Q2 2024 Veru Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to their who Inc. Investors 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.
The opportunity to ask questions. Please note that this event is being recorded.
I'd now like to turn the conference over to Sam Mr. Sam Fisch <unk>, Inc.
<unk> director Investor Relations and corporate Communications. Please go ahead.
Samuel Fisch: 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.
Samuel Fisch: Such forward looking statements are subject to known and unknown risks and uncertainties and our actual results may differ significantly from those projected suggested who are 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 our press release this from time to time.
I'd now like to turn the conference call over to Dr. Mitchell Steiner, <unk>, Chairman CEO and president.
Good morning, with me on this morning's call a doctor Gary by NASA, Chief Scientific Officer, Michele Greco Chief Financial Officer, and Chief Administrative Officer, Michael purpose Executive Vice President General Counsel, and corporate strategy, and Sam Fisch, who you're exactly the director of Investor Relations and corporate communications. Thank you for joining us.
Q2 fiscal year 'twenty 'twenty four earnings call.
Samuel Fisch: Here is a late stage.
Samuel Fisch: Clinical stage biopharmaceutical company focused on developing innovative medicines for high quality weight loss oncology and acute respiratory distress syndrome.
Samuel Fisch: The company's drug development pipeline includes two late stage novel oral small molecule and Novus arm it should distribute one.
Our weight loss pipeline, we Havent Novus arm also known as Ostomy M. K 2866 G. T Expo two four if you're 024, which is an oral selective androgen receptor modulator charm.
<unk> is being developed as a treatment in combination with glucagon like peptide one receptor agonist, which I'll be referring to slip one receptor agonist, which is a weight loss drugs to augment with fat loss and to avoid muscle loss in overweight or obese patients for chronic weight management.
How's your pipeline and pending additional external funding or form a partnership we have a novus arm in combination with <unk> as a treatment for androgen receptor positive estrogen receptor positive and human epidermal growth factor receptor two negative metastatic breast cancer in the second line setting.
Samuel Fisch: And our infectious disease pipeline suddenly pending additional external funding or form a partnership we haven't shipped is appealing and microtubule disruptors, which isn't a planned phase III clinical trial for the treatment of hospitalized patients with viral induced a rds company.
Samuel Fisch: The company also has an FDA approved commercial product UFC, two female condom internal condom, who do a protection against unplanned pregnancy and sexually transmitted infection.
This morning, who will provide an update on the primary focus of our company and the development of an OS arm and oral sorry in combination with a a gobies chemical who tied eclipsed one receptor agonist to avoid muscle loss and to augment fat loss with potentially higher quality weight loss.
Also provide financial highlights for our second quarter fiscal two fiscal year 2024.
Clip one receptor agonists like a simple would go V shape out majority of very effective weight loss drugs. Unfortunately up to 50% of the total weight loss comes from muscle, which is problematic as muscles necessary from metabolism strength and physical function loss of muscle maybe one of the reasons why patients on click one reset.
Agonist drugs reach a weight loss plateau.
The rate of weight loss slows or stops well taken at least one receptor agonist drug <unk>.
Samuel Fisch: Turning to the C. D. C 41, 5% of older adults have obesity in the United States and could benefit from a weight loss medication up to 34, 4% of obese patients over the age of 60 has circa panic obesity.
Samuel Fisch: This large population who circuit panic obese patients is especially at risk when taking a quick one receptor agonist for weight loss as they may already have critically low amounts of muscle due to age related muscle loss.
Because of the magnitude and speed of muscle loss, while our glucagon receptor agonists therapy for weight loss with one receptor agonist drugs may accelerate the development of frailty and muscle weakness and obese or overweight elderly patients muscle weakness may lead to poor balance decreased gait speed mobility disability loss of independence and high.
Samuel Fisch: The risk who falls and fractures in fact, the safety section of the package insert for Gogo vision has been updated based on the recently reported at select cardiovascular outcomes clinical study, which now highlights at 400% increase in pelvic and hip fractures that were observed in patients greater than 75 years of age, but she even would go V.
Compared to placebo, it's two 4% versus 0.6%, which was just statistically significant P value 0.0073, and a 500% increase in pelvic and hip fractures in females of any age that's 1% versus two 2%, which was statistically significant at P value zero point of view.
Fractures of the hip and publish typically occur because it falls, which increase with decreased muscle mass.
Consequently, we believe there is an urgent unmet medical need for a drug when given in combination of glucagon receptor agonist that could prevent the loss of muscle, while preferentially, reducing fat and not only are overweight or obese patients, but also for the large subpopulation of Osaka, Phoenix obese overweight elderly patients who who had.
Risk for developing muscle atrophy, and muscle weakness leading to frailty.
We believe the Novus arm our novel oral selective androgen receptor modulator may be the best drug candidates to address this urgent unmet medical need.
Data from our clinical trials and preclinical studies support Novus arm as potential no sorry. It was a once a day oral dosing works through the androgen receptor, which is a well established mechanism demonstrates tissue selectivity.
Example, improves and preserves muscle mass and physical function directly causes that break down fat and prevent storage of fat, resulting in a decrease in fat mass. This represents a different non overlapping mechanism of drug action to reduce fat that is distinct and flip one receptor agonist lupron receptor agonists suppress appetite to create.
Low caloric state, so who knows orange given political lift one receptor agonist. The combination utilizes a different mechanism to increase the loss of fat.
Samuel Fisch: And that was sort of a built in heels bone potential to treat bone loss, who also knows osteoporosis to prevent fractures and Osama has been previously studied in five clinical studies involving 968 older men who closed medical.
Causal women as well as older patients, who have muscle wasting because of advanced cancer Vance.
