Veru Inc.

Good morning, ladies and gentlemen, and welcome to VarioInc's 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 morning's discussion, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Sam Fish, VarioInc's Executive Director, Investor Relations and Corporate Communications. Please go ahead. Good morning.

The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations, or intentions regarding its business, operations, regulatory interactions, finances, and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties and are 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 10-Q and 10-K 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, VeryWings Chairman, CEO, and President.

Good morning. With me on this morning's call are Dr. Gary Barnett, Chief Scientific Officer, Michelle Greco, Chief Financial Officer and Chief Administrative Officer, Michael Purvis, the General Counsel and Executive Vice President of Corporate Strategy, and Sam Fish, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our Q3 fiscal year 2024 earnings call. Vera is a late clinical stage biopharmaceutical company focused on developing innovative medicines for high-quality weight loss, oncology, and acute respiratory distress syndrome. The company's drug development pipeline includes two late-stage novel oral small molecules, Inovasarm and Subizabulin. In our weight loss pipeline, we have Inovasarm, also known as Osterine, MK2866, GTX024, and VIRU024, which is an oral selective angio-receptor modulator, SARM for short. Inovasarm is being developed as a treatment in combination with a weight-loss drug like a glucagon-like peptide-1 receptor agonist, also known as a GLP-1 receptor agonist, to augment fat loss and to avoid muscle loss in overweight or obese patients for chronic weight management. In our oncology pipeline, impending additional external funding or pharmaceutical partnership, we have Inovasarm in combination with Abemacyclib as a second-line treatment for angioreceptor-positive, estrogen receptor positive, and human epidermal growth factor 2 negative metastatic breast cancer. In our infectious and inflammatory disease pipeline, and similarly pending additional external funding of pharmaceutical partnership, we have subizobulin, a microtubule disruptor, which is a planned phase 3 clinical trial for the treatment of hospitalized patients with viral-induced ARTS. The company also has an FDA-approved commercial product, the FC2 female condom internal condom, for dual protection against unplanned pregnancy and sexually transmitted infections. This morning, we'll provide an update on the current focus of our company, which is the development of Inovasarm, an oral SARM in combination with Rigovit, which is semaglutide, a GLP-1 receptor agonist, to preserve muscle mass and to augment fat loss for a potentially higher quality weight loss. We'll also provide financial highlights for our third quarter fiscal year, 2024. Lipo receptor agonists, which include Ozempic, Wegovy, Cefbound, and Manjaro, are very effective drugs that cause significant weight loss. Unfortunately, up to 50% of the total weight loss comes from muscle, which is problematic, as muscle is necessary not only for strength and physical function, but also muscle is a metabolic tissue that may play a role in allowing a higher quality weight loss. To clarify this point, Muscle preservation may assist in higher quality weight loss in three ways. First, we need a drug that, given in combination with a glucoin receptor agonist, will prevent the loss of muscle caused by a glucoin receptor agonist to preserve physical function in older adults who are at risk for muscle loss and who are overweight and obese. According to the CDC, 42% of older adults have obesity in the United States and could benefit from weight loss medications. Up to 34% of obese patients over the age of 60 have sarcopenic obesity, sarcopenia being the age-related loss of muscle. This large subpopulation of sarcopenic obese patients is especially at risk when taking a GLIP1 receptor drug 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 on a GLIP1 receptor agonist therapy for weight loss, GLIP1 receptor agonist drugs may accelerate the development of frailty and muscle weakness in obese or overweight elderly patients. Muscle weakness may lead to poor balance, decreased gait speed, mobility disability, loss of independence, and higher risk for falls and fractures. In fact, the safety section of the package insert for Bagovi has been updated based on the recently reported select cardiovascular outcome clinical trial, which now highlights a 400% increase in pelvic and hip fractures that were observed in patients greater than the age of 75 years receiving Regovi compared to placebo patients, and that was 2.4% versus 0.6%. Fractures of the hip and pelvis typically occur because of falls, which increase with decreased muscle mass. Second, for all patients who are overweight or obese, muscle preservation may prevent the GLIP1 receptor agonist weight loss plateau. Significant depletion of muscle mass may be one of the may also be one of the reasons why patients with GLP-1 receptor agonist drugs reach a weight loss plateau, meaning the rate of weight loss slows or stops while taking a GLP-1 receptor agonist drug. The hypothesis is that loss of muscle creates a muscle deficit that causes a low energy balance and triggers in the brain a signal to increase appetite that counters the inhibition of appetite from GLP-1 receptor agonist drugs, thus leading to the weight loss plateau. Without a muscle deficit, glucoid drugs may maintain the loss of appetite and reduction of calorie consumption, which may potentially remove more fat mass with greater weight loss. Third, for all patients who are overweight or obese, muscle depletion may trigger the overeating that occurs when the patient discontinues a glucoid receptor agonist, resulting in a rebound weight gain. That is, they regain their original weight. But now, the regained weight is composed of almost all fat. Having a drug that maintains adequate muscle reserve when a gluplein receptor drug is discontinued may prevent this rebound weight gain and help with the maintenance of weight loss. We believe that Inovus Arm, our novel oral selective antireceptor modulator, may be the best drug candidate to address this urgent unmet medical need to preserve muscle in patients receiving a gluplein receptor agonist for weight loss. Data from our clinical trials and preclinical studies support Novosarm's potential. Novosarm is given as a once-a-day oral dose. Novosarm works through the androgen receptor, a well-established mechanism. Novosarm demonstrates tissue