Veru Inc. (VERU) CEO Mitchell Steiner on Q3 2019 Results - Earnings Call Transcript

Aug. 08, 2019 3:02 PM ETVeru Inc. (VERU)
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Veru Inc. (NASDAQ:VERU) Q3 2019 Earnings Conference Call August 8, 2019 8:00 AM ET

Company Participants

Mitchell Steiner - Chairman, President and CEO

Michele Greco - CFO and CAO

Conference Call Participants

Brandon Folkes - Cantor Fitzgerald

Kumar Raja - Brookline Capital

Yi Chen - H.C. Wainwright

Peter McMullin - Tiger Management

Shawn Boyd - Next Mark Capital

Operator

Good morning, ladies and gentlemen, and welcome to Veru, Inc.’s Investor Conference Call. All participants will be in listen-only mode. [Operator Instructions] After this morning's discussion, there will be an opportunity to ask questions. Please note, that this event is being recorded.

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 and developments in such forward-looking statements.

Factors that may cause actual results or developments to differ materially include such things as; the risks related to the development of the company's product portfolio; risks related to the ability of the company to obtain sufficient finance – financing on acceptable terms, we needed to fund developments and company operations, risks related to competition, government contracting risks and other risks detailed in the company's Press Releases, Shareholder Communications and Securities and Exchange Commission filings. For additional information regarding such risks, the company urges you to reviews its 10-Q and 10-K SEC filings.

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

Mitchell Steiner

Thank you, operator and good morning. This is Dr. Mitchell Steiner, I’m the Chairman, President and CEO of Veru, Inc. and joining me are; Michele Greco, CFO and CAO; and Phil Greenberg, Executive Vice President, Legal. Thank you for joining our call.

Veru is a urology and oncology biopharmaceutical company, focusing on prostate cancer and prostate cancer supportive care medicines. Today, we will update you on the clinical development of our drug pipeline and the commercializations of our products as well as provide financial highlights for the third fiscal quarter 2019.

We are delivering on our strategy to be the prostate cancer company. We are dedicated to the development and commercialization of products to address unmet medical needs for prostate cancer treatment and supportive care. The markets for prostate cancer treatment and prostate cancer supportive care are well established as multi-billion dollar markets and given our core expertise and the number and type of drugs in our pipeline, we are uniquely positioned to understand, develop and commercialize medicines with these unmet medical needs of prostate cancer patients.

Here's a brief update on the advancement of the prostate cancer drug pipeline. We have made significant progress with the enrollment of our open label, Phase 1b/2 clinical trial with VERU-111, a novel proprietary first-in-class oral selected antitubulin agent for metastatic castration resistant prostate cancer patients who have also become resistant to novel androgen blocking agents enzalutamide or abiraterone, but prior to IV chemotherapy, also referred to as sort of the pre-chemotherapy or the chemotherapy naive stage.

In other words, the open label Phase 2 clinical trial will target those patients whose prostate cancer has progressed, but before they're offered IV taxane chemotherapy. The pre-chemotherapy space in men who have failed a novel androgen blocking agents is currently the fastest growing unmet medical needs segment in advanced prostate cancer.

In the Phase 1b study, we are determining the maximally tolerated dose, by finding the dose limiting toxicity. Based on inflammation from the Phase 1b clinical trial, we will be able to select the treatment dose that will be evaluated in the Phase 2 clinical trial. We will find the maximally tolerated dose by treating three patients at a time, with an oral, daily dose of VERU-111 for seven days, followed by two weeks off drug, which represents one cycle.

We will treat for at least three cycles and for the patients that are responding to treatment, we will continue this treatment and increase the schedule to two weeks on drugs and one week off for three additional cycles, and then, three weeks continuously on drug, unless there's evidence of prostate cancer progression. This will allow us to assess the durability of the anti-cancer response. The escalating doses of 4.5, 9, 18, 27, 36 and 45 milligram doses of VERU-111. We have now those dosed all six cohorts and awaiting on safety information for the last group which is the 45 – the most recently dosed group which is the 45 milligram groups.

At this time, we can provide an update on some promising early clinical observations in 18 men. As with safety, VERU-111 is well tolerated. We have not seen dose limiting toxicity in men taking the drug for one week on and two weeks off, and so far, also men taken the drug two weeks on and one week off. There have been no reported complaints of neurotoxicity, no evidence of neutropenia or liver enzyme changes, which commonly occur with IV taxanes.

As with the anti-tumor activity, we continue to be encouraged that men whose PSAs was rising – were rising prior to enrollment into the Phase 1b, treatment of VERU-111 in some men have resulted in PSA stabilizations and reductions which are promising early indications of efficacy. As we have not yet reached dose limiting toxicity, we will continue to test higher doses of VERU-111 until we see dose limiting toxicity. We will continue to report safety and efficacy clinical data from the Phase 1b study which is progressing quite nicely. After we have selected a dose from the Phase 1b study, we will then start the Phase 2 study.

According to our QBF, oral drugs abiraterone and enzalutamide for advanced prostate cancer had over $6 billion in 2018 global annual revenue. Interestingly, in men with castration resistant prostate cancer, take these drugs 12% to 25% will just kind of march right through that continue and they'll have cancer progression. 75% to 85% of men will have initial tumor response and then cancer progression within 9 to 15 months.

Men who have failed these novel androgen blocking agents that the patients of VERU-111 is targeting, which we estimate represents a $4.5 billion annual global market. There are currently no FDA approved drugs for men who have failed both androgen deprivation therapy and one of the novel androgen blocking agents.

