UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Commission file number 1-13602 Veru Inc. (Name of registrant as specified in its charter) | Wisconsin 39-1144397 | | | --- | --- | | (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) | | | 2916 N. Miami Avenue, Suite 1000, Miami, Florida 33127 | | | (Address of principal executive offices) (Zip Code) | | | Registrant's telephone number, including area code (305) 509-6897 | | | ...

Financial Data and Key Metrics Changes - For Q3 2023, net revenues were $3.3 million, down from $9.6 million in the prior year [63] - Prescription business net revenues decreased from $6.7 million to $863,000 due to the Chapter 11 bankruptcy of the pill club [63] - Gross profit was $1.2 million or 37% of net revenues, compared to $7.1 million or 74% in the prior year [64] - Operating income for the quarter was $4.9 million, a significant improvement from an operating loss of $21.8 million in the prior year [68] - Net income for Q3 2023 was $6.3 million or $0.07 per diluted share, compared to a net loss of $22.2 million or $0.28 per diluted share in the prior year [70] Business Line Data and Key Metrics Changes - The FC2 female condom business generated over $213 million in net revenue since 2017, with a 115% increase in new prescriptions during Q3 2023 [52][57] - Global public sector net revenues were $2.5 million, down from $2.9 million in the prior year [64] - The U.S. prescription business net revenues were $5.2 million, down from $29.9 million in the prior year [71] Market Data and Key Metrics Changes - The company is experiencing a significant market opportunity in the contraceptive market, with a potential market opportunity for FC2 exceeding $400 million [55] - The company has seen a 115% increase in volume in the U.S. public sector for Q3 2023 compared to Q3 2022 [58] Company Strategy and Development Direction - The company is focused on obtaining regulatory clarity for two major Phase 3 clinical trials for Enobosarm and Sabizabulin [90] - Plans to expand the evaluation of Sabizabulin beyond COVID-19 to include all types of viral-induced lung infections [92] - The company aims to leverage partnerships for Enobosarm and Sabizabulin as a source of non-dilutive capital [96] Management's Comments on Operating Environment and Future Outlook - The company has successfully reduced expenses following the FDA's declination of the EUA for Sabizabulin, with a cash burn of $7.3 million in Q3 2023 [94] - The current cash position is $16 million, with expectations of $14 million in gross promissory notes receivable [94] - The company is actively seeking partnerships to enhance financial flexibility and shareholder value [95] Other Important Information - The company sold its Entadfi product for $20 million, recording a pre-tax gain of $17.5 million [68] - The company is pursuing smallpox and Ebola virus treatments, with a scheduled pre-IND meeting with the FDA [50] Q&A Session Summary Question: How much flexibility does the company have on OpEx to potentially extend the runway beyond the guidance for 12 months? - The company is exploring options to manage cash burn and may slow down drug development or focus on one program at a time to match spending with available resources [88] Question: Can the company comment on the status of the dual test mono trial and if data will be available? - The company is focused on obtaining regulatory clarity for the Phase 3 clinical trials and will provide updates as they progress [90]

[FORM 10-Q](index=1&type=section&id=FORM%2010-Q) [Registrant Information](index=1&type=section&id=Registrant%20Information) This report is a quarterly filing by VERU INC. for the period ended June 30, 2023, registered in Wisconsin and listed on Nasdaq Capital Market - The company has filed all required reports and has been subject to such reporting requirements for the past 90 days[3](index=3&type=chunk) - The company is classified as a non-accelerated filer and a smaller reporting company[4](index=4&type=chunk) Common Stock Outstanding | Date | Common Stock Outstanding (Shares) | | :--------- | :-------------------------------- | | August 8, 2023 | 90,280,439 | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) [FORWARD LOOKING STATEMENTS](index=3&type=section&id=FORWARD%20LOOKING%20STATEMENTS) [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) This report contains forward-looking statements on financial condition, product development, and business outlook, subject to various risks and uncertainties - Forward-looking statements cover the company's financial condition, product development (including **sabizabulin** and **enobosarm**), **FC2** business growth, future financial performance, and clinical trial timing and results[10](index=10&type=chunk) - These statements are based on the company's current plans and strategies, reflecting its assessment of business risks and uncertainties[10](index=10&type=chunk) [Risk Factors for Forward-Looking Statements](index=3&type=section&id=Risk%20Factors%20for%20Forward-Looking%20Statements) Forward-looking statements face multiple risks, including clinical trial delays, regulatory uncertainties, financing difficulties, and market competition - Clinical trials and research may experience delays, and results may not support market approval or commercialization[11](index=11&type=chunk) - The company may not obtain sufficient financing in a timely manner to support product development and operations[11](index=11&type=chunk) - **FC2** sales have significantly declined recently and may not recover to past levels, especially after telehealth industry consolidation and a major customer's bankruptcy[13](index=13&type=chunk) - The company relies on a single supplier for key **FC2** raw materials, and the supplier's planned closure of production facilities may lead to supply disruptions and additional costs[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements as of June 30, 2023, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with related notes [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets, cash, liabilities, and stockholders' equity significantly decreased compared to September 30, 2022 Balance Sheet Key Data | Metric | June 30, 2023 (USD) | September 30, 2022 (USD) | | :------------------- | :------------------ | :----------------------- | | Cash and cash equivalents | 16,213,136 | 80,190,675 | | Total current assets | 43,221,164 | 104,769,474 | | Total assets | 75,195,414 | 136,126,017 | | Total current liabilities | 27,686,180 | 41,437,629 | | Total liabilities | 40,808,163 | 55,287,381 | | Total stockholders' equity | 34,387,251 | 80,838,636 | [Unaudited Condensed Consolidated Statements of Operations](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2023, the company reported net revenue of $3.34 million and net income of $6.31 million, with basic and diluted earnings per share of $0.07, while the nine-month period saw an expanded net loss Operations Statement Key Data (Three Months) | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | | :--------------- | :------------------ | :------------------ | | Net revenue | 3,341,185 | 9,602,195 | | Cost of sales | 2,110,567 | 2,533,572 | | Gross profit | 1,230,618 | 7,068,623 | | Research and development expenses | 2,925,171 | 18,133,412 | | Selling, general and administrative expenses | 10,902,916 | 10,761,486 | | Gain on disposal of ENTADFI assets | 17,456,814 | — | | Operating income (loss) | 4,859,345 | (21,823,775) | | Net income (loss) | 6,314,204 | (22,195,576) | | Basic earnings (loss) per share | 0.07 | (0.28) | Operations Statement Key Data (Nine Months) | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | | :--------------- | :------------------ | :------------------ | | Net revenue | 12,434,946 | 36,765,721 | | Cost of sales | 6,410,198 | 6,679,738 | | Gross profit | 6,024,748 | 30,085,983 | | Research and development expenses | 44,534,153 | 43,755,677 | | Selling, general and administrative expenses | 41,283,275 | 24,887,830 | | Gain on disposal of ENTADFI assets | 17,456,814 | — | | Operating income (loss) | (70,147,580) | (38,551,024) | | Net income (loss) | (69,320,881) | (42,753,412) | | Basic earnings (loss) per share | (0.83) | (0.53) | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) As of June 30, 2023, total stockholders' equity significantly decreased to $34.39 million from $80.84 million as of September 30, 2022, primarily due to an increased accumulated deficit Summary of