Veru Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2024. Unless otherwise noted, comparisons are with the restated periods ended March 31, 2023.
Business context
Veru is a late-stage biopharmaceutical company developing enobosarm for obesity-related muscle loss and breast cancer, and sabizabulin for viral-induced ARDS. Its principal commercial product is FC2, an FDA-approved internal condom sold through U.S. prescription and global public health channels. Veru sold substantially all ENTADFI assets in April 2023.
Financial performance and liquidity
| Metric | Three months ended March 31 | Six months ended March 31 |
|---|---|---|
| Net revenue | $4.1 million, down 37% from $6.6 million | $6.3 million, down 31% from $9.1 million |
| Gross profit / margin | $0.7 million / 16%, versus $4.1 million / 62% | $1.8 million / 29%, versus $4.8 million / 53% |
| Operating expenses | $10.6 million, versus $38.5 million | $20.5 million, versus $76.7 million |
| Net loss | $10.0 million, or $0.07 per share | $18.3 million, or $0.15 per share |
| Cash used in operating activities | Not stated for the quarter | $11.7 million, versus $60.1 million |
FC2 global public health revenue rose to $3.5 million for the quarter and $5.0 million for six months; U.S. prescription revenue fell to $0.6 million and $1.2 million, respectively. The prior-year U.S. prescription comparison included sales to The Pill Club, which subsequently filed for bankruptcy. Lower-margin global public health sales made up a larger share of current-period revenue. Cost of sales also included increased inventory-obsolescence provisions.
At March 31, cash and cash equivalents were $34.7 million, working capital was $35.6 million, and stockholders’ equity was $45.2 million. Cash increased from $9.6 million at September 30, 2023, mainly after a December 2023 public offering that generated approximately $35.2 million net. Current assets were $45.1 million and current liabilities $9.6 million. Veru said cash on hand and expected FC2 sales should fund planned operations for the next 12 months, while noting continued expected losses and cash use.
The company had $9.7 million of residual royalty agreement liabilities and continues to pay 5% of FC2 product revenue under the agreement. A supplier settlement requires $8.3 million in total payments; $0.9 million was included in accounts payable and $5.0 million in other liabilities at quarter-end. No outstanding balance remained under the former term loan.
Material changes and unusual items
- R&D spending fell substantially as Veru refocused development and paused or discontinued other trials; SG&A also declined, including costs previously associated with a potential sabizabulin COVID-19 launch.
- Veru restated comparative 2023 interim financial information after identifying errors in estimating R&D costs for third-party service-provider work. The filing also describes prior-year restatements and identifies related internal-control weaknesses.
- Veru received BWV preferred shares in connection with the ENTADFI sale and recorded a $0.9 million gain. The investment’s reported fair value fell to $0.3 million by March 31, 2024, with a $0.6 million six-month fair-value loss.
- In December 2023, Veru issued 52.7 million common shares at $0.72 per share for approximately $35.2 million net proceeds, materially increasing the share count. Shares outstanding were approximately 146.4 million at March 31, 2024.
Outlook, risks and contingencies
- The FDA cleared Veru’s Phase 2b enobosarm study with a GLP-1 receptor agonist in February 2024. The company reported first-patient enrollment in April 2024 and expected topline results in the fourth calendar quarter of 2024; an extension study’s results were expected in the second quarter of 2025.
- Further breast-cancer development is subject to funding. Veru does not plan to advance sabizabulin Phase 3 development for viral-induced ARDS without external funding, such as grants or a partnership.
- BWV defaulted on certain ENTADFI promissory-note obligations. Under an April 2024 forbearance agreement, it paid $50,000 and agreed to specified payments toward the April note through a forbearance period ending no later than March 31, 2025. The separate $5.0 million September note remained due September 30, 2024. Collection and the value or liquidity of BWV preferred shares are uncertain.
- Late SEC filings make Veru ineligible to file new Form S-3 registration statements until at least March 1, 2025. The company said the delinquency may impair use of its existing shelf, prevents additional Jefferies sales absent a waiver, and will restrict sales under the current shelf after the 2024 Form 10-K until at least March 1, 2025.
- Disclosure controls were deemed ineffective as of March 31, 2024 because of material weaknesses in accounting for complex transactions and estimating third-party R&D costs. Remediation is ongoing. Shareholder class and derivative litigation related to sabizabulin statements remains pending; Veru cannot estimate potential losses.
- Other stated risks include FC2 customer concentration, telehealth-market disruption, global-sector pricing pressure, inventory obsolescence, reliance on a key raw-material supplier, clinical and regulatory uncertainty, and ongoing financing needs.
Important facts for investors to verify
- Whether FC2 sales, particularly U.S. prescription sales and global public health orders, can stabilize and support margins and cash generation.
- Actual cash use and financing needs relative to management’s stated 12-month operating runway, including the supplier settlement payments.
- Enrollment, timing and results of the enobosarm Phase 2b study, and the availability of funding for other development programs.
- BWV’s ability to meet the remaining ENTADFI note obligations and whether the preferred shares can be converted, registered and monetized.
- Progress in remediating internal-control weaknesses and the effects of the 2023 restatements.
- Capital-raising access after Form S-3 eligibility restrictions, and the potential dilution from further equity issuance.