VinFast Auto Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 11, 2023

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Verus Inc. Investor Conference Call. All participants will be in a listen only mode. After this morning's discussion, There will be an opportunity to ask questions. Please note that this event is being recorded.

Operator

I would now like to turn the conference over to Mr. Sam Fish, Verus Inc. Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

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, Our actual results may differ significantly from those projected, suggested or included in any forward looking statements. Risks that may cause actual results All developments to differ materially are contained in our 10 Q and 10 ks SEC filings as well as in our press releases from time to time.

Speaker 1

I would now like to turn the conference call over to Doctor. Mitchell Stein,

Speaker 2

Avero Inc. Chairman, CEO and President. Good morning. With me on this morning's call are Doctor. Gary Barnett, Chief Scientific Officer, Michelle Greco, the CFO and CAO Michael Purvis, the EVP, General Counsel and Corporate Strategy and Sam Fish, Executive Director of Investor Relations and Corporate Communications, thank you all for joining our call.

Speaker 2

Veru Inc. Is a late stage Clinical late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of breast cancer and for SARS CoV-two and other viral acute Respiratory distress syndrome, ARDS related diseases. Our drug development program includes Inovosarm, a selective androgen For the management of advanced breast cancer and cebizobulone, a microtubule disruptor for the treatment of the hospitalized COVID-nineteen And other viral related ARDS. The company also has an FDA approved product, commercial product, the FC2 female condom internal condom The dual protection against unplanned pregnancy and sexually transmitted infections. The revenue from the sexual health program is being used to partially fund the clinical development of our late Therapeutic candidates, which aim to address multibillion dollar premium market opportunities.

Speaker 2

This morning, we will provide an update On our prioritization strategy, the progress of the breast cancer and viral ARDS drug pipeline, as well as the commercialization of our FC2 product. We will also provide financial highlights for our Q2 fiscal year 2023. This past quarter, we implemented a prioritization strategy to focus our drug development efforts on those drug candidates, which we believe have the best opportunity to lead to long term success Shareholder value creation and conserve cash, including a reduction in personnel and certain other measures to reduce costs further. The refocused research and development strategy includes the following: plans for ongoing Phase 2bthree study, the Novusarm and nivemaciclib Combination and second line metastatic setting for AR positive, ER positive, HER2 negative metastatic breast cancers cancer With the company's clinical trial collaboration partner Eli Lilly Company supplying abemaciclib 2, a planned Phase 3 study of ANOVUS arm in bone only, non measurable ER positive HER2 negative metastatic breast cancer. 3, Plans for continued development of cebizobulin in a Phase 3 confirmatory COVID-nineteen study in hospitalized moderate to severe COVID-nineteen in high risk ARDS and 4, a planned Phase 3 clinical study of sebizobulin in hospitalized influenza patients at high risk ARDS.

Speaker 2

In addition, the company announced that Veru is reserving sebizobulin for clinical development only in infectious disease indications and accordingly Has terminated the Phase 3 VERASITY trial with cebizobulin in prostate cancer. Further, Phase 2 development of VERU-one hundred asset will be paused With efforts to find a potential suitable development partner to share the cost of such future development, we also sought to sell our NTATFI asset, which was successful and allowed us to generate additional non Duluth cash. Company's oncology drug pipeline Has 2 clinical development programs with Novosarm, an oral selective androgen receptor agonist for the treatment of advanced metastatic breast cancer. Novusarm is an oral first in class new chemical entity, selective androgen receptor agonist that activates the androgen receptor AR positive, ER positive, HER2 negative metastatic breast cancer, which results in tumor suppressor activity without unwanted Masculinizing side effects and changes is hematocrit. Innovastorm has extensive non clinical and clinical experience, having been evaluated in 25 Separate clinical studies in approximately 1450 subjects dosed, including 3 Phase 2 clinical studies In advanced breast cancer involving more than 250 patients, in the 2 completed Phase 2 clinical studies conducted in women With AR positive HER2 negative metastatic breast cancer, Novusarm demonstrates significant antitumor efficacy in the heavily pretreated cohorts that failed estrogen blocking agents, chemotherapy and or CDK4six inhibitors and was well tolerated with a favorable safety profile.

Speaker 2

In preclinical studies, metastatic breast cancer tissue samples taken from patients who have metastatic breast cancer that has become resistant to CDK4six inhibitors and estrogen blocking agents were grown in mice. In these mice, treatment with the Novusarm in combination with a CDK4six inhibitor Suppress the growth of human metastatic breast cancer greater than either drug was able to do alone. Interestingly, the CDK4six inhibitor treatment caused the metastatic breast cancer tissue to make higher amounts of the antigen receptor, which may explain The observed synergy of combining a CDK4six inhibitor with Innovusarm, which is, as you know, selective AR agonist. The first clinical development study is a Phase IIbIII clinical study called ENABLAR II, which is a Novosarm plus abemastyclic combination treatment 2nd line AR positive ER positive HER2 negative metastatic breast cancer. On March 30, 2023, The company met with the FDA to gain further regulatory clarity for the ongoing Phase 2bthree clinical trial design and program.

Speaker 2

The Phase 2bthree study has been amended to accommodate the FDA's latest recommendations to support a potential registration. In the first stage of the trial, the dose of the Novozarm in the abemaciclib combination is being optimized And the efficacy and safety of the combination therapy is being assessed in 3 arms of 40 patients each, the bemaciclib plus Inovisarm 9 milligram combination therapy, abemaciclib plus Novosarm 1 milligram combination therapy and an estrogen blocking agent as a control arm. The primary endpoint for the Stage 1 of the study is an objective response rate or ORR, which measures objective tumor responses As partial or complete, ORR is an endpoint that the FDA recognizes as an appropriate surrogate endpoint for clinical benefit For a possible accelerated approval, which is consistent with the new FDA guidance issued on March 24, 2023, entitled Clinical trial considerations to support accelerated approval of oncology therapeutics. In Stage 2 of the Phase 2b3 study, We plan to enroll approximately 210 subjects in a multicenter, open label, randomized, 1 to 1 active control clinical study To evaluate the efficacy and safety of Inovisarm plus abemaciclib combination therapy versus an alternative estrogen blocking agent, which is either a selective estrogen receptor degrader or an aromatase inhibitor in subjects with AR positive, ER positive, HER2 negative metastatic breast cancer who have failed A CDK4six inhibitor plus an estrogen blocking agent, so basically first line.

