Veru Inc. (NASDAQ: VERU) Q2 2020 Earnings Call Transcript

Veru Inc. (VERU) Q2 2020 earnings call dated May 13, 2020

Corporate Participants:

Sam Fisch — Director of Investor Relations

Mitchell Steiner — Chairman, President and Chief Executive Officer

Michele Greco — Chief Financial Officer and Chief Administrative Officer

Analysts:

Brandon Folkes — Cantor Fitzgerald — Analyst

Leland Gershell — Oppenheimer & Co. Inc. — Analyst

Yi Chen — H.C. Wainwright & Co. — Analyst

Peter McMullin — Peter McMullin Consulting — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, and welcome to Veru Inc.’s Investors Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc.’s Director of Investor Relations. Please go ahead.

Sam Fisch — Director of Investor Relations

Good morning. The statements made in this conference call that are not historical in nature are forward-looking statements. Such forward-looking statements reflect the Company’s current assessment of the risks and uncertainties related to our businesses. Our actual results and future developments could differ materially from the results or developments in such forward-looking statements.

Factors that may cause actual results or developments to differ materially include such things as the risks related to the development of the Company’s product portfolio, risks related to the ability of the Company to obtain sufficient financing on acceptable terms we need to fund development and Company operations, risks related to competition, government contracting risks, and other risks detailed in the Company’s press releases shareholder communications and Securities and Exchange Commission filings. For additional information regarding such risks, the Company urges you to view its 10-Q and 10-K SEC filings.

I would now like to turn the conference over to Dr. Mitchell Steiner, Veru Inc.’s Chairman, CEO and President.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you, Sam, and good morning. With me on this morning’s call are Michele Greco, CFO and CAO; Phil Greenberg, Executive Vice President, Legal; and Sam Fisch, Director of Investor Relations. Thank you for joining our call.

Veru is an oncology and urology biopharmaceutical company with a focus on developing novel medicines for the management of prostate cancer. Today, we will update you on the clinical development of our drug pipeline and the commercialization of our products as well as provide financial highlights for the second quarter fiscal year 2020.

Here is a brief update on the advancement of the prostate cancer drug pipeline. VERU-111 in prostate cancer; we have made significant progress in the clinical development program for VERU-111, a novel proprietary first-in-class oral targeted antitubulin agent for men who have metastatic castration-resistant prostate cancer and have also become resistant to a novel androgen blocking agent enzalutamide or abiraterone but prior to IV chemotherapy, also referred to as the pre-chemotherapy stage.

Unfortunately, there is a large number of these affected men. According to published scientific reports, about 15% to 25% of men who have metastatic castration-resistant prostate cancer and started treatment with a novel androgen blocking agent will not respond at all to this therapy, and about 75% to 85% of men will initially respond to treatment with an androgen blocking agent, but their cancer will start progressing in about nine to 15 months.

So essentially, within 12 months, the majority of these men will have tumor progression and a new orally available drug with a different mechanism of action that could be prescribed by urologists and medical oncologists, like the investigative drug VERU-111 is greatly needed for these men. The Phase 1b portion of the Phase 1b/2 clinical study involve 39 subjects from seven clinical sites in the United States.

A standard three-by-three design was used to establish the maximum tolerated dose to select a recommended clinical dose with a Phase II study and to assess the preliminary evidence of anti-tumor activity of VERU-111 in men with metastatic castration-resistant prostate cancer who have also become resistant to at least one novel androgen blocking agent.

Oral dosing escalated from 4.5 milligrams to 81 milligrams in the seven days of dosing followed by 14 days of no drug for each 21 day cycle, after no dose limiting toxicity was observed in the seven days of dosing per cycle, the dose was then increased in the next cohort of patients. Additionally, the dosing schedule is expanded to 21 days of continuous dosing per cycle.

As the safety, the maximum tolerated dose of VERU-111 was determined to be 72 milligrams as three of 11 men had a reversible Grade 3 diarrhea. No Grade 3 diarrhea was observed at doses of 63 milligrams or less per day. At doses of VERU-111 of 63 milligrams or less per day, the most common adverse events were mild to moderate nausea, vomiting, diarrhea and fatigue. There were no reports of neurotoxicity and no neutropenia was observed at 63 milligrams and lower for the continuous oral dosing — daily dosing for a 21-day cycle.

Efficacy or anti-tumor activity was assessed by measuring serum PSA and by standard imaging with bone and CT scans. In the eight men that received at least four 21-day cycles of oral VERU-111 at any dose, based upon their 21-day cycle baseline PSAs, six of the eight men, which is 75% had decreases in their PSA levels; four of eight men had, which is 50% demonstrated greater than or equal to 30% decline in PSA; and two of eight men, which is 25%, have greater or equal to 50% decline in PSA.

Based upon the Prostate Cancer Working Group 3 and the response evaluation criteria in solid tumors, which is RECIST 1.1 criteria, these are conventional criteria, objective tumor responses were seen in two of eight, which is 25% of patients in soft tissue and bone, which were partial responses; and five of eight men, 63%, had stable disease.

Objective tumor responses and PSA declines lasted longer than 12 weeks. The primary endpoint used in the pivotal studies — efficacy studies for the treatment of metastatic castration-resistant prostate cancer is median time to cancer progression by imaging bone and CT scans. In the current study, the median duration of response or time to cancer progression has not been reached as seven of the eight men are still being treated on the study with an average duration of response of 10 months. The range is between six and fourteen months.

There are an additional three subjects on the study that have not yet completed four-day — the four 21-day cycles. Therefore, there is a total of 10 men that are still being treated on the study. To better understand the clinical relevance of these preliminary findings, it’s important to note that all patients with metastatic castration-resistant prostate cancer at the time of enrollment in the Phase 1b had evidence of disease progression with at least one novel androgen binding agent drug, whether it’s abiraterone or enzalutamide.

And a contemporary series recently reported in the scientific literature for this similar population of men, the median observed time to cancer progression while being treated with an alternative antigen-blocking agent was about 3.4 months. We have already initiated enrolling an open label Phase 2 portion of the clinical trial in approximately six men with metastatic castration and a novel androgen blocking agent-resistant prostate cancer prior to — and prior to any IV chemotherapy using the recommended dose and schedule that was selected from the Phase 1b which is the 63 milligram oral daily dosing for a continuous 21-day cycle. We are on track to complete enrollment this quarter.

