Veru Inc.
Q3 2021 Earnings Call Transcript

Published: 12 Aug 2021

[Operator:]

Good morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. . I'd now like to turn the conference call over to Mr. Sam Fisch, Veru Inc.'s Director of Investor Relations. Please go ahead.

[Samuel Fisch:]

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

[Mitchell Steiner:]

Thank you, Sam, and good morning. With me on this morning's call are Michele Greco, CFO and CAO; Michael Purvis, EVP, General Counsel and Corporate Strategy; and Sam Fisch, Director of Investor Relations. Thank you for joining our call. Veru is a late clinical stage oncology biopharmaceutical company with a focus on developing novel medicines for the management of 2 of the most prevalent cancers, prostate cancer and breast cancer. We're also committed to developing an effective drug therapy for COVID-19, which is a Phase 3 program. We invest cash generated from our Sexual Health commercial business into the clinical development of our potentially high-value oncology and COVID-19 drug candidates. This morning, we will discuss the progress of our late clinical stage prostate cancer and breast cancer drug programs as well as sabizabulin Phase 3 study for the treatment of COVID-19. We will then provide financial highlights for our record third quarter fiscal year 2021. Veru anticipates having 4 registration clinical trials in prostate cancer, breast cancer and for COVID-19 and 2 potentially registration-enabling clinical trials in breast cancer, up and running by the end of the calendar year 2021 to a total of 6 pivotal or potentially pivotal studies. 2 of these, Phase 3 VRACITY study in prostate cancer and the Phase 3 COVID-19 clinical study have already commenced. We have been very busy executing on this bold plan, and you will see that we're making significant progress. In our prostate cancer clinical program, the company has initiated is enrolling two clinical trials, a Phase 3 VERACITY study to evaluate sabizabulin for the treatment of metastatic castration and androgen receptor targeting agent resistant prostate cancer and a Phase 2 dose-finding clinical study for VERU-100, a GnRH antagonist 3-month long-acting depot delivery formulation for androgen deprivation therapy of advanced hormone-sensitive prostate cancer. Sabizabulin is an oral first-in-class new chemical entity that targets, cross links and disrupt alpha and beta tubulin subunits of microtubules to disrupt the cytoskeleton. And in prostate cancer, this also results in the disruption of androgen receptor's transport from the sinoplasm into the nucleus. The Phase 1b/2 clinical study enrolled 39 men in the Phase 1 and 41 men in the Phase 2 portion. The Phase 2 portion is completely enrolled and is still ongoing. The safety of sabizabulin appears to be similar to the androgen receptor targeted agents like abiraterone and enzalutamide, based on what has been reported in their package inserts. Long-term daily chronic drug administration appears to be feasible and safe. We have patients in the Phase 1b portion that have been on treatment for over 2 years without evidence of prostate cancer tumor progression. At the recommended Phase 2 dose of 63 milligrams, the most common adverse events were mostly grade 1 and 2 diarrhea, fatigue and nausea. There have been no clinically relevant reports of neutropenia, neurotoxicity or hair loss. The Phase 1b/2 study also has yielded promising and significant efficacy outcomes. The efficacy results show PSA declines and responses as well as objective and durable tumor responses, including partial and complete responses. For the intent-to-treat population of all men with measurable disease at baseline, which is 29, the objective tumor response rate is 21%, and all man that received 63 milligrams or greater dose of sabizabulin, which is 55 men, the median radiographic progression-free survival has not been reached as the study is still ongoing, but it's estimated to be greater than 7.4 months. We initiated this past quarter, the Phase 3 VERACITY clinical study, which is an open label, 2

[Michele Greco:]