Stockholders' Equity Changes | Metric | June 30, 2023 (USD) | September 30, 2022 (USD) | | :------------------- | :------------------ | :----------------------- | | Common stock shares | 91,420,436 | 82,692,598 | | Common stock amount | 914,204 | 826,926 | | Additional paid-in capital | 276,756,250 | 253,974,032 | | Accumulated other comprehensive loss | (581,519) | (581,519) | | Accumulated deficit | (234,895,079) | (165,574,198) | | Treasury stock | (7,806,605) | (7,806,605) | | Total stockholders' equity | 34,387,251 | 80,838,636 | - During the nine months ended 2023, the company increased additional paid-in capital through share-based compensation, stock issuance, and private equity investment, but net losses significantly increased the accumulated deficit[20](index=20&type=chunk)[22](index=22&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2023, operating activities resulted in a net cash outflow of $78.52 million, investing activities provided $5.55 million, and financing activities provided $9.00 million, leading to a net decrease in cash of $63.98 million Cash Flow Statement Key Data (Nine Months) | Cash Flow Type | June 30, 2023 (USD) | June 30, 2022 (USD) | | :----------------- | :------------------ | :------------------ | | Net cash outflow from operating activities | (78,521,354) | (26,626,506) | | Net cash inflow from investing activities | 5,547,174 | 4,415,755 | | Net cash inflow from financing activities | 8,996,641 | 401,826 | | Net decrease in cash | (63,977,539) | (21,808,925) | | Cash and cash equivalents at period end | 16,213,136 | 100,550,610 | - Operating cash outflow significantly increased, primarily due to net loss, share-based compensation, impairment of intangible assets, and credit loss provisions, partially offset by the gain on sale of **ENTADFI** assets[24](index=24&type=chunk) - Investing cash inflow primarily resulted from **$6 million** in cash proceeds from the sale of **ENTADFI** assets[24](index=24&type=chunk) - Financing cash inflow mainly came from a **$5 million** private equity investment and **$3.4 million** from common stock sales under a purchase agreement[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed information on the company's accounting policies, estimates, liquidity, fair value measurements, revenue recognition, and significant events [Note 1 – Basis of Presentation](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) This note explains the basis of presentation for the unaudited condensed consolidated financial statements, highlighting the company's focus on oncology and viral ARDS drug development, **FC2** commercialization, and the recent sale of **ENTADFI** assets - The company's primary businesses include developing **enobosarm** for breast cancer and **sabizabulin** for viral ARDS, as well as selling the **FC2** female condom[28](index=28&type=chunk) - The company sold substantially all **ENTADFI®** (benign prostatic hyperplasia treatment) assets on April 19, 2023[28](index=28&type=chunk) - **FC2** sales were the primary source of the company's net revenue for the three and nine months ended June 30, 2023 and 2022[28](index=28&type=chunk) [Note 2 – Liquidity](index=12&type=section&id=Note%202%20%E2%80%93%20Liquidity) The company anticipates continued cash consumption and losses during drug development and commercialization, but expects current cash, **FC2** sales, **ENTADFI** proceeds, and financing capabilities to support operations for the next 12 months - The company expects to continue consuming cash and incurring losses as it develops and commercializes drug candidates[32](index=32&type=chunk) - The company believes its existing cash, **FC2** sales revenue, **ENTADFI** sale proceeds, and financing capabilities are sufficient to support operations for the next 12 months[33](index=33&type=chunk) - The company may seek additional capital through debt financing, common stock offerings, or equity-linked securities[33](index=33&type=chunk) [Note 3 – Fair Value Measurements](index=12&type=section&id=Note%203%20%E2%80%93%20Fair%20Value%20Measurements) The company classifies embedded derivatives related to a change of control clause in a residual royalty agreement as Level 3 fair value measurements, with the balance decreasing to $1.98 million as of June 30, 2023 - The company classifies embedded derivatives (related to the change of control clause in the residual royalty agreement) as Level 3 fair value measurements[36](index=36&type=chunk)[38](index=38&type=chunk) Embedded Derivative Fair Value Changes | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | | :------------------- | :------------------ | :------------------ | | Beginning balance | 4,294,000 | 7,851,000 | | Change in fair value of derivative | (2,319,000) | 557,000 | | Ending balance | 1,975,000 | 8,408,000 | - Fair value estimates use a scenario analysis approach, considering assumptions such as **FC2** revenue forecasts, cash outflows, probability and estimated date of change of control, risk-free rates, and credit risk[38](index=38&type=chunk) [Note 4 – Revenue from Contracts with Customers](index=13&type=section&id=Note%204%20%E2%80%93%20Revenue%20from%20Contracts%20with%20Customers) The company's revenue primarily derives from direct sales of **FC2** products, with significant declines in US prescription channel revenue for both three and nine-month periods ended June 30, 2023 - The company's revenue primarily comes from **FC2** sales in the US prescription channel and global public health sector, as well as past **ENTADFI** sales[42](index=42&type=chunk) Net Revenue by Product and Channel (Three Months) | Category | June 30, 2023 (USD) | June 30, 2022 (USD) | | :------------------- | :------------------ | :------------------ | | FC2 US prescription channel | 863,379 | 6,736,158 | | FC2 global public health sector | 2,478,031 | 2,866,037 | | Total FC2 | 3,341,410 | 9,602,195 | | ENTADFI | (225) | — | | Total net revenue | 3,341,185 | 9,602,195 | Net Revenue by Product and Channel (Nine Months) | Category | June 30, 2023 (USD) | June 30, 2022 (USD) | | :------------------- | :------------------ | :------------------ | | FC2 US prescription channel | 5,172,543 | 29,900,890 | | FC2 global public health sector | 7,249,315 | 6,864,831 | | Total FC2 | 12,421,858 | 36,765,721 | | ENTADFI | 13,088 | — | | Total net revenue | 12,434,946 | 36,765,721 | [Note 5 – Accounts Receivable and Concentration of Credit Risk](index=14&type=section&id=Note%205%20%E2%80%93%20Accounts%20Receivable%20and%20Concentration%20of%20Credit%20Risk) As of June 30, 2023, net accounts receivable totaled $5.08 million, with a significant concentration of credit risk due to The Pill Club's bankruptcy, leading to a $3.9 million credit loss provision Accounts Receivable Composition | Metric | June 30, 2023 (USD) | September 30, 2022 (USD) | | :----------------------- | :------------------ | :----------------------- | | Trade accounts receivable, gross | 9,028,298 | 4,289,892 | | Less: Allowance for credit losses | (3,923,857) | (12,143) | | Less: Allowance for sales returns and payment discounts | (21,563) | (12,854) | | Less: Long-term trade accounts receivable | — | (714,000) | | Accounts receivable, net | 5,082,878 | 3,550,895 | - The company recorded a **$3.9 million** credit loss provision for accounts receivable from The Pill Club in the quarter ended March 31, 2023, due to its uncertain financial condition and subsequent bankruptcy filing on April 18, 2023[50](index=50&type=chunk) - As of June 30, 2023, the combined accounts receivable balances from two customers accounted for **58%** of net accounts receivable[46](index=46&type=chunk) [Note 6 – Balance Sheet Information](index=15&type=section&id=Note%206%20%E2%80%93%20Balance%20Sheet%20Information) This note details inventory and property, plant, and equipment, with net inventory decreasing to $6.49 million and net property, plant, and equipment increasing to $1.49 million as of June 30, 2023 Inventory Composition | Category | June 30, 2023 (USD) | September 30, 2022 (USD) | | :----------- | :------------------ | :----------------------- | | Raw materials | 1,245,019 | 1,662,712 | | Work-in-process | 75,848 | 872,596 | | Finished goods | 5,376,970 | 6,099,343 | | Total inventory | 6,697,837 | 8,634,651 | | Less: Inventory reserve | (207,869) | (15,707) | | Net inventory | 6,489,968 | 8,618,944 | Net Property, Plant, and Equipment | Category | June 30, 2023 (USD) | September 30, 2022 (USD) | | :--------------- | :------------------ | :----------------------- | | Property and equipment, net | 1,492,183 | 1,185,766 | - The September 30, 2022, inventory balance included **$1.1 million** of **ENTADFI** inventory, which was sold with the **ENTADFI** assets[53](index=53&type=chunk) [Note 7 – Intangible Assets and Goodwill](index=16&type=section&id=Note%207%20%E2%80%93%20Intangible%20Assets%20and%20Goodwill) As of June 30, 2023, net intangible assets were $23,810, primarily non-compete clauses, following a **$3.9 million** impairment charge in Q2 FY2023 due to strategic shifts, while goodwill remained unchanged at **$6.9 million** Net Book Value of Intangible Assets | Category | June 30, 2023 (USD) | September 30, 2022 (USD) | | :------------------- | :------------------ | :----------------------- | | Non-compete clauses | 23,810 | 77,381 | | Acquired in-process research and development | — | 3,900,000 | | Total intangible assets | 23,810 | 3,977,381 | - The company recorded a **$3.9 million** intangible asset impairment charge in the second quarter of fiscal year 2023 due to discontinuing the development of **sabizabulin** for prostate cancer and **zuclomiphene**[60](index=60&type=chunk) - Goodwill remained unchanged at **$6.9 million** during the reporting period and is allocated to the research and development reporting unit[61](index=61&type=chunk) [Note 8 – Debt](index=17&type=section&id=Note%208%20%E2%80%93%20Debt) The residual royalty agreement with SWK Funding LLC requires a 5% royalty on **FC2** net sales, with total liability at $10.34 million as of June 30, 2023, and the company also entered a $1.4 million premium financing agreement for D&O insurance - The residual royalty agreement requires the company to pay a **5%** royalty on **FC2** product net sales, terminating upon a change of control or sale of the **FC2** business[63](index=63&type=chunk) Residual Royalty Agreement Liability | Metric | June 30, 2023 (USD) | September 30, 2022 (USD) | | :------------------------- | :------------------ | :----------------------- | | Total residual royalty agreement liability | 10,338,628 | 10,825,536 | | Residual royalty agreement liability, current portion | (1,061,893) | (1,169,095) | | Residual royalty agreement liability, long-term portion | 9,276,735 | 9,656,441 | - The company entered into a premium financing agreement on November 1, 2022, to finance **$1.4 million** of directors and officers liability insurance premiums at an annual interest rate of **6.3%**[68](index=68&type=chunk) [Note 9 – Stockholders' Equity](index=18&type=section&id=Note%209%20%E2%80%93%20Stockholders'%20Equity) The company has authorized but unissued preferred stock, and has engaged in various equity financing activities, including a $200 million shelf registration, a private placement, and common stock purchase agreements with Lincoln Park Capital Fund and Jefferies LLC - The company has authorized **5 million** shares of Class A preferred stock and **15,000** shares of Class B preferred stock, none of which were issued as of June 30, 2023[69](index=69&type=chunk) - The company's **$200 million** S-3 shelf registration statement, effective April 14, 2023, had **$23 million** remaining available as of June 30, 2023[70](index=70&type=chunk) - The 2020 common stock purchase agreement with Aspire Capital expired on June 26, 2023, during which the company sold **4,424,450** shares of common stock for **$8.4 million** in proceeds[73](index=73&type=chunk) - The company sold **5 million** shares of common stock to Frost Gamma Investments Trust for **$5 million** through a private equity investment on April 12, 2023[75](index=75&type=chunk) - On May 2, 2023, the company entered into a common stock purchase agreement with Lincoln Park Capital Fund to sell up to **$100 million** of common stock over 36 months, issuing **800,000** shares as an initial fee[76](index=76&type=chunk)[81](index=81&type=chunk) - The company entered into an at-the-market sales agreement with Jefferies LLC on May 12, 2023, to sell up to **$75 million** of common stock[83](index=83&type=chunk) [Note 10 – Share-based Compensation](index=21&type=section&id=Note%2010%20%E2%80%93%20Share-based%20Compensation) Share-based compensation expenses significantly increased for both the three and nine months ended June 30, 2023, totaling $4.55 million and $13.23 million respectively, allocated across cost of sales, SG&A, and R&D Share-based Compensation Expense | Category | Three Months Ended June 30, 2023 (USD) | Three Months Ended June 30, 2022 (USD) | Nine Months Ended June 30, 2023 (USD) | Nine Months Ended June 30, 2022 (USD) | | :------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Cost of sales | 112,515 | 25,275 | 263,879 | 70,923 | | Selling, general and administrative expenses | 3,667,599 | 2,052,755 | 10,183,510 | 5,036,356 | | Research and development expenses | 770,718 | 832,946 | 2,786,310 | 1,809,066 | | Total share-based compensation | 4,550,832 | 2,910,976 | 13,233,699 | 6,916,345 | - As of June 30, 2023, the company had **17,964,858** unexercised stock options with a weighted-average exercise price of **$5.19**[92](index=92&type=chunk) - Unrecognized compensation expense related to unvested stock options was approximately **$34.8 million** as of June 30, 2023, expected to be recognized over a weighted-average period of **2.1 years**[94](index=94&type=chunk) [Note 11 – Leases](index=23&type=section&id=Note%2011%20%E2%80%93%20Leases) The company holds operating leases for office, manufacturing, and storage spaces, with a weighted-average remaining lease term of 6.1 years and a discount rate of 7.7% as of June 30, 2023 Lease Costs (Nine Months) | Category | June 30, 2023 (USD) | June 30, 2022 (USD) | | :--------------- | :------------------ | :------------------ | | Operating lease costs | 838,112 | 598,965 | | Short-term lease costs | 32,003 | 36,817 | | Variable lease costs | 136,569 | 162,287 | | Sublease income | (134,533) | (134,533) | | Total lease costs | 872,151 | 667,570 | Operating Lease Information | Metric | June 30, 2023 | September 30, 2022 | | :------------------- | :------------ | :----------------- | | Weighted-average remaining lease term (years) | 6.1 | 6.8 | | Weighted-average discount rate | 7.7% | 7.6% | - The company's decision not to cancel its London office lease option resulted in a **$265,000** adjustment to lease liabilities and right-of-use assets[98](index=98&type=chunk) [Note 12 – Contingent Liabilities](index=24&type=section&id=Note%2012%20%E2%80%93%20Contingent%20Liabilities) The company faces inherent product liability risks, maintaining $10 million in insurance, and is involved in two lawsuits related to **sabizabulin** COVID-19 treatment claims, which it intends to vigorously defend - The company faces product liability claims risk and holds **$10 million** in product liability insurance[102](index=102&type=chunk) - The company is a defendant in two lawsuits, including a class action regarding **sabizabulin** COVID-19 treatment and a shareholder derivative suit, both alleging claims against company officers and directors[103](index=103&type=chunk)[104](index=104&type=chunk) - The company has a clinical trial collaboration and supply agreement with Eli Lilly and Company for a combination study of **enobosarm** and **abemaciclib**, with Eli Lilly providing the compound free of charge[106](index=106&type=chunk) [Note 13 – Income Taxes](index=25&type=section&id=Note%2013%20%E2%80%93%20Income%20Taxes) The company uses the liability method for income tax accounting, recognizing deferred tax assets and liabilities, and while the 2017 Tax Cuts and Jobs Act increased deferred tax assets by $8.7 million, a full valuation allowance resulted in no net impact on US income tax expense - The company uses the liability method for income tax accounting, recognizing deferred tax assets and liabilities[109](index=109&type=chunk) - As of September 30, 2022, the company had **$112.7 million** in US federal NOL carryforwards, **$51.3 million** in state NOL carryforwards, and **$5.9 million** in US federal R&D tax credits[110](index=110&type=chunk) - The 2017 Tax Cuts and Jobs Act, requiring capitalization and amortization of R&D expenditures, increased deferred tax assets by approximately **$8.7 million** as of June 30, 2023, but with a full valuation allowance against US deferred tax assets, there was no net impact on US income tax expense[111](index=111&type=chunk) Reconciliation of Income Tax Expense (Benefit) to Statutory Rate (Nine Months) | Item | June 30, 2023 (USD) | June 30, 2022 (USD) | | :----------------------- | :------------------ | :------------------ | | Income tax expense (benefit) at U.S. federal statutory rate | (14,573,616) | (8,931,007) | | State income tax expense (benefit), net of federal benefit | (1,128,414) | (691,515) | | Change in valuation allowance | 14,705,293 | 13,637,539 | | Total income tax expense (benefit) | (77,286) | 224,808 | [Note 14 – Net Income (Loss) Per Share](index=26&type=section&id=Note%2014%20%E2%80%93%20Net%20Income%20(Loss)%20Per%20Share) For the three months ended June 30, 2023, basic and diluted net earnings per share were $0.07, while all potentially dilutive instruments were excluded from diluted EPS calculations for periods with net losses due to their anti-dilutive effect Net Income (Loss) Per Share Reconciliation (Three Months) | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | | :----------------------- | :------------------ | :------------------ | | Net income (loss) | 6,314,204 | (22,195,576) | | Basic weighted-average common shares | 88,266,152 | 80,088,431 | | Basic earnings (loss) per share | 0.07 | (0.28) | | Diluted weighted-average common shares | 88,301,516 | 80,088,431 | | Diluted earnings (loss) per share | 0.07 | (0.28) | Net Income (Loss) Per Share Reconciliation (Nine Months) | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | | :----------------------- | :------------------ | :------------------ | | Net income (loss) | (69,320,881) | (42,753,412) | | Basic weighted-average common shares | 83,218,748 | 80,054,594 | | Basic earnings (loss) per share | (0.83) | (0.53) | | Diluted weighted-average common shares | 83,218,748 | 80,054,594 | | Diluted earnings (loss) per share | (0.83) | (0.53) | - All potentially dilutive instruments were excluded from diluted earnings per share calculations for the three months ended June 30, 2022, and the nine months ended June 30, 2023 and 2022, due to their anti-dilutive effect resulting from net losses[115](index=115&type=chunk) [Note 15 – Sale of ENTADFI Assets](index=27&type=section&id=Note%2015%20%E2%80%93%20Sale%20of%20ENTADFI%20Assets) On April 19, 2023, the company sold substantially all **ENTADFI®** assets to Blue Water Vaccines Inc. for $20 million, including cash, an interest-free note, and up to $80 million in milestone payments, recognizing a gain of approximately $17.5 million - The company sold substantially all **ENTADFI®** assets to Blue Water Vaccines Inc. (BWV) on April 19, 2023[116](index=116&type=chunk) - The transaction price was **$20 million**, comprising **$6 million** in cash, a **$14 million** interest-free note (with **$8.5 million** short-term and **$4.4 million** long-term portions), and up to **$80 million** in milestone payments[116](index=116&type=chunk) - The company recognized a gain of approximately **$17.5 million** from this transaction[116](index=116&type=chunk) [Note 16 – Subsequent Events](index=27&type=section&id=Note%2016%20%E2%80%93%20Subsequent%20Events) On July 24, 2023, company shareholders approved an increase in authorized common stock from 154,000,000 to 308,000,000 shares - On July 24, 2023, company shareholders approved increasing the authorized number of common stock shares from **154,000,000** to **308,000,000**[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results for the period ended June 30, 2023, highlighting progress in oncology, infectious disease, and sexual health programs, alongside challenges in **FC2** sales, high R&D, and financing needs [Overview](index=28&type=section&id=Overview) Veru is a late-clinical stage biopharmaceutical company focused on developing novel drugs for advanced breast cancer and viral ARDS, commercializing the **FC2** female condom, and recently selling **ENTADFI** assets - The company focuses on developing **enobosarm** (for advanced breast cancer) and **sabizabulin** (for viral ARDS) as drug candidates[119](index=119&type=chunk) - The Phase III **ENABLAR-2** clinical study for **enobosarm** has been redesigned per FDA recommendations to optimize dosage and evaluate monotherapy efficacy, with Phase I clinical results expected in late 2024 or early 2025[122](index=122&type=chunk)[125](index=125&type=chunk) - **Sabizabulin** showed mortality benefits in Phase II and III COVID-19 clinical studies, and the company plans to meet with the FDA to expand the Phase III confirmatory COVID-19 study into a Phase III study for all types of viral ARDS[127](index=127&type=chunk)[137](index=137&type=chunk) - The **FC2** business faces challenges from telehealth industry consolidation and the bankruptcy of a major customer (The Pill Club), with the company seeking growth through its own telehealth platform and public health sector partnerships[144](index=144&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) - The company sold **ENTADFI** assets on April 19, 2023, for **$20 million**, with potential for up to **$80 million** in milestone payments[149](index=149&type=chunk) [Oncology Program](index=28&type=section&id=Oncology%20Program) The oncology program focuses on **enobosarm**, an oral selective androgen receptor agonist for metastatic breast cancer, currently in a Phase III **ENABLAR-2** study with initial positive results and expected Phase I clinical results in late 2024 or early 2025 - **Enobosarm** is a novel endocrine therapy for AR+ ER+ HER2- metastatic breast cancer, evaluated in approximately **1,450** subjects across **25** clinical studies[120](index=120&type=chunk) - The Phase III **ENABLAR-2** study has been redesigned into two stages based on FDA recommendations, with the first stage aiming to optimize **enobosarm** dosage in combination with **abemaciclib** and evaluate **enobosarm** monotherapy efficacy[122](index=122&type=chunk) - Preliminary clinical results from the first stage show **2** partial responses and **1** stable disease among the first **3** patients, all of whom have been studied for over **9 months**[123](index=123&type=chunk) - The company plans to obtain Phase III Stage 1 clinical results in late 2024 or early 2025 and may seek accelerated approval based on this data[125](index=125&type=chunk) [Infectious Disease Program](index=29&type=section&id=Infectious%20Disease%20Program) The company is developing **sabizabulin 9mg** for viral ARDS, demonstrating host-targeted antiviral and broad anti-inflammatory properties, with plans to expand its Phase III confirmatory study to treat all types of viral ARDS - **Sabizabulin 9mg** possesses host-targeted antiviral and broad anti-inflammatory properties, showing promise for treating viral ARDS[127](index=127&type=chunk) - In Phase III clinical studies for COVID-19, **sabizabulin** demonstrated a **55.2%** relative reduction in mortality compared to placebo[128](index=128&type=chunk) - The FDA denied Emergency Use Authorization for **sabizabulin** in COVID-19, but an agreement has been reached on the Phase III confirmatory study design, which will evaluate **sabizabulin's** efficacy and safety in hospitalized moderate-to-severe COVID-19 patients[131](index=131&type=chunk)[132](index=132&type=chunk) - The company plans to meet with the FDA to expand **sabizabulin's** Phase III confirmatory study to treat hospitalized patients with all types of viral ARDS[137](index=137&type=chunk) - **Sabizabulin** demonstrated potent anti-inflammatory activity in an H1N1 influenza-induced ARDS mouse model and potential efficacy against poxviruses (e.g., smallpox virus)[133](index=133&type=chunk)[140](index=140&type=chunk) [Sexual Health Program](index=32&type=section&id=Sexual%20Health%20Program) The sexual health program centers on the **FC2** female condom, the only FDA-approved female-initiated, hormone-free contraceptive, with the company focusing on its own telehealth platform and public health partnerships to drive sales amidst industry challenges - **FC2** is the only FDA-approved female-initiated, hormone-free condom for preventing unintended pregnancy and sexually transmitted infections[143](index=143&type=chunk) - The company has launched its own **FC2**-dedicated telehealth and pharmacy services platform to address challenges from telehealth industry consolidation and the bankruptcy of a major customer[145](index=145&type=chunk) - The company anticipates strong growth in its **FC2** US prescription business and continued large orders in the global public health sector through partnerships with US public health