Veru Inc.

After this morning's discussion, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference call over to Mr. Sam Fish, Veru Inc.'s Executive Director, Investor, Relations, and Corporate Communications. Please go ahead, sir.

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 our actual results may differ significantly from those projected, suggested, or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our NQ 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, Veru Inc.'s Chairman, CEO, and President.

Good morning. With me on this morning's call are Dr. Gary Barnett, the Chief Scientific Officer, Michelle Greco, Chief Financial Officer and Chief Administrative Officer, Michael Purvis, 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 Q2 Fiscal Year 2025 earnings call. Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of two clinical stage drug candidates, Inobosarm and Subizabulin. Inobosarm, an oral selective antireceptive modulator, SARM, is being developed as a novel drug that makes GLP-1 receptor agonist weight reduction more tissue selective by preserving lean mass muscle while causing greater fat loss in older patients who are overweight and will have obesity. Subizabulin is an oral microtubule disruptor. It's being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression and promote the regression of atherosclerotic cardiovascular disease. This morning, we will focus our update only on our obesity program. As defined by FDA, obesity is a disease of excess body adiposity of fat. Therefore, the medical objective to treat obesity by weight reduction drug or drugs in combination should be to reduce excess body fat, not lean mass, in order to improve the mobility and mortality associated with obesity. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who overweight or have obesity. Unfortunately, the weight loss is tissue non-selective with the indiscriminate loss of both fat and lean mass. Of the total weight loss, up to 50% of the total weight loss is attributable to lean mass. We must do a better job at getting rid of fat tissue only. Let's face it. No one wants to lose lean muscle mass. Most of this is common sense, but the beneficial consequences of increasing or maintaining muscle mass in an aging population are increased basal metabolism with sustainable weight management, better control of your blood glucose, better joint health, better increased strength, increased balance, potential decreasing falls, increased bone mineral density, potential decreasing non-traumatic bone fractures, and increases in the possibility of maintaining independence in an older population. With that objective, we are developing a novel serum, which is an oral novel serum that has demonstrated in previous clinical studies improvements in body composition with tissue selective increases in lean mass and decreases in fat mass, improvements in both muscle strength and physical function, no masculinizing effects in women and neutral prostate effects in men. We conducted a phase IIb multi-center double-blind placebo controlled randomized dose finding qualities clinical study designed to evaluate the safety and efficacy of a novel serum 3 mg, a novel serum 6 mg of placebo as a treatment to augment fat loss and prevent muscle loss in 168 older patients greater than or equal to 60 years of age receiving semaglutide, which is regovi for chronic weight management. Primary endpoint is percent change in baseline total lean body mass and the key secondary endpoints of percent change in baseline total body fat mass, total body weight, and physical functions measured by a steripine test at 16 weeks. After completing the efficacy dose assessment portion of the phase IIb quality clinical study, the patients continued into a phase IIb extension maintenance trial where all patients have stopped treatment with semaglutide but continue to take placebo, a novel serum 3 mg, a novel serum 6 mg in a blinded fashion for an additional 12 weeks. Phase IIb clinical trial will evaluate whether a novel serum can maintain muscle and prevent the fat regain that generally occurs after discontinuing a GLP receptor agonist. Purpose of the phase IIb quality clinical trial is to select a dose of a novel serum in combination with semaglutide regovi that best preserves lean mass or muscle and physical function after 16 weeks of treatment to advance into a phase III clinical program. The positive top line results the phase IIb quality clinical study demonstrated that the nose arm is a novel drug that when combined with the GLP-1 receptor agonist makes weight reduction more tissue selective for greater fat loss while preserving lean mass or muscle. Phase IIb quality study is the first human study to report the effects of a muscle preservation drug candidate on body composition and physical function in older patients who are receiving a GLP-1 receptor agonist for weight reduction. The phase IIb quality clinical study met its primary endpoint with a statistically significant and clinically meaningful benefit of a 71% preservation of total lean body mass in all patients receiving a novel serum plus semaglutide versus placebo plus semaglutide in 16 weeks and that p-value equals 0.002. The novel serum 3 mg plus semaglutide was the best dose with a greater 99% mean relative reduction in the loss of lean mass and that p-value is less than 0.001, meaning almost the entire weight loss was fat mass. The novel serum 6 mg plus semaglutide dose preserved lean mass but was not any better than the novel serum 3 mg plus semaglutide dose. This is not unexpected. This is similar to what we have seen in previous multiple ascending dose clinical studies. We believe that at a certain point the target of the angina receptor becomes oversaturated by drugs. As for the secondary clinical endpoints, the novel serum plus semaglutide treatment resulted in a dose dependent greater loss of fat mass compared to placebo plus semaglutide with the novel serum 6 mg dose having a 46% greater relative loss of fat mass compared to placebo plus semaglutide group of 16 weeks and that p-value is 0.014. Although the novel serum plus semaglutide significantly preserved lean mass, the additional loss of fat mass caused by the novel serum treatment was able to replace the lean mass preserved to allow a similar net mean weight loss measured by DEXA with semaglutide in 16 weeks. Accordingly, with the novel serum treatment, the tissue composition of the total weight loss shifted to greater and more selective for fat loss. For the placebo plus semaglutide group, the median percentage of total body weight loss was 32% for lean mass and estimated fat loss was 68%. In contrast, in the all-new novel serum plus semaglutide group, the total weight loss due to lean mass was only .4% and estimated fat loss was 90.6%. In the novel serum 3 mg plus semaglutide group, it was .9% lean mass and .6% fat loss. This is a .1% estimated fat loss. Therefore, the novel serum plus semaglutide improved changes in body composition, resulting in more selective and greater loss of fat compared to subjects receiving placebo plus semaglutide. Now, physical function was measured by the stair climb test. Stair climb test is an activity of daily living as it measures muscle strength, balance, and agility. Decline in performance measured by stair climb test has been shown in older patients to predict a higher risk for mobility disabilities, gait difficulties, falls in bone fractures, hospitalizations, and mortality. A responders analysis was conducted using a greater than 10% decline in stair climb power as a cutoff at 16 