Veru(VERU) - 2025 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited financial statements for June 30, 2025, reflect decreased assets and equity, a $24.2 million net loss, an $8.6 million gain from debt extinguishment, and a going concern uncertainty Unaudited Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Data (Unaudited) | Metric | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash, cash equivalents, and restricted cash | $15,010,154 | $24,916,285 | | Total current assets | $16,193,177 | $35,223,224 | | Total assets | $27,330,758 | $60,418,772 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $6,682,015 | $11,867,968 | | Total liabilities | $11,986,125 | $28,102,060 | | Total stockholders' equity | $15,344,633 | $32,316,712 | - Total assets decreased from $60.4 million to $27.3 million, and total stockholders' equity decreased from $32.3 million to $15.3 million between September 30, 2024, and June 30, 2025, largely driven by the sale of discontinued operations (FC2 business) and continued net losses[15] Unaudited Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,020,563 | $4,846,156 | $12,669,495 | $9,489,848 | | Selling, general and administrative | $5,010,528 | $5,809,325 | $15,402,074 | $18,364,622 | | Operating loss from continuing operations | ($7,546,476) | ($10,545,481) | ($25,917,435) | ($26,826,098) | | Gain on extinguishment of debt | - | - | $8,624,778 | - | | Net loss | ($7,332,820) | ($10,968,874) | ($24,179,786) | ($29,270,803) | | Net loss per basic and diluted share | ($0.50) | ($0.75) | ($1.65) | ($2.23) | - For the nine months ended June 30, 2025, the company reported a net loss of $24.2 million, an improvement from the $29.3 million loss in the prior year period, primarily due to an $8.6 million gain on debt extinguishment related to the FC2 business sale[16] Unaudited Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $32.3 million at September 30, 2024, to $15.3 million at June 30, 2025, primarily driven by a net loss of $24.2 million over the nine-month period, partially offset by $6.6 million in share-based compensation[17][20] Unaudited Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Unaudited, Nine Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($24,551,752) | ($17,316,239) | | Net cash provided by investing activities | $18,867,232 | $14,714 | | Net cash (used in) provided by financing activities | ($4,221,611) | $36,826,910 | | Net (decrease) increase in cash | ($9,906,131) | $19,525,385 | | Cash at beginning of period | $24,916,285 | $9,625,494 | | Cash at end of period | $15,010,154 | $29,150,879 | - Investing activities provided $18.9 million in cash, primarily from the $16.3 million net proceeds from the sale of the FC2 business, while financing activities used $4.2 million for the extinguishment of the residual royalty agreement liability[21] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, going concern doubt, FC2 sale impact, SWK debt termination, shareholder litigation, and uncertain ENTADFI asset payments - The company's drug development program focuses on enobosarm for cardiometabolic diseases and sabizabulin for inflammatory diseases, having sold its FC2 business on December 30, 2024, and its ENTADFI assets on April 19, 2023[25] - Effective August 8, 2025, the company executed a 1-for-10 reverse stock split, retroactively adjusting all share and per-share amounts in the financial statements[27][111] - Management has concluded that substantial doubt exists about the company's ability to continue as a going concern for at least twelve months, as current cash is insufficient to fund operations over that period[33][34] - The sale of the FC2 business on December 30, 2024, for $18.0 million resulted in a loss on sale of $4.3 million, with the business results now reported as discontinued operations[35][36][40] - In connection with the FC2 sale, the SWK Residual Royalty Agreement was terminated with a $4.2 million change of control payment, resulting in a gain on debt extinguishment of $8.6 million[59] - The company is a defendant in several shareholder class action and derivative lawsuits related to public statements about sabizabulin for COVID-19, and a lawsuit from the purchaser of the FC2 business alleging breach of representations[89][95] Management's Discussion and Analysis of Financial Condition and Results of Operations Veru, a late-stage biopharmaceutical company, focuses on enobosarm and sabizabulin, with enobosarm's Phase 2b trial meeting its primary endpoint, while facing net losses and going concern doubts after selling commercial assets Overview and Drug Development Programs - Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for cardiometabolic and inflammatory diseases, with two main drug candidates: enobosarm and sabizabulin[114] - Obesity Program (enobosarm): The Phase 2b QUALITY trial for enobosarm, used with semaglutide, met its primary endpoint by preserving 100% of lean body mass compared to placebo, also showing greater fat loss and preserved physical function, with plans to discuss a Phase 3 program with the FDA[119][121][131] - Atherosclerosis Program (sabizabulin): The company is developing sabizabulin as a broad anti-inflammatory agent to treat atherosclerotic cardiovascular disease, leveraging a mechanism similar to colchicine but with a potentially better safety profile, having completed a pre-IND meeting with the FDA[142][145][146] Asset Sales and Discontinued Operations - The company sold its FC2 business on December 30, 2024, for $18.0 million in cash, resulting in a strategic shift and classifying the business as discontinued operations, leading to a loss of $4.3 million[147][148][149] - The company sold its ENTADFI assets to ONCO in April 2023 for a total potential consideration of $20.0 million plus milestones, though collection of remaining promissory notes is uncertain, and forbearance agreements have been entered to extend payment deadlines[150][152] Results of Operations Comparison of Operating Expenses (Three Months Ended June 30) | Expense Category | 2025 | 2024 | Change Driver | | :--- | :--- | :--- | :--- | | Research & Development | $3.0M | $4.8M | Decrease due to wind-down of Phase 2b QUALITY clinical study | | Selling, General & Administrative | $5.0M | $5.8M | Decrease primarily due to lower share-based compensation expense | Comparison of Operating Expenses (Nine Months Ended June 30) | Expense Category | 2025 | 2024 | Change Driver | | :--- | :--- | :--- | :--- | | Research & Development | $12.7M | $9.5M | Increase of $4.5M due to costs for the Phase 2b QUALITY clinical study | | Selling, General & Administrative | $15.4M | $18.4M | Decrease primarily due to lower share-based compensation expense | - For the nine months ended June 30, 2025, the company recorded a gain on debt extinguishment of $8.6 million from the termination of the Residual Royalty Agreement and a gain on the sale of ENTADFI assets of $2.2 million[162][163] Liquidity and Sources of Capital - As of June 30, 2025, the company had $15.0 million in cash, cash equivalents, and restricted cash, down from $24.9 million at September 30, 2024, with working capital decreasing to $9.5 million from $23.4 million[166] - The company has concluded there is substantial doubt about its ability to continue as a going concern, as current cash is insufficient to fund operations for the next twelve months, necessitating additional capital through equity or debt financing[167][168] - In the nine months ended June 30, 2024, the company raised $36.8 million from financing activities, primarily from a $35.2 million public offering of common stock and $1.7 million from its agreement with Lincoln Park Capital[176][181][183] - In connection with the FC2 sale, the company made a final change of control payment of $4.2 million to SWK, terminating the Residual Royalty Agreement and extinguishing the related debt[179] Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure to raw material prices and foreign currency fluctuations significantly reduced after the FC2 business sale - The company's exposure to market risk from raw material prices and foreign currency exchange rates has been significantly reduced following the sale of the FC2 business[187] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[189] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[190] PART II. OTHER INFORMATION Legal Proceedings The company faces multiple legal proceedings, including shareholder class action and derivative lawsuits regarding sabizabulin, and a fraud and breach of contract suit from the FC2 business purchaser - The company is a defendant in a putative class action lawsuit (Ewing v. Veru Inc.) and several derivative actions (Maglia, Franchi, Renbarger, Alshourbagy, Ovadias) related to statements made about sabizabulin as a COVID-19 treatment[89][90][91] - On August 5, 2025, Clear Future, Inc., the purchaser of the FC2 business, filed a lawsuit against the company alleging fraud, breach of representations and warranties, and breach of contract related to the sale[95] Risk Factors The company faces significant operational, financial, and legal risks, including no commercial revenue, going concern doubts, clinical trial delays, competition, intellectual property challenges, and litigation Risks Related to Regulation and Commercialization - The company currently has no commercial revenue and its profitability depends on obtaining regulatory approval and successfully commercializing its drug candidates[195][201] - The company faces risks of delays in its planned clinical trials for enobosarm and sabizabulin due to factors like patient enrollment, regulatory holds, or insufficient funding[195][208][214] - Reliance on third-party CROs for research and third-party manufacturers for drug supply exposes the company to risks of non-compliance with cGCP and cGMP standards, which could jeopardize clinical data and regulatory approvals[195][220][223] Risks Related to Financial Position and Need for Capital - The company has a history of net losses and expects to incur more in the foreseeable future, with its independent auditor including a "going concern" explanatory paragraph in its report, citing losses and the need for additional funding[194][241][244] - The company needs to raise substantial additional capital to fund operations and clinical trials, as failure to do so could force it to curtail or cease operations, and future financing may be on unfavorable terms and cause significant dilution[194][245] - There is uncertainty regarding the collection of additional payments from ONCO for the ENTADFI asset sale, as ONCO has previously defaulted and is operating under a forbearance agreement[194][252][253] Risks Related to Our Business - The company faces intense competition in the obesity treatment market, including from major pharmaceutical companies with greater resources[196][255][256] - The company is a defendant in shareholder class action lawsuits and is involved in disputes with the purchaser of the FC2 business, which could result in substantial legal fees and divert management's attention[196][267][279] - The company has significant payment obligations of $8.3 million to a supplier related to the prior commercialization efforts for sabizabulin[196][262] Risks Relating to Our Intellectual Property - The company's success depends on its ability to obtain and maintain intellectual property rights, with existing patents for enobosarm's composition of matter expiring in 2028 and 2029, increasing reliance on a pending method of use patent application[197][284][294] - The company is dependent on license relationships for its sabizabulin and enobosarm drug candidates and could lose commercialization rights if it fails to meet its obligations under these agreements[197][295] - The company may face claims that its intellectual property infringes on the rights of third parties, which could lead to costly litigation, substantial damages, or prevent commercialization[197][296] Risks Related to Ownership of Our Common Stock - Ownership is highly concentrated, with executive officers and directors beneficially owning approximately 15.3% of outstanding common stock as of August 7, 2025, which could limit the influence of other shareholders[198][305] - The company recently effected a 1-for-10 reverse stock split to regain compliance with Nasdaq's minimum bid price requirement, with a risk of future non-compliance and potential delisting[198][306] - Previous restatements of financial statements and identified material weaknesses in internal control (now remediated) could harm investor confidence and subject the company to legal or regulatory actions[204][309][310] Exhibits This section lists exhibits filed with Form 10-Q, including asset purchase agreements, corporate governance, and CEO/CFO certifications