Q3 2023 Veru Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to Varian, Inc.
Masters Conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After this mornings discussion there will be an opportunity to ask questions. Please.
Please note that disadvantage being recorded.
I'd now like to turn the conference call over to Mr. Sam Fisch grew 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.
Yes.
Such forward looking statements are subject to known and unknown risks and uncertainties and our actual results may differ significantly from those projected suggested or included in any forward looking statements risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in <unk>.
Press releases from time to time I would now like to turn the conference call over to Mitchell Steiner.
Chairman CEO and president.
Good morning, with me on this morning's call a doctor Gary Barden adds the Chief Scientific Officer, Michele Greco Chief Financial Officer, Chief Administrative Officer, Michael Purvis Executive Vice President General Counsel corporate strategy, and Sam Fisch Executive director of Investor Relations and corporate communications. Thank you for joining our call.
There is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of advanced breast cancer and for acute respiratory distress syndrome related to viral infections are.
Our drug development program includes the Novus arm as selective androgen receptor agonist for the treatment of second line hormone receptor positive her two negative metastatic breast cancer and she busy Buick and microtubule disruptor for the treatment of hospitalized COVID-19, and other types of viral related a R. T. S. The company also has an FDA approved.
Commercial product UFC, two female condoms internal condom put a 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 multibillion dollar premium market opportunities.
We've had a very busy and productive third quarter fiscal year 2023.
This morning, we will provide an update on the clinical development of breast cancer in virally Rds drug candidates as well as the good progress on the commercialization of our FC two product will also provide financial highlights for our third quarter fiscal year 2023.
With regard to our oncology program the company's oncology drug pipeline is focused on the clinical development of a novus arm for the treatment of metastatic breast cancer and nobody sort of has a different and new class of endocrine therapy for advanced breast cancer and Novus arm is in a world new chemical entity selective antigen receptor agonist that activates the <unk>.
Engine receptor and androgen receptor positive extra receptor positive her two negative metastatic breast cancer, just depressed timber grows without the unwanted masculinizing side effects and increases in hematocrit typically seen with androgens and Novus arm has extensive non clinical and clinical experience hasn't been evaluated in 25 separate clinical <unk>.
Studies, and approximately 1450 subjects dose, including three phase III clinical studies and advanced breast cancer involving more than 250 patients.
And the two phase III clinical studies conducted in women with androgen receptor positive.
You are positive her two negative metastatic breast cancer and Novus arm demonstrated significant anti tumor efficacy in heavily pretreated cohorts. They failed estrogen blocking agents chemotherapy and the CDK four six inhibitors and it was well tolerated with a very very favorable safety profile.
Current standard of care for first line treatment of it.
Our project or two negative metastatic breast cancer is treatment with the CDK four six inhibitor in combination with an estrogen blocking agent once a patient progressed, while receiving this combination therapy and if there's no specific genetic mutations detected the F. D. A approved treatment choices are limited to either another estrogen blocking agent or chemo.
Therapy is up to 90% of your positive hurt your negative metastatic breast cancers also has the androgen receptor we're developing an oversight.
Active antigen receptor targeting agents.
As another but very different hormone therapy for second line treatment. If you are positive or negative metastatic breast cancer preclinical studies metastatic breast cancer tissue samples taken from patients who have either a positive or negative metastatic breast cancer that have become resistant to CDK four six inhibitors and estrogen blocking agents.
We've grown in mice in these mice treated with an almost arm in combination with CDK four six inhibitor suppressed the growth of the human metastatic breast cancer greater than a CDK four six inhibitor alone.
Interestingly the CDK four six inhibitor treatment causes in metastatic breast cancer tissue to make higher amounts of Andrew receptor, which may explain the synergy of combining CDK four six inhibitor with an oberstar and selective <unk> agonist further and nobu starting treatment alone, which also effective in suppressing the grille. So CDK four six.
Or an estrogen blocking agent resistant metastatic breast cancer tumors in mice.
We're conducting a phase III clinical enabler to study, which I know bush, our monotherapy and combination of Bama Cycloplegia CDK four six inhibitor versus an estrogen blocking agent, which is the active control as a second line treatment for Arab positive you're positive or negative metastatic breast cancer.
March 30th 2023, the company met with the F. D. A to gain further agreement on a phase III clinical trial design and program the phase III study.
Been amended to accommodate the Fda's latest recommendations to support the registration has been Novus arm as a second line treatment for patients with ER positive, you're probably hurt your negative metastatic breast cancer, who had tumor progression, while receiving a CDK four six inhibitor plus an estrogen blocking agents in other words first line.
Three enable us to study has two stages and stage one of the phase III study the objectives are to optimize the dose of the Novus arm in the combination with the Burma cyclists and to assess the efficacy even though it was arm as a monotherapy in a clinical trial design of stage one.
How did your 60 patients into five treatment arms 32 patients. Each the arms are as follows estrogen blocking agent, which is the active control and down the stack that up and Novus arm nine milligram combination therapy that masako, plus I know some three milligram combination therapy than a site in place.
Listen no one milligram combination therapy, and I know it was arm nine milligram mono therapy.
Primary end point for the stage one is an objective tumor response rates also referred to as O. R. Are we're currently producing clinical supply if one milligram 30 milligram and Novus arm capsules for the additional dose optimization arms, we should expect to be available early next quarter.
The stage one initial run in enrolled three patients to assess the safety and pharmacokinetics of advent of cyclic plus and Novus arm nine milligram combination and this run in portion there were no drug drug interactions between a M. A cyclic than in Ozark and there were no new safety findings further the early preliminary clinical results.
Show two partial responses one stable disease in the first three patients based on local assessments and all patients are or were on study for over nine months by way of reference. The objective tumor response rates are about 4% for the estrogen blocking agent alone in similar patients as reported in the scientific literature.