weeks. A greater than 10% decline in stair climb power at 16 weeks represents a 7 to 8 year loss of stair climb power function that occurs with aging, and this is documented by Van Roy in 2019. In our study, the loss of lean mass mattered as .6% of patients on placebo plus semaglutide group had at least a 10% decline in stair climb power physical function at 16 weeks. Again, this is the first human study to demonstrate that older patients receiving GLP-1 receptor vaginus for weight loss are at a higher risk for accelerated loss of lean mass and with physical decline. The all-Enovason plus semaglutide group had statistically significant and clinically meaningful .4% relative reduction in proportionate subjects with loss of at least 10% stair climb power compared to placebo plus semaglutide group, and that P-value was 0.0049. In the Anovason 3mg plus semaglutide group, there was a .4% relative reduction in proportionate patients with at least a 10% decline in stair climb power from baseline versus placebo plus semaglutide group, and that P-value was 0.0066. In the 6mg plus semaglutide group, there was a .2% relative reduction in proportionate patients with at least a 10% decline in stair climb power from baseline versus placebo plus semaglutide group, and the P-value is 0.0505. In conclusion, Anovason treatment on average preserved lean mass of muscle which translated into a reduction in the proportion of patients who had a clinically significant decline in stair climb physical function versus patients receiving semaglutide alone. In summary, Anovason plus semaglutide improved changes in body composition which resulted in more selective and greater loss of adiposity of fat mass while preserving lean mass of muscle and preserving physical function on stair climb power compared to patients receiving placebo plus semaglutide alone. Anovason represents a novel drug that in combination with GLP-1 receptor agonists containing therapy causes greater and more selective loss of fat mass which is the goal for higher quality chronic weight management. Next, we will discuss several upcoming clinical and regulatory catalysts. So, number one, results of the unblinded safety data for the Phase IIB quality study are expected this quarter. Safety data for the Phase IIB quality study remains blinded as the Phase II extension maintenance clinical study portion is still finishing up. It should be noted that the aggregate blinded safety data have not shown any significant differences compared to previous clinical studies of anovazone and was expected for GLP-1 receptor agonists. Further, the independent data monitoring committee met February 10, 2025 to evaluate the unblinded safety data and they made the recommendation to continue the study as planned. Next catalyst is the Phase IIB extension maintenance study efficacy and safety results are expected this quarter. As a reminder, after completing the efficacy dose finding portion of the Phase IIB quality clinical study which evaluated the effects of anovazone body composition during the active weight loss, participants continued into the Phase IIB trial, Phase IIB extension trial where all patients stopped treatment with semaglutide but continued taking placebo, anovazone 3 mg, anovazone 6 mg monotherapy in a blinded fashion for 12 additional weeks. The Phase IIB extension clinical trial will evaluate whether anovazone can maintain muscle and more importantly prevent fat regain that generally occurs after discontinuing GLP-1 receptor agonists. The company plans to present the full clinical efficacy and safety data sets for the Phase IIB quality clinical study and the Phase IIB extension maintenance study in future scientific conferences and publications. The next catalyst is we expect regulatory clarity for the GLP-1 receptor agonists and anovazone combination Phase III clinical program following an end of Phase II FDA meeting which is anticipated in Q3 2025. As a Phase IIB quality clinical study is a positive study, we plan to request an end of Phase II meeting with FDA. During our previous pre-IND FDA meeting, FDA provided general comments about a regulatory path forward for anovazone as a drug that improves body composition during chronic weight management including input on Phase III clinical program design. On the basis of this FDA input, we plan to propose a Phase III clinical program that is similar to the already positive Phase IIB quality clinical trial. The proposed Phase III clinical trial design is a double-blind placebo-controlled study in older patients greater than or equal to the age of 60 who have obesity or overweight and who are eligible for treatment of GLP-1 receptor agonists. The GLP receptor agonists may be either regovi which is a maculotide and or Zepp-bound to be a receptor agonist or a Zeppotype. Patients will be randomized to oral daily anovazone and matching placebo. All subjects will start and receive the GLP-1 receptor agonists during the study. The proposed primary endpoint will be the effect of anovazone on physical function measured by stericline tests at 24 weeks. Proposed key secondary endpoints will be to assess the effect of anovazone on total lean mass, total fat mass, HOMO-IR which is insulin resistance, and hemoglobin A1C at 24 weeks. After the Phase III clinical trial ends at 24 weeks of treatment, the plan is to continue to measure total lean mass, total body weight, stericline tests, total fat mass, bone mineral density, HOMO-IR as I mentioned is insulin resistance, and hemoglobin A1C for up to 68 weeks to capture the longer-term benefits of anovazone improvements on body composition with greater loss of adiposity of fat, preservation of both lean mass and bone for chronic weight management. Another catalyst is we have a novel modified release oral anovazone formulation which is on track to be available for the Phase III clinical studies and commercialization. Viro is currently developing a novel patentable modified release oral formulation for anovazone. The actual formulation, pharmacokinetic release profiles, and method of manufacturing will be subject to future patents. If issued, the expiry for the new modified release oral anovazone formulation patent is expected to be in 2045. The new anovazone formulation has completed animal trials and is anticipated to be in Phase I bioavailable in the clinical trials during the first half of calendar 2025. Again, the expectation is that this novel modified release oral anovazone formulation will be available for Phase III clinical studies and for commercialization. Finally, we are focusing our Phase III clinical program on the older patient population that could benefit from the weight reduction drug for chronic weight management because they are at higher risk for muscle weakness and falls because of age-related loss of muscle. Obesity prevalence is .5% among 47.4 million patients enrolled in Medicare Part D plans. Up to .4% of patients over the age of 60 with obesity in the United States has sarcopenic obesity. Sarcopenic obese patients are patients who have obesity and low muscle mass at the same time and are potentially at the greatest risk for developing critically low muscle mass when taking a currently approved GLP-1 receptor agonist. Although older patients represent a large market population alone, success in this population can be asseduated into the combination of anovazone and GLP-1 receptor agonist treatment in younger patients who have obesity as well as diabetic and the frailty populations. I will now turn the call over to Michelle Greco, our CFO-CAO, to discuss the financial highlights. Michelle?

