Veru - Earnings Call - Q1 2025

Executive Summary

• Q1 FY2025 marked a strategic pivot to a pure biopharma model post-FC2 divestiture, with no continuing revenue line presented and operating loss from continuing operations of $10.2M, but net loss per share improved to $0.06 vs $0.08 prior year on a debt extinguishment gain tied to the sale.
• Enobosarm + semaglutide achieved the prespecified primary endpoint: 71% relative reduction in lean mass loss (p=0.002) and strong functional outcomes (54.4% fewer patients with ≥10% stair climb power decline), establishing proof-of-concept for selective fat loss with muscle preservation in older overweight/obese patients on GLP-1 RAs.
• The Independent Data Monitoring Committee recommended continuing the blinded extension study; topline extension results (fat regain prevention post GLP‑1 discontinuation) are expected in calendar Q2 2025, a near-term clinical catalyst.
• Management unveiled a new cardiometabolic program: exploring sabizabulin as a broad anti-inflammatory therapy for CAD, citing favorable drug-drug interaction profile vs colchicine and an existing safety database (266 dosed patients).
• Liquidity stood at $26.6M cash at quarter end; CFO guided cash runway through year-end 2025 but flagged need for additional capital to fund development—an important financing overhang for equity holders.

What Went Well and What Went Wrong

What Went Well

• Enobosarm met the primary endpoint with a 71% relative reduction in lean mass loss and showed dose-dependent fat loss; 3 mg dose preserved >99% of lean mass loss vs placebo (p<0.001), reinforcing dose selection and mechanistic thesis.
• Functional benefit: 54.4% fewer patients with ≥10% stair climb power decline (p=0.0049), supporting clinical meaningfulness beyond body composition.
• Management tone: “proof of concept” to retain lean mass, improve function, and shift weight loss composition to fat—“should translate to a greater quality weight reduction” over longer treatment.

What Went Wrong

• Operating loss from continuing operations widened to $10.2M vs $7.4M YoY, driven by higher R&D as the company invests in clinical development.
• No continuing revenue line presented post-FC2 sale; discontinued operations booked a $7.1M loss (including ~$4.2M loss on sale), highlighting transitional P&L noise from strategic repositioning.
• Financing risk: CFO stated the company is not profitable with negative operating cash flow and will need additional capital to support pipeline execution; cash suffices through year-end but not for the next 15 months under the operating plan.

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to Veru Inc's Investors Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After this morning's discussion, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc's Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Samuel Fisch (Executive Director of Investor Relations and Corporate Communications)

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 of product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and their actual results may differ significantly from those projected, suggested, or included in any forward-looking statements. Risks that may cause actual results or developments are different materially 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 CEO)

Good morning. With me on this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, Chief Financial Officer and Chief Administrative Officer; Michael Purvis, General Counsel and Executive Vice President of Corporate Strategy; and Sam Fisch, the Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q1 Fiscal Year 2025 earnings call. Veru has evolved into a late clinical stage biopharmaceutical company focused on developing medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of two clinical stage new chemical entities, enobosarm and sabizabulin. Enobosarm is an oral selective androgen receptor modulator, SARM, and is being developed as a new generation of drugs that make GLP-1 receptor agonist weight reduction more tissue selective by preserving lean mass, muscle, and physical function and augmenting fat loss in older patients who are overweight and who have obesity.

Sabizabulin is an oral microtubule disruptor, and it's being developed as a broad anti-inflammatory agent to reduce inflammation, to slow the progression, or promote the regression of atherosclerotic cardiovascular disease. On December 30, 2024, the company sold its FDA-approved commercial product, the FC2 female condom. Let's talk about our obesity program. Obesity, as defined by FDA, is a disease of excess body adiposity or fat. The medical objective is to treat obesity by weight reduction drug, or drugs in combination, should be to reduce excess body fat to improve the morbidity and mortality associated with obesity. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who are overweight and have obesity. Unfortunately, the weight loss is tissue non-selective, with loss of both fat and lean mass, which contains muscle.

Of the total weight loss, 20%-50% of the total weight loss reported by patients was attributable to lean mass loss. According to Medicare, 22% of the U.S. population is greater than 60 years of age and represents 70 million people. Based on the Centers for Disease Control and Prevention data, 41.5% of older adults are obese and could benefit from weight reduction medication. Up to 34.4% of patients over the age of 60 with obesity in the United States have what's called sarcopenic obesity. Sarcopenic obese patients are patients who have obesity and low muscle mass at the same time and are potentially at the greatest risk for developing critically low muscle mass when taking the current approved GLP-1 receptor agonist.

We therefore believe there is an urgent unmet need for a new generation of obesity drugs like enobosarm that can prevent the loss of muscle and allow the preferential loss of fat in older patients who are overweight or have obesity receiving GLP-1 receptor agonist therapies for weight reduction. enobosarm is a next-generation drug that makes weight reduction by GLP-1 receptor agonist drugs more tissue selective for fat loss. Let's talk about our phase II-B QUALITY clinical study update. On January 27th, 2025, the company announced positive top-line results from the phase II-B QUALITY clinical study, which is a multi-center, double-blind, placebo-controlled, randomized dose-finding clinical trial designed to evaluate the safety and efficacy of enobosarm 3 mg, enobosarm 6 mg, or placebo as a treatment to augment fat loss and prevent muscle loss in sarcopenic obesity overweight patients over the age of 60 receiving semaglutide/Wegovy.

