Veru Inc.
Q4 2020 Earnings Call Transcript

Published: 9 Dec 2020

[Operator:]

Good morning, ladies and gentlemen, and welcome to Veru, Inc.'s Investors Conference Call. All participants will be in listen-only mode. 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 Director of Investor Relations. Please go ahead.

[Sam Fisch:]

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

[Mitchell Steiner:]

Thank you, Sam, and good morning. With me on this morning's call are Michele Greco, CFO and CAO; Phil Greenberg, Executive Vice President, Legal; and Sam Fisch, Director of Investor Relations. Thank you for joining our call. We have made several important and exciting announcements this morning. It's been a busy quarter. We actually released two separate press releases this morning, our earnings release and an update on our oncology drug pipeline. This morning we will discuss these new announcements and its impact on Veru’s business strategy, the clinical development of our drug pipeline, and the commercialization of our products. We will also provide financial highlights for our record fourth fiscal quarter and record year-end fiscal year 2020. Veru has made the transformation into a late clinical stage oncology biopharmaceutical company focused on developing novel medicines for the management of two of the most prevalent cancers; prostate cancer and breast cancer. We continue to invest cash generated from our sexual health commercial business into the clinical development of our high value oncology drug candidates, so that our current shareholders can realize the maximum value of our oncology biopharmaceutical company. In fiscal year 2017, the year that the Female Health Company acquired Aspen Park Pharmaceuticals to create Veru, the annual revenues were $13.7 million. And this year, I'm pleased to report that we had a record year of $42.6 million in revenue. In fact, we expect fiscal year 2021 revenue generation will continue to grow robustly to what could be another record year. We accomplished this great and significant company milestone because we set a new commercial strategy for FC2 and launched PREBOOST. We focused on creating an FC2 commercial sector in the U.S. And in the U.S., we launched FC2 as a prescription product to retail pharmacies and partnered with multiple telemedicine and internet pharmacy partners.

[Michele Greco:]

