Veru Inc.

Good morning, ladies and gentlemen, and welcome to VARU Inc.' '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 call over to Mr. Sam Fish, VARU'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 our actual results may differ significantly from those projected, suggested, or included in any forward-looking statements. Risks that may cause actual results or developments that differ materially are contained in our 10Q and 10K SEC filings, as well as in our press releases from time to time. I would now like to turn the conference call over to Dr. Mitchell Steiner, Barrow Inc.' 's Chairman, CEO, and President.

Good morning. With me on this morning's call are Dr. Gary Barnett, our Chief Scientific Officer, Michelle Greco, our Chief Financial Officer and Chief Administrative Officer, Phil Greenberg, General Counsel, and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our first quarter fiscal year 2026 earnings call. Here 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 new chemical entities, small molecules, Inovasarm and Subizabula. The first one, Inovasarm, is an oral selective angio-receptor modulator, SARM, and is being developed as a next-generation drug that when combined with a GLP-1 receptor agonist, and as demonstrated in our company's recently completed Phase II quality study, makes weight reduction more tissue-selective, the fat loss and preservation of lean mass and physical function, which is intended to lead to greater weight loss compared to GLP-1 receptor treatment, to receptor agonist treatment alone, with a focus on older patients with obesity. A second asset, civizibulin, a microtubule disruptor, is being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression or promote the regression of of atherosclerotic cardiovascular disease. This morning, we will focus on the update of our obesity program, and we will also provide financial highlights. The fiscal 2026 first quarter ended December 31st, 2025. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, this weight loss is tissue non-selective with the indiscriminate significant loss of both lean mass and fat. Of the total weight loss, up to 50% is attributable to lean mass. Although the GLP-1 receptor agonist treatment has resulted in profound weight loss for many patients, the strategy for the next generation of obesity drugs should be a combination therapy with a GLP-1 receptor agonist for patients to lose fat only while preserving lean mass and physical function and bone mineral density for the highest quality weight reduction. Bureau's completed positive phase 2B quality clinical trial conducted in 168 older patients with obesity provided the proof of concept that Nozarm could be that next generation drug in combination with the GLP-1 receptor agonist to make the weight loss journey more selective for only fat loss while preserving lean mass and physical function during the active weight loss period, but also notably after semaglutide was discontinued, and those on monotherapy significantly prevented the regain of both body weight and fat mass, such that by the end of the 28-week study, there was greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group. In September of 2025, we announced a successful FDA meeting providing regulatory clarity for the development of the Novozarmin combination with a GLP-1 receptor agonist for greater quality weight loss and treatment of obesity. According to FDA feedback, there are at least two possible regulatory pathways for the development of the Novozarmin combination with a GLP-1 receptor agonist treatment for obesity with preservation of lean mass, which are based on incremental weight loss. First, incremental weight loss with at least a 5% placebo-corrected weight loss difference at 52 weeks of maintenance treatment with a novus arm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor agonist treatment alone may be an acceptable primary endpoint to support efficacy for approval. Second, if the incremental weight loss is less than 5% corrected weight loss, including similar weight loss at 52 weeks of maintenance treatment with a novus arm in combination with GLP-1 receptor agonist treatment compared to a GLP-1 receptor agonist treatment alone. But the Inovasarm treatment group demonstrates a clinically significant positive benefit, such as a statistically significant and clinically meaningful benefit in the preservation of physical function. This may also be acceptable to support efficacy for approval. FDA also confirmed that Inovasarm 3 mg is an acceptable dosage for future VIRU clinical development. Now, coincidentally, On December 19, 2025, the FDA