The study was conducted in 14 clinical sites in the United States. The phase II-B QUALITY study is the first human study to report the effects of a muscle preservation drug candidate on body composition in older patients who have obesity or are overweight receiving a GLP-1 receptor agonist. In a top-line efficacy analysis, the trial met its pre-specified primary endpoint with a statistically significant and clinically meaningful benefit in the preservation of total lean body mass in all patients receiving enobosarm plus semaglutide versus placebo plus semaglutide alone at 16 weeks. There was a 71% relative reduction in lean mass loss and that p-value is 0.002. The enobosarm 3 mg plus semaglutide was the best dose, which was a greater than 99% mean relative reduction in loss of lean mass. That p-value is less than 0.001.

The enobosarm 6 mg semaglutide dose was not much better than the enobosarm 3 mg semaglutide dose on lean mass. As for the secondary clinical endpoints, enobosarm semaglutide treatment resulted in a dose-dependent greater loss of fat mass compared to placebo and semaglutide alone, with the 6 mg dose having a 46% greater relative loss of fat mass compared to placebo plus semaglutide group at 16 weeks. That p-value is 0.014. Although enobosarm semaglutide significantly preserved lean mass, the additional loss of fat mass caused by enobosarm treatment was able to replace the lean mass preserved to allow a similar net mean weight loss with semaglutide at 16 weeks. Accordingly, the tissue composition of the total weight loss shifted to greater and selective loss of fat with enobosarm treatment.

The median percentage of total weight loss in the placebo plus semaglutide group that was due to lean mass was 32%, and the estimated fat loss was 68%. In contrast, in the all enobosarm plus semaglutide group, total weight loss due to lean mass was 9.4% versus estimated fat loss of 90.6%. For enobosarm 3 mg plus semaglutide, it was a 0.9% lean mass loss versus 99.1% fat loss. Therefore, enobosarm plus semaglutide improved changes in body composition, resulting in more selective and greater loss of adiposity than in subjects receiving placebo plus semaglutide. Physical function was measured by the stair climb test. Climbing stairs is an activity of daily living, and the stair climb test measures functional muscle strength, balance, and agility.

Declines in performance measured by stair climb test predicts in older patients higher risk for mortality, mobility disabilities, gait difficulties, hospitalizations, falls, and bone fractures. As a point of reference, stair climb power declines by 1.38% annually with aging, according to Van Roie, and this is a PLOS ONE, 2019 reference. A responders analysis was conducted using a greater than 10% decline in stair climb power as the cutoff was 16 weeks. That cutoff represents an 8-10 year loss of stair climb power due to aging. In our study, the loss of lean mass mattered, as 42.6% of patients on placebo semaglutide had at least a 10% decline in stair climb power physical function at 16 weeks.

This is the first human study to demonstrate that older patients who are overweight or have obesity receiving semaglutide GLP-1 receptor agonists are at higher risk for accelerated loss of lean mass with physical function decline. The all enobosarm semaglutide group had a statistically significant and clinically meaningful 54.4% mean relative reduction in the proportion of subjects that lost at least 10% stair climb power compared to placebo plus semaglutide group. That p-value is 0.0049. In the enobosarm 3 mg semaglutide group, there was a 62.4% relative reduction in the proportion of patients with at least a 10% decline in stair climb power from baseline versus placebo plus semaglutide, and that p-value is 0.0066.

In the enobosarm 6 mg plus semaglutide group, there was a 46.2% relative reduction in the proportion of patients with at least a 10% decline in stair climb power from baseline versus placebo plus semaglutide group, and that p-value is 0.0505. Therefore, enobosarm treatment preserved lean mass muscle, which translated into the reduction in the proportion of patients that had a clinically significant stair climb physical function decline versus subjects receiving semaglutide alone. Enobosarm represents a next-generation of drug that improves GLP-1 receptor agonist therapy to result in tissue selective quality weight reduction. That is, enobosarm plus semaglutide improved changes in body composition, which resulted in more selective and greater loss of adiposity, that's fat, than subjects receiving placebo plus semaglutide alone. We're very excited about the top-line results.

The efficacy data provides a proof of concept that you can retain lean mass, improve physical function, and lose enough fat mass to make up for the lean mass retained to have the same weight loss as semaglutide alone at 16 weeks. Our expectation is that when patients are treated longer with enobosarm plus semaglutide, this selective and greater loss of adiposity should translate to greater quality weight reduction than with semaglutide alone. As for safety, safety data for the phase II-B QUALITY study remains blinded, as the phase II-B extension clinical study portion is ongoing. The unblinded complete safety set will be available after the phase II-B extension study is completed. However, the aggregate blinded safety data have not shown any significant differences compared to previous studies in enobosarm and what is already expected with GLP-1 receptor agonists.

