Veru Inc. Q2 2023 Earnings Call
Speaker 2: Good morning ladies and gentlemen and welcome to the Zruz Inc. Investor Conference Call. All participants will be in the listen only mode.
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Speaker 3: Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fish, Verruz, Inc.'s Executive Director, Investor Relations and Corporate Communications. Please go ahead. 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, regulatory interactions, finances and development, and product portfolio.
Speaker 3: Such road-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. Risk that may cause actual results or development to different materially are contained in our 10Q and 10K SEC filings, as well as on our press releases from time to time.
Speaker 3: I would now like to turn the conference call over to Dr. Mitchell Smith, the very well-enged chairman, CEO and president. Good morning. With me this morning's call to Dr. Gary Barnett, the Chief Scientific Officer, Michelle Greco, the CFO and CAO, Michael Purvis, the EVP General Counsel and Corporate Strategy, and Sam Fish.
Speaker 3: Executive Director of Investor Relations and Corporate Communications. Thank you all for joining our call.
Speaker 3: A selective engine receptor agonist with a management of advanced breast cancer and submissive urine, a microtubule visuopter for the treatment of a hospitalized COVID-19 and other viral-related ARDS. The company also has an FDA-approved product, commercial product, the FC2 female condom and internal condom for dual protection against unplanned pregnancy and sexually transmitted infections. The revenue from the Sexual Health Program is being used to partially fund the clinical development of our late-stage therapeutic candidates which aim to address multi-billion dollar premium market opportunities. This morning,
Speaker 3: We will provide an update on our prioritization strategy, the progress of the breast cancer and viral air DS drug pipeline, as well as the commercialization of our FC2 product. We will also provide financial highlights for our second quarter fiscal year 2023.
Speaker 3: The refocused research and development strategy includes the following. Planes where ongoing phase 2 be 3 study of an obisorm and a Bemicyclid combination and second line metastatic setting for AR positive, ER positive, HER2 negative metastatic breast cancers. Cancer with the company's clinical trial collaboration partner Eli Lilly Company supplying a Bemicyclid 2. A planned phase 3 study of an obisorm and bone only, non-measurable, ER positive, HER2 negative metastatic breast cancer. 3. Planes for continued development to be visible in a phase 3 confirmatory.
Speaker 3: COVID-19 study in hospitalized, moderate severe COVID-19 patients, and high risk for RDS and IV. A planned Phase III clinical study of submissive urine and hospitalized influenza patients and high risk for RDS. In addition, the company announced that VIRUS is reserving submissive urine for clinical development only in infectious disease indications. And accordingly, has terminated the Phase III veracity to trial with submissive urine and prostate cancer.
Speaker 3: Further, Phase 2 development of Bureau 100 Aesthet will be paused with efforts to find a potential suitable development partner to share the cause of such future development. We also sought to sell our Entadfee Aesthet which was successful and allowed us to generate additional non-deluth cash.
Speaker 3: The company's oncology drug pipeline has two clinical development programs for a novosarm. In oral selective engine receptor agonist for the treatment of advanced metastatic breast cancer.
Speaker 3: The Nova Starma is an oral, first in class, new chemical entity. Selective energy receptor agonist activates the antireceptor in AR positive, ER positive, hercinegative metastatic breast cancer, which results in tumor suppressor activity without unwanted mask analyzing side effects and changes in hematocate. The Nova Starma has extensive non-clinical and clinical experience.
Speaker 3: have been evaluated in 25 separate clinical studies in approximately 1,450 subject's dose, including three phase II clinical studies in advanced breast cancer involving more than 250 patients. In the two completed phase II clinical studies conducted in women with AR-positive, ER-positive, and ER-2-negative metastatic breast cancer.
Speaker 3: Nobysarm demonstrates significant anti-tumor efficacy in heavily pre-treated cohorts that failed estrogen blocking agents, chemotherapy, and or CDK46 inhibitors, and was well tolerated with a favorable safety profile.
Speaker 3: In preclinical studies, metastatic breast cancer tissue samples taken from patients who have metastatic breast cancer that has become resistant to CDK46 inhibitors and estrogen blocking agents were grown in mice. In these mice, treatment of the novosarming combination of the CDK46 inhibitor suppress the growth of human metastatic breast cancer greater than either drug or...
Speaker 3: clinical study called Enable-2, which is a Nova-Sarm plus a BEMAS-cyclic combination treating with second-line AR positive, ER positive, HER2 negative, medisidic breast cancer.
Speaker 3: going Phase 2B3 Clinical Trial Design and Program.
Speaker 3: The Phase II B3 study has been amended to accommodate the FDA's latest recommendations to support a potential registration. In the first stage of the trial, the dose of the novice arm in the Bemicyclic combination is being optimized, and the efficacy and safety of the combination therapies being assessed in three arms of 40 patients each.
Speaker 3: The BEMO-Cyclid Plus and OBSORM 9-Mg combination therapy. The BEMO-Cyclid Plus and OBSORM 1-Mg combination therapy. And an extreme blocking agent is to control arm.
Speaker 3: The primary endpoint for the stage one of the study is an objective response rate, ORR, which measures objective tumor responses as partial or complete. ORR is an endpoint that the FDA recognizes as an appropriate surrogate endpoint for clinical benefit for possible accelerated approval.
Speaker 3: We just consistent with the new FDA guidance issued on March 24, 2023 entitled Clinical Trial Considerations to Support Accelerated Approval of Uncalcury Therapeutics.