In stage two of the Phase III study, we plan to enroll approximately 200 subjects in a multicenter open label randomized one to one active control clinical study to evaluate the efficacy and safety than irbesartan with or without a M. A cyclic therapy, depending on the outcome of the stage one versus an alternative antigen blocking agent in subjects with Ara.
Positive or negative.
That's like breast cancer, who have progressed, while receiving a CDK four six inhibitor plus an estrogen blocking agent again first line.
The primary endpoint for the stage two the phase III study is progression free survival.
Our current plan is to have the phase III stage, one clinical results by late 'twenty 'twenty four or early 2025, if the notion of a monotherapy with <unk> plus <unk> arm combination therapy comparator estrogen blocking agent, which is the active control demonstrates significant improvement in O. R. R, which is considered a surrogate endpoint for clinical.
[noise] benefit then the company plans to meet with the F. D. A to consider an accelerated approval regulatory pathway based on the clinical data from the stage one portion of the phase III study, whereas the stage two portion of the phase III clinical study will serve as the confirmatory study with progression free survival as the primary endpoint in.
In January 2022, very entered into a clinical trial collaboration and supply agreement to which Eli Lilly supplies at Burma cycling.
The enabler to phase III clinical trial.
Now, let's turn to our viral a R D S infectious disease program.
Company, that's developing so busy beulah nine milligrams, which is both a host targeted anti viral and broad anti inflammatory properties as a two pronged approach to the treatment of hospitalized patients with viral lung infections at high risk for our D. S and death. The company has completed a positive phase two and a positive phase III COVID-19.
COVID-19 clinical studies that have demonstrated that she busy bulent treatment resulted in significant mortality benefit hospitalized moderate to severe patients with COVID-19, viral lung infection, and hi, Rishi Rds.
And as far as viruses that causes lung lung infections and a R. D. S. Do show in the similar way the company believes it should visit Beulah and has the potential to be a treatment for all types of viral induced lung infections, not only starts Kobe shoe, but also an influenza a or b, we sit with our respiratory syncytial virus also known as RSV.
<unk> and other viruses and hospitalized patients on oxygen who had high virtually arod's, yes, we're planning to meet with the FDA in September to expand the patient population of the agreed upon phase III confirmatory COVID-19 study into a phase III study to treat hospitalized adult patients do you have any kind of viral lung infection, who aren't oxygen support.
And I ratio average yes.
The way to think of it as COVID-19 represents one of many respiratory viruses that cause lung infections and pneumonia that may progress the Ara D S and death, but which we've already conducted a successful phase III study demonstrating a mortality benefit should visit bulent treatment phase III was a double blind randomized placebo controlled study in 204 hospitalized.
Severe COVID-19 patients at high risk for a hard yes. It's primary endpoint was the proportion of patients who died by day 60 and based on the planned interim analysis. The first 150 patients randomized the independent data monitoring committee unanimously recommended that the study be stopped if a clear evidence of clinical benefit and they identified no safety concern.
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And the interim analysis treatments are busy bulent nine milligrams once daily which resulted in a clinically meaningful and statistically significant 55.2% relative reduction in deaths compared to placebo.
On May 10th 2022, the company had a pre emergency use authorization EUA meeting with the FDA to discuss the submission of an EUA application if its a busy bulent COVID-19 treatment.
June 7th 2022 at the request of the F. D. A the company submitted a request for FDA emergency use authorization Vista busy bulent adult hospitalized moderate severe COVID-19 patients at high risk of a hard yes and deaths in February 'twenty eight 2023 F. J notified the company that had declined to grant the company's requests for emergency.
He used to optimization and communicating its decision the FDA stated that despite the F. D. A declining to issue an EUA fishing busy Beulah and at this time the FDA remains committed to working with the company and the development Dishabituate Beulah.
Separately at the Fda's Advisory Committee meeting the F. D. A statistical efficacy summary of our phase III clinical study was presented in their slide 88 of the F. G. H presentation. There was just follows the study met the statistical criterion for stopping at the interim analysis data in all 240 <unk>.
Completing the study indicated treatment benefits for all cause mortality at day 60 results robust missing data assumptions exploratory analysis indicate minimal impact of baseline imbalances in timing of enrollment with duration of standard of care and it was a positive numerical trend consistent across subgroups.
Defined by age baseline W. H O category region and standard of care use at baseline.
On April 27th 2023, the company met with the FDA and reached agreement on the design of the Phase III confirmatory COVID-19 clinical trial to evaluate the busy billing treatment of hospitalized moderate to severe COVID-19 patients who had wished with R. D S and the path forward to submit a new EUA application and or an NDA.
The FDA agreed to a confirmatory phase III randomized one to one multi standard efficacy safety study she busy Beulah nine milligrams oral daily dose plus standard of care versus placebo plus standard of care in 408 hospitalized adult patients with moderate to severe Sars COVID-19 two infection wood hardwood sweetheart.
Yes, the indication, but in other words your patient population because she busy bulent will also be expanded to include all hospitalized module severe COVID-19 patients in other words W. H O four which is passive low oxygen W. H O five force a high flow oxygen W. H O six mechanical ventilation without a requirement for it.
Comorbidity.
The primary efficacy end point will be all cause mortality at day 60 secondary end points include days in the hospital days in the ICU stays and Mechanicals on mechanical ventilation and the proportion of patients alive without respiratory failure, and an exploratory endpoint, which would be the presence of long COVID-19 symptoms at day 180.
In order to get it potentially efficacious drug to patients in an efficient time frame two plants into one and that interim efficacy analyses will be conducted the first planned interim analysis is expected to occur when 204 patients with just 50% of the population has completed his days 60 primary efficacy endpoint in the sector.
The planned interim analysis is expected to occur to occur when 290 patients at 71% of the patient population have completed the day 65 may efficacy endpoint.
Either the interim efficacy analysis, you meet the statistical significance criteria. The trial can be stopped for efficacy should the prespecified primary efficacy endpoint analysis demonstrates statistically significant effect and all cause mortality favoring so busy building the company may consider a new request for an EUA, whereas submission of an NDA as it comes.