announced that total hip bone mineral density, that's BMD, assessed by DEXA scan, qualifies as a validated surrogate endpoint for drug development in postmenopausal women with osteoporosis at risk for fracture instead of the current standard that requires Phase III clinical studies must use bone fractures as a primary endpoint. This is relevant for our NovoSom obesity program, As it's been reported in the scientific literature, the GLP-1 receptor agonist therapy affects body composition by also reducing hip BMD. In fact, the semi-acrytide Rigobi FDA label has recently been updated to include the safety concern of increased risk of hip and pelvic fractures based on a select cardiovascular trial, which is sponsored by Novo Nordisk and over 17,000 subjects. In the select trial, Four to five times more hip fractures of the hip and pelvis were reported on the GOBI than in placebo in female patients and in all patients age 75 and older. The good news for our NovoSARM obesity program is that in previously published preclinical studies and rat models of postmenopausal female osteoporosis, NovoSARM has been shown to have both anabolic and anti-resorptive activities that result in increased bone mineral density. Consequently, this means that distinct from incremental weight loss or muscle preservation and physical function as primary endpoints, improving BMD in postmenopausal women with obesity receiving a GLP-1 receptor agonist who also have osteoporosis can be another primary endpoint going forward for a no-sarm-to-seek regulatory approval for improving body composition. Now let's turn to the current status of our planned phase 2B plateau clinical study. A common and serious clinical and therapeutic challenge of GLP-1 receptor agonist treatments is that 88% of patients with obesity after one year on a GLP-1 receptor agonist drug hit a weight loss plateau where they stopped losing additional weight. This is based on the Suramount One study conducted by Eli Lilly and Company. Unfortunately, 62.6% of these patients still have clinical obesity at the time they reach the weight loss plateau. One explanation might be that the loss of muscle may stimulate appetite in patients receiving a GLP-1 receptor agonist to consume more calories, which may be an important reason why patients hit that weight loss plateau. Noveson has been shown in clinical studies to directly burn fat to preserve muscle to increase physical function and to burn more calories, which would help break through that weight loss plateau, leading to incremental weight reduction. Vero's planned Phase 2B plateau clinical study is a double-blind, placebo-controlled study to evaluate the effect of a no-sum 3 mg on total body weight, fat mass, lean mass, physical function, bone mineral density, and safety in approximately 200 older patients aged greater or equal to 65 years of age who have obesity with a BMI of greater or equal to 35. and are initiating semaglutide treatment for weight reduction. The primary efficacy endpoint to study is the percent change in baseline and total body weight at 68 weeks. An interim analysis will be conducted at 34 weeks to assess the percent change in baseline in lean body mass and fat mass as measured by DEXA scan. The key secondary endpoints, the total fat mass, total lean mass, physical function using the Sterifine test, bone mineral density, and patient-reported outcome questionnaires for physical function, HbA1c, and insulin resistance. Simaglutide was selected as a GLP-1 receptor agonist for the Phase IIb plateau study to build on Viru's previous clinical experience using a Novosarm in combination with Simaglutide in the Phase IIb quality clinical study. Further, there's now an oral form of Simaglutide which may be used in combination with oral Inovasarm in future Phase III clinical studies, making the potential bridging of the future Phase III clinical studies data to the Phase IIb Plateau Inovasarm plus injectable semaglutide data possible. In contrast, Terzepatide injectable does not have an oral formulation. The principal investigator for the Phase IIb Plateau clinical trial will be, again, Steven Himesfield, M.D., professor and the director of the Body Composition Metabolism Laboratory at the Pennington Biomedical Research Center in Baton Rouge, Louisiana. The clinical study is expected to begin this quarter. An interim analysis to assess change in lean body mass and fat mass as measured by DEXA will be conducted in 34 weeks, which is anticipated to be in the first quarter of calendar year 2027. I will now turn the call over to Michelle Greco, CFO of CAO, to discuss the financial highlights. Michelle?

