Veru (NASDAQ:VERU) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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Summary

Veru is focusing on developing innovative medicines for cardiometabolic and inflammatory diseases, specifically targeting older patients with obesity and sarcopenic obesity.

The company completed a positive Phase 2b clinical trial showing that combining Anovasarm with GLP1 receptor agonists leads to greater fat loss and preserves lean mass and physical function.

Financial highlights for the quarter included a decrease in R&D and administrative expenses, resulting in a net loss of $3.1 million compared to a $7.9 million loss in the previous year.

The company completed a public offering, raising approximately $23.4 million, which provides sufficient funds to support operations beyond the interim analysis of the Phase IIb clinical study.

Veru targets a large market opportunity with over 1 billion people globally having obesity and significant proportions of older adults at risk for sarcopenic obesity.

Full Transcript

OPERATOR

Good morning ladies and gentlemen and welcome to Veru Inc. Investors Conference Call. All participants will be in a 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 Fish, Veru Inc. Executive Director, Investors Relations and Corporate Communications. Please go ahead.

Sam Fish (Executive Director, 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 or 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 10Q and 10K 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's chairman, CEO and president. Good Morning. With me on this Morning's call are Dr. Gary Barnett, the Chief Scientific Officer, Michelle Greco, the Chief Financial Officer and Chief Administrative Officer Phil Greenberg, General Counsel and Sam Fish, the Executive Director of Investor Relations and Corporate Communications. Thank you for joining our second quarter fiscal year 2026 earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing innovative medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of two novel next generation drug that when combined with a GLP-1 receptor agonist makes weight reduction more tissue selective for fat loss and preservation of lean mass and physical function which is intended to lead to greater weight loss compared to a GLP-1 receptor agonist treatment alone with a focus on older patients with obesity plaque inflammation to slow the progression or promote the regression of atherosclerotic cardiovascular disease. This morning we'll focus on an update of the clinical development progress of the NovoSarm and in our obesity program. We will also provide financial Highlights for Fiscal 2026 Second Quarter Ended March 31, 2026 GLP-1 receptor agonists have been shown to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, this weight loss is tissue nonselective with the significant indiscriminate loss of both lean mass and fat mass. Of the total weight loss up to 50% is attributable to lean mass although GLP-1 receptor agonist treatments have resulted in substantial weight loss for many patients, the strategy for the next generation of obesity drugs should be a combination therapy with a GLP-1 receptor agonist to cause patients to only lose fat while preserving lean mass and physical function and bone mineral density for the highest quality weight reduction. Now Vero has focused the clinical development of the NovoSorm for weight loss on older patients who have obesity. More specifically, the focus has been on older patients who have sarcopenic obesity which means they have both obesity and low muscle mass and are potentially at the greatest risk for reaching a critically low muscle mass which which may lead to physical function decline when taking the currently approved GLP-1 receptor agonist. According to the European Working Group on Sarcopenia in Older People too, sarcopenia is defined by reduced muscle strength and function as the primary diagnostic criterion confirmed by low muscle quantity and quality, while the impaired physical performance reflects disease severity. As you can see, the working group emphasis is on physical strength and function. Thus muscle loss alone does not define sarcopenia. As a consequence, we have