Speaker 2

The primary endpoint It's progression free survival, which is used to confirm the ORR findings in Stage 1. In January of 2022, Veru entered into a clinical trial collaboration supply agreement through which Eli Lilly supplies abemaciclib, And FDA approved CDK4six inhibitor for the ENABLAR-two study. As you can see, the regulatory strategy And the clinical designs of the Phase 2bthree ENABLIT II clinical study could yield an accelerated approval from Stage 1 And the full approval from Stage 2 for the 2nd line of emiciplinovosome combination treatment of AR positive, ER positive, HER2 negative metastatic breast cancer. We anticipate having clinical data for the Phase 2bthree ENABLIT-two study in 2024. The second clinical study plans to evaluate Inovisarm monotherapy For the treatment of bone only non measurable ER positive HER2 negative metastatic breast cancer.

Speaker 2

Bone is the most frequent site of breast cancer metastases, with bone metastases noted in 60% to 80% of metastatic breast cancers. Up to 51% of patients have bone only non measurable breast metastases and they have very limited therapeutic options. NovoSarm inhibits breast cancer growth And it builds and heals bone by increasing both cortical and trabecular bone. Further, Innovus Arm increased its muscle mass and improves physical function. Both the beneficial bone and muscle effects may reduce the skeletal related events caused by bone metastases.

Speaker 2

Accordingly, Innovusarm could be a potential therapeutic option for women with bone only non measurable metastatic breast cancer. We plan to meet with the FDA to discuss the Phase 2bthree Turn our attention now to the viral ARDS infectious disease program. ARDS is a form of non cardiogenic pulmonary edema with diffuse alveolar damage Associated with systemic inflammatory conditions. Viruses can cause up to 1 third of community acquired pneumonia and viruses can trigger the immune system To release an overwhelming amount of inflammatory proteins known as the cytokine storm. The cytokine storm causes tissue damage in the lungs that leads to ARDS.

Speaker 2

Patients who develop ARDS have a high mortality rate. Virus induced ARDS remains a significant unmet medical need with limited treatment options. Common viral infections that cause ARDS include COVID-nineteen, influenza and respiratory syncytial virus, also known as RSV and other virus infections that may also lead to ARDS and death, posing a global public health risk to society includes smallpox And Ebola virus, a single outbreak involving any one of these viruses would be an immediate global emergency with limited existing options available for treatment. As ARDS results from the over exaggerated immune inflammatory response by the patient to a virus infection Rather than direct injury from the virus infection itself, an antiviral agent alone may not be effective. Cebizobulin has host targeted The antiviral and a broad spectrum anti inflammatory agent has the potential to address the virus infection and the inflammation caused by the cytokine storm that causes ARDS, multi organ failure and death.

Speaker 2

The company is developing subizumabulin for the treatment of hospitalized to moderate to severe COVID-nineteen patients and high risk ARDS and death. ARDS remains the most Frequent serious complication of severe COVID-nineteen infection. It has been reported up to 33% of hospitalized patients COVID-nineteen have ARDS and 75% to 92% of patients admitted to the intensive care unit with COVID-nineteen have ARDS. The mortality rate of COVID-nineteen associated ARDS is 45%. And among patients who die from COVID-nineteen, there's a 90% incidence Of ARDS.

Speaker 2

In the current endemic phase, COVID-nineteen infection is estimated to be the 4th leading cause of death in the United States. COVID-nineteen is not going away. It has transitioned to a new disease that will remain with us like influenza and RSV. The endemic phase for COVID-nineteen remains deadly, with the latest data from the CDC reporting 1100 deaths this past week and an average of 4,500 hospitalizations a The number of COVID-nineteen cases is expected to be seasonal with a rise in mid summer when people gather indoors to get out of the heat And in the winter, when they gather to get out of the cold. As the COVID-nineteen endemic continues, there also needs to remain we need to remain vigilant And focus on preparedness for the next wave of infections involving new potentially more dangerous mutated virus strains.

Speaker 2

In fact, A new mutated strain of Omicron has emerged called Arterus, it's also known as XBB-one hundred and sixteen, And it appears to have high infectivity and pathogenicity. COVID-nineteen will be a problem for the foreseeable future and there's a great need for effective therapies, especially for these hospitalized patients with moderately severe COVID-nineteen infection at high risk for ARDS. The company has completed a positive Phase 2 and positive Phase 3 COVID-nineteen clinical trials evaluating cebizobutin. The Phase 3 clinical study was a double blind randomized placebo controlled study in 204 hospitalized moderate to severe COVID-nineteen patients at high risk ARDS. The primary endpoint was a proportion of patients who died by day 60.

Speaker 2

And based on a planned interim analysis of the first 150 patients randomized, The independent data monitoring committee unanimously recommended that the study be stopped for clear evidence of clinical efficacy And they identified no safety concerns. In the interim analysis treatment of cebizipulin 9 milligrams once a day resulted in a clinically meaningful Significant 55.2 percent relative reduction in deaths compared to placebo. On May 10, 2022, the company had a pre emergency use authorization, so that's EUA meeting with the FDA to discuss the submission of an EUA application for subizumabulin COVID-nineteen treatment. On June 7, 2022, the company submitted a request for FDA emergency use authorization visabizobulin. On July 6, 2022, The company announced publication of the interim analysis, interim efficacy and the full safety clinical results from the Phase 3 COVID-nineteen study of cebizobulin in the New England Journal of Medicine Evidence.

Speaker 2

February 28, 2023, the FDA notified the company that it had declined to grant at that time the company's request for emergency use authorization for cebizobulin to treat hospitalized modest severe COVID-nineteen patients. And in communicating its decision, the FDA stated that despite The FDA declined to issue an EUA for cebizobulin. At this time, the FDA remains committed to working with the company in development of cebizobulin. Separately, On February 16, 2023, the FDA also provided comments on the confirmatory Phase 3 study protocol submitted by the company That could support a new EUA request to the FDA. In regard to the study design, the FDA stated that strong consideration Should be given to the appropriate timeframes for interim analyses, so that should a strong efficacy signal again Be observed, the trial could be stopped in an efficient timeframe.