departments[147](index=147&type=chunk) - The company is fulfilling a large multi-year South African female condom tender contract and expects Brazil to initiate a formal tender process[148](index=148&type=chunk) [Sale of ENTADFI](index=32&type=section&id=Sale%20of%20ENTADFI) On April 19, 2023, the company sold substantially all **ENTADFI®** assets to Blue Water Vaccines Inc. for $20 million, including cash, an interest-free note, and up to $80 million in milestone payments - The company sold substantially all **ENTADFI®** assets to Blue Water Vaccines Inc. (BWV) on April 19, 2023[149](index=149&type=chunk) - The transaction price was **$20 million**, comprising **$6 million** in cash, a **$14 million** interest-free note, and up to **$80 million** in milestone payments[149](index=149&type=chunk) [Consolidated Operations](index=32&type=section&id=Consolidated%20Operations) The company's revenue primarily stems from **FC2** sales, with US prescription channel revenue significantly declining due to customer challenges and bankruptcy, while operating expenses remain high due to R&D and commercialization efforts [Revenues](index=32&type=section&id=Revenues) Company revenue primarily comes from **FC2** sales in the US prescription channel and global public health sector, with US prescription channel revenue significantly declining due to major telehealth customer challenges and bankruptcy, while global public health sales fluctuate and face pricing pressure - The company has shifted its **FC2** business focus to developing its prescription business through internal telehealth solutions to offset lost revenue from major telehealth providers[152](index=152&type=chunk) - The Pill Club, formerly the company's largest telehealth customer, filed for bankruptcy in April 2023, eliminating future revenue from this client[153](index=153&type=chunk)[157](index=157&type=chunk) - The company has recorded a **$3.9 million** credit loss provision for accounts receivable from The Pill Club, with recovery uncertain[156](index=156&type=chunk) - The company's primary **FC2** raw material relies on a single supplier, which plans to close relevant production facilities, potentially leading to supply disruptions and additional costs as the company seeks alternative materials[160](index=160&type=chunk) [Operating Expenses](index=34&type=section&id=Operating%20Expenses) The company's cost of sales for **FC2** includes direct materials, labor, and overhead, with recent increases in raw material and shipping costs, while R&D expenses remain high for drug development and SG&A is expected to rise due to user acquisition costs - **FC2** cost of sales primarily includes direct materials (mainly nitrile polymer), direct labor, and indirect manufacturing and distribution costs[161](index=161&type=chunk) - Nitrile polymer costs and shipping costs have recently increased, and user acquisition costs for the company's own telehealth solutions are also expected to rise[162](index=162&type=chunk) Research and Development Expenses | Period | Three Months Ended June 30, 2023 (USD) | Three Months Ended June 30, 2022 (USD) | Nine Months Ended June 30, 2023 (USD) | Nine Months Ended June 30, 2022 (USD) | | :------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------ | :------------------------------------ | | Research and development expenses | 2,925,171 | 18,133,412 | 44,534,153 | 43,755,677 | - The company expects to continue investing significant resources in the research and development of drug candidates such as **enobosarm** and **sabizabulin**[163](index=163&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section compares operating results for the three and nine months ended June 30, 2023, to the prior year, showing a 65% revenue decline but net income for the three-month period due to **ENTADFI** asset sale, while the nine-month period saw an expanded net loss [THREE MONTHS ENDED JUNE 30, 2023 COMPARED TO THREE MONTHS ENDED JUNE 30, 2022](index=35&type=section&id=THREE%20MONTHS%20ENDED%20JUNE%2030,%202023%20COMPARED%20TO%20THREE%20MONTHS%20ENDED%20JUNE%2030,%202022) For the three months ended June 30, 2023, net revenue decreased by 65% to $3.3 million, but the company achieved a net income of $6.3 million due to a $17.5 million gain from the **ENTADFI** asset sale, despite an 87% drop in **FC2** US prescription channel revenue Three-Month Operating Results Comparison | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | Change (%) | | :--------------- | :------------------ | :------------------ | :--------- | | Net revenue | 3,341,185 | 9,602,195 | -65% | | Net income (loss) | 6,314,204 | (22,195,576) | N/A | | Basic earnings (loss) per share | 0.07 | (0.28) | N/A | | Research and development expenses | 2,925,171 | 18,133,412 | -84% | | Gain on disposal of ENTADFI assets | 17,456,814 | — | N/A | - **FC2** US prescription channel net revenue decreased by **87%**, primarily due to the bankruptcy of The Pill Club, resulting in zero revenue from this customer[166](index=166&type=chunk)[167](index=167&type=chunk) - Gross profit margin decreased from **74%** to **37%**, mainly due to lower high-margin US prescription channel sales and increased unit costs from reduced production volume[170](index=170&type=chunk) - Research and development expenses significantly decreased due to the company's strategic shift to focus on the most promising drug candidates[171](index=171&type=chunk) [NINE MONTHS ENDED JUNE 30, 2023 COMPARED TO NINE MONTHS ENDED JUNE 30, 2022](index=36&type=section&id=NINE%20MONTHS%20ENDED%20JUNE%2030,%202023%20COMPARED%20TO%20NINE%20MONTHS%20ENDED%20JUNE%2030,%202022) For the nine months ended June 30, 2023, net revenue decreased by 66% to $12.4 million, and net loss expanded to $69.3 million, driven by a significant decline in **FC2** US prescription channel revenue, high R&D and SG&A expenses, and credit loss provisions Nine-Month Operating Results Comparison | Metric | June 30, 2023 (USD) | June 30, 2022 (USD) | Change (%) | | :--------------- | :------------------ | :------------------ | :--------- | | Net revenue | 12,434,946 | 36,765,721 | -66% | | Net income (loss) | (69,320,881) | (42,753,412) | N/A | | Basic earnings (loss) per share | (0.83) | (0.53) | N/A | | Selling, general and administrative expenses | 41,283,275 | 24,887,830 | +66% | | Provision for credit losses | 3,911,714 | (6,500) | N/A | | Impairment of intangible assets | 3,900,000 | — | N/A | - **FC2** US prescription channel net revenue significantly decreased, primarily due to telehealth customer business challenges and The Pill Club's bankruptcy, with revenue from The Pill Club dropping from **$17.4 million** to **$3.9 million**[179](index=179&type=chunk) - Global public health sector net revenue increased, driven by shipments for the 2022 South Africa tender project and growth in the US public sector[180](index=180&type=chunk) - Selling, general and administrative expenses increased, mainly due to **$12.9 million** in **sabizabulin** commercialization preparation costs and an increase in share-based compensation costs from **$5 million** to **$10.2 million**[184](index=184&type=chunk) [Liquidity and Sources of Capital](index=37&type=section&id=Liquidity%20and%20Sources%20of%20Capital) As of June 30, 2023, cash and cash equivalents significantly decreased to $16.2 million from $80.2 million, with operating activities using $78.5 million cash, while investing and financing activities provided $5.5 million and $9.0 million, respectively, as the company seeks additional capital through various equity agreements [Liquidity](index=37&type=section&id=Liquidity) As of June 30, 2023, cash and cash equivalents significantly decreased to $16.2 million from $80.2 million, with working capital and stockholders' equity also declining, though the company expects to meet future operating needs through existing cash, **FC2** sales, **ENTADFI** proceeds, and equity financing Liquidity Key Data | Metric | June 30, 2023 (USD) | September 30, 2022 (USD) | | :------------------- | :------------------ | :----------------------- | | Cash and cash equivalents | 16,213,136 | 80,190,675 | | Working capital | 15,534,984 | 63,331,845 | | Stockholders' equity | 34,387,251 | 80,838,636 | - The decrease in working capital and stockholders' equity is primarily due to reduced cash, linked to increased R&D and drug commercialization costs, partially offset by decreased accounts payable and accrued expenses[191](index=191&type=chunk) - The