We have the clinical safety and the anti-tumor data necessary from the Phase 1b clinical study to move forward to select the patient population, dose, and schedule for the Phase III registration trial. We plan to meet with the FDA next quarter to discuss our proposed registration trial design, which is an open label single pivotal Phase III to evaluate the efficacy and safety of VERU-111 versus an alternative androgen blocking agent in men with metastatic castrate-resistant prostate cancer, who have developed cancer progression while receiving one androgen blocking agent.

These recent clinical results have allowed the Company to potentially accelerate the clinical development of VERU-111 for the treatment of metastatic castration androgen blocking agent-resistant prostate cancer. Consequently, Veru has changed — Veru has changed its strategy of investing in an additional Phase 2 studies of other cancer types to focus on obtaining approval of VERU-111 as quickly as possible, by focusing on the study design, obtaining FDA agreement, and initiating and completing a Phase III registration trial for this unmet medical need.

We look forward to updating everyone on the results of the FDA meeting. We have strong IP protection for VERU-III. The composition of matter patents are issued with expiry in 2031 in the U.S. with a possible patent extension to 2036. Method of use patents for prostate cancer in the U.S. are issued and expiry date is in 2031.

We have issued composition and method of use patents in the major markets — major world markets including EU and Japan. The pre-chemotherapy space in men who have metastatic castration and androgen blocking agent-resistant prostate cancer is currently one of the fastest growing unmet medical need segment in advanced prostate cancer. There are currently no FDA approved drugs for this indication.

According to Accuvia, oral drugs abiraterone and enzalutamide for advanced prostate cancer had over $6 billion in 2018 global annual sales and $3.1 billion in the U.S. Men who have failed these novel androgen blocking agents or the patient VERU-111 is currently targeting, which we estimate represents a $5 billion annual global market.

In summary, the clinical development objective is to position VERU-111, which has a unique drug mechanism of action, as it does not target the androgen receptor as the next go-to drug in men who have metastatic, castration-resistant prostate cancer and who have developed prostate cancer progression while being treated with an androgen blocking agent like abiraterone or enzalutamide, but prior to IV chemotherapy.

An advantage of VERU-111 is that it could be potentially prescribed by not only the medical oncologists, but also the urologists who is the usual physician managing these types of patients. We plan to present the full clinical set — dataset at an upcoming major scientific meeting. These clinical results firmly position Veru as an oncology focused biopharmaceutical company.

Next, I will update you on VERU-100, our proprietary peptide drug candidate for the treatment of hormone-sensitive advanced prostate cancer, an established multi-billion dollar global market. The target product profile of VERU-100 is commercially and scientifically compelling as having a number of anticipated advantages over currently available androgen deprivation therapies.

VERU-100 is a long-acting gonadotropin-releasing hormone called GnRH antagonist designed to be administered as a small volume subcutaneous three-month depot injection without a loading dose. As a GnRH antagonist, it is intended to immediately suppress testosterone with no testosterone surge upon initial or repeated administration and no testosterone micro increases which may adversely affect patient outcomes; a problem which potentially occurs with the approved LHRH agonist drugs like Lupron, Zoladex and Eligard.

Currently, there are no GnRH antagonist commercially approved for treatment beyond one month, making VERU-100, if approved, the only commercially available GnRH antagonist three-month depot which is an attractive choice for androgen deprivation therapy. As previously mentioned, we have received agreement from FDA that the development program for VERU-100 may follow an expedited pathway.

Based on this FDA input, the Company plans to commence a single open label, multi-center dose finding Phase 2 clinical trial in approximately 35 men, followed by a single open-label multi-center Phase 3 clinical trial in only approximately a 100 men. Veru is in the process of scaling up GMP manufacturing of drug product to prepare the clinical trial — to prepare for the clinical trials of VERU-100.

Given the effects of COVID-19, there will be at least a quarter delay in this program; but otherwise, we expect the Company’s development program to resume as worker’s are returning to the GMP facility. Company intends to submit an investigational new drug application in the second half of 2020, so we can commence the open label phase 2 study by Q4 calendar year 2020.

As it is an open label phase 2 study, we will be able to update you periodically on our progress towards reaching the primary endpoint, the reduction of testosterone and the castrate levels in real time during late 2020 in early 2021. The planned development pathway for VERU-100 agreed upon by FDA represents a lower cost investment opportunity for a major product that can address the shortfalls of the current $2.6 billion global ADT market.

Our next product candidate in clinical trial is Zuclomiphene, a novel proprietary oral non-steroidal estrogen receptor agonist being evaluated to treat hot flashes, the most common side effect in men on androgen deprivation therapy for advanced prostate cancer and a major reason why men want to stop androgen deprivation therapy. We enrolled 93 men in a multi-center, double-blind, placebo-controlled, dose-finding study — Phase 2 study and we were evaluating two doses 10 milligram and 50 milligram of Zuclomiphene versus placebo.

We reported positive top line interim results a few weeks ago. We determined that the 10 milligram dose was the no effect dose and the 50 milligram Zuclomiphene demonstrated estrogenic activity and a reduction in the frequency of hot flashes from baseline to date 42. We also reported on the safety from the current blinded aggregate clinical database from our placebo-controlled trial.

Based on the study’s interim findings, Zuclomiphene appears to be well tolerated. We have not received any — we have not received any reports of gynecomastia, painful breasts or venous thromboembolic events, which are common side effects in men treated with high doses of estrogen. Because of the continuing effects of COVID-19 and the related strains on the health system and regulatory agencies, we will be delayed in obtaining a face-to-face end of Phase II meeting with FDA for the Zuclomiphene program in order to obtain agreement on the Phase 3 clinical program design that will be acceptable for approval.

We will provide details of the design and timing of this study after we have our FDA meeting. Veru estimates that the peak US revenue potential for Zuclomiphene citrate to be between $580 million to $639 million. Currently, there are no FDA approved drugs for this indication.

Now, although Veru is focused in prostate cancer and oncology, due to the urgency of the current global pandemic and the fact that VERU-111 has the potential to treat both SARS-CoV-2 infection and the associated reactive severe lung inflammation in COVID-19 patients at risk for acute respiratory distress syndrome, the Company is compelled to pursue this COVID-19 indication, even though this indication is not the primary focus of our Company.

