Veru(VERU) - 2024 Q4 - Annual Report

PART I Item 1. Business Veru Inc. is a late clinical-stage biopharmaceutical company developing novel medicines for metabolic diseases, oncology, and ARDS, while commercializing the FC2 Female Condom Overview Veru Inc. is a late clinical-stage biopharmaceutical company developing novel medicines for metabolic diseases, oncology, and ARDS, primarily through enobosarm and sabizabulin - Veru Inc. is a late clinical-stage biopharmaceutical company focusing on metabolic diseases, oncology, and ARDS. Its main drug candidates are enobosarm and sabizabulin[14] - The company also has an FDA-approved commercial product, the FC2 Female Condom, for dual protection against unplanned pregnancy and sexually transmitted infections[14] Company History Veru Inc. originated from The Wisconsin Pharmacal Company Inc., incorporated in 1971, and evolved into a biopharmaceutical company in 2016 - Veru Inc. was originally incorporated as The Wisconsin Pharmacal Company Inc. in 1971[16] - In 1996, the company acquired worldwide rights to the second-generation female condom and changed its name to 'The Female Health Company'[16] - The acquisition of Aspen Park Pharmaceuticals, Inc. in 2016 transitioned the company into a biopharmaceutical entity, leading to the name change to 'Veru Inc.' in 2017[16] Our Strategy Veru's strategy focuses on clinical development of novel medicines for metabolic diseases, oncology, and ARDS, funded partly by its sexual health program - The company's strategy focuses on clinical development and commercialization of novel medicines for metabolic diseases, oncology, and ARDS[18] - A key element is to operate and grow the sexual health program (FC2) to help fund clinical development efforts[18] - Development of sabizabulin for viral-induced ARDS is contingent on obtaining external funding from government grants or pharmaceutical partnerships[20][21] Our Products and Product Candidates Veru's portfolio includes enobosarm for obesity and breast cancer, sabizabulin for ARDS, and the marketed FC2 Female Condom Product Portfolio and Development Phases | Product/Candidate | Indication | Development Phase | | :---------------- | :--------- | :---------------- | | Enobosarm | Augment fat loss, prevent lean mass loss in sarcopenic obese/overweight elderly patients receiving GLP-1 RA | Ongoing Phase 2b QUALITY clinical study | | Enobosarm | AR+ ER+ HER2- metastatic breast cancer (2nd line metastatic setting) | Planned Phase 3 ENABLAR-2 | | Sabizabulin | Hospitalized patients with mild to severe viral-induced ARDS | Planned Phase 3 | | FC2 Female Condom® | Unintended pregnancy and prevents STIs | Marketed | Our Clinical Trials Program and Our Drug Candidates in Metabolic Diseases, Oncology, and ARDS Veru is developing enobosarm for obesity and breast cancer, and sabizabulin for ARDS, with further development contingent on funding Obesity and Overweight Program - Enobosarm Enobosarm is being developed for sarcopenic obese/overweight elderly patients on GLP-1 RAs, with Phase 2b results expected in January 2025 - Enobosarm aims to prevent muscle loss and increase fat loss in sarcopenic obese or overweight elderly patients on GLP-1 RAs, addressing an unmet medical need where 20-50% of weight loss from GLP-1 RAs is lean mass[19][25] - The Phase 2b QUALITY clinical study, evaluating 3mg, 6mg enobosarm, or placebo in 168 patients, completed enrollment in August 2024, with topline results anticipated in January 2025[25] - A Phase 2b extension trial will assess enobosarm's ability to maintain muscle and prevent fat/weight regain after GLP-1 RA discontinuation, with results expected in Q2 2025[26] Oncology Program – Breast Cancer: Enobosarm Enobosarm is a novel endocrine therapy for AR+ ER+ HER2- metastatic breast cancer, with planned Phase 3 contingent on funding - Enobosarm is a selective androgen receptor modulator (SARM) targeting AR+ ER+ HER2- metastatic breast cancer, designed to suppress tumor growth without masculinizing side effects[26] - Phase 2 clinical studies demonstrated significant antitumor efficacy and a favorable safety profile in heavily pretreated women, with higher AR expression correlating with greater activity[27] - The planned Phase 3 ENABLAR-2 trial for enobosarm in combination with abemaciclib is subject to funding availability, with potential for accelerated approval based on objective tumor response rates (ORR)[27] Infectious Disease Program – sabizabulin for hospitalized patients with mild to severe viral-induced ARDS Sabizabulin for viral-induced ARDS showed mortality benefit in COVID-19 trials, but further Phase 3 development requires external funding - Sabizabulin 9mg is being developed for hospitalized patients with viral lung infection at high risk for ARDS and death, demonstrating host-targeted antiviral and anti-inflammatory properties[28] - Positive Phase 2 and 3 COVID-19 clinical trials showed a mortality benefit, and the FDA granted Fast Track designation in January 2022[28] - Further Phase 3 development for viral-induced ARDS is contingent on obtaining external funding (government grants, pharmaceutical partnerships); without it, development will not advance[29] Sexual Health Program The Sexual Health Program focuses on FC2, the only FDA-approved female condom, expanding U.S. and global public health sales - FC2 is the only FDA-approved, female-controlled, hormone-free, and latex-free female condom for preventing pregnancy and STIs, including HIV/AIDS[30] - FC2 is manufactured from a proprietary nitrile polymer, offering advantages like strength, heat transfer, and suitability for latex-sensitive users[30] - The company is focused on increasing U.S. revenue through its dedicated direct-to-patient telemedicine and pharmacy services portal, and growing global public health sector sales via partnerships[22][30] Sale of ENTADFI® Veru sold ENTADFI® assets to ONCO in April 2023 for $20.0 million, with future payments uncertain due to ONCO's defaults - Veru sold ENTADFI® assets to ONCO in April 2023 for $20.0 million, comprising $6.0 million upfront, $10.0 million in promissory notes, and up to $80.0 million in milestone payments[32] - An amendment in September 