Our next product candidate in a clinical trial is zuclomiphene, a novel, proprietary, oral, non-steroidal estrogen receptor, agonist being evaluated to treat hot flashes, the most common side effect in men on androgen deprivation therapy for advanced prostate cancer and a major reason why men want to stop androgen deprivation therapy. We are enrolling approximately 100 men in a multi-center, double-blind placebo dose finding Phase 2 clinical trial, evaluating two doses; 10 milligrams and 50 milligrams of zuclomiphene versus placebo. We anticipate top line results in late summer, early fall 2019, based on the current blinded aggregate preliminary data from our placebo controlled trial.

I'd like to share with you the following general promising clinical observations. Many men are experiencing substantial reductions in hot flashes. As the safety zuclomiphene is well tolerated. In the aggregate safety database, which is made up of both zuclomiphene and placebo treated men, we have not received any reports of gynecomastia, painful breasts or venous thromboembolic events, which you commonly see with higher dose estrogen.

Based on an independent market analysis sponsored by the company, which included interviews with payers covering 259 million US lives, urologists and medical oncologists, the market research estimates that the US potential sales was zuclomiphene citrate will be over $600 million annually, with a 25% market penetration. This independently confirms that zuclomiphene for the indication of treatment of hot flashes to men on the androgen deprivation therapy for advanced prostate cancer is a major market opportunity. Currently, there are no FDA-approved drugs for this indication.

We have also added a new prostate cancer therapy to our robust drug pipeline. Veru announced in June, that we added a breakthrough novel androgen deprivation therapy formulation called VERU-100, following a successful meeting with FDA. VERU-100 is a proprietary peptide drug candidate for the treatment of hormone sensitive advanced prostate cancer, which is an established multi-billion dollar global market.

VERU-100 was internally developed in collaboration with drug delivery experts of San Diego, California. The target product profiles of VERU-100 is commercially and scientifically most compelling, as having a number of anticipated advantages over currently available androgen deprivation therapies. VERU-100 is a long-acting gonadotropin-releasing hormones which is GnRH antagonist designed to be administered as a small volume subcutaneous three-month depot injection without a loading dose.

As a GnRH antagonist, it will immediately suppress testosterone with no testosterone surge upon initial or repeated administration and no testosterone micro increases, which may adversely affect patient outcomes. A problem which potentially occurs with the already-approved LHRH agonists drugs like LUPRON, ZOLADEX and Eligard. Currently, there are no GnRH antagonist commercially approved for treatment beyond one month, making VERU-100 if approved, the only commercially available GnRH antagonists three-month depot, an attractive choice to androgen deprivation therapy.

When the company recently met with FDA, we received agreement that VERU-100 qualifies for an expedited regulatory pathway. Based on this FDA input, the company plans to commence a single open label, multi-center dose finding Phase 2 clinical trial and approximately 60 men, followed by only a single open label, multi-center Phase 3 clinical trial and approximately 100 men. Veru is in the process of scaling up GMP manufacturing drug product to prepare for the clinical trials of VERU-100. The company plans to submit an investigational new drug application by early 2020, so we can commence the Phase 2 clinical study.

We will continue to execute our strategy to become the prostate cancer company, by expanding and advancing our deep pipeline of late-stage, proprietary oncology products for men with advanced prostate cancer. As VERU-100 qualifies for an expedited FDA regulatory pathway, it represents a lower cost investment opportunity for a major product that can address the shortfalls of the current $2.6 billion global androgen deprivation therapy market.

Veru’s ability to advance the clinical development of our proprietary prostate cancer drugs that address unmet medical needs in large markets is being substantially supported by investments of two commercial sources of revenue; the FC2 Female/Internal Condom, as well as PREBOOST/Roman Swipes, 4% benzocaine wipes for premature ejaculation. As you can see from the earnings release, in Q3 fiscal year 2019, we continue to have significant growth in revenues and gross profit from these commercial products.

Although Michele Greco will cover the detailed financial results highlights in a few moments, I would like to make a few comments. We continue to grow and expect further increases of FC2 sales in the public sector with increases in units that sold in the global public sector from 18.4 million units in fiscal year-to-date 2018 to 26.8 million units at fiscal year-to-date 2019. We started shipping South African orders in Q3 fiscal year 2019 and we expect to ship significant orders for South Africa under the tender award in Q4 fiscal year 2019.

As for the FC2 by prescription in the US, we increased sales from $834,000 in fiscal year-to-date 2018 to $9.4 million in fiscal year-to-date 2019, which is an increase created 10 times year-over-year. We expect to have significant growth in sales as we have signed new agreements to supply FC2 by prescription to telemedicine companies and to pharmacy distributors.

We've also dramatically shifted the ratio of FC2 sales in global public sector to US prescription sales. In the fiscal year-to-date 2018, US prescription net revenues were 88% compared to global public sector net revenues of 92% versus now and fiscal year-to-date 2019, the US prescription net revenues of 42% compared to global public sector net revenues of 58%. The robust growth of the US FC2 prescription business remains noteworthy, as it allows us to be less reliant on intermittent ordering patterns typically seen in our traditional FC2 public sector business.

For our premature ejaculation product, marketed as Roman Swipes, the company entered into a multiyear US distributor agreement with Roman Health Ventures, a premier and fast-growing men's health and telemedicine company that discreetly sells men's health products via the internet through the website, www.getroman.com. We have begun to see these revenues grow and we plan to comment on details of these revenues next quarter.