Thank you, Dr. Steiner. As Dr. Steiner indicated, we're having another great year. In December, the company sold PREBOOST for $20 million. In February, the company completed an equity raise, which resulted in $107.9 million in net proceeds after deducting underwriting commissions and costs. And in the third quarter, the company achieved record level net revenues and gross profits related to the sales of FC2. For the first 3 months of fiscal year 2021, our net revenues were $45.6 million, surpassing $42.6 million in net revenues for the entire fiscal year of 2020. We have already achieved a record year for net revenues versus any prior full fiscal year after only 3 quarters. Let's start our highlights with third quarter results for the 3 months ended June 30, 2021. Overall, net revenues were up 71% to $17.7 million from $10.3 million in the prior year third quarter due to the growth of our FC2 U.S. prescription business. The company reported significant FC2 sales growth and its prescription business with net revenues up 150% to $13.5 million from $5.4 million in the prior year third quarter. Gross profit rose 113% to $13.9 million or 79% of net revenues compared to $6.5 million or 63% of net revenues in the prior year third quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased to $16.7 million compared to the prior year quarter of $7.9 million. Research and development costs were $11.2 million compared to $4.4 million in the prior year quarter due to the commencement of several new phases in our clinical trials. The operating loss for the quarter was $2.9 million compared to $1.4 million in the prior year quarter. In the prior year, the company received a forgivable loan of approximately $540,000 under the Paycheck Protection Program of the CARES Act. The forgivable loan was treated like a government grant and recognized as a reduction in operating expenses during the quarter. As a result, we recorded a reduction to selling, general and administrative expenses of approximately $420,000 and a reduction to payroll-related research and development costs of approximately $120,000. Non-operating expenses were $2.7 million compared to $1.4 million in the prior year third quarter and primarily consisted of interest expense and change in the fair value of the derivative liabilities related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018. For the quarter, we recorded a tax benefit of $2.9 million compared to a tax expense of $241,000 in the prior year third quarter. The tax benefit recorded for the quarter is primarily due to the increased value of the U.K. net operating losses due to an increase in the U.K. tax rate from 19% to 25%. The bottom line results for the third quarter of fiscal year 2021 was a net loss of $2.7 million or $0.03 per diluted common share compared to a net loss of $3 million or $0.05 per diluted common share in the prior year third quarter. Turning to the results for the 9 months ended June 30, 2021. For the first 9 months of fiscal year 2021, total net revenues were up 48% to $45.6 million from $30.8 million in the prior year period, again, a record high for any fiscal year. The company reported growth in FC2 sales and the U.S. prescription business and the global public sector business. Net revenue from the U.S. prescription business was up 79% to $32.9 million from $18.4 million in the prior year period. Net revenue for the global public health sector business was up 6% to $11.8 million from the 9-month period. Overall, gross profit was $35.6 million or 78% of net revenues compared to $21.2 million or 69% of net revenues in the prior year period. The increase in gross profit and gross margin is due primarily to the increase in the U.S. prescription business and a decrease in labor, transportation and equipment maintenance costs. Operating expenses increased by $14.5 to $39.2 million compared to the prior year period of $24.7 million. The increase is primarily driven by research and development costs, which increased by $10.8 to $24.4 million from $13.7 million in the prior year period. Operating income for the period was $14.8 million compared to an operating loss of $3.5 million in the prior year period, an increase of $8.3 million. The increase is primarily due to gain on sales of PREBOOST of $18.4 million. Excluding this gain, we had an operating loss of $3.6 million for the period. Non-operating expenses were $5.9 million compared to $3.6 million in prior year period and primarily consisted of interest expense and change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the 9-month period, we recorded a tax benefit of $2.8 million compared to a tax expense of $30,000 in the prior year period. The company has net operating loss carryforwards for U.S. federal tax purposes of $42 million with $13.8 million expiring in years through 2040 and $28.2 million, which can be carried forward indefinitely. Our U.K. subsidiary has net operating loss carryforwards of $61.3 million, which do not expire. The bottom line results for the first 9 months of fiscal year 2021 was net income of $11.7 million or $0.14 per diluted common share compared to a net loss of $7.1 million or $0.11 per diluted common share in the prior period. Excluding the gain on sale of PREBOOST, the adjusted net loss was $6.7 million or $0.09 per diluted common share in the current period. Now turning to our balance sheet. As of June 30, 2021, our cash balance was $123.2 million. Our accounts receivable were $8.3 million. Due to our sale of PREBOOST in December, we added $15 million in cash during December and $5 million in notes receivable, which will be collected over the next 10 months. In February, we completed an underwritten public offering of 7,419,354 shares of our common stock at a public offering price of $15.50 per share. Net proceeds were $107.9 million. Our net working capital was $137.2 million at June 30, 2021, compared to $12.3 million at September 30, 2020. During the 9 months ended June 30, 2021, we used cash of $14.8 million for operating activities compared with $1.6 million used for operating activities in the prior period. Overall, we're delighted to see the continued increases in sales in the FC2 business. This revenue source, together with our strong balance sheet, continues to be the sources of funds we use to invest in our promising pharmaceutical clinical development programs as we continue to transform our company into a premium oncology biopharmaceutical company seeking large market opportunities. Now I'd like to turn the call back to Dr. Steiner.

