Categories Earnings Call Transcripts, Health Care

Veru Inc (VERU) Q2 2023 Earnings Call Transcript

Veru Inc Earnings Call - Final Transcript

Veru Inc (NASDAQ:VERU) Q2 2023 Earnings Call dated May. 11, 2023.

Corporate Participants:

Samuel Fisch — Executive Director of Investor Relations and Corporate Communications

Mitchell Steiner — Chairman, President and Chief Executive Officer

Michele Greco — Chief Financial Officer and Chief Administrative Officer

Analysts:

Yi Chen — H.C. Wainwright — Analyst

Rohan — Oppenheimer — Analyst

Brandon Folkes — Cantor Fitzgerald — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, and welcome to Veru Inc. Investor Conference Call. [Operator Instructions]

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

Samuel Fisch — Executive Director of Investor Relations and Corporate Communications

Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company’s plans, objectives, expectations or intentions regarding its business, operations, regulatory interactions, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time.

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

Mitchell Steiner — Chairman, President and Chief Executive Officer

Good morning. With the meeting this morning’s call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the CFO and CAO. Michael Purvis, EVP, General Counsel and Corporate Strategy; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you all for joining our call. Veru Inc. is a late-stage clinical — late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of breast cancer and for SARS-CoV-2 and other viral acute respiratory distressed syndrome ARDS-related diseases. Our drug development program includes Enobosarm, a Selective Androgen Receptor Agonist for the management of advanced breast cancer and Sabizabulin, a Microtubule Disruptor for the treatment of hospitalized COVID-19 and other viral-related ARDS.

The company also has an FDA approved product, commercial product, the FC2 Female Condom, internal condom for dual protection against unplanned pregnancy and sexually transmitted infections. The revenue from the sexual health program is being used to partially fund the clinical development of our late-stage therapeutic candidates, which aim to address multi-billion dollar premium market opportunities. This morning, we will provide an update on our prioritization strategy, the progress of the breast cancer and viral ARDS drug pipeline as well as the commercialization of our FC2 product. We will also provide financial highlights for our Second Quarter Fiscal Year 2023. This past quarter, we implemented a prioritization strategy to focus our drug development efforts on those drug candidates, which we believe have the best opportunity to lead to long-term success and shareholder value creation and conserve cash, including a reduction in personnel and certain other measures to reduce costs further.

The refocused research and development strategy includes the following: plans for our ongoing Phase IIb/III study of enobosarm and abemaciclib combination in second-line metastatic setting for AR+ ER+ HER2- metastatic breast cancer. With the company’s clinical trial collaboration partner, Eli Lilly Company supplying abemaciclib; two, a planned Phase III study of enobosarm in bone-only nonmeasurable ER+ HER2- metastatic breast cancer; three, plans for continued development sabizabulin in a Phase III confirmatory COVID-19 study in hospitalized moderate to severe COVID-19 patients at high risk for ARDS; and four, a planned Phase III clinical study of sabizabulin in hospitalized influenza patients at high risk for ARDS. In addition, the company announced that Veru is reserving sabizabulin for clinical development only in infectious disease indications.

And accordingly, has terminated the Phase III VERACITY trial with sabizabulin in prostate cancer. Further, Phase II development VERU-100 asset will be pause with efforts to find a potential suitable development partner to share the cost of such future development. We also sought to sell our ENTADFI asset, which was successful and allowed us to generate additional non-dilutive cash. Company’s oncology drug pipeline has two clinical development programs for enobosarm, an oral selective androgen receptor agonist for the treatment of advanced metastatic breast cancer. Enobosarm is an oral first-in-class new chemical entity, selective androgen receptor agonist that activates the androgen receptor in AR+ ER+ HER2-metastatic breast cancer, which results in tumor suppressor activity without unwanted masculinizing side effects and changes in immaculate.

Enobosarm has extensive non-clinical and clinical experience, having been evaluated in 25 separate clinical studies in approximately 1,450 subjects dosed, including three Phase II clinical studies in advanced breast cancer involving more than 250 patients. In the two completed Phase II clinical studies conducted in women with AR+ ER+ HER2-metastatic breast cancer, enobosarm demonstrates significant antitumor efficacy in heavily pretreated cohorts that failed estrogen blocking agents, chemotherapy and/or CDK4/6 inhibitors and was well tolerated with a favorable safety profile. In preclinical studies, metastatic breast cancer tissue samples taken from patients who have metastatic breast cancer that has become resistant to CDK4/6 inhibitors in estrogen blocking agents were growing the mice. In these mice, treatment with enobosarm in combination with a CDK4/6 inhibitor suppressed the growth of human metastatic breast cancer greater than either drug was able to do alone.

Interestingly, the CDK4/6 inhibitor treatment caused the metastatic breast cancer tissue to make higher amounts of the androgen receptor, which may explain the observed synergy of combining a CDK4/6 inhibitor with enobosarm, which is selective AR agonist. The first clinical development study is a Phase IIb/III clinical study called ENABLAR-2, which is a enobosarm plus abemaciclib combination treatment with second-line AR+ ER+ HER2-metastatic breast cancer. On March 30, 2023, the company met with the FDA to gain further regulatory clarity for the ongoing Phase IIb/III clinical trial design and program. The Phase IIb/III study has been amended to accommodate the FDA’s latest recommendations to support a potential registration. In the first stage of the trial, the dose of the enobosarm and the abemaciclib combination is being optimized and the efficacy and safety of the combination therapies being assessed in three arms of 40 patients each, the abemaciclib plus enobosarm nine milligram combination therapy, abemaciclib plus enobosarm one milligram combination therapy and an estrogen blocking agent as the control arm.