chosen to also objectively evaluate and measure physical function by stair climb test in the phase 2 quality clinical study. Vero's completed phase 2b quality clinical trial was a multicenter double blind placebo controlled randomized those finding clinical trial designed to evaluate safety and efficacy of anovosarm 3mg inovosarm 6mg or placebo as a treatment to augment fat loss and prevent muscle loss in 168 older patients as greater than or equal to 60 years of age receiving semaglutide wegovy for weight reduction after the efficacy dose finding active weight loss portion of the phase 2b clinical trial was completed at 16 weeks. Participants continued into a phase IIb maintenance extension study where all patients discontinued semaglutide treatment but continue receiving either placebo novosome 3mg inovosome 6mg as monotherapy in a double blind fashion for 12 weeks. Phase 2b quality clinical trial was a positive study that demonstrated that preserving lean mass and physical function with a Noble SERM plus semaclotide led to greater fat loss. As I mentioned, Veru focused on the impact of weight loss on physical function, not just lean mass in older patients with obesity. In the Phase IIb quality clinical study, physical function was measured by the stair climb test which is a common activity of daily living declines in physical function as measured by cessations and mortality. It has been reported that stereocline power declines by 1.38% annually with aging. Now it should be noted that the phase 2b quality clinical study is the first human study to demonstrate that the weight reduction in older patients who have obesity receiving a GLP-1 receptor agonist puts them at high risk for accelerated loss of lean mass with physical function decline. A prespecified responders analysis was conducted using a greater than 10% decline in stereocline power as a cutoff at 16 weeks, which is a significant loss as it represents loss of stair climb power that would naturally occur with aging over a seven to eight year period in older patients. In a phase IIb quality study, the loss of lean mass mattered as 44.3% of patients on placebo placemaglutide group had at least a 10% decline in stair climb power physical function at 16 weeks. And what happened to the study group that received anovasarm in combination with the GLP-1 receptor agonist? In the phase 2b quality clinical study, innovasarm treatment preserved lean mass which translated into a reduction in the proportion portion of patients. The Inovasarm 3 milligram plus somaglutide group had a statistically significant and clinically meaningful 59.8% relative reduction in proportion of patients that lost at least 10% stair climb power compared to the placebo plus semaglutide group and that P value is 0.0006. In the anovasome 6 milligram group plus semaglutide there was a 44.1% relative reduction in the port portion of patients with at least a 10% decline in stereocline power from baseline versus placebo plus semaglutide group and that P value is 0.051. Based on the results of this short term study, we believe there's an urgent unmet need for a drug that prevents the loss of muscle and physical function as well as augments the loss of fat for greater weight loss and at risk older patients with sarcopenic obesity receiving a GLP-1 receptor agonist for weight reduction. The next important question is can you potentially have greater weight loss by adding a novus arm to a GLP-1 receptor agonist treatment? First of all, as the phase 2b quality clinical studies demonstrated, patients receiving a novus arm had greater fat loss plus if you're able to observe muscle and physical function with ANOVA SERM While taking a GLP-1 receptor agonist, we would expect that more calories will be burned which is expected to result in greater weight loss compared to GLP-1 receptor agonists alone, especially in a longer study. Now let's turn to the current progress of our phase 2b plateau clinical study. A common clinical and therapeutic challenge with GLP-1 receptor agonist treatments is that 88% of patients after one year on a GLP-1 receptor agonist hit a weight loss plateau where they stop losing additional weight. Based on the Sermont one study conducted by Eli Lilly, one