Vance canceled stimulates a low calories state because of loss of appetite with a significant unintentional loss or wasting of both muscle and fat.
Samuel Fisch: Mass similar to what is observed with one receptor agonist treatment.
Talvitie the clinical data from these five clinical trials demonstrate that knows who aren't treatment leads to increases in muscle mass with improvements in physical function as well as significant reductions in fat mass. The expectation is that a novus arm in combination with it slipped one receptor agonists with potentially preserve muscle and augment the fat reduction.
Two different mechanisms, resulting in higher quality total weight loss.
Samuel Fisch: More importantly, you know, which arm has a large safety database, which includes 27 clinical trials involving 1581 men and women dose with no concern, but some patients dose for over two years in this large safety database, who knows arm was generally well tolerated without masculinizing infection in women.
Versatile mild liver enzyme elevations happens going forward, but no drug induced liver injury has been observed in any of the clinical studies evaluating and nobu sorry. Furthermore, there were no increases in gastrointestinal side effects. This is important is there is there are already significant infrequent gastrointestinal side effects.
With clip one receptor agonist treatment alone.
Samuel Fisch: Now turning to the <unk> clinical program for high quality weight loss.
As to be multi center double blind placebo controlled randomized dose finding clinical study.
To evaluate the safety and efficacy of the Novus arm three milligrams knows I'm six milligrams compared to placebo in combination with Gogo vision. So that's M. Mcglynn tied with just the glucagon receptor agonist in approximately 90 older patients over the age of 60, who are overweight or obese.
The purpose of the phase two b clinical trial is to select the optimal dose of <unk> and <unk>.
Combination with eclipse one receptor agonist, the best preserves muscle and augments the reduction of fat mass with 16 weeks of treatment. The primary endpoints of the phase two b clinical trial will be the change in total lean body mass from baseline to 16 weeks key secondary endpoints will be the change from baseline to 16 weeks until.
Fat mass.
Resistance to body weight and physical function as measured by stair climb test.
Samuel Fisch: We initiated the phase <unk> study enrolling our first several patients in April of 'twenty 'twenty four and the clinical study is planned to be conducted in approximately 15 clinical sites in the United States.
<unk>, who is also the phase two b clinical trial are expected at the end of calendar year 'twenty 'twenty four.
Samuel Fisch: We believe that assessing the effects of an Osama lean body mass and fat mass at 16 weeks should be adequate did demonstrate significant lots of muscle in the semicon tied placebo cohort support comes from the step one study reported by Wilding at all in the New England Journal of Medicine step one study that evaluated <unk> types of weight loss.
It's an overweight and obese patients showed that 49% of the.
Samuel Fisch: Total weight loss and a 68 week study occurred by week 16, and approximately 40% of total weight was attributed to muscle loss.
Samuel Fisch: After completing the 16 week after we see dose finding portion of the phase <unk> clinical trial.
<unk> will then continue.
Samuel Fisch: Until a blinded phase two b extension clinical trial, where all patients will stop receiving the glucagon receptor agonist, but we'll continue taking the placebo and the other songs three milligrams whenever some six milligrams for an additional 12 weeks the blinded phase two b extension clinical trial will evaluate whether novus arm can maintain muscle and prevent.
Samuel Fisch: The fat and weight gain that occurs after discontinuing it with one receptor agonists. The topline results of the separate blinded phase two B extension clinical study are expected in calendar Q2 2025.
Samuel Fisch: There's nobody wants a muscle drug to also burn fat our current phase two B clinical program was designed to provide clinical data to support the development and Novus arm put precision high quality weight loss by answering the following clinical questions related to muscle.
For the at risk older patients, who are overweight or obese canon oberstar and prevent the loss of muscle to preserve physical function.
Older patients, who have or who may develop shakopee and it could be see that is they have both low muscle deserves an overweight or at high risk for accelerated development of frailty muscle.
Most of the weakness in physical function decline, while receiving a blip one receptor agonist.
Second question for all patients who are overweight or obese can in irbesartan preserve muscle to do is to prevent the clip one who weight loss plateau. The hypothesis is that lots of muscle creates a muscle deficit and that triggers an increase in appetite. This increase in appetite counters that hypochlorous benefited clip on drugs.
Leading to weight loss plateau without deficit slip one drugs may potentially be moved more fat and be able to maintain or have a court date by the way Nobody's arm has direct effects on fad to further increased fat loss third question for all patients who are overweight or obese Cana novus arm maintain adequate muscle reserve.
Samuel Fisch: When a glib one receptor agonist drugs with discontinued to prevent the rebound wait wait regain which is almost fac lungs all fat.
Samuel Fisch: We're excited that our phase two b clinical study has been initiated and is enrolling we believe we have sufficient financial resources on hand, which includes the recent financing of the net proceeds of $35 $2 million to complete and provide results in both the phase two b clinical trial and the phase II B extension clinical trial.
Samuel Fisch: I'll now turn the call over to Michele Greco CFO and C E O to discuss the financial highlights Michelle.
Michele Greco: Thank you Dr. Steiner.
Let's start with the second quarter results for the three months ended March 31 2024.
Overall, net revenues were $4 $1 million compared to $6 $6 million in the prior year second quarter.
Michele Greco: The company's quarterly sales for its U S prescription business decreased to $597000 from $4 $1 million in the prior year second quarter.
The reduction in the prescription business net revenue is due to $3 $9 million in revenues for sales to the pill club and the prior year period.
Do not have any sales to the pill club and the current year period, you know the pill club chapter 11 bankruptcy filing in April 2023.
We recorded a provision for credit losses related to those sales in the prior year.