company expects to continue consuming cash and plans to meet its operating capital needs for the next 12 months through existing cash, **FC2** sales revenue, **ENTADFI** sale proceeds, and equity financing[193](index=193&type=chunk)[194](index=194&type=chunk) [Operating activities](index=38&type=section&id=Operating%20activities) For the nine months ended June 30, 2023, operating activities used $78.5 million in cash, primarily due to a $69.3 million net loss, non-cash adjustments for share-based compensation, intangible asset impairment, and credit loss provisions, partially offset by the **ENTADFI** asset sale gain - For the nine months ended June 30, 2023, operating activities used **$78.5 million** in cash[195](index=195&type=chunk) - Cash usage primarily included a **$69.3 million** net loss, along with **$13.2 million** in share-based compensation, **$3.9 million** in intangible asset impairment, and **$3.9 million** in credit loss provisions as non-cash adjustments[195](index=195&type=chunk) - A **$17.5 million** gain on the sale of **ENTADFI** assets and a **$2.3 million** change in the fair value of derivative liabilities partially offset the cash outflow[195](index=195&type=chunk) [Investing activities](index=38&type=section&id=Investing%20activities) For the nine months ended June 30, 2023, investing activities provided $5.5 million in cash, mainly from the $6 million cash proceeds from the **ENTADFI** asset sale, partially offset by capital expenditures - For the nine months ended June 30, 2023, investing activities provided **$5.5 million** in cash, primarily from **$6 million** in cash proceeds from the sale of **ENTADFI** assets[197](index=197&type=chunk) - In the prior year period, investing activities provided **$4.4 million** in cash, mainly from the **$5 million** sale of the **PREBOOST®** business[198](index=198&type=chunk) [Financing activities](index=38&type=section&id=Financing%20activities) For the nine months ended June 30, 2023, financing activities provided $9.0 million in cash, primarily from a $5 million private equity investment, $3.4 million from common stock sales under the Aspire Capital agreement, and $0.3 million from stock option exercises - For the nine months ended June 30, 2023, financing activities provided **$9.0 million** in cash[199](index=199&type=chunk) - Primary sources included a **$5 million** private equity investment, **$3.4 million** from common stock sales under the Aspire Capital purchase agreement, and **$0.3 million** from stock option exercises[199](index=199&type=chunk) - In the prior year period, financing activities provided **$0.4 million** in cash, mainly from stock option exercises[200](index=200&type=chunk) [Sources of Capital](index=39&type=section&id=Sources%20of%20Capital) The company secures capital through various means, including the SWK residual royalty agreement, a private equity investment, and common stock purchase agreements with Lincoln Park Capital Fund and Jefferies LLC - The SWK residual royalty agreement requires the company to pay a **5%** royalty on **FC2** product net sales, with approximately **$1.1 million** expected to be paid in the next 12 months[202](index=202&type=chunk)[203](index=203&type=chunk) - The common stock purchase agreement with Aspire Capital expired on June 26, 2023, during which the company sold **4,424,450** shares of common stock for **$8.4 million** in proceeds[205](index=205&type=chunk) - The company sold **5 million** shares of common stock to Frost Gamma Investments Trust through a private equity investment, generating **$5 million**[206](index=206&type=chunk) - The company entered into an agreement with Lincoln Park Capital Fund to sell up to **$100 million** of common stock over 36 months, having already issued **800,000** shares as an initial fee[208](index=208&type=chunk) - The company entered into an at-the-market sales agreement with Jefferies LLC to sell up to **$75 million** of common stock[209](index=209&type=chunk) [Fair Value Measurements](index=40&type=section&id=Fair%20Value%20Measurements) The company classifies embedded derivatives related to a change of control clause in a residual royalty agreement as Level 3 fair value measurements, with estimates based on unobservable inputs and subjective assumptions that could significantly impact operating results - The company classifies embedded derivatives (related to the change of control clause in the residual royalty agreement) as Level 3 fair value measurements[212](index=212&type=chunk) - Fair value estimates use a scenario analysis approach, considering assumptions such as **FC2** revenue forecasts, cash outflows, probability and estimated date of change of control, risk-free rates, and credit risk[213](index=213&type=chunk) - Any significant changes in these assumptions could lead to significantly higher or lower fair value measurements in future reporting periods, materially impacting operating results[213](index=213&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure has not significantly changed since its annual report on Form 10-K for the year ended September 30, 2022 - The company's market risk exposure was discussed in its annual report on Form 10-K for the year ended September 30, 2022[215](index=215&type=chunk) - There have been no significant changes in the company's market risk exposure since September 30, 2022[215](index=215&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) As of the end of this reporting period, the company's management, including the CEO and CFO, assessed the effectiveness of disclosure controls and procedures, concluding they are effective, with no significant changes to internal control over financial reporting this quarter - Company management assessed the effectiveness of disclosure controls and procedures, concluding they are effectively designed and operated[216](index=216&type=chunk) - There were no significant changes in the company's internal control over financial reporting during this quarter[217](index=217&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company's current material legal proceedings are disclosed in Note 12, "Contingent Liabilities," to the financial statements, which is incorporated by reference herein - The company's current material legal proceedings are disclosed in Note 12, "Contingent Liabilities," to the financial statements[219](index=219&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section supplements the risk factors disclosed in the company's annual report on Form 10-K, focusing on risks related to its refocused R&D strategy, financing, **sabizabulin** EUA, **FC2** sales, customer concentration, and supply chain - Failure to obtain additional capital may require the company to scale back development programs or share technology rights with third parties on unfavorable terms[221](index=221&type=chunk) - **Sabizabulin's** eligibility for FDA Emergency Use Authorization depends on the federal government continuing to issue EUAs for COVID-19 treatments; otherwise, New Drug Application (NDA) approval may be required for market entry[222](index=222&type=chunk) - **FC2** sales revenue has significantly declined recently and may not recover to past levels, especially after the bankruptcy of a major telehealth customer (The Pill Club)[223](index=223&type=chunk) - The company faces concentrated credit risk with **$3.9 million** in accounts receivable from The Pill Club, which may not be fully or partially recoverable due to its bankruptcy[225](index=225&type=chunk) - The company relies on a single supplier for key **FC2** raw materials, and the supplier's planned closure of production facilities may lead to supply disruptions and additional costs[226](index=226&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with this quarterly report, including asset purchase agreements, certificate of amendment to the articles of incorporation, stock purchase agreements, registration rights agreements, at-the-market sales agreements, and CEO and CFO certifications - Exhibits include asset purchase agreements, certificate of amendment to the articles of incorporation, stock purchase agreements, registration rights agreements, at-the-market sales agreements, and CEO and CFO certifications[228](index=228&type=chunk)[229](index=229&type=chunk) [SIGNATURES](index=49&type=section&id=SIGNATURES)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 305-509-6897 (Registrant's Telephone Number, Including Area Code) FORM 10-Q (Mark One) Commission File Number 1-13602 | | | (Exact Name of Registrant as Specified in its Charter) Wisconsin 39-1144397 2916 N. Miami Avenue, Suite 1000, Miami, FL 33127 (Address of Principal Executive Offices) (Zip Code) N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of ...