Speaker 2

On April 27, 2023, the company met with the FDA and reached agreement on the design of the Phase 3 confirmatory COVID-nineteen clinical trial and the path forward to submit a new EUA application and or NDA. The FDA agreed to a confirmatory Phase 3 randomized 1 to 1 multistensive global efficacy and safety study It's a bizobulin 9 milligrams oral daily dose plus standard of care treatment versus placebo plus standard of care treatment In 408 hospitalized adult patients with moderate to severe SARS CoV-two infection with high risk for ARDS. The patient population for cebisobulin will be expanded to include all hospitalized moderate to severe COVID-nineteen patients, That's who for passive flow flow oxygen, who 5 forced or high flow oxygen, who sticks mechanical ventilation And there's no requirement to have a comorbidity. The primary efficacy endpoint will be all cause mortality at day 60. Secondary endpoints include days in the hospital, days in the ICU, days of mechanical ventilation and a proportion of patients alive without respiratory failure.

Speaker 2

And an exploratory endpoint will be the presence of long COVID-nineteen symptoms at day 180. In order to get a potentially efficacious drug to patients in an efficient timeframe, there are 2 planned interim efficacy analyses that will be conducted. As requested by FDA, the first planned interim analysis will occur when 204 patients, that's 50% of the population, have completed Day 60 primary efficacy endpoint and the second planned interim analysis is expected to occur when 290 patients, which is 71% Have completed the Day 60 primary efficacy endpoint, which incidentally is the same timeframe with a similar amount of data as when the interim analysis Conducted for the 1st Phase 3 study. If either of the interim efficacy analyses meet statistical significance criteria, The trial could be stopped for efficacy. Should the pre specified primary efficacy endpoint analysis demonstrate a statistically significant effect And all cause mortality favoring Cybusafullin.

Speaker 2

The company may consider a new request for an EUA and or submission of an NDA As the company would potentially have 2 adequate and well controlled trials for review. As the program has fast track designation, Enrolling NDA submission is a possibility for cipizipulin. The Phase 3 confirmatory COVID-nineteen clinical trial is expected to begin enrollment in second half of twenty twenty three and the first planned interim efficacy analysis is anticipated to be conducted in 2024. Now our justification for pursuing a Phase 3 confirmatory trial in hospitalized moderate to severe COVID-nineteen patients at high risk for ARDS is as follows. First of all, COVID is here to stay.

Speaker 2

It's a large market size, it's the 4th leading cause of death, there's lack of effective treatment options and high mortality rates in COVID-nineteen patients who progress to ARDS. Cibisibulin has a unique mechanism of action as a host targeted antiviral And a broad anti inflammatory agent and its viral mutant strain agnostic. As requested by the FDA, The host targeted antiviral activity, cebizobulin, has been reconfirmed with an in vitro cell study Done at the University of Rochester, but University of Rochester. Zebizobulin has demonstrated efficacy and safety in In previous Phase 2 and Phase 3 clinical studies, we have regulatory clarity, the Phase 3 COVID-nineteen confirmatory study With 2 potential interim analyses to assess efficacy of subizbulin earlier, the company may request a new EUA and or an NDA This additional data from the Phase 3 confirmatory COVID-nineteen study. And interestingly, on the Section 564, the Federal FDA may continue to issue EUAs and EUA drugs may be available after the National Public Health Emergency ends today.

Speaker 2

Clinical evaluation of other drug candidates by competitors had marginal no activity. Thus, there will be less competition For hospitalized COVID-nineteen patients to enroll into clinical trials, having a positive first Phase 3 COVID-nineteen study Mitsubishi Bulin treatment demonstrating mortality benefit published in New England Journal of Medicine evidence should also help with patient recruitment into clinical trials. And compared to the 1st Phase 3 clinical study, we plan to conduct a confirmatory Phase 3 clinical study in a greater number of clinical sites Approximately 100 sites compared to 50 clinical sites for the previous Phase 3 study. Now as it relates the current ex U. S.

Speaker 2

Regulatory status, the company believes that it's most likely that all the ex U. S. Regulatory authorities like the FDA We require some level of new additional clinical data, including from the confirmatory Phase 3 study before granting emergency conditional or other similar authorizations of SABITSUVU in for COVID-nineteen. In April, we submitted a request to the FDA's SEDAR, SDER, To reevaluate the FDA's declination of our EUA for cebizobulin to the FDA's Formal dispute resolution process are often referred to as the FDA dispute resolution or the FDR process. We will provide more details on the content of our FDR application when we have an FDA response on the next steps.

Speaker 2

But for now, we can say that our main argument for seeking a reevaluation is that we believe the FDA applied an incorrect standard of review of our EUA, essentially holding our data to the proven safe and effective standard of a new drug Rather than the proper standard under an EUA application, whether Subdivo Lens' potential benefits outweigh its potential risks. And we also believe that this inappropriate standard affected much of the November 2022 PADC Advisory Committee meeting. Also, we have contrasted the FDA's higher level of scrutiny towards our sebibulin EUA with other EUAs that have been granted, including the recent EUA granted for certain late stage COVID-nineteen patients. We're now awaiting the FDA's decision on whether to accept our request to the FDA FDR process. We will determine our next steps based at that time based on the FDA's response, but we will consider all options.

Speaker 2

We hope to hear this month, but because we're dealing with an EUA and not proceeding under a PDUFA statute like we would if we had filed an NDA, The FDA's timelines are not definite. Our FDR application is a matter of high importance of VERU and we will update you when the time is appropriate. Now in order to position cibizipulin as a drug to be used broadly for the treatment of viral ARDS, in other words, COVID has sorted the hook into ARDS. The company also plans to expand the clinical developments of bisibulin for the treatment of hospitalized influenza patients at high risk for ARDS And death. On April 4, 2023, the company announced positive results from a preclinical study of cebizobulin Demonstrating robust anti inflammatory activity with improved outcomes in an H1N1 influenza induced pulmonary infection mouse ARDS model.