Net revenues from the global public sector business for the quarter with $3 $5 million compared to $2.4 million in the prior year's quarter.
Michele Greco: The increase in the public sector business is for increased shipments under our contracts with U N F. P. A N USA I D.
Michele Greco: Overall gross profit was $678000 or 16% of net revenues compared to $4 $1 million or 62% of net revenues in the prior year quarter.
Michele Greco: The decrease in gross profit and gross margin is due primarily to 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.
The increase in our cost of sales due to a charge of $700000 or an obsolete stock reserve related to inventory in the U S prescription channel.
Our operating expenses for the quarter decreased to $10 $6 million compared to the prior year's quarter at $38 $5 million.
Michele Greco: Decrease is primarily due to research and development costs, which decreased $14 $9 million, the $3 million compared to $17 $9 million in the prior year quarter and a decrease in selling general and administrative expenses of $5 $3 million from $12 $8 million.
Michele Greco: In the prior year quarter to $7 $6 million in the current quarter.
The decrease in research and development costs.
Michele Greco: Who do I brought development strategy to focus development efforts and those drug candidates with the best opportunity for long term success and shareholder value creation, while matching available funding.
During the quarter, we prepared the A&D submission for <unk> for weight loss clinical program and other programs had been caused you to reduce expenses.
Michele Greco: The decrease in selling general and administrative expenses is primarily due to significant cost incurred in the prior year related to preparation for the potential commercialization of the visit beyond for COVID-19 prior to the Fda's declination of the company's EUA application and an increase in personnel related.
Michele Greco: Costs in the prior year due to increased head count for potential commercialization.
This incremental head count has now been reduced post the EUA declination.
Michele Greco: In addition, during the prior year quarter, we recorded an impairment charge totaling $3 $9 million.
Related to in process research and development assets recorded for the visit beyond for prostate and recall nothing because of the Companys change in strategy.
Michele Greco: We also recorded a provision 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.
Michele Greco: The operating loss for the quarter was $9 $9 million compared to $34.4 million in the prior year quarter.
Non operating income was $45000 compared to $559000 in the prior year's second quarter.
Michele Greco: Primarily consisted of interest income and the change in the fair value of the derivative liabilities related to the F. T to synthetic royalty financing, partially offset by interest expense and the change in the fair value of the and kinetics preferred stock received in October 3rd 2023 related to it.
<unk> from <unk> kinetics for the sale of enhancing.
For the quarter, we recorded a tax expense of $182000 compared to a tax benefit of $67000 in the prior year second quarter. The bottom line result for the second quarter with a net loss of $10 million or seven cents per diluted common share compared to a net loss of $33 8 million.
We're 42 cents per diluted common share in the prior year second quarter.
Michele Greco: Turning to the results for the six months ended March 31, 'twenty 'twenty four for the first six months of fiscal 2024 total net revenues were $6 $3 million compared to $9 $1 million in the prior year period.
Net revenue from the U S prescription business was $1 $2 million compared to $4 $3 million in the prior year period.
The reasons for the decrease in net revenues from the prescription business for the period are consistent with the quarter.
Included in the net revenues for the prior period with $3 $9 million for sales to the pill club.
Net revenue from the global public sector business for the period with $5 million compared to $4 $8 million in the prior year's period.
Overall gross profit was $1.8 million or 29% of net revenues compared to $4 $8 million or 53% of net revenues in the prior year period.
The decrease in profit and gross margin is due primarily the decrease in the U S prescription business.
Michele Greco: The increase in cost of sales.
Michele Greco: Operating expenses decreased by $56 $2 million and $25 million compared to the prior year period of $76 $7 million. The decrease is driven by a reduction in research and development cost of $33 $8 million to $4 $6 million from 38.4.
In the prior year period, and a reduction in selling general and administrative expenses of $14 $5 million from $34 million in the prior year period.
$15 $9 million.
The factors contributing to the decrease in research and development costs and selling general and administrative expenses are the same as those described for the quarter.
Michele Greco: As I mentioned during the prior year second 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 pill club.
Operating loss for the period was $17 $8 million compared to $71 $9 million in the prior year period.
Decrease of $54 $1 million, which is primarily due to the reduction in operating expenses.
Non operating expenses were $421000 compared to $763000 in the prior year period.
And primarily consisted of interest expense and the change in the fair value of the kinetics preferred shares received related to the sale of an tsetse, partially offset by the change in the fair value of the derivative liabilities related to the F. C. Two synthetic royalty financing and interest income.
Michele Greco: For the six month period, we recorded a tax expense of $110000 compared to a tax benefit of $135000 in the prior year period.
The bottom line result for the first six months of fiscal 2024, with a net loss of $18 $3 million or 15 cents per diluted common share compared to a net loss of $72 $5 million or <unk> 90 per diluted common share in the prior year period.
Michele Greco: The net loss for the company decreased by $54.2 million for the current six month period.
Michele Greco: Main reason for the decrease in the net loss relates to the company's focus on drug candidates with the best opportunity for long term success and shareholder value creation, while matching available funding and elimination of the commercial team and related commercialization expenses for the potential loss of some visibility for COVID-19.
Michele Greco: Now looking at the balance sheet.
As of March 31, 2024, our cash balance was $34 $7 million and our accounts receivable were $2 $8 million compared to a cash balance of $9 $6 million and an accounts receivable balance of $4 $5 million as of September 30th 2023.
Michele Greco: Our net working capital was $35 $6 million on March 31, 2024, compared to $5 $1 million on September 30th 2023.
Michele Greco: During the six months ended March 31, 2024, we used cash of $11 $7 million for operating activities compared with $61 million used for operating activities in the prior period.