2023 settled a $4.0 million note with $1.0 million cash and 3,000 shares of ONCO Preferred Stock (later converted to 142,749 shares of ONCO common stock)[33] - Forbearance agreements in 2024 addressed ONCO's defaults, extending the September 2024 Promissory Note maturity to June 30, 2025, and adjusting payment terms. Veru recognized a gain of $5.7 million in fiscal 2023 and $1.2 million in fiscal 2024 from the sale[33][34] Government Regulation The company's products and drug candidates are subject to extensive FDA and international regulations covering development, manufacturing, and marketing FDA Regulation of Female Condoms FC2, a Class II medical device, requires ongoing compliance with FDA regulations including QSR, MDR, and labeling, with non-compliance risking penalties - FC2 was reclassified from a Class III to a Class II medical device in 2018, requiring new devices to submit a 510(k) premarket notification and comply with special controls[35] - The company must comply with FDA's Quality System Regulation (QSR), Medical Device Reporting (MDR), and regulations for labeling, promotion, and advertising[35] - Non-compliance can result in fines, injunctions, civil penalties, recalls, production suspension, and criminal prosecution[35] FDA Regulation of Prescription Pharmaceutical Products FDA approval for pharmaceuticals involves nonclinical tests, IND submission, multi-phase clinical trials, and cGMP/cGCP inspections, a lengthy and costly process - The FDA approval process for pharmaceutical products includes nonclinical tests, IND submission, and human clinical trials (Phase 1, 2, 3)[35][36] - Pre-approval inspections ensure compliance with cGMP for manufacturing and cGCP for clinical investigators[35] - The process culminates in FDA approval of a New Drug Application (NDA) for commercial marketing, requiring substantial time, effort, and financial resources[35][36] Emergency Use Authorizations EUAs allow unapproved medical products during emergencies but are not full FDA approvals and can be revoked; the company won't seek them for current candidates - EUAs permit the use of unapproved medical products during emergencies if they may be effective and lack approved alternatives[36] - EUAs are not a substitute for FDA approval and can be revoked; the company does not plan to seek EUAs for current drug candidates after sabizabulin's COVID-19 EUA was declined[36] 505(b)(2) Approval Process The 505(b)(2) pathway expedites approval for new formulations of approved drugs, but none of the company's current candidates will use it - Section 505(b)(2) of the FDCA provides an expedited regulatory pathway for new or improved formulations or new uses of previously approved drug products[38] - Applicants can rely on the FDA's safety and effectiveness findings for a Reference Listed Drug (RLD), potentially requiring additional studies[38] - None of the company's current drug candidates are expected to follow the 505(b)(2) approval pathway[38] 505(b)(1) Approval Process The 505(b)(1) process is for novel drugs or new indications, requiring all studies to be company-conducted; enobosarm and sabizabulin will follow this - The 505(b)(1) approval process is used for novel drugs or new indications, requiring all studies to be conducted by or for the company[38] - Enobosarm (for obesity and breast cancer) and sabizabulin (for viral-induced ARDS) are expected to follow this regulatory pathway[38] NDA Submission and Review by the FDA NDA submission requires extensive data and fees, with FDA review for safety, effectiveness, and cGMP compliance, often facing delays - NDA submission requires comprehensive data on product development, nonclinical studies, and clinical trials, along with a substantial user fee[38] - The FDA reviews for safety, effectiveness, and cGMP compliance, including facility inspections, with review goals of 10 months for non-priority and 6 months for priority applications[38] - Approval may be delayed, refused, or granted with limitations on indicated uses and requirements for post-marketing studies[38][40] Post-Approval Requirements for Pharmaceutical Products Approved pharmaceuticals face ongoing FDA regulation, including recordkeeping, adverse event reporting, cGMP, marketing restrictions, and supply chain security - Approved pharmaceutical products are subject to continuous FDA regulation, including recordkeeping, adverse event reporting, and cGMP compliance for manufacturing facilities[40] - The FDA strictly regulates marketing and promotion, limiting claims to those supported by approved prescribing information; off-label use communications are restricted[40] - The Drug Supply Chain Security Act mandates product tracking, tracing, and verification requirements for manufacturers to ensure supply chain integrity[40] Federal Trade Commission (FTC) Regulation of Advertising The FTC regulates advertising for OTC drugs and non-restricted medical devices, requiring substantiated claims and imposing penalties for violations - The FTC regulates advertising for OTC drugs and non-restricted medical devices, prohibiting unfair/deceptive practices and false advertisements[40] - Claims must be substantiated by competent and reliable scientific evidence, often requiring randomized, double-blind, placebo-controlled clinical trials[40] - Violations can result in cease-and-desist orders, injunctions, civil penalties, and criminal contempt proceedings[40] Other Healthcare Regulations The company is subject to various healthcare laws, including anti-kickback, False Claims, data privacy (HIPAA, GDPR), and price reporting, with severe penalties for non-compliance - The company is subject to federal and state healthcare laws, including anti-kickback statutes, False Claims Acts, and practitioner payment sunshine laws[40] - Data privacy and security regulations like HIPAA, HITECH, and GDPR impose strict requirements on handling individually identifiable health information, with potential for significant financial penalties for non-compliance[41] - Failure to comply with these laws can result in criminal/civil penalties, fines, exclusion from government programs, and reputational harm[41] Anti-Corruption Laws The FCPA and international anti-corruption laws prohibit improper payments to foreign officials and require accurate record-keeping, with severe sanctions for violations - The FCPA prohibits U.S. individuals/businesses from making improper payments to foreign officials to influence business decisions[43] - Companies with U.S. listed securities must also maintain accurate books and records and adequate internal accounting controls[43] - Violations can result in government scrutiny, severe criminal/civil sanctions, and business disruption[43] Foreign and Other Regulation The company navigates diverse foreign regulations for clinical trials, sales, and distribution, with FC2 holding MSAP, ISO13485, and CE Mark approvals - The company is subject to varying foreign regulations for clinical trials, sales, and distribution outside the U.S.