[Mitchell Steiner:]

Thank you, Michelle. Our company's fundamentals are strong. We have enjoyed another strong record financial quarter with also another record for U.S. FC2 prescription revenues, which has allowed us to significantly advance our clinical programs. Based on year-to-date performance, we'll have a record year in revenue, with the robust performance of the commercial business, plus the prospects for additional future revenues in TADFIN, coupled with our strong cash position, we believe that we'll be able to substantially invest in the continued clinical development of our prostate and breast cancer drug pipe-- product candidates as well as sabizabulin COVID-19 Phase 3 clinical study. We plan to continue to generate robust growing revenues for our sexual health business. We have successfully transformed our company into a late clinical stage oncology biopharmaceutical company supported by growing revenue from our cash-generating sexual health business. We have already-- we are already currently enrolling or plan to enroll a total of 6 pivotal or potentially pivotal studies this calendar year for major indications and large market opportunities. To summarize, in the prostate cancer clinical program, the company has initiated and is enrolling 2 clinical trials. Prostate cancer remains a very serious cancer as it is the second leading cause of cancer deaths in men. The drug product candidates that we're developing over 2 important indications. First, VERU-100, GnRH antagonist depot delivery formulations for androgen deprivation therapy of advance hormone sensitive prostate cancer has attributes to address the commercial limitations of other androgen deprivation treatments. The Phase 2 dose-finding clinical study is enrolling, and we expect to report results in the second half of the calendar year, and the Phase 3 clinical study has already been agreed upon by FDA, is expected to be initiated shortly thereafter. The second major indication of market opportunity takes advantage of the adoption and the widespread use of androgen receptor targeted agents, which have moved very early in the care of advanced prostate cancer, in which all men will develop resistance to these drugs and their prostate cancer will progress. The market for androgen receptor targeted agents is approaching $6 billion annually. We're developing sabizabulin, an oral agent which has the efficacy that appears to be similar, if not greater, to what has been reported in the literature for chemotherapy but have side effect profile that's similar to what has been reported in the package inserts to androgen receptor targeted agents. This will allow sabizabulin, if approved, to be prescribed by both urologists and medical oncologists for men after progressing on androgen receptor targeted agent or before IV chemotherapy. The Phase 3 VERACITY clinical study to evaluate sabizabulin for the treatment of metastatic castration and antigen receptor targeted agent resistant prostate cancer is enrolling. In the breast cancer program, the company expects to initiate 3 clinical trials soon. Breast cancer also remains a very serious cancer as it is also the second leading cause of cancer deaths in women. ER positive breast cancer occurs in 85% of all breast cancers. The standard care now uses-- the standard of care now uses CDK4/6 inhibitor in combination with an estrogen blocking agent in the first and second line metastatic settings. Almost all women will become resistant to CDK4/6 inhibitor, and the standard of care in this setting is now being defined. The drugs we are developing offer 2 important indications in AR positive, ER positive breast cancer. Using a companion diagnostic to selecting women who have greater than 40-- greater than equal to 40% AR staining in breast tissue, which would represent approximately 50% of all women who are ER positive with metastatic breast cancer. The first indication for enobosarm monotherapy is in the third line setting. The second indication is a Phase 2b clinical study that will evaluate enobosarm combination with abemaciclib, the CDK4/6 inhibitor in the second line setting. Enobosarm by targeting and activating the androgen receptor represents the first new hormone therapy in breast cancer in decades. For the other 15% of women have triple negative breast cancer, we plan to initiate the Phase 2 clinical study evaluating sabizabulin monotherapy, and a sabizabulin plus Trodelvy combination therapy versus Trodelvy monotherapy in women with metastatic triple negative breast cancer who have failed at least 2 chemotherapies. The goal is to see if sabizabulin alone or in combination with Trodelvy, will have better efficacy and safety profile, specifically for possible protection against neutropenia than Trodelvy alone. Finally, we're enrolling a Phase 3 clinical trial to evaluate sabizabulin in hospitalized COVID-19 patients with high-risk for ARDS. We're still in the middle of a global pandemic. The fact is that COVID will be a long war. We have witnessed evidence of this over and over. The bottom line is that although we have effective vaccines for now, we still need effective drugs to win the war. We have to be-- have to continue to be steadfast in the execution of our Phase 3 clinical study. If we confirm the promising results observed in the completed Phase 2 clinical study, we expect to seek emergency use authorization for this indication. We are committed. COVID is not going away. In summary, we have a portfolio of premium late clinical stage drug candidate products for large global market indications, we expect a stream of steady, positive news flow achieving clinical trial milestones and reports of clinical trial data. We are open to the possibility of a pharmaceutical partnership if it enhances shareholder value. And we have a rapidly growing commercial based business, which affords us strategic options. With that, I'll now open the call to questions. Operator?