The independent data monitoring committee met this week, February 10th, 2025, to evaluate the unblinded safety data, and they made the recommendation to continue the study as designed. This week they met and made that recommendation. After completing the efficacy dose-finding portion of the phase II-B QUALITY clinical study, the participants continued into the phase II-B extension trial, where all patients have stopped treatment with semaglutide, but they continue taking placebo, enobosarm 3 mg, enobosarm 6 mg in a blinded fashion for 12 weeks. The phase II-B extension trial will evaluate whether enobosarm alone can maintain muscle and prevent fat regain that generally occurs after discontinuing the GLP-1 receptor agonist. The top-line results of the separate blinded phase II-B extension clinical study are expected in the second quarter of calendar 2025.

The company plans to present the full clinical efficacy and safety data set for the phase II-B QUALITY clinical study in future scientific conferences and publications after the phase II-B extension portion of the study is completed and unblinded. As the phase II-B QUALITY study has positive top-line clinical results, we plan to move forward to request an end-of-phase II-B meeting with FDA. We have previously met with FDA to discuss our regulatory path forward as an improvement in body composition drug, and the FDA has provided general advice on phase III design. Based on the successful phase II QUALITY clinical trial, we plan to run a similar study as a phase III study. The duration of treatment will be expected to be 52 weeks, which will allow us to also capture the longer-term benefits of enobosarm improvements on body composition for greater loss of adiposity and weight reduction.

As for the novel enobosarm modified release oral formulation, as you know, Veru is currently developing a novel patentable modified release formulation for enobosarm. We anticipate the actual formulation, pharmacokinetic release profile, and method of manufacturing will be subjects of future patents. The drug product formulation is currently in animal trials and is anticipated to be available for the phase I bioavailability clinical trial during the first half of calendar 2025. The expectation is that the oral enobosarm modified release drug formulation will be utilized for the phase III clinical studies and for commercialization. A new program is the atherosclerosis inflammation program.

Given the recent positive top-line results from the phase II-B QUALITY study, evaluating enobosarm as a cardiometabolic agent that has the potential to preserve muscle, artery, and fat in overweight and obese patients receiving GLP-1 receptor agonist therapy for weight reduction, Veru has evolved its drug development strategy for sabizabulin and is exploring the possibility of the clinical development of sabizabulin, which is a novel oral broad anti-inflammatory agent for the treatment of inflammation in atherosclerotic cardiovascular disease. The company believes there are compelling scientific evidence and rationale to evaluate sabizabulin as a treatment for inflammation associated with atherosclerotic cardiovascular disease. More specifically, atherosclerotic coronary artery disease remains the leading cause of mortality worldwide. Inflammation and high cholesterol jointly contribute to atherosclerotic cardiovascular disease.

It appears that the pathogenesis and progression of coronary artery disease, however, is largely driven by inflammation in response to the atheromatous plaques containing cholesterol in the arterial wall. Even with maximal cholesterol reduction therapies, there remains a major and largely untreated residual inflammation risk. The realization that the combined use of aggressive lipid-lowering and inflammation-inhibiting therapies might be needed to further reduce atherosclerotic risk has sparked the search for anti-inflammatory medicines that can lower the risk of atherosclerotic events in patients with coronary artery disease. An old drug, colchicine, which inhibits tubulin polymerization of microtubules, resulting in broad anti-inflammatory activity, recent randomized controlled trials assessing the role of low-dose colchicine to treat inflammation to reduce major adverse cardiovascular events had promising results, demonstrating a reduction in cardiovascular risk.

Colchicine lowered major adverse cardiovascular events by 31% among those with stable coronary artery disease and by 23% in patients following a recent myocardial infarction. This magnitude of benefit is greater than what has been observed in contemporary trials of lipid-lowering agents, including those with PCSK9 inhibitors. Data from these trials led the FDA just recently, in June of 2024, to approve colchicine as the first anti-inflammatory drug for reducing cardiovascular events in patients with established atherosclerotic cardiovascular disease. However, while colchicine may be the first FDA-approved drug to treat atherosclerotic inflammation, unfortunately, colchicine has significant safety concerns that may limit its expected widespread use. Colchicine has high potential for drug-drug interactions with commonly used cardiovascular drugs, including almost all statins. In contrast, Veru sabizabulin is a new molecular entity, small molecule, that targets the colchicine-binding site on beta-tubulin.

Like colchicine, sabizabulin inhibits microtubule polymerization and has demonstrated the ability to reduce the most important inflammatory mediators that play a role in the initiation and the progression of atherosclerotic coronary artery disease. In contrast to colchicine, sabizabulin has stable pharmacokinetics, low potential for drug-drug interactions, and thus sabizabulin may be administered potentially more safely as a secondary therapy in combination with statin therapy for the reduction of inflammation to slow the progression and promote the regression of atherosclerotic cardiovascular disease. Overall preclinical data from the in vitro and in vivo inflammatory studies show that sabizabulin treatment suppressed all the cytokines and chemokines tested, and in phase II and phase III pulmonary inflammation COVID-19 clinical studies, sabizabulin has demonstrated broad anti-inflammatory activity. The safety database consists of 266 dosed patients from previous sabizabulin clinical development programs.