We would potentially have two adequate and well controlled trials for review as.
As the program has fast track designation, a rolling NDA submission as possibility for she busy fueling.
Now suppose you bulent does have activity against influenzae. So on April four 2023, the company announced results from a preclinical study was so busy bulent demonstrating robust anti inflammatory activity with improved outcomes in the H one N. One influenza induce pulmonary inflammation mouse a R. D S model.
And this was conducted by a team of researchers lab core early development laboratories in the United Kingdom.
As you visit bulent treatment resulted in a statistically significant decrease in the total number of inflammatory cells in a reduction key cytokines and chemokines and lung fluid clinically. So busy building treatment resulted in a reduction of severity of lung inflammation by histopathology and a dose dependent improvement in lung function.
As for our case for expanded indication to all types of viral infections in a R. D. S. Well viruses caused up to one third of community acquired pneumonia and viral infections can trigger the immune system to reach at least an overwhelming amount of inflammatory proteins known as the cytokines storm cytokine storm causes tissue.
Damaging lungs that lead to M. D S and patient developed ore D. S have a high mortality rate. It's a R. D has resulted in the over exaggerate immune inflammatory response by patients to the virus infection, rather than by direct injury from the virus itself and anti viral agent alone may not be effective so busy bulent its a host targeted MTV.
Viral and broad spectrum anti inflammatory agent has the potential to address the virus infection and the inflammation caused by the cytokine storm that causes are D. S. Multi organ failure and death now we're in the middle of the summer surge of COVID-19, and another one is expected in the fall and the winter and the current endemic phase.
COVID-19 infection is estimated to be the fourth leading cause of death in the United States in 2023 era.
D. S remains your frequent serious combo with carbon copy complication.
Severe COVID-19 infection, it's been reported that up to 33% of hospitalized patients COVID-19 have a R. D S, 75% to 92% of patients admitted to the intensive care unit with COVID-19 have a R. D. S. The mortality rate of COVID-19 associated Ara D. S. It's 45% among the patients who die from Covid.
19, there was a 90% incidence of lgs is a COVID-19 endemic continues there's also need to be to remain vigilant and focus on preparedness for the next wave of infections involving new new viral strains.
COVID-19 will be a problem for the foreseeable future and there's a need for effective therapies, especially for these hospitalized patients with moderate to severe COVID-19 infection and highways for yard yes. Further the influenza burden estimates according to the centers for disease control and prevention in the United States was up to 630000 hospitalizations.
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RSV was responsible for 177000, hospitalizations and 14000 deaths among 65 years and older.
Adults in the United States.
Interestingly, the pathogenesis and the mortality rates for hospitalized influenza and RSV adult patients, who have viral lung infections and who developed a rds are similar to the COVID-19 associated a R. D S patients with viral lung infections, who aren't oxygen support.
Richard R. G S represent a high unmet need and a potentially large market opportunity with very limited treatment options viral induced pneumonia and lung infection is the leading cause of hospitalization in the U S. According to the American thoracic Society.
So although we have reached agreement with the FDA for the design of the Phase III confirmatory COVID-19 clinical trial clinical trial, we believe that given the changing COVID-19 landscape the need for an agent like stay busy Beulah and it has the potential to provide a mortality benefit and all types of viral lung infections that could lead to a R. D S and death.
And viral lung infections and aired yesterday serious unmet medical need.
Now plants, you meet with the FDA again to reach agreement on the design of the proposed expanded phase III confirmatory study evaluating she busy beulah nine milligrams for the treatment of hospitalized adult patients who have viral among infection on oxygen who had highway she already has in depth, regardless of the type of virus.
And to confirm that a completed that's a completed positive phase III Covid studies that we've already done and the proposed phase III for all viral a R. D. S study together will be sufficient to submit an NDA for the broader indication for the treatment of all hospitalized adult patients with viral lung infections on oxygen.
And I wish we are yes. The FDA has granted a meeting with the Bureau in September of 'twenty 'twenty. Three we will provide an update on the viral infection are D. S program. After we meet with FDA and have appropriate clarity on this proposed study.
Now if we reach agreement with the FDA, we will not pursue the phase III confirmatory COVID-19, only study where the influenza a or B only study.
Now the clinical precedent that informs us of ARPA that informed us if all of this potential change in the regulatory and clinical strategy was actually set by Astrazeneca Astrazeneca has begun enrolling a phase III efficacy and safety of Tokyo rack and they've.
In hospitalized patients receiving standard of care for all types of viral infections, requiring a supplemental oxygen.
So listen of clinical trials that Gov N E cheese 05624450, the primary endpoint is the proportion of patients that die of progress to invasive mechanical ventilation by day 30, and Tulsa rack of Mab is an anti inflammatory anti IL 33 antibody.
Hibbitts the IL families cytokines.
Now interestingly in hospitalized COVID-19 patients a supplemental oxygen similar anti inflammatory antibody treatments had an absolute reduction in mortality is less than 5%. So Ana Canada, which is an IL one antibody had a less than 4.4% absolute reduction and socialism mab in IL six antibody had less than four.
2% absolute reduction in mortality in our phase III COVID-19 study, which included patients on mechanical ventilation treatment, which are busy bulent dual antiviral and broad anti inflammatory agent resulted in a 20% absolute reduction in mortality.
Now with April we submitted a request to the F D a to either to reevaluate F. G. H declination of our EUA precipitous peeling through the F. T. H formal dispute resolution process yesterday denied our request for entry into the process F. J stated that they're committed to working with us so busy people and they have recommended we continue with.
Our current clinical plan and to reach out to the FDA as often as needed under the fast track designation supports your busy bulent its development.
Interestingly in another development, the influenza and emerging infectious disease division of the biomass medical advanced research and development authority of the United States Department of Health and Human resources BARDA is planning a large multi center clinical trial in hospitalized adult patients who they are D. S BARDA stage.