Thank you Dr. Steiner. As Dr. Steiner indicated, we had a record breaking fourth quarter and a record breaking year. Let's start with our fourth quarter results for fiscal year 2020. Overall net revenues were up 35% to $11.7 million from $8.7 million in the prior year fourth quarter, due to the growth in our U.S. FC2 prescription business. The company reported significant FC2 sales growth in its prescription business, with net revenues of 87% to $8.7 million from $4.7 million in the prior year fourth quarter. We are pleased with the overall net revenue increase, despite the decline in FC2 unit sales to 5.3 million units from 9.8 million units in the prior year fourth quarter, due to a decline in low margin public health sector unit sales. Net revenues for the public health sector were $2.2 million, compared to $3.8 million in the prior year fourth quarter. Overall, gross profit was $9.6 million or 81% of net revenue, compared to $5.8 million or 67% of net revenues in the prior year fourth quarter. The increase in gross profit and gross margin is driven primarily by increased sales in our U.S. FC2 prescription business, partially offset by an increase in labor and equipment maintenance costs as we have ramped up production to meet demand. During the fourth quarter, we recorded a non-cash impairment charge of $14.1 million related to in process research and development, associated with the acquisition of Aspen Park Pharmaceuticals in fiscal 2017. The charge is primarily a result of deferred development timeline, and the decision to cease development work in tamsulosin DRS, VERU-722 for male infertility and VERU-112 for Gout, in response to management's strategic decision to prioritize the development of our premium oncology drug product candidates, which are highly differentiated unique new chemical entities or formulations, that unprotected drugs under the development addressing larger and potentially more profitable market. The impairment charge results in a book value of zero for these in process research and development assets. The remaining book value of other in process research and development assets acquired in the ATP acquisition is $3.9 million as of September 30, 2020. There was no impairment charge reported in fiscal 2019. Operating expenses for the quarter increased by $13.5 million to $20.8 million, compared to the prior year fourth quarter of $7.3 million, primarily due to the non-cash impairment charge of $14.1 million. Excluding the effects of the impairment charge for the fourth quarter, we had operating expenses of $6.7 million, a reduction of $600,000 compared to the prior year period of $7.3 million. Operating loss for the quarter was $11.3 million, excluding the effect of the impairment charge adjusted operating income was $2.8 million for the quarter, compared to the operating loss in the prior year fourth quarter of $1.5 million. Non-operating expenses were $1.7 million, compared to $2 million in the prior year fourth quarter, and primarily consisted of interest expense and changing the fair value of the derivative liability 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 $1.1 million compared to a tax benefit of $421,000 in the prior year fourth quarter. The effective tax rate for this quarter is 8.6% and 12.1% for the prior year quarter, due to recording a valuation allowance against the net operating loss generated for the quarter in the U.S., which is most of the pre-tax loss for the period. The bottom-line results for the fourth quarter fiscal 2020 was a net loss of $11.8 million, or $0.17 per diluted common share compared to a net loss of $3.1 million, or $0.05 per diluted common share in the prior year fourth quarter. Turning to the results for the fiscal year ended September 30, 2020. Net revenues for the fiscal year 2020 were up 34% to a record $42.6 million from $31.8 million in the prior year. Overall FC2 unit sales totaled 32.8 million compared to 37.9 million units in the prior year. Net revenue from the U.S. prescription business was up 93% to $27.1 million, from $14.1 million in the prior year period. Net revenue for the public health sector business was $13.4 million, compared to $16.8 million in the prior year. Net revenue for PREBOOST increased to $2 million from $884,000 in the prior year. Gross profit was up 42% to $30.8 million from $21.7 million in the prior year. Gross margin was 72% compared to 68% in the prior year. Gross profit and gross margin increased compared to the prior year, despite the increases in cost of sales resulting from increased labor transportation and equipment maintenance costs, and increased cost incurred due to the temporary manufacturing shutdown in Malaysia at the end of the second quarter, as a result of the COVID-19 pandemic. FC2 unit sales for fiscal year 2020 includes 5.8 million units to South Africa under the tender award announced in August 2018, for a total of 120 million units. We started shipping these orders from South Africa during the third quarter of fiscal year 2019, and through the end of fiscal year 2020, we have shipped 10.1 million units. We will continue shipping South Africa orders during fiscal year 2021. Operating expenses increased to $45.5 million compared to the prior year of $28.1 million, primarily due to the non-cash impairment charge of $14.1 million. Excluding the effect of the impairment charge for the year, operating expenses were $31.4 million, an increase compared to the prior year $28.1 million, with $3.2 million due to increased research and development costs. During the third quarter, the company received a potentially 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. In November, we were notified the loan was forgiven in full by the U.S. Small Business Administration. Operating loss for the year was $14.7 million, excluding the effect of the impairment charge, operating loss was $647,000 compared to the operating loss in fiscal 2019 of $6.4 million. Non-operating expenses were $5.3 million, compared to $5.9 million in the prior year, which primarily consisted of interest expense and changing the fair value of the derivative liability related to the synthetic royalty financing. For the year we recorded a tax benefit of $1.1 million compared to $304,000 in the prior year. The effective tax rates for this year was 5.4% compared to 2.5% in the prior year, and it's due to recording evaluation allowance against the net operating loss generated during those years in the U.S., which represents the majority of the pre-tax loss for the years. The company has net operating loss carry forward to the U.S. federal tax purposes of $41.7 million, with $13.5 million expiring in years through 2038, and $28.2 million, which can be carried forward indefinitely. And our UK subsidiary has net operating loss carry forward of $61.3 million, which do not expire. The bottom-line results for fiscal year 2020 was a net loss of $19 million or $0.28 per diluted common share, compared to a net loss of $12 million or $0.19 per diluted common share in the prior year. Now looking at the balance sheet. As of September 30, 2020, our cash balance was $13.6 million and our accounts receivable balance was $5.2 million. Our net working capital was $12.3 million at September 30, 2020, compared to $2.8 million at September 30, 2019. Added to the balance sheet at the year-end is $15 million in cash from the recently announced sale of PREBOOST, with another $5 million is notes receivable to be collected over 18 months. Overall, we are delighted to see the continued increases in sales in the U.S. FC2 prescription business and look forward to increasing FC2 sales in both the prescription and global public health sector businesses. These revenue sources continue to be important sources of funds to invest in our promising pharmaceutical clinical development program, as we continue to transform our company into an oncology biopharmaceutical company with a focus on developing novel medicines for the management of prostate and breast cancers. Now I'll turn the call back to Dr. Steiner.