Speaker 2

H1N1 is the old Spanish flu and now swine flu, and this was conducted by a team of researchers at LabCorp early development laboratories in the United Kingdom. Sibizobulin treatment resulted in a statistically significant decrease in the total number of inflammatory cells and a reduction in key cytokines And chemokines in lung fluid. Clinically, sebibulin treatment resulted in a reduction in severity of lung inflammation by histopathology, it was a dose dependent improvement in lung function. Oral administration of the 2 milligram per kilogram of bisibulin resulted in a reduction of clinical signs and body weight loss The company expects to submit the full data set for presentation in the future scientific meetings and peer review publications. These preclinical data suggests that savisabulin has a potential for treatment for hospitalized influenza patients at high risk for ARDS and death.

Speaker 2

The pathogenesis and mortality rates for hospitalized influenza patients who develop ARDS are similar to COVID-nineteen associated ARDS, representing a high unmet need and very limited treatment options. According to the CDC, and this is important, influenza burden estimates in the United States We're up to 630 hospitalizations and 55,000 passengers in the last 6 months. Accordingly, VERU is planning a double blind, randomized, placebo controlled Phase 3 clinical trial evaluating sebizumabulin in hospitalized adult Patients at high risk for ARDS. Moreover, the company is planning to expand the developments of bisibulin for smallpox and Ebola viruses under the Animal Rules FDA regulatory pathway. So on April 11, 2023, the company announced positive results From a preclinical in vitro study evaluating the effects of bisibulin against the prototypical pox virus called the vaccinia virus, Which demonstrates that bisibulin prevented both the release of the pox virus from infected cells and the spread of the pox virus And this was conducted by a team of researchers led by Doctor.

Speaker 2

Brian Ward, who is Associate Professor of Microbiology and Immunology, University of Rochester School of Medicine In dentistry in New York, the company expects to submit the full data set for presentation in future scientific meetings and peer reviewed publications. Based on the preclinical data, the company plans to expand the bisibulin program to include other Serious virus infections that pose a global public health threat to society. Cipizipulin as a host targeted antiviral and broad anti inflammatory agent Maybe useful as a novel treatment not only gets smallpox and other pox viruses, but it may also reduce the hyper Reactive immune response triggered by pox virus that's responsible for severe pneumonia, ARDS, multi organ failure and death. The company plans to have a pre IND meetings with the FDA to discuss the Animal Rule regulatory requirements for assessing the efficacy of cebizobulin, The smallpox virus as well as the Ebola virus. Clinical human efficacy trials of drugs for preventing or treating smallpox and Ebola viruses are not feasible and challenged studies in healthy subjects are unethical.

Speaker 2

Therefore, drugs for these indications are generally developed and approved Under regulatory pathway commonly referred to as the animal rule, FDA may grant marketing approval based on adequate and well controlled animal efficacy studies Now as for our commercial business, the company's sexual health program consists of FC2, an FDA approved commercial product that dual protection against unplanned pregnancy and sexually Transmitted infections. Company sells FC2 both in the commercial sector and in the public health sector, both in the U. S. And globally. In the U.

Speaker 2

S, FC2 is available by prescription through multiple telemedicine Internet pharmacy channels as well as retail pharmacies. The company has launched its own dedicated direct to patient telemedicine pharmacy services portal platform to continue to drive sales growth. FC2 is also available to public health sector entities such as State Departments of Health and 501(3) Organizations. In the global public health sector, the company markets FC2 to entities, including ministries of health, government health agencies, UN agencies and non profit organizations and commercial partners. Company had another FDA approved product in Taffy, which has been asked to dalafil capsules for oral use as a new treatment for benign prostatic hyperplasia that was approved by the FDA in December 2021.

Speaker 2

On April 19, 2023, the company entered into an asset purchase agreement with Bluewater Biotech. The purchase price of the transaction was $20,000,000 plus $80,000,000 of potential sales milestones based on net revenues of Intaffy after closing. I will now turn the call over to Michelle Greco, the CFO and CAO to discuss the financial highlights. Michelle? Michelle?

Speaker 3

Thank you, Doctor. Steiner. As Doctor. Steiner indicated, we continue to have a lot of ongoing activity at Veru. Let's start with the Q2 results for the 3 months ended March 31, 2023.

Speaker 3

Overall, net revenues were $6,600,000 compared to $13,000,000 in the prior year Q2. The company reported quarterly sales for its U. S. Prescription business of $4,100,000 compared to $11,600,000 in the prior year Q2. The decrease in the prescription business is due to lower volume from our Customers as a result of ongoing business challenges, which includes changes in strategy, the impact from a rebranding, a reduction in marketing And the recent bankruptcy filing of the Pill Club, an important FC2 customer, all resulting in a slowdown of orders in recent periods.

Speaker 3

Net revenue from the Global Public Sector Business for the quarter was $2,400,000 compared to $1,400,000 in the prior year's quarter. The increase in the Public Sector business is because the company began shipping to South Africa under the most recent tender during the quarter and because the company is seeing increased orders In the U. S. Public sector, resulting from 2 contracts executed last year. Overall, gross profit was 4 point 2% of net revenues compared to $11,200,000 or 86% of net revenues in the prior year quarter.

Speaker 3

The decrease in gross profit and gross margin is driven primarily by decreased sales in our U. S. FC2 prescription business. Operating expenses for the quarter increased to $43,500,000 compared to the prior year's quarter of $22,900,000 The increase is primarily due to research and development costs, which increased $7,400,000 to $22,900,000 compared to $15,500,000 in the prior year quarter and the increase in selling, general and administrative expenses of $5,400,000 from $7,400,000 in the prior year quarter to $12,800,000 in the current quarter. The increase in research and development cost It's due to the number of ongoing clinical trials, mainly for preparation for the Phase 3 COVID-nineteen confirmatory study And costs related to the ongoing and planned INOVUSARM study, along with increased personnel costs due to increased headcount.