Quote this clinical trial will evaluate the safety and efficacy of novel threat agnostic and host directed therapeutics that can address a R. D. S caused by known and unknown, how security threats, such as pandemic influenza COVID-19, other emerging infectious diseases and chemical biological.
Radiological nuclear incidents and quote.
If he was selected as one of the finalists and present us busy bulent to BARDA as a novel threat agnostic and host directed therapeutic agent with broad anti inflammatory and anti inflammatory activities and hospitalized adult patients at high rates. We are yes. The E. R. D edge therapeutics pitch event was called just breathe was conducted at the end of July of 2023 we expect.
We expect to be notified of a decision in early Q4, 2023 BARDA plants, just liked up to three therapeutic candidates representing different mechanisms of action versus placebo for participation in the plan BARDA sponsored L. D. S clinical study, which can which would consist of 200 subjects per arm.
As you know we're pursuing smallpox in the bowl of virus or other viral infections that may also lead to Eric Our air D. S in death, and posing a global public health threat Society include smallpox and Ebola virus single outbreak involving any one of these viruses would be an immediate global emergency with limited existing options for treatment.
On April 11, 2023, we announced positive results from preclinical in vitro study conducted by a team of researchers led by Brian and Dr. Brian Ward Associate Professor of Microbiology, and Immunology University of Rochester, New York, The preclinical study evaluated the effects of slippage against the prototypical pox virus called Vaccinia virus.
This which demonstrates the visit bulent prevented both who believes that the pox virus doesn't affect yourselves and the spread is a pox virus to healthy cells to do this is fueling is a host directed.
Antiviral and a broad anti inflammatory agent may be useful as a novel treatment not again, not only against smallpox and out of the pox viruses, but also may reduce the hyper reactive immune response triggered by pox viruses responsible the severe pneumonia. They are D S multi organ failure and death.
Company has a scheduled pre IND meeting with FDA. This month to discuss the animal rule regulatory requirements for assessing the efficacy so visit fueling the smallpox virus.
No clinical or clinical human efficacy trials of drugs for preventing or treating smallpox.
It's not we're not feasible and you can't Challenge studies, just challenge studies, we actually tried to give small pox the healthy subjects with its unethical. Therefore drugs for these indications are generally developed and approved and their regulatory pathway, commonly referred to as the animal rule.
The FDA may grant marketing approval based on adequate and well controlled animal efficacy studies when the results of those studies establish the drug is reasonably likely to produce clinical benefit in humans.
Now I'd like to turn to our commercial business. The company sells F. C. Two in both the U S commercial sector and in the public health sector in the United States and globally.
Only F D. A approved female internal economy, United States F. C. Two is a well established and serious business. We have sold over 750 million female condoms worldwide and since 2017 F. C. Two has generated over $213 million of net revenue, we have and we plan to continue.
To invest profits from the U F C. Two business to help fund the clinical development of our drug candidates and Nobu sorry, Mr busy fueling.
Telehealth channel has become an important commercial strategy in the United States for access to birth control products, especially for our product FC too as a non hormonal and latex free option to prevent pregnancy and transmission of sexually transmitted infections in a recent survey of 6000 respondents conducted by the Kaiser.
Family Foundation.
82% of respondents said that the COVID-19 pandemic was not not the reason they first access birth control online, which supports our strategy to move work to provide contraceptive access using the telehealth, Florida.
And the same survey.
Almost 5% of women reported getting the F. C. Two female condom is actually the number three most prescribed contraceptive behind pills and emergency contraception as a point of reference. We believe this is good news about the potential commercial opportunity for F. C. Two in the United States contraceptive market, if 5% market share shown in the survey.
Cable to be extrapolated to the estimate estimated $8 3 billion dollar contraceptive market in 2022 with projections should grow at a compound annual rate growth rate of approximately five 1%. There is potentially agree that 400 million dollar market opportunity for AFC to.
Accordingly to have more direct control over promotion distribution to maximize U S. Prescription sales reps to the company made a decision last year to launch its own independent actually two dedicated direct to patient Telehealth Telecom Tirasemtiv portal company continues to invest in it grows it's direct to patient tell them.
Medicine portal as well as adding a new telehealth and internet for milk fifth fulfillment pharmacy partners. So we can provide coverage in all 50 states in the United States.
I haven't taken the time to refine our marketing drive operational improvements and enhance the patient experience. During the initial launch phase, they're increasing new prescriptions being written and filled two R. F C to telehealth portal during the third quarter of fiscal year 2023, we started new prescriptions grow over 115% providing prescription.
Approximately 4400 patients we.
We believe these results support our strategy and demonstrates high demand for F. C. Two we plan to continue to grow and deepen our investment in a profitable way by further expanding our presence both in social media channels and online search now in the U S public sector in the U S public sector. The company has seen a 115% increase.
<unk> volume there the third quarter of fiscal year 2023 versus third quarter of fiscal year 2022.
Rose is attributable attributed both to key U S public sector partnerships, including the Companys recent announcement in April 'twenty. Two 'twenty three that is entered into a purchasing agreement with faxes group services. The number one provider of oral and emergency contraceptive in the U S clinics.
Global public health sector outside the U S. The company Mark F C. Two to entities, including ministries of health government health agencies UN agencies not for profit agencies and commercial partners. We are currently supplying a large multi year of south African tender for female condoms, which is expected to continue until 2025.
And we have seen sales grow in the current year as the current tender at launch. We also expect a form of Brazil tender process to commence later this year.
Based on our experience to date, we expect revenue from our U S. F. C. Two prescription business will deter with demonstrated robust growth both from our dedicated F. C to telehealth portal. If the addition of new telehealth and other commercial distribution partnerships. Furthermore, we intend to continue to leverage partnerships with entities in the U S public sector such as state.
You've held 501 C. Three organizations generate strong unit sales growth, we have seen in fiscal 2023 from this channel.
Now the company had another FDA approved product called and Tad fee.
Which are which is a product for a new treatment for BPH that was approved by the F. D. A N December 2020 one.