The primary endpoint for the Stage I of the study is an objective response rate or ORR, which measures objective tumor responses as partial or complete. ORR is an endpoint that the FDA recognizes as an appropriate surrogate endpoint for clinical benefit for a possible accelerated approval, which is consistent with the new FDA guidance issued on March 24, 2023, entitled clinical trial considerations to support accelerated approval of oncology therapeutics. In Stage two of the Phase IIb/III study, we plan to enroll approximately 210 subjects in a multi-center, open-label, randomized, one-to-one active control clinical study to evaluate the efficacy and safety of enobosarm plus abemaciclib combination therapy versus an alternative estrogen blocking agent, which is either a selective androgen receptor degrader or an aromatase inhibitor in subjects with AR+ ER+ HER2- metastatic breast cancer, who have failed a CDK4/6 inhibitor plus an estrogen blocking agent, so basically first-line.

The primary endpoint is progression-free survival, which is used to confirm the ORR findings in Stage 1. In January of 2022, Veru entered into a clinical trial collaboration supply agreement through which Eli Lilly supplies abemaciclib, an FDA-approved CDK4/6 inhibitor for the ENABLAR-2 study. As you can see, the regulatory strategy and the clinical design for the Phase IIb/III ENABLAR-2 clinical study could yield an accelerated approval from Stage one and the full approval from Stage two for the second-line of abemaciclib, enobosarm combination treatment of AR+ ER+ HER2- metastatic breast cancer. We anticipate having clinical data for the Phase IIb/III ENABLAR-2 study in 2024. The second clinical study plans to evaluate enobosarm monotherapy for the treatment of bone-only nonmeasurable ER+HER2- metastatic breast cancer. Bone is the most frequent site of breast cancer metastases with bone metastases noted in 60% to 80% of metastatic breast cancers, up to 51% of patients have bone-only nonmeasurable breast cancer metastases, and they have very limited therapeutic options.

Enobosarm inhibits breast cancer growth and builds and heels bone by increasing both cortical and trabecular bone. Further, enobosarm increased its muscle mass and improve physical function, both the beneficial bone and muscle effects may reduce the skeletal-related events caused by bone metastases. Accordingly, enobosarm could be a potential therapeutic option for women with bone-only nonmeasurable metastatic breast cancer. We plan to meet with the FDA to discuss the Phase IIb/III clinical development program to evaluate enobosarm monotherapy in bone-only nonmeasurable metastatic breast cancer. We turn our attention now to the viral ARDS infectious disease program, ARDS is a form of noncardiogenic pulmonary edema with diffuse alveolar damage associated with systemic inflammatory conditions. Viruses can cause up to 1/3 of the community-acquired pneumonia and viruses can trigger the immune system to release an overwhelming amount of inflammatory proteins known as the cytokine storm.

The cytokine storm causes tissue damage in the lungs that leads to ARDS. Patients who develop ARDS have a high mortality rate. Virus-induced ARDS remains a significant unmet medical need with limited treatment options. Common viral infections that cause ARDS include COVID-19, influenza and Respiratory Syncytial Virus, also known as RSV and other virus infections that may also lead to ARDS in depth, posing a global public health risk to society includes smallpox and Ebola virus. A single operating involving any one of these viruses would be an immediate global emergency with limited existing options available for treatment. As ARDS results from the over-exaggerated immune inflammatory response by the patient to a virus infection rather than direct injury from the virus infection itself, an antiviral agent alone may not be effective. Sabizabulin has host targeted antiviral and a broad spectrum anti-inflammatory agent has the potential to address the virus infection and the inflammation caused by the cytokine storm that causes ARDS, multi-organ failure and death.

Company is developing sabizabulin for the treatment of hospitalized moderate to severe COVID-19 patients at high risk for ARDS and death. ARDS remains the most frequent serious complication of severe COVID-19 infection. As we reported up to 33% of hospitalized patients with COVID-19 have ARDS, and 75% to 92% of patients admitted to the intensive care unit with COVID-19 have ARDS. The mortality rate of COVID-19 associated ARDS is 45%. And among patients who die from COVID-19, there’s a 90% incidence of ARDS. In the current endemic phase, COVID-19 infection is estimated to be the fourth leading cause of death in the United States. COVID-19 is not going away. It has transitioned to a new disease that will remain with us like influenza and RSV. The endemic phase for COVID-19 remains deadly with the latest data from the CDC reporting, 1,100 deaths this past week and an average of 4,500 hospitalizations a day, the number of COVID-19 cases is expected to be seasonal, with a rise in mid-summer when people gather in doors to get out of the heat and in the winter when they gather to get out of the cold.

As the COVID-19 endemic continues, there also needs to remain — we need to remain vigilant and focused on preparedness for the next wave of infections involving new potentially more dangerous mutated virus strains. In fact, a new mutated strain, if Omicron has emerged called Arcturus, it’s also known as XBB.1.16 and it appears to have high infectivity in pathogenicity. COVID-19 will be a problem for the foreseeable future and there’s a great need for effective therapies, especially for these hospitalized patients with moderate to severe COVID-19 infection at high risk for ARDS. The company has completed a positive Phase II and a positive Phase III COVID-19 clinical trials evaluating sabizabulin. The Phase III clinical study was a double-blind randomized placebo-controlled study in 204 hospitalized moderate to severe COVID-19 patients in high risk for ARDS. The primary endpoint was the proportion of patients have died by day 60. And based on a planned interim analysis of the first 150 patients randomized, the independent data monitoring committee unanimously recommended that the study be stopped for clear evidence of clinical efficacy, and they identified no safety concerns.

In the interim analysis, treatment of sabizabulin nine milligram once a day resulted in a clinically meaningful and statistically significant 55.2% relative reduction in deaths compared to placebo. On May 10, 2022, the company had a pre-emergency use authorization so that’s EUA meeting with the FDA to discuss the submission of an EUA application for sabizabulin COVID-19 treatment. On June 7, 2022, the company submitted a request for FDA emergence use authorization for sabizabulin. On July 6, 2022, the company announced publication of the interim analysis, interim efficacy and the full safety clinical results from the Phase III COVID-19 study of sabizabulin in The New England Journal of Medicine Evidence. February 28, 2023, the FDA notified the company that was — that had declined to grant at that time, the company’s request for emergency use authorization for sabizabulin to treat hospitalized moderate to severe COVID-19 patients.

