Veru(VERU) - 2020 Q3 - Quarterly Report

Forward Looking Statements This section outlines the nature of forward-looking statements and highlights key business and operational risks - This section identifies forward-looking statements within the report, which are subject to known and unknown risks and uncertainties, cautioning that actual results may differ materially from expectations[10] - Key risk factors highlighted include potential delays in clinical trials due to COVID-19, financing risks, challenges in developing a COVID-19 treatment, and risks related to product demand and manufacturing[10][11] PART I. FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's analysis of financial condition and results of operations Financial Statements The unaudited financial statements show increased assets and revenues, persistent net losses, and reliance on financing for cash flow Unaudited Condensed Consolidated Balance Sheets Total assets and stockholders' equity increased, driven primarily by a significant rise in cash and cash equivalents Condensed Consolidated Balance Sheet Data (in thousands) | Balance Sheet Item | June 30, 2020 | September 30, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $15,394 | $6,295 | | Total current assets | $26,859 | $16,807 | | Total assets | $65,188 | $53,629 | | Liabilities & Equity | | | | Total current liabilities | $17,373 | $14,020 | | Total liabilities | $23,909 | $21,296 | | Total stockholders' equity | $41,279 | $32,333 | Unaudited Condensed Consolidated Statements of Operations Net revenues grew for both three and nine-month periods, though the company continued to report a net loss Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $10,322 | $9,727 | $30,843 | $23,075 | | Gross profit | $6,519 | $6,571 | $21,225 | $15,824 | | Research and development | $4,436 | $4,866 | $13,667 | $10,139 | | Operating loss | $(1,393) | $(1,842) | $(3,477) | $(4,978) | | Net loss | $(3,025) | $(2,774) | $(7,141) | $(8,957) | | Net loss per share | $(0.05) | $(0.04) | $(0.11) | $(0.14) | Unaudited Condensed Consolidated Statements of Cash Flows Financing activities provided the primary source of cash, offsetting cash used in operations and leading to a net cash increase Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,589) | $(4,530) | | Net cash used in investing activities | $(73) | $(75) | | Net cash provided by financing activities | $10,762 | $8,885 | | Net increase in cash | $9,099 | $4,280 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, revenue breakdowns, financing agreements, and the receipt of a PPP loan - The company believes its current cash position and ability to secure financing are adequate to fund planned operations for the next 12 months[43] - On June 26, 2020, the company entered into a new common stock purchase agreement with Aspire Capital for up to $23.9 million, replacing a prior agreement[87][91][92] - In April 2020, the company received a Paycheck Protection Program (PPP) loan of approximately $540,000, which it expects to be forgiven[122] Net Revenues by Product and Channel (in thousands) | Revenue Source | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | FC2 Public health sector | $4,254 | $4,906 | $11,198 | $13,040 | | FC2 U.S. prescription channel | $5,392 | $4,378 | $18,395 | $9,412 | | PREBOOST® | $676 | $443 | $1,250 | $623 | | Total Net Revenues | $10,322 | $9,727 | $30,843 | $23,075 | Operating Income (Loss) by Segment (in thousands) | Segment | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Nine Months Ended June 30, 2020 | Nine Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Commercial | $5,264 | $5,619 | $17,609 | $11,425 | | Research and development | $(4,853) | $(4,436) | $(13,550) | $(10,104) | | Corporate | $(2,252) | $(2,576) | $(7,536) | $(6,300) | | Total Operating Loss | $(1,393) | $(1,842) | $(3,477) | $(4,978) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its biopharmaceutical pipeline, the operational impact of COVID-19, and financial results, highlighting revenue growth and liquidity sources Overview and COVID-19 Impact The company outlines its biopharmaceutical focus and details the operational impact of the COVID-19 pandemic, including a temporary facility shutdown - The company's prostate cancer pipeline includes VERU-111 (also for COVID-19), VERU-100, and Zuclomiphene Citrate[129][130][131][132] - The sole manufacturing facility for FC2 in Malaysia was temporarily shut down on March 16, 2020, but returned to 100% staffing by May 4, 2020[141] - During the quarter ended June 30, 2020, the COVID-19 pandemic did not have a material net impact on consolidated operating results, but significant uncertainty remains[142][144] Results of Operations Revenue increased for both the three and nine-month periods, driven by strong growth in the FC2 U.S. prescription channel - Growth in FC2 net revenues was primarily driven by the U.S. prescription channel, which saw a 95% increase for the nine months ended June 30, 2020[173] Financial Performance Comparison: Q3 2020 vs Q3 2019 | Metric | Q3 2020 | Q3 2019 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $10.3M | $9.7M | +6% | | Gross Profit | $6.5M | $6.6M | -1.5% | | Gross Margin | 63% | 68% | -5 p.p. | | Net Loss | $3.0M | $2.8M | +7% | Financial Performance Comparison: Nine Months 2020 vs 2019 | Metric | Nine Months 2020 | Nine Months 2019 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $30.8M | $23.1M | +34% | | Gross Profit | $21.2M | $15.8M | +34% | | Gross Margin | 69% | 69% | 0 p.p. | | Net Loss | $7.1M | $9.0M | -21% | Liquidity and Sources of Capital The company's cash position improved significantly due to financing activities, which are deemed sufficient for near-term operations - Cash and cash equivalents increased from $6.3 million to $15.4 million between September 30, 2019, and June 30, 2020[182] - Net cash from financing activities for the nine-month period was $10.8 million, primarily from $13.4 million in share sales to Aspire Capital[189] - The company entered a new common stock purchase agreement with Aspire Capital for up to $23.9 million on June 26, 2020[196][197] - In April 2020, the company received a $0.5 million PPP loan, which it expects to be fully forgiven[198] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk exposure since the last annual report - There have been no material changes to the company's market risk exposures since September 30, 2019[202] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[203] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[204] PART II. OTHER INFORMATION This part covers legal proceedings, updated risk factors, and other corporate governance matters Legal Proceedings The company is not currently party to any material pending legal proceedings - As of the filing date, the company is not involved in any material pending legal proceedings[206] Risk Factors This section updates risk factors, focusing on challenges related to the COVID-19 pandemic and the company's PPP loan - The COVID-19 pandemic may make it difficult to recruit patients for clinical trials, potentially delaying drug candidate advancement[208] - Disruptions at the FDA due to the pandemic could delay or prevent the approval of new drugs[210] - The company's pursuit of VERU-111 as a COVID-19 treatment is at an early stage and may not be successful[216] - The company's application for its PPP loan could be determined to have been impermissible, potentially leading to penalties and reputational damage[218][219] Other Information The company's Board of Directors was expanded with the appointment of a new independent director - On August 11, 2020, the Board of Directors was expanded from five to six members, and Grace Hyun, M.D. was appointed to fill the vacancy[221] Exhibits This section lists all exhibits filed with the report, including material contracts and certifications