Drugs that target microtubules have broad anti-tumor — anti-viral activity by disrupting the intracellular transport of viruses such as SARS-CoV-2 along the microtubules. Microtubule trafficking is critical for viruses to cause infection. Furthermore, microtubule depolymerisation agents that target alpha and beta tubulin subunits of microtubules like a drug called colchicine also have strong anti-inflammatory effects, including the potential to treat the cytokine release syndrome, also known as the cytokine storm, which induced by the SARS-CoV-2 viral infection that seems to be associated with the high COVID-19 mortality rates.

VERU-111 is an oral, first-in-class microtubule depolymerisation agent that targets the colchicine-binding site of alpha and beta tubulin subunits to inhibit microtubules. The Company met with the FDA and has received agreement on the clinical development of VERU-111 as a potential dual anti-viral and anti-inflammatory agent to combat COVID-19 under the new FDA program, coronavirus treatment acceleration program, CTAP.

As reported yesterday, FDA granted Veru permission to proceed with a Phase II, double-blind randomized one-to-one placebo-controlled clinical trial evaluating daily doses of VERU-111 versus placebo for 21 days in 40 hospitalized patients. It will be 20 in the VERU-111 and 20 in the placebo subjects and these are subjects who’ve tested positive for SARS-CoV-2 virus and are deemed to be at high risk for acute respiratory distress syndrome.

The primary efficacy endpoint will be the proportion of patients that are alive and without respiratory failure at day 29. Secondary endpoints will include measured improvements on the WHO disease severity scale. It’s an 8 point ordinal scale which captures the COVID-19 disease symptoms and signs, including hospitalization to progression of pulmonary symptoms to mechanical ventilation as well as death.

Study is expected to commence in two weeks. We are excited about the potential for VERU-111 to treat both the viral infection and potential for to treat both the viral infection and the inflammatory response caused by the virus. The Phase 2 primary endpoint is as critical. The Phase 2 primary endpoint is being alive without respiratory distress is a clinically meaningful one.

Because of the urgent need for effective and timely therapeutics to combat COVID-19, the Company has applied for significant grant funding through both the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services called BARDA, and the Defense Advanced Research Agency of the U.S. Department of Defense called DARPA to expedite the clinical development of VERU-111 for COVID-19. The coronavirus pandemic continues to paralyze the economy and threaten lives across the world. An effective drug to treat COVID-19 is still desperately needed and this Phase II study will expeditiously determine whether VERU-111 has efficacy and safety against COVID-19.

There is really no downside to conducting this small study, especially as we get the non-dilutive funding and if VERU-111 has efficacy, upside is substantial for patients. VERU’s ability to advance the clinical development of our proprietary prostate cancer drugs that address unmet medical needs in large markets is being substantially supported by investments from two commercial sources of revenue.

The FC2 Internal Condom as well as PREBOOST/Roman Swipes which is a 4% benzocaine wipe for premature ejaculation. The Company also expects revenues from TADFIN which the NDA is expected to be submitted in late 2020, early 2021, which will provide additional resources to support the Company’s clinical development program. As you can see from the earnings release, in Q2 fiscal year 2020, we continue to have significant growth in revenue and gross profit from these commercial products.

Although Ms. Greco will cover the detailed financial result highlights in a few moments, I would like to make a few comments. We again have the pleasure of reporting robust growth in fiscal year 2020 and expect further increases of FC2 sales in both the public sector and prescription sales in the U.S. for the rest of the year.

We had a $7 million — we had $7 million in revenue from the prescription business for Q2 of fiscal year 2020 compared to $2.6 million for Q2 fiscal year 2019, an increase of 168%. In fact, to give you a sense of the growth trajectory for all of fiscal year 2019, we sold 159,000 FC2 prescribed units. And for just the first quarter — first two quarters of fiscal year 2020, we sold 171,891 FC2 prescribed unit.

Focusing on the Veru’s commercial segment which is made up of FC2, PREBOOST/Roman swipes and drug commercialization costs, we have net revenues increase in Q2 fiscal year 2020 to $9.9 million compared to $7 million in Q2 fiscal year 2019, which is up 43%. Gross profits for Q2 fiscal year 2020 was $7.4 million compared to $4.6 million in Q2 for fiscal year 2019, which is up 61%. In fact, our gross margin climbed to 75% of net revenues from 66%

Our operating income from this segment significantly increased to $6.2 million from $2.8 million. Net revenue for fiscal year-to-date 2020 was $20.5 million compared to fiscal year-to-date 2019 of $13.3 million. This is an increase of 54%. Our income from operations for this segment of the business was $12 million for the fiscal year-to-date 2020, up from $6.2 million in fiscal year-to-date 2019, an increase of 94.6%.

As you can see, our base commercial business is doing very well and as a stand-alone business, it would be quite valuable experiencing significant growing revenue and incomes from operations. This continued revenue growth and profit and positive cash flow from this base commercial business has allowed us to substantially invest in the development of our prostate cancer clinical programs, which enhances the entire value of VERU for our shareholders.

We intend to continue this revenue growth trajectory with not only the current growth of revenues from FC2 and PREBOOST, but also from the revenues that we expect to generate from the commercialization of the Company’s proprietary Tadalafil-Finasteride Combination Capsule for the treatment of BPH called TADFIN.

We’re collecting 12-month stability data on TADFIN manufacturing batches and expect to submit the NDA by the end of 2020 to just beginning of 2021. In the United States, we are exploring commercially launching TADFIN through telemedicine channels. As you have seen, we’ve had great success with our other products using this sales channel. We expect revenues from TADFIN to add substantially to near-term revenues with high gross margins to existing and growing revenues from FC2 and the PREBOOST/Roman swipe business.

I will now turn the call over to Michele Greco CFO and CAO to discuss the financial highlights. Michele?

Michele Greco — Chief Financial Officer and Chief Administrative Officer

Thank you, Dr. Steiner. As Dr. Steiner indicated, we started off the year with two great quarters. Let’s start our highlights with the second quarter results for the three months ended March 31st, 2020. FC2 unit sales totaled $6.9 million compared to $9.8 million in the prior year second quarter. Total net revenues were up 43% to $9.9 million from $7 million in the prior year second quarter.

The Company reported quarterly sales growth in its U.S. prescription business and in PREBOOST. Net revenue from the U.S. prescription business was up 168% to $7 million from $2.6 million in the prior year second quarter. Gross profit was up 61% to $7.4 million from $4.6 million in the prior year second quarter.