And in communicating its decision, the FDA stated that despite the FDA declined to issue an EUA for sabizabulin at this time, the FDA remains committed to working with the company in development of sabizabulin. Separately, on February 16, 2023, the FDA also provided comments on a confirmatory Phase III study protocol submitted by the company that could support a new EUA request to the FDA. In regard to the study design, the FDA stated that strong consideration should be given to the appropriate time frames for interim analysis, so that should “strong efficacy signal again be observed, the trial could be stopped in an efficient time frame”. On April 27, 2023, the company met with the FDA and reached agreement on the design of the Phase III confirmatory COVID-19 clinical trial and the path forward to submit a new EUA application and/or NDA. The FDA agreed to a confirmatory Phase III randomized, one-to-one, multi-center global efficacy and safety study of sabizabulin nine milligrams oral daily dose plus standard of care treatment versus placebo plus standard of care treatment and 408 hospitalized adult patients with moderate to severe SARS-CoV-2 infection with high risk for ARDS.

The patient population for sabizabulin will be expanded to include all hospitalized moderate to severe COVID-19 patients, to WHO-4, passive, low flow oxygen, WHO-5 forced, high flow oxygen, or WHO-6 mechanical ventilation, and there’s no requirement to have a co-morbidity. The primary efficacy endpoint will be all-cause mortality at day 60. Secondary endpoints include days in the hospital, days in the ICU, days in mechanical ventilation and a proportion of patients alive without respiratory failure. And an exploratory endpoint will be the presence of long COVID-19 symptoms at day 180. In order to get a potentially efficacious drug to patients in an efficient time frame, there are two planned interim efficacy analyses that will be conducted. As requested by FDA, the first planned interim analysis will occur when 204 patients that 50% of the population have completed day 60 primary efficacy endpoint and the second planned interim analysis is expected to occur when 290 patients, which is 71% have completed the day 60 primary efficacy endpoint, which incidentally is the same time frame with a similar amount of data as when the interim analysis was conducted for the first Phase III study.

If either of the efficacy analysis meet statistical significance criteria, the trial could be stopped for efficacy. Should the pre-specified primary efficacy endpoint analysis demonstrate a statistically significant effect on all-cause mortality favoring sabizabulin, the company may consider a new request for EUA and/or submission of an NDA “as the company would potentially have two adequate and well-controlled trials for review”. As the program has fast track designation, enrolling NDA submission is a possibility for sabizabulin. The Phase III confirmatory COVID-19 clinical trial is expected to begin enrollment in the second half of 2023, and the first planned interim efficacy analysis is anticipated to be conducted in 2024. Now our justification for pursuing a Phase III confirmatory trial in hospitalized moderate to severe COVID-19 patients and high risk for ARDS is as follows. First of all, COVID is here to stay. It’s a large market size. It’s the fourth leading cause of death. There’s lack of effective treatment options and a high mortality rate in COVID-19 patients, who progress to ARDS.

Sabizabulin has a unique mechanism of action as a host targeted antiviral and a broad anti-inflammatory agent and its viral mutant strain agnostic. As requested by the FDA, the host targeted antiviral activity sabizabulin has been reconfirmed with an in vitro cell study done at the University of Rochester. Sabizabulin has demonstrated efficacy and safety in the previous Phase II and Phase III clinical studies, we have regulatory clarity, the Phase III COVID-19 confirmatory study with two potential interim analyses to assess efficacy of sabizabulin earlier. The company may request a new EUA and/or an NDA with this additional data from the Phase III confirmatory COVID-19 study. And interestingly, on the Section 564 the Federal Food, Drug and Cosmetic Act, FDA may continue to issue EUAs and EUA drugs may be available after the National Public Health Emergency ends today.

Clinical evaluation of other drug candidates by competitors had marginal no activity. Thus, there will be less competition for hospitalized COVD-19 patients to enroll into clinical trials, having a positive first Phase III COVID-19 study with sabizabulin treatment, demonstrating a mortality benefit published in New England Journal of Medicine Evidence should also help with patient recruitment into clinical trials. And compared to the first Phase III clinical study, we plan to conduct a confirmatory Phase III clinical study in a greater number of clinical sites with approximately 100 sites compared to 50 clinical sites for the previous Phase III study. Now as it relates to the current ex-U.S. regulatory status, the company believes that it is most likely that all the ex-U.S. regulatory authorities, like the FDA, will require some level of new additional clinical data, including from the confirmatory Phase III study before granting emergency conditional or other similar authorizations of sabizabulin for COVID-19. In April, we submitted a request to the FDA CDER — SDER to reevaluate the FDA’s declination of our EUA for sabizabulin to the FDA’s formal dispute resolution process often referred to as the FDA dispute resolution or the FDR process.

We will provide more details on the content of our FDR application when we have an FDA response on the next steps. But for now, we can say that our main argument for seeking the reevaluation is that we believe the FDA applied an incorrect standard of review of our EUA, essentially holding our data to the proven safe and effective standard of a new drug application rather than the proper standard under an EUA application whether sabizabulin’s potential benefits outweighs potential risk. And we also believe that this inappropriate standard affected much of the November 2022 PADAC Advisory Committee meeting. Also, we have contrasted the FDA’s higher level of scrutiny towards our sabizabulin EUA with other EUAs that have been granted, including the recent EUA granted for prohibit for certain late-stage COVID-19 patients.