[43] - FC2 has MSAP, ISO13485 approval (covering Australian TGA, Brazil ANVISA, Health Canada), and the CE Mark for the EU[43] - Manufacturing facilities are subject to inspection by UNFPA, USAID, ISO, and country-specific ministries of health[43] Intellectual Property; Regulatory Exclusivity Veru protects its technology via patents, trade secrets, and regulatory exclusivity, with NCE status for enobosarm and sabizabulin granting market exclusivity Enobosarm Intellectual Property and Regulatory Exclusivity Enobosarm, an NCE, is eligible for 5 years of U.S. market exclusivity and PTE, with Veru holding licenses for patents expiring in 2029 (extendable) - Enobosarm qualifies as an NCE, potentially granting 5 years of U.S. market exclusivity and up to 5 years of patent term extension (PTE)[44] - Veru holds an exclusive worldwide license to 16 issued U.S. patents and 59 foreign patents for enobosarm, with the latest composition of matter patent expiring in 2029 (extendable to 2034)[44] - The company owns pending method-of-use patent applications for enobosarm in weight management, with potential expiration in 2044, and is developing a novel modified-release formulation for future patents[44] Sabizabulin Intellectual Property and Regulatory Exclusivity Sabizabulin, an NCE, is eligible for 5 years of U.S. market exclusivity and PTE, with Veru holding licenses for patents expiring in 2031 (extendable) - Sabizabulin qualifies as an NCE, potentially granting 5 years of U.S. market exclusivity and up to 5 years of patent term extension (PTE)[44] - Veru holds an exclusive worldwide license to 13 issued U.S. patents and 14 foreign patents for sabizabulin, with the latest molecule composition of matter patent expiring in 2031 (extendable to 2036)[45] - The company owns patents and applications for sabizabulin polymorphs and methods of use, with potential patent terms extending to 2043 (extendable to 2048)[45] Trademarks The company holds U.S. trademark registrations for 'FC2 Female Condom' and its logo, with applications for 'Veru' and protection in 40 countries - The company has trademark registrations for 'FC2 Female Condom' and its logo in the U.S.[45] - Applications for 'Veru' and 'Veru' with the chevron have been filed in the U.S.[45] - Trademark protection for Female Condom marketing names and symbols extends to 40 countries/jurisdictions[45] Significant Customers Four largest customers accounted for 60% of net revenues in fiscal 2024, primarily global public health sector buyers - The four largest customers accounted for 60% of the company's net revenues in fiscal 2024[48] - Significant customers are primarily global public health sector buyers, including large global agencies (UNFPA, USAID) and government health agencies[48] - These customers purchase FC2 for distribution in HIV/AIDS prevention and family planning programs worldwide[48] Human Capital Management Veru had 210 global employees as of October 31, 2024, focusing on retention through competitive compensation, benefits, and equity awards - As of October 31, 2024, Veru had 210 full-time employees: 26 in the U.S., 9 in the U.K., 174 in Malaysia, and 1 in another country[49] - Key objectives include identifying, recruiting, integrating, retaining, and motivating employees, fostering growth and diversity[49] - Compensation includes annual base salary, comprehensive benefits, and equity awards for retention. The company has no collective bargaining agreements and reports good employee relations[49] Environmental Regulation The company reported no material environmental costs in fiscal 2024 or 2023, and its Malaysian operations are ISO 14001 certified - The company incurred no material environmental expenses in fiscal 2024 or 2023 and anticipates none in the foreseeable future[49] - Its operations in Malaysia are audited and certified against ISO 14001, the environmental management standard[49] Raw Materials FC2's primary raw material, a specialty nitrile polymer, is from a single supplier, necessitating a costly transition to an alternative grade - The principal raw material for FC2 is a specialty nitrile polymer, sourced from a single supplier[50] - The company is transitioning to an alternative grade of nitrile due to the supplier closing its manufacturing facility, which will require costs for formulation, testing, and FDA approval[50] - The supplier is providing continuity of supply from another facility during the transition[50] Manufacturing FC2 is manufactured and warehoused in a single leased facility in Malaysia, with an annual capacity of 100 million units, subject to FDA and U.K. inspections - FC2 is manufactured and warehoused in a single leased facility in Selangor D.E., Malaysia, with an annual production capacity of approximately 100 million units[50] - The facility is subject to periodic FDA inspections for cGMP compliance and by a U.K.