Speaker 3: In stage two of the Phase II B, the three study, we plan to involve approximately 210 subjects in a multi-center open label randomize one-to-one active control clinical study to evaluate the efficacy and safety of a Nova Saunplus of Bemicyclic Combination Therapy versus an alternative extractant of Esteem's blocking agent.
Speaker 3: which either is selective ethym receptor degrader or an aromatase inhibitor, subjects with AR positive, ER positive, or virtual negative medisidecobress cancer, who have failed a CDK46 inhibitor plus in this in estrogen blocking agents, so basically first line.
Speaker 3: The primary endpoint is progression-free survival, which is used to confirm the ORR findings in stage 1. In January of 2022, very entered into a clinical trial collaboration supply agreement, through which Eli Lilly supplies the Bemicyclum.
Speaker 3: FDA approved CDK46 inhibitor for the Enable to Study.
Speaker 3: As you can see, the regulatory strategy and the clinical designs of the Phase II-B-3 enable a clinical study could yield an accelerated approval from Stage 1 and a full approval from Stage 2 for the second line of MSI for the Benobosom combination treatment of AR positive your positive or two negative metastatic breast cancer.
Speaker 3: We anticipate having clinical data for the Phase II B3 enable a two study in 2024. The second clinical study plans to evaluate an over-starmed monotherapy for the treatment of bone only non-measurable ER positive or her two negative medisidic breast cancer. Bone is the most frequent site of breast cancer metastases with bone metastases noted in 60 to 80 percent.
Speaker 3: metastatic breast cancers. Up to 51% of patients have bone only non-measurable breast cancer, metastasis, and they have very limited therapeutic options. Novusarm inhibits breast cancer growth and builds and heals bone by increasing both cortical and trerectual bone.
Speaker 3: Further, an over-sharm increased muscle mass and improved physical function. Both the beneficial bone and muscle effects may reduce the skeletal-related events caused by bone metastases.
Speaker 3: Accordingly, an OBSR could be a potential therapeutic option for women with bone only non-measurable metastatic breast cancer. We plan to meet with the FDA to discuss the Phase 2B3 clinical development program to evaluate an OBSR monotherapy and bone only non-measurable metastatic breast cancer.
Speaker 3: To turn our attention now to the viral ARDS infectious disease program, ARDS is a form of non-cardiogenic pulmonary deemal with diffuse alveolar damage associated with systemic inflammatory conditions. Viruses can cause up to one-third of the community acquired pneumonia and viruses can trigger the immune system.
Speaker 3: to release an overwhelming amount of inflammatory proteins known as either kind storm.
Speaker 3: The cytokine storm causes tissue damage in the lungs that leads to ARDS. Patients who develop ARDS have a high mortality rate. Virus induced ARDS remains a significant unmet medical need with limited treatment options. Common viral infections that cause ARDS include COVID-19 influenza and respiratory and situavirus, also known as RSV. And other virus infections that may also lead to ARDS and death, posing a global public health risk to society include smallpox and Ebola virus.
Speaker 3: A single outbreak involving any one of these viruses would be an immediate global emergency with limited existing options available for treatment.
Speaker 3: As ARDS results from the overexaggerated immune inflammatory response by the patient to a virus infection rather than direct injury from the virus infection itself, an antiviral agent alone may not be effective. Subvisibule has host targeted antiviral and a broad spectrum anti-inflammatory agent has the potential to address the virus infection.
Speaker 3: and the inflammation caused by the cytokine storm that causes ARDS, multi organ failure, and death. The company is developing sub-bisubuelin for the treatment of hospitalized to moderate severe COVID-19 patients and high-risk ARDS and death. ARDS remains the most frequent serious complication of severe COVID-19 infection. It has been reported up to 33% of hospitalized patients with COVID-19 have ARDS and 75 to 92% of patients admitted to the intensive care unit with COVID-19 have ARDS. The mortality rate of COVID-19 associated ARDS
Speaker 3: is 45%. And among patients who died from COVID-19, there's a 90% incidence of RDS. In the current endemic phase, COVID-19 infections is estimated to be the fourth leading cause of death in the United States. COVID-19 is not going away. It has transitioned to a new disease that will remain with us, like influenza and RSV.
Speaker 3: The endemic phase for COVID-19 remains deadly, with the latest data from the CDC reporting 1100 deaths this past week and an average of 4,500 hospitalizations a day. The number of COVID-19 cases expected to be seasonal with a rise in mid-summer when people gather indoors to get out of the heat and in the winter when they gather to get out of the cold. As the COVID-19 endemic continues,
Speaker 3: There also needs to remain vigilant and focus on preparedness for the next wave of infections involving new potentially more dangerous mutated virus strains. In fact, a new mutated strain of Omrakon has emerged called archerous. It's also known as XBB1.
Speaker 3: 16 and it appears to have high infectivity and pathogenicity. COVID-19 will be a problem for the foreseeable future and there's a great need for effective therapies, especially for these hospitalized patients with modalities severe COVID-19 infection at high risk with ARDS.
Speaker 3: The company has completed a positive phase two, a positive phase three COVID-19 clinical trials evaluating sub-isabewal. The phase three clinical study was a double-blind, randomized placebo controlled study and 204 hospitalized moderate severe COVID-19 patients at high risk with ARDS. The primary endpoint was the proportion of patients that died by day 60.
Speaker 3: And based on a plan into analysis of the first 150 patients randomized, the independent data monitoring committee unanimously recommended that the study be stopped for clear evidence of clinical efficacy and they identified no safety concerns. In the interim analysis treatment, it's a visible in 9 milligrams once a day.