We’re now awaiting the FDA’s decision on whether to accept our request to the FDR process, we will determine our next step based — at that time based on the FDA’s response, but we will consider all options. We hope to hear this month, but because we’re dealing with an EUA and not proceeding under a PDUFA statute like we would if we had filed an NDA, the FDA’s time lines are not definite. Our FDR application is a matter of high importance of Veru and we will update you when the time is appropriate. Now in order to position sabizabulin as a drug to be used broadly for the treatment of viral ARDS, in other words, COVID assorted the hook into ARDS. The company also plans to expand the clinical development of sabizabulin for the treatment of hospitalized influenza patients at high risk for ARDS and death.

On April 4, 2023, the company announced positive results of a preclinical study of sabizabulin, demonstrating robust anti-inflammatory activity with improved outcomes in an H1N1 influenza induced pulmonary infection mouse ARDS model, H1N1 is the old Spanish flu and now swine flu, and this was conducted by a team of researchers at LabCorp, early development laboratories in the United Kingdom. Sabizabulin treatment resulted in a statistically significant decrease in the total number of inflammatory cells and a reduction in key cytokines and chemokines in lung fluid. Clinically, sabizabulin treatment resulted in a reduction in severity of lung inflammation by histopathology and it was a dose-dependent improvement in lung function. Oral administration of the two milligram per kilogram sabizabulin resulted in a reduction of clinical signs and body weight loss associated with H1N1 infection. Company expects to submit the full data set for presentation in the future scientific meetings and peer review publications.

These preclinical data suggests that sabizabulin has a potential for treatment for hospitalized influenza patients in high risk for ARDS and death. The pathogenesis and mortality rates for hospitalized influenza patients who develop ARDS are similar to COVID-19 associated ARDS, representing a high unmet need and very limited treatment options. According to the CDC, this is important. Influenza burden estimates in the United States who up to 630 hospitalizations and 55,000 deaths in just the last six months. Accordingly, Veru is planning a double-blind, randomized, placebo-controlled Phase III clinical trial evaluating sabizabulin in hospitalized adult influenza patients at high risk for ARDS. Moreover, the company is planning to expand the development of sabizabulin for smallpox and Ebola viruses under the Animal Rules FDA regulatory pathway.

So on April 11, 2023, the company announced positive results from a preclinical in vitro study evaluating the effects of sabizabulin against the prototypical poxvirus called the vaccinia virus, which demonstrates sabizabulin prevented both the release of the poxvirus from an infected cells and the spread of the poxvirus to healthy cells. And this was conducted by a team of research led by Dr. Brian Ward, who is Associate Professor of Microbiology and Immunology, University of Rochester School of Medicine and Dentistry in New York. The company expects to submit the full data set for presentation at future scientific meetings and peer review publications. Based on the clinical data — preclinical data, the company plans to expand sabizabulin program to include other serious virus infections that pose a global public health threat to society.

Sabizabulin as a host targeted antiviral and broad anti-inflammatory agent may be useful as a novel treatment not only against small pox and other poxviruses, but it may also reduce the hyper reactive immune response triggered by poxvirus that’s responsible to severe pneumonia, ARDS, multi-organ failure and death. The company plans to have a pre-IND meetings with the FDA to discuss the Animal Rule of regulatory requirements for assessing the efficacy of sabizabulin to smallpox virus as well as Ebola virus. Clinical human efficacy trials of drugs for preventing or treating smallpox and Ebola viruses are not feasible and challenge studies in healthy subjects are unethical.

Therefore, drugs for these indications are generally developed and approved under a regulatory pathway commonly referred to as the Animal Rule. FDA may grant marketing approval based on adequate and well-controlled animal efficacy studies, when the results of those studies established if the drug is reasonably likely to produce clinical benefit in humans. Now as for our commercial business, the company’s sexual health program consists of FC2 and FDA-approved commercial product to dual protection against unplanned pregnancy and sexually transmitted infections. Company sells FC2 both in the commercial sector and in the public health sector, both in the U.S. and globally. In the U.S., FC2 is available by prescription through multiple telemedicine and internet pharmacy channels as well as retail pharmacies.

The company has launched its own dedicated direct-to-patient telemedicine pharmacy services portal platform to continue to drive sales growth. FC2 is also available to public health sector entities such as State Departments of Health and 501(c)(3) organizations. In the global public health sector, the company markets FC2 to entities, including ministries of health, government health agencies, U.N. agencies and non-profit organizations and commercial partners. The company had another FDA-approved product ENTADFI, which is finasteride and tadalafil capsules for oral use as a new treatment for benign prostatic hyperplasia that was approved by the FDA in December 2021. On April 19, 2023, the company entered into an asset purchase agreement with Blue Water Biotech. The purchase price for the transaction was $20 million plus $80 million of potential sales milestones based on net revenues of ENTADFI after closing.

I will now turn the call over to Michele Greco, the 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 continue to have a lot of ongoing activity at Bureau. Let’s start with the second quarter results for the three months ended March 31, 2023. Overall, net revenues were $6.6 million compared to $13 million in the prior year second quarter. The company reported quarterly sales for its U.S. prescription business of $4.1 million compared to $11.6 million in the prior year second quarter. The decrease in the prescription business is due to lower volume from our customers as a result of ongoing business challenges which includes changes in strategy, the impact from a rebranding, a reduction in marketing spend and the recent bankruptcy filing of The Pill Club and important FC2 customer, all resulting in a slowdown of orders in recent periods. Net revenue from the global public sector business for the quarter was $2.4 million compared to $1.4 million in the prior year’s quarter.

The increase in the public sector business is because the company began shipping to South Africa under the most recent tender during the quarter and because the company is seeing increased orders in the U.S. public sector resulting from two contracts executed last year. Overall, gross profit was $4.1 million or 62% of net revenues compared to $11.2 million or 86% of net revenues in the prior year quarter. The decrease in gross profit and gross margin is driven primarily by decreased sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased to $43.5 million compared to the prior year’s quarter of $22.9 million. The increase is primarily due to research and development costs, which increased $7.4 million to $22.9 million compared to $15.5 million in the prior year quarter and the increase in selling, general and administrative expenses of $5.4 million from $7.4 million in the prior year quarter to $12.8 million in the current quarter.

