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spk06: Good morning, ladies and gentlemen, and welcome to the VARU Incorporated Investor 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 morning's discussion, there will be an opportunity to ask questions. Please note that this event is being recorded. And I'd like to turn the conference call over to Mr. Sam Fish, VARU Incorporated's Executive Director of Investor Relations and Corporate Communications. Please go ahead.
spk07: 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, finances, and development and product portfolios. 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 that differ materially are contained in our 10Q and 10K SEC filings, as well as in our press releases from time to time. I would now like to turn the conference call over to Dr. Mitchell Steiner, Barueng's Chairman, CEO, and President. Good morning.
spk08: With me on this morning's call are Michelle Greco, the CFO and CAO, Dr. Gary Barnett, the Chief Scientific Officer, Michael Purvis, Executive Vice President, General Counsel in Corporate Strategy, and Tim Fish, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our call. Fiscal year 2021 was an exciting and very productive year for Beery. We have successfully transformed our company into a late-stage oncology biopharmaceutical company. we're developing novel medicines for the management of two of the most prevalent cancers, breast cancer and prostate cancer. One of our anti-cancer drugs, Avizabulin, has dual antiviral and anti-inflammatory effects and is also being developed for the potential treatment of hospitalized COVID-19 patients at high risk with acute respiratory distress syndrome, which remains a global dire unmet medical need. The company has a commercial sexual health division which includes a drug candidate in Tadfi, formerly referred to as Tadfin, a new treatment for benign prostatic hyperplasia, and a commercial product, the FC2 female condom, internal condom, and the FDA-approved product for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections. Revenue from the Sexual Health Division is being used to largely fund the clinical development of our late-stage drug candidate assets, which aim to address multi-billion dollar premium market opportunities. This morning, we will discuss Bureau's business strategy, the clinical development of our drug pipeline, and the commercialization of our products. We will also provide financial highlights for the fourth fiscal quarter and record fiscal year 2021. As you are aware, we're still in the middle of the COVID-19 pandemic with no end in sight. Countries in Europe and other continents are now back in lockdown. Centers for Disease Control and Prevention have recently reported that the U.S. COVID-19 in the U.S., COVID-19 has killed 377,883 people in 2020 and 401,117 people in 2021. The year is not yet over. A new, potentially more troubling COVID-19 variant called Omicron has emerged in South Africa, and a case just has been confirmed in California. This new virus variant appears to have mutations that make it more contagious and may infect people that have been previously vaccinated, rendering the current choices of COVID-19 vaccines and antibody drugs less effective. The mechanism of drug action of subisobulin, is that it disrupts the microtubule intracellular transport of the coronavirus, a process that will still be required by new variants or strains of COVID-19, including Omicron, to cause infection. Well, there have been recent developments evaluating the Merck drug, and the Pfizer drug, Paxilobin, for the treatment of unhospitalized patients with mild to moderate COVID-19, who are at relatively low risk of dying. Subisobulin, in contrast, is being developed for hospitalized patients who are at high risk of death. In our positive phase two clinical study in hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome, subisobulin treatment resulted in an 82% relative reduction in deaths compared to placebo. In our phase two clinical studies, or results are replicated to any significant degree in our global Phase III clinical study, we believe subisobulin would fill in a significant unmet medical need for hospitalized patients. In May of 2021, we initiated the Phase III clinical study, which is a double-blind, multicenter, multinational, and randomized two-to-one placebo-controlled study evaluating daily oral doses of 9 mg subisobulin for up to 21 days versus placebo, standard of care, and 300 hospitalized COVID-19 patients who are at high risk for acute respiratory distress syndrome. 200 subjects will be treated with subizobulin, and 100 subjects will receive placebo. The primary efficacy endpoint will be the proportion of patients who die on study up to day 60. Secondary endpoints will include the proportion of patients without respiratory failure, days in the ICU, WHO ordinal scale for clinical improvement change from baseline, days on mechanical ventilation, days in the hospital, and viral load. The study is being conducted in the U.S., Brazil, Argentina, Mexico, Colombia, and Bulgaria. The company has sufficient clinical drug supply on hand to complete this Phase III clinical study. To help fund the commercial drug to supply the needs of the U.S. population, assuming confirmatory positive clinical results and FDA approval, we are seeking funding from BARDA and other agencies. The company anticipates having results for the Phase III clinical trial in the first half of calendar year 2022. As for our oncology drug portfolio, this was the year we initiated our expansive metastatic breast cancer program with two of our drug candidates, Inobusarm and Subizabulin. We are developing treatments against both hormone receptor-positive and triple negative metastatic breast cancers. Inobus arm is an oral selective androgen receptor targeted agonist, which has shown efficacy in phase two studies in a heavily pretreated hormone receptor positive metastatic breast cancer patient population with an excellent safety profile without causing unwanted masculinizing adverse side effects. Inobus arm represents the first new and novel endocrine therapeutic approach to breast cancer in decades. Our second drug candidate to bisabulin is an oral cytoskeleton disruptor that targets unique binding sites and cross-links microtubules, a well-validated cancer target resulting in promising efficacy and a favorable safety profile without clinically relevant neurotoxicity, neutropenia, or alopecia. Furthermore, chronic oral daily administration of sibizabulin is feasible. Our clinical development strategy allows us to potentially become an important treatment option for a variety of large market opportunities in both hormone receptor positive and triple negative metastatic breast cancer. In the third line treatment setting for hormone receptor positive metastatic breast cancer, we have two clinical programs. based on the patient's androgen receptor nuclei staining or expression levels in their breast cancer tissue. For patients with greater than or equal to 40% androgen receptor expression, we are actively enrolling in a global phase three ART test registration clinical study to evaluate in Novosar monotherapy for the third-line treatment of androgen receptor positive, estrogen receptor positive, and human epidermal growth factor two negative metastatic breast cancer. Novus arm targets the antireceptor, which has a tumor suppressor activity in AR-positive, ER-positive, HER2-negative metastatic breast cancer without causing unwanted masculinizing side effects. Novus arm has extensive non-clinical and clinical experience, having been evaluated at 25 separate clinical studies in over 2,000 patients, including three Phase II clinical studies in advanced breast cancer involving more than 250 patients. This means we have a very good understanding of the favorable safety profile of the NovoSARM. As for efficacy, there were two Phase II clinical studies