Michele Greco: We generated cash from financing activities for the six months ended March 31, 2024 of $36 $8 million compared to $3 $8 million in the prior period.
Michele Greco: On December 18th 2023, we completed an underwritten public offering of our common stock which included the exercise in full of the underwriters' option to purchase additional shares net proceeds to the company from this offering were approximately $35 $2 million after deducting underwriting discounts and <unk>.
Michele Greco: Mission and costs incurred by the company.
Michele Greco: All the shares sold in the offering were offered by the company.
Michele Greco: We are working to increase the future S. T. Two net revenues in the U S prescription channel by growing awareness and driving demand of FC two through increased marketing efforts for our own telehealth platform and pursuing additional distributors in the telehealth sector. We are starting to see increases in our global public sector business from efforts to increase.
Michele Greco: F C two market awareness and developing countries.
Michele Greco: We believe our current cash balance along with costs expected to be generated from sales of FC too will be adequate to fund the planned operations of the company for at least the next 12 months as we continue to focus on developing and over time for high quality weight loss over the years, who have had plenty of experience in managing our cash.
Michele Greco: Right.
Michele Greco: I'd now like to turn the call back to Dr. Steiner Dr. Steiner.
Mitchell S. Steiner: Thank you Michelle.
Mitchell S. Steiner: I'll go with one receptor agonists work, mainly by creating a low caloric starvation state the results and the non selective loss muscle and fat tissues to cause weight loss using a muscle preserving jobs that can also decrease fat mass and novus arm in combination with the slip on receptor agonists may potentially allow for the additive reduction of fat mass.
Mitchell S. Steiner: So a high quality precision weight loss and that not only in older patients who are overweight overweight or obese, but also on all patients who are overweight or obese. This is truly a new indication, we believe that who knows orange the best investigational drug candidate to address the muscle loss caused by <unk> one receptor agonist drugs.
Mitchell S. Steiner: Who knows arm is a first in class novel sorry.
Mitchell S. Steiner: Oral once a day dosing as demonstrated tissue selectivity utilizes a well established known mechanism of actions the androgen receptor to favorably change body composition.
Mitchell S. Steiner: Activation of Andrew receptor increases muscle mass improve physical function and decreases fat mass to potentially achieve a higher quality of weight loss.
Mitchell S. Steiner: Osama has a favorable side effect profile is not expected to add to the gastrointestinal side effects.
Mitchell S. Steiner: He observed with <unk>, one receptor agonist treatment alone.
Mitchell S. Steiner: Global obesity and overweight drug market is projected by research analysts to be <unk> hundred billion dollars about 2030, accordingly, the combination of who know massamba. The glucagon receptor agonist also potentially represents a multibillion dollar global opportunity.
Mitchell S. Steiner: Very excited about the prospects of an Osaka to address this new and important unmet medical need and we're looking forward to quickly enrolling this important and timely phase two b clinical study.
Mitchell S. Steiner: Note that we also have new clinical conclusions that we've generated from reexamining the clinical data.
Mitchell S. Steiner: Some of the previous five clinical muscle studies, evaluating and nobu, sorry that should further support.
Mitchell S. Steiner: So for <unk> for the preservation of total lean body mass and reduction of fat mass to improve body composition, but potentially a higher quality of weight loss in patients who are obese or overweight.
Mitchell S. Steiner: We will be presenting two late breaking abstract presentations at the American Association of clinical Endocrinology 'twenty 'twenty four annual meeting taking place May nine to 11, New Orleans, Louisiana.
Mitchell S. Steiner: Reservations are double blind multiple ascending dose safety pharmacokinetic and body composition study.
Mitchell S. Steiner: Sorry, I'm in healthy young and older men lead author is Dr. Jeffrey Crawford from the Department of Medicine, Duke School of Medicine.
Mitchell S. Steiner: The second abstract is potential to optimize weight loss with nobu sorry.
Mitchell S. Steiner: Which is to augment reduction of fat mass, while preserving muscle in older patients with obesity.
Mitchell S. Steiner: The authors also Dr. Jeffrey Crawford.
Speaker Change: The Department of Medicine, Duke School of Medicine, with that and now open the call to questions operator.
Speaker Change: Ladies and gentlemen at this time, we will begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. We ask that you. Please pickup your handset before pressing the keys to ensure the best sound Quad.
Speaker Change: To withdraw your question. Please press Star then two please limit yourself to one question and one follow up if you have further questions. You may reenter. The question queue. Once again. It is star then one to rejoin the question queue, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Doug or excuse me Dennis thing with Jefferies. Please go ahead.
Dennis: Hi, good morning, Thanks for taking our questions and thanks for the very.
Dennis: Very comprehensive prepared remarks as well.
Dennis: Maybe if I can just ask about your internal views around duration of therapy, and if you think that this work alright.
Dennis: <unk> would be used over let's say 12, 24 52 week period, and then patients are stopped or do you view this as more of a chronic therapy.
Dennis: For the lifetime of a patient being on it on a quick one thanks.
Speaker Change: Great question and so so the duration of therapy. So we do believe I'll start at the beginning we do believe there'll be used for chronic chronic management of obesity.
Speaker Change: <unk> patients and the reason for that is you know it is a glib group one is being used.
Speaker Change: Group, one G I P like Brooklyn, G. I P. A glucagon being use that the bodies moving into negative net negative.
Speaker Change: Nitrogen balance that you wanted to protect and preserve muscle. So if you want to preserve muscle you want to take it.
Speaker Change: Oh, sorry.
Speaker Change: That said.
Speaker Change:
Speaker Change: You know there there could be reasons for using a novus arm two to rescue patients that started started taking a quick one and then the muscle mass got low and they got into trouble and the question is how do you how do you rescue them. So they don't get that rebound weight gain and <unk> and <unk>, which is our fad. So no I'm, sorry, I'm going to use it potentially episodic there.
