Veru Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 9 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to Verio Inc. Investors Conference Call. All participants will be in listen only mode. After this morning's discussion, there will be an opportunity to ask Please note, this event is being recorded. I would now like to turn the conference over to Mr.

Operator

Sam Fish, Fairway 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, 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 ks SEC filings

Speaker 2

as well

Speaker 1

as in our press releases from time to time. I would now like to turn the conference call over to Doctor. Mitchell Steiner, VeriWink's Chairman, CEO and President.

Speaker 2

Good morning. With me on this morning's call are Doctor. Gary Barnett, Chief Scientific Officer Michelle Greco, Chief Financial Officer and Chief Administrative Officer Michael Purvis, the General Counsel and Executive Vice President of Corporate Strategy and Sam Fish, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q3 fiscal year 2024 earnings call. VERU is a late clinical stage biopharmaceutical company focused on developing innovative medicines for high quality weight loss, oncology and acute respiratory distress syndrome.

Speaker 2

Company's drug development pipeline includes 2 late stage novel oral small molecules, Inovusarm and sebizobulin. In our weight loss pipeline, we have Inovusarm, also known as Osterine, MK-two thousand eight hundred and sixty six, GTX-twenty four and VERU-twenty four, which is an oral selective angio receptor modulator, SARM for short. Novosarm is being developed as a treatment in combination with a weight loss drug like a glucagon like peptide 1 receptor agonist, also known as a GLP-one receptor agonist to augment fat loss and to avoid muscle loss in overweight or obese patients for chronic weight management. In our oncology pipeline, pending additional external funding or pharmaceutical partnership, we have Inovusarm in combination with abemaciclib as a second line treatment, the androgen receptor positive, estrogen receptor positive and human epidermal growth factor 2 negative metastatic breast cancer. In our infectious inflammatory disease pipeline and similarly pending additional external funding of pharmaceutical partnership, we have cebizobulin, a microtubule disruptor, which is a planned Phase 3 clinical trial for the treatment of hospitalized patients with viral induced ARTS.

Speaker 2

The company also has an FDA approved commercial product, the FC2 female condom internal condom for dual protection against unplanned pregnancy and sexually transmitted infections. This morning, we'll provide an update on the current focus of our company, which is the development of InovaSarm, an oral Sarm in combination with Wegovy, which is semaglutide, a GLP-one receptor agonist to preserve muscle mass and to augment fat loss for a potentially higher quality weight loss. Will also provide financial highlights for our Q3 fiscal year 2024. Lipfirm receptor agonist, which included Ozempic, Wegovy, Cepfound and Manjaro, were very effective drugs that caused significant weight loss. Unfortunately, up to 50% of the total weight loss comes from muscle, which is problematic as muscle is necessary not only for strength and physical function, but also muscle as a metabolic tissue that may play a role in allowing a higher quality weight loss.

Speaker 2

To clarify this point, muscle preservation may assist in high quality weight loss in 3 ways. First, we need a drug that given in combination with a GLP-one receptor agonist will prevent the loss of muscle caused by GLP-one receptor agonist to preserve physical function in older adults who are at risk for muscle loss and who are overweight and obese. According to the CDC, 42% of older adults have obesity in the United States and could benefit from weight loss medication. Up to 34% of obese patients over the age of 60 have sarcopenic obesity, sarcopenia being the age related loss of muscle. This large subpopulation of sarcopenic obese patients is especially at risk when taking a GLP-one receptor drug for weight loss as they may already have critically low amounts of muscle due to age related muscle loss.

Speaker 2

Because of the magnitude and speed of muscle loss, while on a gliplan receptor agonist therapy for weight loss, gliplan receptor agonist drugs may accelerate the development of frailty and muscle weakness in obese or overweight elderly patients. Muscle weakness may lead to poor balance, decreased gait speed, mobility disability, loss of independence and higher risk for falls and fractures. In fact, the safety section of the package insert for Begovy has been updated based on the recently reported select cardiovascular outcome clinical trial, which now highlights a 400% increase in pelvic and hip fractures that were observed in patients greater than the age of 75 years receiving Wegovy compared to placebo patients and that was 2.4% versus 0.6%. Fractures of the hip and pelvis typically occur because of falls, which increase with decreased muscle mass. 2nd, for all patients who are overweight or obese, muscle preservation may prevent the GLP-one receptor agonist weight loss plateau.