The increase in research and development costs is due to the number of ongoing clinical trials, mainly for preparation for the Phase III COVID-19 confirmatory study and costs related to the ongoing unplanned in enobosarm study, along with increased personnel costs due to increased headcount. The company also incurred expenses related to preparation of the launch of COVID-19 under an EUA, including manufacturing drug product for the launch as required by the FDA. The increase in selling, general and administrative expenses is primarily due to commercialization costs related to preparation for the potential launch of sabizabulin for COVID-19 prior to the FDA’s declination of the company’s EUA application and an increase in personnel-related costs due to increased headcount. Most of this incremental headcount has now been reduced post the EUA declinations.

In addition, during the quarter, we recorded an impairment charge totaling $3.9 million related to in-process research and development assets recorded for sabizabulin for prostate and zuclomiphene because of the company’s change in strategy to focus its efforts on those drug candidates, which have the best opportunity for long-term success and the potential for meaningful Phase III data readouts in 2024. We also recorded a provision for credit losses of $3.9 million related to the total amount due from The Pill Club as a result of the uncertainty of their financial condition after they filed for Chapter 11 bankruptcy in April. The operating loss for the quarter was $39.4 million compared to $11.8 million in the prior year quarter. Non-operating income was $559,000 compared to a non-operating loss of $2.4 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.

For the quarter, we recorded a tax benefit of $67,000 compared to $27,000 in the prior year second quarter. The bottom line results for the quarter was a net loss of $38.8 million or $0.48 per diluted common share compared to a net loss of $14.2 million or $0.18 per diluted common share in the prior year second quarter. Now turning to the results for the six months ended March 31, 2023. For the first six months of fiscal 2023, total net revenues were $9.1 million compared to $27.2 million in the prior year period. Net revenue from the U.S. prescription business was $4.3 million compared to $23.2 million in the prior year period. The causes for the reduction of the net revenues from the prescription business for the period are consistent with those in the quarter. In addition, the net revenues from The Pill Club were $3.9 million for the current period compared to $10.8 million in the prior year period, a reduction of $6.9 million. Due to The Pill Club’s Chapter 11 bankruptcy filing, we are uncertain whether these revenues will return in the future.

Net revenues from another prescription channel customer were $11.3 million in the prior year period and zero in the current period. We understand this reduction is due to the impact of its most significant customer in turn reducing its orders. Net revenue from the global public sector business for the period was $4.8 million compared to $4 million in the prior year period. Overall, gross profit was $4.8 million or 53% of net revenues compared to $23 million or 85% of net revenues in the prior year period. The decrease in profit and gross margin is due primarily to the decrease in the U.S. prescription business. Operating expenses increased by $40.1 million to $79.8 million compared to the prior year’s period of $39.7 million. The increase is primarily driven by research and development costs, which increased by $16 million to $41.6 million from $25.6 million in the prior year period, and the increase in selling, general and administrative expenses, up $16.3 million from $14.1 million in the prior year period to $30.4 million in the current period.

The factors contributing to the increase in research and development costs and selling, general and administrative expenses are the same as those described for the quarter. As I mentioned before, during the quarter, we also recorded an impairment charge of $3.9 million related to in-process research and development costs and a provision for credit losses of $3.9 million related to receivables from The Pill Club. Operating loss for the period was $75 million compared to $16.7 million in the prior year period. The increase in the operating loss of $58.3 million is due to the increased research and development costs, increased selling, general and administrative expenses, the impairment charge, the provision for credit losses, all combined with a reduction in net revenues during the current year period. Non-operating expenses were $763,000 compared to $3.7 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 $135,000 compared to a tax expense of $87,000 in the prior year period. The company has net operating loss carryforwards for U.S. federal tax purposes of $112.5 million with $29.7 million expiring in years through 2042 and $82.8 million, which can be carried forward indefinitely. And our U.K. subsidiary has net operating loss carryforwards of $63.1 million, which do not expire. The company also has U.S. federal research and development tax credit carryforwards of $8.5 million, which expire in years through 2042. The bottom line results for the first six months of fiscal 2023 was a net loss of $75.6 million or $0.94 per diluted common share compared to a net loss of $20.6 million or $0.26 per diluted common share in the prior year period. The net loss for the company increased by $55 million for the current period.

The main reason for the increase in the net loss relates to the company preparing for the potential launch of sabizabulin for COVID-19 in the U.S. and outside the U.S. This requires building the commercial team, engaging vendors to assist with the commercial launch and manufacturing drug product for the launch upon the EUA approval as required by the FDA. Since the declination, the majority of the employees hired for the commercial team have been terminated and the commercial launch sales and marketing-related vendor contracts have been canceled. The related costs for commercialization for the period totaled $12.1 million. The cost of manufacturing drug product for the launch for the period was $12.4 million. In addition, with the change in strategy, the company stopped several drug development trials and reduced headcount related to the reduction in drug trials. During this period, we also recorded an impairment charge of $3.9 million and a credit loss charge of $3.9 million.

Lastly, our gross margin decreased by $18.2 million for the period. Now looking at the balance sheet, as of March 31, 2023, our cash balance was $23.5 million, and our accounts receivable was $4.2 million compared to a cash balance of $80.2 million and an accounts receivable balance of $3.6 million as of September 30, 2022. Our net working capital was $4 million on March 31, 2023 compared to $63.3 million on September 30, 2022. During the six months ended March 31, 2023, we used cash of $60.1 million for operating activities compared with $12.6 million used for operating activities in the prior period. We generated cash of $2.6 million related to the sale of shares under the common stock purchase agreement with Aspire Capital. There has been a lot of activity since the end of our second quarter on March 31, 2023.