[Mitchell Steiner:]

Thank you, Michelle. We have enjoyed a record financial quarter and a record year which has allowed us to significantly advance our clinical oncology programs. In fact, we are now into our third year of growth in our FC2 prescription business. With the improving performance of our sexual health business, we believe that we'll be able to substantially invest in the continuous clinical development of our prostate and breast cancer drug product candidates, as well to submit the NDA and if approved, commercially launch TADFIN which would provide even more revenue, adding to the already growing revenues from FC2. We have created a very valuable sexual health business. We had a profitable Q4 fiscal year 2020, before the adjustment for impairment, record revenue fiscal year 2020 and sold PREBOOST for $20 million. Looking forward to fiscal year 2021, we expect our revenues to continue to be strong and growing towards yet another record year. And as a consequence, the company expects to have sufficient resources generated from our sexual health business and existing sources of cash to fund the clinical development of all of our currently planned registration clinical trials, without the need for new equity financing through the end of fiscal year 2022. With resources in place, we will continue to advance our late clinical programs to and through the highest value point, which is enrolling Phase 3 clinical studies and having Phase 3 positive clinical results. Registration oncology clinical studies are ideal as a typically are single clinical studies with premium large global markets. As such, we anticipate a steady flow of important positive news for Veru over the next few months to one year. We have four registration studies planned to commence in calendar year 2021. So VERU-111 for the metastatic castration resistant prostate cancer, we will report open label efficacy and safety clinical results for the Phase 2b clinical trial. The plan to submit the Phase 3 pivotal trial protocol and start the VERACITY Phase 3 registration clinical trial in calendar year Q1, 2021. For VERU-100 our novel peptides GnRH antagonist three month depot formulation for advanced prostate cancer, we will initiate the Phase 2 clinical study in early calendar year 2021, and by the second-half of the calendar year 2021 to start a Phase 3 pivotal registration clinical study. For enobosarm, the AR targeting agent without the unwanted virilization adverse side effects and our newest drug asset to treat ER+/HER2- metastatic breast cancer, we plan to commence the ARTEST Phase 3 clinical registration study in the first-half of calendar year 2021. For VERU-111, for its second indication in triple negative breast cancer, we will meet with the FDA in first-half of calendar year 2021 to discuss a Phase 2b trial design for possible accelerated approval for VERU-111 versus Trodelvy for patients with taxane resistant triple negative breast cancer. The Phase 2b clinical study is planned to commence in the second-half of calendar year 2021. Additional milestones will include, we plan to complete the Phase 2 clinical program for COVID-19 in subjects at high risk for ARDS, submit the NDA for TADFIN, and we'll continue to explore partnerships to license and/or distribute and sell our drug products. We plan to continue to generate robust growing revenues for the sexual health business, which, as a standalone business is very valuable. Coming off a record year of $42.6 million in revenue with gross margins of 72%, and expecting another record year in fiscal year 2021, we could have options to monetize the business as we did the PREBOOST business. We have successfully transformed our company into a late clinical stage oncology biopharmaceutical company, supported by a growing revenue cash generating sexual health business. With that, I’ll now open the call for questions. Operator?

[Operator:]

The first question today comes from Brandon Folkes of Cantor Fitzgerald. Please go ahead.