Speaker 3

The company also incurred expenses related to preparations of the launch of COVID-nineteen under an EUA, including manufacturing Drug products for the launch as required by the FDA. The increase in selling, general and administrative expenses is primarily due to the commercialization costs Related to preparation for the potential launch of cebizobulin for COVID-nineteen prior to the FDA's declination of the company's EUA application And an increase in personnel related costs due to increased headcount. Most of this incremental headcount has now been reduced post the EUA declination. In addition, during the quarter, we recorded an impairment charge totaling $3,900,000 related to in process research and development assets Recorded for sebizobulin for prostate and zuclomiphene because of the company's change in strategy to focus its efforts on those drug candidates, which have the best opportunity for long term success and the potential for meaningful Phase 3 data readouts in 2024. We also recorded provision for Credit losses of $3,900,000 related to the total amount due from the pill club as a result of the uncertainty of their financial condition after they file for Chapter 11 bankruptcy in April.

Speaker 3

The operating loss for the quarter was $39,400,000 compared to $11,800,000 in the prior year quarter. Non operating income was $559,000 compared to a non loss of $2,400,000 in the prior year's Q2 and primarily consisted of interest expense and the change in the fair value The derivative liabilities related to the synthetic royalty financing. For the quarter, we recorded a tax benefit of $67,000 compared to $27,000 in the prior year's Q2. The bottom line results for the quarter was a net loss of $38,800,000 or $0.48 per diluted common share compared to a net loss of $14,200,000 or $0.18 per diluted common share in the prior year Q2. Now turning to the results for the 6 months ended March 31, 2023.

Speaker 3

For the 1st 6 months of fiscal 2023, total net revenues were $9,100,000 compared to $27,200,000 in the prior year period. Net revenue from the U. S. Prescription business was $4,300,000 compared to $23,200,000 in the prior year period. The causes for the reduction of the net revenues from the prescription business for the period are consistent with those in the quarter.

Speaker 3

In addition, the net revenues from The Pill Club were $3,900,000 for the current period compared to $10,800,000 in the prior year period, a reduction of $6,900,000 Due to the Pill Club's Chapter 11 bankruptcy side, we are uncertain whether these revenues will return in the future. Net revenues from another prescription channel customer were $11,300,000 in the prior year period and 0 in the current period. We understand this reduction is due to the impact of its most significant customer, in turn reducing its orders. Net revenue from the Global Public Sector business for the period was $4,800,000 compared to $4,000,000 in the prior year period. Overall, gross profit was $4,800,000 or 53 percent of net revenues compared to $23,000,000 or 85 percent of net revenues in the prior year Period.

Speaker 3

The decrease in profit and gross margin is due primarily to the decrease in the U. S. Prescription business. Operating expenses increased by $40,100,000 to $79,800,000 compared to Prior year's period of $39,700,000 The increase is primarily driven by research and development costs, which increased by $16,000,000 to $41,600,000 from $25,600,000 in the prior year period and the increase in selling, general and administrative expenses of $16,300,000 from $14,100,000 in the prior year period to $30,400,000 in the current period. The factors contributing to the increase in research and development costs in selling, general and administrative expenses are the same as those described for the quarter.

Speaker 3

As I mentioned before, during the quarter, we also recorded an impairment charge of $3,900,000 related to in process research and development costs And a provision for credit losses of $3,900,000 related to receivables from the pill Operating loss for the period was $75,000,000 compared to $16,700,000 in the prior year period. The increase in the operating loss $58,300,000 is due to the increased research and development costs, increased selling general and administrative expenses, the impairment charge, The provision for credit losses, all combined with the reduction in net revenues during the current year period. Non operating Expenses were $763,000 compared to $3,700,000 in the prior year period and primarily consisted of interest And the change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the 6 month period, we recorded a tax Benefit of $135,000 compared to a tax expense of $87,000 in the prior year period. The company has net operating loss carryforwards for U.

Speaker 3

S. Federal tax purposes of $112,500,000 With $29,700,000 expiring in years through 2042 $82,800,000 which can be carried forward indefinitely. And our U. K. Subsidiary has net operating loss carryforwards of $63,100,000 which do not expire.

Speaker 3

The company also has U. S. Federal research and development tax credit carry forwards of $8,500,000 which expire in years through 2,040 2. The bottom line results for the 1st 6 months of fiscal 2023 was a net loss of $75,600,000 or $0.94 per diluted common share compared to a net loss of $20,600,000 or $0.26 diluted common share in the prior year period. The net loss for the company increased by $55,000,000 for the current period.

Speaker 3

The main reason for the increase in the net loss relates to the company preparing for the potential launch of sebizobulin for COVID-nineteen in the U. S. And outside the U. S. This required building a commercial team, engaging vendors to assist with the commercial launch and manufacturing drug product for the launch upon the EUA Approval as required by the FDA.

Speaker 3

Since the declination, the majority of the employees hired for the commercial team have been terminated And the commercial launch sales and marketing related vendor contracts have been canceled. The related costs for commercialization for the period Totaled $12,100,000 The cost of manufacturing drug product for the launch for the period was 12 $400,000 In addition, with the change in strategy, the company stopped several drug development trials and reduced headcount related to the reduction in drug trials. During this period, we also recorded an impairment charge of $3,900,000 and a credit loss charge of $3,900,000 Lastly, our gross margin decreased by $18,200,000 for the period. Now looking at the balance As of March 31, 2023, our cash balance was $23,500,000 and our accounts receivable was $4,200,000 Compared to a cash balance of $80,200,000 and an accounts receivable balance of $3,600,000 as of September 30, 2022. Our net working capital was $4,000,000 on March 31, 2023 compared to $63,300,000 on September 30, 2022.

Speaker 3

During the 6 months ended March 31, 2023, we used cash of $60,100,000 for operating activities compared with $12,600,000 used for operating activities in the prior period. We generated cash of $2,600,000 related to the sale of Under the common stock purchase agreement with Aspire Capital. There has been a lot of activity since the end of our Q2 on March 31, 2023. On April 12, we entered into a stock purchase agreement with the Frost Gamma Investment Trust, which generated $5,000,000 from the sale of shares of the company's common stock. On April 19, we entered into an asset purchase agreement to sell our NTAPPE product to Bluewater Biotech for $20,000,000 We received $6,000,000 at closing, dollars 4,000,000 payable by September 30, 2023, dollars 5,000,000 payable by April 19, 2024 and $5,000,000 by September 30, 2024.