Focusing now on Veru’s commercial segment, which is FC2 PREBOOST/Roman Swipes and drug commercialization costs, we had net revenues in Q3 fiscal year 2019 of $9.7 million compared to $5.5 million in Q3 fiscal year 2018, which is of 77%. Net revenues for fiscal year-to-date 2019 were $23.1 million, compared to $10.7 million in fiscal year-to-date 2018, which is up 116%. In fact, gross profit the fiscal year-to-date 2019 was $15.8 million, compared to all of fiscal year 2018 of $8.7 million, which is up 80% when comparing only the first nine months of fiscal year 2019 to the full fiscal year 2018.

With continued revenue growth, we have been able to substantially fund the development of our prostate cancer clinical programs and our urology specialty pharmaceuticals for the past nine months, we intend to continue this revenue growth trajectory with the revenues that we will generate from the commercialization of the company's proprietary tadalafil and finasteride combination tablet, for the treatments of BPH called TADFIN.

We expect this to be the company's first pharmaceutical urology asset that move into commercialization. We recently had a pre-NDA meeting with FDA for TADFIN for the treatment of BPH. The purpose of the meeting was to discuss the proposed NDA and to confirm the clinical, non-clinical and the chemistry manufacturing controls requirements for the company's NDA submission, utilizing the FDA expedited 505(b)(2) regulatory pathway.

Veru submitted a pre-NDA briefing document to the FDA that outline the company's preliminary data package being prepared for the NDA submission, including bioequivalence and bioavailability clinical study results, CMC and other regulatory elements with the 505(b)(2) submission. Based upon the Veru’s in-person meetings and written communications with FDA regarding our pre-NDA briefing package, we believe that all the requested components of our upcoming TADFIN NDA will be available to fulfill the FDA’s requirements for submission after we have reached 12 months of stability data for the TADFIN manufacturing batches.

Veru is excited to advance our 505(b)(2) development program to an NDA submission by the summer of 2020. We look forward to working with FDA to bring this novel and differentiated treatment option that combines both tadalafil and finasteride into one formulation for men’s suffering from BPH.

Tadalafil trade name Cialis is currently approved for treatment of BPH and erectile dysfunction and finasteride is currently approved for the treatment of BPH as finasteride 5 milligrams PROSCAR, and male pattern hair loss, which is finasteride 1 milligram PROPECIA. The co-administration of tadalafil and finasteride has been shown to be more effective for the treatment of BPH that finasteride alone.

In the US, we’re commercially launching TADFIN only through telemedicine channels. As you have seen, we've had great success with our other products using this sales channel. We have also in discussions with potential commercial partners outside the US, having TADFIN revenues from US sales and potential partnerships with upfront payments and royalties from outside the US should add substantial near-term revenues with high gross margins to the existing and growing revenues from FC2 the PREBOOST/Roman Swipes products.

I will now turn the call over to Michele Greco, CFO and CAO to discuss the financial results. Michele?

Michele Greco

Thank you, Dr. Steiner. Let's start with our third quarter results for the three months ended June 30th, 2019. FC2 unit sales totaled $10.9 million, up 9% over the prior year third quarter of $10 million. Net revenues were up 77% to $9.7 million from $5.5 million in the prior year third quarter. The company reported FC2 sales growth in its prescription business, with net revenues up more than tenfold to $4.4 million from $400,000 in the prior year third quarter.

Net revenue for the public sector business was $4.9 million, compared to $5.1 million in the prior year third quarter. Gross profit was up a 114% to $6.6 million from $3.1 million in the prior year third quarter. Gross Margin increased to 68% from 56% in the prior year third quarter. The increase in gross margin is driven primarily by the increase in the US prescription business. These financial results reflect modest shipments under the new tender orders from South Africa.

We've previously announced that we won 75% of the South African tender, representing up to a 120 million units over three years for the total tender. This translates to approximately 30 million units per year for our company, and potentially $10.4 million in revenue per year for a total of approximately $30 million over three years. We started shipping these new orders from South Africa during the third quarter. We will be shipping more South Africa orders during the fourth quarter of this fiscal year.

Operating expenses for the quarter increased by $374,000 to $8.4 million compared to the prior year third quarter of $8 million. Included in the prior year third quarter operating expenses is $227,000 related to the settlement agreement we entered into with our Brazilian distributor during December 2017.

Excluding the settlement, the operating expenses increased $601,000, which is primarily driven by the increase in research and development costs of $1.1 million and primarily offset by a reduction of $800,000 in salary and marketing expenses due to the company exchange and its US sales strategy.

During the quarter, we incurred $934,000 of interest expense and change in the fair value of the derivative liabilities related to the synthetic royalty financing, compared to $1.8 million incurred in the prior year third quarter. For the quarter, we recorded a de minimis tax benefit compared to a tax expense of $1.2 million in the prior year third quarter.

The effective tax rate for this quarter is basically zero due to recording evaluation allowance against the net operating loss generated for the quarter in the US, which is the majority of the pre-tax loss for the period. The bottom line results for the third quarter of fiscal 2019 was a net loss of $2.8 million or $0.04 per diluted common share, compared to a net loss of $7.9 million or $0.15 per diluted common share in the prior year third quarter.

Turning to the results for the nine months ended June 30th, 2019. For the first nine months of fiscal 2019, FC2 unit sales totaled 28.1 million, compared to 18.5 million units in the prior year period, an increase of 51%. Net revenues were up a 116% to $23.1 million from $10.7 million in the prior year period. The company reported growth in FC2 sales in both its US prescription and public sector businesses and in PREBOOST.