Gross margin increased to 75% from 66% in the prior year second quarter. The increase in gross margin is driven primarily by the increase in the U.S. prescription business. These financial results do not reflect the new tender orders that will be coming from South Africa. We previously announced that we won 75% of the South African tender, representing up to $120 million units over three years for the total tender.

This translates to approximately 30 million units per year for our Company and potentially $10.4 million in revenue per year for a total of approximately $30 million over three years. We expect these new orders from South Africa to ship in greater volumes during the third quarter of this fiscal year.

Operating expenses for the quarter increased by $1 million to $7.7 million compared to the prior year second quarter of $6.7 million, due to the increase in research and development cost of $1 million. Non-operating expenses were $644,000 compared to $1.9 million in the prior year second quarter and primarily consisted of interest expense and the change in the fair value of the derivative liabilities related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018.

For the quarter, we recorded a tax benefit of $133,000 compared to a tax expense of $25,000 in the prior year second quarter. The effective tax rate for this quarter of 14% is due to recording evaluation allowance against the net operating loss generated for the quarter in the U.S. The bottom line results for the second quarter of fiscal 2020 was a net loss of $811,000 or $0.01 per diluted common share compared to a net loss of $4 million or $0.06 per diluted common share in the prior year second quarter.

Now turning to highlights of the results for the six months ended March 31st 2020. For the first six months of fiscal 2022, the FC2 unit sales totaled $17 million compared to $17.2 million units in the prior year period. Total net revenues were up 54% to $20.5 million from $13.3 million in the prior year period. The Company reported growth in FC2 sales in the U.S. prescription business and in PREBOOST.

Net revenue from the U.S. prescription business was up 158% to $13 million from $5 million in the prior year period. And just to note, for all of fiscal year 2019, the U.S. prescription revenue was $14.1 million. Net revenue for PREBOOST/Roman swipes was $574,000 compared to $180,000 in the prior year period.

Gross profit was up 59% to $14.7 million from $9.3 million in the prior year period. Gross margin increased to 72% from 69% in the prior year period due primarily to the increase in the U.S. prescription business.

Operating expenses increased by $4.4 million to $16.8 million compared to the prior-year period of $12.4 million, driven primarily by the increase in research and development costs of $4 million. Non-operating expenses were $2.2 million compared to $2.9 million in the prior year period and primarily consisted of interest expense and the change in the fair value of the derivative liabilities related to the synthetic royalty financing.

For the six-month period, we recorded a tax benefit of $210,000 compared to a tax expense of $118,000 in the prior year period. The effective tax rate for the six months of 4.9% is due to recording evaluation allowance against the net operating loss generated for the six months in the U.S.

The Company has net operating loss carry-forwards for U.S. federal tax purposes of $42.7 million, with $14.4 million expiring in years through 2038 and $28.3 million which can be carried forward indefinitely. And our U.K. subsidiary has net operating loss carry-forwards of $61.7 million, which did not expire.

The bottom line results for the first six months of fiscal 2020 was a net loss of $4.1 million or $0.06 per diluted common share compared to a net loss of $6.2 million or $0.10 per diluted common share in the prior period. The reduction in the net loss of $2.1 million is due primarily to the increase in our net revenues which is offset by the increase in our research and development costs.

Turning to our balance sheet. As of March 31st 2020, our cash balance was $2.6 million and our accounts receivable were $5.8 million compared to a cash balance of $6.3 million and accounts receivable of $5 million at September 30th, 2019. During the six months ended March 31st, 2020, we used cash of $4.9 million for operating activities compared with using cash of $4 million in the prior period.

Overall, we can see the continued increases in sales in the U.S. FC2 prescription business and the increasing sales of PREBOOST/Roman Swipes to Roman Health Ventures and look forward to increasing sales in the global public sector business in the third quarter. These revenue sources continue to be a source of funds we use to invest in our promising pharmaceutical clinical programs as we continue to transform our company into an oncology and urology biopharmaceutical company with a focus on developing novel medicines for the management of prostate cancer.

Now, I’d like to turn the call back to Dr. Steiner.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you, Michele. We have enjoyed yet another strong financial quarter which has allowed us to significantly advance our clinical programs. In fact, we now have had 10 straight quarters of growth in our FC2 U.S. prescription business.

Looking forward to the rest of fiscal year 2020 and early fiscal year 2021, we expect our revenues to continue to be strong and growing towards a record year. With the improving performance of the commercial business, we believe that we’ll be able to substantially invest in the continued clinical development of our prostate cancer and other cancer drug product candidates as well as to submit the NDA, and if approved, commercially launch TADFIN through Internet sales, which would provide even more revenue, adding to the already growing revenue from FC2 and from PREBOOST/Roman Swipes.

We are creating a very valuable commercial business, which includes both the urology specialty pharmaceuticals and the female health company divisions. With the new clinical data from the VERU-111 prostate cancer program, we must prioritize and focus our efforts towards the execution of the Phase III registration program for this unmet need in prostate cancer. This begins by obtaining regulatory clarity from both FDA and EMA on the clinical trial design.

We have reached an important Company clinical milestone that well positions VERU as an oncology biopharmaceutical company. We anticipate a steady flow of important positive news with VERU over the next few months to a year; one, for VERU-111 our oral selective antitubulin, we’ll report an open label efficacy and safety clinical results from the Phase II VERU-111 and we will meet with the FDA and report on the Phase III clinical trial program. For VERU-100, our novel peptide GnRH antagonist three-month depot formulation, we will complete GMP manufacturing of clinical supply, submit the IND, and we will initiate the Phase II clinical trial.

For the Zuclomiphene our oral estrogen receptor agonist, we will have a face-to-face meeting with the FDA — face-to-face end of Phase II meeting with FDA. We plan to initiate and complete the Phase 2 clinical program for COVID-19 in subjects with high risk to acute respiratory distress syndrome.

We’ll submit the NDA for TADFIN. We would have secured partnerships with some of our drug products and we plan to continue to demonstrate robust growing revenues for our commercial products FC2 and PREBOOST/Roman Swipes.

We’re committed to driving shareholder value by transforming Veru into an oncology company. We will initially focus our efforts to providing substantial benefits to the prostate cancer patients by developing and commercializing VERU-111 as well as our other oncology products to address unmet medical needs in the management of the disease.