Speaker 2

Significant depletion of muscle mass may also be one of the reasons why patients with GLP-one receptor agonist drugs reach a weight loss plateau, meaning the rate of weight loss slows or stops while taking a GLP-one receptor agonist drug. The hypothesis is that loss of muscle creates a muscle deficit that causes low energy balance and triggers in the brain a signal to increase appetite that counters the inhibition of appetite GLP-one receptor agonist drugs, thus leading to the weight loss plateau. Without a muscle deficit, GLP-one drugs may maintain the loss of appetite and reduction of calorie consumption, which may potentially remove more fat mass with greater weight loss. 3rd, for all patients who are overweight or obese, muscle depletion may trigger the overeating that occurs when the patient discontinues a gluploid receptor agonist, resulting in a rebound weight gain, that is that we gained the original weight. But now the regained weight is composed almost all of fat.

Speaker 2

Having a drug that maintains adequate muscle reserve and a GLP-one receptor drug is discontinued or discontinued may prevent this rebound weight gain and help with the maintenance of weight loss. We believe that InovusArm, our novel oral selective antireceptor modulator may be the best drug candidate to address this urgent unmet medical need to preserve muscle in patients receiving a gliP-one receptor agonist for weight loss. Data from our clinical trials and preclinical studies support InnovusRARM's potential. InnovusRARM is given as a once a day oral dose. InnovusRARM works through the androgen receptor, and well established mechanism.

Speaker 2

Inovisarm demonstrates tissue selectivity as it improves and preserves lean body mass, muscle mass and physical function. In addition, InovaSarm also directly causes a breakdown of fat and prevents storage of fat, resulting in a decrease in fat mass. This represents a different non overlapping mechanism of drug action to reduce fat that's distinct from the GLP-one receptor agonist, which suppresses appetite resulting in a low caloric state. Therefore, if Inovis arm is given with a GLP-one receptor agonist, the combination utilizes 2 different mechanisms to increase the loss of fat. Also, Inobisarm builds and heals bone, providing another potential benefit to treat bone loss, which is also known as osteoporosis to prevent fractures.

Speaker 2

Inovisum has been previously studied in 5 clinical studies that measured muscle as an endpoint involving 968 older men and postmenopausal women, as well as older patients who have muscle wasting because of advanced cancer. And advanced cancer population is relevant as advanced cancer causes a loss of appetite, resulting in significant unintentional loss or wasting of both muscle and fat mass similar to what's observed with a glioborne receptor agonist treatment. The totality of the clinical data from these five clinical trials demonstrates that NovoStar treatment leads to increases in muscle mass with improvements in physical function as well as significant reductions in fat mass. The expectation is that Novosarm in combination with a gluploid receptor agonist would both preserve muscle and augment fat reduction resulting in a higher quality total weight loss. Furthermore, Innovus Arm has a large safety database, which includes 27 clinical trials involving 1581 men and women dosed with Innovus Arm with some patients dosed for over 2 years.

Speaker 2

In this large safety database, Innovus Arm is generally well tolerated without masculinizing effects in women. Reversible mild liver enzyme elevations have been reported, which are mostly grade 1 adverse events, there were no grade 3 or grade 4 adverse events. To be clear, no drug induced liver injury has been observed from any of the 27 clinical studies evaluating Inovusar. Furthermore, there are no increases in gastrointestinal side effects compared to placebo. This is important as there's already significant and frequent gastrointestinal side effects with a gliplan receptor agonist treatment alone.

Speaker 2

Now turning to our Inovus arm clinical program for high quality weight loss. We're conducting the Phase 2b quality clinical trials. The quality is the name of the trial, which is a multicenter, double blind, placebo controlled, randomized dose finding study to evaluate the safety and efficacy of Inovuson 3 milligrams, Inovuson 6 milligrams compared to placebo in combination with Begovi, which is semaglutide, a platform receptor agonist in approximately 150 older patients greater than the age of 60 who are overweight or obese. Purpose of the Phase 2b clinical trial is to select the optimal dose of a Novus arm in combination with a quick one receptor agonist best preserves muscle and augments a reduction of fat mass for a better body composition at 16 weeks of treatment. The primary endpoints of the Phase 2b clinical trial will be the change in total lean body mass from baseline to 16 weeks and key secondary endpoints will be the change in baseline to 16 weeks in total fat mass, total body weight and physical function as measured by the SERACLEM test.

Speaker 2

After completing the 16 week efficacy dose finding portion of the Phase 2b clinical trial, participants will then continue into a blinded Phase 2b extension clinical trial, where all patients will stop receiving a CLIP-one receptor agonist, but will continue taking placebo, Inovisarm 3 milligrams or Inovisarm 6 milligrams for an additional 12 weeks. The blinded Phase 2b extension clinical trial will evaluate the maintenance of weight loss, meaning whether Inovisarm can maintain muscle and prevent the fats and weight gain that occurs after discontinuing the glioblin receptor agonist. We believe that assessing the effects of Inovisarm on lean body mass and fat mass at 16 weeks time point should be adequate to demonstrate significant loss of muscle in a semaglutide and placebo cohort. Support comes from the STEP 1 study reported by Wilding et al. In the New England Journal of Medicine.