selectivity as it improves and preserves lean body mass, muscle mass, and physical function. In addition, Novosarm also directly causes a breakdown of fat and prevents storage of fat, resulting in a decrease in fat mass. This represents a different, non-overlapping mechanism of drug action to reduce fat that's distinct from a GLP-1 receptor agonist, which suppresses appetite, resulting in a low caloric state. Therefore, if Inova's arm is given with a GLP-1 receptor agonist, the combination utilizes two different mechanisms to increase the loss of fat. Also, Inova's arm builds and heals bone, providing another potential benefit to treat bone loss, which is also known as osteoporosis, to prevent fractures. Inovasorm has been previously studied in five clinical studies that measured muscle as an endpoint, involving 968 older men and postmenopausal women, as well as older patients who have muscle wasting because of advanced cancer. An advanced cancer population is relevant, as advanced cancer causes a loss of appetite, resulting in significant unintentional loss a wasting of both muscle and fat mass, similar to what's observed with a GLP-1 receptor agonist treatment. The totality of the clinical data from these five clinical trials demonstrates that Inovasarm treatment leads to increases in muscle mass with improvements in physical function as well as significant reduction in fat mass. The expectation is that Inovasarm in combination with a GLP-1 receptor agonist would both preserve muscle and augment fat reduction resulting in a higher quality total weight loss. Furthermore, Inovus Arm has a large safety database, which includes 27 clinical trials involving 1,581 men and women dosed with Inovus Arm, with some patients dosed for over two years. In this large safety database, Inovus Arm is generally well-tolerated without masculinizing effects in women. Reversible mild liver enzyme elevations have been reported which are mostly grade 1 adverse events, there were no grade 3 or grade 4 adverse events. To be clear, no drug-induced liver injury has been observed from any of the 27 clinical studies evaluating Inovasar. Furthermore, there are no increases in gastrointestinal side effects compared to placebo. This is important, as there's already significant frequent gastrointestinal side effects with a GLIP1 receptor agonist treatment alone. Now, turning to our Novosarm clinical program for high-quality weight loss, we're conducting the Phase IIb Quality Clinical Trial, so Quality is the name of the trial, which is a multicenter, double-blind, placebo-controlled, randomized dose-finding study to evaluate the safety and efficacy of Novosarm 3mg and Novosarm 6mg compared to placebo in combination with Begovi, which is semaglutinase, Glyph1 receptor agonist, in approximately 150 older patients greater than the age of 60 who are overweight or obese. The purpose of the Phase 2B clinical trial is to select the optimal dose of Anobis arm in combination with a glucomy receptor agonist that best preserves muscle and augments the reduction of fat mass for a better body composition at 16 weeks of treatment. The primary endpoint to the Phase 2B clinical trial will be the change in total lean body mass from baseline to 16 weeks, and key secondary endpoints will be the change from baseline to 16 weeks in total fat mass, total body weight, and physical function as measured by the serocline test. After completing the 16-week efficacy dose-finding portion of the Phase IIb clinical trial, participants will then continue into a blinded Phase IIb extension clinical trial, where all patients will stop receiving a GLIP1 receptor agonist but will continue taking placebo, Inovasarm 3 mg, or Inovasarm 6 mg for an additional 12 weeks. The blinded phase 2B extension clinical trial will evaluate the maintenance of weight loss, meaning whether Inovasarm can maintain muscle and prevent the fats and weight gain that occurs after discontinuing the GLIP1 receptor agonist. We believe that assessing the effects of Inovasarm on lean body mass and fat mass at 16 weeks' time point should be adequate to demonstrate significant loss of muscle in a semaglutide and placebo cohort. Support comes from the STEP1 study reported by Wilding et al. in the New England Journal of Medicine. The STEP1 study that evaluated semaglutide for weight loss in overweight and obese patients showed that 49% of the total weight loss that's lost in that 68-week study occurred by week 16. Approximately 40% of the total weight loss was attributed to muscle loss. As Inovasarm is a muscle drug that also burns fat, our current Phase 2B clinical program is designed to provide body composition clinical data to support the Phase 3 clinical development of Inovasarm for precision, high-quality weight loss by answering the following clinical questions related to muscle. For at-risk older adults who are overweight or obese, can Inovasarm prevent loss of muscle to preserve physical function. For all patients who are overweight or obese, can InovaSARM preserve muscle to prevent the GLP-1 receptor agonist weight loss plateau? And for all patients who are overweight or obese, can InovaSARM maintain adequate muscle reserve when GLP-1 receptor agonists are discontinued to prevent the rebound weight gain, which is almost all fat? I'm proud of our team. as they have expeditiously executed the Inova's Arm Phase 2B Quality Clinical Program. We prioritized the company's clinical development activities to address this new important unmet need in November of 2023. We filed the IND with the FDA in January of 2024. We received FDA clearance on the IND in February of 2024. We made a strategic decision to upsize the size of the trial to 150 patients to increase the power of the study. We initiated this Phase 2B quality study in April of 2024. Clinical studies being conducted in 14 clinical sites in the United States. This morning, I'm pleased to report that we have completed the greater than 150 patient enrollment for the Phase 2B quality study. can now anticipate that the last patient to complete the Phase 2B quality study will be in December of 2024, with top-line clinical results of the Phase 2B clinical study expected in January of 2025. Furthermore, the top-line results of the separate blinded Phase 2B extension clinical study may now be expected in the second calendar quarter of 2025. We believe we have sufficient financial resources on hand cash of $29.2 million at the end of June 2024 to complete and provide results in both the Phase IIb Quality Clinical Trial and the Phase IIb Extension Clinical Trial. I will now turn the call over to Michelle Greco, CFO, CAO, to discuss the financial highlights. Michelle?