The company's decision to explore this major cardiometabolic indication was based on the significant unmet medical need to treat inflammation in our atherosclerotic cardiovascular disease, the large global market opportunity, the current clinical and safety sabizabulin database of 266 patients, the high probability of success, given that sabizabulin's drug mechanism of action is similar to colchicine, strong intellectual property position, and is consistent with the company's focus on cardiometabolic diseases. Furthermore, the company believes sabizabulin may be evaluated in a small phase II dose-finding proof of concept study to assess the progression of coronary atherosclerosis in patients using the primary endpoint of coronary plaque volume and composition measured by coronary CT angiography imaging. The company decides to pursue the phase II clinical study. The company plans to partner with the Colorado Prevention Center in Aurora, Colorado, and the Lundquist Institute in Torrance, California.

Veru has had its pre-IND meeting with the FDA Division of Cardiology and Nephrology Center for Drug Evaluation and Research on December 26, 2024. The indication for discussion was the use of sabizabulin to slow progression and promote the regression of atherosclerotic disease in patients with coronary artery disease.

The FDA agreed that there remains an unmet medical need based on disease pathophysiology and concurred with the general design of the small phase II study using coronary CT angiography imaging as a primary endpoint. The FDA also requested the company conduct chronic nonclinical toxicology animal studies to support the chronic use of sabizabulin for this indication. The chronic nonclinical animal studies are expected to be completed, and a new IND for the proposed indication is expected to be submitted by the first half of calendar 2026. Veru currently has sufficient drug substance to supply the proposed phase II clinical study.

Comment on the FC2 female condom sale. On December 30, 2024, we sold our FC2 female condom business to an affiliate of Riva Ridge Capital Management LP, a New York City-based investment management firm for $18 million, subject to adjustment as set forth in the purchase agreement, which Michele Greco will discuss in a few moments. The monetization of the FC2 business allows Veru to be a pure biopharmaceutical company, focusing its additional non-dilutive resources on the execution and development of its promising late-stage clinical pipeline. I will now turn the call over to Michele Greco, CFO and CEO, to discuss the financial highlights. Michele?

Michele Greco (CFO and Chief Administrative Officer)

Thank you, Dr. Steiner. As Dr. Steiner indicated, on December 30, 2024, Veru sold the FC2 female condom business to Clear Future Inc. The purchase price was $18 million in cash, subject to adjustment as set forth in the purchase agreement for the transaction.

Net proceeds from the sale of the FC2 female condom business were approximately $16.4 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK Holdings, LLC, pursuant to a residual royalty agreement for a 2018 financing transaction. The loss on the sale of the FC2 female condom business is approximately $4.2 million, the difference between the estimated net proceeds of $16.4 million and the total carrying value of the FC2 business of $20.6 million. On December 30, 2024, the carrying value of the FC2 female condom business was comprised primarily of deferred income tax assets of $12.3 million, accounts receivable of $4.6 million, and inventory of $3.4 million, partially offset by accrued expenses and other current liabilities of $1.5 million. Liabilities associated with the residual royalty agreement, which totaled $9.9 million at September 30, 2024, were extinguished.

The sale of the FC2 female condom business represents a change in strategy, allowing the company to focus all of its efforts exclusively on drug development and also affects how we present our operations and financial results. In our financial statements, all direct revenues, costs, and expenses related to the FC2 female condom business are classified within the loss from discontinued operations net of tax in the statements of operations. Let's review the results for the three months ended December 31, 2024. Research and development costs increased to $5.7 million from $1.7 million in the prior quarter. The increase is due to $4.3 million in expenses related to the company's enobosarm phase II-B QUALITY clinical study for higher quality weight loss. Selling, general, and administrative expenses were $5.2 million, compared to $6.7 million in the prior quarter.

The decrease is primarily due to a decrease in share-based compensation and a decrease in headcount from 23 to 22. We recognize a gain on the sale of ENTADFI assets of $695,000, compared to a gain of $918,000 in the prior quarter, which is based on non-refundable consideration received related to promissory notes due to Veru. In conjunction with the sale of the FC2 female condom business, we recorded a gain on the extinguishment of debt of $8.6 million related to the termination of the residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million, which included an embedded derivative for the change of control provision at fair value of $4.7 million.

The bottom line result for continuing operations was a net loss of $1.8 million, or $0.01 per diluted common share, compared to a net loss of $7.7 million, or $0.08 per diluted common share in the prior year's quarter. Net loss from discontinued operations net of taxes related to the FC2 business was $7.1 million, or $0.05 per diluted common share, including the $4.2 million loss on the sale of the FC2 business, compared to a net loss of $609,000, or $0.01 per diluted common share in the prior quarter.