Speaker 2

The STEP 1 study that evaluated semaglutide for weight loss in overweight and obese patients showed that 49% of the total weight loss that's lost in that 68 week study occurred by week 16. Approximately 40% of the total weight loss was attributed to muscle loss. As Inovisarm is a muscle drug that also burns fat, our current Phase 2b clinical program is designed to provide body composition clinical data to support the Phase 3 clinical development of Inovisarm for precision high quality weight loss by answering the following clinical questions related to muscle. For at risk older adults who are overweight or obese, can an OBUS arm prevent loss of muscle to preserve physical function? For all patients who are overweight or obese, can Inovis arm preserve muscle to prevent the GLP-one receptor agonist weight loss plateau?

Speaker 2

And for all patients who are overweight or obese, can Inovisar maintain adequate muscle reserve when GLP-one receptor agonists are discontinued to prevent the rebound weight gain, which is almost all fat. I'm proud of our team as they have expeditiously executed the Innovisarm Phase 2b quality clinical program. We prioritized the company's clinical development activities to address this new important unmet need in November of 2023. We filed the IND with the FDA in January of 2024. We received FDA clearance on the IND in February of 2024.

Speaker 2

We made a strategic decision to upsize the size of the trial to 100 and 50 patients and increase the power of the study. We initiated this Phase 2b quality study in April of 2024. Clinical study is being conducted in 14 clinical sites in the United States. This morning, I'm pleased to report that we have completed the greater than 150 patient enrollment for the Phase 2b quality study. We can now anticipate that the last patient to complete the Phase 2b quality study will be in December of 2024 with top line clinical results of the Phase 2b clinical study expected in January 2025.

Speaker 2

Furthermore, the top line results with a separate blinded Phase 2b extension clinical study may now be expected in the 2nd calendar quarter in 2025. We believe we have sufficient financial resources on hand with cash of $29,200,000 at the end of June 2024 to complete and provide results in both the Phase 2b quality clinical trial and the Phase 2b extension clinical trial. I will now turn the call over to Michele Greco, CFO, CAO to discuss the financial highlights. Michele?

Speaker 3

Thank you, Doctor. Steiner. Let's start our highlights with the Q3 results for the 3 months ended June 30, 2024. Overall, net revenues were $4,000,000 compared to $3,300,000 in the prior year's Q3. The company's quarterly sales for its U.

Speaker 3

S. Prescription business were $552,000 compared to 800 and $63,000 in the prior year's Q3. Net revenue from the Global Public Sector business for the quarter was $3,400,000 compared to $2,500,000 in the prior year's quarter. The increase in the Public Sector business is for increased shipments under our contracts with UNFPA and USAID. Overall, gross profit was $1,300,000 or 34 percent of net revenues compared to $1,200,000 or 37 percent of net revenues in the prior year quarter.

Speaker 3

Gross profit increased due to an increase in units sold. The decrease in gross margin is due to the change in sales mix with the U. S. Prescription business, which has a higher profit margin comprising a smaller percentage of total net revenues. Operating expenses for the quarter decreased to $12,400,000 compared to the prior year's quarter of $19,700,000 The decrease is primarily due to research and development costs, which decreased to $4,900,000 compared to $8,800,000 in the prior year quarter and the decrease in selling, general and administrative expenses of $3,400,000 from $10,900,000 in the prior year quarter to $7,500,000 in the current quarter.

Speaker 3

The decrease in research and development cost is due to our drug development strategy to focus development efforts on those drug candidates with the best opportunity for long term success and shareholder value creation while matching available funding. During the quarter, we initiated the Phase 2b quality clinical study. The decrease in selling, general and administrative expenses is primarily due to significant costs incurred in the prior year related to preparation for the potential commercialization of cebizobulin for COVID-nineteen prior to the FDA's declination of the company's EUA application and an increase in personnel costs in the prior year due to increased headcount for the potential commercialization. These additional costs and incremental headcount have now been reduced post the EUA declination. On April 19, 2023, we sold our NTAD Feed product to Oncenetics for $20,000,000 We received $6,000,000 at closing and promissory notes of $14,000,000 which are recognized as additional gain on the sale when non refundable consideration is received.