[Brandon Folkes:]

Hi, thanks for taking my questions and congratulations on all the progress and the deal. Sorry if I missed this, but can you just maybe elaborate a little bit on the economics of the premium oncology deal? Any color on the upfront royalty milestones. And then, just any color on the size of the trial you're thinking for that product. And then maybe just one sort of clarification question, does cash runway through the end of 2022 -- does that just contemplates FC2 sales and the cash flow generation from that or do you contemplate any sale of assets in net cash run rate? Thank you.

[Mitchell Steiner:]

Okay, good. So the first part has to do with enobosarm and have we disclosed any the deal terms. And the answer is, it's undisclosed, but it was -- enobosarm is a late stage asset for the University of Tennessee and Ohio State. So, I will tell what I can tell you is that it's a very favorable deal for the company that includes very reasonable milestones and a low-single-digit royalty on net sales. So, it's a very good deal for our company, but we haven't disclosed the rest of it, but it's a good deal for the company, given the size of the market and where we're going. And I think everybody's going to be very, very happy once we get past this next trial, which gets to your next question. And that is have we told you about the size. We believe that the size of the enobosarm ER+/HER2- metastatic trial in endocrine resistant women, it's going to be about 240 patients. 240 patients is the number, and it's a one to one randomization. So it's not a huge study. And that's again, the single open label study should be sufficient for the successful approval. So that's why we're excited about it. And interestingly, with the other 20 -- just to make a comment with the other 25 studies, all of the studies that you would expect for Phase 1, like the drug-drug interaction studies, the QT studies, renal impairment, liver impairment studies, all that's been done. There's no QT issues, effect issues. I mean, it's a really nice clean profile on this drug. And so you can imagine for a cancer product having that kind of clean profile, this could be very, very attractive as another endocrine therapy for women that just want to avoid the toxic IV chemo. As it relates to – and so that's why we're so excited about this. It fits our model, right, and we’ve got VERU-111 kind of a very favorable side effect profile for cytotoxic to be used in prostate cancer as an oral agent before IV chemo. So the same thing here, breast cancer, an oral agent that can be used with a favorable toxicity profile, but efficacy and other benefits of muscle building and bone building, and you'll see the data tomorrow that we present at San Antonio. And you'll see it's got a great side effect profile and quality of life, et cetera, and before chemo. So this is a great space, pre-chemo space is a great space to be. As it relates to the cash runway, the cash runway includes cash on hand, and we just sold PREBOOST for $20 million, which gives us $15 million. We’ve already closed it. So we got $15 million in cash added to our balance sheet, plus we're going to get another $5 million that’s unconditional or non-conditional, it's just a note basically. And so we don't have to hit anything to get that money over the next 18 months, of which we'll get $2.5 million within a year, another $2.5 million six months after that. So within the next 18 months, we get a full $20 million. So when you put those numbers together plus the growing FC2 business, yes, the answer to your question is we feel comfortable going, running all of our clinical developments including the potential for registration trials through the end of fiscal year 2022. I wish we can guide beyond that, but that's where the auditors told us we can stop. But yes, we’re going to still have money coming from the business, and we’re still -- clinical trials are expensive, but if you think about it, we have four – let’s say all four registration trials are going on. The enobosarm one I just told you is 240 patients, the VERU-100 is 100 patients, the VERU-111 is around 200 patients, and then triple negative breast probably about 100 to 150 patients. If you add all those together, it is still going to be less than 500 patients before trials, about 500 to 600 patients. And you're not getting them all at once because these trials will be done over 18 months to two years. And so, it's very manageable, particularly with the revenues that we have coming in and cash on hand. And so anyway, I think that answers your question.

[Brandon Folkes:]

Great. Thank you very much.

[Mitchell Steiner:]

All right. Thank you.

[Operator:]

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

[Yi Chen:]

Hi, thank you for taking my questions and congratulations for in-licensing of the new candidate. So my first question is, could you give us some more color on the existing population of the ER ER+/HER2- breast cancer patients in the U.S. and the new occurrences every year? And my second question is related to the sales of FC2, could you provide us with some breakdown in terms of private prescription sales versus public sales? Thank you.