Financial Data and Key Metrics Changes - Overall net revenues for Q1 2023 were $2.5 million, a significant decrease from $14.1 million in the prior year quarter [47] - The operating loss for the quarter was $35.6 million, compared to $5 million in the prior year quarter, reflecting increased operating expenses and reduced revenues [52] - The net loss for the quarter was $36.8 million or $0.46 per diluted common share, compared to a net loss of $6.4 million or $0.08 per diluted common share in the prior year quarter [54] Business Line Data and Key Metrics Changes - Revenue from the US prescription business decreased to $163,000 from $11.6 million in the prior year period, attributed to challenges faced by telemedicine customers [47] - Net revenue for the global public health sector business was $2.3 million, slightly down from $2.6 million in the prior year period [48] - Gross profit was $700,000 or 28% of net revenues, down from $11.8 million or 84% of net revenues in the prior year period, primarily due to decreased sales in the US FC2 prescription business [48] Market Data and Key Metrics Changes - The company is seeing improvements in FC2 revenues in Q2 fiscal year 2023, indicating a potential recovery in sales [66] - The telemedicine sector and global public health orders had underperformed, but market conditions are improving [46] Company Strategy and Development Direction - The company is focused on developing sabizabulin for COVID-19 and other viral diseases, with plans to expand its investigation into other infectious disease indications [33][61] - The company has established a commercialization infrastructure for sabizabulin and is preparing for potential launches in the US and internationally [29][63] - There is a near-term strategy to drive FC2 sales through partnerships with telemedicine and internet pharmacy services [65] Management's Comments on Operating Environment and Future Outlook - Management emphasized the ongoing need for effective treatments for COVID-19, highlighting the mortality rates and the lack of adequate approved alternatives [60][61] - The company is in a holding pattern regarding clinical trials while awaiting regulatory decisions on sabizabulin [62] - Management expressed confidence in the potential for sabizabulin to address unmet medical needs in ARDS and other viral infections [88] Other Important Information - The company has paused some spending and is evaluating clinical trial priorities to conserve cash while awaiting regulatory decisions [44][62] - The cash balance as of December 31, 2022, was $46.9 million, with net working capital of $32.9 million [55] Q&A Session Summary Question: What gives you confidence that HHS won't follow the White House in winding down the COVID emergency? - Management clarified that HHS governs the FDA and has its own emergency declaration, which remains in effect despite the White House's plans [70][71] Question: Can you elaborate on the cash situation and spending pause? - Management indicated that spending was ramped up in anticipation of EUA approval but has since been paused to conserve cash while awaiting regulatory decisions [72][73] Question: Are you pulling back on enrollment in oncology trials? - Management confirmed that enrollment timelines may be extended as they evaluate cash flow and prioritize trials [78][80] Question: Can the company advance Sabizabulin into a clinical trial for ARDS excluding COVID-19 patients? - Management acknowledged the potential to explore ARDS indications but emphasized the need to wait for regulatory clarity [87][90] Question: Do you expect FC2 sales to return to previous levels? - Management noted that they are starting to see revenues return to previous levels, contingent on resolving customer issues [93] Question: Is it correct that Veru may terminate one of the ongoing breast cancer or prostate cancer trials due to budgeting priorities? - Management stated that no decisions have been made yet, but they are looking at all options to prioritize trials that are closest to completion [95][96]

Financial Performance - For the three months ended December 31, 2022, net revenues were $2,507,794, a decrease of 82.3% compared to $14,135,132 for the same period in 2021[40]. - Sales of FC2 in the U.S. prescription channel generated $163,004, down from $11,574,266 in the prior year, while global public health sector sales were $2,336,997, compared to $2,560,866 in 2021[40]. - The company reported a net loss for the three months ended December 31, 2022, amounting to $(68,278) compared to a net income of $114,655 in the same period of 2021[95]. - Gross profit decreased to $0.7 million for the three months ended December 31, 2022, with a gross profit margin of 28%, down from 84% in the prior year[132]. - Operating activities used cash of $34.5 million in the three months ended December 31, 2022, compared to $8.7 million in the same period in 2021[141]. Cash Flow and Liquidity - The company anticipates continued cash consumption and losses as it develops and commercializes drug candidates, with current cash expected to fund operations for the next 12 months[30][31]. - The Company had cash and cash equivalents of $46.9 million as of December 31, 2022, down from $80.2 million at September 30, 2022[138]. - The company plans to pursue opportunistic financing alternatives, including equity and debt financing, to support its operations[31]. Accounts Receivable and Inventory - As of December 31, 2022, accounts receivable net balance was $3,864,310, an increase from $3,550,895 at September 30, 2022[44]. - Two customers accounted for 76% of net accounts receivable as of December 31, 2022, compared to 83% at September 30, 2022[45]. - As of December 31, 2022, net inventories amounted to $8,732,627, an increase of 1.32% from $8,618,944 on September 30, 2022[51]. Research and Development - Research and development expenses increased to $18.7 million for the three months ended December 31, 2022, up from $10.1 million in the same period in 2021[133]. - The Phase 3 clinical study of sabizabulin demonstrated a statistically significant 55.2% relative reduction in deaths compared to placebo in hospitalized COVID-19 patients at high risk for ARDS[100]. - The company is currently enrolling approximately 210 patients in a Phase 3 trial for enobosarm as a treatment for AR+ER+HER2- metastatic breast cancer[107]. - The company plans to conduct a confirmatory Phase 3 clinical study for sabizabulin to support full regulatory applications in multiple regions[105]. Shareholder Equity and Stock Options - The company reported a significant increase in stockholder equity as reflected in the unaudited condensed consolidated statements[101]. - The total intrinsic value of options exercised during the three months ended December 31, 2022, was approximately $355,000, compared to $447,000 for the same period in 2021[79]. - The Company had unrecognized compensation expense of approximately $49.6 million related to unvested stock options, expected to be recognized over a weighted average period of 2.2 years[80]. Regulatory and Compliance - The company has filed certifications pursuant to the Sarbanes-Oxley Act of 2002 by both the CEO and CFO, ensuring compliance and accuracy in financial reporting[31.1][31.2]. - The company’s leadership is committed to maintaining compliance with SEC regulations, as evidenced by the signing of the report by the CEO and CFO[165][167]. - The company’s financial documents are designed to meet the requirements of the Securities Exchange Act of 1934, ensuring regulatory adherence[165]. Corporate Governance - The company has undergone multiple amendments to its articles of incorporation, indicating ongoing corporate governance adjustments[3.1][3.2][3.3][3.4][3.5][3.6][3.7]. - The company’s amendments to its corporate structure reflect strategic decisions aimed at enhancing shareholder value and operational flexibility[3.8]. Market and Risk Factors - The company continues to face the same risk factors disclosed in its Annual Report for the fiscal year ended September 30, 2022, with no material changes[159]. - There have been no material changes to the Company's market risk exposure since September 30, 2022[154].