Speaker 3

During the current quarter, we recognized an additional gain on sale of $110,000 compared to the gain on sale of $4,700,000 in the prior period. The operating loss for the quarter was 10 point $7,000,000 in the prior quarter. Non operating income was $132,000 compared to $1,300,000 in the prior year's quarter. The reduction is primarily due to the change in the fair value of the derivative liabilities related to the FC2 synthetic royalty financing. For the quarter, we recorded a tax expense of $162,000 compared to $58,000 in the prior year's quarter.

Speaker 3

The bottom line result for the Q3 was a net loss of $11,000,000 or $0.07 per diluted common share compared to a net loss of $12,500,000 or $0.14 per diluted common share in the prior year's quarter. During the Q3, we used cash of $5,600,000 for operating activities. Now turning to the results for the 9 months ended June 30, 2024. For the 1st 9 months of fiscal 2024, total net revenues were $10,200,000 compared to $12,400,000 in the prior year period. Net revenues from the U.

Speaker 3

S. Prescription business were $1,800,000 compared to $5,200,000 in the prior year period. Included in the net revenues for the prior period were $3,900,000 for sales to the Pill Club. The reduction of prescription business net revenues is due to not having any revenues from the Pill Club in the current period due to the fact the Pill Club's Chapter 11 bankruptcy filing in the prior year. Net revenues from the Global Public Sector Business for the period were $8,400,000 compared to $7,200,000 in the prior year's period.

Speaker 3

Overall, gross profit was $3,200,000 or 31 percent of net revenues compared to $6,000,000 or 48 percent of net revenues in the prior year period. The decrease in gross profit and gross margin is due to the change in the sales mix with the U. S. Prescription business, which has a higher profit margin comprising a smaller percentage of total net revenues and an increase in our cost of sales due to a charge of $1,200,000 for an obsolete stock reserve related to inventory in the U. S.

Speaker 3

Prescription channel. Operating expenses decreased by $63,400,000 to $32,900,000 compared to the prior year of $96,400,000 The decrease is driven by a reduction in research and development costs of $37,700,000 to $9,500,000 from $47,300,000 in the prior year and a reduction in selling, general and administrative expenses of $17,900,000 from $41,300,000 in the prior year to $23,400,000 The factors contributing to the decrease in research and development costs and selling, general and administrative expenses are the same as those described for the quarter. During the prior year, 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 the receivables from the Pill Club. During the 9 months, we recorded a gain on the sale of Entatfi of $1,000,000 compared to $4,700,000 in the prior period. Operating loss for the period was $28,700,000 compared to $85,600,000 in the prior year, a decrease of $56,900,000 which is primarily due to the reduction in operating expenses.

Speaker 3

Non operating expenses were $289,000 compared to operating income of $508,000 For the 9 months, we recorded a tax expense of $272,000 compared to a tax benefit of $77,000 in the prior year. The bottom line results for the 1st 9 months of fiscal 2024 was a net loss of $29,300,000 or $0.22 per diluted common share compared to a net loss of $85,000,000 or $0.012 per diluted common share in the prior year. The net loss for the company decreased by $55,700,000 for the 9 month period. The main reason for the decrease in the net loss relates to the company's focus on drug candidates with the best opportunity for long term success and shareholder value creation, while matching available funding and elimination of the commercial team and related commercialization expenses for the potential loss launch of cevizabulin for COVID-nineteen. Now looking at the balance sheet.

Speaker 3

As of June 30, 2024, our cash balance was $29,200,000 and accounts receivable were $1,600,000 compared to a cash balance of $9,600,000 and accounts receivable balance of $4,500,000 as of September 30, 2023. Our net working capital was $27,900,000 on June 30, 2024, compared to $5,100,000 on September 30, 2023. During the 9 months ended June 30, 2024, we used cash of $17,300,000 for operating activities compared with $78,500,000 used for operating activities in the prior period. We generated cash from financing activities for the 9 months ended June 30, 2024 of $36,800,000 compared to $9,000,000 in the prior period. On December 18, 2023, we completed an underwritten public offering of our common stock, which included the exercise in full of the underwriters' option to purchase additional shares.

Speaker 3

Net proceeds to the company from this offering were approximately $35,200,000 after deducting underwriting discounts and commissions and costs incurred by the company. All the shares sold were offered by the company. We are working to increase the future FC2 net revenues in the U. S. Prescription channel by growing awareness and driving demand of FC2 through increased marketing efforts for our own telehealth platform.

Speaker 3

We're starting to see increases in our global public sector business from efforts to increase FC2 market awareness in developing countries. Now I'd like to turn the call back to Doctor. Steiner. Doctor. Steiner?