With that, I now open the call to questions, operator?

Questions and Answers:

Operator

Ladies and gentlemen. At this time we will begin the question-and-answer session. [Operator Instructions] The first question comes from Brandon Folkes of Cantor Fitzgerald. Please go ahead.

Brandon Folkes — Cantor Fitzgerald — Analyst

All right, thanks for taking my questions and congratulations on all the progress. On VERU-111, granted you haven’t met with the regulatory agencies, could you perhaps just elaborate about how you think about the Phase III design? Anything you can say maybe around the size, the number of patients and then how are you thinking about what is the hurdle you think physicians and practice will want to see in that Phase III to use VERU-111 in practice.

And then, lastly, maybe just on COVID-19, should we think of this as a potential revenue generating opportunity for the company or is this going to be similar to what we’ve seen from other companies where it’s really just a public duty type thing? Thank you.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you. All good questions. So let’s start at the Phase III design for the — for VERU-111. So what I can do is I can refer you to the Alaparib, that’s A-L-A-P-A-R-I-B study that’s in front of the FDA as we speak. It’s very instructive in terms of how we’re thinking about our clinical trial. So this is one, I believe, will get approved. This is a patient population that’s similar to our patient population. These are patients with metastatic castration-resistant prostate cancer that have failed an androgen blocking agent. Some of them have chemo but just — but it’s mostly the same patient population.

And the reason I bring that up is because it is a registration trial and the FDA has allowed them to use as an active comparator, patients that are placed on an alternative androgen blocking agent. So that means, if you think about our patient population, as they fail castration — to the castration-resistant, they put on an androgen blocking agent either enzalutamide or abiraterone and then they get randomized to alternative androgen blocking agent. It means that they start out with abiraterone to get put on enzalutamide; if they start with enzalutamide they get put on abiraterone. That’s what I mean by alternative androgen blocking agent, okay.

And that’s your comparator arm, the FDA has allowed that in three of the non-metastatic studies that have been approved and it’s being allowed in this study. So that’s why we feel pretty good. The endpoint of that study, just like those other three clinical studies with non-metastatic, is progression free survival — radiographic progression-free survival of imaging based progression-free survival. Another way of saying that is when cancer progresses and you can see it on either a bone scan a CT scan that’s deemed a failure, okay. They have accepted that, okay.

The active comparator, in this case, is an oral agent that’s going after patients that — Alaparib is going after patients who have a genetic mutation, which is really a small segment of the population. That’s why we want to be the go-to drug. We want to be the drug that will treat anybody, not anybody that has a genetic mutation. So that’s a much bigger market

And, in that study, interestingly, they hit the hurdle they have to hit, is in the treatment of — I’m going to back out, in terms of the trial size because you can do progression-free survival, imaging based progression-free survival in sort of 800 patients or a 1,000 patients in this study. That study I think is about 250 patients. So, the range is going to be around the 250 to 300 mark. It’s a much smaller study, and quite frankly, it’s a shorter study and the reasons it’s a shorter study is because the comparator arm, the active control fails in about 3.4 to 3.6 months.

So, if you go for a year, you’ve gone three of those cycles and so follow-up is not very long unfortunately for the patient, but your benchmark that you’re going up against is about 3.4 to 3.6 months median progression-free survival — radiographic progression-free survival.

And for Alaparib, they showed a 7.4 month advantage and everybody believes they’re going to get approved, okay. So I say — I share that with you because I think we’re going to be very similar to that. I think our trial design — trial size will be between 250 and 300. I think we’re going to — we’re going to have an endpoint of imaging based progression-free survival.

I think we’ll be able to compare our agents VERU-111 against an alternative blocking — alternative androgen blocking agents. I think the hurdle that we need to hit is maybe about 3.4 to 3.6 months.

I have comfort to know that in the Phase 1b, the median duration of response is 10 months with a range between six and 14 months. It feels good, but of course you have to be careful into the Phase 1b but that gives you — that gives you comfort that we should — we should be in good shape from a standpoint of being able to beat that. And that’s the kind of design, so it feels safe because we’re not asking the agency to do something new.

And — but it also gives you a sense of why we’re excited about going into a Phase III registration program, because these patients are around, so recruitment should be pretty straightforward, and it’s completely an unmet medical need and there is enough regulatory precedent that we can feel comfortable around trial design.

As it relates to your second question which has to do with COVID-19, that’s nice, you’re doing it and you’re going to do like Gilead and just kind of give it away and give all the doses to the government and show three or four days of hospital benefit and you know and move on.

No, we’re a small company and we think we have an innovative compound VERU-111. VERU-111 has the potential for dual activity. As we know the microtubules are the — basically the transport system in which viruses make their way and hijack the cell and get replicated and come out of the cell to infect other cells.

If you disrupt the railroad tracks, just like we do in cancer, you’re going to disrupt the railroad tracks just in a viral infection, the fact that this classic compound has been used in gout and have been used in Familial Mediterranean Fever, in Behcet’s disease all which are very — artery inflammation and lung inflammation and heart inflammation and toe inflammation and even opiates and non-steroidal anti-inflammatories can’t touch it and colchicine does.

So it’s a — we bind to the colchicine binding site. What makes us different in colchicine is that colchicine has a very narrow therapeutic index and even in the recommended therapeutic dose, you can get into toxicity. We’re are not a substrate for P-glycoprotein. We don’t have those drug-drug interactions.

It is — we already call tell from the 39 patients, we have a wide safety margin. So I think we have a very unique opportunity to step in and have a dual function. We do not — we do think also that the endpoint that we’re going after is a clinically meaningful one. I think people have scratch their heads of why some of these companies have gotten — and again, I’ll just point out Gilead why it’s gotten so much pressed over three or four days leaving the hospital. And I would argue that in that — in that crazy period of time, people were leaving the hospital because beds were needed for sicker patients.

And is that endpoint really a relevant endpoint, because people can leave the hospital for reasons independent of the disease. But you can’t fake a death and you can fake being on a respirator. And so, if you have an endpoint of being alive and not in respiratory distress, that’s a pretty clinically meaningful endpoint.

Our thinking is to get non-dilutive funding to help us do two things; one is to continue the drug development, the clinical trial development; and second is to, to be able to manufacture the doses that are going to be required. They’re asking of a 20 million doses and so to get to that number — of course, we don’t have the money for that. So that’s only going to happen if we get non-dilutive resources from government agencies that are focused on this.