Thank you, Dr. Scheiner. Let's review the results for the three months ended March 31, 2025. Research and development costs increased to $3.9 million from $3 million in the prior quarter. The increase is due to expenses related to the company's anovazone Phase IIB quality clinical study for higher quality weight loss. Selling, general, and administrative expenses were $5.2 million compared to $5.9 million in the prior quarter. The decrease is primarily due to a decrease in share-based compensation. We recognize a gain on sale of NTAFE assets of $974,000 while there was none in the prior quarter. The gain represents nonrefundable consideration received related to promissory notes due to Vero. The bottom-line result for continuing operations was a net loss of $7.9 million or $0.05 per diluted common share compared to a net loss of $8.7 million or $0.06 per diluted common share in the prior year's quarter. Net loss from discontinued operations, net of taxes, related to the FC2 female condom business, which was sold on December 30, 2024, was $49,000 or 0 cents per diluted common share compared to a net loss of $1.3 million or 1 cent per diluted common share in the prior quarter. The net loss from discontinued operations during the current quarter represents changes in an estimate made at the time of the FC2 business sale while the net loss for the prior year quarter represents the operations of the FC2 business during that period. Now turning to the results for the six months ended March 31, 2025. Research and development costs increased to $9.6 million from $4.6 million in the prior period. The increase is due to $6.4 million in expenses related to the company's ANOVA-SARM Phase 2B quality clinical study for high-quality weight loss during the six months. Selling general and administrative expenses were $10.4 million compared to $12.6 million in the prior period. The decrease is primarily due to decrease in share-based compensation. We recognize the gain on sale of NTAFE assets of $1.7 million compared to a gain of $918,000 in the prior period, which is based on nonrefundable consideration related to promissory notes due to VEHRU. In conjunction with the sale of the FC2 female condom business, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the SWK residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million, which included an embedded derivative for the change of control provision at fair value of $4.7 million. The bottom-line result for continuing operations was a net loss of $9.6 million, or 7 cents per diluted common share, compared to a net loss of $16.4 million, or 13 cents per diluted common share in the prior period. Net loss from discontinued operations net of taxes related to the FC2 business was $7.2 million, or 5 cents per diluted common share, including the $4.2 million loss on sale of the FC2 business, compared to a net loss of $1.9 million, or 2 cents per diluted common share in the prior period. The increase in the net loss from discontinued operations of $5.3 million is due to the loss on the sale of the FC2 female condom business of $4.2 million, and the increase in the loss from the change in fair value of derivative liabilities of $3.1 million, partially offset by a decrease in selling general administrative expenses of $2.2 million. The purchase price for the sale of the FC2 business was $18 million in cash, subject to adjustments as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 female condom business were approximately $16.3 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK pursuant to a residual royalty agreement for a 2018 financing transaction. The loss on the sale of the FC2 female condom business is approximately $4.2 million, the difference between the estimated net proceeds of $16.3 million and the total carrying value of the FC2 business of $20.6 million. The sale of the FC2 female condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development. Now looking at the balance sheet, as of March 31, 2025, our cash equivalence and restricted cash balance was $20 million, compared to $24.9 million as of September 30, 2024. The restricted cash balance as of March 31, 2025, was $354,000 related to the sale of the FC2 female condom business. Our net working capital was $15.8 million on March 31, 2025, compared to $23.4 million on September 30, 2024. The company is not profitable and has had negative cash flow from operations. We will need additional capital to support our drug development candidates. Based upon the company's current operating plan, our cash, as of the issuance date of the company's financial statements, is not sufficient for the company to fund operations for the next 12 months. However, we have sufficient capital to take the company into the fourth quarter of this calendar year, which is beyond the upcoming near-term catalysts, which include the unblind safety data for the Phase 2B quality clinical trial, the top-line efficacy and safety data for the Novusarm Phase 2B extension maintenance study, the regulatory clarity from the FDA end of Phase 2 meetings for the Novusarm Phase 3 program, and the Phase 1 bioavailability data for the novel modified release oral Novusarm formulation. During the six months ended March 31, 2025, we used cash of $19.1 million for operating activities, compared with $11.7 million used for operating activities in the prior period. We generated cash from investing activities of $18.4 million for the six months ended March 31, 2025, while we used $40,000 in investing activities in the prior period. The cash generated in the current year relates to proceeds from the sale of the FC2 female condom business of $16.3 million, proceeds of $1.7 million from the sale of the NTAFI assets, and proceeds of $393,000 from the sale of Onkinetics equity securities. We used cash in financing activities for the six months ended March 31, 2025 of $4.2 million related to the change of control payments pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 female condom business. In the prior period, we generated $36.8 million from financing activities. Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