On April 12, we entered into a stock purchase agreement with the Frost Gamma Investments Trust, which generated $5 million from the sale of shares of the company’s common stock. On April 19, we entered into an asset purchase agreement to sell our ENTADFI product to Blue Water Biotech for $20 million. We received $6 million at closing, $4 million payable by September 30, 2023, $5 million payable by April 19, 2024 and $5 million by September 30, 2024, plus there’s a possibility of up to $80 million in sales milestone payments. On May 2, we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC, which provides the company with the right but not the obligation to sell to Lincoln Park up to $100 million of shares of the company’s common stock over a 36-month period. We are working to increase the future net revenues in the prescription channel by growing awareness and demand of FC2 through increased marketing efforts for our own telehealth platform and pursuing additional distributors in the telehealth sector.

We’ve started to see an increase in the U.S. public sector as a result of new agreements recently executed and are seeing increases in our global public sector business from shipments on tenders. We will continue to consume cash as we develop our drug candidate. We believe the current cash balance, along with the revenue from sales of FC2, cash payments we will receive from the recent sale of our ENTADFI product and our ability to secure financing will be adequate to fund the planned operations of the company for the next 12 months as we continue to focus on developing novel medicines for the treatment of breast cancer, for COVID-19 and other related ARDS-related diseases.

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

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you, Michele. As Ms. Greco said, the main reason for the increase in the net loss relates to the large expense of preparing for potential loss of sabizabulin for COVID-19 in the U.S. and outside the U.S. This required building a commercial team, engaging vendors to assist in the commercial launch and manufacturing drug product for launch upon EUA approval as required by FDA. These activities have ceased. We’ve hit the reset button. As for our cash burn and cash position, we have been able to also significantly cut costs by prioritizing our spend, restructuring our clinical development to focus only on the most promising near-term programs. We have strategically positioned Veru on late-stage clinical programs in both advanced breast cancer with enobosarm in virally induced ARDS infectious disease program with sabizabulin, both areas of great unmet need, and these are major premium market opportunities.

Our cash and cash equivalents were $23.5 million as of March 31, 2023, and subsequent to the company’s fiscal year 2023 second quarter, as previously disclosed, Frost Gamma Investments Trust acquired $5 million of company common stock in a private placement. The company sold ENTADFI product to Blue Water Biotech for $20 million and up to $80 million in additional sales milestones and Veru has also entered into a common stock purchase agreement for a purchase of up to $100 million with Lincoln Park Capital Fund. Under the terms of the agreement, Lincoln Park is committed to purchasing up to $100 million of Veru’s common stock at Veru’s sole discretion from time to time over a 36-month period. We’re pleased to enter into this transaction with Lincoln Park Capital, and we believe that this agreement allows us to access capital in a very efficient manner.

We believe this purchase commitment further enhances our financial flexibility and is aligned with our long-term strategy for shareholder value creation. We intend to use any net proceeds from the sale of common stock to Lincoln Park Capital for working capital and for general corporate purposes as well as to advance our late-stage clinical programs. Furthermore, we have a near-term strategy to drive FC2 revenues from our commercial business as follows. We are adding additional, again, adding additional telemedicine and internet pharmacy service partnerships. We have our own dedicated direct-to-patient telemedicine and internet pharmacy services portal. We’re pleased with the telemedicine portal as a growing source of revenue, making the strategic move has allowed us to both supply FC2 to other telemedicine providers and to also have our own FC2 dedicated telemedicine portal that we can control and grow.

We’ve expanded our pharmacy fulfillment capabilities to over 50 states in the United States, and the website can be reached at fc2condums.com. We expect to continue to increase U.S. public sector sales through our agreements in New York Department of Health and with the distribution partners with Global Protection as well as Afaxys, and we’re seeing an increase in global public health — public sector sales, and we believe Brazil is getting ready to order a new tender. It should be noted, we had an improvement in our FC2 revenues in the second quarter of fiscal year 2023.

And finally, we are actively seeking in some cases already in discussions for potential partnerships for enobosarm in breast cancer and sabizabulin in viral-induced ARDS as another source of non-dilutive capital. All of these resources and business development activities should allow us to advance our most important drug candidates, enobosarm for second-line AR+ ER+ HER2- metastatic breast cancer and sabizabulin for SARS-CoV-2 viral ARDS, that could yield Phase III clinical data in 2024.

With that, I’ll now open the call to questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question will come from Yi Chen with H.C. Wainwright. You may now go ahead.

Yi Chen — H.C. Wainwright — Analyst

Hey, good morning. I’m sorry if I missed this during your prepared remarks, my line was a little choppy. But any color on if you have to rehire or rebuild a commercial team following the potential positive pivotal study results from sabizabulin and also any learnings from your previous efforts?

Mitchell Steiner — Chairman, President and Chief Executive Officer

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

Yi Chen — H.C. Wainwright — Analyst

Yes. Any learnings from what —

Mitchell Steiner — Chairman, President and Chief Executive Officer

Learnings, yes, absolutely. Absolutely. Yes. Thank you for that question. Yes, I’ll tell you what the learnings are. And again, the purpose of this is to get as much candor as we can. And we were told by both the European authorities and U.S., that we have to have drug ready to go, commercially ready to go, and we also need to have the ability to distribute ready to go. And so we invested and heavily because we waited nine months, we were under the impression that this would be short-term, that’s why they call it Emergency Use Authorization and turn out to be much longer than that. And for nine months, we sat there burning cash.

So the learnings, the next time is either you have a partnership with a group that already has a commercial team ready to go and you can incrementally add to that commercial team or you just wait. You handle the manufacturing piece because you have no choice, you have no drug to release, but maybe the public will get made to us if we don’t launch quickly, but I’d rather have the public get mad at us not launching quickly, then sitting here for nine months, burning cash with a group that was ready to launch in July. So the learnings is, going forward, until I see in black and white at the FDA or any of the other regulatory authorities have approved or authorized the product, we’re going to sit tight.