[Operator:]

. Our first question comes from Brandon Folkes from Cantor Fitzgerald.

[Brandon Folkes:]

Congratulations on all the progress. Maybe firstly, just having transformed Veru into an oncology company, you do have a fair month going on. So do you have any sense of urgency to sell the FC2 business just to streamline the company and reinvest those funds? And then along those lines, any change in thinking about whether you may fund the COVID program you sold, given the-- what, once you see the data?

[Mitchell Steiner:]

So the first question is, given that we clearly have transformed ourselves into an oncology company, and there's no doubt now with the Phase 3s and the Phase 2bs that we're on track with two the major cancers in areas that are large markets. So we feel very, very good about that. But interestingly, we're also-- with the FC2 business, we're looking for strategic options, but these strategic options-- it's been most interesting that we're not in the rise. So the keyword that you used was urgency. So there's no real urgency because, look, it's generated $45 million in the last...

[Michele Greco:]

Nine months.

[Mitchell Steiner:]

Nine months. And if we stay on track with that same growth, we're say essentially bringing in the amount of money we need to fund all of our clinical trials. And so if you look at it that way, and you look at the cash in the bank, we raised $107 million, we've got $120 million, whatever number, $130 million if we add the accounts receivable, almost to $140 million, so we're not burning through our cash. So we're in a very interesting position that we're in the driver seat to see what we want to do with the asset. So I think-- and by the way, strategic option doesn't always mean sell the business. There can be other things that we can do that can enhance shareholders' value and allow our shareholders to get the best of both world. So we're working through that, no urgency, and it's not taking our eye off the ball, which is to continue to push and execute on the oncology side. As it relates to your second question, when I said relating to COVID-19, and whether or not we're prepared to fund it after we report positive results. So as I mentioned in my prepared remarks, that we have the resources and we have the clinical trial supply, drug supply. So we're going to be able to run the study without losing a beat and so we're not dependent on external funding, or funds for that. If we have successful data, we're going to be in a very interesting position again because even though we have begun to increase the scale-up of sabizabulin because of the multiple trials that are going on, including COVID-19, it's a different level of production that you need to do to get ready for the U.S. population and the world. With that said, we will see. I mean, I think we're at a 9 milligram dose, you need a lot of drug to begin-- and it's only a 21-day treatment, and we can do the treatments at 7-day interval. So there's a lot of flexibility to try to quote spread the drug as quickly as we can. But the ideal situation would be just like we saw recently with Merck that the government will step in and provide the resources required to scale up so that the drug will be available for the masses, including outside the U.S. And so we'll continue to move in that direction because, as I said, we've already taken care of the resources and the drugs that we need to do the Phase 3. But I do think that we have positive data given the environment that we're in right now and the fact that people are so fatigued that they're also realizing that this COVID thing is not going to where we have not turned the quarter-- corner. We had this whole discussion that it looks great. Everything was opening up. I'm hearing some of the conferences are starting to get canceled again. It just doesn't-- with stock guys, and we're only going to win this with a vaccine and a drug. So I do think that the move for funding will change dramatically as people step in with positive data.

[Operator:]

Next question comes from Yi Chen from H.C. Wainwright.

[Yi Chen:]

The first question is, the-- has the Delta variant in any way affected the enrollment speed?