Thank you, Michelle. And with that, I'll now open the call to questions. 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 one 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 the best sound quality. To withdraw your question, please press star and then two. 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 will pause momentarily to assemble our roster. And your first question today will come from Dennis Ding with Jeffries. Please go ahead.

Good morning. This is Anthea, on for Dennis. Thank you for taking our questions. Could you talk a little bit more about how you're thinking about your cash balance and runway, specifically what options are exploring to fund the Phase 3 and is there potential to partner out the program? Thank you.

Yeah, thank you for the question. So hopefully you heard loud and clear that we have enough cash to last us into the fourth quarter, calendar quarter. That gives us plenty of time to get through these catalysts. Part of what we're trying to do is to get the full appreciation and value understood by investors and others based on the clinical data and other information that's coming out. So as I mentioned, so we're expecting this quarter to have the unblinded safety data for the Phase 2 quality clinical study, the top line efficacy and safety data for the Novus arm extension study will come out this quarter as well. Q3, we have regulatory clarity because that's when we'll have the meeting with the FDA on the Phase 3 program. Remember that dictates how much money, how big the study is. So it's kind of premature to say how much cash we're going to need for the clinical study until we know exactly what the FDA agrees to. We have an idea, but again, we need to get clarity. And so that will help dictate how we're thinking and what to do. And then we're expecting Phase 1 bioavailability bridging data, if you will, for the novel modified release oral Novus arm formulation. So these are all value generating opportunities. With that said, yes, I think the approach should be to go for non-dilutive funding. And non-dilutive funding would be best from either a partnership, a partnership type act, partnership or more from a large pharmaceutical company of which we are in active discussions. And the reason we're in active discussions is because we have Phase 2B data that uniformly we've been told by key opinion leaders, we've been told by the scientific advisory board, we've been told by every expert in the field that this is a game changer to be able to have a drug that will make a GLP-1 burn only fat that's unheard of. And so we are the first company to report on a GLP-1 in combination with a muscle preservation drug that's an oral drug. And being an oral drug and being a non-peptide, being a small molecule, has some very interesting potential. And the way I see it, the future of weight loss and chronic weight management is going to be a journey in which you lose fat only and hold on to lean. And furthermore, it's going to be an oral space. It's going to be an oral drug that you take for weight loss. It's going to be an oral drug you take for body composition. And you can do it, especially the small molecules. You can pair them together as a fixed combination. This could be very, very interesting. This is where the field is going. So as we get more and more information, I think that will solidify clearly that we're ahead of the pack. I think the myosin inhibitors, even if everything is equal, the IV or sub-Q, and that's what they're trying to move away from. So our strategy is to get the milestones behind us to keep the discussions with the pharmaceutical companies going and to have more clarity on the Phase III program. And that will help us understand better what's the best way to fund the Phase III. Thank you for the question. Got it. Thank

you.