Speaker 3

Plus, there's a possibility of up to $80,000,000 in sales milestone payments. On May 2, we entered into a common stock purchase agreement with Lincoln Park Capital Fund LLC, which provides the company with Right, but not the obligation to sell to Lincoln Park up to $100,000,000 of shares of the company's common stock over a 36 month period. We are working to increase the future net revenues in the prescription channel by growing awareness and demand of FC2 Through increased marketing efforts for our own telehealth platform and pursuing additional distributors in the telehealth Sector. We've started to see an increase in the U. S.

Speaker 3

Public sector as a result of new agreements recently executed and are seeing increases in our global public sector business from shipments and tenders. We will continue to consume cash as we develop our drug candidates. We believe the current cash balance Along with the revenue from sales of FC2, cash payments we'll receive from the recent sale of our EntAPI product and our ability to secure financing We'll be adequate to fund the planned operations of the company for the next 12 months as we continue to focus on developing novel medicines for the treatment of breast cancer for COVID-nineteen and other related ARDS related diseases. Now I'd like to turn the call back to Doctor. Steiner.

Speaker 3

Doctor. Simon?

Speaker 2

Thank you, Michelle. As Ms. Greco said, the main reason for the increase in the net loss relates to the large expense preparing for potential losses of Busibulin for COVID-nineteen in the U. S. And outside the U.

Speaker 2

S. This required building a commercial team, Engaging vendors to assist in the commercial launch and manufacturing drug products for launch upon EUA approval as required by FDA. These activities have ceased. We've hit the reset button. As for our cash burn and cash position, we have been able to also significantly cost by prioritizing our spend, restructuring our clinical development to focus only on the most promising near term programs.

Speaker 2

We have strategically positioned Veru on late stage clinical programs to both advance breast cancer with Inova's arm Enviroly induced ARDS infectious disease program with cebizobulin, both areas of great unmet need And these are major premium market opportunities. Our cash and cash equivalents were $23,500,000 as of March 31, 2023 And subsequent to the company's fiscal year 2023 Q2, as previously disclosed, Frost Gamma Investments Trust acquired $5,000,000 of company Common stock in a private placement, the company sold Zantasi product to Bluewater Biotech for $20,000,000 up to $80,000,000 in additional Sales milestones and VERU has also entered into a common stock purchase agreement for purchase of up to $100,000,000 With Lincoln Park Capital Fund, under the terms of the agreement, Lincoln Park is committed to purchasing up to $100,000,000 of Veru's common stock at Veru Sole discretion from time to time over a 36 month period. We're pleased to enter into this transaction with Lincoln Park Capital and we We believe that this agreement allows us to access capital in a very efficient manner. We believe this purchase commitment further enhances our financial flexibility and is aligned with our long term strategy for shareholder value creation. We intend to use any net proceeds from the sale of common stock to Lincoln Park Capital For working capital or for general corporate purposes as well as to advance our late stage clinical programs.

Speaker 2

Furthermore, We have a near term strategy to drive FC2 revenues from our commercial business as follows. We are adding additional Again, adding additional telemedicine and Internet pharmacy service partnerships. We have our own dedicated direct to patient telemedicine and Internet pharmacy Services portal. We're pleased with the telemedicine portal as a growing source of revenue. Making this strategic move has allowed us to both supply FC2 To other telemedicine providers and to also have our own FC2 dedicated telemedicine portal that we can control and grow.

Speaker 2

We've expanded our pharmacy fulfillment capabilities to over 50 states in the United States, and the website can be reached at fc2condoms.com. We expect to continue to increase U. S. Public sector sales through our agreements in New York Department of Health and with the distribution partners with Global Protection as well as the FAXIS. And we're seeing an increase in global public health public sector sales, and we believe Brazil is getting ready to order a new tender.

Speaker 2

It should be noted, we had improvements in our FC2 revenues in Q2 of fiscal year 2023. And finally, We are actively seeking, in some cases already in discussions, for potential partnerships with Inovus Arm in breast cancer And sobusibulin and virally induced ARDS as another source of non dilutive capital. All of these resources and business development activities Should allow us to advance our most important drug candidates, Novosarm for second line AR positive, ER positive, HER2 negative metastatic breast cancer And cebizobulin for SARS CoV-two viral ARDS that could yield Phase 3 clinical data in 2024. With that, I'll now open the call to questions. Operator?

Operator

Ladies and gentlemen, at this time, we will begin the question and answer session. To ensure the best sound quality. We will pause momentarily to sub our roster. Our first question will come from Yi Chen with H. C.

Operator

Wainwright. You may now go ahead.

Speaker 4

Hey, good morning. And I'm sorry if I missed this during your prepared remarks. My line was a little choppy, but any color on if you have to rehire or rebuild a commercial team Following the potential positive pivotal study results from Savizavila? Thank you. And also any learnings from You appreciate your efforts.

Speaker 2

To make sure I understand the question, so the question is, Would we consider building a commercial team for our drugs going forward?

Speaker 4

Yes, any learnings from what

Speaker 2

Oh, learnings. Yes, yes, absolutely. Yes, thank you for that question. Yes, I'll tell you what the learnings are. And again, the purpose of this is to get as much candor We can.

Speaker 2

And we were told by both the European authorities and You asked that we have to have drug ready to go, commercially ready to go, and we also need to have the ability to distribute ready to go. And so we invested heavily because we waited 9 months. We were under the impression that this would be short term. That's why they call it emergency use Authorization, it turned out to be much longer than that. And for 9 months, we sat there burning cash.