[Mitchell Steiner:]

Yes, so I'm going to have Michele answer the second question, which is FC2 breakdown, RX versus public, you want public global or public U.S. or both?

[Yi Chen:]

Both. Thank you.

[Mitchell Steiner:]

Both, okay. So while Michele is getting that, I'll answer your first question. We have not said much about the market size except to say that the market size is very similar to the CDK4/6 inhibitors, because the CDK4/6 inhibitor is an endocrine, it's a therapy that's done in combination with the endocrine therapies. And so, I will tell you that 85% of women, so if you go back and look at the number of women with breast cancer that I quoted in my presentation, 85% of those women are going to have ER+ disease. So, automatically that's our patient population. And 15% will have triple negative breast cancer, which will be ER negative. So, that’s 276,480 new cases a year, which 85% of those cases will be ER+. And so I would say, we're going to continue to do the market research, but it ends up being at about, by the time you take in the metastatic cases, you ending up at about 30,000 to 40,000 cases a year. And the good news is, they're not dying, with endocrine therapy you're continuing to treat them, and they're looking for the next thing and the next thing they're looking for the IV chemo. And so we're trying to take a step before that. But we're going to continue to give you some more granularity on the market size, except to tell you that if we price like a CDK4/6 inhibitor, which is a surrogate, if you will, for that market that's a $6 billion worldwide market right now. And we're going after those patients that fail a nonsteroidal lung patient inhibitor, which is usually what they get first fulvestrant, which is what they get second, they usually get one or the other in combination of CDK4/6 inhibitor, so we could be either second line or third line. So that's still a big piece of the pie. And who would not want to take another endocrine therapy that has some potential benefits besides treating the tumor and not be virilizing and to avoid IV chemo. So I think it's going to be a very attractive area. Michele, would you like to answer the question on the FC2?

[Michele Greco:]

Sure. In the U.S. prescription channel, as we've indicated, revenues are $27.1 million. And the public sector, the U.S. we had about $1.2 million, the rest of the world we had about $12.2 million for a total of $13.4 million. And as we saw, we had sales of around $2 million for PREBOOST for the year. So that's our $42.6 million.

[Yi Chen:]

Got it. Thank you.

[Mitchell Steiner:]

Okay.

[Operator:]

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

[Leland Gershell:]

Hey, good morning, Mitch. Thanks for taking my question. I wanted to ask, as the company continues to refine its profile and with the sale of PREBOOST and also as recognized by the impairment charge shifting strategy away from some other assets. I want to ask about any thoughts of perhaps monetizing the FC2 business through a similar type transaction and the interest you have had there? And then I have follow-up. Thanks.

[Mitchell Steiner:]

Yes. So good question. And so, as I said a couple of times during the paired comments, that the PREBOOST model is a great model. I mean, we were able to monetize PREBOOST, and see those resources for what's important to us, which is as a company strategy, which is to be in clinical development of premium cards new products, big markets with a single study, you can you can access those big markets globally. And so, that's what we need to do. And so the smaller products doesn't make sense to put the resources behind it, because the accounting products dwarf it in terms of the potential. And so, putting our bet and our confidence in the two prostate programs and two breast cancer programs make the most sense. With that said, we have also been able to do that. And the model works, I mean, we've been able to do that with primarily the money we're generating on our own or like we just monetized PREBOOST, so it makes perfect sense, that here we are now with $42.6 million in revenue. And I told you, the gross profit is about 72%. This is a very valuable business. And, as I mentioned in my other call, I even think our market cap is reflecting just the base business. Forget about the enterprise value of the drugs. And so I made the point that, there's so much potential here. And to unlock that potential, we have to take a serious look at how to take the base business and create enough cash and cash resources so that we would be completely independent as we move forward, independent financially, as we move forward with going into these markets. I mean, Immunogenic just sold their product Trodelvy. They have accelerated approval with 108 patients. And they are finally just confirming their Phase 3, one single product in triple negative breast cancer is $21 billion. I mean, there's many examples. I think there's a new -- it's a new set point now for oncology products. I mean, you're not seeing a $1 billion, $2 billion deals anymore, you're seeing, $14 billion, $20 billion. So the neighborhood just got expensive for us to have four drugs that are going for that neighborhood that kind of real estate in that neighborhood is a big deal. So it makes sense to monetize the FC2 business in a way that allows us to preserve holding on to as much as possible the drugs and do that. And another way to say it is, we're always going to consider maximizing shareholder value and by unlocking the potential of FC2, and the standalone pharmaceutical company versus pure pharma play, biotech play, because that's what we are. And we've got the new chemical entities and we have the data and the trial to show that. So it's an exciting time for us and we have to seriously consider how do we uncouple, unlock the value of the assets that we have.