conducted in women with ER-positive HER2-negative metastatic breast cancer where NovoSARM demonstrated significant anti-tumor activity in heavily pre-treated cohorts that developed tumor progression after receiving estrogen-blocking agents, chemotherapy, and or a CDK4-6 inhibitor. And again, in this population, The NovoSARM was well-tolerated with a favorable safety profile. In October of this year, we initiated the Phase III Multisensor International Open Label Randomized One-to-One or Test Registration Clinical Trial to evaluate the efficacy and safety of the NovoSARM monotherapy versus an active comparative either Examestane plus or minus Eprolimus or CERN for the treatment of AR-positive, ER-positive, HER2-negative metastatic breast cancer in approximately 210 patients with greater than or equal to 40% AR expression in the breast cancer tissue after receiving a non-steroidal aromatase inhibitor, fulvestrin, and a CDK4-6 inhibitor. In patients with less than 40% AR expression, we have a planned phase 2B study to evaluate sebizobulin monotherapy for the third-line treatment of ER-positive or 2-negative metastatic breast cancer. The phase 2B clinical study will be an open-labeled multi-sensor, and randomized one-to-one study evaluating the efficacy and safety of sabizabulin 32 milligrams monotherapy versus active comparative either exomestane plus or minus everolimus or CIRM for the treatment of ER-positive HER2-negative metastatic breast cancer in approximately 200 patients with less than 40% AR expression in the breast cancer tissue after receiving a non-steroidal aromatase inhibitor, filvestrin, and a CDK4-6 inhibitor. We just received the safe-to-proceed letter from the FDA this month, and the Phase IIb study is expected to commence in calendar Q1 2022. We're also moving in over some earlier in the treatment sequence to the second-line treatment of AR-positive, ER-positive, HER2-negative metastatic breast cancer by targeting patients with AR breast cancer expression greater than or equal to 40% in the Phase III Enabler II clinical study. A CDK4-6 inhibitor and estrogen-blocking agent combination has become the first-line therapy for patients with ER-positive or 2-negative advanced breast cancer. Fortunately, almost all patients will develop drug resistance and eventually develop breast cancer progression. Based on the positive Phase II clinical data and the preclinical data supporting the use of a Novosarum in combination with a CDK4-6 inhibitor in patients who are CDK4-6 inhibitor and estrogen-blocking agent resistant, we plan to conduct a phase three multi-sensor, open-label, randomized one-to-one active control registration clinical study named ENABLER to evaluate the efficacy and safety of a Novocharm plus a Bemacycline combination therapy versus an alternative estrogen-blocking agent in subjects with AR-positive, ER-positive, HER2-negative metastatic breast cancer with failed first-line therapy with palbociclin, which is a CDK4-6 inhibitor, plus an estrogen-blocking agent, and have greater than or equal to 40% error expression in their breast cancer tissue. We plan to involve approximately 186 subjects in this Phase III clinical study, which is expected to commence in calendar Q1 2022. There will also be a scientific presentation on Inovus Arms' anti-tumor activity in estrogen-blocking agent and CDK4-6 inhibitor-resistant human metastatic breast cancer models, at the upcoming San Antonio Breast Cancer Symposium, which will be held December 7th through the 10th of 2021, to be presented by Dr. L. Jean Lim of the Garvan Institute of Medical Research and the Kinghorn Cancer Center at St. Vincent Hospital in Sydney, Australia. Although the presentation is under embargo, we cannot share the exciting scientific data until next week. What I can say is that these scientific results clearly demonstrate the anti-tumor synergy of the combination of anobisarm and a CDK4-6 inhibitor to treat patients who develop tumor progression after receiving an estrogen-blocking agent and a CDK4-6 inhibitor. Finally, for AR-positive metastatic triple-negative breast cancer patients, we will be conducting a Phase II single-arm study evaluating anobisarm plus sabizabulin combination therapy. As previously mentioned, sabizabulin is an oral first-in-class new chemical entity that targets and inhibits microtubules to disrupt the cytoskeleton. Overexpression of P-glycoprotein is a common mechanism that leads to taxane and other chemotherapy resistance in metastatic triple-negative breast cancer. And sabizabulin is not a substrate for P-glycoprotein. Sabizabulin significantly inhibited cancer proliferation, migration, metastasis, and invasion of triple-negative breast cancers that have become resistant to paclitaxel in preclinical models. Furthermore, In a phase two study conducted by Merck, 18 heavily pretreated women with AR-positive metastatic triple negative breast cancer treated by inovasarum plus pimerolizumab combination demonstrated promising evidence of efficacy, including a 25% clinical benefit rate, which is the complete response added to the partial response added to stable disease at 16 weeks, and objective tumor responses when they showed one complete response and one partial response. Thus, the combination of two oral agents, sabizabulin and Novosarm, may provide a new treatment option for women who have AR-positive metastatic triple negative breast cancer. We intend to commence a single-arm sabizabulin plus a Novosarm combination therapy phase two clinical study in approximately 111 women with AR-positive metastatic triple negative breast cancer who have tumor progression after receiving at least two systemic chemotherapies in calendar Q1 2022. We are partnering with Roche Ventana, a major global diagnostics company, to develop a companion diagnostic androgen receptor test. In the Phase II 801 study, we have determined that the presence and the amounts of the androgen receptor expression in breast cancer tissue were important for Novus arms targeted anti-tumor activity. In fact, We have identified that patients who have greater than or equal to 40% adrenoreceptor nucleotide staining by immunohistochemistry, which is a measure of AR expression in their breast cancer tissue, are the patients that are most likely to respond to InovaSARM. Based on this observation, the FDA has recommended that we develop a companion diagnostic test to determine the patient's AR expression status. Consequently, we are partnering with Roche Ventana Diagnostics a world-leading oncology companion diagnostic test, who will develop and, if approved, commercialize this companion diagnostic AR test. The companion diagnostic test will be developed in parallel with the Phase III AR test clinical study. Fiscal year 2022, we will have an expansive breast cancer program and plan to be conducting four late-stage clinical studies for the treatment of different large and important populations of significant unmet medical need in metastatic breast cancer. Also in fiscal year 2021, our prostate cancer program has made great progress. We have late clinical stage studies addressing three separate indications. Our first indication is evaluating subisobulin for the third-line treatment of metastatic prostate cancer in the Phase III veracity study. Over the past eight years, several novel androgen receptor targeting agents have been approved for castration-resistant prostate cancer, including abiraterone, enzalutamide, and apalutamide. Unfortunately, most men with metastatic castration-resistant prostate cancer will develop tumor progression while receiving an angio-receptor-targeted agent, 60 to 70% of patients progressing by 12 to 18 months, and 30 to 40% of men having no benefit at all. New, effective, and well-tolerated treatment alternatives that do not target the angio-receptor axis and have an easy mode of administration are greatly needed. Visibulin is a member of a novel class of truss that disrupts the