And — or like we’re doing now, pursue partnerships with commercial organizations that are in this space that know how to commercialize. And so in which case, then it’s not a big incremental expense for them to be ready and being idle. But for a company of our size, it’s focused on clinical development and it was a major learning. Now in all fairness, we’re in the middle of a public crisis. It was an emergency. People are dying at some point, 700 to 1,000 patients a day. At one point, it was 2,500 patients a day.

And so it felt like things were going to move quickly and but hindsight 2020. And if we had to do it again, I would wait until I see something from the FDA that says you’re officially authorized and then the delay should be the company not getting the drug out fast enough, not that the FDA took the nine months delay and the company getting lost a lot of money in that process.

Yi Chen — H.C. Wainwright — Analyst

Great, thank you. I’ll hop back-in line.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you.

Operator

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

Rohan — Oppenheimer — Analyst

Hey, everyone is Rohan [Phonetic] here speaking on behalf of Leland Gershell. Just a couple of questions from me, could you update us on some of the ongoing discussions with European and ex-U.S. authorities on ongoing sabizabulin reviews? And have there been any communications around the confirmatory Phase III trial and if that might satisfy their request for additional data? And secondly, do you have a sense for what kind of spend will be needed to fund the additional ARDS studies, particularly the influenza trial?

Mitchell Steiner — Chairman, President and Chief Executive Officer

Yes. So right now, we have some — as soon as the FDA made the decision that they were going to decline the Emergency Use Authorization at this time, all the agencies talk. There’s no question as these agencies talk across the world. But they all came back with sort of different kind of take on it. So for example, the Article 18 with the European Union, the EMA, they took the position that they cannot issue a negative opinion. I mean, because we got data, I mean. And so what they said instead, was if you can provide this with additional clinical information doesn’t necessarily have to be a Phase III clinical study, although the Phase III clinical study certainly would suffice, they would be willing to review that as a way forward to get to a positive opinion. But we have to meet with them, find out what kinds of data they want and short of a Phase III.

But if the Phase III is done, we feel that, that will easily suffice for Europe. The other major group is the Access Group. We’re still in discussions with them. And — but again, our sense is that we can provide them additional clinical information. And certainly, if it’s a Phase III clinical trial, that would be appropriate. I think all the agencies know already that we’re committing to the Phase III study. And so they know that’s forthcoming and as it relates to — and so those are the conversations that we have with them. And we do believe that the confirmatory Phase III study that the agency has reached agreement with the company, all the elements of that study, which suffice not only for U.S., if we’re successful, but outside the U.S. as well. So all that’s still influx, decisions haven’t been made, it’s just literally we’re on hold or in suspension until we provide more data.

As it relates to spend, for the Phase III confirmatory — Phase III confirmatory COVID-19 study, it will cost us roughly $16 million to get to the 204 patients that we need for the first interim look. And so that’s a number to think about. For influenza — so that’s for COVID-19, and that will get us into 2024, so $16 million incremental increase that we would need for the clinical development program to get us to that number, which will open up ARDS. As it relates to influenza, the planned study, we’re not planning to start that study until we secured funding, and we’re comfortable. And so for example, one of the things that we’re doing now, it turns out that, again, influenza is a big deal, influenza kill almost in the same number of patients as COVID did in the last six months when influenza was — came back with the vengeance after being gone low numbers in last year.

And so we are actively talking to BARDA. As you know, BARDA has recently received $5 billion in funding. Their interest is ARDS, their interest is influenza. And so we’re going to be — and we have developed a nice relationship with BARDA through our interactions with them with COVID. So we plan to continue to use that as a potential pathway to get non-dilutive dollars that we can support the influenza study. But for us to take that cash right now makes no sense until we get COVID-19 over the finish line.

Rohan — Oppenheimer — Analyst

Thanks so much.

Mitchell Steiner — Chairman, President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question will come from Brandon Folkes with Cantor Fitzgerald. You may now go ahead.

Brandon Folkes — Cantor Fitzgerald — Analyst

All right, thanks for taking my questions and thank you for all the color. Can you just perhaps dive a little bit deeper and elaborate on some of these assumptions that go into the statement of being able to fund the company for the next 12 months? Any additional details you can provide on the stock purchase agreements. Just is that something that can be used pretty quickly and heavily in the near-term? And then similarly, I heard sort of your prior commentary on the cost of the COVID-19 trial. But how much more can opex come down and how quickly? And then similarly, how quickly do you expect the FC2 investments to have an impact? Just any color on the cash burn in the next few quarters would be helpful?

Mitchell Steiner — Chairman, President and Chief Executive Officer

Yes. So I’m going to have Michele comment in a moment as well. I’m going to — I’ll give you from a high level, the stock purchase agreement as I understand it. And so as you know, we had one with Aspire Capital over the last, I don’t know, five years or so, and we sparingly used it. It was always there when we needed additional cash to keep things moving, if we could not get non-dilutive cash. So our goal is always to get non-dilutive cash and that’s why we’re active in partnership discussions. We’re active. We’re trying to get BARDA to provide money, and we’re active in investing in our FC2 efforts because the FC2 efforts will allow us to gain non-dilutive cash. And finally, we sold in ENTADFI for $20 million, of which all of that will come in the same time period that we’re running the COVID-19 clinical study in the ENABLAR study to get to clinical data. So the gap that we need to make up depends on what FC2 does.

And — but the goal is to have readily available funding in the event that we want — that we needed. And so the stock purchase agreement basically means that Veru sole discretion, we can ask Lincoln Park Capital, who’s been — who’s agreed to buy up to $100 million of Veru’s stock over the next three years. So it’s very different than ATM. And ATM means that you have to go to the bank and the market has to be — it’s basically a market-driven transaction, and you have to have — the market has to be ready to accept that stock or you can’t do the deal. With a purchase agreement like this, it’s not based on market conditions at all. It’s based on — you have a price that’s agreed to and they have to buy at that price.