explanation might be that the loss of muscle caused by non selective tissue weight loss may reach a point that now stimulates the appetite in patients receiving a GLP-1 receptor agonist so they consume more calories which in turn may cause patients to stop losing weight and hit that weight loss plateau again. Novusart has been shown in clinical studies to directly burn fat and to preserve muscle to increase physical function and burn more calories. Thus, by preserving muscle, appetite stays suppressed while more calories are burned which can help to break through the weight loss plateau leading to incremental weight reduction. Now let's turn to the Design of the Phase 2b Plateau Clinical Study which is a double blind placebo controlled study to evaluate the effect of anovasome 3mg on total body mass, excuse me, total body weight, fat mass, lean mass, physical function, bone mineral density and safety in approximately 200 older patients age greater than or equal to 65 who have obesity, BMI greater or equal to 35 and are initiating semaglutide GOVI GLP-1 receptor agonist treatment for weight reduction. The primary efficacy endpoint of the study is a percent change of baseline in total body weight at 68 weeks. Interim analysis will be conducted at 36 weeks to assess the percent change in baseline lean body mass and total fat mass as measured by DEXA scale. The key secondary endpoints for the overall study are total fat, total lean mass, physical function again measured by stair climb test, mobility disability assessment, bone mineral density and patient reported outcome questionnaires for physical function, HbA1c and insulin resistance. The objective of the Phase 2b Plateau clinical trial is to focus on the effects of longer term GLP-1 receptor agonist treatment in older patients who have obesity. The phase 2b plateau clinical study will also assess the ability of inovasone to break through the weight loss plateau observed in patients receiving the GLP-1 receptor agonist treatment to achieve clinically meaningful incremental weight reduction as well as to preserve muscle mass and physical function by 68 weeks. The interim analysis of the clinical study study will occur when all patients have been treated for 36 weeks. Now, semaglutide was selected as a GLP-1 receptor agonist for the phase 2 but study to build on Viru's previous clinical experience using inovasarm in combination with semaglutide in the positive phase 2 quality clinical study. Further, the clinical data from the Phase IIb plateau clinical study using injectable semaglutide may support the use of oral semaglutide and oral Inovisarm fixed dose combination in future phase 3 clinical studies. Contrast, there are no approved oral formulations with tirzepatide. On March 9, 2026 we announced the enrollment of the first patient into Phase 2b plateau clinical study. I'm very pleased with the current enrollment rate and we're on track for results of the 36 interim analysis which is expected in Q1 calendar year 2027. Now Vero is targeting the at-risk older patients with sarcopenic obesity. So how large is that market? How about the total market for obesity? The Wall Street Journal reported last week that there are more than 1 billion people in the world with obesity. The World Health Organization estimates that there are two and a half billion adults globally who are either overweight or obese, with the rate of adult obesity more than doubling since 1990. And right now there are only two companies, Lilly and Novo Nordisk, that together are treating less than 2% of them. How about the total market for sarcopenic obesity? The overall prevalence of obesity and low muscle mass is almost 30 million adults in the US. How about the total market of patients who are 65 years and older with obesity? The prevalence of obesity in patients who are 65 years and older is 41.5% among the 47.4 million patients enrolled in Medicare Part D plans. That's about 20 million potential patients. As you can see. Taken together, the market opportunity for Inovus arm in combination of GLP-1 receptor agonists in older patients with sarcopenic obesity is very large. I will now turn the call over to Michelle Greco, CFO Cao, to discuss the financial highlights.