cytoskeleton by targeting unique binding sites of microtubules, which results in an improved safety profile. In preclinical models, there was no evidence of significant liver toxicity, neurotoxicity, and neutropenia with visibulin treatment. This more tolerable safety profile was also confirmed in the first in-man phase 1b2 study and prostate cancer patients. At a recent presentation by the European Society for Medical Oncology Congress that was held September 16th to 21st, 2021, we provided an update analysis of the 80 patients enrolled in both the Phase 1B and Phase 2 portions of the study. These subjects were heavily pretreated and had tumor progression while receiving at least one novel endoreceptor-targeted agent. In fact, Approximately 40% of the subjects had tumor progression after receiving at least two androgen receptor-targeted agents. In regard to safety, there were 54 men treated at the recommended Phase II dose of subvisibulin 63 milligrams oral daily dosing in the Phase Ib2 combined study. Subvisibulin was well-tolerated with no clinically relevant neutropenia neurotoxicity, and the most common adverse events were gastrointestinal-related, including diarrhea, nausea, and fatigue, which were predominantly low-grade 1 and 2. As for efficacy, in combining patients from both the Phase 1B and 2 studies who received 63 milligrams of subizobulin daily and had measurable metastatic disease at baseline based on the prostate cancer work in Group 3 criteria, the median radiographic progression-free survival is estimated to be 7.4 months with a range of 3.2 to 35-plus months as there are still five patients on the study, which two have been on subizobulin without tumor progression for almost three years. In the phase 1b2 study population with measurable disease at baseline per resist 1.1, the overall response rate was 21%. Based on this phase 1b2 study, subizobulin demonstrated a safety profile similar to what has been reported in the literature, but in novel angio-receptor targeted agents, and has promising evidence of efficacy similar to or better than IV chemotherapy. Thus, these updated findings from our Phase 1B2 clinical study of subisobulin continue to support the potential role of subisobulin filling a growing significant unmet medical need. In June, the company initiated an open-label randomized two-to-one multi-center Phase 3 veracity clinical study evaluating sabizabulin versus an alternative androgen receptor-targeted agent for the treatment of chemotherapy-naive men with metastatic castration-resistant prostate cancer who have had tumor progression after receiving at least one androgen receptor-targeted agent. The primary endpoint is radiographic regression-free survival. Enrollment for the Phase III veracity clinical study is on track. We expect to enroll approximately 245 patients from 45 clinical centers in the U.S. Our second clinical study is evaluating Vero 100, a GnRH antagonist three-month depo formulation, in a phase two dose-finding clinical study for the treatment of hormone-sensitive advanced prostate cancer. Androgen deprivation therapy remains the mainstay primary therapy for advanced prostate cancer, but current androgen deprivation therapy drug products have several important clinical shortfalls. Lupron, Elgar, and Zolidex are LHRH agonists whose initial administration leads to a testosterone surge that lasts up to 21 days. Firmagon, a GnRH antagonist, is a large volume subcutaneous injection formulation designed for only a single month release. Relagolix is an oral GnRH antagonist and has the potential for patient compliance concerns. In contrast, Vero 100 has a target product profile that addresses a number of these important clinical shortfalls of the currently commercial androgen deprivation therapy products. Vero 100 is a long-acting GnRH antagonist designed to be administered as a small-volume subcutaneous three-month depot injection. Vero 100 drug products are expected to immediately suppress testosterone with no testosterone surge. Vero 100 as a long-acting injected depot would ensure patient compliance while on treatment. Furthermore, as a class, GnRH antagonists have been shown to have fewer cardiovascular adverse events than an LHRH agonist. In June, the company initiated the Phase II dose-finding clinical study of 0100 antidepressant therapy in 35 men with hormone-sensitive advanced prostate cancer. Although the study is ongoing, the preliminary clinical data are promising and support the expected target product profile. The Phase III registration clinical study design has already been agreed upon with FDA. It will be a single-arm study, which will involve approximately 100 men. Maintenance of castrate blood concentrations of testosterone is the primary endpoint. After the Phase II dose-finding study is completed, we will initiate the Phase III clinical study, which is anticipated to begin in calendar first half of 2022. In our third late-stage clinical study, we are advancing Zuclomiphene for the treatment of hot flashes caused by androgen deprivation therapy. Upon further evaluation of the clinical data from our positive Phase II Zuclomiphene clinical study, we decided that because of Zuclomiphene's excellent safety profile, that we should optimize the efficacy of Zuclomiphene to treat hot flashes by further increasing the dose in a planned Phase IIb clinical study. In summary, we will have three late-stage clinical studies for the management of metastatic prostate cancer in fiscal year 2022. The Bureau has a base commercial sexual health division, which includes a commercial product, the FC2, an FDA-approved product for the dual protection against unplanned pregnancy and transmission of sexually transmitted infections, and the drug candidate, Intafi, which is Tadalfil 5mg and Finasteride 5mg Capsule, a new treatment for benign prosthetic hyperplasia with an FDA-produced date this month. We have built the infrastructure to allow for broad access to FC2 across the United States. As a result, FC2 is now available through multiple sales channels. In particular, we have partnered with fast-growing, highly reputable telemedicine platform companies to bring FC2 product to patients in a cost-effective and highly convenient manner. Although Ms. Greco will provide the full financial results in Bureau's commercial segment, which is FC2 and drug commercialization costs, I'm happy to report that we've achieved another record fiscal year. In fact, our revenue increased 44% to $61.3 million, which significantly exceeded the revenue of $42.6 million we had in fiscal year 2020. Our strategy is to continue to drive robust FC2 sales, not only to seek additional telemedicine and pharmacy services partners, but also to create our own dedicated direct-to-patient telemedicine and pharmacy services platform, both to brand our company and to further sales growth. We plan to also brand our new name, UREV, for our women's health business. We also have developed a tap fee in novel treatment for benign prostatic hyperplasia, The co-administration of sedalafil and finasteride have been shown to be more effective with treatment of benign prosthetic hyperplasia than finasteride alone without causing sexual adverse side effects. The PDUFA date is in December of 2021. If approved, Entapathy is expected to be marketed and distributed by our own direct-to-patient telemedicine and telepharmacy platform. We have also partnered with GoodRx. a U.S.-based digital resource for healthcare to reach their almost 20 million monthly visitors, which includes both consumers and healthcare providers, and offers a unique cash prize to ensure that our treatment is more affordable and accessible. We plan to augment our marketing and sales efforts by seeking partners in the U.S. and ex-U.S. We expect to begin commercialization, if approved, in early calendar year 2022. I will now turn the call over to Michelle Greco, CFO, CAO, to discuss the financial highlights. Michelle?