Now, I see this as — this is going to be — this is not — this is not charity guys. This is not call of duty for charity. We’re a small company that can use these resources to help move our other programs along and to well capitalize our company, so we can become a major force in oncology and that’s going to — and so this product turns out to have activity, which we’ll find out here by summer.

Then we’re, we’re going to be in a different place. This is going to be substantial upside, yes, for the patient, but also for the Company. So, no, this is not — it’s a call to duty and we’re compelled to do it because we understand the mechanism of our drug and similar compounds in the world and we feel that we will — we feel there’s is a very good chance. It’s a fascinating hypothesis and there is enough pharmacologic rationale and evidence that we should be doing this.

But I would also say that we would be looking for this to be a drug that we would sell not only for COVID-19 but for any other COVID-20, COVID-21, COVID-22 [Phonetic] whatever; because whatever the mechanism is being done for a very common virus like coronavirus, it could be used across others. So we may end up having an antiviral section of our oncology company, but that’s okay.

Brandon Folkes — Cantor Fitzgerald — Analyst

Great. Thank you very much and congratulations again on every — all the progress.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you.

Operator

The next question comes from Leland Gershell of Oppenheimer. Please go ahead.

Leland Gershell — Oppenheimer & Co. Inc. — Analyst

Hey, good morning, Mitch.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Good morning.

Leland Gershell — Oppenheimer & Co. Inc. — Analyst

Thanks for taking my questions and congratulations. It’s really great to hear of all the terrific progress that you are making, particularly with 111. And wanted to ask about, as you think about that overall development program, in addition to growing into those who are refractory to the most novel androgen blockers, wanted to ask about your thoughts in terms of moving that earlier in the paradigm before you’re trying to squeeze that last bit of sort of androgen blocking ability out with those agents.

It’s harder and harder to get to benefit as you get further down the kind of androgen access with compounds. Wanted to ask about how you might move 111 to be earlier in the treatment paradigm for advanced prostate cancer. Also wanted to ask, in terms of the dose you are going to be using in the COVID-19 program, would that be the same as a 63 milligram that you have for oncology? Thanks.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Great. Two good questions. So I’ll answer the second — the second question first. The dose that we’re using in the COVID-19 is 18 milligrams. So it’s really much lower than the 63 milligrams. We know we get good drug levels with that, but there is a big difference of trying to be an antiviral versus being an anti-cancer drug.

So for anti-cancer drug, you tend to get as close as you can to the maximally tolerated dose. And with an antiviral, we got plenty of drug around the 18 milligrams. And so it will differentiate those two doses. As it relates to your question related to, can you go earlier in the treatment paradigm for prostate cancer? And the answer is definitely, yes.

But let me tell you why this is — what we’ve learned in the Phase 1b that is critical. Critical as you think about going earlier. If we were an oral cytotoxic drug that had a side effect profile similar to other ones like platinum-based and taxane based, and just thinking — just think of all those IV outside of toxic agent, those drugs are given by medical oncologist for a reason. They’re given to the medical oncologists because the patients have to be pre-medicated with anti-histamines and prednisone because of the hypersensitivity reactions that can threaten their life.

The dose limiting toxicities for those kinds of drugs had neutropenia, which means that if you have neutropenia, you have sepsis and ICU visits and unfortunately patients can pass away from the — from the sepsis. You have neurotoxicity, you have — basically aside of adverse side effects and a series of side effects that really need to be managed by the medical oncologists, okay. So, in that setting, even if you want to go earlier, you may not be able to.

In prostate cancer, because — and I’ll tell you why I brought that up in a moment. In prostate cancer, there is a very unique circumstance, because the urologists will manage the prostate cancer patient from the time they’re diagnosed to the time they develop hormone-sensitive prostate cancer — metastatic hormone-sensitive prostate cancer, all way to now because of the oral agents enzalutamide and abiraterone, which can be given with reasonable side effects, they have created these centers to manage prostate cancer from an acute disease to a chronic disease.

And so, they’re using all of these oral agents. Remember they have a busy practice and so they can’t be sitting in the hospital managing sepsis and all this other stuff. And so they really need to have an agents that has fewer side effects that could be given by urologists versus a medical oncologist. So that’s a key test. Once the patient needs IV chemotherapy or that’s the option they choose then they’re going into a center that has chemotherapy chairs and has the all the wherewithal to handle the side effects.

So VERU 111 has demonstrated in the phase 1b study that the side effect profile is consistent with a drug a urologist can give in their practice. So we could potentially think about going earlier but not because we want to go earlier but because the drug has a side effect profile that potentially will allow us to go earlier.

And so, what do I mean by that? So going earlier would mean going after patients that that three drugs have recently been approved for, and again, these are androgen blocking agents and one is enzalutamide, apalutamide and darolutamide. These are all androgen blocking agents that have been moved in the non-metastatic castrate resistant space.

So these are patients who do not have metastatic disease. They were put on androgen deprivation therapy to treat their PSA unfortunately and now their PSA is going back up, but they still don’t have any met. They’re freaked out because they’re worried that they’re going to get a bone met. And so they put them on one of those three agents and it will delay time to that bone met for about two years, very effective.

However, though, about third of those patients, it doesn’t help. And so what you’re going to do with those third. They can’t — you’ve exhausted the androgen receptor as a target. And so, at that point, they need a new medicine with a new mechanism of action, and these patients are being treated by urologists.

And so VERU-111 could potentially be positioned as a therapy, almost like we did — so it’s castration — in this case, it’s non-metastatic castrate-resistant and androgen blocking resistant but still haven’t — trying to stop them from developing the first met. So that would be a great spot to go.

Interestingly, based on the STAMPEDE and the CHAARTED data, one of the things that we’ve learned is that if patients come in with bulky hormone-sensitive disease, meaning that they haven’t been castrated yet, that the standard of care is now emerging, that you combine it with either an androgen blocking agent or with docetaxel. So, that means that patient will come in with hormone-sensitive disease which is about as early as you can be, and then they get IV docetaxel plus androgen deprivation therapy and that has shown the benefit.

So I could see a situation where, as an oral antitubulin, we could be in that space as well. So the beauty of the side effect profile and the beauty of understanding extremely well the entire spectrum of where we could be in prostate cancer, the two mechanisms that have continued to show promise has been androgen receptor targeted agents and antitubulins. And so I think — I think we’re well positioned to take advantage of other indications.