-based notified body for CE (MDR) and ISO 13485 and MDSAP accreditations[50] Competition FC2 faces competition from male and other female condoms, with FDA reclassification potentially increasing U.S. market competition, while drug candidates face intense pharmaceutical competition - FC2 competes with male condoms and other female condoms, facing increasing competition and pricing pressures, particularly in the global public health sector[50] - The FDA's reclassification of female condoms to Class II medical devices may reduce barriers for other female condoms to enter the U.S. market, increasing competition[50] - The pharmaceutical industry is highly competitive; the company's drug candidates face competitors with substantially greater R&D, regulatory, management, manufacturing, distribution, marketing, and financial resources[50] Available Information The company provides its SEC filings (annual, quarterly, current reports) free of charge on its investor relations website - The company makes its SEC filings (10-K, 10-Q, 8-K, and amendments) available free of charge on its investor relations website: **https://verupharma.com/investors/**[52](index=52&type=chunk) Item 1A. Risk Factors The company faces significant risks including regulatory hurdles, funding dependency, market acceptance, financial instability, supply chain issues, and intellectual property challenges Risks Related to the Regulation and Commercialization of Our Products and Drug Candidates The company faces risks in drug approval, clinical trial delays, funding dependency for sabizabulin, market acceptance, and extensive government regulation - The company has limited experience in obtaining regulatory approval for drugs, having only approved one drug (ENTADFI) which was subsequently sold[54][62] - Clinical trials for drug candidates, including enobosarm for obesity, may experience delays, suspensions, or discontinuations due to various factors like regulatory approvals, patient enrollment, or safety concerns[54][63][66][67] - Development and commercialization of sabizabulin for ARDS are contingent on securing significant external funding (government grants, pharmaceutical partnerships)[54][81] - Market acceptance and sales of FC2 and drug candidates depend on physician prescriptions, cost-effectiveness, competition, and adequate insurance coverage/reimbursement, which may not be available[54][87][88] Risks Related to Our Financial Position and Need for Capital The company has a history of net losses, requires substantial additional capital, faces potential dilution, and has impaired capital-raising ability due to SEC filing issues - The company incurred a net loss of $37.8 million in fiscal 2024 and expects continued losses, raising substantial doubt about its ability to continue as a going concern[89][90] - Substantial additional capital is needed for drug development and commercialization, which may be raised through equity or debt financing, potentially leading to significant stockholder dilution[91] - Due to late SEC filings, the company is ineligible to use Form S-3 registration statements until March 1, 2025, impairing its ability to raise capital efficiently[93] - There is uncertainty regarding the receipt of future installment payments or milestone payments from ONCO for the ENTADFI asset sale, and the value of ONCO common stock held[94] Risks Related to Our Business Business risks include FC2 sales fluctuations, competition, supply chain reliance, international operations, legal judgments, and cybersecurity threats - FC2 sales are affected by government contracting risks, including unpredictable tender awards and potential budget cuts, and increased competition due to FDA reclassification of female condoms to Class II[95] - Net revenues from FC2 sales have declined, especially in the U.S. prescription channel, partly due to the bankruptcy of a major telehealth customer (The Pill Club), and efforts to grow sales via its own telehealth portal may not be successful[98][99] - The company relies on a single manufacturing facility for FC2 and single-source suppliers for certain raw materials, creating risks of supply disruptions and increased costs during transitions[111][112] - The company is exposed to international business risks (economic/political instability, currency fluctuations), legal judgments (product liability, stockholder class actions), cybersecurity threats, and anti-bribery law compliance (FCPA)[108][115][118][120] Risks Relating to Our Intellectual Property Commercial success depends on protecting IP through patents and trade secrets, facing challenges from patent invalidation, license termination, and infringement claims - The company's commercial success relies on obtaining and maintaining intellectual property rights, but patent positions are highly uncertain and subject to legal challenges, invalidation, or narrow interpretation[124][125] - The company is dependent on license relationships for sabizabulin and enobosarm, with risks of license termination if obligations are not met, impacting commercialization[127] - There is a risk of infringing third-party patents, which could lead to costly litigation, substantial damages, or the inability to commercialize drug candidates without obtaining licenses on unfavorable terms[127][128] - Protecting trade secrets is difficult, as employees or competitors may unintentionally or willfully disclose or independently develop confidential information[131] Risks Related to Ownership of Our Common Stock Common stock ownership is concentrated, facing Nasdaq delisting risk, potential investor confidence issues from past restatements, and price volatility - Ownership of common stock is highly concentrated (executive officers and directors beneficially owned ~14.9% as of Dec 12, 2024), potentially limiting other shareholders' influence[132] - The company received a Nasdaq delisting notice for failing to meet the $1.00 minimum bid price requirement, risking reduced liquidity and market coverage if not remediated by February 25, 2025[133][134] - Past financial restatements and identified material weaknesses in internal controls (now remediated) may affect investor confidence, increase costs, and lead to legal/regulatory scrutiny[134][135] - The trading price of common stock has been volatile, and substantial future sales of shares could depress the market price. Capital appreciation is the sole source of gain as no cash dividends are anticipated[139][140][141] Item 1B. Unresolved Staff Comments This section states that there are no unresolved staff comments - Not Applicable[142] Item 1C. Cybersecurity The company has a cybersecurity risk management program overseen by the board, with