spk00: Thank you, Dr. Steiner. As Dr. Steiner indicated, we had another great year. Last December, the company sold Preboost for $20 million, resulting in a gain on sale of $18.4 million. In February, the company completed an equity raise, which resulted in $108 million in net proceeds after deducting underwriting commissions and costs. And for the fiscal year, the company achieved record-level net revenues of $61.3 million and record-level gross profits of $47.9 million. Let's start with highlights of our fourth quarter results for fiscal year 2021. Overall, net revenues were up 33% to $15.6 million from $11.7 million in the prior year fourth quarter due to the growth in our U.S. FC2 prescription business. The company reported significant FC2 sales growth in its prescription business with net revenues up 55% to $13.6 million from $8.7 million in the prior year fourth quarter. Gross profit was $12.3 million for 79% of net revenues compared to $9.6 million for 81% of net revenues in the prior year fourth quarter. The increase in gross profit is driven primarily by increased sales in our U.S. FC2 prescription business. Operating expenses for the quarter increased by $7.4 million to $14.2 million compared to the prior year fourth quarter of $6.7 million. Research and development costs were $8.3 million compared to $3.3 million in the prior year quarter due to the commencement of several new phases in our clinical trials. During the fourth quarter of fiscal 2020, we recorded a non-cash impairment charge of $14.1 million related to in-process research and development associated with the acquisition of Aspen Park Pharmaceuticals in fiscal 2017. Operating loss for the quarter was $1.9 million compared to the prior period of $11.3 million, which included the non-cash impairment charge of $14.1 million. Non-operating expenses were $2.8 million compared to $1.7 million in the prior year fourth quarter and primarily consisted of interest expense and a change in the fair value of the derivative liabilities related to the synthetic royalty financing. We entered the synthetic royalty financing during March of 2018. For the quarter, we recorded a tax benefit of $356,000 compared to a tax benefit of $1.1 million in the prior year fourth quarter. The effective tax rate for this quarter is 7.7% and 8.6% for the prior year quarter due to recording evaluation allowance against the net operating loss generated for the quarter in the U.S., which is most of the pre-tax loss for the period. The bottom line results for the fourth quarter fiscal 2021 was a net loss of $4.3 million for $0.05 per diluted common share, compared to a net loss of $11.8 million for $0.17 per diluted common share in the prior year fourth quarter. Now turning to the results for the fiscal year ended September 30th, 2021. Total net revenues for fiscal year 2021 were up 44% to a record high of $61.3 million from $42.6 million in the prior year. The company reported growth in FC2 sales in the U.S. prescription business and in the global public sector business. Net revenues from the U.S. prescription business was up 71% to $46.5 million from $27.1 million in the prior year. Net revenue for the global public health sector business was $13.9 million for the fiscal year. Overall gross profit was $47.9 million for 78% of net revenues compared to $30.8 million for 72% net revenues in the prior year. The increase in gross profit and gross margin is due primarily to the increase in the U.S. prescription business. Operating expenses increased to $53.3 million compared to the prior year of $31.4 million. The increase is primarily driven by research and development costs, which increased to $32.7 million from $16.9 million in the prior year and increases in the cost for personnel, insurance, and commercialization. During the prior year, the company received a forgivable loan of approximately $540,000 under the Paycheck Protection Program of the CARES Act. The forgivable loan was treated like a government grant and recognized there was reduction in operating expenses. During the first quarter of fiscal 2021, we sold pre-boosts, resulting in a pre-tax gain of $18.4 million. During the fourth quarter in the prior year, there was a non-cash impairment charge of $14.1 million. Operating income for the year was $13 million, which includes the $18.4 million related to the gain on sale of pre-boosts, compared to an operating loss of $14.7 million in the prior year, which includes the non-cash impairment charge of $14.1 million. Non-operating expenses were $8.7 million, compared to $5.3 million in the prior year, which primarily consisted of interest expense and change in the fair value of the derivative liabilities related to the synthetic royalty financing. For the year, we recorded a tax benefit of $3.1 million compared to $1.1 million in the prior year. The tax benefit primarily relates to an increase in UK tax rates from 19% to 25%, which will be effective in fiscal 2023. This change in tax rates increased the value that we expect to derive from our net operating losses in the UK. The company has net operating loss carry forwards for US federal tax purposes of $39.1 million, with $30.5 million expiring in years through 2040, and $8.6 million, which can be carried forward indefinitely. And our UK subsidiary has net operating loss carried forward of $63.5 million, which do not expire. The bottom line result for fiscal year 2021 was net income of $7.4 million, or $0.09 for diluted common share, compared to a net loss of $19 million for 28 cents for diluted common share in the prior year. Now turning to the balance sheet. As of September 30th, 2021, our cash balance was $122.4 million, and our accounts receivable balance was $8.8 million. Our net working capital was $136 million on September 30th, 2021, compared to $12.3 million on September 30th, 2020. Due to the sale of PreBoost in December of 2020, we added $15 million in cash and $5 million in notes receivable, $2.5 million, which will be collected this month, and the remaining $2.5 million, which will be collected over the next six months. In February, we completed an underwritten public offering that resulted in net proceeds of $108 million. During the fiscal year ended September 30, 2021, we used cash of $15.6 million for operating activities. Overall, we're delighted to see the continued increases in sales in the FC2 business. This revenue source, together with our strong balance sheet, continues to be the source of funds we use to invest in our promising pharmaceutical clinical development programs as we continue to transform our company into a premium oncology biopharmaceutical company seeking large market opportunities in breast and prostate cancers, as well as being opportunistic by joining the global efforts to find effective treatments for COVID-19. Now I'd like to turn the call back to Dr. Steiner.