Net revenues from the US prescription business was up more than tenfold to $9.4 million from $831,000 in the prior year period. And just to note, all of fiscal year 2018, US prescription revenues were $2.4 million. Net revenue for the public sector business was up 33% to $13 million from $9.8 million in the prior year period. Net revenue for PREBOOST/Roman Swipes increased $616,000 to $623,000 from $7,000 in the prior year period.

Gross profit was up 183% to $15.8 million from $5.6 million in the prior year period. Gross margin increased to 69% from 52% in the prior year period. The increase in gross margin is driven primarily by the increase in the US prescription business.

Operating expenses decreased by $1.9 million to $20.8 million compared to the prior year period of $22.7 million, included in the prior year operating expenses, is the $4 million related to the settlement agreement we entered with our Brazilian distributor, Semina during December 2017. Excluding the settlement agreement, the operating expenses increased $2.1 million, which is primarily driven by the increase in research and development costs of $2.3 million.

During the period, we incurred $3.9 million of interest expense in change and the fair value of derivative liabilities related to the synthetic royalty financing, compared to $2.1 million in the prior year period. We entered into the synthetic royalty financing during March of 2018.

For the nine months, we recorded a tax expense of $117,000 compared to a text benefit of $3.3 million in the prior year period. The effective tax rate for the nine months of 1% is due to recording evaluation allowance against the net operating loss for the nine months in the US, which represents the majority of the pre-tax loss for the period.

The company has been operating loss carryforwards for US federal tax purposes of $33.2 million, with $14.4 million expiring in years through 2037 and $18.8 million, which can be carryforward indefinitely. And our UK subsidiary has net operating loss carryforwards of $62.3 million, which do not expire.

The bottom line results for the first nine months of fiscal 2019 was a net loss of $9 million or $0.14 per diluted common share compared to a net loss of $16 million or $0.30 per diluted common share in the prior period. The reduction in the net loss of $7.1 million is due primarily to the increase in our gross profits offset by the interest expense.

Now looking at the balance sheet. As of June 30th, 2019, our cash balance was $8 million and our accounts receivable balance was $4.8 million. Our net working capital was $5.5 million at June 30th, 2019, compared to a negative $2.4 million at September 30th, 2018.

During the nine months ended June 30th, 2019, we used cash of $8.7 million in operations and we received net proceeds from financing activities of $8.9 million, of which, $9.1 million related to the public offering of the company's common stock last October, $3.6 million related to the sale of shares under their purchase agreement with Aspire Capital, $200,000 related to stock option exercises, all offset by installment payments on the synthetic royalty agreement of $4 million.

We continue to make significant progress on our clinical programs and are optimistic about the continuing increase in the US prescription business for FC2, the increasing global public sector volumes as well as the increasing sales of Roman Swipes to Roman Health Ventures.

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

Mitchell Steiner

Thank you, Michele. We have enjoyed another strong financial quarter, which has allowed us to significantly advance our clinical programs. In fact, we now have had four strong quarters showing revenue growth in the commercialization of our products. Furthermore, as we have completed at least one month in Q4 fiscal year 2019, the revenues continue to be strong. With the improving performance of the commercial products and the strengthening balance sheet, we believe that we have been able to substantially invest in the continuous clinical development of our prostate cancer drug product candidates, as well as to submit NDAs and if approved, commercially launched TADFIN which would provide even more revenue, adding to the already-grown revenues from our Female Health Division, and from PREBOOST/Roman Swipes.

We anticipate a steady flow of important positive news of Veru over the next few months to one year. We expect to report open label efficacy and safety clinical results, the Phase 1b and Phase 2 clinical trials with VERU-111. Our oral tubulin inhibitor for metastatic castration and novel androgen blocking agent resistant prostate cancer, as well as started Phase 3 study. We report clinical results with the Phase 2 clinical trial, evaluating zuclomiphene for the treatment of hot flashes caused by androgen deprivation and to have started a Phase 3 study.

Submit the NDA for TADFIN and expect approval and commercially launch the product following FDA review. Complete GMP manufacturing of clinical supply of VERU-100, submit the IND and commence the Phase 2 clinical trial. We secured our partnerships with some of our drug products and finally, we continue to demonstrate robust growing revenues for our commercial products, FC2 and PREBOOST/Roman Swipes. We are committed to driving shareholder value by becoming the prostate cancer company and providing a continuum of care for prostate cancer patients.

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

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question is from Brandon Folkes of Cantor Fitzgerald. Please go ahead.

Brandon Folkes

All right, thanks for taking my questions and congratulations on the progress during the quarter. One on VERU-111. Having dosed to six cohorts to-date, you mentioned you’re going to continue to dose into easy toxicity. So I just want to clarify, could there be additional doses beyond the 45 dose?

Mitchell Steiner

Yes. So the protocol allows us to continue to go up. And as you know, there's really, as I mentioned in the call, there's really - there's three parts to the study. First one is dose escalating at one week on and two weeks off. And so, in that and then let me lay off the three and then I'll take what we're doing.

So track one is, these cohorts come in three at a time and they go from 9.5 to 4.5. At second cohort, second part of the study are the patients that do not progress they get to stay on the drug and they switch over to two weeks on one week off, and a three cycles later this still not progressing. They're holding on, then we can go to three weeks on continuously. Okay, so that's the third.

So looking at the first track, which is just dose escalating at one week on two weeks off, yes, we are allowed to continue to go up. So at 45, it shows no dose limiting toxicity, we go to 54 and that shows no dose limiting toxicity, we go to 63. But in the background, the patients that have not progressed are allowed to keep going. So you could see we’re like hitting this thing, I mean because there's no dose limiting toxicity, we're able to give a lot more drug.