Speaker 3: resulted in a clinically meaningful statistically significant 55.2% relative reduction in deaths compared to placebo. On May 10, 2022, the company had a pre-emergency use authorization, so that's EUA meeting, with the FDA to discuss the submission of an EUA application for Subbizerville and COVID-19 treatment. On June 7, 2022, the company submitted a request for FDA emergency use authorization for Subbizerville.
Speaker 3: On July 6, 2022, the company announced publication of the interim analysis, interim efficacy, and the full safety clinical results from the Phase III COVID-19 study of Subisit Bureau in the New England Journal of Medicine evidence.
Speaker 3: February 28, 2023, the FDA notified the company that had declined to grant at that time the company's request for emergency use authorization for subvisive violence and tweet hospitalized modalities of your COVID-19 patients. And in communicating its decision, the FDA stated that despite the FDA declined to issue a new U.A. for subvisive violence at this time. The FDA remains...
Speaker 3: design, the FDA stated that strong consideration should be given to the appropriate timeframes for interim analyses so that should a, quote, strong efficacy signal again be observed, the trial could be stopped in an efficient timeframe, end quote.
Speaker 3: On April 27, 2023, the company met with the FDA and reached agreement on the design of the Phase III Confermentary COVID-19 Clinical Trial and the path forward to submit a new EUA application and or NDA. The FDA agreed to a Confermentary Phase III randomize one-to-one, multi-centred global efficacy and safety strategy.
Speaker 3: It's a visibular 9 milligrams oral daily dose plus standard of care treatment versus placebo plus standard care treatment in 480 hospitalized adult patients with moderate severe SARS-CoV-2 infection, which is high risk for ARDS.
Speaker 3: The patient population for submissive violent will be expanded to include all hospitalized monitored severe COVID-19 patients. So that's who four passive flow flow oxygen, who five forced to high flow oxygen, who six mechanical ventilation, and there's no requirement to have a comability.
Speaker 3: The primary efficacy endpoint will be all caused mortality at day 60. Secondary endpoints include days in the hospital, days in the ICU, days in mechanical ventilation, and a proportion of patients alive without respiratory failure. And an exploratory endpoint will be the presence of long COVID-19 symptoms at day 180. In order to get a potentially efficacious drug to patients in an efficient time frame,
Speaker 3: There are two planned interim efficacy analyses that will be conducted. As requested by FDA, the first planned interim analysis will occur when 204 patients, that's 50% of the population, have completed day 60 primary efficacy endpoint. And the second planned interim analysis is expected to occur when 290 patients, which is 71% have completed the day 60 primary efficacy endpoint, which incidentally, at the same time frame,
Speaker 3: with a similar amount of data as when the interim analysis was conducted for the first phase to restudy. If either of the interim efficacy analyses meet statistical significance criteria, the trial could be stopped for efficacy. Should the pre-specified primary efficacy endpoint analysis demonstrate a statistically significant effect?
Speaker 3: and all cause mortality favorings to be fueling. The company may consider a new request for an EUA and or submission of an NDA, quote, as the company would potentially have two adequate and well-controlled trials for review.
Speaker 3: As a program has fast track designation, a rolling NDA submission is a possibility for sub-biscipline. The Phase 3 confirmatory COVID-19 clinical trials expect to begin in enrollment in second half of 2023, and the first plan in the emergency analysis is anticipated to be conducted in 2024. Now our justification for pursuing a Phase 3 confirmatory trial
Speaker 3: The unique mechanism of action is a host targeted antiviral and a broad anti-inflammatory agent and its viral mutant strain agnostic.
Speaker 3: As requested by the FDA, the host-targeted antiviral activity, Subitribulin, has been reconfirmed with an in vitro-self study done at the University of Rochester, but at the University of Rochester.
Speaker 3: It's a bit of violent. It's demonstrated efficacy and safety in previous phase two and phase three clinical studies. We have regulatory clarity. The phase three COVID-19 confirmed regulatory study with two potential inter-analysis to assess efficacy of the visible in earlier.
Speaker 3: The company may request a new EUA and or an NDA with this additional data from the Phase 3 confirmatory COVID-19 study. Interestingly, on the Section 564, the Federal Food Drug and Cots MediGaq, FGA may continue to issue EUAs and EUA drugs may be available after the National Public Health Emergency
Speaker 3: and treatment demonstrating a mortality benefit published in New England Journal of Medicine evidence should also help with patient recruitment into clinical trials. Compared to the first Phase III clinical study, we plan to conduct a confirmatory Phase III clinical study in a greater number of clinical sites with approximately 100 sites.
Speaker 3: compared to 50 clinical sites for the previous phase 3 study. Now as it relates to the current XUS regulatory status, the company believes that it is most likely that all the XUS regulatory authorities like the FDA require some level of new additional clinical data, including from the confirmatory phase 3 study before granting emergency conditional
Speaker 3: or other similar operations as a visible for COVID-19.
Speaker 3: In April , we submitted a request to the FDA's CDER to re-evaluate the FDA's declination of our EUA for sebizibulin to the FDA's formal dispute resolution process, often referred to as the FDA dispute resolution or the FDR process.
Speaker 3: We will provide more details on the content of our FGR application when we have an FGA response on the next steps. But for now, we can say that our main argument for seeking a re-evaluation is that we believe the FGA applied an incorrect standard review of our EUA, essentially holding our data to the proven safe.
Speaker 3: effective standard of a new drug application rather than the proper standard under an EUA application where the surveillance potential benefits outweigh its potential risks.