Thank you, Dr. Steiner. On October 31, 2025, Bureau completed an underwritten public offering of 1.4 million shares of our common stock, pre-funded warrants to purchase up to 7 million shares of our common stock, accompanying Series A warrants to purchase up to 8.4 million shares of our common stock, and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per share of common stock and the accompanying Series A and Series B warrants. Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting costs and discounts paid by the company. In the prior year period, on December 30, 2024, Bureau sold the FC2 female condom business to Clear Future, Inc. In our financial statements, all direct revenues, costs, and expenses related to the FC2 female condom business are classified within loss from discontinuing operations, net of tax in the statements of operations. Now let's review the results for the three-month end of December 31, 2025. Research and development costs decreased to $1.3 million from $5.7 million in the three months ended December 31st, 2024. The decrease is primarily due to a wind down of the phase 2B quality clinical study for Inovasarm as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. General administrative expenses were $4.1 million compared to $5.2 million in the prior quarter. The decrease is primarily due to a decrease in share-based compensation. We recognize a gain in the sale of Entafi assets of $695,000 in the prior quarter, which is based on non-refundable consideration receipts related to promissory notes previously due to VERU. As the promissory notes are now settled, no additional gain is expected in future periods. In conjunction with the sale of the FC2 female condom business, we recorded a gain on extinguishment of debt of $8.6 million in the prior year's quarter, related to the termination of the residual royalty agreement. During the prior fiscal year, the company entered into a settlement agreement with On Kinetics, Inc., whereby the company received a cash payment of $6.3 million and Series D preferred stock in a warrant, which had a combined fair value of $2.5 million. The loss associated with the change in fair value of securities held related to On Kinetics, $0.1 million compared with $0.3 million for the prior period. The bottom line result was a net loss of $5.3 million, or $0.26 per diluted common share, compared to a net loss of $8.9 million, or $0.61 per diluted common share, in the prior year's quarter. For the prior period's quarter, the net loss included a net loss of $7.1 million from discontinued operations. Now looking at the balance sheet. As of December 31, 2025, our cash, cash equivalents, and restricted cash balance was $33 million compared to $15.8 million as of September 30, 2025. On both December 31, 2025 and September 30, 2025, there was $.1 million of restricted cash related to the sale of the FC2 female condom business. Our net working capital was $29.7 million as of December 31, 2025, compared to $11.1 million as of September 30, 2025. The company is not profitable and has had negative cash flow from operations. Based on the company's current operating plan, our cash, as of the issuance date of these financial statements, is expected to be sufficient for the company to fund operations through the interim analysis and the Phase 2B plateau clinical study to assess percent change from baseline and lean body mass and fat mass as measured by VEXA scans. During the three-month ended December 31st, 2025, we used cash of $6.2 million for operating activities, compared with $11.3 million used for operating activities in the prior period. There was no cash generated from investing activities in the current period. for the three months ended December 31st, 2024, we generated cash from investing activities of $17.2 million, primarily from proceeds from the sale of the FC2 female condom business of $16.2 million. Net cash provided by financing activities for the three months ended December 31st, 2025, was $23.4 million, which were the proceeds from the sale of common stock and warrants in an underwritten public offering net of commissions and costs. We used cash and financing activities for the three months ended December 31st, 2024, of $4.2 million, related to the change of control payment to SWK pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 female condom business. Now, I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

Thank you, Michelle. With that, we'll now open the call to questions. Operator?

Ladies and gentlemen, at this time, we will begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, we ask that you pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your question, please press star and 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 1 to rejoin the question queue. Our first question comes from Edward Nash with Kianaccord. Please go ahead.

Hey, good morning, guys. Thanks so much for taking my questions. I wanted to first just ask a couple questions. One was why not use the oral semaglutide in this study as opposed to having the optionality in the phase three? Is it just because it's relatively new now, its lack of real-world data?

I think the reason is that we're trying to minimize the potential differences between what we saw in the phase two, be a quality study, and what we want to see in the plateau study. And so, you know, the oral form is not exactly the same as the injectable. The injectable is a little bit better. So that means that, you know, we show what we need to show in the phase 2B plateau study. Then we should see even a better response with an oral semaglutide that doesn't do as well as the injectable. So really, it's been calculated, took a step back, and said, why do we want to change that to his appetite now? and essentially create a completely different study with different outcomes potentially. So we're trying to be safe as we move towards it. Now, with that said, it's, you know, semaglutide is the active ingredient in both the injectable and the oral, and so that could be easily bridged. And what you're trying to bridge is not the efficacy, because we're going to be testing the efficacy in the Phase III. What you want to bridge is into all the safety, and you should be able to do that.