[Mitchell Steiner:]

Yes. So I'll tell you what-- so the answer is yes, and let me tell you why. So when we started the clinical trial, and you can go back and look at when we said we opened the COVID-19 Phase 3, the United States's contribution to the trial enrollment and the reason we can't incredibly is because the rates of hospitalization and death kind of just disappeared. And I have a person that I call in each of these emergency-- excuse me, each of these ICUs to see what's happening because, looks, it's crickets now, it looks like we've lived this thing. And I-- a week ago, I got a phone call from him saying that he's still working on this drug because we're getting slaughtered. So you just have to pick up the newspaper and see that it's gone the other way. So yes, the Delta . The delta variant is definitely helping us in the U.S. ex-U.S., the Delta variant has already been out there in Brazil and South America, the Brazilian variant is there. South America has been hit extremely hard. And so we're in those countries that continue to look like we did 6 months ago or 4 months ago. And then on top of that, you know the Delta variant is coming. We're hearing from sites across the world that they're getting ready to the Delta variant. So they're seeing what happened in the United States and happening in the United States. So it's taken on an extreme urgency. And as I had mentioned before, the way that sabizabulin works is that it works through interrupting microtubules and microtubules are responsible for pulling the virus from the surface into the nucleus where the coronavirus can replicate. And then once it makes new viruses, the viruses have to be brought to the outside of the cell and released, and our drug works by interrupting that, again, the microtubules, which are required to-- like a highway to bring the virus to the outside of the cell and release it. So we don't care whether it's a blue car or green car or a bus or a truck, the highway is gone, you're not going to be able to move freely in and out. So we're comfortable that we're not going to have an issue like a very specific antibody or a vaccine against the variant. And-- so I think that's going to be the major strength of our compound. So whether Delta variant or Lambda variant or some of these other variants that are coming through, it should not matter. And so I think that puts us in good footing to-- if again, if we replicate the Phase 2 results, to have an effective broad spectrum type of product.

[Yi Chen:]

Got it. And then also, sabizabulin should perform the same among those patients that got COVID-19 regardless whether they are vaccinated or unvaccinated. Is that correct?

[Mitchell Steiner:]

Yes. But in fairness, it is a good question, in fairness, it's-- and again, we're staying very, very close to this because we're in the middle of this war, so to speak, if you're vaccinated, you tend to have a more mild outcome. And so yes, you're seeing this strange breakthrough. And what's happening is that the unvaccinated are the ones that are really are in the brunt of this particular part of the pandemic. And so if you're unvaccinated, then the Delta variant, you're going to get it, and you're going to get it quickly, but still, it's the same situation, age, comorbidities and the whole bit. And even though we're hearing that a lot of the young people are starting to show up because they didn't get vaccinated. About half of these ICUs are filled with the people that are still older age that didn't get vaccinated. So there's going to be plenty of people that we can try to help through our clinical trial, but more importantly, confirm with our clinical trial is going to support-- clinical trials are going to replicate what we saw in Phase 2. So that's what I would say about the Delta variant.

[Yi Chen:]

Got it. Does this slow down the enrollment for the Phase 3 prostate cancer trials?

[Mitchell Steiner:]

No, we have not seen that. Interestingly, and I had made this comment before, that with cancer patients, cancer-- I mean, cancer, it's metastatic, it's spreading. And so people are scared. What we did see in the first half when we had the Phase 1b and the Phase 2 ongoing is we did have a few patients that got a little bit nervous about coming into the hospital to get their scans. So they're already in the trial that was enrolled, but they kind of-- we got a little delay here and there when we actually looked with a CT scanner an MRI, but that was more of a rare instance. Most people stayed on track. And so now, I can tell you that sabizabulin Phase 3 is open and enrolling, and we're smack on target, if not a little ahead of target in terms of enrollment. So far, we have not seen that problem. And then get back to your point before about COVID-19, there's no question we're getting a lot of inbound interest for sites in the U.S. before, like I said, it was crickets. We couldn't-- nobody was calling us, nobody was returning our calls. But that's changed dramatically. And so we're hoping that this will get us to the finish line in terms of enrollment.

[Operator:]

The next question comes from Kumar Raja from Brookline Capital Markets.

[Kumaraguru Raja:]

So with regard to the completion of enrollment by the end of the year for the COVID-19 trial, does that take into consideration the recent upticking cases? And also in terms of dosing either orally or by the nasogastric route, do you see any difference in efficacy based on how the drug is being administered.

[Mitchell Steiner:]

Right. So nasal-- I'm answering the second question first. So you're asking that sabizabulin in COVID-19 being a capsule or are we finding some problems administering the drug in the ICU setting.