Clinical Trials and Drug Development - Sabizabulin treatment resulted in a statistically significant 51.6% relative reduction in deaths compared to placebo in a Phase 3 study involving 204 hospitalized COVID-19 patients at high risk for ARDS and death [331]. - The FDA agreed that no additional efficacy or safety studies were required to support an Emergency Use Authorization (EUA) application for sabizabulin based on the positive Phase 3 study results [332]. - The UK’s MHRA and Australia’s TGA have expedited the review and registration of sabizabulin for emergency use in hospitalized COVID-19 patients at high risk for ARDS [333]. - The Company is conducting a Phase 3 clinical study (ENABLAR-2) to evaluate the efficacy and safety of enobosarm plus abemaciclib in approximately 186 subjects with AR+ ER+ HER2- metastatic breast cancer [339]. - The Phase 3 VERACITY study is enrolling approximately 245 men with metastatic castration-resistant prostate cancer to evaluate sabizabulin 32mg [341]. Financial Performance - The Company generated net revenues of $39.4 million in fiscal 2022, a 36% decrease from $61.3 million in fiscal 2021, with a net loss of $83.8 million [374]. - FC2 net revenues decreased by 35% year over year, with a 44% decrease in total unit sales and a 17% increase in average sales price per unit [375]. - Research and development expenses increased by 116% to $70.6 million in fiscal 2022 from $32.7 million in fiscal 2021, driven by multiple ongoing clinical trials [378]. - Selling, general and administrative expenses rose by 109% to $43.2 million in fiscal 2022, primarily due to increased personnel costs and commercialization efforts [380]. - The gross profit margin for fiscal 2022 was 78% of net revenues, consistent with fiscal 2021, despite a decrease in gross profit to $30.6 million [377]. Cash Flow and Investments - Cash and cash equivalents decreased to $80.2 million as of September 30, 2022, down from $122.4 million a year earlier, reflecting increased R&D expenditures [385]. - The company used cash of $47.5 million in operating activities for fiscal 2022, with a net loss of $83.8 million [389]. - Net cash from investing activities was $4.3 million in fiscal 2022, primarily from $5.0 million received on notes receivable from the sale of the PREBOOST business [391]. - Net cash provided by financing activities in fiscal 2022 was $1.1 million, mainly from stock option exercises [393]. - The company completed a public offering of 7,419,354 shares at $15.50 per share, generating net proceeds of $108.0 million in February 2021 [394]. Inventory and Product Availability - The Company has maintained sufficient inventory of FC2 to meet expected customer demand despite temporary disruptions due to COVID-19 [356]. - The Company has launched its own dedicated direct-to-patient telemedicine platform to drive sales growth [360]. - The Company is working to restore ordering patterns in the U.S. prescription channel through increased marketing efforts and new distribution partnerships [375]. - The decrease in FC2 net revenues in the global public health sector was primarily due to the absence of significant sales from Brazil and South Africa tenders in fiscal 2022 [375]. Market and Operational Risks - The Company has experienced increased costs in products, supplies, salaries, and general administrative expenses due to inflation, leading to price increases where possible [416]. - The Company's exposure to market risk is primarily related to fluctuations in raw material commodity prices, particularly nitrile polymer, and foreign currency exchange rate risk [417]. - The U.K. and Malaysia subsidiaries adopted the U.S. dollar as their functional currency, reducing foreign currency risk and stabilizing operating results [417]. - The Company may face pricing concessions or financial accommodations requests from distributors due to currency fluctuations impacting their operations [417]. Accounting and Valuation - IPR&D assets are considered indefinite-lived until project completion or abandonment, and are tested for impairment during this period [414]. - The valuation process for IPR&D assets is complex, requiring significant input and judgment regarding future volume, revenue, and expense growth rates [414]. - The Company has adopted recent accounting pronouncements, with additional information available in Note 1 of the financial statements [415].

Veru Inc. (NASDAQ:VERU) Q4 2022 Earnings Conference Call December 5, 2022 8:00 AM ET Company Participants Sam Fisch - Executive Director, Investor Relations, and Corporate Communications Mitchell Steiner - Chairman, Chief Executive Officer and President Michele Greco - Chief Financial Officer and Chief Administrative Officer Conference Call Participants Brandon Folkes - Cantor Fitzgerald Leland Gershell - Oppenheimer Chris Howerton - Jefferies Yi Chen - H.C. Wainwright Operator Good morning, ladies and gent ...

Veru Inc. Nasdaq:VERU | --- | --- | --- | --- | |---------------------------------------------------------------------------------------------------|-------|-------|-------| | | | | | | | | | | | Biopharmaceutical Company focused on Infectious Disease and Oncology | | | | | Veru Corporate Presentation Cantor Oncology, Hematology & HemeOnc Conference September 28, 2022 | | | | Forward looking statements The statements in this release that are not historical facts are "forward-looking statements" as that term ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) Commission File Number 1-13602 Veru Inc. (Exact Name of Registrant as Specified in its Charter) Wisconsin 39-1144397 (Registrant's Telephone Number, Including Area Code) N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Securities registered pursuant to Section 12(b) of the Act: 2916 N. Miami Avenue, Suite 1000, Miami, FL 33127 (Address of Principal Executive Offices) (Zip Code) ...