And your next question today will come from Gary Nachman with Raymond James. Please go ahead.

All right. Thanks for all the updates and good morning. So Mitch, for the Phase IIb extension maintenance study, review what outcomes would be considered a success in terms of the magnitude of benefit on weight loss and muscle mass for anobisone versus placebo after stopping the GLP-1. Does it need to be stat-sig or just show a positive trend? And just say if the data is imminent or if it will be later in the quarter, if you could narrow that at all and then have a little bit of a look at

the data and see if it can be more detailed. Okay.

Yeah. So okay. Fair enough. So the real laughing is you want to know the exact timing of the data release. And I'll see if I can give you some more clarity. So as you know, the study is powered on the Phase IIb quality study, which is the formal first 168 patients, 16 weeks, lean body mass, lean to primary endpoint. So the way to think of the extension study is almost like a safety study. And what happens when you stop with GLP-1? So it would be more descriptive, but it's telling a real story about the working hypothesis that muscle is important. And so the idea, so if you consider it successful, we already know that we maintain lean mass with anobisone and we burn more fat mass going into it. And we also know that the placebo group, meaning semaglutide alone, is acting just like you would expect semaglutide to act in other studies. So in step one study with semaglutide at 68 weeks, there was a 40% reduction. For the total weight loss, 40% was lean and 60% was fat. We saw 32% lean and 68% fat at 16 weeks. So the placebo group is acting just like we expect from the published New England Journal of Medicine article, step one. So the expectation is that the placebo arm, now without semaglutide and without anobisone, will act similarly, which we expect to see fat regain. Remember, fat's the enemy. We have to pause for a moment. When we deal with weight loss and obesity, it's all about what happens to fat going through the process, meaning that if fat comes back and you get fat regain, that's bad. So fat regain is what we're trying to blunt, and with fat regain comes weight gain. And then the question of muscle, I guess because we're doing a DEXA, we're going to have a better clear understanding of what happens to muscle. Now if muscle comes back from the placebo group and you have fat regain, muscle I'm not worried about. I'm happy if muscle comes back. If muscle doesn't come back, that's fine. The key thing to focus on is what happens to fat regain. How about anobisone? If you hold on to, if you have anobisone and muscle is not depleted, meaning that you're not getting two signals to the brain. One signal in the brain is you stop at your LP1 you're told to eat, and you have a muscle depletion you're told to eat, you got to double eat. So you overeat. But anobisone shuts off one of those, and the idea is that we will again focus on fat, blunt the fat regain. And I think a success would be if we can show that we've blunt it so much that in fact we may actually cause additional fat loss. Think about that for a moment. So if we cause additional fat loss and don't cause regain, anobisone monotherapy could be a nice off-ramp for patients who are, for patients who want to stop at GLP-1 for a sort of reason. Now to be very clear, the whole idea is to stay on GLP-1 to get the benefits. And unfortunately 60% of patients at year one come off at GLP-1, and by year two it's 80% of patients for all kinds of reasons. And one of the main reasons is they reach the weight loss that they're happy with, and the problem they're having is they stop, they'll get all the fat back, and they feel like they've lost it. So again, it's the focus on the fat. And if we can show a blunted fat regain, further loss of fat in an extension of 12 weeks, that would be considered success. And the second question you asked, which is the timing, I will tell you the following. The safety data for the Phase IIB quality study will come out first this quarter, and then shortly after that we would expect to see the Phase IIB extension maintenance data come out, and the safety and the efficacy will come out together.

Okay, that's helpful. And then just in terms of the Phase III study, understanding that you still have to meet with FDA, what's your best guess on how big you think it'll need to be, and are you leaning towards using the 3-milligram, 6-milligram, or both doses, and also doing it just for older patients? And then just quickly, any potential concerns with tariffs? So where is anobisome sourced and manufactured, if you can comment on that, thinking ahead, particularly for the modified formulation?

Thanks. Yeah, Gary Brunette will answer the question about tariffs, because he's got a better handle on how we're making the formulation, where it's sourced. But to answer your first question, the expectation is that the primary endpoint for the trial will be in older patients. We picked older patients, because older patients have a different risk benefit. I think it's important because it's a call to action. And the risk benefit is that if patients have a decline in function, that actually means something. That means something in terms of balance, gait difficulties, mobility, disability, falls and fractures, mortality. I mean, you can dip into entire literature, so that tells you, kind of sets up nicely why physical function is important. With that said, the primary endpoint, if you stare at climate for 24 weeks, if you do the power calculations, that ends up being about, and then back up. I don't know whether you use three or six yet. It feels like three, but we've got to get the full data set to see, because three does a great job on lean, but six does a great job on fat. But three does a good job on fat, too. So we're still debating that, but put that aside for a moment. There'll be one dose. So one dose we'll take forward. And so it'll be one dose versus semaglutide plus a minus, semaglutide and or to zepatide. We're thinking now we'll probably do both. Why? Because there's only two drugs on the market right now, GLP-1s, that are commercial. And so it makes sense. If we want to be using combination with either one, we should probably have data on both of them and stratify the phase three so that we pre-specify that we're going to analyze the data with semaglutide group and to a zepatide group separately. And I think that would be very helpful. All the rest of the companies, even though there's 120 companies working on this, on obesity products, right now the zepatide and semaglutide are way ahead. And so by the time our phase three is completed, those are still going to be the market leaders that we'll have to approach. So with that said, we believe that the numbers will be something like 200 patients per arm. So a total of approximately 400 patients randomized for the phase three. Gary Barnett, can you answer the question about tariffs and whether we have concerns about sourcing that could potentially affect an obisarm price?