Thank you, Dr. Steiner. Let's start our highlights with the third quarter results for the three months ended June 30, 2024. Overall, net revenues were $4 million compared to $3.3 million in the prior year's third quarter. The company's quarterly sales for its U.S. prescription business were $552,000 compared to $863,000 in the prior year's third quarter. Net revenue from the global public sector business for the quarter was $3.4 million compared to $2.5 million in the prior year's quarter. The increase in the public sector business is for increased shipments under our contracts with UNFPA and USAID. Overall, gross profit was $1.3 million or 34% of net revenues compared to $1.2 million or 37% of net revenues in the prior year quarter. Gross profit increased due to an increase in units sold. The decrease in gross margin is due 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. Operating expenses for the quarter decreased to $12.4 million compared to the prior year's quarter of $19.7 million. The decrease is primarily due to research and development costs, which decreased to $4.9 million compared to $8.8 million in the prior year quarter and the decrease in selling general and administrative expenses of $3.4 million from $10.9 million in the prior year quarter to $7.5 million in the current quarter. The decrease in research and development costs is due to our drug development strategy to focus development efforts on those drug candidates with the best opportunity for long-term success in shareholder value creation while matching available funding. During the quarter, we initiated the phase 2B quality clinical study. The decrease in selling general administrative expenses is primarily due to significant costs incurred in the prior year related to preparation for the potential commercialization of Sibizabulin for COVID-19 prior to the FDA's declination of the company's EUA application and an increase in personnel costs in the prior year due to increased headcount for the potential commercialization. These additional costs and incremental headcount have now been reduced post the EUA declination. On April 19, 2023, we sold our NTAD feed product to Unkinetics for $20 million. We received $6 million at closing and promissory notes of $14 million, which are recognized as additional gain on the sale when non-refundable consideration is received. During the current quarter, we recognized an additional gain on sale of $110,000 compared to the gain on sale of $4.7 million in the prior period. The operating loss for the quarter was $10.9 million compared to $13.7 million in the prior quarter. Non-operating income was $132,000 compared to $1.3 million in the prior year's quarter. The reduction is primarily due to the change in the fair value of the derivative liabilities related to the FC2 synthetic royalty financing. For the quarter, we recorded a tax expense of $162,000 compared to $58,000 in the prior year's quarter. The bottom line result for the third quarter was a net loss of $11 million or 7 cents per diluted common share compared to a net loss of $12.5 million or 14 cents per diluted common share in the prior year's quarter. During the third quarter, we used cash of $5.6 million for operating activities. Now turning to the results for the nine months ended June 30, 2024. For the first nine months of fiscal 2024, total net revenues were $10.2 million compared to $12.4 million in the prior year period. Net revenues from the U.S. prescription business were $1.8 million compared to $5.2 million in the prior year period. Included in the net revenues for the prior period were $3.9 million for sales to the Pill Club. The reduction of prescription business net revenues is due to not having any revenues from the Pill Club in the current period due to the fact the Pill Club's Chapter 11 bankruptcy filing in the prior year. Net revenues from the global public sector business for the period were $8.4 million compared to $7.2 million in the prior year's period. Overall, gross profit was $3.2 million or 31% of net revenues compared to $6 million or 48% of net revenues in the prior year period. The decrease in gross profit in gross margin is due to the change in the sales mix with the U.S. prescription business which has a higher profit margin comprising a smaller percentage of total net revenues and an increase in our cost of sales due to a charge of $1.2 million for an obsolete stock reserve related to inventory in the U.S. prescription channel. Operating expenses decreased by $63.4 million to $32.9 million compared to the prior year of $96.4 million. The decrease is driven by a reduction in research and development costs of $37.7 million to $9.5 million from $47.3 million in the prior year, and a reduction in selling general and administrative expenses of $17.9 million from $41.3 million in the prior year to $23.4 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. During the prior year, 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 the receivables from the Pill Club. During the nine months, we recorded a gain on the sale of a TAD fee of $1 million compared to $4.7 million in the prior period. Operating loss for the period was $28.7 million compared to $85.6 million in the prior year, a decrease of $56.9 million, which is primarily due to the reduction in operating expenses. Non-operating expenses were $289,000 compared to operating income of $508,000. For the nine months, we recorded a tax expense of $272,000 compared to a tax benefit of $77,000 in the prior year. The bottom line results for the first nine months of fiscal 2024 was a net loss of $29.3 million or 22 cents per diluted common share compared to a net loss of $85 million or 1.2 cents per diluted common share in the prior year. The net loss for the company decreased by $55.7 million for the nine-month period. The 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 in shareholder value creation while matching available funding and elimination of the commercial team and related commercialization expenses for the potential launch of sedizabulin for COVID-19. Now looking at the balance sheet, as of June 30th, 2024, our cash balance was $29.2 million and accounts receivable were $1.6 million, compared to a cash balance of $9.6 million and accounts receivable balance of $4.5 million as of September 30th, 2023. Our net working capital was $27.9 million on June 30th, 2024. compared to $5.1 million on September 30th, 2023. During the nine months ended June 30th, 2024, we used cash of $17.3 million for operating activities compared with $78.5 million used for operating activities in the prior period. We generated cash from financing activities for the nine months ended June 30th, 2024 of $36.8 million compared to $9 million in the prior period. On December 18th, 2023, we completed an underwritten public offering of our common stock, which included the exercise in full of the underwriter's option to purchase additional shares. Net proceeds to the company from this offering were approximately $35.2 million after deducting underwriting discounts and commissions and costs incurred by the company. All the shares sold were offered by the company. We are working to increase the future FC2 net revenues in the U.S. prescription channel by growing awareness and driving demand of FC2 through increased marketing efforts for our own telehealth platform. We're starting to see increases in our global public sector business from efforts to increase FC2 market awareness in developing countries. Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