Product as part of the company's sexual health program.
On April 19, 2023, the company entered into an asset purchase agreement the Bluewater vaccines to sell substantially all of the assets related to taxi transaction closed April 19, 2023, and the purchase price for the transaction was $20 million plus $80 million in future sales milestones.
I will turn the call over to Michele Greco CFO CFO to discuss the financial highlights Michelle.
Thank you that's the China.
We have a lot of activity.
Let's talk about highlight with the third quarter result.
For the three months ended June 32023.
Overall, net revenues were $3 $3 million compared to $9 $6 million.
For your third quarter.
Prescription business net revenues decreased from $6 $7 million in the prior year third quarter to $863000.
The reduction in the prescription business not revenue is due to not having any revenues from the pill club inventory here yet.
Many of the clubs are in bankruptcy.
Global public sector, net revenues were $2 $5 million compared to $2 $9 million in the prior year third quarter.
Gross profit was $1.2 million or 37% of net revenues compared to $7 $1 million or 74% of net revenues in the prior year third quarter.
The reduction in gross profit and gross margin is driven primarily by the change in sales mix with a U S. B two prescription business, representing 26% of net revenues in the current period compared to 70% in the prior year period.
Operating expenses for the quarter decreased to $13 $8 million from the prior year's quarter of $28 $9 million.
Decrease of $15 $1 million is primarily due to research and development costs, which decreased $15 $2 million to $2 $9 million compared to $18 1 million in the prior year quarter.
And is offset by a small increase in selling general and administrative expenses of approximately $100000 from $10 8 million to $10 $9 million right period.
The decrease in research and development cost is primarily due to the company's recently announced updated strategy to refocus its development effort on drug candidates with the pump opportunity.
To long term success and to create value for the shareholder.
On April 19th we felt he had the product to blue water biotech $20 million, we received $6 million at closing and promissory notes of $4 million payable by <unk>.
Remember 2023 $5 million payable by April 2024, and $5 million payable by September 2024.
In addition, there's the possibility of up to $80 million in sales milestone payment.
We recorded a $17 5 million pretax gain on the sale of an tansey.
Operating income for the quarter with $4 9 million compared to an operating loss of $21 $8 million in the prior year quarter.
The change of $26 $7 million due to the pretax gain on sale have been hit the $17 $5 million.
And in operating expenses of $15 $1 million offset by the reduction in the gross profit by $28 million.
Non operating income was $1 $5 million compared to non operating expense of $234000 in the prior year's third quarter.
And primarily consisted of the change in the fair value of the derivative liabilities.
Weighted to the synthetic royalty financing, partially offset by interest expense.
Change of $1 $7 million, primarily due to a reduction in interest expense of $536000.
And the change in the fair value of the derivative liability $908000.
For the quarter, we recorded a tax expense of $58000 compared to $138000 in the prior year.
Our third quarter.
The bottom line results for the third quarter of fiscal 2023, with net income of $6 $3 million or seven cents per diluted common share compared to a net loss of $22 $2 million or 28 cents per diluted common share in the prior year third quarter.
Turning to the results for the nine months ended June 32023 for the first nine months total net revenues were $12 $4 million compared to $36 $8 million in the prior year period.
Net revenues from the U S prescription business were $5 $2 million compared to $29 $9 million in the prior year period net revenues from the global public health sector business were $7 $2 million compared to $6 $9 million in the prior year period.
The reduction in the U S prescription business net revenues is primarily due to lower volume from telemedicine customers because of ongoing challenges, which included changes in strategy the impact debris branding and reduction in marketing spending and thereby resulting in slow down in orders during recent quarters.
No adult customers discontinuing operations.
Net revenues from the Pill club was $3 9 million in the current year period compared to $17 4 million in the prior year period.
We recorded a provision for credit losses for the net revenues during the current year period, which were included in the gross accounts receivable balance.
June 32023.
The pill club <unk> chapter 11 bankruptcy.
Net revenues from another prescription channel customer were $11 3 million in the prior year period and zero in the current year period, which we understand argue the inventory management after a reduction in orders from its most significant customer, which just discontinued its operations, thereby resulting in our customers.
See some orders.
We're working to increase net revenues in future periods.
Growing awareness and driving demand through increased due to marketing efforts through our telehealth platform into discussions with potential new distribution partners in the telecom sector.
The increase in F Q2, net revenues in the global public health sector is the result of shipments commencing for orders under the 2022, South African tender in the current year period as well as increases in the U S public sector orders.
Gross profit was $6 million or 48% of net revenues compared to $31 million or <unk>, 82% of net revenues in the prior year period.
Gross profit in gross margin is due primarily the change in sales mix with the U S prescription business, which has a higher profit margin comprising a smaller percentage of total net revenues.
And how your production cost per unit due to lower production volumes.
Expenses increased by $25 million and $93 $6 million compared to the prior year period $68 $6 million increase is primarily driven by selling general and administrative costs, which increased by $16 $4 million and $41 $3 million.
From $24 $9 million in the prior year period.
The increase in selling general and administrative cost is due to commercialization costs of $12 $9 million related to preparations for the potential launch of the visit dealing for COVID-19 incurred during fiscal 2023 prior to the Fda's declination decision on our EUA application and an increase.
Share based compensation costs.
$1 $2 million from $5 million, resulting from an increase in the number of Unvested stock options for which we recognized over a three year period.
Research and development expenses increased to $44 $5 million from $43 $8 million in the prior year period.
Increased research and development expenses in the second half of fiscal 2022, and the first half of fiscal 2023 were mainly related to the visit dealing for COVID-19, and our emergency use authorization application in the third quarter of fiscal 2023, because of our updated drug development strategy, we have seen a decrease.
Research and development expenses.
We recorded a provision for credit losses of $3 $9 million during the period related to the total receivables due from the pill club because of the uncertainty of their financial condition.
No such provision for credit losses in the prior period.
During the period, we also recorded an impairment charge of $3 $9 million.