Speaker Change: <unk>.
Speaker Change: But to answer your question directly I think its chronic management interestingly.
Speaker Change: If you look at the data supplemental data from the select cardiovascular outcomes study.
Speaker Change: Very interesting because when you look at weight loss.
Speaker Change: And this is a big studies, who was down for four to five years.
Speaker Change: As published in New England Journal Medicine, and what it shows is that the patients lose 10%.
Speaker Change: Total wage Oh.
Speaker Change: Basically by call it.
Speaker Change: Call It six months to nine months and it stays at 10% for the next three and a half years.
Speaker Change: So it's amazing this plateau is real.
Speaker Change: And so I think I think by having the ability to add something to that with one.
Speaker Change: Pretense you can add to the to the total weight loss, they do get achieve and potentially modify that plateau. So I think the best answer at this point is the thinking is who will be used for chronic management.
Speaker Change: But.
Speaker Change: There's a lot there's a lot to learn from our clinical study.
Speaker Change: That will help us understand what are some of the other programmatic things that we can do <unk>.
Speaker Change: <unk> quite frankly, you know I mentioned about the fractures I mean.
Speaker Change: Pelvic fractures in older patients, who as acute as it.
Speaker Change: It has a high mortality rate and that's a hard endpoint and Novus arm, who used to be called the Austrian because of the first things that we recognized about <unk> was at Boeing potential to build critical with.
Speaker Change: Trabecular bone and and that's why for example, that's why males have less hip fractures in females because because of the angiogenic component. They ended up having stronger cortical bone. So you know other programmatic approach.
Speaker Change: To see whether or not the combination will ultimately affect our reduction in pelvic fractures hip fractures. So so at this point now again chronic therapy with.
Speaker Change: Thinking, but a lot of it depends on programmatically, how we roll it out all of that depends on how the phase II data comes out.
Speaker Change: Thank you.
Speaker Change: Was there a follow up Mr. Ding.
Speaker Change: No. Thank you. Thank you. Thanks. Our next question comes from William <unk> with B Riley Securities. Please go ahead.
Speaker Change: Okay.
William: Yes. Thank you for taking my questions and congratulations on a nice quarter.
Speaker Change: So.
Speaker Change: Your.
William: You, you've obviously been started to enroll your phase II trial on that said you will be looking at some functional endpoints, including stair climb.
William: I was curious to see if there were any plans to look at additional functional end points, possibly six minute Tom.
William: <unk> work or grip strength there.
William: The others may be even reduced hip fracture like we've seen in some of these other trials.
Speaker Change: Yeah, Great question. So so first of all.
Speaker Change: Functional endpoints, who we have to understand that if you're trying to build muscle preserved muscle than the functional endpoint is gonna be a strength endpoint.
Speaker Change: Now the duration end point, so six six minute walk test and anything related to endurance, probably is not going to be very sensitive, which can be sensitive things related to strength burst strain, so who were trying to measure quadriceps and arms strain.
Speaker Change: Interestingly, it's not just strength from a regulatory standpoint. The agency is taking it one step further and as we've seen in writing from the FTA and that is they do not like grip strength, who chest press like press two and in the regulatory world that's not seen as a as a functional tests.
Speaker Change: Shrink tests.
Speaker Change: So the reason I bring this up I think it's very important that people focus on what is from a regulatory standpoint, except for physical function endpoint stair climb power stair climb test is one of those tests and we've been very fortunate to have Dr. Shirley machines.
Speaker Change: Who is one of our key.
Speaker Change: Members of the scientific Advisory Board, who has done over 2000 patients with stair climb test.
Speaker Change: And we've been working with them for many years first with Gtx announcing theory, but interestingly in a thousand patients in those five clinical studies about 900 in the 'twenty, who those patients we did stair climb test.
Speaker Change: T J recognize stair climb test as a functional end point, we can measure speed of going up the steps and you can also measure a power.
Speaker Change: From a regulatory standpoint, you know tallo pharma had a drug approved for muscular dystrophy, who I think in the last three months and that was based on a stair climb test.
Speaker Change: So measuring functional endpoints, we're going to focus on the functional endpoint like that correlates well with for example, like like strength, there's a lot of literature over the last 10 years 12 years, showing that stair climb power. If you you have still good stair climb power and decrease in in time to go up the steps.
Speaker Change: Did that correlates very nicely with like strange and an end.
Speaker Change: Another strength endpoints, which is how you wanted to measure in medicine that goes after muscle.
Speaker Change: So Joe so we're going to focus on stair climb power.
Speaker Change: It's a it's a <unk>.
Speaker Change: Primary endpoint I mean, very clear it is that really a secondary endpoint to endpoint to allow us to power what we wanted to see in a phase III setting.
Joe: Yes, Dr. Gary Barnett, who is our chief scientific officer, Who's one of the pioneers who the stair climb test to comment.
Gary Barnett: Yes, Hello, it's Gary.
Gary Barnett: Right. So you have to look at whats regulatory Lee.
Gary Barnett: From a FTA perspective, reasonable and what's going to get us closer to.
Gary Barnett: Marketability of that stair climb power at functional and important think about it it's very functional right. If you have several critical PCB or you have pleaded muscle.
Gary Barnett: Being able to climb steps lift yourself up carrying groceries et cetera is very important.
Gary Barnett: Contributes to.
Gary Barnett: Your quality of life and your ability to thrive and that is exactly what we're gonna be testing in the FDA recognizes that.