The increase in the net loss from discontinued operations of $6.5 million is due to the loss on the sale of the FC2 female condom business and the increase in the loss from the change in fair value of derivative liabilities of $3.1 million, partially offset by an increase in gross profit of $400,000 and a decrease in selling, general, and administrative expenses of $500,000. Now looking at the balance sheet, as of December 31, 2024, our cash, cash equivalents, and restricted cash balance was $26.6 million, compared to $24.9 million as of September 30, 2024. At December 31, 2024, there was $354,000 of restricted cash related to the sale of the FC2 female condom business. Our net working capital was $22 million on December 31, 2024, compared to $23.4 million on September 30, 2024. The company is not profitable and has negative cash flow from operations.

We will need additional capital to support our drug development candidates. Based upon the company's current operating plan, our cash, as of the issuance date of these financial statements, is not sufficient for the company to fund operations for the next 15 months. However, we currently have sufficient capital to take the company to the end of the calendar year, which is well beyond the data readout for enobosarm phase II-B QUALITY extension study. During the three months ended December 31, 2024, we used cash of $11.3 million for operating activities, compared with $6 million used for operating activities in the prior period. We generated cash from investing activities of $17.2 million for the three months ended December 31, 2024, while there was none generated in the prior period.

The cash generated relates to proceeds from the sale of the FC2 female condom business of $16.2 million, proceeds of $700,000 from the sale of the ENTADFI assets, and proceeds of $400,000 from the sale of Onconetix securities. We used cash in financing activities for the three months ended December 31, 2024, of $4.2 million related to the change of control payment to SWK pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 female condom business. In the prior period, we generated $37 million from financing activities. On December 18, 2023, we completed an underwritten public offering of our common stock, which included the exercise and full of the underwriter's option to purchase additional shares. Net proceeds to the company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs incurred by the company.

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

Mitchell Steiner (Chairman, President, and CEO)

Thank you, Michele. We have gone over the company progress, clinical progress, and financial highlights. With that, I'll now open the call to questions, Operator.

Operator (participant)

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. Once again, that is star and then one to rejoin the question queue. We will pause momentarily to assemble our roster.

Our first question today will come from William Wood of B. Riley. Please go ahead.

William Wood (Managing Director of Institutional Sales)

Hi. Thanks to everybody. Appreciate you taking questions. Obviously, congratulations on the very nice quarter and the results. Thank you. I guess maybe first off, if I could, for the extension trial, I'm just kind of curious what the rollover of patients from the induction to the maintenance portion is, and maybe if you could provide any color on why patients may be discontinuing, if so.

Mitchell Steiner (Chairman, President, and CEO)

Yeah. I'm going to ask Dr. Gary Barnette, our Chief Scientific Officer, to answer the question of basically asking for the dropout rate or who didn't go on to the extension study. He'll answer that for you. He'll tell you the number one reason why they dropped out. Gary?

Gary Barnette (Chief Scientific Officer)

Yeah. Hello. As Mitchell said previously, the dropout rate in the study is about 13%, and it continues to be that. About 13% of the randomized subjects did not reach the extension, etc. The most common reason for dropping out of the study or discontinuing the study is GI side effects, which, as we all know, are associated with GLP-1 RAs themselves. It is relatively expected what we're seeing.

William Wood (Managing Director of Institutional Sales)

I assume the potential difference between placebo versus treatment isn't disclosed yet, and we'll get that information more at the end?

Gary Barnette (Chief Scientific Officer)

That is correct. That will be in the final analysis of the study, especially the safety status. Right now remains blinded.

William Wood (Managing Director of Institutional Sales)

Right. One quick last one. You're now saying second quarter for the induction—I'm sorry, for the maintenance readout. I'm just curious. I believe you were saying sort of more April, maybe even early May. Has this been now pushed out a little bit more, or are you just—or relatively no changes here?

Mitchell Steiner (Chairman, President, and CEO)

Relatively no changes. Yeah. We're guiding second quarter, but nothing's changed. I mean, 12 weeks of—12 weeks or 12—we know when the last patient went out in December, we reported exactly as we told you we're going to do for the phase II-B QUALITY. And 12 weeks or 12 weeks can't shorten that, and you can't make that longer. The time span that we need after the 12 weeks when the last patient comes out of the study is just literally scrubbing the data and getting the tables, listing the figures, and that kind of stuff.

William Wood (Managing Director of Institutional Sales)

Yep. That makes sense. I appreciate you taking our questions. I'll hop back in queue.

Operator (participant)

Thank you. Our next question today will come from Gary Nachman of Raymond James. Please go ahead. Hey, guys.

Denis Reznik (Senior Equity Research Associate)

Good morning. This is Denis Reznick on for Gary Nachman. Just a couple of questions from us. Sure. First, talk a little bit more about your thoughts going into the extension trial data in the second quarter. What are you hoping to show, and what is the bar for success, particularly on the weight regain following the GLP-1 discontinuation? Can you remind us what your assumptions are for the placebo arm? What are your expectations for the enobosarm arm? I have another follow-up.

Mitchell Steiner (Chairman, President, and CEO)

Yeah. Yeah. The way to think of the maintenance study is no one has actually—let's say it a different way. It is an exploratory extension where we are trying to show that enobosarm has the ability to hold on to muscle. Remember, the working hypothesis is that muscle—if you hold on to muscle, you should not see the rebound weight gain, which is fat.