Yeah, at this point we don't foresee anything significant. Obviously there potentially could be something come up. But the cost of goods of an obisarm is relatively low. So we believe we'll be in good shape regarding tariffs. Okay, great.

Thanks a lot.

And your next question today will come from William Wood with B. Riley. Please go ahead.

Thank you for taking our questions and congratulations on a very nice quarter and very promising results. I'm looking ahead to those. Maybe just wanted to tease out a bit more on what you might have seen already on safety. Understanding it's blinded to date, you did say that you haven't seen any significant differences compared to what you're expected or expecting based on the previous studies. So just to sort of help us out and set a bar, maybe you could provide some color on what your expectations are for the safety based on these prior studies and how we should be interpreting this in terms of just the general safety but maybe specifically on these liver tests.

Yeah, so I think maybe the best way to answer is to go head on with liver. And because people are saying that SARMS in general, which the data comes from the recreational use of SARMS at doses 10 to 20 times higher. So if we're at 3 milligrams, they're given doses of 30 milligrams, which is 10 times higher up to 75 milligrams which is up to 20 times higher. So go take an Advil and the next day take 21 of them. See how you feel. So the problem is that it's uncontrolled. Don't know who's making it. It's made by a Chinese Indian company. So even in that case, the real world data looks pretty good in terms of liver safety compared to, for example, alkylated anabolic androgens, which has also been abused in the past. I put abuse aside from our clinical studies, which we have a database of about 1600 patients. We saw a rate of ALT increase of about 1.8 percent or something like that in the placebo group and about 3.4 percent or something like that in the novus arm group. And that's like in 500 patients per group. And what we see is very, very characteristic of what you see with the testosterone type product, not the alkylated testosterone that we've modified to make it oral and has been the problem. But if you take regular testosterone, we're probably more similar to that where you see slight increases, mild increases in ALT in a few subjects. It always goes down either on drug, mostly almost always on drug unless the patient stops the study for some reason. And it goes down to normal. We've never seen anything related to function, meaning bilirubin increases, alpha phosphatase increases, procoagulation issues. So in other words, it's mild increases, self-limiting comes back down and represents what's called adaptation of tolerance, which is a common mechanism. The liver handles some agents. The other thing about the novus arm is we're not a, we don't fit the two rule. Two rule looks at what dose, technically it's called rule of two, in which if your dose is over 100 milligrams, it raises concern. Our dose is 3 milligrams. We don't fit that rule. So from that standpoint, our expectation is that what we're seeing is what we've been seeing before. And it's acting the same way, mild increases, comes back down, mostly usually on drug. And so we're not expecting, it's tolerance and adaptation. And it's not drug induced liver injury by Heise's law, which is what people get into trouble with with drug development. We just have not seen that. And so I want to set the bar that in the aggregate, it's not like we saw something in the aggregate and now we're going to separate it out. I mean, Gary Barnett, do you want to add to that?

Yeah, I think you summarized it correctly. And that's exactly what we've seen in previous studies. If you go away and expand out of liver, we don't see any significant serious adverse events. And we're not seeing that in this particular study either. So the safety in aggregate is consistent with the studies that we've conducted previously.

You know, one interesting thing is that GLP-1s also affect ALT, but same way. Elevations have come down with time. And so the adaptation tolerance approach and the widely used. And that's true for to zepatide and for semaglutide. So again, we're not seeing anything inconsistent with what we've seen before, which we've been saying. I think what will be different is when we provide the full data safety data set, you'll see what's happening in each category. You know, semaglutide alone versus semaglutide plus three plus six. Is that helpful?

Very helpful. We appreciate that. That's very extra detail there, Mitch. So just one more actually from us. It looks from everything that you've presented so far, the FDA has sort of provided two paths towards two shots on goal or two paths towards regulatory improvement. You can sort of go after functional improvements or potentially go after metabolic improvements. It looks like you're sort of at least initially overwhelmingly targeting functional data, obviously with your very nice positive stair climb, also as your primary endpoint or in in phase three. I was curious, though, to how you're seeing sort of the other path if you feel that that would be open to a Nova's arm. Also, I don't think we've seen too much data on that. And so how do you see sort of these two alternate paths towards regulatory improvement? And will or and will we or what should we be expecting as far as sort of the metabolic tests from the phase to be quality coming up here shortly?