Gary Barnett: Strength assessments like grip strength and leg press et cetera, arent really functional cures. The strike there was a lot of other aspects of the body.
Gary Barnett: That has to be working to.
Gary Barnett: To allow a patient to have a better quality of life. So that's why we chose we choose.
Gary Barnett: Stair climb in stair climb power and we'll continue doing that.
Gary Barnett: So there's another saum has shown in basically every study we've tested two.
Gary Barnett: To benefit patients compared to a blinded placebo control in the.
Gary Barnett: Functional.
Gary Barnett: And it would be.
Speaker Change: Functional go ahead, Okay, I was going to add one additional point and that is that the muscle has to be.
Gary Barnett: Adding lean body mass and lean body mass component of that is muscle to Oregon terminal, Oregon's and and others.
Gary Barnett: Apartments are going to stay the same but you didn't change as muscle and that increasing lean body mass is good but the link increasing lean body mass at Liza physical function means that the quality of the muscle is that's built.
Gary Barnett: <unk> is good quality. So that's why the functional endpoint is interesting now with that said.
Gary Barnett: Muscle alone is a metabolic tissue.
Gary Barnett: So independent of function in patients that are not at risk for physical decline like you go after all patients a drug that can preserve muscle may.
Gary Barnett: It may not have consequences function for for example, a 32 year old male.
Gary Barnett: A male who is.
Gary Barnett: Obese.
Gary Barnett: BCD.
Gary Barnett: Because they can lose 25% to 40% of their muscle mass and still do pretty well functionally.
Gary Barnett: At least initially.
Gary Barnett: But the plateau is a real problem as I mentioned in the select trial I mean can you imagine being at 10% weight loss with four four to five years and so that's why there's a lot of frustration and if you can break through that so I think from a metabolic standpoint, showing that muscle is preserved.
Gary Barnett: The muscle doesn't contribute to the.
Gary Barnett: Overeating or the or the increase in appetite and it's one of the mechanisms is fighting the hydrochloric state by suppression of appetite look one. So so so I think you'd have to think of it in two buckets bucket one physical decline in patients at risk with the older patients who start to panic.
Gary Barnett: Two the metabolic effects.
Gary Barnett: That can help.
Gary Barnett: Manage appetite and ER and other good things that you weren't muscles to do an in patient says that it may not be English for physical decline, but would benefit from you know from losing more weight Tonight, who that plateau.
Speaker Change: Got it very helpful.
Speaker Change: I appreciate that extra color. There one actor quick question I know, it's still a bit early but I was curious if theres been any feedback.
Speaker Change: From investigators, possibly Ah patients about enthusiasm towards your approach and the need to sort of maintain or the lean muscle a loss to a minimum in the in the phase II trial has just started to get enrolling.
Speaker Change: Yeah, So I'm going to let Dr. Gary by that answer that question too because he's he's closer to clinical trial and I mean, I will just say my my initial my initial impressions.
Dr. Gary: Never seen such enthusiasm for a clinical trial that we've ever run I mean, who is tremendous enthusiasm in the space and our IND for this trial, particularly we've been bombarded with phone calls and requests by patients who get into the study and by sites. It wanted to make sure they get patients in the study, but Gary do you want to add to that.
Gary Barnett: Yes, we're getting calls from patients and sites.
Gary Barnett: Into our clinical trials number.
Gary Barnett:
Gary Barnett: Rich Daly Daly, who we're talking 25 to 50 to 60 70 calls a day.
Gary Barnett: We are interested in that study of course, we have the fact that advisory board and our investigators that are coming on that are extremely excited about.
Gary Barnett: The opportunity to participate in the study we recognize most clinicians who use coupons recognized to be the <unk>.
Gary Barnett: Problem with what we're facing with the loss of muscle.
Gary Barnett: And especially in the older patient population as much as.
Gary Barnett: Described but we're gonna go we have a lot of calls coming in and we direct them to clinical trials Gov and encourage them to find a site.
Gary Barnett: Near them, but they may participate in the study so yes, theres a lot of enthusiasm for sure.
Speaker Change: To add to that the other thing that I've never seen before is the common awareness that muscle loss is occurs with equipped ones I mean, no matter, what patient, but whatever group with as patients who are investors or brokers or I mean, it's it's understood that muscle loss occurs with with weight loss.
Speaker Change: When the clip on drugs and interesting and very very Ettrick surgery was the same case and but the difference isn't very ettrick surgery, which you'd see the same thing she rapid weight loss.
Gary Barnett: That tows and stays that way.
Gary Barnett: And the reason why it's not a lot of attention was brought to US because you know it was about 250000 bariatric surgical cases done a year and with the clip ones youre in millions of patients being effect is just really has moved to the front burner and end to end.
Gary Barnett: So the question now becomes you know.
Gary Barnett: We're excited that we have to weight loss with not excited that weight loss includes so much muscle.
Gary Barnett: And there's a lot of debate or discussion and what does it mean and to have a tool I can novus arm that can specifically.
Gary Barnett: <unk> muscle and decreased fat can answer a lot of questions that can't be answered.
Gary Barnett: The current ways that people are going after it but just looking at muscle laws such as muscle losses can you preserve it can you add to it and now what does that mean clinically.
Speaker Change: Excellent. Thank you for the very clear response and I appreciate it congrats on the quarter and thank you for taking our questions I'll hop back in June.
Speaker Change: Thank you.
Speaker Change: The next question comes from Gary Nachman with Raymond James. Please go ahead.
Speaker Change: Yeah.
Gary Nachman: Hey, guys. Good morning. This is Dennis on for Gary Thanks for taking my question.