Because remember, the muscle's not the issue. The muscle's depleted. It's all about fat. The regain that patients get, it's all fat. The way to think of the extension for just 12 weeks, it's not the weight as much as it's the fat. Fat tracks weight. It's purely an adiposity play. If enobosarm holds muscle, you have more muscle in that 12-week period of time, so you can burn more fat. Enobosarm itself, as you saw the 6 mg group, had a 46% further reduction in fat compared to semaglutide alone. It's a fat burner. What we want to show—and this is what people were afraid of—is the rebound weight gain is all fat. We were focusing most of our thinking around, can we stop that rebound fat regain?

Maybe even show even more fat loss because enobosarm burns fat as it goes forward. I am going to have Gary Barnette, our Chief Scientific Officer, add a few comments to that.

Gary Barnette (Chief Scientific Officer)

Yeah. As you know, when you take away the GLP-1, appetite returns. We have seen that in the studies with the GLP-1s. We do expect weight gain, and we specifically expect fat gain in the placebo group. It is going to be interesting to see exactly how enobosarm can minimize that fat regain while maintaining the muscles or the lean mass in this case. That is what we expect to see. Obviously, the data will bear out exactly, and we are looking forward to that result here coming in the second quarter.

Mitchell Steiner (Chairman, President, and CEO)

Yeah. If we can show—we can blunt the fat and potentially blunt the weight regain. If you focus on fat and hold muscles constant, that's what you're gaining weight with, the fat. I think the focus is on fat, fat, fat because we're using body composition as our endpoint.

Denis Reznik (Senior Equity Research Associate)

Okay. Great. That was super helpful. Just another couple of quick follow-ups.

Mitchell Steiner (Chairman, President, and CEO)

Sure. Sure.

Denis Reznik (Senior Equity Research Associate)

For the safety monitoring committee that met earlier this week, can you talk specifically about what kind of patient safety data they looked at, how far out it went into? Now that you just had a little bit more time with the 16-week data, are you finding anything notable within the patient's size or the patient background characteristics that is abnormal that should be called out? Thanks so much, guys.

Mitchell Steiner (Chairman, President, and CEO)

Yeah. Yeah. Good question. To answer the second question, I'll have Gary answer the first question on what kinds of data that the independent data monitoring committee see. In terms of your question, remember, we only got top-line data. There's not much additional stuff to talk about. I mean, the baseline characteristics with group characteristics. We don't have individual data. The top-line data, we're going to get the full data set, the individual data set, and the study is unblinded. At that point, we can go through and look and see. It's not so much what's abnormal and what's normal. I mean, big questions for me are going to be which groups did the best, which groups did the worst. How do you think about that as you go forward with your phase III program? What additional information you can learn about gender and things of that sort.

I think we're going to get a lot more information we just don't have. For top-line data, because it's kind of think of it as an interim look, and then the study continues, we've got a very set set of data. That makes sense. There's not much more to say at this point, except that we're extremely excited about the outcome because it answered the questions we wanted to answer. Remember, enobosarm, in five other studies, it's a 3 mg dose particularly because that's what bridged us to this study. We never studied above 3 mg in muscle studies. We've done it in multiple-centered dose studies. And 3 mg was our bridge. It worked every time. Guess what? It worked again. It's unambiguous. We definitely can improve and stop the loss of lean mass.

What was also exciting is also confirmed the ability to burn fat in a patient population on a GLP-1. That was exciting. Third, you were able to keep the lean mass, get rid of more fat to a point that the 3 mg, 99% of the total weight you lost was fat, less than 1% was mass, and you still had the same weight loss at 16 weeks. Finally, we showed that physical function matters in these patients and that we were able to show there's a problem. That 42.6% of patients on semaglutide alone at 16 weeks had greater than 10% decline in stair climb, which is like 8-10 years of your aging loss of stair climb. I mean, to me, that's a home run.

That really helps us think very positively about our program going forward because it's better to fix a problem than try to have a better HbA1c or a better insulin resistance. We expect to see all of that. Better, better, meaning a GLP-1 does a great job with that, so you have to make it better than a GLP-1. Whereas a GLP-1 does affect function in a negative way, we make it better. In terms of the data for the IDMC, Gary, what does the IDMC see?

Gary Barnette (Chief Scientific Officer)

Yeah. They see individual patient data, individual safety data, all the way down again to the patient level. They see it broken out within the traditional tables. They also see the dose or the randomization scheme. The data that this particular IDMC saw was up to a cutoff of December 20, 2024, which included all subjects had passed through or completed the day 112 visit, and then some additional data in the extension was included in this review. They review down to the individual patients with the patient demographics and background and medical history and con meds, and they get all that information and also including their treatment assignments.

Denis Reznik (Senior Equity Research Associate)

That's super helpful. Thanks, guys, and congrats on all the progress.

Operator (participant)

Great. Thank you. The next question will come from Dennis Ding of Jefferies. Please go ahead.