Thank you, Michelle. All of the GLP-1 receptor agonists work mainly by creating a low caloric starvation state by reducing appetite that results in the non-selective loss of both muscle and fat tissues to cause weight loss. Using a muscle-preserving drug that can also decrease fat mass, like Inobizarm, in combination with a GLP-1 receptor agonist may allow for the enhanced reduction of fat mass for higher quality precision weight loss in not only older patients who are overweight or obese, but also for all patients who are overweight or obese. This is truly an unmet medical need. We believe that Novosarm is the best investigational drug candidate to address the muscle loss caused by GLIP1 receptor agonist drugs for weight loss. Novosarm is a first-in-class arm, has a once-a-day oral dosing, has demonstrated tissue selectivity, utilizes a well-known mechanism of action, the angina receptor, to favorably change body composition. Activation of the angina receptor increases muscle mass, improves physical function, and decreases fat mass to potentially achieve a higher quality weight loss. Novus arm has a favorable safety profile and would not add to the gastrointestinal side effects that are already observed with a glyphosate receptor agonist treatment alone. The global obesity and overweight drug market is projected by many research analysts to be $100 billion annually by 2030. The combination of the Novus arm with a glyphosate receptor agonist potentially represents a multi-billion dollar opportunity. I should note that we also have new clinical data that we generated from reexamination of the clinical data from some of the previous five clinical muscle studies evaluating Novosarm that further support the potential for Novosarm for the preservation of total lean body mass and the reduction of fat mass to improve body composition for higher quality weight loss in patients who are obese or overweight. The company will be presenting an abstract of the Obesity Week 2024 and that's in November 2nd through the 6th in San Antonio, Texas. Furthermore, we've been invited to present keynote lectures at the fourth edition of the World Obesity and Weight Management Congress being held October 24th to 26th in Baltimore, Maryland, and the 17th International Conference of the Society of Sarcopenia, Cachexia, and Wasting Disorders being held December 6th through the 8th in Washington, D.C., I've also been invited to co-chair a session entitled Body Composition Changes Induced by Glyphoid Receptor Agonists and Obesity Therapy at the International Conference of the Society of Sarcopenia, Cachexia, and Wasting Disorders. We are very excited by the prospects of Inova's arm to address this new and important medical need. We are looking forward to the top-line results of this important and timely Phase IIb quality clinical study. With that, I now open the call to questions. Operator?