no material risks identified as of the report date - The company has a cybersecurity risk management program to protect critical systems and information, integrated into its overall risk management system[142] - The program includes policies, processes for assessing/managing threats, an incident response plan, access controls, firewalls, intrusion detection, vulnerability management, and employee security awareness training[142] - The board of directors provides risk oversight, and the Chief Financial Officer is primarily responsible for managing cybersecurity threats, with assistance from a third-party service provider[142] - As of the report date, no material risks from known cybersecurity threats or prior incidents have been identified that materially affect operations, strategy, or financial condition[142] Item 2. Properties The company leases headquarters in Miami, an office in London, and an FC2 manufacturing facility in Malaysia, all deemed adequate - Company headquarters: Miami, Florida (12,000 sq ft, lease ends Feb 2030)[143] - London office: 6,400 sq ft, lease expires Aug 2025[143] - FC2 manufacturing/warehouse: Selangor D.E., Malaysia (45,800 sq ft, lease ends Aug 2025), with 100 million units annual capacity[143] Item 3. Legal Proceedings Material pending legal proceedings are detailed in Note 13, Contingent Liabilities, of the financial statements - Material pending legal proceedings are described in 'Litigation' in Note 13, Contingent Liabilities, of the financial statements[143] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[143] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Capital Market under 'VERU', with approximately 148 record holders as of December 12, 2024 - Common stock trades on the Nasdaq Capital Market under the symbol 'VERU'[143] - As of December 12, 2024, there were approximately 148 record holders of common stock[143] Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Veru Inc.'s financial condition and operations, highlighting drug development, FC2 performance, ENTADFI sale impact, and liquidity challenges Overview Veru Inc. is a late clinical-stage biopharmaceutical company developing enobosarm and sabizabulin, and commercializing the FC2 Female Condom - Veru Inc. is a late clinical-stage biopharmaceutical company with drug development programs for enobosarm (obesity, breast cancer) and sabizabulin (viral-induced ARDS)[145] - Development of sabizabulin for viral-induced ARDS is contingent on obtaining external funding[145] - The company also has an FDA-approved commercial product, the FC2 Female Condom, for dual protection against unplanned pregnancy and STIs[145] Obesity Program Enobosarm is being developed for sarcopenic obese/overweight elderly patients on GLP-1 RAs, with Phase 2b results expected in January 2025 - Enobosarm is being developed to ameliorate muscle wasting effects and promote preferential fat loss in sarcopenic obese/overweight elderly patients on GLP-1 RAs[146] - The Phase 2b QUALITY clinical trial, evaluating enobosarm 3mg/6mg or placebo, completed enrollment of 168 subjects in August 2024, with topline results expected in January 2025[147] - A Phase 2b extension trial will assess enobosarm's ability to maintain muscle and prevent fat/weight regain after discontinuing GLP-1 RA, with results expected in Q2 2025[147] Oncology Program The oncology program focuses on enobosarm for AR+ ER+ HER2- metastatic breast cancer, with further Phase 3 development contingent on funding - Enobosarm is being developed as a new class of endocrine therapy for AR+ ER+ HER2- metastatic breast cancer, especially for patients who have progressed on standard therapies[148] - Phase 2 trials showed significant antitumor efficacy and a favorable safety profile in heavily pretreated patients[148] - Stage 1a of the Phase 3 ENABLAR-2 trial completed in October 2023 with early preliminary results showing two partial responses and one stable disease[149] - Continued clinical development for breast cancer is subject to funding availability, with Stage 1b expected to reinitiate by early 2026, potentially pursuing an accelerated approval pathway[148][149] Infectious Disease Program Sabizabulin for viral-induced ARDS showed mortality benefit in COVID-19 trials, but further Phase 3 development requires external funding - Sabizabulin 9mg is being developed for hospitalized patients with viral-induced ARDS, exhibiting host-targeted antiviral and broad anti-inflammatory properties[150] - Positive Phase 2 and 3 COVID-19 clinical trials showed a mortality benefit, and the FDA granted Fast Track designation in January 2022[150] - Further Phase 3 development for viral-induced ARDS is contingent on securing external funding; without it, the company does not plan to advance the program[150] Sexual Health Program The sexual health program focuses on FC2, the only FDA-approved female condom, expanding U.S. and global public health sales - FC2 is the only FDA-approved female condom for dual protection against unplanned pregnancy and STIs, sold in U.S. prescription and public health channels, and globally in the public sector[151] - The company launched its own telehealth portal in April 2022 to maximize reach and control promotion/sales of FC2 in the U.S. prescription channel[151] - Global public health sector sales include a large multi-year South African tender (until 2025) and a new tender in Brazil (started Q4 fiscal 2024)[153] Sale of ENTADFI Veru sold ENTADFI® assets to ONCO in April 2023 for $20.0 million, with future payments uncertain due to ONCO's defaults and forbearance agreements - Veru sold ENTADFI® assets to ONCO in April 2023 for $20.0 million, comprising $6.0 million upfront, $10.0 million in promissory notes, and up to $80.0 million in milestone payments[154] - Forbearance agreements were entered into due to ONCO's defaults, amending payment terms and extending the September 2024 Promissory Note maturity to June 30, 2025[154][156] - A $4.0 million note was settled with $1.0 million cash and ONCO Preferred Stock (converted to 142,749 shares of ONCO common stock). The probability of receiving milestone payments is considered remote[154] Consolidated Operations Consolidated