Speaker 2

Thank you, Michelle. All of the GLP-one receptor agonists work mainly by creating a low caloric starvation state by reducing appetite that results in the non selective loss of both muscle and fat tissues to cause weight loss. Using a muscle preserving drug that can also decrease fat mass like Enobozarm in combination with a gliiform receptor agonist may allow for the enhanced reduction of fat mass for high quality higher quality precision weight loss in not only older patients who are overweight or obese, but also for all patients who are overweight or obese. This is truly an unmet medical need. We believe that Novusarm is the best investigational drug candidate to address the muscle loss caused by GLP-1 receptor agonist drugs for weight.

Speaker 2

With Novus arm is a 1st in class arm, has once a day oral dosing, has demonstrated tissue selectivity, utilizes a well known mechanism of action, the androgen receptor to favorably change body composition. Activation of the androgen receptor increases muscle mass, improves physical function and decreases fat mass to potentially achieve a high quality weight loss. Novosome has a favorable safety profile would not add to the gastrointestinal side effects that are already observed with a gliiform receptor agonist treatment alone. The global obesity and overweight drug market is projected by many research analysts to be $100,000,000,000 annually by 2,030. The combination of Innovus arm with the gluform receptor agonist potentially represents a multibillion dollar opportunity.

Speaker 2

I should note that we also have new clinical data that we generated from reexamination of the clinical data from some of the previous five clinical muscle studies evaluating Novosarm that further support the potential of Novosarm for the preservation of total lean body mass and the reduction of fat mass to improve body composition for higher quality weight loss in patients who are obese or overweight. The company will be presenting an abstract of the Obesity Week 2024, and that's in November 2, 26 in San Antonio, Texas. Furthermore, we've been invited to present keynote lectures at the 4th edition of the World Obesity and Weight Management Congress being held October 24th to 26th in Baltimore, Maryland and 17th International Conference of the Society of Sarcopenia, cachexia and wasting disorders being held December 6th to 8th in Washington, D. C. I've also been invited to co chair a session entitled Body Composition Changes Induced by Glickloyl receptor agonist and obesity therapy at the International Conference of the Society of sarcopenia and cachexia and wasting disorders.

Speaker 2

We are very excited about the prospects of INOVOSARM to address this new and important unmet medical need. And we are looking forward to the top line results of this important and timely Phase 2b quality clinical study. With that, I'll now open the call to questions. Operator?

Operator

Yes. Thank you. And the first question comes from Yi Chen with H. C. Wainwright.

Operator

Thank you for taking my questions. Assuming positive results plan to find a partnership for a potential registration study? Thank you.

Speaker 2

Thank you, Yi. So assuming we have a positive study, which means that now that we have complete enrollment, we can now have a little bit more certainty, have a lot more certainty in terms of how the trial will progress in terms of information. So the expectation is the last patient will be will complete the study, the 16 week portion of the study in December, give us some time there to clean up the data and look at the data and get the top line results, call it, January. So in January 2025, we will have the Phase 2b quality clinical trial data. The reason I say it that way is the extension trial is not required for us to move forward with talking to the FDA or potentially talking to partners.

Speaker 2

So really it's the data that we get in January that will start to ball rolling from a standpoint of moving forward. So moving forward means collect the information, go back to the FDA and start having further discussions now with real data in hand. I mean, I want this data really represents the 1st muscle drug and we have competition with, for example, myostatin inhibitors, but this data will be the 1st muscle drug to be given in combination with GLP-one to see what the results look like. I mean, all these other drugs pretty much have no clinical data in combination with GLP-1 and the data that they use to move forward with their Phase IIs just like us is data showing muscle preservation, reduction in fat and other conditions, not in combination with the GLP-1. So with that said, we should we will have a real opportunity to meet with the FDA and understand what the clinical the Phase 3 clinical program will look like.

Speaker 2

With that said, also, this is also an ideal time with data in hand to begin to have discussions for potential partnerships. As I mentioned in previous calls, we have talked to the major players. As you would expect, the expectation is for us to get this study done, so we'll have real data, so we can have real discussions. And so that's so the way to think of it is, after January, it gives the company an opportunity to begin moving on the regulatory front and moving on the partnership

Operator

front. Got it. That's helpful. Thank you.

Speaker 2

Thank you.

Operator

Thank you. And the next question comes from Leland Gershell with Oppenheimer. Yes.

Speaker 4

Hey, Mitch. Thanks for taking the question. Just a question actually on safety. In the trials that you referenced, I think the 5 studies that you referenced with the Novusarm, I think the high dose was 3 milligrams. I know you're testing up to 6 in the current quality study.