[Kumaraguru Raja:]

It looks like they can be either administered orally are using the nasogastric tube. So, yeah.

[Mitchell Steiner:]

Yes, yes, exactly. So from that standpoint, we have not seen any problem because patients need to get medicines. And so we-- because it's a capsule and it's a powder in the capsule, we've had no problem with administering either orally or through an NG tube. So that's been fine. As it relates to your question about the uptick and meeting our goals. In other words, we said we'd get this thing filled by year-end and then a quiet in the U.S. So I must admit we were getting nervous because we have to have a certain U.S. component in a win way. But now we're not nervous anymore because the U.S. has gone-- I mean just look at the numbers, it was 108,000 new cases on average daily and the hospitalizations are picking up, 2 weeks after the deaths will start picking up. And so it's just-- I mean, we've gotten to a point now, now entering the fourth wave, that we can always predict what's going to happen, and it's not-- other than to vaccinate the patient, the unvaccinated patient is kind of following the playbook. So I would say because of the uptick in cases that we're more likely to reach our goal.

[Kumaraguru Raja:]

And with regard to sabizabulin as well as enobosarm, with regard to Europe, what's happening in that front? And also, you talked talk a little bit about pharmaceutical partnerships. So how should we think about it? Would it be like just like partnership for Europe? Or maybe a little bit of color on that?

[Mitchell Steiner:]

Yes, sure. So we're fortunate that we're going to be in a position in both our breast cancer and prostate cancer programs to be in Phase 3. And because we're in Phase 3, the question then becomes, how are you viewing partnerships. And as you know, the back of the envelope would say that if you piecemeal the relationships, it will decrease the value of the opportunity for a global partner. And so what we're trying to do is, first of all, and we'll take a step back, sabizabulin prostate, we're only running in the U.S. and the enobosarm Phase3, our test study is being done in the U.S. and Europe. And we're also in the process of beginning to have some of the EMA discussions that we will need. And as you know, EMA and with Brexit and everything that understands Britain, so that's gotten a little strange. But our position right now is to execute on the trial, the trials are open label, which means that we have a DSMB that can look at this, and we can continue to execute. But I think the most important thing for us to do is get these things filled, execute on them. We are in constant discussions with large pharma and medium-sized pharma and small pharma across all our programs. And-- but I think the way we're thinking of it, the biggest value that we're going to have to shareholders is to see if we can couple the good Phase 2 data with some good Phase 3 data or some promise of Phase 3 data because it's open label. And to me, that feels like that's going to get us the best value. We have the resources, thanks to our shareholders' support, and we have the resources because of our base business. So I think we're in a very unique position that we can wait it out to get the best position-- get the best deal. So-- but I do believe that at some point, some of our programs are going to be best served with a pharmaceutical relationship. Particularly on the commercial side. And so we're doing exactly as you would expect us to do, and that is having discussions with the largest and the smallest-- the largest, not the smallest, the largest, and the medium. Largest for global and the medium for piecemeal. And-- but our preference is to keep the dialogue going until we get an offer we can't refuse.

[Operator:]

Next question comes from Chris Howerton from Jefferies.

[Christopher Howerton:]

I guess just two for me. First, on the FC2, obviously, great to see the continued growth on that program. I guess, I'm curious if you could provide a little color as to what is driving that growth currently? And what is the expectations going into the second half of the year, perhaps like there is some seasonality to the trends that you might expect for contraception, that would be helpful for us to know about. So that's one question. And then the second question, I guess, maybe I missed it, but I'm just wondering when we might expect the Phase 2 portion for the ongoing study in prostate cancer?

[Mitchell Steiner:]