[Leland Gershell:]

All right, great. And then another question just on TADFIN with that product on track to come to market in about a year's time. I wanted to ask about just how the company is going to approach, given that it's going to be going to telemedicine. And it's probably going to be seen as kind of a more convenient and better alternative to what our two generic drugs are taken together quite frequently. How the company's new approach is making that product visible, growing awareness? What that will look like? And how we should think about expenses?

[Mitchell Steiner:]

Yes. Let me tell you how I'm thinking about that. It's a great question, okay. And I think what we were able to tap into and we've been successful with FC2 and with PREBOOST, is we tapped into the telemedicine market, okay. And a telemedicine market is growing exponentially now, particularly because of COVID-19. And so, what would have taken 10 years is now happening in months. And what it has done is a whole world has moved away from I want to go to CVS and take two generic drugs with a copay, two, if I can punch a number in my phone, it can show up by Amazon the next day discretely, then that would be wonderful. And so you see a lot of these and other companies, get Roman and others, they are taking basically generic erectile dysfunction products and they are selling the hell out of them, okay. And for some of these groups, they are seeing $200 million to $300 million in revenue. I mean it's just unbelievable for what you and I would have call a generic product, okay. And so, there is a completely untapped group of men into the case of TADFIN, that if they have this available through telemarketing and it can be sent to their home discreetly, and we price it appropriately that's the key thing. It's a whole new universe, okay. And if I would have told you I went with FC2 when we did marketing and selling with 12 salespeople, and they ran around there, visiting OB-GYN doctors, we got 400 prescriptions a month for 12 people. In telemedicine, I don't know, we just reported with 348,000 prescriptions in this past year and the year before that 158,000 prescriptions. You don't realize the power of the internet. And by the way, we don't spend anything, almost nothing on marketing and selling as a company. And so that money can go into drug development. So same thing with TADFIN, we don't have an appetite to set up a marketing and selling sales force to TADFIN. We think the advantage of TADFIN is going to be the discreteness, convenience, and being able to get it into telemedicine and not use our marketing and selling dollars to do that as a company and let our partners do that. And I can tell you, we're an active partner to discussions around TADFIN internationally and nationally and it'll be great for us. Because again, we've got to keep your eye on the ball, which is the $6 billion market, $3 billion market with our prostate cancer and breast cancer products, and got to get those trials filled and get it done on time and hold bid. And so if the TADFIN to add a little extra cash to the pile of cash that we're accumulating so that we can keep this moving, I think it's attractive. And basically we're almost there. And we also heard from the FDA that they're going to waive the fee, the PDUFA fee I think is the technical term for it. So the NDA, because we're a small company. So we're not going to even spend that filing fee for this product. So it's upside for us.

[Leland Gershell:]

Great. Thanks so much for the color, Mitch.

[Mitchell Steiner:]

Thank you.

[Operator:]

The next question comes from Kumar Raja of Brookline Capital Markets. Please go ahead.