Speaker 3: And we also believe that this inappropriate and effective much of the November 2022 PADEC Advisory Committee meeting. Also we have contrasted the FDA's higher level of scrutiny towards our submissibility UA with other EUA's that have been granted, including the recent EUA grant for prohibit.
Speaker 3: for certain late-stage COVID-19 patients. We're now waiting the FDA's decision on whether to accept our request into the FDR process. We will determine our next steps at that time based on the FDA's response, but we will consider all potential options. We hope to hear this month, but because we're dealing with an EUA and not proceeding under a producer's statue like we would if we had filed an NDA.
Speaker 3: The FDA's timelines are not definite. Our FDR application is a matter of high importance of VIRRU and will update you when the time is appropriate.
Speaker 3: Now, in order to position subbizubulans a drug to be used broadly for the treatment of viral ARDS, so that it's COVID is sort of the hook into ARDS. The company also plans to expand the clinical development of subbizubulans for the treatment of hospitalized influenza patients at high risk for ARDS and death.
Speaker 3: On April 4, 2023, the company announced positive results of a pre-clinical study of submissibule and demonstrating robust anti-inflammatory activity with improved outcomes. And then an H1N1 influenza-induced pulmonary infection mouse ARDS model. H1N1 is the old Spanish flu and now swine flu, and this was conducted by...
Speaker 3: a team of researchers in lab corps early development laboratories in the United Kingdom. Subituual and treatment resulted in a statistically significant decrease in a total number of inflammatory cells and a reduction in key cytokines and chemokines in lung fluid. Clinically, subituual and treatment resulted in a reduction in the severity of lung inflammation.
Speaker 3: in the future scientific meetings and peer review publications. These preclinical data suggests that the visible has a potential for treatment for hospitalized influenza patients in high risk of air DS and death. The pathogenesis and mortality rates for hospitalized influenza patients who develop RDS was similar to COVID-19 associated with RDS.
Speaker 3: representing a high met need and very limited treatment options. According to the CDC, this is important. Influenza burden estimates in the United States who up to 630 hospitalizations and 55,000 doesn't just last six months.
Speaker 3: Accordingly, virus planting a double blind, randomized placebo control phase three clinical trial, evaluating submissive urine and hospitalized adult influenza patients at high risk with ARDS. Moreover, the company's plan to expand the development of submissive urine for smallpox and Ebola viruses under the animal rules FDA regulatory pathway.
Speaker 3: So on April 11, 2023, the company announced positive results from a pre-clinical individual study evaluating the effects of the visibule and gets the prototypical Pox virus called the Vaxinia virus, which demonstrated the visibule and prevented both the release of the Pox virus from infecting cells and the spread of the Pox virus to healthy cells.
Speaker 3: And this was conducted by a team of research led by Dr. Brian Ward, who is a associate professor of microbiology and immunology University of Rochester School of Medicine and Dentistry in New York. The company expects to submit the full data for presentation future scientific meetings and peer review publications. Based on the clinical data, the company plans to expand the Bishops Building Program to include.
Speaker 3: other serious virus infections that pose a global public health threat to society. It's a visible as a host target of the antiviral and broad anti-inflammatory agent may be useful as a novel treatment not only gets smallpox and otherpox viruses, but it may also reduce the hyper-reactive immune response triggered bypox virus that's responsible for severe pneumonia.
Speaker 3: and Ebola viruses are not feasible and challenge studies and healthy subjects are unethical. Therefore drugs for these indications are generally developed and approved under regulatory pathway commonly referred to as the animal rule. FDA-made grant marketing approval based on adequate and well-controlled animal efficacy studies when the results of those studies establish that the drug.
Speaker 3: is reasonably likely to produce clinical benefit in numerous. Now as for our commercial business, the company's sexual health program considers FC2 an FDA-approved commercial product that dual protection against unplanned pregnancy and sexually transmitted infections. Company sells FC2 both.
Speaker 3: in the commercial sector and in the public health sector, both in the U.S. and globally. In the U.S., FC2 is available by description through multiple telemedicine internet pharmacy channels as well as retail pharmacies. The company has launched its own dedicated director patient telemedicine pharmacy services portal platform to continue to drive sales growth. FC2 is also available to public health sector entities such as State Department of Health and 501C3 organizations.
Speaker 3: In the global public health sector, the company markets F.C.T. to entities including ministries of health, government health agencies, UN agencies, and non-profit organizations and commercial partners. Company had another FDA approved product in Tati, which has been asked right to the Alulfill Capsules World Use as a new treatment for benign prosthetic population that was approved by the FDA in December of 2021.
Speaker 3: On April 19, 2023, the company entered into an asset purchase agreement with Bluewater Biotech.
Speaker 3: The purchase price for the transaction was $20 million plus $80 million of potential sales milestones based on net revenues of Entathy after closing.
Speaker 3: I will now turn the call over to Michelle Drecko, the CFO and CAO, to discuss the financial highlights.
Speaker 4: Thank you Dr. Stiner. As Dr. Stiner indicated, we continue to have a lot of ongoing activity at Bureau. Let's start with the second quarter results for the three months ended March 31, 2023. Overall, net revenues were $6.6 million compared to $13 million in the prior year's second quarter. The company reported quarterly sales for its US prescription business of $4.1 million.
Speaker 4: and important FC2 customers, all resulting in a slowdown of orders in recent periods.