Michelle Greco (Chief Financial Officer and Chief Administrative Officer)

Michelle thank you, Dr. Steiner. Let's review the results for the three months ended March 31, 2026. Research and development costs decreased to $3.1 million from $3.9 million in the prior quarter. The decrease is primarily due to wind down of the phase 2b quality clinical study for NovoSarm as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. Personnel costs also decreased primarily due to the reduced share based compensation expense. Selling general and Administrative expenses were $4.1 million compared to $5.2 million in the prior quarter. The decrease is primarily due to a decrease in the share based compensation expense. We recognize the gain on the sale of enthe assets of $974,000 in the prior year's quarter which is based on non refundable consideration received related to promissory notes previously due to verus. As the promissory notes are now settled, no additional gain is expected in future periods. During the prior fiscal year, the Company entered into a settlement agreement with Oncogenetics which included payment of Series D preferred stock and warrants. During the current period, the increase in fair value of the equity securities received was $3.9 million as a result of the realized gain from the conversion of the preferred stock and then sale of the underlying common stock and change in the fair value of the remaining preferred stock and warrants. Favorable anti-dilution provisions triggered by the Oncogenetics reverse stock split during the period contributed to the increase in the fair value. The bottom line result for continuing operations was a Net loss of $3.1 million or $0.13 per diluted common share compared to a Net loss of $7.9 million or $0.54 per diluted common share in the prior year's quarter. During the quarter, the Company recognized an additional gain on sale of the FC2 business of $351,000 for the net proceeds received from Clear Future in the settlement of the dispute related to a pre closing tax receivable and liability which is included as income from discontinued operations in the prior year period. Veru sold the FC2 Female Condom business to Clear Future in our financial statements, all direct revenues, cost and expenses related to the FC2 Female Condom business are classified within Loss from Discontinued Operations Net of Tax in the Statement of Operations, net loss was $2.7 million or $0.12 per diluted common share compared to a Net loss of $7.9 million or $0.54 per diluted common share in the prior quarter. Now turning to the Results for the six months ended March 31, 2026, research and development costs decreased to $4.5 million from $9.6 million in the prior period. The decrease is primarily due to a wind down of the phase 2b quality clinical study for Novaserm as a treatment to augment fat loss and prevent muscle loss which was completed during fiscal 2025. Personnel costs also decreased primarily due to the reduced share based compensation expense. Selling general Administrative expenses were $8.2 million compared to $10.4 million in the prior period. The decrease is primarily due to a decrease in the share based compensation expense. We recognize the gain on the sale of the INDAF assets of $1.7 million in the prior period in conjunction with the sale of the FC2 Female Condom business during the prior fiscal year. We recorded a gain on extinguishment of debt of $8.6 million related to the termination of the SWK holdings residual royalty agreement. During the current period, the Company recorded a gain of $3.8 million from the increase in the fair value of equity securities compared to a loss from the decrease in fair value of Equity securities of $0.3 million in the prior period. The increase in fair value of the equity securities during the current year period is the result of a realized gain from the conversion of the Oncogenetics preferred stock stock and sale of the underlying common stock and change in fair value of the remaining preferred stock and warrants. Favorable anti-dilution provisions triggered by the Oncogenetics reverse stock split during the period contributed to the increase in fair value. The bottom line results for continuing operations was a Net loss of $8.4 million or $0.39 per diluted common share compared to a Net loss of $9.6 million or $0.66 per diluted common share in the prior period. The net loss was $8.1 million or $0.38 per diluted common share compared to a Net loss of $16.8 million or $1.15 per diluted common share in the prior period. Looking at the balance sheet as of March 31, 2026, our cash cash equivalents and restricted cash balance was $27.6 million compared to $15.8 million as of September 30, 2025. On both March 31, 2026 and September 30, 2025, there was $0.1 million of restricted cash related to the sale of the FC2 Female Condom business. Our net working capital was $28 million on March 31, 2026 compared to $11.1 million on September 30, 2025. On October 31, 2025, Veru completed an underwritten public offering of 1.4 million shares of our common stock, pre funded warrants to purchase up to 7 million shares of our common stock, accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per share of common stock and the accompanying Series A and Series B warrants. Net proceeds to the Company from this offering were approximately $23.4 million after deducting underwriting, discounts and commissions and costs paid by the Company. The Company is not profitable and has had negative cash flows from operations based on the Company's current operating plan. Our cash as of the issuance date of these financial statements is expected to be sufficient for the Company to fund operations beyond the interim analysis in the Phase IIb clinical study that would be performed to assess percent change from baseline in lean body mass and fat mass as measured by DEXA Scan. During the 6 months ended March 31, 2026, we used cash of $15.1 million for operating activities compared with $19.1 million used for operating activities in the prior period. We generated cash from investing activities of $3.5 million for the six months ended March 31, 2026 compared to $18.4 million in the prior period. The cash generated during the current period represents proceeds from the sale of the onconnects equity securities of $3.2 million and $0.3 million for the settlement of a dispute related to pre closing tax matters related to the sale of the FC2 business. The cash generated in the prior period relates to proceeds from the sale of the FC2 Female Condom business of $16.3 million, proceeds of $1.7 million from the sale of enthe assets and proceeds of $393,000 from the sale of equity securities. Net proceeds provided by financing activities for the six months ended March 31, 2026 was $23.4 million which were the proceeds from the sale of common stock and warrants in an underwritten public offering net of commissions and costs. We used cash and financing activities for the six months ended March 31, 2025 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. I now like to turn the call back to Dr. Steiner. Dr. Steiner.

Dr. Mitchell Steiner (Chairman, CEO and President)

Thank you, Michelle. With that I'll now open the call to questions. Operator

OPERATOR

Ladies and gentlemen, at this time we will begin the question and answer session. To 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's star, then one to rejoin the question queue. We will pause momentarily to assemble our roster. The first question today comes from Leland Gershel with Oppenheimer. Please go ahead.