Speaker 4

Just wanted to ask kind of what gives you confidence that you'll be okay, particularly with respect to liver at 6? And are there any considerations with respect to the types of patients in the study, I. E, overweight, obese, therefore, may have bad accumulation in the liver, could that put them in further risk of having liver injury? And also, is there any provision for our alcohol cessation during the study, which also could be a factor? Thank you.

Speaker 2

Yes. Thank you. So the answer to the first I'm going to answer a couple of those questions and I'm going to ask Doctor. Gary Barnard, our Chief Scientific Officer to answer some of those questions. So as it relates to the database, you're absolutely right.

Speaker 2

The database that we have for muscle as an endpoint goes up to 3 milligrams. Of course, we have single ascending dose and multiple ascending dose studies that were done in much higher doses of as high as 100 milligrams. And but I need to remind everybody that we also have done almost 250 patients at 9 milligrams or 18 milligrams in our breast cancer program. And some patients have been taking those doses for as high as for as long as 2 years plus. So we do have data for safety above the 6 milligram.

Speaker 2

And but with that and then in this patient and again, we saw no evidence of liver toxicity defined as drug induced liver injury. As it relates to triglycerides, one of the things that we did see in a different patient population, the older patients, men over the age of 60 and women postmenopausal, is we did see about 30% reduction in triglyceride. So, one of the mechanisms for if you worry about overweight patients or obese patients that may have fatty liver, we may be able to reduce the triglycerides, which is the source of the fatty liver. As it relates to alcohol, I may have to ask Doctor. Gary Barnett what we're doing in a clinical protocol.

Speaker 5

Yes. We are not excluding alcohol. We do monitor the alcohol history and the alcohol intake as we go forward. Of course, we're excluding patients with alcohol associated cirrhosis and alcohol associated hepatitis, alcohol associated fat and liver. If we know those things, they're excluded from the study.

Speaker 5

But we're not we don't exclude the intake of alcohol during the study, but we do monitor that.

Speaker 4

Got it. Thank you very much for the color. I look forward to the top line results.

Speaker 2

Great. Thank you.

Operator

Thank you. And the next question comes from Gary Nachman with Raymond James.

Speaker 6

Hi, guys. This is Tejas on for Gary. Congrats on the quarter. So my first question is, can you just talk about how you're expecting the Phase 2b to progress now that you're fully enrolled? And if we should expect any incremental updates before you report top line in January?

Speaker 6

And on that safety question, are you pleased with everything you're seeing with the safety committee thus far in that current trial? And then I also have a follow-up.

Speaker 2

Yes. So as it relates to the Phase 2 and what to expect, so as I promised, we would announce when we fully enroll the study. So that's probably the last announcement in terms of progress because the last patient out will be December. And so the next report will be the actual top line data. As it relates to safety, we're pleased with what we're seeing so far, but we enrolled 150 patients in 3 months.

Speaker 2

And so many of these patients are still just starting their part of their 1st month. So we still early times, But again, the 3 milligram dose we've used in 5 clinical trials and other trials and then we've used 9 milligram and 18 milligram. But with so we're not expecting anything strange, but that's why we run the study and that's what we're going to follow. And so it's hard to say much more about safety at this point, except there's no surprises. And then as it relates to Yes.

Speaker 6

Yes. I just wanted to ask a little bit more about some of the secondary endpoints in the Phase 2b and then how do you expect them to trend and specifically on the homa IR. Can you talk a bit more about the significance of that and what you're hoping to show?

Speaker 2

Yes. So HOMA IR, we have mistakenly put on our slide that we were measuring HOMO IR in this patient population. We have measured HOMO IR in previous patient populations and show the benefit of insulin resistance. For this Phase 2, given how short it is, we've decided to move the HOMO IR into the next study, so the Phase 3 study. So that won't be one of the data points that you'll see.

Speaker 2

You will see again, lean body mass, fat mass, which will be the body composition endpoints. We'll have total weight, body weight. So we'll see that. And then from a functional endpoint, we'll be measuring physical function by stair climb. The reason that's important is because stair climb power and stair climb test is a sensitive measure of quadricep strength and is sensitive to testosterone and androgen anabolic stimulation.

Speaker 2

And it's also a test that the FDA has told us in writing is the acceptable function endpoint. To pause for a moment, as you know, there are many that you may have heard like grip strength and leg press and chest press. The FDA told us those are not acceptable functional endpoints. So the functional endpoint that we've chosen in the study, Stericline Power is accepted by FDA. In fact, Italo Pharma with an F had the muscular dystrophy drug approved, I guess about 6 months ago.