Speaker 2

So the learnings The next time is either you have a partnership with a group that already has a commercial team ready to go And you can incrementally add to that commercial team or you just wait. You handle the manufacturing piece because you have no choice, you have to have drug to release. But maybe the public will get mad at us if we don't launch quickly, but I'd rather have the public get mad at us not launching Quickly than sitting here for 9 months burning cash with a group that was ready to launch in July. So the learnings is going forward Until I see in black and white that the FDA

Speaker 4

or any of

Speaker 2

the other regulatory authorities have approved to authorize the product, We're going to sit tight and or like we're doing now, pursue partnerships with commercial organizations That are in this space that know how to commercialize. And so in which case, then it's not a big incremental Expense for them to be ready and be in idle, but for a company of our size that's focused on clinical development And it was a major learning. Now in all fairness, we're in the middle of a public crisis. It was an emergency. People are dying at some point 7 to 1,000 patients a day.

Speaker 2

At one point, it was 2,500 patients a day. And So it felt like things were going to move quickly. And but hindsight is 2020. And if we had to do it again, I would wait until I see something from the FDA that says you officially authorized and then the delay should be the company not getting the drug out fast enough. Not that the FDA took it 9 months away and the company lost a lot of money in that process.

Operator

Our next question will come from Leland Gershell with Oppenheimer. You may now go ahead.

Speaker 5

Rowan here speaking on behalf of Leeuwen Duchel. Just a couple of questions from me. Could you update us on some of the ongoing discussions with European and ex U. S. Authorities on ongoing SYMZIVION reviews and has there been any communications around the confirmatory Phase 3 trial and If that might satisfy their request for additional data?

Speaker 5

And secondly, do you have a sense for what kind of spend will be needed to fund the additional ARDS studies, Particularly the influenza trial? Thank you.

Speaker 6

Yes.

Speaker 2

So right now, we had some As soon as the FDA made the decision that they were going to decline the emergency use authorization at this time, All the agencies talk. There's no question this these agencies talk across the world. But they all came back with sort of different Kind of take on it. So for example, the Article 18 with the European Union, the EMA, They took the position that they cannot issue a negative opinion, I mean, because we got data, I mean. And so what they said instead was you can provide us with additional clinical information, it doesn't necessarily have to be a Phase 3 clinical study, Although the Phase 3 clinical study certainly would suffice, they would be willing to review that as a way forward To get to a positive opinion.

Speaker 2

But we have to meet with them, find out what kinds of data they want and short of a Phase 3. But if the Phase 3 is done, feel that that will easily suffice for Europe. The other major group is the Access Group was still in discussions with them. And but again, our sense is that we can provide them additional clinical information. And certainly, if it's a Phase 3 Clinical trial, that would be appropriate.

Speaker 2

I think all the agencies know already that we're committing to the Phase 3 Study. And so they know that that's forthcoming. And as it relates to And so those are the conversations that we had with them. And we do believe that the confirmatory Phase 3 study That the agency has reached agreement with the company, all the elements of that study Which suffice not only for U. S.

Speaker 2

If we're successful, but outside the U. S. As well. So all that's still in flux. Decisions haven't been made.

Speaker 2

It's just Literally, we're on hold or in suspension until we provide more data. As it relates to spend, For the Phase 3 confirmatory COVID-nineteen study, it will cost us Roughly $16,000,000 to get to the 204 patients That we need for the 1st interim look. And so that's a number to think about. For influenza, so that's for COVID-nineteen and that will get us into 2024. So $16,000,000 of incremental increase that we would need for the clinical development program to get us to that number, which will open up ARDS.

Speaker 2

As it relates to influenza, the planned study, We're not planning to start that study until we secured funding and we're comfortable. And so for example, one of the things that we're doing now It turns out that, again, influenza is a big deal. Influenza killed almost in the same number of patients As COVID did in the last 6 months when influenza came back with a vengeance after being gone low numbers in the last year. And so we are actively talking to BARDA. As you know, BARDA had recently received $5,000,000,000 in funding.

Speaker 2

Their interest is ARDS, their interest is influenza. And so we're going to be and we have developed a nice relationship with BARDA through our interactions with them with COVID. So we plan to continue to use that as a potential pathway To get non dilutive dollars that we can support the influenza study, but for us to take that cash right now makes no sense until we get COVID-nineteen

Operator

Our next question We'll call from Brandon Folkes with Cantor Fitzgerald. You may now go ahead.

Speaker 6

Hi. Thanks for taking my questions and thank you for All the color.

Operator

Can you just perhaps

Speaker 6

dive a little bit deeper and elaborate on some of these assumptions that go into the statements of being able to fund the company for 12 months. Any additional details you can provide on the stock purchase agreement? Just is that something that be used pretty quickly and heavily in the near term. And then similarly, I heard sort of your prior commentary on the cost of the COVID-nineteen trial. But How much more can OpEx come down and how quickly?

Speaker 6

And then similarly, how quickly do you expect the FC2 investments to have an impact? Just any color on the cash burn in the next few quarters would be helpful.

Speaker 2

Yes. So I'm going to have Michelle comment In a moment as well, I'm going to I'll give you from a high level the stock purchase agreement and As I understand it. And so as you know, we had one with Aspire Capital over the last, I don't know, 5 years or so, and we Sparingly used it. It was always there when we needed additional cash to keep things moving if we could not get non dilutive So our goal is always to get non dilutive cash and that's why we're active in partnership discussions. We're active with trying to get bartered to Provide money and we're active in investing in our FC2 efforts because the FC2 efforts will allow us to gain Non dilutive cash.

Speaker 2

And finally, we sold in TADSE for $20,000,000 of which all of that will come in the same time period that we're running the COVID-nineteen clinical Study and the enabler study to get to clinical data. So the gap that we need to make up depends on what FC2 does And but the goal is to have readily available funding in the event that we want that we need it. And so the stock purchase agreement basically means that Veru's sole discretion, we can ask Lincoln Park Capital, who's been Who's agreed to buy up to $100,000,000 of Veru stock over the next 3 years. So it's very different in an ATM. And ATM means that you have to go to the bank and the market has to be it's basically a market driven Transaction and you have to have the market has to be ready to accept that stock or you can't do the deal.

Speaker 2

With a purchase Agreement like this, it's not based on market conditions at all. It's based on You have a price that's agreed to and they have to buy at that price and the goal is for the fund to hold on to this stock And not put the stock back into circulation. So it doesn't put pressure on the stock. It doesn't help either parties if you put pressure on the stock. So that's my sort of Lehman's non financial expert thinking behind it, Michelle can correct me, but it worked out very nicely because it doesn't put pressure on the stock.