spk08: Thank you, Michelle. We've enjoyed a record year, which has allowed us to significantly advance our clinical oncology programs. In fact, we are now entering our fifth year of growth in our FC2 U.S. prescription business. We had a record year of $61.3 million in revenue. We plan to commercially launch and tap the approved via telemedicine portal and potential licensing deals, which will provide even more revenue adding to the already growing revenues from FC2. We expect another record year in fiscal year 2022. With resources in place, we will continue to advance our expansive late clinical stage breast cancer and prostate cancer programs, as well as phase three COVID-19 clinical study that's expected to have results in the first half of 2022. We anticipate a steady flow of important positive news for VIRU over the next few months to one year. In summary, we have evolved into an oncology biopharmaceutical company solidly dedicated to developing treatments for breast cancer and prostate cancer. Our strategy to advance the clinical development of our drug candidates by investing revenues generated by our sexual health division is working. As a standalone business, our women's health business, UREV, is valuable, profitable, and growing, which provides optionality for various shareholders. I am proud of the hardworking, dedicated, and talented team we have assembled to execute our clinical and commercial strategy. We are committed to driving shareholder value by developing commercial novel medicines, addressing significant unmet medical needs, and the management of breast cancer and prostate cancer and being opportunistic by developing subcutabulin for hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome and death. With that, I'll now open the call to questions.
spk06: Operator? Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your question, please press star, then 2. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. Once again, that is star then one to rejoin the question queue. Our first question comes from Brandon Foulkes from Cantor Fitzgerald. Please go ahead.
spk04: Hi, thanks for taking my questions and congratulations on all the progress. So the two questions for me, maybe just on Zebulon and COVID, can you remind me what control arm is able to be dosed with? And then along those lines, how active are you in dialogue with the respective agencies on those endpoints just as sort of COVID treatments evolve? I guess my second question I'll just ask up front. On to this, if you learn again in the third line, monotherapy and breast, you noted you received the safety proceed letter from the FDA. So can you just let us know, are there any other hurdles you have to overcome between now and starting the phase 2B? Or is it now just a... Are you just really setting up the study and getting it running in the first quarter of next year? Thank you.
spk08: First of all, Brandon, thank you for being on the call. And I'm going to answer your second question first. That's an easy one. So a safe to proceed letter is, you know, typically what you do technically after you file. This has to be filed as a separate IMD because it's a different drug. And with that said, save a proceed letter is the official green light in the FDA to move forward. There are no other hurdles. And so all we're doing now is we've got everybody engaged. We have a CRO ready to go. And just to pause for a moment, let me tell you why this is unique and maybe didn't come across in the call. What we're doing is we're actually asking, if you look at the populations of the patients in the greater than 40 and less than 40, it's the same population of patients. These are patients that have received at least two estrogen-blocking agents and a CDK4-6 inhibitor. They're all third-line. So when they come into the study, then the companion diagnostic, or in this case it would be the CLIA test, look for their AR status. If their AR status is greater than 40, greater than or equal to 40, then they go on to the AR test study. If it's less than 40, then they go to the Phase 2B study. So in some ways, they're sister companion studies. And so we're being incredibly efficient with money because that same patient, instead of being told you can't be in the study and you chalk that up as a screen failure, whatever you call that, now we have an opportunity to capture that patient in one or the other study. So it really is a very efficient way to fill that study. So maybe that didn't come across well. as loudly as I'd like it to. But with that said, there are no hurdles. And in fact, we're starting to collect patients for recruitment because our test study is up and running and we do have patients that are less than 40. So it'll be pretty efficient. So our thinking was that since we know less than 40s are not going to respond the way the greater than 40s do, let's take advantage of another one of our assets. As it relates to the second question, I'll frame the question we're very fortunate to have here Dr. Gary Barnett will answer the question. And that was basically for the COVID-19 study, looking at the control arm, just to remind you again what that control arm was in the Phase IIb and then what the control arm is in the Phase III. And then the other part of your question was, you know, dialogue with the FDA in relation to that endpoint and how comfortable they are with that endpoint.
spk10: Gary? And so in the Phase 2 study and in the Phase 3 study, we do allow standard of care. These are both blind. So the Phase 2 is a blind study. This is a blind study. Ethically, we need to allow them to have standard of care, things like dexamethasone, remdesivir, the other products that have been approved by the FDA through the EUA process. And then on top of that, we have a blinded, either the patient is randomized to subizobulin or to placebo. That's how the studies work. And the phase three study is identical in that way to the phase two where we showed the benefit. As far as the endpoint, the FDA, you know, obviously mortality or death is the gold standard endpoint for just about every clinical trial you have or you could have. Now, we don't use it much because most of the time we're trying to do something else. So the FDA is very comfortable with death as the primary endpoint. And based on the phase two data, we are, and the and the data we're seeing in the literature, we feel very comfortable that that's where we should be.