Yes, 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 are using a speakerphone, we ask that you please pick up your handset before pressing the keys to ensure 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. We'll pause momentarily to assemble the roster. And the first question comes from Yi Chen with HC Wainwright.

Thank you for taking my questions. Assuming positive results coming out of the Phase 2B Quality Study, how soon can you advance the candidate to the next step and whether you plan to find a partnership for a potential registration study. Thank you.

Thank you, Yi. So assuming we have a positive study, which means that now that we have complete enrollment, we can now have a little bit more certainty, have a lot more certainty in terms of how the trial will progress in terms of information. So the expectation is the last patient will be, will complete the study, the 16-week portion of the study in December. give us some time there to clean up the data and look at the data and get the top-line results. We'll call it January. So in January 2025, we will have the Phase 2B quality clinical trial data. The reason I say that way is the extension trial is not required for us to move forward with talking to the FDA or potentially talking to partners. So really it's the data that we get in January that will start the ball rolling from a standpoint of moving forward. Moving forward means, you know, collect the information, go back to the FDA, and start having, you know, further discussions now with real data in hand. I mean, you know, this data really represents the first muscle drug. I know we have competition with, for example, myostatin inhibitors, but this data will be the first muscle drug to be given in combination with GLP-1 to see what the results look like. I mean, all these other drugs pretty much have no clinical data in combination with CLIP-1, and the data that they use to move forward with their Phase IIs, just like us, is data showing muscle preservation, reduction in fat, and other conditions, not in combination with CLIP-1. So with that said, we have a real opportunity to meet with the FDA and understand what the Phase III clinical program will look like. With that said, this is also an ideal time with data in hand to begin to have discussions for potential partnerships. As I mentioned in previous calls, we have talked to the major players. As you would expect, the expectation is for us to get this study done so that we'll have real data so we can have real discussions. The way to think of it is after January, it gives the company the opportunity to begin moving on the regulatory front and moving on the partnership front.

Got it. That's helpful. Thank you.

Thank you.

Thank you. And the next question comes from Leland Gershaw with Oppenheimer.