And the goal is for the fund to hold on to the stock and not put the stock back into circulation. So it doesn’t put pressure on the stock. It doesn’t help either parties if you put pressure on the stock. So that’s my sort of layman’s non-financial expert thinking behind it. Michele can correct me. But it worked out very nicely because it doesn’t put pressure on the stock. As it relates to FC2 investment, as soon as we got the declination from the FDA, we realized that we needed to, again, refocus on FC2. We had some headwinds with some of our major customers, and we saw that happening over the last couple of quarters. And so the good news is, is that we have identified and are moving forward and getting additional telemedicine partners that we’ll announce over time that will come in and fill the gap or fill in the void that we now have with telemedicine prescriptions from The Pill Club and another partner that also faced headwinds. Again, this is independent of us.

This is what they did. And — but it’s our customers. And so we feel that’s going to be very important. But also, we’re getting real data, and I encourage you to look at the FC2 site, but we’re getting real data to show that — and this is very consistent with the Google market analytics that we conducted a couple of three years ago that when women are offered FC2, about half the women want to try it. And about 60% or 70% will continue to get FC2. And the reason that’s important is because FC2 is, Michele — Ms. Greco said, by driving awareness, it’s a blue ocean. It is a non-hormonal birth control method that women can be empowered to use. And also, as you saw recently, syphilis has become another major epidemic. And you can’t get protection from STIs with birth control pills or IUDs or anything of that sort you have to use a barrier technique and women are just not waiting for man to put a condom on.

They’re taking control. So we think we tapped into something very interesting, and we’re starting to see the numbers grow and it could easily fill our gap for next year easily. And stay tune. But the investment is paying off. And the reason we know that is we get real-time data. So we know exactly how much we’re spending. We know exactly how much we’re spending per prescription. We know exactly when patients want to continue to use the product. We’ve just expanded pharmacy fulfillment to 50 states in — all 50 states. The pharmacy world is state-based. So you can’t — it’s not a U.S. thing, it’s U.S. and states. And so if you don’t have, in some cases, bricks-and-mortar or agreement in each of the states and you’re not licensed, you can’t fulfill. So we solve that problem. And we’re working with Medicaid to make sure again, women have a choice.

Women have access, which is all part of the Affordable Care Act. So we’re heavily invested in it. And also with FC2, we’re finding at the U.S. public sector drives awareness. And finally, the global public sector has come back. COVID-19 has put quite a ranch in worldwide sales of FC2 and the kind of resources are being diverted towards vaccines and that kind of stuff. But it feels like it’s kind of moving the other direction now beyond vaccines. So as we mentioned the South African tender, we’re supplying. Brazil is getting ready for a major tender that we’ll compete for. And we’re still the major brand for FC2. FC2 has been the major brand internationally. In the U.S., we’re the only approved FDA product.

So I think if we can get back to where we were just even 1.5 years ago or even a year ago, that having resources at that level will easily cover our clinical burn, clinical trials burn. Michele, do you want to add anything to that?

Michele Greco — Chief Financial Officer and Chief Administrative Officer

Yes. I would just like to comment a little bit about opex and the use of cash. Last quarter, we did talk about the fact that we were cutting back on expenses. We were still waiting for the FDA. All signs have been pointing to an EUA approval. So we did not pull the plug on all of our commercialization efforts until the last minute when the FDA formally said no. And so one of the things that we had started to do was work with our vendors and push out some of our payment dates. And so we’re still seeing that you’re seeing that in our cash burn. We’ve pushed out payments related to building up the drug supply that the FDA said, we needed to have on hand. And the same thing as we terminated all the vendors related to the commercialization efforts, we had payments due with them.

We worked on pushing those payments out as well. So our spend, our cash burn has been a lot higher now. It’s going to start to come back down in our next quarter. It’s not going all the way down to the level it was a year ago, but it’s going to get much closer. It’s going to — if these go down by half of what we just saw, if not a little bit more. And as Mitch indicated, until we have the cash in place for the confirmatory trial, we’re not going to be going ahead with it. But just to give you a little bit of color on our opex and our cash spend.

Brandon Folkes — Cantor Fitzgerald — Analyst

That’s very helpful. And then one follow-up, if I may. On the Phase III confirmatory trial design for COVID-19, is that designed to meet the NDA standard or the EUA standard here in the U.S. And then similarly ex-U.S., should we think about you continuing to pursue EUA equivalents or for approvals post that Phase III confirmatory trial?

Mitchell Steiner — Chairman, President and Chief Executive Officer

It’s a great question. And so to answer that question, the idea is that this trial — and the FDA also agrees and is guiding us towards this is that — and the quote that I used in my prepared comments was then we would have two well-controlled studies. And if you have two well-controlled studies — successful studies, then the FDA views that as the standard for an NDA. So we will have — we are setting ourselves up in the U.S. to do the EUA and NDA together. And you say, Mitch, why would you do that? Well, the NDA takes time. And even at a fast track designation, you get a six-month review. And in the EUA, they can go much quicker and get you to market. But the standard that we’re going to hit with a successful trial is going to be an NDA standard. So we should be able to easily blow away in EUA standard.

But the EUA standard, let’s we get on the market in weeks, whereas an NDA gets you on the market in six months plus. So we think from a timing standpoint, if the EUA is still available, which we would apply for that and simultaneously we apply for the NDA. Ex-U.S. is kind of the same way, because the approval takes longer, we would take advantage of the shorter route, but also have the longer route in play as well. So it’s still the same way to think of it. So no, we’re not going to be just an EUA standard. With this trial behind us when it’s completed, it would be an NDA standard.

Brandon Folkes — Cantor Fitzgerald — Analyst

All right, thank you very much. I appreciate all the color.

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 call over back to Dr. Mitchell Steiner for any closing remarks.

Mitchell Steiner — Chairman, President and Chief Executive Officer

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

Operator

[Operator Closing Remarks]

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