operations show a net loss of $37.8 million in fiscal 2024, a significant improvement from $93.2 million in 2023, driven by reduced expenses Revenues Revenues are primarily from FC2 sales, with global public health sector growth offsetting declines in the U.S. prescription channel due to customer bankruptcy - Revenues are primarily from FC2 sales in the U.S. prescription channel and global public health sector[157] - The Pill Club, formerly the largest telehealth customer (24% of net revenues in fiscal 2023), ceased contributing revenue due to Chapter 11 bankruptcy, resulting in a $3.9 million provision for credit losses in fiscal 2023[157] - Global public health sector revenues increased due to timing and shipment of orders, including a South African tender and a new Brazilian tender, while the U.S. prescription channel declined[157][159] Operating Expenses Operating expenses, including cost of sales, R&D, and SG&A, decreased significantly in fiscal 2024 due to strategic refocusing and reduced commercialization costs - Cost of sales consists primarily of direct material (nitrile polymer) and labor for FC2, with increases due to raw material and transportation costs[158] - Research and development expenses decreased from $51.2 million in fiscal 2023 to $12.8 million in fiscal 2024, driven by a strategic refocusing of drug development efforts and termination of various trials[158] - Selling, general and administrative expenses decreased from $48.1 million in fiscal 2023 to $31.2 million in fiscal 2024, primarily due to reduced commercialization costs for sabizabulin and ENTADFI[161] Results of Operations (Year Ended September 30, 2024 Compared to Year Ended September 30, 2023) In fiscal 2024, net revenues increased 4% to $16.9 million, while net loss decreased significantly to $37.8 million, driven by expense reductions Key Financial Results (Fiscal Years Ended September 30) | Metric | 2024 (Millions $) | 2023 (Millions $) | Change (%) | | :----- | :---------------- | :---------------- | :--------- | | Net Revenues | $16.9 | $16.3 | +4% | | Net Loss | $(37.8) | $(93.2) | -59.5% | | Net Loss per Share (Basic & Diluted) | $(0.28) | $(1.10) | -74.5% | | Gross Profit | $5.9 | $7.6 | -22.3% | | Gross Profit Margin | 35% | 46% | -11 ppts | | R&D Expenses | $12.8 | $51.2 | -75% | | SG&A Expenses | $31.2 | $48.1 | -35% | | Gain on Sale of ENTADFI® assets | $1.2 | $5.7 | -78.9% | - The decrease in net loss was primarily driven by a significant reduction in R&D expenses (due to strategic refocusing) and lower SG&A expenses[161] - Gross profit and margin decreased due to a change in sales mix, with the U.S. prescription channel (higher margin) decreasing from 36% to 14% of FC2 revenues, and an increase in obsolete inventory provision[159][161] Liquidity and Sources of Capital Cash increased to $24.9 million in 2024, but ongoing losses raise going concern doubts, necessitating additional capital, with S-3 eligibility impaired Liquidity Cash and cash equivalents increased to $24.9 million in 2024, but negative operating cash flow raises substantial doubt about going concern Liquidity Position (as of September 30) | Metric | 2024 (Millions $) | 2023 (Millions $) | | :----- | :---------------- | :---------------- | | Cash and Cash Equivalents | $24.9 | $9.6 | | Working Capital | $23.4 | $5.1 | | Stockholders' Equity | $32.3 | $19.7 | - The company is not profitable and has negative cash flow from operations, with current cash insufficient to fund operations for the next 12 months[162] - These uncertainties raise substantial doubt about the company's ability to continue as a going concern, necessitating additional capital through public/private equity or debt offerings[162] Operating activities Operating activities used $21.7 million in cash in fiscal 2024, a significant improvement from $88.0 million in 2023, due to lower net loss and non-cash adjustments Cash Used in Operating Activities (Fiscal Years Ended September 30) | Metric | 2024 (Millions $) | 2023 (Millions $) | | :----- | :---------------- | :---------------- | | Net Cash Used in Operating Activities | $(21.7) | $(88.0) | | Net Loss | $(37.8) | $(93.2) | | Share-based Compensation | $13.6 | $17.9 | | Provision for Obsolete Inventory | $1.6 | $0.2 | | Provision for Credit Losses | $0 | $3.9 | | Impairment of Intangible Assets | $0 | $3.9 | | Gain on Sale of ENTADFI® assets | $(1.2) | $(5.7) | - The decrease in cash used in operating activities in fiscal 2024 was mainly due to a lower net loss and increased non-cash adjustments[163] Investing activities Net cash provided by investing activities was $0.1 million in fiscal 2024, a decrease from $6.3 million in 2023, due to lower ENTADFI® sale proceeds Net Cash Provided by Investing Activities (Fiscal Years Ended September 30) | Metric | 2024 (Millions $) | 2023 (Millions $) | | :----- | :---------------- | :---------------- | | Net Cash Provided by Investing Activities | $0.1 | $6.3 | | Cash Proceeds from Sale of ENTADFI® assets | $0.3 | $7.0 | | Capital Expenditures | $(0.2) | $(0.7) | - The decrease in cash provided by investing activities in fiscal 2024 was mainly due to significantly lower proceeds from the ENTADFI® asset sale compared to the prior year[164] Financing activities Net cash provided by financing activities was $36.8 million in fiscal 2024, primarily from a $35.2 million public common stock offering Net Cash Provided by Financing Activities (Fiscal Years Ended September 30) | Metric | 2024 (Millions $) | 2023 (Millions $) | | :----- | :---------------- | :---------------- | | Net Cash Provided by Financing Activities | $36.8 | $11.1 | | Proceeds from Public Offering (net) | $35.2 | $0 | | Proceeds from Common Stock Purchase Agreements | $1.7 | $4.8 | | Proceeds from Private Investment in Public Equity (net) | $0 | $5.0 | | Proceeds from Jefferies Sales Agreement (net) | $0.1 | $1.0 | - The significant increase in financing cash flow in fiscal 2024 was primarily due to a $35.2 million public common stock offering[164] Sources of Capital Capital sources include a Residual Royalty Agreement, a $35.2 million public offering, and common stock purchase agreements, though S-3 eligibility is impaired SWK Credit