Hey, Mitch. Thanks for the question. Just a question actually on safety. In the trials that you referenced, I think the five studies that you referenced with the Novus arm trial, I think the high dose was 3 milligrams. I know you're testing up to 6 in the current quality study. I just wanted to ask what gives you confidence that you'll be okay, particularly with respect to liver, at 6? And are there any considerations with respect to the types of patients in the study, i.e., overweight, obese, therefore may have diabetes? You know, may have fat accumulation in the liver. Could that put them in, you know, further risk of having liver injury? And also, is there any provision for alcohol cessation during the study, which also could be a factor? Thank you.

Yeah, thank you. So the answer, the first, I'm going to answer a couple of those questions, and then I'm going to ask Dr. Gary Barnett, our chief scientific officer, to answer some of those questions. So as it relates to the database, You're absolutely right. The database that we have for muscle as an endpoint goes up to 3 milligrams. Of course, we have single ascending dose and multiple ascending dose studies that were done in much higher doses, up as high as 100 milligrams. But I need to remind everybody that we also have done almost 250 patients at 9 milligrams or 18 milligrams in our breast cancer program. And some patients have been taking those doses for as long as two years plus. So we do have data for safety above the six milligram. And then in this patient, and again, we saw no evidence of liver toxicity defined as drug-induced liver injury. As it relates to triglycerides, one of the things that we did see in a different patient population, the older patients, men over the age of 60 and women post-menopausal, is we did see about a 30% reduction in triglyceride. So one of the mechanisms, if you worry about overweight patients or obese patients that may have fatty liver, we may be able to reduce the triglycerides, which is the source of the fatty liver. As it relates to alcohol, I'm going to have to ask Dr. Gary Barnett what we're doing in the clinical protocol.

We are not excluding alcohol. We do monitor the alcohol history and the alcohol intake. as we go forward. Of course, we're excluding patients with alcohol-associated cirrhosis and alcohol-associated hepatitis, alcohol-associated fatty liver. If we know those things, they're excluded from the study. But we don't exclude the intake of alcohol during the study, but we do monitor that.

Got it. Thank you very much for the color. I look forward to the top-line results. Great. Thank you.

Thank you. And the next question, Chris and Gary Nockman with Raymond James.

Hi, guys. This is Cages on for Gary. Congrats on the quarter. So my first question is, can you just talk about how you're expecting the phase to be to progress now that you're fully enrolled and if we should expect any incremental updates before you report top line in January? And on that safety question, are you pleased with everything you're seeing with the safety committee thus far in that current trial? And then I also have a follow-up.

Yes. So as it relates to the phase two and what to expect, so as I promised, we would announce when we fully enrolled the study. And so that's probably the last announcement in terms of progress because the last patient out will be December. And so the next report will be the actual top line data. As it relates to safety, we're pleased with what we're seeing so far. But, you know, we enrolled 150 patients in three months. And so many of these patients are still just starting part of their first month. So we, you know, it's still early times. But, again, you know, the three milligram dose we've used, you know, in five clinical trials and, you know, other trials. And then we've used nine milligram and 18 milligram. So we're not expecting... anything strange, but that's why we run the study and that's what we're going to follow. And so it's hard to say much more about safety at this point, except there's no surprises.

And then as it relates to, you can ask another question after that, you said as a... Yeah, I just wanted to ask a little bit more about some of the secondary endpoints in the Phase IIb and then how do you expect them to trend and specifically on the HOMA-IR? Can you talk a bit more about the significance of that and what you're hoping to show?

Yeah. So HOMO-IR, we have mistakenly put on our slide that we were measuring HOMO-IR in this patient population. We have measured HOMO-IR in previous patient populations and show the benefit of insulin resistance. For this phase two, given how short it is, we decided to move the HOMO-IR into the next study, so the phase three study. So that won't be one of the data points that you'll see. You will see, again, lean body mass, fat mass, which will be the body composition endpoints. We'll have total weight, body weight, so we'll see that. And then from a functional endpoint, we'll be measuring physical function by stair climb. The reason that's important is because stair climb power, a stair climb test, is a sensitive measure of quadricep strength. and is sensitive to testosterone and androgen anabolic stimulation. And it's also a test that the FDA has told us in writing is the acceptable function endpoint. To pause for a moment, as you know, there are many that you may have heard, like grip strength and leg press and chest press. The FDA told us those are not acceptable functional endpoints. So the functional endpoint that we've chosen in the study, serocline power, is accepted by FDA. In fact, Italo Pharma, with an F, had the muscular dystrophy drug approved, I guess about six months ago. And so I think that's key. The other thing that's key, in those five clinical studies that we did in almost 968 patients, About 900 of those patients we did stair climb. So we know how to do stair climb, and we've learned a lot in how to execute on that endpoint. Dr. Barnett, do you want to add to anything to that?