Speaker 4: net revenue from the global public sector business for the quarter was $2.4 million compared to $1.4 million in the prior year's quarter. The increase in the public sector business is because the company began shipping to South Africa under the most recent tender during the quarter and because the company is seeing increased orders
Speaker 4: in the U.S. public sector, resulting from two contracts executed last year. Overall, gross profit was $4.1 million or 62% of net revenues compared to $11.2 million or 86% of net revenues in the prior year quarter.
Speaker 4: The Decrease and Gross Profit in Gross Margin is driven primarily by Decrease sales in our US FC2 prescription business.
Speaker 4: Operating expenses for the quarter increase to $43.5 million compared to the prior year's quarter of $22.9 million.
Speaker 4: The increase is primarily due to research and development costs, which increase $7.4 million to $22.9 million compared to $15.5 million in the prior year quarter, and the increase in selling general administrative expenses of $5.4 million.
Speaker 4: from $7.4 million in the prior year quarter to $12.8 million in the current quarter. The increase in research and development cost is due to the number of ongoing clinical trials, mainly for preparation for the Phase 3 COVID-19 confirmatory study and cost related to the ongoing and planned and no-boss armed study.
Speaker 4: along with increased personnel costs due to increased headcount. The company also incurred expenses related to preparations of the launch of COVID-19 under an EUA, including manufacturing drug products for the launch as required by the FDA.
Speaker 4: The increase in selling general and administrative expenses is primarily due to the commercialization costs related to preparation for the potential launch of sub-isabulin for COVID-19 prior to the FDA's declination of the company's UA application and an increase in personnel-related costs due to increased headcount.
Speaker 4: Much of this incremental headcount has now been reduced post the EUA declination. In addition, during the quarter we recorded an impairment charge totaling $3.9 million related to in-process research and development assets recorded for sebizibulin for prostate and zucoma theme because of the company's change in strategy.
Speaker 4: to focus its efforts on those drug candidates which have the best opportunity for long-term success and the potential for meaningful Phase III data readouts in 2024. We also recorded provisions for credit losses of $3.9 million related to the total amount due from the pill club as a result of the uncertainty of their financial condition after they filed for Chapter 11 bankruptcy in April . The operating loss for the quarter was $39.4 million compared to $11.8 million in the prior year quarter.
Speaker 4: Nonoperating income was $559,000 compared to a nonoperating loss of $2.4 million in the prior year's second quarter and primarily consisted of interest expense and the change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the quarter, we recorded a tax benefit of $67,000 compared to $26,000 compared to $2,000.
Speaker 4: Now turning to the results for the six months ended March 31, 2023.
Speaker 4: For the first six months of fiscal 2023, total net revenue is $9.1 million compared to $27.2 million in the prior year period.
Speaker 4: Net revenue from the US Prescription business was $4.3 million compared to $23.2 million in the prior year period.
Speaker 4: The causes for the reduction of the net revenues from the prescription business for the period are consistent with those in the quarter. In addition, the net revenues from the pill club were $3.9 million for the current period compared to $10.8 million in the prior year period, a reduction of $6.9 million.
Speaker 4: Due to the pill club's Chapter 11 bankruptcy findings, we are uncertain whether these revenues will return in the future. Net revenues from another prescription channel customer were $11.3 million in the prior year period and zero in the current period. We understand this reduction is due to the impact of its most significant customer, in turn reducing disparities in carrying a year in salary.
Speaker 4: 85% of net revenues in the prior year period. The decrease in profit and gross margin is due primarily to the decrease in the US prescription business.
Speaker 4: Operating expenses increased by $40.1 million to $79.8 million compared to the prior year's period of $39.7 million. The increase is primarily driven by research and development costs, which increased by $16 million to $41.6 million from $25.6 million in the prior year period.
Speaker 4: and the increase in selling general and administrative expenses of $16.3 million from $14.1 million in the prior year period to $30.4 million in the current period.
Speaker 4: The factors contributing to the increase in research and development costs in selling general administrative expenses are the same as those described for the quarter.
Speaker 4: As I mentioned before, during the quarter, we also recorded an impairment charge of $3.9 million related to in-process research and development costs and a provision for credit losses of $3.9 million related to receivables from the co-club.
Speaker 4: Operating loss for the period was $75 million compared to $16.7 million in the prior year period. The increase in the operating loss at $58.3 million is due to the increased research and development costs, increased selling general administrative expenses.
Speaker 4: The impairment charge, the provision for credit losses, all combined with the reduction in net revenues during the current year period.
Speaker 4: Nonoperating expenses were $763,000 compared to $3.7 million in the prior year period and primarily consisted of interest expense and the change in the fair value of the derivative liability related to the synthetic royalty financing.
Speaker 4: For the six month period, we recorded a tax benefit of $135,000 compared to a tax expense of $87,000 in the prior year period. The company is net operating loss carry forward for US federal tax purposes of $112.5 million.
Speaker 4: with $29.7 million expiring in years through 2042 and $82.8 million, which can be carried forward indefinitely. And our UK subsidiary has been operating lost carry forwards of $63.1 million, which should not expire. The company also has US Federal Research and Development Text Credit carry forwards of $29.7 million expiring in years through 2042 and $82.8 million, which should not expire.
Speaker 4: or 26 cents per diluted common share in the prior year period.
Speaker 4: The net loss for the company increased by $55 million for the current period. The main reason for the increase in the net loss relates to the company preparing for the potential launch of Subisubilance for COVID-19 in the U.S. and outside the U.S. This required building a commercial team, engaging vendors to assist with the commercial launch.