[Kumar Raja:]

Congratulations on the licensing and thanks for taking my questions. For enobosarm Phase 3 trial, are you planning to go forward with the 9 milligram dose or the 18 milligram dose? What can you share with regards to the safety and efficacy profile for both those doses? And also, what needs to be done before you can start the Phase 3 trial? Do you have enough drug supply? And how easy or difficult is it to manufacture this drug?

[Mitchell Steiner:]

Good. Thank you for both the question. So this refers to the new acquisition enobosarm. The Phase 2 study has 9 milligram and 18 milligram doses. Today the presentation will happen at 9, no tomorrow. Tomorrow is the presentation on that part of it, so stay tuned. So I can't give you the actual details. But I can give you some general comments. General comments after being in 25 trials, now this is a very well tolerated drug. Naïve cancer just as a drug in general, even if it was a quality of life drug, I mean, it's amazingly well tolerated. And so we're going to announce the safety there. And things that you would worry about within an agent of this sort would be hematocrit increases, liver toxicity, you worried about virilization in women and we just don't see that. And so we will share with you the exact safety profile in the future right after that presentation. So the presentation, that spotlight presentation at the San Antonio will have that information and they will put it out subsequently so everybody can get access to it, if they're not getting into the program. So with that said, it's very well tolerated. Now with that said, the 9 milligram and 18 milligram you'll see the efficacy. And again, I don’t want to share much more than that, except to say that like the first Phase 2, that was done in 22 patients it's a good activity and you're going to see that. But we are going to go with the 9 milligram and you'll see the reason why after the presentation, and that's where we met with the FDA. The FDA agreed to the 9 milligram. So drug definitely has activity in a heavily pretreated patient population. When I say heavily pretreated not only at multiple lines of endocrine therapy, but also chemotherapy. And so these are patients that are not the patients that are going to be in our Phase 3, in which who would not have had chemotherapy and they'll be even more likely to respond to enobosarm. As it relates to what are we waiting for, we had to meet with the FDA. And we got that out of the way. And the next thing is, you're absolutely right, we do have to have the 2b marketed drug a product. And so we're doing that now. It's not hard to make, but you have to go through the process where you want to bridge from the new 2b marketed forum into the forum that was used in the other 25 trials. And so it's not complicated, it just takes time. And so with all that's happening as we speak right now, and so we are on target to start in the first-half, hopefully by early summer, we'll get started with the actual Phase 3 part of it. And so it'll take us takes about a quarter, quarter and a half to do the GMP stuff.

[Kumar Raja:]

Okay, thank you so much.

[Mitchell Steiner:]

Thank you.

[Operator:]

The next question comes from Peter McMullin of Peter McMullin Consulting. Please go ahead.

[Peter McMullin:]

Congratulations, Mitch.

[Mitchell Steiner:]

Thank you, Peter.

[Peter McMullin:]

When you talk about maximizing assets and if you were to sell off the FC2, for example, how would you propose to maximize the tax losses which are considerable going forward?

[Mitchell Steiner:]

Yes, that’s great question. So I'm going to let Michele answer that question. And Michele, would you like to take that one on?

[Michele Greco:]

Sure. Peter, we would be selling the company in the UK, which holds the $63 million in NOL. And so we would take that into consideration when we look at the value that we're looking for if we were to sell the FC2 business.

[Peter McMullin:]

Good thought. And what about the U.S. side?

[Michele Greco:]

The U.S. side, if we were to sell the FC2 business, it's just assets in the U.S. All the NOLs will be retained by Veru.

[Peter McMullin:]

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.

[Mitchell Steiner:]

Thank you, Operator. Again, I appreciate everybody joining us on today's call and I look forward to updating all of you on our progress in our next Investors call. Have a Merry Christmas, Happy New Year. And hopefully 2021 will look a lot different than 2020. Thank you.

[Operator:]

The digital replay of the conference will be available beginning approximately noon Eastern Time today, December 9th 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 10149625. Please record your name and company when joining. The conference has now concluded. Thank you for attending today's discussion. You may now disconnect.