Speaker 2

As it relates to FC2 investment, as soon as we got the declination from the FDA, we realized that We need to again refocus on FC2. We had some headwinds with some of our major customers and we saw that happening over the last couple of quarters. And so the good news is that we have identified and have moved moving forward in getting additional telemedicine partners That we'll announce over time that will come in and fill the gap or fill in the void that we now have with Telemedicine prescriptions from the pill club and another partner that also faced headwinds. Again, this is independent of us. This is what they did.

Speaker 2

And but it's our customers. And so we feel that's going to be very important. But also we're getting real data and I encourage you to look at the FC2 site, but we're getting real data to show That and this is very consistent with the Google market analytics that we conducted a couple of 3 years ago That when women are offered FC2, about half the women want to try it and about 60 70% will continue to get FC2. And the reason that's important is because FC2, as Michelle Ms. Greco said, By driving awareness, it's a blue ocean.

Speaker 2

It is a non hormonal birth control method that women It can be empowered to use. And also, as you saw recently, syphilis has become another major epidemic. And you can't get Protection from STIs with birth control pills or IUDs or anything of that sort. You have to use a barrier technique and women are just not Waiting for demand to put a condom on. They're taking control.

Speaker 2

So we think we tapped into something very interesting and we're starting to see the numbers grow And it could easily fill our gap for next year easily. And Stay tuned, but the investment is paying off. And the reason we know that is we get real time data. So we know exactly how much we're spending. We know exactly how much we're spending per prescription.

Speaker 2

We know exactly when patients want to continue to use the product. We've just expanded Pharmacy fulfillment to 50 states in the United all 50 states. The pharmacy world is state based, so you can't just it's not a U. S. Thing, it's U.

Speaker 2

S. And states. And so if you don't have, in some cases, bricks and mortar or agreement in each of the states and you're not licensed, you can't fulfill. So we solved that problem and we're working with Medicaid to make sure, again, women have a choice, women have access, which is all part of the Affordable Care Act. So we're heavily invested in it.

Speaker 2

And also with FC2, we're finding that the U. S. Public sector drives awareness. And finally, the global public sector has come back. COVID-nineteen has put quite a wrench in Worldwide sales of FC2 and kind of resources are being diverted towards vaccines and that kind of stuff, but it feels like it's kind of moving the other direction now beyond vaccines.

Speaker 2

So as we mentioned the South African tender, We're supplying Priscilla is getting ready for a major tender that we'll compete for. And we're still the major brand for FC2. FC2 has been the major brand internationally and in the U. S. We're the only approved FDA product.

Speaker 2

So I think if we can get back to the Back to where we were just even a year and a half ago, even a year ago, that having resources at that level We'll easily cover our clinical burn, clinical trials burn. Michelle, do you want to add anything to that?

Speaker 3

Yes. I would just like to comment a little bit about OpEx and the use of cash. Last quarter, we did talk about the fact that we were cutting back on expenses. We were still waiting for the FDA. All signs have been pointing to an EUA approval.

Speaker 3

So we did not pull the plug On all of our commercialization efforts, until the last minute when the FDA formally said No. And so one of the things that we had started to do was work with our vendors and push out some of our Payment date. And so we're still seeing that net you're seeing that in our cash burn. We've pushed out payments related to building up the drug supply that the FDA said we needed to have on hand. And the same thing as we terminated all the vendors related to the commercialization efforts.

Speaker 3

We had payments due with them. We worked on pushing those payments out as well. So our spend, our cash burn has been a lot higher now. It's going to start to come back down in our next Quarter, it's not going all the way down to the level it was a year ago, but it's going to get much closer. It's going to at least go down by half Of what we just saw, if not a little bit more.

Speaker 3

And as Mitch indicated, Until we have the cash in place for the confirmatory trial, we're not going to be going ahead with it. But just to give you a little bit of color on our OpEx and our cash spend.

Speaker 6

Thank you. That's very helpful. And then one follow-up, if I may. On that Phase III confirmatory trial design for COVID-nineteen, Is that designed to meet the NDA standard or the EUA standard here in the U. S?

Speaker 6

And then similarly, ex U. S, Should we think about you continuing to pursue EUA equivalents or full approvals post that Phase 3 confirmatory trial? Thank you.

Speaker 2

It's a great question. And so to answer that question, The idea is that this trial and the FDA also agrees and is guiding us towards this is that And the quote that I used in my prepared comments was then we would have 2 well controlled studies. And if you have 2 well controlled studies, successful studies, then the FDA views that as the standard For an NDA. So we will have we are setting ourselves up in the U. S.

Speaker 2

To do the EUA and NDA together. And you say, well, Mitch, why would you do that? Well, the NDA takes time. And even that fast track designation, get a 6 month review. But in EUA, they can go much quicker and get you to market.

Speaker 2

But the standard that we're going to hit With a successful trial, it's going to be an NDA standard. So we should be able to easily blow away an EUA standard. But the EUA standard lets you get on the market in weeks, whereas an NDA gets you on the market in 6 months plus. So we think from a timing standpoint, if the EUA is still available, which we would apply for that and simultaneously we apply for the NDA. Actually, it's kind of the same way.

Speaker 2

Because the full approval takes longer, we would take advantage of the shorter route, But also have the longer route in play as well. So it's still the same way to think of it. So no, we're not going to be just an EUA Standard, with this trial behind us, when it's completed, it would be an NDA standard.

Speaker 6

Great. Thank you very much. I appreciate all the color.

Operator

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

Speaker 2

Thank you. I appreciate everybody You have joined our call today, and I look forward to updating you all on our progress on our next investors' call. Thank you for being with us today.

Operator

A digital replay of the conference call will be available beginning approximately noon Eastern Time today, May 11, by dialing 1-eight seventy seven-three forty four-seven thousand five hundred and twenty nine in the U. S. And 1-four twelve-three seventeen-eighty eight internationally. You will be prompted to enter the replay access code, which will be 1,000,000,000,000,000,000 2419. Please record your name and company when joining.

Operator

The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.

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