Speaker 4: and manufacturing drug products for the launch upon the EUA approval as required by the FDA. Since the declination, the majority of the employees hired for the commercial team have been terminated, and the commercial launch sales and marketing related vendor contracts have been canceled. The related costs for commercialization for the period totaled $12.1 million.
Speaker 4: The cost of manufacturing drug products for the launch for the period was $12.4 million.
Speaker 4: In addition, with the change in strategy, the company stopped several drug development trials and reduced headcount related to the reduction in drug trials. During this period, we also recorded an impairment charge of $3.9 million and a credit loss charge of $3.9 million. Lastly, our gross margin decreased by $18.2 million for the period.
Speaker 4: Now looking at the balance sheet, as of March 31, 2023, our cash balance was $23.5 million and our accounts receivable was $4.2 million compared to a cash balance of $80.2 million and an accounts receivable balance of $3.6 million as of September 30, 2022.
Speaker 4: Our networking capital was $4 million on March 31, 2023 compared to $63.3 million in September 30, 2022. During the six-month-old March 31, 2023, we used cash at $60.1 million for operating activities, compared with $12.6 million use for operating activities in the prior piece.
Speaker 4: with the Frost Gamma Investment Trust, which generated $5 million from the sale of shares of the company's common stock. On April 19, we entered into an asset purchase agreement to sell our NTSB product to Blue Water Biotech of $20 million.
Speaker 4: We receive $60 million at closing $4 million payable by September 30, 2023, $5 million payable by April 19, 2024, and $5 million by September 30, 2024. Plus, this is the possibility of up to $80 million in sales milestone payments. On May 2nd, we enter into a common stock purchase agreement with Lincoln Park Capital Fund LLC.
Speaker 4: for our own telehealth platform and pursuing additional distributors in the telehealth sector. We've started to see an increase in the US public sector as a result of new agreements recently executed and are seeing increases in our global public sector business from shipments and tenders. We will continue to consume cash as we develop our drug candidates. We believe the current cash balance.
Speaker 4: along with the revenue from sales of SC2. Cash payments will receive from the recent sale of our Entancy Product and our ability to secure financing. We'll be at a quick to fund the planned operations of the company for the next 12 months as we continue to focus on developing novel medicines for the treatment of breast cancer for COVID-19 and other related.
Speaker 3: are its related diseases. Now I'd like to turn the call back to Dr. Stainer. Dr. Stainer? Thank you, Michelle. As Ms. Greco said, the main reason for the increase in the net loss relates to the large expense of preparing for potential losses to visible and for COVID-19 in the U.S. and outside the U.S.
Speaker 3: This required building a commercial team, engaging vendors to assist in the commercial launch, and manufacturing drug products for launch upon EUA approval as required by FDA. These activities have ceased. We've hit the reset button. As for our cash burn and cash position, we have been able to also significantly cut costs by prioritizing our spend.
Speaker 3: and restructuring our clinical development to focus only on the most promising near-term programs. We have strategically positioned VIRU on late stage clinical programs in both events breast cancer, with an OVIS arm, and virally induced RDS infectious disease program with subbisubulant. Both areas of great unmet need, and these are major premium market opportunities.
Speaker 3: are cash and cash equivalents of $23.5 million as of March 31, 2023, and subsequent to the company's fiscal year 2023, second quarter, as previously disclosed. Frost Hammer Investments Trust acquired $5 million of company common stock in a private placement. The company sold its Intadfi product to Blue Water Biotech for $20 million and up to $80 million in additional sales milestones. And Vero has also entered into a common stock purchase agreement for purchase of up to $100 million with Lincoln Park Capital Fund. Under the terms of the agreement.
Speaker 3: Lincoln Park is committed to purchasing up to a hundred million dollars of Bureau's common stock at Bureau's sold the discretion from time to time over a 36-month period. We're pleased to answer into this transit transaction with Lincoln Park Capital and we believe that this agreement allows us to access capital in a very efficient manner. We believe this purchase commitment further enhances our financial flexibility.
Speaker 3: to drive FC2 revenues from our commercial business as follows. We are adding additional, again, adding additional telemedicine and internet pharmacy service partnerships.
Speaker 3: We have our own dedicated direct-to-patient telemedicine internet pharmacy services portal. We're pleased with the telemedicine portal as a growing source of revenue. Making this strategic move has allowed us to both supply FC2 to other telemedicine providers and to also have our own FC2 dedicated telemedicine portal that we can control and grow.
Speaker 3: We've expanded our pharmacy fulfillment capabilities to over 50 states in the United States, and the website can be reached at fc2condoms.com. We expect to continue to increase U.S. public sector sales through our agreements with the New York Department of Health and with the distribution partners with Global Protection as well as the faxes.
Speaker 3: And we're seeing an increase in global public health, public sector sales, and we believe Brazil is getting ready to order a new tender. It should be noted we had improvement in our FC2 revenues in the second quarter of fiscal year 2023. And finally, we are actively seeking, in some cases already in discussions, for potential partnerships with Inobisarm and breast cancer and sub-visibulin and viral-induced ARDS as another source of non-dilutive capital.
Speaker 3: All of these resources and business development activities should allow us to advance our most important drug candidates, Novosarum for second-line AR-positive, ER-positive, HER2-negative metastatic breast cancer, and Sibizibulin for SARS-CoV-2 viral ARDS that could yield Phase III clinical data in 2024.
Speaker 3: With that, I'll now open the call to questions. Operator. Operator 1 Ladies and gentlemen, at this time we will begin the question and answer session.