And if we can give a lot more drug, then as you know, in this class of agents with the anti-tubulins, more drug is better. And that's been shown over and over, the reason that can't give more drug is the toxicity so high. So this bodes incredibly well for an oral agent. And so this Phase 1b is going to be able to provide information not only on dose, but also on schedule, meaning, how often you able to give it?

So I'm excited about that part of it. So you're absolutely right, we will continue to raise the dose in three cohorts at a time. At the same time, we're going to be allowing the patients to the lower doses to go from one week on to two weeks off to two weeks on one week off to three weeks on, no time off. So we're going to get that information.

And interestingly, the final thing that we’ll be able to pull from this study for those patients that don't progress is what's really happening with progression-free survival. And so we know for this patient population based on the literature, that their progression-free survival is about 3.5 months. And so, what that means is that, these are sick patients. And so we're very encouraged by these early results.

Brandon Folkes

Okay, thank you very much. And maybe just want to follow-up and so just to confirm, we would only get data at the end of the study, so essentially, yeah, the longer we don't get data for perhaps –

Mitchell Steiner

Not necessarily.

Brandon Folkes

Depends.

Mitchell Steiner

Not necessarily. So my thinking is that, as we start moving towards this – you can have a study and because it's open label, we can provide data, okay. So the idea is that, at the scientific meetings and particularly on the calls, I'll be able to update you. But we are starting to target some of the scientific meetings to present the dataset, and even though will be partial because we haven't reached toxicity.

You'll be able to see at least what we're seeing, and particularly on the safety side, because that's why we do the 1b, and we're just not seeing neutropenia, we're just not seeing neurotoxicity. We're not seeing liver function issues, but yet we are seeing PSA stabilizations, we are seeing PSA reductions. So you're in the window for activity, but we're not seeing the safety. So the answer is, yeah we could see the Phase 1b data as I mentioned in the call sooner.

Operator

Thank you, sir. Our next question is from Kumar Raja of Brookline Capital Markets.

Kumar Raja

Thanks for taking my question. So one more on VERU-111. So in terms of the PSA stabilization and the reductions, at what doses and at what time points do you see that? And also in terms of the 21-day cycles, what are you seeing there? Or do you see patients continue to move forward there? And at what doses are you seeing that?

Mitchell Steiner

Yeah, good question. So what I can tell you is that, we – and I mentioned this on the previous call is that, we even at the lowest doses, which is the 4.5 and the 9, we're seeing the stabilizations and reductions. So it appears this drug is active, okay.

As it relates to your question about the 21-day cycle. So where we are now as these patients, almost all of these lower dosed patients are moving into the 14-day on and one week off were just starting patients that are moving to the 21-days on and continuous, because if we think about it, if you do three cycles at one dose, and then you switch to three more cycles of the second schedule, and then you do – you move on, you're looking at 9 weeks and that is 18 weeks. So that's 4 – with that 4.5 months.

So, they're getting past the 3.5 months, which is what you would have expected a progression-free survival. So we're just starting to see the 21-day cycle 21 days – yeah, 21 day drug on cycle. And there's not much I can say much more than that, but I can tell you so far for the 14 days on and one week off with as I said in my comments, my former comments, we're not seeing a neurotoxicity and neutropenia or liver function changes.

Kumar Raja

Okay, and how quickly can you move to the Phase 2 part once the Phase 1 is done? And also for the zuclomiphene Phase 2 data, what would you consider a homerun?

Mitchell Steiner

Yeah, good question. All right. So you can just snap two questions here, so I'll answer them. So for VERU-111, because we've already pre-cleared and I think it’s the best way to say we've pre-cleared the Phase 2 design with the FDA, then literally, there is no – nothing that has to be done except that we picked a dose and we can immediately expand into the Phase 2.

So when we hit a dose limiting toxicity, the way that works is, you take another three patients at that dosage you saw the toxicity and you're looking to see whether in six patients, what is that rate, and that will inform you to your Phase 2 dosing. So that would - you'll have a little – once you get your toxicity, you have at least a month there before you can go to your Phase 2, because you've got to double check the toxicity, that makes sense.

As it relates to zuclomiphene, great question. So and as you know, we've been thinking about it, so what makes this study a little different is, you'll see in the literature that estrogens can reduce hot flashes by 80 – 70% to 80%. But what the literature does is, it combines all of the types of hot flashes.

In other words, you can have mild hot flashes, you can have moderate hot flashes, you can have severe hot flashes, moderate means, you just feel warm – Assuming, mild means, you just feel warm. Moderate means, you feel warm and you sweat and severe means, you feel warm, you sweat and you have to stop doing whatever activity that you're doing, okay.

The FDA does not – even the loser has an 80% reduction, the FDA views as clinically meaningful that you have to fix is the moderate to severe, so not the mild. So now that means that you're taking the worse of the worse and then asking the question when there's no option right now, what kind of reduction would you see?

So, that right now the loser is telling you you're seeing and your placebo group about a 20% or 22% reduction, what would be a homerun in a hot flash study? I mean, clearly 40% I mean, 60% with no option right now. So if you can, if – so that means, one in to one to one and two patients will see an improvement in their hot flashes, so they can continue the medicine that's required to treat the underlying disease that would be pretty good.

So to me, there's two parts to the homerun, because everything in drug development is benefit versus risk. So the benefit is, you're statistically and clinically meaningfully better than placebo. And then the second thing is, boy, you got good safety. Because if you have good safety, we are expecting to use this drug chronically.

And we have set up the development of the drug as a chronic drug. And the agreement that we have with the FDA is, this is going to be a chronic drug. And these patients on androgen deprivation, stay on androgen deprivation for potentially decades. The safety part can bode extremely well for a very – what could be a very successful product.