Speaker 2

And so I think that's key. The other thing that's key in those five clinical studies that we did in almost 9 68 patients, about 900 of those patients we did stair climb. So we know how to do stair climb and we've learned a lot and how to execute on that endpoint. Doctor. Barnett, do you want to add to anything to that?

Speaker 5

No. We yes, that's exactly right. And we're looking for changes in lean mass. We're looking for maintenance of lean mass in our treated group versus a loss in lean mass in the placebo group. And we're looking to assess how much fat we can how much we can augment to fat loss.

Speaker 5

That's the main focus of this study.

Operator

And the next question comes from William Wood with B. Riley Securities.

Speaker 7

Appreciate it for taking my questions and congratulations on the quarter. Just looking for a little extra color here on what we might expect in January for the top line data. Is this going to be like simply lean mass loss being reported? Or will you provide any extra details on the body weight loss and or the fat loss or specifically the functional improvements?

Speaker 2

Yes, great question. So the question because you're a little garbled, but I think the basic question is that I heard is that when you report in January, what can we expect in terms of top line data and the kinds of top line data that we'll get. And the answer is for sure, and I say it this way because a lot depends on our concern that if you report too much information, then all of a sudden now you can't get all these societies and stuff don't want you to I mean you have to have a scientific meeting with new information. So with that said, the most important thing about the trial is reporting out on body composition. So certainly the primary endpoint of lean body mass and total fat mass, So you have a clear understanding of our dose response or the right dose to pick for the right preservation of muscle and reduction of fat compared to placebo.

Speaker 2

So, we'll have that for sure. And then we'll just I just have to see how societies and additional scientific meetings and that kind of stuff, what we can report. But as you know, in the springtime and the wintertime, there are a lot of meetings that will be going on. So if it's not right in the top line data happening in January, it will be shortly thereafter in one of the major meetings.

Speaker 7

Got it. Very helpful. And maybe actually just a quick question. I believe you mentioned that you're going to have a presentation at Obesity Week. You mentioned the abstract.

Speaker 7

Is this going to be, I would say, unseen data from past clinical trials? Or is it going to be a little bit of what we've been seeing or potentially what we've seen already?

Speaker 2

It will be additional data that you have not seen. It's another analysis looking at data. So, it's not repeat data that we've already shown. So it'll be new data from the old studies.

Speaker 5

Okay, helpful.

Speaker 7

That's it. I'll jump back in queue.

Speaker 5

Thanks so much.

Speaker 2

Thank you. Appreciate it.

Operator

Thank you. And the next question comes from Dennis Ding with Jefferies.

Speaker 8

Hi, this is Anthea on for Dennis. Thanks for taking my questions. 2 from us. On SteriClime Power, could you talk a little bit about the MCID is for the measure and what would be a successful outcome in Phase 2? And on the Phase 3, you've spoken previously about moving forward in elderly patients only versus the broader obesity population.

Speaker 8

Can you just let us know your thinking there and how the Phase 2 informed that decision? Thank you.

Speaker 2

Great. So I'm going to take the second question first and then Doctor. Barnab will talk about sterile client power in terms of what's deemed a success. So in terms of the study, so to be very clear, the FDA has told us and the Phase III program that they're looking forward to us having the opportunity to develop the drug in all patients that have obesity or overweight. So in other words, all comers.

Speaker 2

And their belief is that a muscle preservation drug will have benefit in older patients, it has benefit in older patients, will have benefit in younger patients too. And so that's a positive sign that the FDA is well aware of body composition and how they're thinking about it. The FDA also said that one way forward would be to look for incremental weight loss and this is now talking about Phase 3 programs now. Incremental weight loss with the combination versus the GLP-one alone. The incremental weight loss, the FDA did not commit to how much weight loss incremental weight loss you should demonstrate because their position is that because you have a muscle preservation drug, they may benefit in other ways such as physical function, HOMO IR as Gary Nachman brought up.

Speaker 2

There are other things, other benefits of having a muscle preservation drug that's beyond just the adding muscle or preserving muscle just for sake of doing it. So, showing function is important. And so, in a Phase 3 program, having those endpoints as key secondary endpoints and the primary endpoint weight loss allows the FDA to look at the totality of the data for clinical benefit and clinical meaningfulness, which is good because at one point it was a direct cutoff on weight and that was it, but now it's much more, much more totality to data. So what will inform us in this study, the Phase 2 is not whether we're going to go after an older patient population. This study is meant to ask the question in an informative patient population, meaning doesn't it make sense that if you want to show a benefit in physical function, you pick patients that already have muscle loss and may already have functional limitations.