Yeah, that's exactly right. And we're looking for changes in lean mass. We're looking for maintenance of – of lean mass in our treaty group versus a loss in lean mass in the placebo group. And we're looking to assess how much fat we can, how much we can augment the fat loss. That's the main focus of this study. Thanks for that caller, guys.

Thank you.

Thank you. And the next question comes from William Wood with B. Reilly Securities.

Appreciate it for taking my questions, and congratulations on a quarter. Just looking for a little extra color here on what we might expect in January for the top line data. Is this going to be simply lean mass loss being reported, or will you provide any extra details on the body weight loss and or the fat loss, or specifically the functional improvements?

Yeah, great question. So the question, because you were a little garbled, but I think the basic question that I heard is that, you know, when you report in January, you know, what can we expect in terms of top line data and the kinds of top line data that we'll get? And the answer is, for sure, and I say it this way because a lot depends on our concern that if you report too much information, then all of a sudden now you can't get it. All these societies and stuff don't want you to, I mean, you have to have a scientific meeting with new information. So with that said, the most important thing about the trial is reporting out on body composition. So certainly the primary endpoint of lean body mass and total fat mass so you have a clear understanding of a dose response or the right dose to pick for the right preservation of muscle and reduction of fat compared to placebo. So we'll have that for sure. And then we'll just, you know, I just have to see how the societies and additional scientific meetings and that kind of stuff, what we can report. But as you know, in the springtime and the wintertime, there are a lot of meetings that will be going on. So if it's not right at the top line data happening in January, it'll be shortly thereafter in one of the major meetings.

Got it. Very helpful. And maybe actually just a quick question. I believe you mentioned that you're going to have a presentation at Obesity Week. You mentioned the abstract. Is this going to be, I would say, unseen data from past clinical trials, or is it going to be a little bit of what we've been seeing or potentially what we've seen already.

It'll be additional data you have not seen. It's another analysis looking at data. So it's not repeat data that we've already shown. So it'll be new data from the old studies.

Okay. Helpful. That's it. I'll jump back in, Keith. Thank you so much.

Thank you. Appreciate it.

Thank you. And again, if you'd like to ask a question, please press star then one. To draw your question, press star then two. And the next question comes from Dennis Ding with Jefferies.

Hi, this is Anthea on for Dennis. Thanks for taking our questions. Two from us. On stair climb power, could you talk a little bit about what the MCID is for the measure and what would be a successful outcome in phase two? And on the phase three, you've spoken previously about moving forward in elderly patients only versus the broader obesity population. Can you just let us know your thinking there and how the phase two informed that decision? Thank you.

Great. So I'm going to take the second question first, and then Dr. Barnett will talk about stair climb power in terms of what's deemed a success. So in terms of the study, so to be very clear, the FDA has told us that in the Phase III program that they're looking forward to us having the opportunity to develop the drug in all patients that have obesity or are overweight. So, in other words, all comers. And their belief is that a muscle preservation drug will have benefit and older patients will have benefit and younger patients too. And so that's a positive sign that the FDA is well aware of body composition and how they're thinking about it. The FDA also said that one way forward would be to look for incremental weight loss, and this is now talking about phase three programs now, incremental weight loss with the combination versus the GLIP1 alone. The incremental weight loss, the FDA did not commit to how much weight loss, incremental weight loss, you should demonstrate because their position is that because you have a muscle preservation drug, they may benefit in other ways, such as physical function, HOMA-IR, as Gary Nachman brought up. There are other things, other benefits of having a muscle preservation drug that's beyond just the adding muscle or preserving muscle just for the sake of doing it. So showing function is important. And so in a Phase III program, having those endpoints as key secondary endpoints and the primary endpoint weight loss allows the FCA to look at the totality of the data for clinical benefit and clinical meaningfulness, which is good because at one point it was a direct cutoff on weight and that was it, but now it's much more... much more totality of the data. So what will inform us in this study, the phase two, is not whether we're going to go after an older patient population. This study is meant to ask the question in an informative patient population, meaning doesn't it make sense that if you want to show a benefit in physical function, you pick patients that already have muscle loss and may already have functional limitations, and if you treat them with an anabolic agent, selective anabolic agent like Inovasarm, that you show a benefit in physical function. So you're going to more likely show that in an older patient population, which, by the way, in the 950-some-odd patients, we've done five clinical studies, they were older patients. So we have experience with older patients. An older patient, with at least certainly with a 3-milligram dose, the totality of the data shows that we hit function. So that would make sense. As you start thinking about a Phase III program, again, the whole approach would be to go for all comers. And so, Gary, if you don't mind, can you comment on success? Gary Barnett, Chief Scientific Officer, can you comment on success, what would be considered success with stair climb power? And then second, how we're thinking about the Phase III development program as it relates to all comers, but also having the subgroup for the older patients.