With that all said, we have to focus, focus, focus on metastatic prostate cancer, a metastatic castration-resistant prostate cancer has failed, an androgen blocking agent. And if we can win with that trial. You need a single trial and do it correctly, we’re going to be on the market and have significant revenue and we can use those resources to continue to expand the indications. Thank you.

Leland Gershell — Oppenheimer & Co. Inc. — Analyst

Thank you.

Operator

The next question comes from Yi Chen of H.C. Wainwright, please go ahead.

Yi Chen — H.C. Wainwright & Co. — Analyst

Thank you for taking my — Hi, thank you for taking my questions. So my first question is, for the trial — for the — for the trial in COVID-19, do you plan to enroll patients who have received Remdesivir or any other drugs, who are currently being evaluating the clinical trial, but did not respond?

Mitchell Steiner — Chairman, President and Chief Executive Officer

Yeah. At this point, no, because that’s, that would be — first of all, for a couple of reasons. First of all, there is tons of patients out there, unfortunately. Even though New York has shown a flattening, I don’t say a reduction but a flattening of the curve. What we’re seeing in the rest of the country between those areas because that’s where we’re running the clinical trial, where they have a CRO in place. We’ve already done the feasibility. So we have a real keen sense of what’s really happening in the country, and this has not gone away.

I don’t care what Trump is saying about, let’s reopen the schools and all that stuff. I’m not trying to be political here, I’m just trying to be realistic here. Just go look at the newspapers, those numbers are still pretty damn scary. So they will not be a shortage of patients and so if you want to study to be informative, it’s best to do it in patients that will give you the information.

And so the idea would be that, we would take patients that have been deemed by the critical care specialist to be at high risk for acute respiratory distress syndrome and we know who those patients are. It’s based on age, it’s based on co-morbidities. They’ve already started to show they’re moving down the path of trouble and they’re hospitalized. And so that’s going to be the patient population that — quite frankly, if that patient population is addressed, then we’re going to feel much more comfortable reopening schools and reopening businesses and that kind of stuff. And so that’s the ones we’re focusing.

Remdesivir, and quite frankly, if you take a step back, Hydroxychloroquine and azithromycin combination has been shown over and over and over, not to work. So even though we jumped to that initially, I think everybody is pretty comfortable that that really doesn’t have activity. And now with Remdesivir, people are scratching their head, because they had three trials that were questionable and they had this trial that was successful.

And again, I’m not taking anything away from them. I’m going to use what [Indecipherable] said. He said, “Basically, it’s a good start and we have to build upon it.” And to me, build upon that means you need drugs with multiple mechanisms of action and we have a completely different mechanism of action that we not only look at the virus, but more importantly, the sequelae of the virus. I mean, today the common cold is not managed by treating the underlying virus. It’s managed by treating the symptoms. I mean, if you have a running nose you get an antihistamines; you have a fever, you get an antipyretic and you just run the course.

In this situation too, it’s the cytokine storm. It’s the cytokine release syndrome. It’s a very, very characteristic of this disease. Interestingly, other characteristic of this disease that makes it different is the — is the total body inflammation. So we focus on the lungs, but we’re seeing now that — you’re seeing the pericarditis and it’s really a strange pericarditis. And by the way, if you look at colchicine, it’s kind of used for pericarditis.

The other thing is that these kids are starting to show up with what’s called Kawasaki disease, which is a very similar to — basically a total body inflammation of the blood vessels and Familial Mediterranean Fever and Bechet’s disease is basically a total body vessel inflammation and they colchicine to treat those patients.

So we’re thinking we have a really good mechanism of action. And that’s why we want to focus, focus, focus, on patients that can give us the most information — the fewest number of patients who can give the most information and then decide where we want to go from there. But starting initially, we’re going to take patients that have not been on any of those drugs. Okay?

Operator

His line had disconnected. I’m sorry. So…

Mitchell Steiner — Chairman, President and Chief Executive Officer

No worries. He’ll call back.

Operator

So we can go to next questioner if he come — comes back reckons back, right, to Peter McMullin of Peter McMullin Consulting. Please go ahead.

Peter McMullin — Peter McMullin Consulting — Analyst

Hey, good morning, Mitch. How are you?

Mitchell Steiner — Chairman, President and Chief Executive Officer

Good morning, Peter.

Peter McMullin — Peter McMullin Consulting — Analyst

Two quick questions. One, I think Malaysia has done a pretty good job of controlling COVID-19. Can you give us a status report on the factory or your source of cash flow? And is it open? Will it open? Is it producing female condoms?

Second question is — second question, just you got both VERU-111 is making great progress, there is other people developing competing drugs out there, some of which have better balance sheets. Can you just talk about how you feel about the competitive profile in the future?

Mitchell Steiner — Chairman, President and Chief Executive Officer

Sure. So the first question has to do with, how did COVID-19 affect our supply chain, so to speak? So when we saw — when we saw that things were to starting to — I mean, remember this happen rapidly where all of a sudden in February, everybody is sitting in a picnic and then by March the bottom falls out of the market.

And what we saw was — we saw that, and as you know, our number one area of high margin business is the U.S. So the first thing we did is we stockpiled FC2 prescription in 12 count supply. 12 pack supply in the U.S. and we did so that we end up stockpiling of what we thought we would need for the whole year. So we really dodged a bullet there. So there was no interruption at all in the U.S. business.

In the ex-U.S. business, we were able to meet the needs of most of the large governments, but some of the large governments shut down. So South Africa and Brazil, I mean just read the newspapers, they’re freaked out and having some real issues. So even though we made it, we couldn’t ship it because they couldn’t have — they didn’t have the people at work to do the testing to bring the product in.

So you’ll see for Q3, our fiscal year Q3, we had a slight decrease in units. We had a decrease in units outside the U.S., but the units in the U.S. will allow us — allowed us to make our money. And so we have a good quarter. And so next quarter, we’re going to see an overabundance and over representation of public sector because now they’re opening up and taking product.

As it relates to the factory, the Malaysian factory was shut down and we all looked at each other and said “Oh my Gosh, what’s going to happen there.” But what — I think it happened for about two or three weeks and then the government says for any essential businesses, they were allowed to open up. And so, so we got an exemption, the team did a great job opening up. We’re not at a 100% capacity.