Related to in process research and development assets recorded person visit appealing for prostate cancer and the clomiphene based on our updated drug development strategy. There was no such impairment charge recorded in the prior year period.
During the period, we recorded a pretax gain of $17 $5 million on the sale of being hit the asset yeah.
The operating loss for the period was $71 million compared to $38 $6 million in the prior year period, the increase of $31 $6 million, primarily due to increased selling general and administrative expenses. The write off of the intangible asset recording of the credit loss provision for the pill club.
All offset by the pre tax gain on the sale of unhappy.
Non operating income was $749000 compared to non operating loss of $4 million in the prior year period.
I'm merely consisted of interest expense and the change in the fair value of the derivative liabilities related to synthetic royalty financing the change of core point $7 million, primarily due to reduction in interest expense of $1 $3 million and an increase in the change in the fair value of the derivative liability of $2 9 million.
Dollars.
For the nine months period, we recorded a tax benefit of <unk>.
$77000 compared to a tax expense of $225000 in the prior year period.
The company has net operating loss carryforwards for U S federal tax purposes of $112 $7 million with $29 7 million expiring in years through 2042.
And $82 $9 million, which can be carried forward indefinitely.
U K subsidiary has net operating loss carryforwards of $63 $1 million, which do not expire.
The bottom line result for the first nine months of fiscal 2023 with a net loss of <unk>.
$69 $3 million or 83 cents per diluted common share compared to a net loss of $42 $8 million or 53 cents per diluted common share in the prior period.
Now, let's look at our balance sheet.
June 30th 2023, our cash balance was $16 $2 million, our accounts receivable balance was $5 $1 million and our gross promissory notes receivable from the sale and then hit the $14 million.
Working capital was $15 $5 million on June 32023, compared to $63.3 million on September 32022.
During the nine months ended June 30th we used cash of $78 $5 million for operating activities.
With $26 $6 million for operating activities in the prior year period.
On April 19th we entered into an asset purchase agreement salary and hit the assets at Blue water biotech for $20 million, we received $6 million at closing $4 million payable by September 2023, $5 million payable by April 2024, and $5 million payable by September 2024.
But there is the possibility of up to $80 million in sales milestone payments.
Second we entered into a common stock purchase agreement with Lincoln Park Capital Fund LLC, which provides the company with the right, but not the obligation to sell to Lincoln Park up to $100 million of shares of the company's stock over a 36 month time period.
On May 12, 2023, we entered into an open market sales agreement with Jefferies LLC, a sales agent, which provides the company the opportunity to issue and sell through Jefferies shares of our common stock with an aggregate value of up to $75 million.
We are not obligated to sell any shares of common stock under the Japanese sales agreement Jefferies will use commercially reasonable efforts consistent with its normal trading and sales practices associated with comes back from time to time based upon their instructions, including any price type or size limits specified by us.
On July 24, 2023, we had a special meeting at which the company's shareholders approved an increase in the number of authorized shares of common stock from 154 million to $308 million.
We are working to increase the future etsy to net revenues in the U S prescription channel break growing awareness and driving demand of FC too.
<unk> marketing efforts for our own telehealth platform and pursuing additional distributors in the telecom sector. We are starting to see an increase in the U S public sector to meet up with new distribution agreements executed within the last year and are starting to see increases in our global public sector business.
Under 10.
I think to hear about a new tender in Brazil later in the calendar year.
Over the years, we have had plenty of experience in managing our cash burn and wanted to be effective tools. We have if needed is to slow down the drug development or focusing on one drug program and the time to try to match drug development spend with available resources.
We believe that current cash balance.
Along with the revenue from sales of FC two cash payments will receive from the sale of Rins hit the asset and our ability to secure financing will be adequate to fund the planned operations with the company for the next 12 months as we continue to focus on developing novel medicines for the treatment of metastatic breast cancer in for viral induced <unk>.
Respiratory distress syndrome diseases.
Now I'd like to turn the call back to Dr. Steiner Steiner.
Thank you Michele so the key takeaways from this past quarter, our we have focused on obtaining rather as regulatory clarity on two major phase III clinical trials and we've received FDA clarity for the phase III, enabling two study evaluating <unk> monotherapy <unk> plus a M. A cycle of combination therapy versus an estrogen blocking agent activity.
Troll as second line treatment for hormone receptor her two negative breast cancer and metastatic breast cancer at the stage one portion of the phase III demonstrates significant improvement in or are the primary end point by either the <unk> arm alone or in combination with <unk> of them will meet with the FDA for a potential accelerated approval.
[noise] pathway, we will also quickly initiate a phase the stage two confirmatory portion of the phase III study with progression free survival as the primary endpoint. So remember nobis arms in new and different hormone agent that targets, Andrew receptors Express metastatic breast cancer with potential improvements in quality of life without the unwanted masking a lie.
<unk> effects and increase in hematocrit typically associated with androgens given the current COVID-19 landscape and the large unmet medical need to have a treatment available with a potential mortality benefit against all types of viral induced a R. D. S. The company will meet with the FDA in September to gain agreement to expand the evaluation of <unk>.
Bulent beyond COVID-19 into phase III confirmatory study that will include all types of viral induced lung infections influenza RSV, COVID-19, and other viruses and hospitalized patients requiring supplemental oxygen who are at risk for.
A R. G E. R. D. S. This expanded phase III study would help us with more certainty and the timing of patient enrollment and offers a larger market opportunity.
The influenza emerging emerging infectious disease division of BARDA is planning a large multicenter placebo controlled clinical trial to evaluate the safety and efficacy of three novel threat agnostic agnostic and host directed therapeutics in hospitalized adult patients. They are G. S Bureau was selected as one of the finalists and we expect to be notified of the decision during the calendar.
Q4 2023.
Companies reported positive preclinical data because you're busy bulent influenza, a induce rds and for pox virus and F. D. A pre IND meeting for smallpox virus is scheduled for August of 2023, our financial position. We have successfully reduced expenses. After we received the COVID-19, UA declination company's cash burn during the.