Great. So the first question had to do with-- can give you a little bit more color in terms of FC2 growth. And I will tell you there is no seasonality. And as you can tell, it's also completely COVID-19 resistant. So the growth is being driven by-- and this is the beauty of it, we have telemedicine partners that are using their resources to market and sell and bring women seeking birth control to their website, the storefront. It's an incredibly powerful way to go out there and market and sell because if we look at the number of FTEs that are supporting our U.S. business, in fact 3 or 4, and that's generating $30 million, $35 million, if you take out U.S. public-- global public sector. And so it's incredibly efficient for a company like ourselves because then we can use those resources to put back into the company. Now with that said, where we see the growth taking place is we're also seeing that there's a very, very healthy reorder rate with the telemedicine, so it's not-- yes, it's a big blue ocean, and people are starting, but they're coming back. And the reorder rate is very, very healthy. As you know, that won't help the numbers from an exponential standpoint. Also, we're in discussions with other telemedicine groups that are focused on birth control. And because this area is growing, new ones are showing up periodically that we've engaged with. And hopefully, we'll pick up a few more of those. Any time we pick up a few more of those, it really increases the number of prescriptions that we're able to have. And then finally, we're going to look for other ways that we can take advantage of digital, internet channels to sell. And so we've been very, very pleased, and the global public sector defined, It was flat, or it was a little bit more than flat. But boy, do you-- I think you're going to see all of the growth driven primarily by the U.S. prescription business. And the ratios have flipped. Where it used to be all public sector and then with a little bit of U.S. prescription. Now it's going to-- from a revenue standpoint, from a profit standpoint, it's all going to be primarily U.S. and so I'm happy to report we do believe we're going to have a pretty good year. I mean, this is-- we're entering-- we're 4 years into it. We're entering in our fifth year of growth. And go look, it just seems to be the same rate. And that's very good for us because if we can maintain that, then we're paying for our clinical trials. And so that's-- and keep some real cash in the bank and not touch it. So this is so that we can accelerate and stay on track, and we can also look at a big pharmaceutical partner and say, look, you're not going to wait us out. If you can give us a deal, give us the best deal possible. So I think it's put us in a good position. So to give you color, there's no seasonality, COVID-19 is not affecting the growth, the -- we're actively involved in business development to get additional telemedicine groups on board, and we also have a few things that we're doing to also enhance that. So the business is growing. Happy to report. The second question you asked had to do with the ongoing Phase 2. The ongoing Phase 1b, it's completed, but we still have a couple of patients that are beyond 2 years. So that study is still going on. And in the Phase 2, we still have patients on it. And so I think what will happen is by year-end, we'll be able to provide more color because the longer we wait with these patients, the more accurate that we're going to get in terms of understanding the median progression-free survival and some of the other data. So the Phase 3 is up and running. Urologists and medical oncologists are excited about the data they have seen so far. We've reported updates. The updates are consistent that the agent has activity. And in prostate cancer, that's why we're excited to expand it into triple negative breast cancer because data that we saw in prostates showed that we would have an effect on prostate cancer with no neutropenia and neurotoxicity. That played out clinically. And then we also have data in triple negative breast cancer that-- it should also translate clinically. And it will be interesting to see how that plays out when we go into our second major indication. So I would say look for data, the Phase 2 sabizabulin portion of the prostate cancer study towards the end of the year.

[Christopher Howerton:]

That's great. And I guess, I think we've discussed this in the past, but maybe if I can ask, is there any information that you anticipate learning from either the ongoing Phase 1b, obviously, the longer-term follow-up or within the Phase 2 patients that would any way change your current Phase 3 plans? Or do you feel pretty solid about those Phase 3 designs at this point?

[Mitchell Steiner:]

I think we feel very solid about the Phase 3 design. I think the reason we're continuing is because if I would have told you that on average, these patients are failing in 3 months, 3.5 months with an alternative androgen receptor targeted agent, and we've got some patients in the Phase 1b, 12 months and now heading into 2 years, that's pretty good. But that doesn't change our Phase 3 design. And then the Phase 2 is also providing us information that we use to help the trial design assumptions and understanding the PFS and that kind of stuff. So I would say that we've learned what we needed to learn in the Phase 1b and the Phase 2, that's the reason we went to Phase 3 because we felt at that point, there was nothing new we're going to learn. And we just can't take the drug away and stop the study. So we have to keep providing drug for the patients that are responding. So no, I think we're on firm and solid assumptions for the Phase 3.

[Operator:]

. The next question comes from Alexandra Heller from Oppenheimer.

[Alexandra Heller:]

Congrats on the quarter. Can you walk us through how you see the VERU-100 fitting into the existing treatment landscape for hormone sensitive prostrate resistant cancer and then also your strategic plans for the asset?