Dennis: Can you just walk through your current thinking of a potential phase three do you think the FTA will require the trial to be used in combination with the various approved quick ones with many different cohorts or could you run a phase III with just some of them who tied similar to kind of how the phase two and then I've got a follow up after.
Speaker Change: Yeah, So I'm gonna have stocked up on the Barnett who sorry.
Speaker Change: Chief Scientific officer, and also heads up quick regulatory to take a stab at that question because at this point that we don't have feedback with them what do you think Gary.
Gary: Well I mean, however, we want for label to look at how we would we would we would design it right now.
Gary: Are using only similar glu, Todd and our phase two.
Gary: Obviously as you might expect limiting the the.
Gary: The good for on Q1.
Gary: One is a decrease is variability not what we would do in a clinical trial.
Gary: Trial, where we opened it up to the.
Gary: Proved.
Gary: Once you've got point, what we would stratify randomization, so that certainly could slip one in.
Gary: Tends to be used would be would be equally distributed across the three groups or the two groups in that case so.
Gary: Frankly.
Gary: I would I would design using all of our loved ones at that point.
Gary: Just because I think that's how the product will be used in the clinic.
Speaker Change: Yeah and to answer the question in Phase II. So why do we pick one quick one for the phase two one is you know the decrease variability of course two is to us.
Gary: To.
Gary: It is to be able to power. The study based on known information and semi Glu tide has the best information in terms of what happens to muscle overtime, but the other ones who are either in progress or just incomplete and it's just hard to say are we know who as you know every one of these little ones and kind of a combination.
Gary: Yeah.
Gary: The.
Gary: Once he is using two drugs three drugs are all in it kind of going after the clip on VIP or glucagon.
Gary: I'll have muscle laws and we just don't know the time and we don't know what the amount. So that's why we use them with blue tie them with.
Gary: With that said Ah Ah.
Gary: One more comment with that said Theres been no information about some of them, who you lose 25% and somebody who is 40 per cent and who is 50%, but not all the same well in fairness. The mechanism is they do decreasing appetite essentially creating a hyper caloric state so basically a starvation state in our bodies.
Gary: Like you wouldn't have wild I mean, you're you're losing your glycogen from your liver and then you can see from your muscles and you start to hit including the new Genesis and muscle breaks down if that breaks down so the bodies not responding to a particular receptor it you're responding to it to a metabolic state.
Gary: And I'm trying to say is I just don't know if we can actually pick out, which one is better or less in terms of a muscle it unless you've ever done head to head and and if it was done head to head I think we will find that the muscle laws is gonna be more related to the potency of the appetite suppression and ER and ER and the duration.
Gary: Ration that patients are on the drug and so so.
Speaker Change: Gary is right I mean, if you can get all of the other ones are in the study and we stratify for that Oh, you know, we minimize the ability the ability of the potential for variability.
Speaker Change: Some arm to arm that would be great, but I think what we'll do after we talk to the FTA with the phase II results.
Speaker Change: Lay out programmatically, what we're thinking because because there are some end points that are interesting like hip fractures in.
Speaker Change: And topic fractures that you know if you can make a difference in that that's almost like not the cause.
Speaker Change: Cardiovascular select trials showing cardiovascular benefit.
Speaker Change: Integral appointed because you know the ones who are not being paid for by Medicare until they showed an endpoint that was at cardiovascular endpoint. So can you imagine a situation that we show in our program reduction and fractures well, that's going to feel a lot better.
Speaker Change: And that in and have more of a meaningful from a payer standpoint.
Speaker Change: In fact, the payers now are paying for it would go away because they show that that endpoint so more to come.
Speaker Change: That was very helpful. Thank you and then just a quick follow up you know now that have or who is fully focused on an episodic for weight loss can you just talk a little bit about how the S. E T business fits in within the overall company and kind of how you view the value that it provides you guys. Thanks so much.
Speaker Change: I'm, sorry, which business.
Speaker Change: Excuse me I'll call them.
Speaker Change: Yeah, Yeah, yeah. So it kind of you know the reason we.
Speaker Change: First of all is a legacy product came from the female health company that went very.
Speaker Change: Very who was our Aspen Park Pharmaceuticals was acquired by a female health company and ultimately we came out of that was very good and the reason we did that initially we said that we would have revenue and we would and we would be able to use that revenue and it was a high profit business too.
Speaker Change: Pay for our clinical development and in over the last five years or so I think it has generated something like $200 million in cash that we were able to use in clinical trials something like five years.
Speaker Change: And so we achieved what we wanted to achieve and now the business is kind of turnkey.
Speaker Change: It's in the background.
Speaker Change: As you know we have a team that's involved with it but our main primary focus is the farmer pharmaceuticals in particular now in <unk> yeah in obesity.
Speaker Change: Where we see right now is it the F C. Two business if it keeps generating cash for us it's great.
Speaker Change: If we wanted to look for selling into doing something like that we can we have options to monetize it.
Speaker Change: Clearly, it's not I mean, our focus is as a pharmaceutical company.
Speaker Change: Great. Thank you so much and congrats on the progress.
Speaker Change: Thank you very much.
Speaker Change: Again, if you would like to ask a question. Please press Star then one to withdraw your question Press Star then two.
Speaker Change: The next question comes from Rowhani Mathur with Oppenheimer. Please go ahead.
Rohan Mathur: Hey, it's rolling onto a leading herschelle. Thanks for taking my question I'm on the topic of weight loss quality.
Rohan Mathur: There aren't very many studies being conducted to evaluate preservation of muscle mass and function.
Rohan Mathur: How do you how are you viewing the bar for success.
Rohan Mathur: That's an assumption given the lack of competitors.
Rohan Mathur: And has the FDA provided any color here.