Quarter was during this quarter was $7 3 million, a $16 $1 million reduction compared to the prior quarter, our cash position in fiscal year Q3, 2023 was $16 million plus we expect $14 million and a gross promissory notes receivable from the sale of <unk> taxi for fiscal year 2022, 3%.
2024, if you add that together you get a $30 million and plus we expect to continue to receive cash contributions from our F. C. III commercial sexual health business and very much also entered into a common stock purchase agreement for purchase up to $100 million with Lincoln Park Capital Fund and under the terms you agree.
Lincoln Park is committed to purchase up to $100 million of various common stock at its sole discretion that vary from time to time over 36 months, we believe this commitment.
Further enhances our financial flexibility and are aligned with long term strategy for shareholder value creation.
Finally, we're actively seeking in some cases already in discussions for potential partnerships with novus arm in breast cancer and she busy beulah and viral induced Ara, yes, as another source of non dilutive capital with that I'll now open up the call to questions operator.
Ladies and gentlemen at this time, we will begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad.
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We will pause momentarily to assemble IRA.
Our first question comes from Dennis Dang with Jefferies. Please go ahead.
Hi, Good morning. This is anthea on for Dennis Congratulations on all the progress.
Two questions if I may.
Just one on cash how much flexibility do you have on Opex.
We extend the runway beyond guidance at 12 months.
And second on breast cancer.
Can you comment on the data Dr Test mono trial, and we will see data from that thank you.
Sure.
About cash I'm going to ask Michel to answers and Michele can you answer that question. Please.
Yeah.
The the question beyond the 12 month runway. It the answer is no different than you know what.
What I said for currently right now you know based on cash based on all the changes, we're making with the FC too and the improvements we're seeing with the etsy to portal the ink.
Creases, where CN and our U S public sector.
Also on a global public sector space for the F. B two product coupled with the fact that we have.
No payments due from the sale of and Patsy.
You know we continue that's our operating expenses, we continue to look at ways to make improvements and so again I we.
No I don't see any issue as we look out beyond the 12 month time period.
Thank you Michele I, just wanted to add to that so.
Again, we're very excited about this base business the base sexual health business has continued to be there for us I mean to refresh everybody's memory. I mean, you know we had a peak year of $60 million, then went to a $34 million and prior to that it was 30, something 45 million and 37 million and $18 million it generates real money.
And and that's been our success, so we don't dilute our shareholders.
I'm, a big shareholder and as a result, you know very very sensitive to dilution.
For that reason, we have found I mean, the internet has been an incredible way and that that growth of our business happens.
Not yeah, we get business from a global public sector. Yes, we got you know more business in U S public sector, but really it's the U S prescription business portable care Act and the growing demand for non hormonal.
Birth control that women have control over so we just happen to be at the right business at the right time and so we you know.
Based on our numbers the numbers are going to go up and so we see a 'twenty 'twenty four it being a better year I mean, we were good.
Good.
Next 12 months, but 2024 and without a pause.
Out of 2024 as you move into 2025, I mean, the portal should be doing a pretty good job at helping to the FCC to put a pretty good job in helping us with.
With cash as far as to continue to develop our two main phase III programs as it relates to your second question, which is about our tests so just to be clear.
Our test with it is is as <unk> monotherapy in a what is a later line patient population an enabler to later line means they fail the CDK four six inhibitor in at least two.
Estrogen blocking agents in some and what we found is in some cases, they were on four or five or more.
Approximately 50 patients that enrolled in that monotherapy study and and those patients still on this study as we speak and so.
In order for Us to report data, we need to have the completed.
Clinical study report and so once we get this clinical study before we have the access to the data then yeah, we're going to look at that data very very carefully to make sure that we can make some conclusions about another sort of monotherapy in a much later stage patient population, but we're encouraged and so we're looking forward to seeing that they report that.
Got it thank you.
Thank you.
Our next question comes from Chen with H C. Wainwright. Please go ahead.
Hey, everyone. This is kate on behalf of UQM.
The first question.
Hey, Blair.
Do you anticipate a certain range of minimum range of.
Overall response rate that you would like to see from the stage one.
A portion of the study in order to receive an accelerated approval.
I don't know.
Hi, Thanks. Good question, Yeah, it's a good so as long as we stay hypothetical I'm happy to say hypothetical so the.
Question basically is what do we what do we what do we think our O our rates could be.
And and so so if you look at the the.
The five arms then you start with the active again. This is this is based on religious if you have this second patient. The second line patient population patient population is filled with CDK four six inhibitor and that's been blocking agent did the expectation for the estrogen active control is going to be around 4% four to five.
Were sent or Okay, and that is actually based on the most recent study that came out with a with the surge.
Hum.
Trent and I looked at their control group because that will best friend was given.
They're active control with patients who have failed a <unk>.
D K four six.
Or an estrogen blocking agent and were given the alternative estrogen blocking agent. The O. R is about 4%. So that's probably the most recent large study that we can point our finger to say, that's 4% as it relates to the <unk> in combination with a <unk> arm.
Burma cycled alone.
<unk> is around 9% and that's and that's in a population that's probably not exactly like this one but close and and so so 9% by itself, but we don't have a bit bound by itself. We have been a plus of novus arm. So our expectations have been the pleasant novus arm could be pretty interesting considering we've.
Got our first three patients we have two partial responses and stable disease and we are just getting started.
Now you know, our our our expectations, there's going to be much much higher than the.
Active control and then when you look at the <unk> by itself well, we'd have to go back to the phase two study that was done in patients where only 10% to 12% when our CDK four six inhibitor. This is 136 women and the basis for why we in licensed that product and when you look at tumor.
Responses, whether its re to want to read it too it doesn't matter just looking for objective tumor responses I mean, we were in the.
30, 30 plus percent depending on how you cut the data. So it was always so when you look at 37% versus 4% it looks pretty good and Thats monotherapy. So so we think we're going to be in that range of 4% for active active control <unk> as you know and in the notice on our monotherapy can be pretty much neck.