Speaker 2

And if you treat them with an anabolic agent, selective anabolic agent like Inovusarm, you show a benefit in physical function. So you're going to more likely show that in older patient population, which by the way in the 9.50 some odd patients, we've done 5 clinical studies, they were older patients. So we have experience with older patients. An older patient with at least certainly with a 3 milligram dose, the totality of data shows that we hit function. So that would make sense.

Speaker 2

As you start thinking about a Phase 3 program, again, the totality, the whole approach would be to go for all comers. And so, Gary, if you don't mind, can you comment on success Gary Barnett, our Chief Scientific Officer, can you comment on the success, what would be considered success with Stericline Power? And then second, how we're thinking about the Phase 3 development program as it relates to all comers, but also having the subgroup for the older patients?

Speaker 5

Sure. So in the Phase 2 study, I would believe the success really is being able to power and inform the design of the Phase 3. That's a success. And the success as far as numerically goes, I think any separation from between the placebo group and the Inobisarm treated group would be a success, meaning we can show an observational difference between the power exerted going up the steps between the two groups, I think that would be a success. Remember, we're looking at change from baseline.

Speaker 5

So we've got a baseline value and then we have a value at 16 weeks and then we'll have another value at the end of the extension. And I really think that the definition of success would be that we could observationally see a difference. As far as the Phase III trials, what I would what I really what I think we're going to propose to the FDA, what we're going to try to do is we're going to power the Phase III study on with the overall. Remember, the FDA basically has told us that they believe that weight or excuse me, that muscle loss or a drug to preserve muscle or preserve lean mass would be beneficial regardless of age. But they certainly recognize that the most at risk patients are the aged population, which we're studying the Phase II.

Speaker 5

So they do want us to include the younger patients in the Phase III study. So I would probably propose at this point that we would have a body weight endpoint, total body weight endpoint is the primary in the overall population. And then I would power the subgroup, meaning the patients over the age of 60, for Stericline Power, because that is the at risk population. So we intend, obviously, if these patient populations have already lost lean mass, just due to their advancing age and then we accelerate that with a GLP-one or a diet like this, then I think that that's where the value of an OBASAR increasing lean mass, increasing is going to be the most important from a patient outcome and quality of life.

Speaker 2

And let me also add, Gary, that the Phase 3 program is going to be done like a typical Phase 3 program. As you know, we're looking at 16 weeks. And the reason we pick 16 weeks for the Phase 2 is for two reasons. One is we know about half the total weight that's lost in a trial that goes on for 68 weeks happens in the 1st 16 weeks. And we also know from bariatric surgery data that in the 1st 3 months, the 55% of the muscle you lose in that whole year post surgery happens in the 1st 3 months.

Speaker 2

So we know there's a lot of activity going on with muscle in that 1st 16 weeks. And we've got between the step 1 data and now the bariatric surgery data that gives you clarity on what's happening earlier. So the Phase 2 will help us understand what we want to do going forward to Phase 3. Time for the Phase 3 will be, if we use semaglutide or tozepatide and probably use both, the 1st 16 weeks is what you need to titrate up and then you go on for another year, so it's about 68 weeks. So your Phase 3 program will be 68 weeks and your functional endpoint will be at the end of that 68 weeks.

Speaker 2

So you have a lot more time to build and maintain muscle and separate out the placebo group. And so the way to look at it is the Phase 2 is just the beginning and the 1 year study will allow you to see the additional fat burning benefits of having a drug that directly reduces fat by having a GLP-one receptor agonist that's not going to have a competing signal where the GLP-one says stop eating and the competing signal is going to be the muscle deprivation deficit telling the brain to eat because that's self preservation. If you get rid of that noise and the GLP-one can work better. And finally, with more muscle, you lose more fat. So that's why we think weight loss an endpoint and particularly is a good endpoint and particularly now the FDA is thinking about clinical benefits, not just weight loss, just weight loss in our case function.

Speaker 2

And so, I think it puts us in a good position. And also the label will be will reflect that, because again, the FDA doesn't really see muscle loss for cosmetic reasons. They see muscle preservation for functional reasons. Long answer, but hopefully that gave you some clarity.

Speaker 8

Yes, that was helpful. Thank you. Okay.

Operator

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

Speaker 2

Thank you, operator. I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress at our next investors' call. Thank you again. Bye now.

Operator

Thank you. A digital replay of the conference call will be available beginning approximately noon Eastern Time today, August 8, by dialing 1- seventy seven-three forty four-seven thousand five hundred and twenty nine in the U. S. And 1-four twelve-three seventeen 0088 internationally. You will be prompted to enter the replay access code, which will be 2561,276.

Operator

Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.

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Earnings Conference Call
Veru Q3 2024
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