Yeah, so let me just, you know, so let me tell you how I'm seeing it from a standpoint of paths. So the first thing to say, let's talk about a Nova's arm for a second. So Nova's arm has consistently shown lean body mass maintenance and improvement in other patient populations and we've shown the same thing in this patient population. We've shown reductions in fat and other populations, older patients. Again, we've shown the same thing in this patient population. We have not seen the individual data with some of the metabolic parameters, but some of the metabolic parameters to look for are LDL, insulin resistance, and HbA1c. We've seen our previous studies, LDL is maintained or slightly lower, triglycerides go down. This was a Nova's arm in other populations. And we've also seen insulin resistance get better. So HOMA-IR got better, HbA1c. I'm not quite sure on that one, but my guess is it got better. Maybe Gary knows. In this study, we're measuring, we're not measuring HOMA-IR in the phase 2b, but we are measuring HbA1c and LDL. And so from a metabolic standpoint, you know, we're going to be additive, I believe, to what you see with the GLP-1. Now to take a step back, and what we do differently, of course, is we have, in addition to muscle mass being metabolic, we also have muscle mass being physical function. And that's been the hardest one for other drugs like myostatin, it was a show. And so, and part of that is because the angio receptor is a time-tested receptor. We know, all you have to do is look at the real world literature, you know, people, you know, they maintain muscle, they burn fat, they improve their performance. And so it is a performance drug. There's no question about it. But FDA is asking it to be a performance drug. They're asking you to show function. So by definition, it's not just what you see on DEXA, it's what you see by performance. And we've seen that, whereas myostatin inhibitors in general have had a tough time. And we're oral, so I put this in a good position. Now the pathway from a regulatory standpoint, you have to think of it a couple of ways. The FDA has put out a guidance in January 20, 2025 that is very interesting because the debate in the field is what is the regulatory pathway? And what you heard from others is that if you showed a 5% greater weight reduction, incremental weight reduction when you combine two drugs together, then that gets you over the hurdle. Based on everything I know, several meetings with the FDA, the FDA guidance itself, and furthermore workshops with the FDA, that's evolving. People are now understanding what the FDA meant was for the first time you have a drug for weight loss, 5% weight loss compared to placebo and standard care or standard lifestyle changes is 5%. But once you're in and you have an approved drug that's 10%, for example, weight loss, and you put that in combination with the second drug and you come back with 15%, the agency doesn't know what that means. What did you do to make the patient better? So the agency says you have to have a second test. And that second test is what did you do that's clinically meaningful? So the FDA says clinically meaningful means HbA1c gets better, insulin resistance gets better, LDL gets better, for example. Those are metabolic things that get better. In the case of ArcDrop, the fact that we showed improvement in lean mass, stabilized the technical test, stabilized preserved lean mass, we can show function. If you show benefit in function, that's a benefit, clinically meaningful. But if you think about what the GLP-1 is doing, the GLP-1 treatment makes HbA1c better, makes insulin resistance better, makes LDL better. So the combination has to make better, better. Whereas in the situation with physical function, we just showed in our Phase 2B, the physical function is not better with the GLP-1. The GLP-1, .6% of older patients in fact have a 10% or greater decline in their client power. So we can make something worse better. That's interesting. Now pause for a moment. That means that the bar is high and low. It's low for the first time you have a product that's by itself. It's high if you give it in combination because you're being asked to do more than just weight loss. The FDA also has said in their guidance that there's a body composition pathway for approval. So body composition basically means fat and muscle and bone and that kind of stuff. They know there's a problem that the GLP-1s that you change body composition and in fact the FDA has purposely gone out of the way to define obesity as excess adiposity. So a weight reduction drug has to be a drug that burns fat. Fat is what you get. You get no points for losing lean. In fact the FDA now mandates sponsors to do a dexor NMRI to quantify, at least in the subpopulation, how much lean is lost and how much fat is lost because the whole goal is to show fat loss. So in that same guidance they say, however, if your drug is a body composition drug, like in our case we're preserving lean, then that path is beyond the scope of the weight reduction guidance because you're now a body composition drug in combination with GLP-1 and come seek advice. Well our pre-IND was out of life. So when we had the pre-IND meeting the FDA made it very, very clear that in our case we're fortunate because we do improve lean mass. A dexor scan of lean mass by itself is cosmetic. So holding on to lean mass is wonderful but what does it mean? And again it's performance. It's function. And so performance and function has to be measured somehow. We did a stair climb test and so now we have in our phase 2B a great situation that if we replicate the phase 2B in a phase 3 setting, that's wonderful. Then we win. So the primary endpoint is physical function by stair climb test at 24 weeks and we show that we can stop the decline physical activity, physical function by stair climb in patients on GLP-1. That's clinically meaningful on its own. So that is a very clear pathway forward with FDA consistent with the guidance and consistent with what they told us in our meetings with FDA.

Appreciate that, Keller. I'll hop back into queue but definitely on the lookout for the imminent data and congratulations again for a very nice quarter. Thank

you.