Agreement and Residual Royalty Agreement The company repaid a $10.0 million term loan but remains obligated to pay 5% of FC2 net sales under a Residual Royalty Agreement - The company repaid a $10.0 million term loan under the SWK Credit Agreement in August 2021[166] - An ongoing Residual Royalty Agreement requires payment of 5% of FC2 product revenue from net sales[166] - Estimated quarterly revenue-based payments under the Residual Royalty Agreement for the 12 months post-September 30, 2024, are approximately $1.0 million[166] Common Stock Offering In December 2023, a public offering of 52.7 million common shares generated approximately $35.2 million in net proceeds - In December 2023, the company completed a public offering of 52,708,332 common shares at $0.72 per share[167] - The offering generated approximately $35.2 million in net proceeds after deducting underwriting discounts and commissions[167] Aspire Capital Purchase Agreement The Aspire Capital Purchase Agreement, allowing sales up to $23.9 million, expired in June 2023 after generating $8.4 million in total proceeds - The Aspire Capital Purchase Agreement allowed the company to sell up to $23.9 million of common stock over 36 months[168] - In fiscal 2023, 2,779,713 shares were sold to Aspire Capital, generating $3.4 million in proceeds[168] - The agreement expired on June 26, 2023, with total proceeds of $8.4 million from 4,424,450 shares sold over its term[168] Private Investment in Public Equity In April 2023, the company completed a PIPE with Frost Gamma Investments Trust, issuing 5 million common shares for $5.0 million - In April 2023, the company issued and sold 5,000,000 common shares to Frost Gamma Investments Trust (FGI) at $1.00 per share[169] - This private investment in public equity (PIPE) generated a total of $5.0 million[169] Lincoln Park Capital Fund, LLC Purchase Agreement The Lincoln Park Purchase Agreement allows sales up to $100.0 million, but is paused until March 1, 2025, due to late SEC filings - The Lincoln Park Purchase Agreement allows the company to sell up to $100.0 million of common stock over 36 months[170] - In fiscal 2024, 1,800,000 shares were sold to Lincoln Park, generating $1.7 million in proceeds[170] - Due to late SEC filings, the company cannot sell securities under this agreement until March 1, 2025[170] Open Market Sale Agreement with Jefferies LLC The Jefferies Sales Agreement, allowing sales up to $75 million, was terminated in September 2024 after generating $0.1 million in fiscal 2024 - The Jefferies Sales Agreement allowed the company to sell up to $75 million of common stock through Jefferies LLC[171] - In fiscal 2024, 90,156 shares were sold, generating $0.1 million in net proceeds[171] - The agreement was terminated on August 19, 2024, effective September 3, 2024, ceasing further sales[171] Critical Accounting Estimates Critical accounting estimates involve significant judgment for income taxes, fair value measurements, goodwill, intangible assets, and R&D costs Income Taxes Income tax accounting requires significant judgment in valuing deferred tax assets and liabilities, with a $69.0 million valuation allowance against U.S. deferred tax assets in 2024 - Income tax accounting requires recognizing deferred tax assets and liabilities and applying a valuation allowance if future benefits are not expected to be realized[174] - Significant judgment is needed to forecast future taxable income in U.S., U.K., and Malaysia jurisdictions[174] - The U.S. deferred tax asset valuation allowance increased by $7.3 million in fiscal 2024 due to projected pretax losses, and full valuation allowances are maintained for U.S. and certain U.K. entities[174] Fair Value Measurements Fair value measurements for embedded derivatives in the Residual Royalty Agreement are Level 3, increasing to $1.6 million in 2024 due to higher change of control probability - Financial liabilities, specifically embedded derivatives in the Residual Royalty Agreement, are measured at fair value using Level 3 unobservable inputs[176] Fair Value of Embedded Derivatives (as of September 30) | Metric | 2024 (Millions $) | 2023 (Millions $) | | :----- | :---------------- | :---------------- | | Fair Value of Embedded Derivatives | $1.6 | $1.3 | | Non-operating Expense (Change in Fair Value) | $0.3 | $(3.0) (Gain) | - The increase in fair value in fiscal 2024 was primarily due to an increased probability of a change of control and decreased discount rates[176] Goodwill and Intangible Assets Goodwill remained at $6.9 million, subject to annual impairment review, while a $3.9 million IPR&D impairment was recorded in fiscal 2023 - Goodwill was $6.9 million at September 30, 2024 and 2023, assigned to the Research and Development reporting unit, and is subject to annual impairment review[177] - Intangible assets, especially IPR&D, are highly vulnerable to impairment charges[177] - A $3.9 million impairment charge was recorded in fiscal 2023 for IPR&D (sabizabulin for prostate cancer and zuclomiphene) due to the strategic decision to cease their development, resulting in a zero IPR&D balance[177] Research and Development Costs R&D costs are expensed as incurred, with accruals for third-party activities requiring significant judgment, though no material differences have occurred - R&D costs are expensed as incurred, including salaries, benefits, clinical trial costs, and contract services[178] - Accruals for third-party R&D activities are based on estimates of work completed and service agreements, requiring significant judgment[178] - No material differences between accrued and actual costs have been experienced, but future variations in estimates could affect results[178] Recent Accounting Pronouncements Information on recently adopted and issued accounting pronouncements is provided in Note 1 to the financial statements - Information on recent accounting pronouncements is provided in Note 1 to the financial statements[179] Impact of Inflation and Changing Prices The company experienced increased costs due to inflation, partially offset by raising selling prices where possible - The company has experienced increased costs due to inflation for