Speaker 2: To ask the question you have asked a star then want to name telephone keypad. If you are using a speakerphone, we ask to please pick up your hands up before pressing the keys to ensure the best sound quality.
Speaker 2: To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. Once again, that is star then 1 to rejoin the question queue.
Speaker 2: We will pause momentarily to assemble our roster. Our first question will come from Yi Chen with HC Wainwright.
Speaker 5: You may now go ahead Hey good morning And I'm sorry if I miss this during your prepared remarks My line was a little choppy, but any color on if you have to rehire or rebuild a commercial team
Speaker 5: following the potential positive pivotal study results from Sabyabhala. Thank you and also any learnings from your previous efforts.
Speaker 3: I'm trying to understand the question. The question is, would we consider building a commercial team for our drugs going forward? Any learnings from what? Oh, learnings. Yeah, yeah, absolutely. Absolutely, yeah. Thank you for that question. Yeah, I'll tell you what the learnings are.
Speaker 3: commercially ready to go and we also need to have the ability to distribute ready to go. And so we invested heavily because we waited nine months. We were under the impression that this would be short term. That's why they call it emergency use authorization. It turned out to be much longer than that. And for nine months we sat there burning cash.
Speaker 3: So the learnings for next time is either you have a partnership with a group that already has a commercial team ready to go and you can incrementally add to that commercial team or you just wait. You handle the manufacturing piece because you have no choice, you have to have a drug to release.
Speaker 3: But, you know, maybe the public will get mad at us if we don't launch quickly, but I rather have the public it mad at us not launching quickly than sitting here for nine months burning cash with a group that was ready to launch in July . So the learnings is, you know, going forward until I see in black and white the FDA or any of the other regulatory authorities have approved, approved off.
Speaker 3: be ready and be in idle, but for a company of our size that's focused on clinical development and it was a major learning. Now in all fairness, we were in the middle of a public crisis. It was an emergency. People were dying at some point seven to a thousand patients a day.
At one point it was 2,500 patients a day. And so it felt like things were going to move quickly. But hindsight, it was 20-20. And if we had to do it again, I would wait until I see something from the FDA that says you're officially authorized. And then the delay should be the company not getting the drug out fast enough.
Not that the FDA took nine months away and the company lost a lot of money in that process. Great. Thank you. The whole back of the line. Our next question will come from the Leland Guarphial with Oppenheimer. You may now go ahead. Thank you.
Hey, Rohan here speaking on behalf of Leland Gochel. Just a couple of questions from me. Could you update us on some of the ongoing discussions with European and ex-U.S. authorities on ongoing civilian reviews and have there been any communications around the confirmatory phase 3 trial and...
They took the position that they cannot issue a negative opinion because you have data. And so what they said instead was if you can provide this with additional clinical information, that's necessarily have to be a Phase III clinical study, although the Phase III clinical study certainly would suffice. They would be willing to review that.
as a way forward to get to a positive opinion. But we have to meet with them, find out what kinds of data they want, and short of a Phase 3. But if the Phase 3 is done, we feel that that will easily suffice for Europe .
The other major group is the access group, which was still in discussions with them. But again, our sense is that we can provide them with additional clinical information. And certainly if it's the Phase III clinical trial, that would be appropriate. I think all the agencies know already that we're committing to the Phase III study.
And so they know that that's forthcoming. And as it relates to... And so those are the conversations that we had with them. And we do believe that the Confirmatory Phase 3 study, that the agency has reached agreement with the company, all the elements of that study.
would suffice not only for US if we're successful, but outside the US as well. So all that's still in flux and decisions haven't been made. It's just literally we're on hold or in suspension until we provide more data. As it relates to spend for the phase three confirmatory COVID-19 study
It will cost us roughly $16 million to get to the 204 patients that we need for the first interim look. And so that's a number to think about. For influenza, that's for COVID-19.
and that will get us into 2024. So $16 million that incremental increase that we would need for the clinical development program to get us to that number, which will open up ARDS. As it relates to influenza, the plan study, we're not planning to start that study until we secured funding and were comfortable. And so for example, one of the things that we're doing now is it turns out that, again, influenza is a big deal. Influenza, you know, kill the...
their interest is influenza and so we're going to be and we have developed a nice relationship with Barter through our interactions with him with COVID. So we plan to continue to use that as a potential pathway to get non-delutive dollars that we can support the influenza study. But for us
to take that cash right now makes no sense until we get COVID-19 over the finish line. Thanks, Mitch. Thank you. Again, if you have a question, please press star then 1. Our next question will come from Brandon Foulkes with Cancer Fitzgerald.
You're in our role ahead. Hi, thanks for taking my questions and thank you for all the color. Can you just pass?
dive a little bit deep and elaborate on some of these assumptions that go into the statement of being able to fund the company for the next 12 months. Any additional details you can provide on the stock purchase agreement? Is that something that can be used pretty quickly and heavily in the near term? And then similarly, I heard sort of your prior commentary on the cost of the stock purchase agreement.
COVID-19 trial, but how much more can OPEX come down and how quickly, and then similarly, how quickly do you expect the FC2 investments to have an impact? Just any color on the cash burn in the next few quarters would be helpful. Yeah, so I'm gonna have Michelle comment in a moment as well. I'll give you from a high level the stock purchase agreement as I understand it.