Speaker Change: Yeah, Great question. So a part of the partners who are trying to decide whether you use muscle car the problem with the field right now is trying to understand.
Rohan Mathur: The problem is you have lots of muscle significant loss of muscle again, its up to half of them.
Rohan Mathur: Did you lose muscle.
Rohan Mathur: Exchange rate again, and humor me for a moment the exchange rate is if you lose two pounds half of its muscle happens. It's bad. So you have to sacrifice a pound of muscle foot pounds of fat and you can see how you can get to a point, where somebody who has 400 pounds and they lose 10% of the weight and a 360.
Rohan Mathur: There's still a beast they still have problems, there's still overweight in the stock. So I think there's a whole whole area that should be looked at and we're looking at in our phase two and that is changing body composition trying to show that we can reduce more fat with the combination. So that we can get clues about how we will handle it at 52 weeks.
Rohan Mathur: Next later, you're you've got a situation, where you preserve muscling, who keep losing that cause the loss of fat is what's going to lead to the increase in weight loss.
Rohan Mathur: As it relates to muscle function fund.
Rohan Mathur: Function really has to be a function really has to focus on the older patient population and if you look at our five five clinical trials at 948 patients something like that almost 1000 patients.
Rohan Mathur: Most all of those patients who are older patients so over the age of 60.
Rohan Mathur: Postmenopausal women. So we have a lot of experience and what it looks like if somebody who's not a b's.
Rohan Mathur: And whether or not does it benefited muscle and fat and function and so we have that under our belt, which I think is great.
Rohan Mathur: So now the leap is going from that information to the obese and overweight patient population.
Rohan Mathur: And again, our anchor to that our circuit to that is a one of US one of the studies, who we did was in the lung cancer patients with chemo and these lung cancer patients has really.
Rohan Mathur: <unk>, an appetite and so it's almost like a good one.
Rohan Mathur: Because the local or state and we were able to show in that state we didn't build muscle.
Rohan Mathur: We're not creating bodybuilders, but what we did do we maintain muscle preserved muscle and that and that correlated in that core.
Rohan Mathur: And that was at 84 and that correlated with function and and and ultimately by the time it gets at week 21.
Rohan Mathur: It was greater than loss of weight in the obese patients, who we feel we feel that the debt that we've got some interesting information as you know there's no company, who brought the point up that has muscle data.
Rohan Mathur: Or any any data in combination with a muscle drug in humans. So so she'll do you know the big categories Myostatin inhibitors, it's IV.
Rohan Mathur: At least in some of the phase twos, because others have reached that point, yet do you see an increase in diarrhea, but you know what do you see diary woodcliff ones, who have raised questions about the combination put that aside for a moment.
Rohan Mathur:
Rohan Mathur: So so so they're not focusing on function necessarily the focus on the.
Rohan Mathur: The first bucket, which is the metabolic tissue. If you keep the metabolic tissue can you see greater weight loss.
Rohan Mathur: F D a.
Rohan Mathur: It is not going to be happy with just showing you have muscle unless there's some some some benefit for the patients. So the benefit is going to be additional weight loss incremental weight loss with a combination that's clinically meaningful.
Rohan Mathur: Or you can have the shelf function.
Rohan Mathur: And so so so function needs to be done and patient instead of informative, meaning that you take the older patients is already has low muscle. That's in you know they could potentially get into trouble and we know that they can have accelerated lots of muscle of accelerated frailty and that's the patient that you can see you.
Rohan Mathur: Can take up the stairs and then show with the agent like ours that by maintaining muscle stop into physical decline that you can you can separate out stair climb power and speed.
Rohan Mathur: Because youre not going to see the floor ceiling effect that happens sometimes with these exercise functional endpoints. So I think again, our phase two b.
Rohan Mathur: It is designed in a way that none of the others are at this point because because you know, we're adding patients who are putting patients on the risk and it can be informative. So we can understand how to design the phase III with the information that we get from it from the phase two b against the Fca's cautioned us that.
Rohan Mathur: Strength in like Kras, and chest press and that kind of stuff with strength and points hit or not.
Rohan Mathur: No not not considered functional endpoints. So so that's why we focus so much on muscle with a muscle drug in this phase to be because it will allow us to branch out and programmatically approach.
Rohan Mathur: The different things that muscle can be involved with and again metabolic or function.
Speaker Change: Thanks, and just as a follow up when you think about a potential pets or how do you think about targeting other populations that could also benefit from these wells in Oklahoma with coupons.
Speaker Change: Yeah. So so so so but right now the phase two b's focus on older patients, but to phase III programs, who can be all comers for sure.
Speaker Change: And and then we'll embed a special populations, who maybe understand how we want to rollout the function part of it so theres still still a little thinking we have to do based on the phase II B that will help us understand programmatically, how are we going to go out to dry.
Speaker Change: But you know what's interesting is you know.
Speaker Change: Follow the money so wherever the glib ones go we go. So for example, they started using clip lunches sleep apnea using clip ones for cardiovascular outcomes with ones for inflammation. It's the same in and problem that is that you're going to see a reduction in weight and you can see a reduction muscle being a big part of that weight.
Speaker Change: That will also help us understand what we need to go.
Speaker Change: Thanks, so much.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference call back over to Dr. Mitchell Steiner for any closing remarks.
Speaker Change: I appreciate everyone, who has joined US on today's call and I look forward to updating all of you on our progress in our next investors call. Thank you again.
Speaker Change: The digital replay of the conference call will be available beginning approximately noon eastern time today may eight by dialing 187734475 to nine in the U S and one for 123170088 internationally.
Speaker Change: You'll be prompted to enter the replay access code, which will be 8861692. Please record your name and company when joining the conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].