Again, if you would like to ask a question, please press star then 1. To withdraw your question, press star then 2. And your next question today will come from Yi Chen with HC Wainwright. Please go ahead.

Good morning. This is Eduardo. On for Yi. Just a quick question again on the phase 3 trial. You mentioned the iodine trisepatide and I'm curious what your thoughts are there. There's some anecdotal evidence that trisepatide skews a little bit more towards fat loss instead of lean mass. I'm curious how you're planning around that in your trial design potentially. If you're losing more, less lean mass, you might need a little bit more patience in that group to power a difference. I'm curious how you're thinking about that in trial design. Yeah, so if

you go back and look at the data, you'll see the following. To my surprise until I saw the data, trisepatide loses about the same amount of muscle or lean mass as semaglutide. And the data comes from the step one study for semaglutide where I think it's about 6.8 at 68 weeks, it was 6.8 kilograms of lean that's lost. And so remember it's with the lean, not so much with the fat is, it's how much lean you're trying to preserve for function. And so 6.8. And if you go back and look at the trisepatide data and you have to look in the supplemental tables, I was able to find a number at 72 weeks. Remember 72 weeks is because you have a different titration period and so it gets to 72 weeks. It was about 6.2 kilograms. So the difference between the lean mass loss at approximately a year plus is similar. So I think that the functional issues trisepatide is going to have to be pretty much similar to what we found with semaglutide. With that said, we're going to power the study based on those numbers and stratify the subjects based on whether it's a zepatide or semaglutide so we don't mix apples with oranges. I think the apples are going to look very much like oranges in this study. But to be purists, we could keep them separate. Gary Barnett, do you want to add to that?

No, that's right. There'll be stratification on which and we'll make sure they're equal between the treatment groups. So that difference will wash out or will be accounted for in the randomization. And of course, the type of GLP-1 that they'll be on will also be one of our covariates in the ANOVA in the final statistical analysis.

Got

it. Thanks a lot. That's

really helpful.

Thank you.

And your next question today will come from Leyland Gershel with Oppenheimer. Please go ahead. Hey, good morning. Thanks for taking

our

question.

You know, just wondering, Mitch, you know, the industry has been investing a fair bit, you know, in the development of potential therapies for the side effect of the GLP-1s, these would be the myostatin blockers and so forth. I'm wondering if, you know, in the work you've done to look at the differences between ANOVO and perhaps those strategies, are there any concerns you may have that those may show any benefits that may supersede or be differentiated from ANOVO as we await the remaining data from the Phase 2? Thanks.

Great question. So let's, you know, I'll begin with what I think makes this different and I'll end with what I think makes this different. What makes this difference is we're oral and there are IV or sub-Q and the whole space is moving, even if all things are equal, things are moving in the direction of oral treatments for chronic weight management. And all the GLP-1 containing agents have a degree of lean mass loss. Nobody's going to disagree that older patients are at risk because they have less muscle mass to begin with and it's not a percent thing. 25% of a small amount of muscle is still a big amount. And so the older patients, even big pharma will tell you, are the ones at most of risk that we need to keep an eye on. With that said, I think the myostatin inhibitors are going to have to overcome a problem in their development which has been showing physical function benefits and physical function benefits by objective measurements of muscle function. Now I'm not talking about six-minute walk tests because six-minute walk tests should get better if you lose weight because six-minute walk tests is cardiovascular. That's why they'd use six-minute walk tests, for example, for pulmonary artery hypertension drugs and that kind of stuff. But muscular dystrophy, for example, they use for muscle quality, they use stair climb and those kinds of tests. So I think the challenge is I think they're going to show greater loss of fat. I think they're going to show a preservation of lean. But because lean doesn't translate necessarily to function, then they're going to have to make better, better, which means they're going to have to look at LDL, they're going to have to look at HbO1c, they're going to have to look at insulin resistance, something metabolic. I think that's a challenge because you can only make things better, better, so much better, meaning that if your LDL hits 70 with a GLP-1 alone, then what's better than better? You're already in a better range. Same thing with HbO1c and same thing with insulin resistance. So what are you going to show? So I think it's a question mark. So I'm going to end with what I think makes this different again, and that is we're oral. And because we're oral, that doesn't matter what they show because a small molecule that's oral that can be combined with the future of weight loss medicines, which is an oral agent that's not a peptide, that's a small molecule. Then you'll be able to mass produce the drug more cheaply, distribute it much better where you're not looking for cold storage and that kind of stuff, and get to the massive number of people that could benefit from a weight loss drug that is now a drug that is taking 99% of the fat away and that's going to be a problem. So it's a true weight loss drug, getting rid of the fat, that's the enemy.

Great, thanks very much.

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

I appreciate everyone who joined us on today's call, and I look forward to updating all of you on our progress on our next Investors Call, and stay tuned for the numerous catalysts that will be coming out over the short term. Thank you. Bye now.

You will be prompted to enter the replay access code, which will be 768-2749. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.