Leland Gershel

Hey, good morning. Couple questions from us. Assuming success in the plateau study, would you expect to need two phase 3s or could you perhaps get by with one pivotal and perhaps use plateau supporters and also wanted to ask in further studies with NovoSarm given the development of evolving agents for obesity as an orals are coming through, others want to know if the design would capture those agents as well. With the ultimate label diagnostic to the primary weight loss agent, would you need to study the specific weight loss agents to indication label for inovasone?

Dr. Mitchell Steiner (Chairman, CEO and President)

so thank you Leland. So the first question is basically if we're successful, what is the next step? And you go to phase three. So let's be very clear what that means. As you know, the FDA has come back and told us that incremental weight loss of greater than 5% for the efficacy portion of the study is sort of the anchor. Okay, so you have greater than 5% that stands on its own. If you want to add the function benefits and the bone benefits, then you have to show those separately. But you least you're moving forward with incremental weight loss. If your incremental weight loss is less than 5%, then you have two ways to move forward. One is physical function as a primary endpoint. And the reason the phase IIB is so important is because we're doing a lot of work on physical function to make sure that we have a very clear understanding of the Phase 3 endpoint for physical function as a claim. And furthermore, we're collecting bone mineral density information. As you know, the FDA has recently reported back in December of 2025 that BMD alone can be a surrogate endpoint in place of fractures. And so that could be very interesting is we know GLP-1s can cause bone loss in this patient population undergoing this accelerated weight loss. So if the incremental weight loss is greater than 5%, then that will be the primary endpoint with function and BMD secondary endpoints. If incremental weight loss is less than 5%. That's why this trial is so critical. Critical. It's a perfect trial because it's measuring all these things in body composition that can inform us on what if they working out which direction they're going to take. So this is not just for a NovoSarm Myostatin inhibitors. If you want to have incremental weight loss and function and bmd, you have to measure those all separately and they have to be separate claims and you have to make sure you have the data to do that. We're the only company that really is focused on function with a very objective measurement. So that's why this trial will be interesting. As you know, we've de risked a lot of it with the phase two quality study that we've done. But the problem with the quality study is 16 weeks and you need more than that time to see weight loss, incremental weight loss. And, and so we're doing the definitive study to answer that question. To answer your second question, yes, the field is just to refresh everybody's memory. Second question is if we do move forward and we've got all these companies coming out with weight loss agents, orals and non orals, is the claim going to be a Novus arm with any GLP-1 receptor agonist or. The studies have to be specific to the GLP-1 receptor agonist in the form of the formulation of that agonist. And the answer is, my understanding is certainly initially it's going to be based on the specific GLP-1 receptor agonist. So that's why it was important for us to focus on, you know, semaglutide initially. But I think since each of these have different, each of these GLP-1 receptor agonists have different effects on weight loss that you're probably going to have to do, whether it's us or anybody else is probably going to have to combine it with the specific weight loss agent initially and then we'll see what happens with the field later. It may get to a point that GLP-1 alone or GLP-1 GIP-1 alone, but initially my opinion is going to be specific to the GLP-1 receptor agonist. Now, Gary Barnett is on the call, he's our chief scientific officer. What do you think about that question, Gary?

Gary Barnett

Yeah, it's a great question. I think that at some point I can envision, remember the consequence that we're treat. Treating with NovoSarm is weight loss. And weight loss occurs with all of the GLP-1s and all of the incretins, and all of them will have a similar issue with the loss of lean mass and the plateau that we're addressing in the plateau study. I think that I can see a world where we include multiple different incretins, as in our phase three. But Mitch is exactly correct. You know, the FDA's longtime mantra is you get in your label what you study in your Phase three. So right now our plan is to really focus on one or two incretins, in the Phase 3 program. Okay, thank you,

OPERATOR

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

Dr. Mitchell Steiner (Chairman, CEO and President)

Thank you, operator. I appreciate everyone who joined us on today's call and I look forward to updating all of you on our progress on our next investors call. Have a great day.

OPERATOR

The digital replay of the conference call will be available beginning approximately 12:00pm Eastern Time today, May 13th by dialing 1-855-669-9658 in the U.S. and 1-412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 882-6955. Please record your name and company when joining.

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