[Mitchell Steiner:]

Yes. So for VERU-100, the beauty of this compound is that we were able to sit on the side lines and watch how the field has evolved over the last 30, 40 years. And what we've learned is that medical castration is-- nobody wants surgical castration, medical castration is the way to go. And interestingly, in this current landscape with these new drugs that are allowing patients to live longer, such the androgen receptor targeted agents and some of the chemotherapy and the PARP inhibitors, you're finding out that patients are living longer. And in all instances, the base is androgen deprivation therapy. So when we went from 18 months now, you could be double or triple that. And they're on ADT, the whole time. ADT is truly a chronic therapy. And for us to get involved with that, with something that takes advantage of what we've learned. So what have we learned? We learned that the landscape now is that the agonist such as LUPRON, ELIGARD and those kinds of medicines, always-- when you give the injection, you have about 14 days, 2 weeks of high levels of testosterone that then comes down and the castration levels are not as ideal. And-- but yes, that's what we had and it worked. And then the antagonist came along and they shut off testosterone right away, and the patient gets castrated right away, and it turns out that it also lowers FSH, which is thought to be important for cardiovascular events. I mean, LUPRON, if you've had the LUPRON type drug, showed this in their study that if you had a cardiovascular event and you were put on leuprolide, you have a 1 in 5 chance of having another one. It's pretty high. So I would argue that the GnRH antagonist was discovered first that LUPRON and the agonist have probably would never been approved. So I think this field is definitely moving to GnRH antagonists. Now in the flavors of GnRH antagonist, now the second challenge is how do you become part of the medical care standard versus how do you disrupt the medical care standard. So the standard of care right now is the patient comes in every 3 to 4 months to get imaging and to see their doctor and to come in every month as it makes sense, we know that because Decroralics was a 1-month GnRH antagonist depot and it did not do well. And it didn't do well because it was not a good drug. People are kind of using it to castrate the patient right away, then add LUPRON. So people were worried about it. But the problem is it didn't fit standard of care. And-- so the 3 and 4 month depots froms LUPRON and ELIGARD are the of standard of care. So if you had a GnRH antagonist, that was a 3 or 4 month depot, then you could be easily substitutable and become the preferred choice because at the end of the day, compliance is really kind of important for this agent. And the reason compliance is important for this agent is because you don't feel well when you get castrated. You lose your libido, you become-- you develop change in body composition with fat and the diabetes and loss of muscle mass and gynecomastia and hot flashes. So you're constant looking for a way to get a drug holiday. And so they were in control, if the patient was in control with their own castration, then they may not be as compliant because they want that weekend break or they want to feel good when their kids, or whatever. And testosterone comes back up, it's going to cause the tumor to spread and then the patient is going to have to get on some more expensive drugs than the androgen receptopr targeted agents and IV chemo. So we think the strategy for us is that when the patient first develops advanced disease, metastatic prostate cancer that's hormone sensitive, that the foundation, the drug that you start with should be our drugs, it should be VERU-100. And because it's given every 3 months, potentially be given every three months, it would be-- it would not buck the standard of care. So doctors will be comfortable providing it, knowing the patient will come back at the same time, but they will usually see the patient at the same time that we usually image the patient. So you're not changing standard of care. And the urologists and the physician gets paid because they get administered the medicine, and they also get a percentage of the product based on the AWP, so that doesn't change. And so our strategy and compliance is critical. Now the other thing that's changed also is that the data shows that it's unusual for a patient to get ADT monotherapy today. And so if somebody comes with hormone sensitive disease, they almost certainly can have it coupled with some of these other medicines. And that's even another reason why you want to try to decrease the pill load and other things that the patient is taking and make it simple so that there's 1 less thing they have to worry about every day. So I do think it's going to be very interesting. The other thing, and that will be quiet, is strategically, the worldwide market for ADT androgen deprivation therapy is about $2.6 billion, and that's based on pricing for leuprolide. GnRH antagonists are not price packaged generic leuprolide. And so the market is probably double, if not triple that. And we just don't need to get much of that market to really move the needle. So this is a really attractive option and a really attractive product for us. And the way we think of this product is this is the kind of product we could have regional license-- regional partners in Europe, Asia and maybe hold on to U.S. ourselves because it's the foundation. That's where you're going to go in and call on urologists and medical oncologists about prostate cancer. And as you know, we have sabizabulin for patients that fail ADT and androgen receptor targeted agent would make a lot of sense. So that's how we're thinking about it, Alex.

[Operator:]

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

[Mitchell Steiner:]

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

[Operator:]

The digital replay of the conference call will be available beginning approximately noon Eastern time today, August 12, 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 10157539. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.