And so as you know, we had one with a spiral capital over the last, I don't know, five years or so. And we sparingly used it. It was always there when we needed additional cash to keep things moving if we could not get non-delutive cash. So our goal is always to get non-delutive cash and that's what we're active.
and partnership discussions were active with trying to get part of the provide money and were active in investing in our FC2 efforts because the FC2 efforts will allow us to gain non-delutive cash. And finally we sold in Tatsby for $20 million of which all of that will come in the same time period.
that we're running the COVID-19 clinical study and the enable study to get to clinical data. So the gap, you know, the gap that we need to make up depends on what FC2 does and, but the goal is to have readily available funding in the event that we want that we need it. And so the stock purchase agreement basically means that the virus sold discretion, we can ask
Lincoln Park Capital who's agreed to buy up to $100 million of Viru stock over the next three years. So it's very different than ATM. And ATM means that you have to go to the bank and the market has to be, it's basically a market driven transaction.
price and the goal is for the fund to hold on to this stock and not put the stock back into circulation so that's a good pressure on the stock. It doesn't help either parties if you put pressure on the stock. So that's my sort of layman's non-financial expert thinking behind it. Michelle can correct me. But it worked out very nicely because it doesn't put pressure on the stock. So that's a good pressure on the stock.
as it relates to FC2 investment, as soon as we got the declination from the FDA, we realized that we need to again refocus on FC2. We had some headwinds with some of our major customers and we saw that happening over the last couple of quarters. And so the good news is that we have identified...
and moving forward and getting additional telemedicine partners that we'll announce over time that will come in and fill the gap or fill in the void that we now have with telemedicine prescriptions from the Pill Club and another partner that also faced headwinds. Again, this is independent of us. This is what they did. For more information, visit www.covid19.com
but it's our customers. And so we feel that's going to be very important. But also we're getting real data. And I encourage you to look at the FC2 site. But we're getting real data to show that, and this is very consistent with the Google Market Analytics that we conducted a couple, three years ago.
that when women are offered F.C.2 about half the women want to try it and about 60% to 70% will continue to get F.C.2. The reason that's important is because F.C.2 is Michelle, as Ms. Greco said, by driving awareness, it's a blue ocean. It is a non-homonal birth control method. It's a blue ocean.
that women can be empowered to use. And also, as you saw recently, syphilis has become another major epidemic, and you can't get protection from STIs with birth control pills or IUDs or anything of that sort. You have to use a barrier technique. And women are just not waiting for the man to put a condom on. They're taking control. So we think we tapped into something very interesting
know exactly how much we're spending for prescription. We know exactly when patients want to continue to use the product, we've just expanded pharmacy fulfillment to 50 states in the United, all 50 states. You know, pharmacy world is state-based so you can't just not, the US thing is US and states. And so if you don't have, in some cases, breaks in mortar.
or agreement in each of the states and you're not licensed, you can't fulfill. So we solve that problem and we're working with Medicaid to make sure again women have a choice, women have access which is all part of the Affordable Care Act. So we're heavily invested in it and also with FCT2 we're finding out the US public sector drives awareness and finally the global public sector has come back. COVID-19 is political.
still the major brand for FCTU, FCTU has been the major brand internationally and in the US we're the only approved FDA product. So I think, you know, if we can get back to where we were just even a year and a half ago or even a year ago.
about the fact that we were cutting back on expenses. We were still waiting for the FDA. All signs had been pointing to NAUA approval. So we did not pull the plug on all of our commercialization efforts until the last minute when the FDA formally said that we were going to do a
related to building up the drug supply that the FDA said we needed to have on hand.
those payments out as well. You know, so our spend, our cash burn has been a lot higher now. It's going to start to come back down, you know, in our next quarter. It's not going all the way down to the level it was a year ago, but it's going to get much closer. It needs to go down by half.
of what we just saw, if not a little bit more. And as Mitch indicated, you know, until we have the cash in place for the confirmatory trial, we're not going to be going ahead with it. But just to give you a little bit of color on our OPEX and our cash fund.
Thank you, that's very helpful. And then one follow up if I may. Under that Phase III confirmatory trial design for COVID-19, is that designed to meet the NDA standard or the EUA standard here in the US? And then similarly, ex-US, should we think about you put...
continuing to pursue EUA equivalents or full approvals post that Phase III confirmatory trial? Thank you. It's a great question. And so, to answer that question, the idea is that this trial, and the FDA also agrees and is guiding us towards this, is that...
And the quote that I used in my prepared comments was then we would have two well-controlled studies. And if you have two well-controlled studies, successful studies, then the FDA views that as the standard for an NDA. So we are setting ourselves up in the U.S.
But in the EUA, they can go much quicker and get you to market. But the standard that we're going to hit with a successful trial is going to be an NDA standard, so we should be able to easily blow away an EUA standard. But the EUA standard lets you get on the market in weeks, whereas an NDA gets you on the market in six months plus. So we think from a timing standpoint that the EUA is still available.
which we would apply for that, and simultaneously we would apply for the NDA. XDUS is kind of the same way. Because the full approval takes longer, we would take advantage of the shorter route, but also have the longer route in play as well. So it's still the same way to think of it. So no, we're not gonna be just an EUA standard. With this trial behind us, when it's completed, it would be an NDA standard. Great, thank you very much. I appreciate all the color. Okay.
Ladies and gentlemen, this concludes our question and intercession. I would like to turn the call over back to Dr. Mitchell Steiner for your closing remarks. Thank you. I appreciate everybody who joined our call today and I look forward to updating you all on our progress on our next Investors call. Thank you for being with us today. Is there a replay of the conference call we'll be available beginning approximately noon? You've turned time today. May 11th by dialing 1-877.