Operator

Thank you, sir. [Operator Instructions] Our next question is from Yi Chen of H.C. Wainwright. Please go ahead.

Yi Chen

Thank you for taking my question. Looking at the operating expenses in the third quarter, the period that it was meaningful and higher than the second quarter. So how should we look at the R&D and SG&A expenses going forward?

Mitchell Steiner

Good question. So I'll answer the big picture and then I'll have Michele also provide some comments. As you know, we have three programs, and we have been budgeting for those clinical developments for those three programs and as we had mentioned that, given the current budget, we're going to be able to, with the revenues coming in existing sources of capital, be able to make it to the end of 2020. And certainly beyond that the revenues continue to go up. So from that standpoint, the way to think of it is that, we're still on track to be able to manage our business, given where we are now.

However, one of the things that's very interesting is, now we're starting to see some very promising signals of just data from the cancer program and we look at the aggregate hot flash data with the safety and in the degrees of hot flash benefits that we're seeing in the aggregate data and now we've also added VERU-100, which is a GnRH antagonists long-term depot, and the FDA is telling us, all you have to do is a 60 patient study and a 100 patient study, you can do on the market, there may be an opportunity based on this to potentially increase some of our spend.

But at this point, now, the way to think of it immediately, would you like to answer that, Michele?

Michele Greco

Yes. As I mentioned in my comment, looking back when you compare this period to the last period, whether it's for the quarter or for the nine months, we did hit some unusual items in there which we did separate out. And our expenses, they're not as predictable for the research and development, you can't just look at this quarter and try to determine that this quarter is indicative of what the next quarter is going to be for research and development. Because as Mitch said, we're continuously progressing these drugs. And so costs change depending on which phase of the program you're in.

And as far as the selling and administrative expenses, we did have a change in the sales strategy. So we're starting to see the impact or therefore the reduction and looking at our expenses. So our expenses are getting a little bit more normalized, but there again, there are different things and facts and circumstances that change, I would say that, they're a little bit more in line with what you're seeing here in our third quarter, to be experiencing in the fourth quarter.

Mitchell Steiner

Thank you.

Yi Chen

Thank you.

Operator

Thank you very much. The next question is from [indiscernible]. Please go ahead.

Unidentified Analyst

Yes. Good morning. This maybe a question for Michele. I'm sorry, if I missed this earlier. Could you flesh out the net cash provided by financing activities in the nine months in the cash flow statement, please?

Michele Greco

Sure.

Unidentified Analyst

Approximately $9 million?

Michele Greco

So that was - $9.1 million was the public offering we did in October, $3.6 million relates to sales of shares under the Aspire agreement and $200,000 related to stock option exercises, and then, we had a payment under total payments under the synthetic royalty of $4 million.

Unidentified Analyst

Thank you.

Mitchell Steiner

Thank you, Dave. Next question.

Operator

Thank you very much. Next question is from Natalie Hurtig. Please go ahead.

Unidentified Analyst

Hello, Mitch. This is actually Steve Dearholt [ph]. And my question is in concern of you mentioned the value of having a safe drug. Do you anticipate being able to use this VERU-111 and other types of cancers? Are you thinking about that for your future? And maybe even licensing that for with other drug companies?

Mitchell Steiner

Yes. So Steve, thank you for the question. And absolutely. So let me – and this kind of gets to a little bit of why I was saying, because of the promising information that we're seeing. Our job is to increase the value of the asset, and to ultimately provide the VERU-111 not only again increase shareholder value, but to get to the patient that needs a drug. And if you have a drug that's an antitubulin, antitubulin is traditionally have been incredibly toxic. But we know if you give more, it's better.

Well, antitubulins is not a prostate-specific targeted mechanism. And just happen to be in prostate cancer is very effective. And in prostate cancer, you can look at PSA, which is a fast way to get a read and whether you're seeing the activity. But there are so many cancers today that are sensitive to antitubulin like taxanes and ixabepilones and vinca alkaloids, that we would very much consider sooner rather than later, to expand into other like tumor types, because that will show the value of the job.

So to give you an example, Medivation, which was sold to Pfizer, $14 billion, their job is only prostate cancer drugs, and a site that was sold to Novartis for $2 billion plus, only a prostate cancer drugs. Cougar and Aragon both were sold to J&J of about $1 billion apiece, only prostate cancer drugs.

So if you were able to show that your prostate cancer drug and you had activity outside of prostate, then I think it will really truly increase the value of the drug and increase the likelihood of a significant partnership. Because, then you're thinking about blowing it out into multiple tumor types, which we should be doing.

With that said, I think, as a small company, we can take on the task of additional Phase 2s with small numbers of patients that show signals, just like we're doing in prostate, and with that very little investment, I think it will increase the value of the opportunity. So this is different. We stuck with prostate, because that's our - as I say stick with your knitting that you know, but on the other hand, it's very clear that this could be a major oncology product.

And even in the field of IV chemo, and the whole field of medical oncology, oral agents are taking over, patients just don't want to sit in chairs anymore and get IV chemo, they can get something orally at home or he can manage the dose by just decreasing the number of tablets and keeping the patient by having spent eight hours in the fusion chair. And you have less toxicity than these other agents, particularly neurotoxicity and neutropenia. This is knock on wood, it's looking very attractive.

Unidentified Analyst

Okay, thank you.

Mitchell Steiner

Thank you.

Operator

Thank you. The next question is from Peter McMullin. Please go ahead.