Anthea Li (Equity Research Associate of Biotechnology)

Good morning. This is Anthea on for Dennis. Just a couple of questions from us on enobosarm. Given the oral formulation that you're working on, the new one, is there a potential for it to be combined with oral GLP-1s as a fixed-dose combo?

I'm curious if you've looked into that and if you could pursue a partnership on that. And then on sabizabulin, colchicine I believe works through hsCRP reduction. So can you just remind us what % reduction they get and what sabizabulin does? And given your current cash position, your confidence that phase II would be feasible. Thank you.

Mitchell Steiner (Chairman, President, and CEO)

All right. I have a clarification on your second question. What did you say colchicine's mechanism was?

Anthea Li (Equity Research Associate of Biotechnology)

hsCRP reduction, C-reactive protein.

Mitchell Steiner (Chairman, President, and CEO)

Oh, I got you. You're talking about, I got you, got you, got you. That's the stance of the CRP. CRP is a nonspecific inflammatory protein. Yeah, yeah. Really, it's not the nonspecific inflammatory protein, it is a result of broad anti-inflammatory activity. Yeah. Got it. Got it. Got it. Got it. Okay.

The first question about oral formulation. In the oral formulation, the expectation is, and we know from enobosarm, that enobosarm is a very nice oral product, highly bioavailable. Yes, we're working on new oral formulations and modifiable leaves, but we can be easily combined with an oral GLP-1. Yes, that has come up with some of our discussions because people feel that a fixed combination dose makes the most sense, particularly if you ask the question, what are we trying to do? If you think about a GLP-1, it creates a hypocaloric state. The hypocaloric state allows your body to non-selectively lose fat and muscle. It's just non-selective, a low-calorie state. In comes enobosarm.

Enobosarm telling muscle to steal the calories and take it from fat allows you to hold on to muscle in that low-calorie state and burn more fat. If you want to make the GLP-1 better, you'd better add enobosarm. That, to me, is the definition of a new generation obesity product. The answer is yes because we're oral. If you look at our competition, our competition is IV or sub-Q. The only other one that was oral was no longer pursuing activities. The other ones, IV or sub-Q. Function has been, physical function has been very difficult to show. We've shown over and over physical function. Again, we hit on physical function in this study.

If you want to do a fixed combination and make the drug, make the GLP-1 more tissue-selective and have the functional benefit, I think it would be very attractive. Yes, it's come up. As it relates to sabizabulin and colchicine, I'm telling you, in all our assays that we've done preclinically, colchicine is used as our positive control. Everything colchicine does, sabizabulin does. What's different is sabizabulin is a different kind of molecule, so it's not a substrate for P-glycoprotein or 3A4. That plays a bigger role in the drug-drug interactions that can happen. Colchicine, as you know, has a very low therapeutic index, narrow therapeutic index. If you have a drug-drug interaction, you can push colchicine levels to toxic levels. That's one of the reasons why it's not picked up widespread use.

Yes, CRP, high-sensitive CRP, is a measurement that you would use peripherally in these patients, which sabizabulin should easily do the same thing given that all the cytokines and chemokines that we've measured have statistically significant reductions both in vivo and in vitro. So we measure the actual cytokines that cause C-reactive protein to go up, C-reactive protein against the CRP, high-sensitive CRP. With that said, because we don't have the drug-drug interactions, and this is the excitement around sabizabulin, is that one of the things that people are thinking about is you want to take patients with atherosclerotic disease and suppress the lipids as much as possible. It's all about suppressing LDL. Once you suppress LDL, there's still a lot of risk left to a point that heart disease, in particular ischemic MIs, is still the number one killer. There's still residual risk.

They believe that inflammation is the reason for that. That is why colchicine got approved. The problem is you cannot get colchicine with a lipid-lowering drug because of drug-drug interactions with statins. Imagine sabizabulin that you do not have to convince anybody that we have the same mechanism as colchicine from an inflammatory standpoint, but it becomes a safety play. I am a urologist, and this reminds me of the days when abiraterone and ketoconazole were being developed. Ketoconazole is an old drug that has been shown to reduce castrate males. They were given to patients with advanced prostate cancer, but it had side effects. Abiraterone came in and had a better safety profile, and it is not generic, and a pharma company owned it and had long enough IP, became a blockbuster.

It is okay sometimes to come in and not be innovative and be the first anti-inflammatory agent for coronary artery disease, but to be one that has the same mechanism of action but a different safety profile and oral and proprietary makes it very, very attractive, meaning that the high probability of success with the efficacy, and it will play out. Especially if you can do a small study like we are thinking about, the phase II where plaque measurements by CT coronary angiography can give you the information you need to move forward. That is what we are excited about. As it relates to cash, as Michele said in her comments, we have enough cash elasticity at the end of the year, the end of the calendar year. That is the end of December.

Anthea Li (Equity Research Associate of Biotechnology)

Okay. Sorry. If I could ask a follow-up on that.

Mitchell Steiner (Chairman, President, and CEO)

Sure.

Anthea Li (Equity Research Associate of Biotechnology)

Is there a numerical hsCRP reduction that's been measured for sabizabulin, or?