spk08: I think the other statement I will make is that, you know, the reason I brought it up, the Merck and the Pfizer drugs are not for hospitalized patients. In fact, the Merck drug failed in hospitalized patients. So they're in pre-hospitalized patients, and this patient group will have a much, much lower overall death rate And in the hospitalized patients, one of the concerns we had running this study was that perhaps with this, quote, standard of care dexamethasone, remdesivir, you know, and drug antibody cocktails and that kind of stuff, that the death rate would be at a point that it's, you know, much lower that we would need a huge study. And that's not the case. What we're learning is that patients are coming in WHO 5s and 6s and, quite frankly, 4s, you know, these the death rate is the same if not higher than what we saw in the phase two. And so we can say that in aggregate. And so we're feeling pretty good that there is a big difference between going after patients in a pre-hospitalization standpoint versus a hospitalized standpoint because the hospitalized patients are definitely sicker. So that's why we think we have a, a position with our drug that at this point now, there really have been no effective drugs, oral drugs that have been approved in this space or any coming up, you know, coming anytime soon. So we really own this space and that's why we've got to push it, push it pretty hard.
spk06: Okay. Next question. Next question is from Leland Gershaw from Oppenheimer. Please go ahead.
spk03: Thank you for taking my question. Just actually one question. It's on subvisibulin. It's kind of a mechanistic one. You know, there's another compound being developed elsewhere, plinibulin, which also, you know, binds proximate to the colitis and binding site on tubulin. And in addition to that, it's been recently published that that compound may play an immuno-oncologic role as it releases tubulin. an immune defense protein, GFH1. I'm just wondering if, on work you've done with sabitabulin, if you've seen other elements of activity that may be along those lines, you know, in addition to the known activity with the disruption of microtubules. Thank you.
spk08: Thank you. So, yeah, from a mechanistic standpoint, let me just pause for a moment and tell you what I think is happening with plenibulin. So, first of all, from the mechanistic standpoint, Plenibulin started out as a colpacin binding compound, a colpacin binding site compound on the beta subunit of tubulin. And what I don't know, quite frankly, is what did it do on the alpha subunit of tubulin. So the binding site on the alpha tubulin subunit I don't know, okay? With our compound, what makes it different, and that's why I keep saying we're a novel class, is that it looks like I have not seen another compound that has hydrogen bonding on the beta subunit and the hydrogen bonding on the alpha subunit, the tubulin. And so that's why we're saying it's cross-linking because those bonds are so strong that it's actually cross-linking, causing the microtubules not only to not be able to polymerize, but also they cause them to de-polymerize. And so it's a little different. Now with that said, and we think this is the reason for the safety, we do think there's some overlap. So plenipulin clinically shows a reduction in neutropenia. End of story. And they had a very successful phase three that showed a reduction in neutropenia. But as you know, when you go after side effects of chemotherapy, the agency usually requires two clinical studies, And so even though plenipulin shows great success and proof of concept in a phase three setting that it can reduce the neutropenia induced by chemotherapy, the agency asked them for a second one. So it's not shocking from my point of view. And, you know, I don't know, I have not read the regulatory documents or anything like that, but from the outside looking in, you know, they usually want two. Like, for example, our hot flash product, you know, even though we're treating cancer patients, The FDA has made it very clear they'd like two pivotal studies, maybe a phase two being a three. They want two studies where they can move forward with treating the side effects of a cancer drug. So in this case, treating the side effects of angio-deprivation therapy-induced hot flashes. It's the same thing here with chemotherapy-induced neutropenia. So it's similar. As it relates to other things, I will tell you that, you know, some visibulin has already shown us that it can have activity in as an antiviral and anti-inflammatory, and that's why we're using it in COVID-19. And we've actually, you know, put out in the press release the anti-inflammatory activity across multiple cytokine proteins that are down-regulated or inhibited by subizobulin. And so it's not surprising to me that subizobulin may have immunomodulating activities But we have not tested specifically the immunomodulating activities that plenipulin has. So I can't tell you whether it was similar in that regard, but I would not be surprised. So the net-net of it is we're different, but there's some overlap. What we can say about subizobulin, all that preclinical stuff that we showed, you know, neutropenia, neurotoxicity, and the preclinical models didn't appear to be important or did not appear to happen with the compound played out in the clinical models. And so we're feeling pretty good going forward in breast cancer that we should be able to still see the favorable side effect profiles in this viewer.
spk01: Thank you.
spk08: Thank you.
spk06: Next question, please. Next question is from Yi Chen from HC Wainwright. Please go ahead.
spk09: Thank you for taking my questions. Just to clarify, the companion diagnostic AR test being developed is the test that you use in the our test study to measure the AR expression. Is that correct? Are there any other currently available tests to measure AR expression level?