Peter McMullin

Good morning, Dr. Steiner. Speaking to you from the Toronto International Airport. Congratulations on a lot of the cylinders working properly yet. My question would be that what's keeping you awake these days at night? You know, what could go wrong, could go wrong?

Mitchell Steiner

Yeah, it’s a good question. So when you look at base business, the first thing – the thing that worries you for the FC2 business, PREBOOST, but I’m not worried about, that's growing and as you know, and it's an exclusive and getroman is good. As it relates to FC2, we break into public sector and FC2 prescription business. What keeps me up at night in the public sector, which I think would mitigated with the FC2 prescription business, is that the public sector even though we have about 90% market share, there - just as anticipated, competition is coming in and pricing has to come down, all the things that we've predicted and the reason why we did the transaction with a Female Health Company has come to beat.

And so, here we are now, if we did not diversify, as the Female Health Company Board had done, we will be in a whole hell of trouble, if you look at our numbers, you can see that everything grew except the number of units this last quarter in the public sector, and we're getting less for those units in the public sector. So what keeps me up at night – keeps me up at night was sort to solve that problem by having a more robust US business. And so in fact, we've been able to, and I think we're on the track guys to have the best revenue year that the Female Health Company now Veru has ever had. So I'm pretty excited about that.

As it relates to the drugs, drug development, when you’re putting a poison in a patient that hasn't seen before. And so literally every day you wake up wondering, what you're going to see, the longer you go, and the higher the dose goes, and you don't see something you start to feel pretty good. But that keeps you up at night, because drug development is all about, what are some of the off target effects you didn't expect? And obviously, drugs that we have, VERU-100 seems to be the one that GnRH antagonist seems to be the most straightforward, both from a regulatory clarity standpoint, it's not going to cost a lot of money, people understand the drug. So it's pretty attractive from that standpoint.

Zuclomiphene blinds away. We know estrogens work for hot flashes. But and we also know that the estrogen is dose limiting in terms of this toxicity. And we did find an oral agent. Again, we didn't know that before, but we know this now, based on the aggregate data, we found an oral agents not giving us gynecomastia, it's not giving us breast tenderness and we're not seeing the rate of venous thromboembolic events that you would expect. So that used to keep us up at night and feel better.

And then VERU-111, this is an exciting drug that we finally have in man and it's playing out quite frankly, very much like the preclinical models and animals, where we did not see neurotoxicity, we did not see neutropenia and people always say, you can't translate that into man. But that's what we're seeing. So in general, I'm very, very happy with the business. I'm very happy with the team. And I think I think we've made great progress.

Peter McMullin

About to call my flight, so like I worked in One Click One, the judge dismissed the lawsuit and I guess they had 30 days to appeal. Is there any continuing issue there?

Mitchell Steiner

Yeah, as we saw from the press release, that they dismissed everything, and it's completely dismissed. And the other side always has a chance to appeal. And at this point now, to our knowledge, they have not. And so that's all we can say at this point. But if you look at it, everything that case was based on the judge that said no, and dismissed it. So we feel pretty good. And we've got a good case and so far every step of the way. It's been in our favor. So we're feeling pretty good.

Peter McMullin

I also want to want to add - okay, thank you, Peter.

Operator

Thank you. The next question is from Shawn Boyd of Next Mark Capital. Please go ahead.

Shawn Boyd

Good morning. Can you hear me, okay?

Mitchell Steiner

Yes, perfectly.

Shawn Boyd

Right. Just wanted to go back to FC2 for a second. The US prescription sales? Well, I mean, congratulations on the growth in both measures, there that the public sales and the prescription sales, but on the prescription sales in particular, that growth. Can you help us just a little bit on how you're penetrating that and sort of maybe for those of us newer to the story, what you're targeting? How big can that be? And maybe just some parameters to think about as we [indiscernible] here and then go into 2020?

Mitchell Steiner

Yeah, so first of all, if you're new to the story, one other things that we did is, we took advantage of the Affordable Care Act, the Affordable Care Act, now almost nine years ago, when it was enacted, basically said that female contraception which the female condom is number 12 on the list, that insurance companies were mandated to pay for the product with no co-pay. And the drug was at that point – the product FC2 is at that point was a Class 3 medical device. It's now it's been downgraded to a Class 2 medical device, but hasn't changed anything. We still have essentially the largest market share in that product.

What we did as we said, what, if this is can be paid for by insurance companies, then we need to make it available by prescription, making available by prescription doesn't just mean you say you're available by prescription. So we spent first year and a half, creating the infrastructure and making sure that 98% of retail pharmacies actually had the product that we packaged it in 12 packs so that it makes sense for a woman that wants to get it, that had all the right codes, it was in the Compendium, it was truly a prescription product.

Then we went out to six different channels by which the which I'll just tell you two of them. One was by traditional marketing and selling with a Salesforce, Salesforce at 12 and then we had an independent contracting Salesforce of 80 and then we decided to see what would happen if we hooked into telemedicine and telemedicine until a pharmacy, is where it took off.

So as you would imagine, if you want to do marketing and selling like a drug, you got to pay bonuses and people and salary. And all of a sudden you're putting a lot of money out to get very little. But if you want to do telemedicine and telemedicine is basically a internet-based group that has doctors that interact with the patients through an intake form or through Skype. And basically you're providing them with female contraception, some of them have cash pay, some of them are by insurance. And essentially, they fill the prescriptions and they actually deliver the prescriptions to their homes, just like a Walgreens would or CVS would. And that whole group is basically tapped into a, what I would call a blue ocean, meaning, that there's so much pent up demand for women to try to avoid having to make the schedule with OB/GYN doctor, the primary care doctor and make the appointment, pay for the appointment, get the prescription.