Sure. So in the Phase II study, I would believe a success really is being able to power and inform the design of the Phase III. That's a success. And success as far as numerically goes, I think any separation between the placebo group and the Anobisarm treaty group would be a success, meaning we can show an observational difference between the power exerted going up the steps between the two groups. I think that would be a success. Remember, we're looking at change from baseline, so we've got a baseline value, and then we have a value at 16 weeks, and then we'll have another value at the end of the extension. And I really think that the definition of success would be that we could observationally see a difference. As far as the Phase III trials, what I really think we're going to propose to the FDA and what we're going to try to do is we're going to power the Phase III study with the overall. Remember, the FDA basically has told us that they believe that muscle loss or a drug to preserve muscle or to preserve lean mass would be beneficial regardless of age. But they certainly recognize that the most at-risk patients are the aged population which we're studying the phase two. So they do want us to include the younger patients in the phase three study. So I would probably propose at this point that we would have a body weight endpoint. Total body weight endpoint is the primary in the overall population. And then I would power the subgroup, meaning the patients over the age of 60, for stair climb power, because that is the at-risk population. So we intend, obviously, if these patient populations have already lost lean mass, you know, just due to their advancing age, and then we accelerate that with a GLP-1 or a diet like this, then I think that that's where the value of an OB-SAR, increasing lean mass, increasing physical function, is going to be the most important from a patient outcome and quality of life.

And let me also add, Gary, that the Phase III program is going to be done like a typical Phase III program, As you know, we're looking at 16 weeks. And the reason we picked 16 weeks for the phase two is for two reasons. One is we know about half the total weight that's lost in a trial that goes on for 68 weeks happens in the first 16 weeks. And we also know from bariatric surgery data that in the first three months, the 55% of the muscle you lose is in that whole year post-surgery happens in the first three months. So we know there's a lot of activity going on with muscle in that first 16 weeks. And we've got, you know, between the step one data and now the bariatric surgery data that gives you clarity on what's happening earlier. So the phase two will help us, you know, understand what we want to do going forward to phase three. Time for the phase three, would be, you know, if we use semaglutide to his appetite and probably use both, the first 16 weeks is what you need to titrate up, and then you go on for another year, so it's about 68 weeks. So your Phase III program will be 68 weeks, and your functional endpoint will be at the end of that 68 weeks. So you have a lot more time to build and maintain muscle and separate out the placebo group And so the way to look at it is the phase two is just the beginning, and the one-year study will allow you to see the additional fat-burning benefits of having a drug that directly reduces fat, but having a GLP-1 receptor agonist that's not going to have a competing signal where the GLP-1 says stop eating, and the competing signal is going to be the muscle deprivation deficit telling the brain to eat because that's self-preservation. If you get rid of that noise, then the GLIP1 can work better. And finally, with more muscle, you lose more fat. So that's why we think weight loss is an endpoint and particularly is a good endpoint. And particularly now the FDA is thinking about, you know, clinical benefit is not just weight loss. It's weight loss and, in our case, function. And so I think it puts us in a good position. Also the label. will reflect that because, again, the FDA doesn't really see muscle loss for cosmetic reasons. They see muscle preservation for functional reasons. Long answer, but hopefully it gave you some clarity.

Yeah, that was helpful. Thank you.

Okay.

Thank you. Ladies and gentlemen, this concludes the question and answer session. I would like to turn the comments back over to Dr. Mitchell-Steiner for any closing remarks.

Thank you, Operator. I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress at our next investor's call. Thank you again.

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