spk08: Yeah. So let me answer that question. So the question is basically, are we using companion diagnostic tests being developed with Roche-Ventana currently to measure antireceptor expression in the patients entering the AR test study? That's Question one. And the answer is no, we're not. We're using a AR CLIA test. And what we plan to do during the AR test phase three is to begin to bridge into the commercial test that's being developed by Roche-Ventin. So this is not unusual. This is done often. And so we're using a AR CLIA test versus, CLIA test means it's a laboratory-developed test. It's done with all the controls and everything. It's done with the same antibody. So it's done the same way, but it's not designated a commercial test and not designated as an FDA-approved test. So we're doing that and bridge into the RTEST study. We have plenty of samples between the RTEST study and the other Three studies that are being done in, you know, the Enabler study, it's a phase three, and the phase 2B, less than 40s. And so we have plenty of samples, so we feel very, very comfortable that Ventana Roche, who's an expert in developing the diagnostic tests, we're not, so that's why we're having the global diagnostic company do it for us. We'll focus on drug development. So the short answer, the long answer, is that yes and no. What's gonna happen towards the tail of the study is probably, by the time we're in the middle of it all, that we would've switched over to the companion diagnostic, and so we'll have plenty of information. And so the concept would be that the AR test would be ready to be filed, submitted to the FDA at the same time we file the clinical data for the ART test study. And interestingly, the same commercial companion diagnostic test can also be used and not have to be revalidated and the other patient populations can be used in the combination studies that we're doing. So really, this just opens up the companion diagnostics are being used across all of the ART studies. You know, an interesting fact is, you know, Pantana-Roche At this point, I think it's doing about 85% of the initial testing that's done in breast cancer in a woman to molecularly characterize their tissue, their breast cancer. So in other words, we have ER positive, PR positive, progesterone receptor, HER2 negative. That panel is actually done by Roche. And so if Roche can come in and we are able to, and this is me dreaming for a moment, we can be in a situation where every woman will know their AR status from the very beginning. And that would, and then hopefully be a footnote of some sort that, you know, opens up the possibility that Novozarm could be available in the future. So this could be very, very interesting from a marketing commercialization standpoint. Now, with that said, you know, ER, you know, ER is done by immunohistochemistry as well, estrogen receptor, and that was grandfathered in. So the FDA doesn't have a companion diagnostic for ER. However, HER2 negative, I mean, excuse me, HER2, whether it's negative or positive, is. It does have a companion diagnostic that had to be approved. And so the FDA, when they saw the results that we presented to them for the angioreceptor, they made very clear that, you know, although many laboratories across the world are doing angioreceptor immunohistochemistry in a standard fashion, that they require... because it's so important to treat the right women to get the best effect by going after greater than equal to 40%. And the flip side is true too, and that is that if we're not seeing the same kind of activity in the less than 40s, they shouldn't be subjected to a drug that's not going to provide them benefit. And so the FDA took the position that, you know, because this is critical, that it should be a companion diagnostic. So when we now fast-forward, into, you know, now we have an approved product in Opus Arm, hopefully. Then, in that situation, the companion diagnostic will be available. AR testing will be done in other laboratories, but the one that will be approved will be the combination of Opus Arm and the companion diagnostic.
spk09: Got it. And based on current enrollment status, when do you expect the ARC test study and the veracity study to complete enrollment?
spk08: Gary?
spk10: Yeah, you know, obviously we're actively, we're on track on both of them, and we expect toward the end of 2022 into 2023. So we're targeting data readout.
spk08: And again, this is, you know, we're not trying to guide or anything, but we're certainly targeting data readout in sort of mid-2023, quite frankly, for both studies. They're really close. Got it. Thank you.
spk06: Thank you. Next question, please. Our next question comes from Chris Howerton from Jeffrey. Please go ahead.
spk05: Hey, great. Thanks so much for taking the questions. Mitch, I may have missed it, but I just was wondering if there was any updated strategy for the SC2 business. I know there was some thoughts of divestiture, but obviously it's been doing pretty well. So that would be one question. And then the follow-up to that would be, could you provide some guidance or some thinking with respect to that business for next fiscal year, please? Thank you.
spk08: I'll answer the second – well, let me answer the first question. So, you know, as we mentioned and publicly put out that we were exploring strategic options for the FC2 business. And strategic options doesn't always mean that you just go up and sell it off. It means, you know, what's the best way to maximize shareholder value. And as I also said many times is that we're not in a rush. We're making lots of money off the product and it's paying for our development. So it's not like we have to get rid of it. If anything, I love the Dan business, but it's, you know, it's, you know, we're just trying to figure out how we can get, you know, instead of a one plus one equals 0.5, how do we get a one plus one equals 10? So, you know, we've got a very different shareholder base looking at the base business. We have a different shareholder base and their expectations for the pharmaceutical business. But with that said, what's important to us is we're running a business. And so what we're doing is we're continuing to understand the options that we have in the FC2 business. We're treating the business as if we're never going to get rid of it so that we make sure we make the right decisions to continue to grow the revenue. But at the same time, we're being very opportunistic in understanding what is the best next step for the asset. So stay tuned. As it relates to revenue, as I mentioned in Carl, you know, we have put additional, again, along those lines in treating it like our own baby, we have put in some additional ways to continue to grow the business. I mean, we're in our fifth year of growth now. In this past year, we did 44% revenue growth. It just keeps happening. And for some reason, when you start looking at other women's health companies, and we all know many of them that you guys have been following, We kind of blow them away. So as a standalone business with revenues for this part of our business of $60, $61.3 million, and most of that revenue, we don't have a sales force. We don't have 100 people calling on people. We're not putting fancy ads on the Super Bowl. And so that means instead of spending that money, we're using that money to run our business and to minimize dilution. and to accelerate the programs so that we, you know, that we have become a major player in breast cancer and prostate cancer. And, of course, COVID, we think, you know, we think now that the dust has settled and the Omicron, you know, variant is here, it does remind us that don't be, you know, it humbles us that this is not going away. As much as business wants COVID to stay or go away and we can reopen, it looks like it's going to be tough. I mean, it's scaring people, okay? So when you have that kind of fear, that means we do not have control over it. If we don't have control over it, we need to continue doing what we're doing is fight our way through getting the study done so that if we become an important option, you know, that we can move that quickly to patients. Okay, so back to the guidance. So we're putting in We're putting in a direct-to-patient portal. So that means we have evolved from a purely, you know, manufacturer providing to other telemedicine portals to actually having our own portal. So that's kind of changed the valuation of the base business because instead of being a manufacturer that depends on customers that have their own portals, we all have our own portal. And, you know, our competition out there is the male condom business. In the male condom business, the female condom business is about less than 1% of that market share. It is a tremendous blue ocean out there for us. And so with that size blue ocean, there's room for a lot of portals to be out there to serve and to bring this product forward. And