And neck, and so that if that happens again again I'm just thinking ahead.
<unk> by itself is a very well tolerated medicine, it builds muscle builds bone.
Whose quality of life and whereas <unk> is a very good medicine in combination and those aren't Burma has.
Issues with Gi.
And neutropenia, it's more like a chemo. So if we were able to if we're able to have the combination. It's a high number would go with it. If you have this combination and it's similar to notice on monotherapy. We may just picking up as a monotherapy can go forward with it because of the safety and quality of life. So we have all of this is hypothetical but this is how we're thinking about it from a standpoint of how we set up the study.
Sure.
Excellent. Thank you so much and our last.
Lastly, I am sorry, if I missed this during your prepared remarks, but could.
Could you provide a prescription.
Prescription revenue for the quarter.
Thank you.
What's the question prescriptions for the FC FC two prescriptions for the quarter, Yeah. So I'd just say at 4400.
Gotcha. Thank you so much sure thing and 4400.
Yeah. So that's pretty good that's a you know.
I'm very happy with that because that means we are on that is that slope going up in <unk> and and we get we get a good good good price for that okay.
Next question please.
With that I'd like to ask a question. Please press Star then one to withdraw your question. Please press Star then two.
Our next question comes from Leland <unk> with Oppenheimer. Please go ahead.
Hey, Matt.
Thank you.
The update.
Well, it's a couple of questions.
To enable her to just understand so since those three initial patients as you were evaluating.
The combination have you have you been enrolling additional patients or if you are.
Now just starting to enroll.
Patients into the.
Stage, one as you work towards those hundreds, yes, yes sure sure sure.
Yeah. It's good question. So this is what happened with <unk>.
Got the result.
Preplanned three patients to be in call it stage one.
Which was the first time when we look at the combination of MSI, who within with the Novus arm to make sure there's no drug drug interactions with the PK.
Pick the Novus arm nine milligrams, because that's what we did in the phase two study as monotherapy and we took the <unk> could be approved dose and you put them together and you have three patients that come in with the you know the second line.
Position.
And we got the data back and shows there's no drug drug interactions no new safety issues and we should you know we basically show that even at the first scan we show two partial responses. The first eight week scan Michele two partial responses and stable disease and so we went to the FDA and to get more clarity when the FDA came back in.
Said you know.
Don't go higher nine looks good basically.
Don't go higher or deny that but we're very interested in dose optimization you can do it.
For a registration program. They want you to have dose optimization sorted out.
And we pick our dose was based on nine milligrams at 18 milligrams. It was done in the phase two so they said go lower and so we you know so we can.
So we.
We will be going to three milligrams in combination with the Novus arm one milligrams in combination with <unk> and that will allow the agencies and then the notion of monotherapy that will allow the anybody to look at the Burma and Novus arm.
Another sign of monotherapy and combination and you can tease out with the Novus arm is doing what they must do it because you have a monotherapy. So all of that took a little bit of time.
Get sorted out at least a couple of meetings with the FDA.
Comments back from the other actually three sets of comments back from the FDA to get clarity and we wanted to make sure. We did it right and so so where we are now is enrollment will pick up again next quarter when the one milligram and three milligram and Novus arm clinical supply is ready.
So that's what we're waiting on.
Okay understood and just with respect to the.
Public side of the of the two.
Could you comment if you have additional payments remaining on the South African tender and also what you may see as the potential value.
The Brazil tender.
Yeah, So Michelle it's actually the expert and so I'm gonna have a comment on that but but she's going to tell you how to think about the tender in general and and how much do you know how much do we can expect some of the South African one and then she'll tell you historically what has happened in Brazil Michelle.
Sure.
The South Africa tender.
Started we won a significant portion at Tinder and so the sales have just started it's a three year tender process, though.
A three year tender. So we have a lot of time with multiple distributors in South Africa, They continue to supply product yeah.
Brazil.
Normally.
Takes a little bit of a break between tenders and.
The new tender.
Partially due to the change in government as well.
The new tender is going to be coming out towards the end of this calendar year.
And their tender normally is in the area.
Money.
Early into 50 million units and it all depends on the government and how much they put out forbid them in most instances they put a.
Portion of the tender that is for non latex and we fall into that category.
So we get an opportunity to bid on are pushing on the tender where other female condoms in the global public sector can't do it.
And so you know that normally last about 18 months to supply that.
Until like I said, the tender process should be announced towards the end of this year. Once it's awarded when we start distributing.
That would be in our you know into our next fiscal year into the second half of that year.
The South Africa tenders going to continue though.
All of next year and the following year as well.
Yeah, and the expectation that it will continue after that it's been going on for 20 years. So that's going to keep going and she said you just put new ones out or to extend the current one.
So in summary, the way to think of it it's got a U S based business, it's growing and it's palpable and we're seeing it and it feels good.
Description business and that's our largest profit margin. The second largest profit margin is U S public sector that went up 115% big.
Big departments of health that have not ordered in the past has started ordering again and then we picked up some new business of 540 bees and that kind of stuff. So that feels good so our second biggest profit.
And then all of a sudden I am I attributed to Covid with Covid everybody was using their dollars to go after vaccines and masks and all that stuff now that thats kind of passed and people are kind of getting to the new normal.
The resources are being freed up and that's why I think we see them.
People go back to cause it.
Very clear are the number one reason public health is using the F. C. Two condom is probably more in line with the the ability to stop sexually transmitted diseases than it is her birth birth control and that's probably true for sure in Brazil, and South Africa, and and USA I D, which is a.
Big organization that we work with just the name tells you that it's primarily sexually transmitted diseases.
Alright, thanks for the additional color.
Great.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference call back over your Doctor Mitchell Steiner for any closing remarks.
Thank you operator, I appreciate everybody joining us on today's call I look forward to updating all of you on our progress on our next investors call have a great afternoon.
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