we have -- we had $9.6 million in cash and $4.5 million in accounts receivable. In December of 2023, Veru announced an underwritten public offering led by Raymond James and Associates and Oppenheimer & Company, 52.7 million common shares with the net proceeds of Veru from the offering of $35.2 million. The offering was oversubscribed and the underwriters fully exercised their over-allotment option. Equally as important, through the offering, the company has brought into our stock many highly regarded biotech institutional investors, who are attracted to the potential of enobosarm for the weight loss indication. Though some of the net proceeds from our recent successful financing may be used for working capital purposes, including existing vendor obligations with general corporate purposes, we will prioritize the use of the net proceeds for the development of enobosarm, with a primary near-term focus and funding the proposed Phase IIb clinical trial to evaluate the safety and efficacy of enobosarm as a treatment to augment fat loss and to prevent muscle loss in sarcopenic obese overweight elderly patients, receiving GLP-1 receptor agonist who had risk for developing muscle atrophy and muscle weakness. We anticipate the Phase IIb primary clinical trial data in calendar Q4 2024 and the results of the Phase IIb extension study in calendar first half of 2025. We believe we have sufficient resources on hand to reach these important milestones. If successful, will use the primary clinical data from the Phase IIb that we expect to receive in calendar year Q4 2024 to plan the next clinical study. Although we had to make hard choices in 2023, we believe we are now in a great position with the resources to advance enobosarm, as an important drug to be used in combination with any GLP-1 receptor agonist. The overweight and obesity market opportunity is expected to be $100 billion by the end of the decade. And with the potential addition of enobosarm, treatment with the GLP-1 receptor agonist drugs may be able to avoid loss of muscle and preferentially reduce fat for high quality and safe weight loss. We are looking forward to a very successful 2024. With that, I'd now like to open the call to questions. Operator?

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question comes from Dennis Ding with Jefferies.

Maybe on enobosarm and safety profile, how do you think about the safety data that you guys have to date? And how do you think that would translate in obesity and how the FDA would think about the SARMs in enobosarm, given the risk-benefit profile is much different in obesity versus in cancer?

Thank you for your question. First of all, one study, the answer to that question, the risk -- the safety profile in our large safety database shows enobosarm again well tolerated and really across the board. And we don't see masculinization in women. We don't see it's neutral on prostate. And so from a safety standpoint, it's extremely well tolerated. With that said, the FDA did allow GTX to use enobosarm to treat in a Phase IIb setting women with stress urinary incontinence. And as you know, women with stress urinary incontinence, that's not a lethal indication, stress urinary incontinence means when they cough and sneeze, they lose urine. So in that postmenopausal, premenopausal population, that will allow to use the enobosarm specifically. So the benefit/risk ratio in that setting is could be very similar to an obesity patient, and so I think the FDA has already kind of voted on that. So I think they can be easily translated. We are looking at a subpopulation of patients that have low muscle reserve, and that's the patient population that we're most worried about. So we do have a spectrum of clinical benefit versus risk that we can go after, not just the obese patient who's 22 years old and want to try to avoid muscle loss, but also the greater than 60-year-old patient that who have substantially accelerated frailty. To be clear, what I mean by that is that what the reason why there is a concern, and this is again the risk-benefit ratio, is the issue that patients over the age of 60, typically, it will take them to go from age 60 to age 80 to get something called frailty. Frailty means you lose muscle. And you lose enough muscle, you end up having functional limitations, which is worrisome. And when you give a GLP-1 receptor agonist, you typically take a 60-year-old patient, and we're basically putting it through an accelerated frailty process, because they're losing so much muscle in such a short period of time. So I think there's a lot of room when you look at risk benefit with a SARM from stress urinary incontinence to patients with frailty. And the reason we used it in cancer is because it worked in the clinical trials that showed that going after the anti-receptor could be very interesting. But equally, the data, the data that we have in otherwise healthy patients, post-menopausal patients, sarcopenic patients, again, support the clinical benefit-risk ratio.

The next question comes from Leland Gershell with Oppenheimer.

A couple of questions from us. First, with respect to the modified release formulation that you mentioned you're working on, enobosarm is a once daily. Just wondering, beyond basis for new IP, what might be the clinical advantages of the modified release that you're going after? And secondly, would you expect to take that into a pivotal program in sarcopenia and also with the primary endpoint of the Phase IIb be applicable to the Phase III, how do you see that? Any differences in what's required for registration for enobosarm in sarcopenia?