Mitchell Steiner (Chairman, President, and CEO)

No, no, no, no. We've not taken patients with coronary artery disease and treated a patient to see what happens to CRP. What we have done is you got it. You got it.

Anthea Li (Equity Research Associate of Biotechnology)

Yeah. If I could also ask.

Mitchell Steiner (Chairman, President, and CEO)

Yes, yes.

Anthea Li (Equity Research Associate of Biotechnology)

How are you thinking about IL-6 and their 70-90% hsCRP reduction profile in ASCVD?

Mitchell Steiner (Chairman, President, and CEO)

Yeah. IL-6, as you know, is not oral, right? Right. It was injectable. Our expectation is that IL-6 is one of the many cytokines that's responsible for the inflammation related to coronary artery disease. This reminds us of the same battle we had with COVID, IL-6 versus sabizabulin. Sabizabulin did a much better job. We had a reduction of 50%, and these other agents were more like 5%. I do think that inflammation is not one cytokine. If you have a pan-cytokine approach, which is what colchicine does and what sabizabulin does, that should be much more effective than knocking out a single cytokine in this particular disease.

Anthea Li (Equity Research Associate of Biotechnology)

Got it. That's really helpful. Thank you so much.

Operator (participant)

Again, if you have a question, please press star then one. Our next question today will come from Leland Gershell of Oppenheimer. Please go ahead.

Leland Gershell (Managing Director)

Hey, good morning. Thanks for the updates. Mitch, as you've been studying enobosarm in the older population, obviously those at risk of sarcopenic obesity, and seeing the data you have, obviously very encouraging.

Just wondering if your thoughts as you take the compound forward into registration, if you'll include a means to study it maybe in a broader population of people who are not as old, given that there is also maybe risk of muscle loss during weight loss. Thank you.

Mitchell Steiner (Chairman, President, and CEO)

Good question. First, the statistics. It turns out, as I mentioned, that 22% of the population, based on Medicare, over the age of 60, 42% of those patients could benefit from a weight reduction drug because they're overweight or obese. A third of them have true sarcopenic obesity. That's a big, big market, okay? Big market. Now, the question is, how about outside that market? It turns out, if you look at just forget age, the data shows that 31 million Americans have sarcopenia and are obese. That presumably includes patients who are younger.

The idea is, from a clinical benefit-risk profile, mostly is to treat patients that have a problem. The older patients are more likely because, as you know, we did not screen for sarcopenia. We just took over the age of 60. Still, 42.6% of those patients had a greater than 10% decline in GLP-1. This is actually showing you with stair climb test that patients were in trouble, and people were talking about it. If you do a six-minute walk test and endurance test, that is different. If you do a test that is focusing on leg muscles and muscles that are important for what they call explosive force, getting out of a chair, getting out of a tub, going upstairs, that is different. Those are the muscle types, it is called type 2 muscle, that goes away with age.

When you treat with enobosarm or a testosterone-type product, you build back the type 2 muscle. That is why you see function. There is a difference between taking an endurance runner and an older patient. I mean, the endurance runner is not going to be able to lift heavy weights like a bodybuilder, but they can certainly run 6 mi or 10 mi or whatever. We focus primarily on the activities of daily living that matter to patients. With that said, the FDA has told us that a drug of this nature would have benefit in younger patients as well. If that is the case, Gary Barnette, who is on the call, has a strategy to address that in our phase III. Gary, do you want to talk about that?

Gary Barnette (Chief Scientific Officer)

Yeah. Obviously, if the FDA asked for a broader age population and if we deem it appropriate, what I would do is I would design a study with statistical power on efficacy on the older population and include the younger population as observational and maybe have an overall analysis for every randomized subject, but do a subgroup as the primary, meaning older, over 60, the group we just ran, with the additional efficacy and safety data generated in the younger population to support broadening the label if appropriate.

Leland Gershell (Managing Director)

Great. Thank you. Just a follow-up question. Just wanted to confirm that when Veru does report the extension data from the second part of the QUALITY study coming up in a few months, if you'll also be including the full complement of the safety observations from both parts of the study. Thanks.

Mitchell Steiner (Chairman, President, and CEO)

Yeah. To make sure I understand the question, when the study is unblinded and we're reporting the phase II-B extension study, will we be reporting the full safety data set? Is that the question?

Leland Gershell (Managing Director)

Yes. That's right. Yep.

Mitchell Steiner (Chairman, President, and CEO)

Yes. The answer is yes.

Leland Gershell (Managing Director)

Okay. Great. Thanks for taking the questions.

Operator (participant)

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 CEO)

Great. Thank you. I appreciate everyone who joined our call today. I look forward to updating you on our progress and excited about the prospects of enobosarm, not only in patients in the phase II-B study, but also the extension study. Again, thank you all for being on the call.

Operator (participant)

The digital replay of the conference call will be available beginning approximately noon Eastern Time today, February 13, by dialing 1-877-344-7529 in the U.S. and 1-412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 3764668. Please record your name and company when joining. The conference is now concluded. Thank you for attending today's discussion.