Got it. Thank you. And just one follow-up is on the, with regards to the function aspect, functional aspect of the FDA allowing that as a potential approval pathway, preservation of function, Did you guys specifically discuss with the agency about stair climb test and the specific questionnaires that you're looking to employ to determine whether or not they consider those to be sufficient for that endpoint?

Yes. So, yes, we did speak to the agency specifically about stair climb. As you know, we've done five now with the quality studies, six studies, previously done with Inovasarmin, done by our company here at VIRU, with 1,000 patients using SteriCLIMB. So we have, you know, 20 years' experience with SteriCLIMB. And it's not just talking to the agency with this trial and other trials, but also, you know, every major scientific group. And SteriCLIMB still comes out as the best way to measure what's happening in this patient population. It's most sensitive to declines. and it's very sensitive to anabolic intervention. With that said, the main comments that the FDA brought up was in the conduct of the study, they wanted to make sure that we did duplicate stair climb runs. In other words, the patient goes up the stairs once, then it goes up a second, and then you average that. And they also wanted to make sure that in addition to loaded, that we did unloaded. What that means, is that when a patient goes up the stairs, the unloaded means they just go up just as they are. Loaded means that you add a backpack with some weight. And the concept there, which is kind of clever, is that we're trying to normalize weight. And the way you normalize weight is that you just add back the weight that they lost when they come back for that final visit. And you do that with the plates. And so this way, you're actually measuring and challenging the patient's muscles. And that's why it becomes such a sensitive. measure of intervention. And so we had those kinds of discussions with the FDA. What's open is, and what we're going to focus on in the plateau study, is also what happens with the patient-reported outcomes and how the patient-reported outcomes helps to further define how a patient functions and feels. And so that's why the Phase II makes more sense than jumping to a Phase III, because that will help with the clinical meaningfulness of what we're actually measuring objectively.

Got it. Thank you very much.

And the next question comes from Rohan Mather with Oppenheimer. Please go ahead.

Hey, this is Rohan. I'm from Cleveland. Thanks for the question. I just wanted to ask on the interim analysis plans, are there any pre-specified decision rules with respect to futility or alterations of the sample size? That are part of the criteria there. Thank you.

So I have Dr. Gary Barnett, our chief scientific officer.

Gary? Yeah, no, there's no futility analysis or sample size re-estimation associated with this interim analysis.

And as you know, the primary endpoint is weight loss. And so the interim analysis is looking at lean mass and fat mass. And so the real purpose of it is to gain confirmation that we're heading in the right direction, meaning that you're seeing the lean mass preservation and the additional fat mass loss at 34 weeks. That should translate to 68 weeks of weight loss benefit. And so from a statistical standpoint, by not looking at total weight loss, plus it's too early anyway, at 34 weeks, you're not taking a statistical penalty or an alpha hit at the interim, which will affect the amount of alpha spend you have at the end of the study.

Got it. And just one more from me. If you go down the route of assessing functional benefit and in the case that maybe less than 5% of weight loss is observed, is there any sense for what degree of weight loss needs to be seen? And is that counterbalanced by Does that get to the functional benefit?

Yeah, so as I said in my public statements, that question has come up before. So greater than 5% alone is weight loss, incremental weight loss you're in. If it's less than 5% and the weight loss could be similar to the GLP-1 receptor agonist alone, meaning that you didn't see an incremental weight loss difference at all. But, but, but you showed a physical function benefit. then that can be a basis for approval going forward.

Understood. Thank you.

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.

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

The digital replay of the conference call will be available beginning approximately 12 p.m. Eastern Time today, February 11th, by dialing 1-855-669-9658 in the U.S. and 1-412-317-0088 internationally. You will be prompted to enter the replay access code, which will be 7410. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.