Yes. Great question. So I'm going to answer some of that question, and I'm going to ask Dr. Gary Barnette, our Chief Scientific Officer, to answer some of that question as well. I'll work backwards. The plan is that the only formulation that will be in the Phase III pivotal study will be the new formulation. There'll be no data in the Phase III setting with the formulation that we'll be using in the Phase IIb. And so the expectation is that yes, it's once a day dosing, but we're changing the pharmakinetics to decrease the -- and change the Cmax and keep the exposure the same. The exposure is the same, then you can directly relate exposure to Phase IIb formulation to the new formulation, but making it more difficult generics to come in because, as you know, they have to match the Cmax and the AUC. I'll have Gary give you some insight in terms -- additional comments and some insight in terms of where we are with the development. Gary?

Yes. We've done some preliminary development work with the molecule, statistical chemical property work and some preliminary work with it. We do anticipate that there will be a -- an FDA vernacular, lower or the minimal effective dose, lower AUC, lower Cmax, but effective continues to be the target. So while we do believe that the safety profile of enobosarm is very good, we will be optimizing that through this formulation with a specialized release profile.

And just curious in terms of the Phase III design, would you expect that to be replicative of the Phase IIb or any significant differences required for registration?

You mean for the Phase III?

Yes.

So the Phase III -- for the pivotal do I think the Phase IIb -- no, I would say the way I would look at it -- I jump to head. Let me just come back to the question. The question is, do I think that the Phase III design is going to look like the Phase IIb design? And the answer is no. I think the way to think of the Phase IIb design is how much information can we get, so that can be better understand what is the right design of the Phase III. So that's the reason why we're asking a lot of questions. The first question is use a biomarker. The biomarker is lean body mass. Lean body mass is not your endpoint. It's not a regulatory endpoint. However, we know that if you can pick a drug that has the best effect on lean body mass, which is muscle and the best effect of reducing fat, and the reduction of fat is going to translate to weight loss, you don't have to wait 45 -- 48 weeks to get that information. You can get that information in 12 weeks. So the idea is do you dose finding? Remember, there's no drugs -- muscle drugs currently in combination with a GLP-1 receptor agonist, we have information. So we want to get that information, get the combination and information of the GLP-1 receptor agonist by itself versus enobosarm 3 and versus enobosarm 6, and we're expecting to see the 3 milligram would maintain or improve muscle and decrease fat and that the 6 milligram to maintain improved muscle and decrease fat even further. So the idea is we would have the best opportunities directly to decrease fat, augment the fat loss that you see with a GLP-1 receptor agonist. The problem with a GLP-1 receptor agonist, because you lose muscle and fat, then you'll see a plateau in your weight loss. And the plateau is because your body is telling you can't keep losing 40% of your muscle. Every pound you lose, you're losing 40% of that is muscle. At some point, your appetite kicks in and you get a plateau. But yet there's plenty of fat that you can melt away burn, but you can't do that because you're burning muscle at the same time. So if you can maintain muscle, you may be able to get a deeper and more pronounced fat loss. So that's the reason why when whole muscle constant or higher and decrease fat deeper, and you can get that information at 12 weeks in the design of this study that we have now. Second part of the study -- and by the way, then that dose would then be moved into a clinical study that either is going to include all patients, depending on how we're thinking about it in resources or focus on the sarcopenic obese patient. If you do all patients, we still would do a subpopulation of sarcopenic obese patients in a Phase III setting. And then that kind of study would go on for 48 weeks because that's what required by the FDA guidance for weight loss. The second part of the study, which is the extension study, which is a rollover study, if you will, the concept there is the other problem that you have with the GLP-1 receptor agonist is that if the patient stops the medicine for whatever reason, to get this rebound, fat gain and weight gain and the muscle doesn't come back. So you can actually make a patient with low muscle worse in that setting. And so if you're dealing with a sarcopenic obese patient or an older patient that actually gets in trouble with the GLP-1 receptor agonist, it will be nice to have a medicine that we can have in the endocrinologist [indiscernible] that they can say, okay, I have a drug, I can give you now that we'll restore that muscle and not -- and minimize the fat rebound and the weight gain rebound because you're actually making them worse. So we're going to learn that information in this study as well. But probably that won't -- if that becomes a Phase III, that will be a separate study. It's just asking a different question. So the primary question is still the same one. Can we augment fat and weight loss, maintain muscle, get a deeper weight loss because you're losing fat and you're losing that because you're directly reducing fat and by maintaining muscle you can get deeper fat loss that would be the goal. So I think the Phase IIb is trying to answer those questions in a short period of time because you want to spend your time in the Phase III program than in the Phase II program.

[Operator Instructions] The next question comes from Yi Chen with H.C. Wainwright.

Just to clarify. So you expect the top line results of the Phase IIb trial to show that muscle master remain roughly the same, correct? So clinically speaking, what percentage, in terms of percentage range, what would be considered roughly the same for the muscle mass?