We’re about 50% to 60% capacity, but that’s fine. Because of all the stockpile that we put in the U.S. and all the product we already have on hand, we’re going to be able to meet the needs of our customers, not only in Q3, but also in Q4, and then we just have to take it after that and see what happens. But Malaysia is back online.

As it relates to — as it relates to your second question about the competitive landscape. So really the competitive landscape with companies with bigger balance sheets and you know I’m not worried about that because you look how much progress we’ve been able to do with being smart and efficient and being able to take a program like VERU 111 to registration trial in a period of 2.5 years from the time we started the first Phase 1 is pretty, is pretty impressive. I congratulate my team.

But as it relates to the competitive landscape, there is really existing drugs like the taxanes which are IV and given by medical oncologists and we already know the side effects and why patients are trying to avoid that. And there is nothing in this space. If I had to pick a class of drugs that is coming in, and again, in prostate immunotherapy, it’s just not been very effective and I’ll tell you that.

There is another drug, which is a — which is a radiation based or radio isotope based drug and that one tend to be for patients later in the course of disease. But in the exact space that we’re in, there is a class of compounds called PARP inhibitors and these R&D being backed by some of the biggest companies AstraZeneca Merck, Pfizer, I mean, this is sort of the next big thing.

But these drugs are indicated for patients that have certain mutations that you can actually measure. So for example, we’ve heard of BRCA1 and BRCA2 which are common in breast cancer, while on prostate cancer, those and those mutations or the mutations that they’re driving to treat these patients. So, for example, Alaparib, but which is the one in front of the FDA now.

I mean, as I mentioned in my previous comments, the New England Journal of Medicine article showed a 3.4-month progression-free survival for the control arm and for the treatment arm, which is going after those mutations mean is 7.4 months. So we were able to double it, and that’s the degree of benefit that we’re seeing with these kinds of drugs.

And if you ask, can we co-exist? The answer is absolutely, yes. It’s about 5% to 15% of the patient population with half of these mutations, which means with the 95% to 85% of patients, they need another drugs with a different mechanism. There is another — while we’re on the topic, there is another set of drugs called androgen receptor degrading agents. So these are agents that one of the thoughts is just to keep pounding on the androgen receptor.

And my personal view on that is, I think we’re doing a pretty good job on squeezing testosterone as low as we can. And so if those agents are successful. I think they’re just going to cannibalize the androgen blocking agent population and will not add anything incrementally once you’ve exhausted that target. So I think we’re in good shape I think time is of the essence that we need to get into the registration trial as quickly as possible and be that go-to drag.

Peter McMullin — Peter McMullin Consulting — Analyst

Thank you.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Alright, thank you.

Operator

And we have a follow-up from Yi Chen from H.C. Wainwright. Please go ahead, sir.

Yi Chen — H.C. Wainwright & Co. — Analyst

Thank you for taking my follow-up question. I just wonder, are there any more data published on the antiviral property of VERU-111. And also, do you think, based on the mechanism of 111 that it can treat moderately ill COVID-19 patients as well.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Yeah. So the first — I think the first — I think the first part of your question was whether there is any — VERU-111 animal data for COVID-19?

Yi Chen — H.C. Wainwright & Co. — Analyst

Yes, thank you.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Yeah. So, no, the answer is no. And we do have — what we do have is not for COVID-19 specifically, but we have done and — but there are data showing that colchicine has antiviral and anti-inflammatory activity and there are data that show that the way colchicine works is that it works by microtubule depolymerization agents. So it binds to microtubulin in the, guess what, colchicine-binding sites and that’s why they named in that. And so, the primary mechanism of action is inhibiting microtubules.

We have done in vitro and in vivo; in vivo in cancer models but in vitro, we have done those assays where we compete against colchicine and we bind to the colchicine-binding site. We have more — we have, in the in the published data we show that we are — we’re more potent than colchicine in preventing microtubules polymerization in vitro. We also have molecular data showing where our — where our VERU 111 binds to alpha and beta tubulin. So we’ve done mass spec and molecular modeling, and we know exactly how it fits in the microtubule and we fit exactly where colchicine fits.

So it’s not surprising that we’re basically a derivative colchicine and more potent with a better side effect profile because of drug-drug interaction. So I don’t think we’re making a big leap from that standpoint. So that’s why I think it’s worth testing it. As it relates to your second question, which is — so again, strong, strong rationale and I do think it’s the anti-inflammatory component that’s going to win the day here.

As it relates to your second question. Yes, I mean our situation is that we have a cancer program and we’ve been developing VERU-111 as a cancer product. And so it makes sense that the first place to start is in patients that are severely ill and — or potentially could become severely ill. But as in most antivirals and drugs of this sort, once you’ve demonstrated in that patient population, then it makes sense to go earlier.

And so we would do the same thing. But we would start with getting a signal in a patient population that are heavily dependent on whether an inflammatory reaction occurs because of the underlying virus infection and in an endpoint that’s not ambiguous that you can clearly say it’s related to the drug. If we can do that, then I think the program will take off on its own.

Yi Chen — H.C. Wainwright & Co. — Analyst

Thank you. And just lastly, I just want to confirm, you currently do have enough drug to support both prostate cancer and COVID-19 trials, right?

Mitchell Steiner — Chairman, President and Chief Executive Officer

Correct. We have plenty of drug. But we do not have enough drug to support the United States or the world in the event we’re successful. With that said, it’s not — it doesn’t take long. It is a small molecule, so there is nothing complex about it. And we’ve already identified sources that can help us do that and help us scale up.

So we are ready for it, in the event that we get news back this summer that we have activity and in which case you do — you do scale up at the same time you’re doing your Phase III, because when the Phase III is done, you have to be ready for distribution.

You saw how quickly Remdesivir had to get distributed, but we’re not going to make that decision until we see signal and usually you don’t make — you don’t do the expansion unless you find non-dilutive money from government agencies that will help you do that. So that’s how we’re thinking about it.

Yi Chen — H.C. Wainwright & Co. — Analyst

Got it. Thank you very much.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Okay.

Operator

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

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you. Thank you. I appreciate you joining us on today’s call and I look forward to updating all of you about our progress in our next investors call. Thank you.

Operator

The digital replay of the conference will be available beginning approximately noon Eastern Time today, May 13th by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You will be prompted to answer the replay access code which will be 10143040. Please record your name and company when joining.