again, our track record shows there's a market. And we want to feed into that market directly because if the female health business you rep has its own telemedicine portal, then that really opens us up to a lot of control over our destiny. And the second thing we're doing is to continue to go out there and get additional telemedicine partners because every time you turn around, there's another female contraception internet storefront or pharmacy storefront that's opening up because that is such a big area of need. And because of COVID, again, women are not interested in, you know, going to the, you know, OB-GYN doctor or the primary care doctor, then having to go walk over to the CVS and then have to stand in line and then have to wait for the, you know, the medicine to come in and, you know, two days, three days later, go back to the CVS and then, yeah, just too many steps. They like to push the button like they do the button for Amazon to get their Pellegrino water, you know, and push the button, and it shows up in that front step. And so that, because of COVID, that is the reason why you're seeing such a surge in interest in telemedicine right now, because that has really created tremendous convenience, and we tapped right into it. So I think that's a lot of our success. So we think, all I can say about guidance, to get back to your question, as you know, we don't give guidance. But we do feel that we're going to have a better year in fiscal year 2022 than we did in 2021. And we had a great year in 2021. And so that gives you a sense of some real resources that we can reinvest into our programs and, quite frankly, some of those resources that put into continuing to drive the robust growth. And so it relates to the sexual health business. And TASI is in front of the FDA right now. And We're expecting to hear this month, and assuming we get approved, you know, we've already moved very, very quickly in creating a telemedicine portal, again, separate from the female health business. Almost we treat that like a standalone business. And we're partnered with GoodRx. GoodRx spends $300 million, $400 million a year pulling people into their site, and we're going to piggyback on that power. and take advantage of that because, as you know, BPH is probably one of the main medicines that men will go for men's health, particularly men over the age of 50. And so we can tap into that, take advantage of something. GoodRx didn't even exist three years ago or four years ago. So we're dealing with technologies and approaches to selling a product that just didn't exist five years ago. four years ago, and we're tapping right into it with Intacity. The other thing we're doing with Intacity is we're not going to hire a marketing and selling sales force. We're just not going to go out there and get 100 people out there trying to sell to doctors. COVID doesn't let doctors into the offices anymore. I mean, it doesn't let salespeople into doctors' offices anymore, and it's just become a new world, and it's just an expense that we just don't have to spend. I'd rather use that money for drug development. And so with that said, there are opportunities for us also to partner XUS and IndyUS for, you know, other groups that are going to be interested in help getting this product out, kind of like we're doing with FC2. With FC2, it's not exclusive to us. We've got other, you know, very, very popular telemedicine portals that are helping us sell the product. And we're going to kind of do the same thing with Intacity. Why not? And it's not about, you know, trying to be exclusive in the doctor's offices anymore. So I think we're going to have a very good year. Our expectation is that, you know, the second half of the year will be stronger than the first half of the year because, you know, everything will be in place towards the second half of the year. But we're looking for a good year. Okay. Well, thank you very much, Mitch. Thank you.
spk06: The next question comes from Kumar Raha from Brookline Capital. Please go ahead.
spk01: Thanks for taking my questions and also congratulations on all the progress. So first with regard to the COVID-19 trial, what kind of variability are you seeing across the different regions? And do you expect that predominantly these patients are going to have the Delta variant?
spk08: Yeah, so make sure I understand the first part. So what are we seeing across different regions in terms of strain?
spk10: Death rate. Death rate.
spk08: Oh, death rate.
spk10: It's pretty comparable. Yeah, yeah. You know, obviously, you know, we're in the middle of recruitment, and we watch, you know, the blinded data very closely, but we're seeing very similar, for instance, very similar mortality rates in the United States versus Brazil.
spk08: Yeah. Yeah. Yeah, so I would say that that's the reason why the FDA likes to use death as an endpoint because you can't fake a death. And so if a death happens, it's a pretty hard endpoint. And you're not worried about things like, you know, there may be different standard of care in hospitalizations or ICU stay in different countries, not because they're better or worse, but because, you know, if you have to make a decision who goes in the ICU, you may take somebody out of the ICU. that in the U.S. would stay in the ICU because you don't have enough ICU beds and you've got to just ration it and that has nothing to do with the virus. So that's why death's probably the better endpoint. And when you look at deaths as an endpoint, it seems to be comparable from region to region. As it relates to the strains, you know, interesting, I saw a recent graph where it looks like the Delta strain has become the predominant strain across the world. And so the other ones have kind of gone away. And now the big fear is this Omicron strain is coming in and it's going to do the same thing. And the only reason people are getting scared is because we already know with 30-plus mutations in the spike protein that we're already seeing. Regeneron already, you know, reported. And some of the other, I just saw a recent one with another antibody-directed drug. And, you know, we're going to see that, you know, these monoclonal antibodies, they go into very specific epitopes on the spike protein. If that epitope, if that spot is changed, the virus, the antibody is not going to work. And we're seeing that now. And so, you know, it is time for an oral agent that has a more, think of it as sort of a broad spectrum antibiotic concept, where it's going to have activity in some basic, very well-conserved mechanism, which is how does a virus move from outside the cell into the nucleus, replicate and get the new virions, the new viruses to come back out of the cell. I mean, that is highly regulated, highly conserved highway, the microtubules that they use. And so whether you're at Delta strain or Omicron strain, it doesn't matter. That's how they work. That's why I think, you know, we're in good shape. But we are, you know, we are, as part of the determining whether they're COVID positive or not, we are getting information on what strain the patient has. So we can go back once we get the data set and see whether or not there's differences in strains which we don't think we'll see. But we are collecting that information. But I would argue I think most of the strain right now is Delta.
spk01: Okay. And with regard to Tadfin, have you had labeling discussion, and what are your expectations in terms of the label? Thanks.
spk08: Okay. In terms of Tadfin, and so just for the record, people are clear. So the FDA has agreed that if we're approved, the trade name will now be in Tadfin. And so I love TASFN, but it turns out that the agency said there's another compound at the agency that could be confusing to use TASFN. And so because of that, they asked us to come up with another name. So we came up with a TASFE. And so that's it. As it relates to the agency, what I can tell you at this point is we are, you know, going back and forth with the agency now on labels. And so I can't give you a full statement yet in terms of what the label will say. But we're working on that, so stay tuned.
spk01: Thanks so much. Okay.
spk06: Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference call back over to Dr. Mitchell Steiner for any closing remarks.
spk08: Thank you, Operator. I appreciate you all joining us today, and I look forward to updating you all on the progress at our next investor's call. Thank you.
spk06: The digital replay of the conference call will be available beginning approximately noon Eastern time today, December 2nd, by dialing 1-877-344-7529 in the U.S. and forward. 1-412-317-0088 internationally. You'll be prompted to enter the replay access code, which will be 1-0-1-612-17. Please record your name and company when joining. The conference call is now concluded. Thank you for attending today's discussion.
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