products, supplies, salaries, benefits, and general and administrative expenses[180] - These increased costs have been partially offset by raising selling prices where possible[180] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk is limited to raw material prices and foreign currency exchange rates, with no significant interest rate risk or hedging activities - Market risk is limited to raw material commodity price fluctuations (nitrile polymer for FC2) and foreign currency exchange rates[180] - The company does not use financial instruments for trading or hedging and holds no derivative financial instruments[180] - U.K. and Malaysia subsidiaries adopted the U.S. dollar as functional currency in 2009, stabilizing operating results and reducing foreign currency risk[180] - Distributors face exchange rate risk as their orders are in U.S. dollars but sales are in local currency, potentially leading to requests for pricing concessions[180] Item 8. Financial Statements and Supplementary Data This item refers to a separate section of the report for the company's financial statements and supplementary data - Financial statements and supplementary data are provided in a separate section of the report, with an index to the consolidated financial statements[180] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There are no changes in or disagreements with accountants on accounting and financial disclosure to report - None[180] Item 9A. Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of September 30, 2024, with previously identified material weaknesses remediated Limitations on Effectiveness of Controls and Procedures Controls and procedures provide only reasonable assurance due to inherent limitations, resource constraints, and the need for management judgment - Controls and procedures provide only reasonable assurance due to inherent limitations and resource constraints[181] - Management must apply judgment in evaluating the benefits of controls relative to their costs[181] Evaluation of Disclosure Controls and Procedures As of September 30, 2024, the CEO and CFO concluded that disclosure controls and procedures were effective for timely information reporting - As of September 30, 2024, the CEO and CFO concluded that disclosure controls and procedures were effective[182] - This ensures timely recording, processing, summarizing, and reporting of required information for disclosure decisions[182] Remediated Material Weaknesses in Internal Control Over Financial Reporting Two previously identified material weaknesses in internal control over financial reporting, related to technical accounting and R&D expense estimates, were remediated in Q4 2024 - Two material weaknesses were previously identified: one in applying technical accounting guidance to nonrecurring events and transactions, and another in management review of R&D expense estimates from third-party providers[184] - Both material weaknesses have been successfully remediated during the quarter ended September 30, 2024[184] - Remediation involved enhanced controls, additional review procedures, and defining precision for control activities to prevent/detect material errors[184] Changes in Internal Control over Financial Reporting No material changes in internal control over financial reporting occurred, other than remediation efforts for previously identified material weaknesses - No material changes in internal control over financial reporting occurred, other than remediation efforts for previously identified material weaknesses[185] Management's Report on Internal Control Over Financial Reporting Management concluded that the company maintained effective internal control over financial reporting as of September 30, 2024, based on the COSO 2013 framework - Management is responsible for establishing and maintaining adequate internal control over financial reporting[186] - Based on the COSO 2013 framework, management concluded that the company maintained effective internal control over financial reporting as of September 30, 2024[186] Report of Independent Registered Public Accounting Firm As a non-accelerated filer, the independent registered public accounting firm is not required to opine on internal control effectiveness - As a non-accelerated filer, the independent registered public accounting firm is not required to express an opinion on the effectiveness of internal control over financial reporting[186] Item 9B. Other Information This item states that there is no other information to report - None[187] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not Applicable[188] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement[190] - The Audit Committee members are Lucy Lu (Chairperson), Michael L. Rankowitz, and Loren Mark Katzovitz[190] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2025 Proxy Statement - Information on executive compensation is incorporated by reference from the 2025 Proxy Statement[190] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the company's 2025 Proxy Statement - Information on security ownership and equity compensation plans is incorporated by reference from the 2025 Proxy Statement[190] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2025 Proxy Statement[190] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 'Audit Committee Matters – Fees of Independent Registered Public Accounting Firm' section of the 2025 Proxy Statement[190] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the report's exhibits, including consolidated financial statements and an extensive index of agreements and corporate documents - The report includes consolidated financial statements: Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations, Stockholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements[193] - An extensive exhibit index lists various agreements (e.g., Asset Purchase, Forbearance, Stock Purchase), corporate documents (Articles of Incorporation, By-Laws), equity incentive plans, and certifications[195][196][197][198] Item 16. Form 10-K Summary This item states that the Form 10-K Summary is not applicable - Not Applicable[200] Signatures The report is signed by Mitchell S. Steiner (Chairman, CEO, President) and