And so the barrier to entry is the doctor, I'm a doctor, we’re the barrier to entry. And so what telemedicine does, it goes, it circumvents that in a sense that the woman will interact in a discreet way, get her birth control in a discreet way. And the birth control was mandated to be paid for by the Affordable Care Act, it was kind of a perfect storm. So all of these telemedicine groups started springing up around the birth control pills, emergency B contraception, and then now our Female Condom. And it's like it's allowing to provide a portfolio of female contraception that they didn't have before.

And so we hooked in. And it turns out, and I’ll give you roughly the numbers, roughly, so we went from something like 1,400 prescriptions in first quarter - first fiscal year 2018. By the time we got to fourth quarter fiscal year ‘18 we were about 15,000 prescriptions, and this quarter, I think just to fast forward another six months, this quarter, we hit about 51,000 prescriptions, and so for a quarter. And so to answer your question, that's what the growth is.

And to be able to use the internet and some of these telemedicine groups are licensed in all 50 states, some of them are fewer. And we have moved our role from being a marketing and selling organization spending money to have a sales head and having sales people and all of that stuff to becoming a wholesaler, all we're doing now is basically providing the product to the telemedicine networks. And so what that means is, we've gone from having a US FTE base of about 18 to 20 to about three or four to make that kind of money.

And so from a – so we've been able to now take that money and plough it into our drug development. So if you're new to the story, I think that has been the success. Can it continue to grow? Yeah, there's a lot of things we haven't learned, for example, what's the reordering rate?

All right, the other thing we have to learn is, so far it looks like so many new telemedicine groups are starting to show up. It's like getroman is a perfect example. They’re in men's health now with their many that are focused just in women's health, and they're expanding and they're contacting us. So I don't know the answer right now, I can tell you every time our team looks out, there's another 2, 3, 4 or 5 of these telemedicine groups that coming to the table and all we have to do is, provide it as a wholesaler. And so it's been a very interesting ride.

Operator

Thank you, sir. The next question is from [indiscernible]. Please go ahead.

Unidentified Analyst

Hi, can you hear me?

Mitchell Steiner

Yes.

Unidentified Analyst

Good. I wondered if you could talk a little bit about your partnering and licensing strategy going forward. For instance, when do you think it would be viable to start looking at those discussions?

Mitchell Steiner

So I can tell you from my experience, that when you see a company all of a sudden announce this good news on their drug development program. And then all of a sudden, two or three weeks later, do a big pharma deal. It didn't happen in two to three weeks. What typically happens is that, you begin talking to large pharmaceutical companies, 18 months, 12 months, before you think you're going to be announcing that news.

And you do that, because you want to keep them up-to-date, some of them will sign non disclosure agreements, and they'll come in and look at the data, most companies at least in our situation, we would hold them off, because our thinking is, we want, we're going to have more value for the shareholder, the more that we have data. And but you just can't engage in the last minute and expect it just takes time.

So we have already started the process now over the last year, year and a half of talking to large pharmaceutical companies that you would expect, would be very interested in a product like VERU-111. Particularly if we can be used after their product, with their product or before their product. And they're already committed to the $6.5 billion revenue getting now in 2018, they can do everything they can do to protect that.

And so we're on the radar for VERU-111, Zuclomiphene, the same thing. We've already started discussions for about a year to 18 months, VERU-100 is new, we just announced that one so that one we haven't done much with. TADFIN, for the last 18 months we've been extremely active outside the US, trying to secure our partner, that has been moving very, very nicely.

In the US, our strategy is they hold on to it for we’re potentially launching through telemedicine, so that we don't have to have a marketing and sales group. But we can use that money to continue to support our clinical development and invest in our clinical development. So from that standpoint, I would say that we've already started doing what one should do to be able to secure the partnership in a very efficient and expedited way at the time we have good news.

Unidentified Analyst

What do you think the minimum hurdle is to have a deal for VERU-111? Would it be Phase 2 data?

Mitchell Steiner

I think if we do a good Phase 1b, which we are, which means, it's the patients that are intended to be your patient groups. So it's not like a healthy volunteer group, which we never do with cancer product. So the patients that we're treating 1b are going to be basically the same patients that we will be treating going forward.

The Phase 2 is important, because now you take that dose, and you expand it into more patients. So I would say that the maximum value for the company would be to an open label, okay, which means you don't have to wait until the end and you're not getting to get a postcard that says, this is the data it’s open label.

So from that standpoint, I think you're correct, I think the maximum value that we can get to this asset right now would be the Phase 2 data with prostate. If the Phase 1b looks good, and we decide to expand and accelerate the other tumor types, then I think the deal will look even more attractive if we can show activity in other tumor types in addition to prostate, all which can be done in a small number of patients in a Phase 2 setting.

Operator

Thank you very much, sir. Ladies and gentlemen, that then concludes the question-and-answer session. I would now like to turn the conference back over to Dr. Mitchell Steiner for any closing comments.

Mitchell Steiner

Thank you. Thank you. I appreciate you – I appreciate everybody joining us on today's call. I look forward to updating all of you on our progress at our next investors call. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, the digital replay of the conference call will be available beginning approximately noon eastern time today, August 8th, and you can access that by dialing 1877-344-7529 in the US, and 1412-317-0088, internationally. You will be prompted to enter the replay access code which will be 101-339-620. Please record your name and company when joining. Ladies and gentlemen, the conference call is now concluded. Thank you for attending today's discussion. And you may now disconnect your lines.

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