Veru Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended September 30, 2022; comparisons are with FY2021. This is an annual filing, not a standalone fourth-quarter report, and the filing does not provide clear standalone Q4 financial results.
Business context
Veru is a biopharmaceutical company developing medicines for oncology and viral-related acute respiratory distress syndrome (ARDS). Its commercial products are FC2 Female Condom and, newly launched in FY2022, ENTADFI for benign prostatic hyperplasia. Most revenue continued to come from FC2. Pipeline programs include sabizabulin, enobosarm, VERU-100 and zuclomiphene citrate.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net revenue | $39.4 million | $61.3 million |
| Gross profit / margin | $30.6 million / 78% | $47.9 million / 78% |
| Research and development | $70.6 million | $32.7 million |
| Selling, general and administrative | $43.2 million | $20.7 million |
| Net income (loss) | $(83.8) million | $7.4 million |
| Operating cash flow | $(47.5) million | $(15.6) million |
| Cash and cash equivalents at year-end | $80.2 million | $122.4 million |
| Working capital at year-end | $63.3 million | $136.0 million |
FY2022 loss per share was $1.05, versus FY2021 income per diluted share of $0.09. Year-end stockholders’ equity was $80.8 million, down from $152.3 million. The company reported no off-balance-sheet arrangements.
The former $10 million SWK term loan was repaid in August 2021. A residual royalty agreement remains: Veru pays 5% of FC2 product revenue; its recorded liability was $10.8 million at September 30, 2022, including $1.2 million classified as short-term. The company estimated approximately $1.2 million of royalty payments over the following 12 months. Lease liabilities were $5.1 million.
Material changes versus FY2021
- Revenue fell 36%. FC2 revenue declined 35%, reflecting a 44% drop in units, partly offset by a 17% increase in average selling price per unit. U.S. prescription and global public-health FC2 revenue each fell about one-third.
- R&D rose 116%, mainly with increased activity and costs for the Phase 3 COVID-19, VERACITY and ARTEST programs. FY2022 R&D included $18.6 million of sabizabulin pre-launch inventory costs.
- SG&A more than doubled, reflecting increased staffing and share-based compensation, ENTADFI commercialization, preparation for a potential sabizabulin launch, and FC2 telehealth efforts.
- FY2021 included an $18.4 million pretax gain on the PREBOOST business sale; no such gain was recorded in FY2022. The final $5.0 million of sale proceeds was collected in FY2022.
- Operating cash use increased to $47.5 million. Cash declined by $42.2 million during FY2022, compared with a $108.8 million increase in FY2021, which included $108.0 million of net proceeds from a public stock offering.
Outlook, commentary and risks
- Management said cash and expected product sales were adequate to fund planned operations for at least 12 months from the filing’s assessment. It also warned that development and commercialization needs, including sabizabulin, could require additional financing.
- FC2 sales face uncertain telemedicine-customer ordering, variable government tender timing, pricing pressure and customer concentration. Two customers accounted for 73% of FY2022 revenue. A South African tender award covering up to 120 million units over three years provided a potential FY2023 volume source, but tender awards do not guarantee purchases of the maximum amount.
- ENTADFI became commercially available in August 2022 and revenue recognition began in September; FY2022 sales were not material. Its commercial prospects depend on adoption, distribution and competition in a mature market with generic alternatives.
- For sabizabulin in hospitalized COVID-19 patients, the completed Phase 3 trial reported a 51.6% relative reduction in Day-60 mortality in the full study. The FDA advisory committee voted 8–5 that known and potential benefits did not outweigh known and potential risks. The vote was nonbinding; the filing states the FDA would make the final EUA decision. Expedited or emergency review pathways were also being pursued in certain foreign jurisdictions.
- Key risks include clinical and regulatory uncertainty, potential need for further studies, continuing cash burn and financing or dilution, third-party manufacturing reliance, and the concentration of revenue in FC2 and a small number of customers. FC2 is manufactured at one Malaysian facility and relies on a limited supply chain for key inputs.
- The company reported a net loss of $83.8 million and a full valuation allowance against U.S. deferred tax assets; the allowance increased by $25.8 million in FY2022. The independent auditor issued an unqualified opinion on the financial statements and identified deferred-tax valuation allowance assessment as a critical audit matter.
Important facts for investors to verify
- Subsequent FDA action, if any, on the sabizabulin EUA, and whether additional or confirmatory clinical evidence is required.
- Current enrollment, timing and results expectations for Phase 3 ARTEST, ENABLAR-2 and VERACITY, as well as the planned VERU-100 Phase 3 program.
- Whether FC2 telemedicine orders recover, South African tender shipments occur as expected, and customer concentration or receivable exposure changes.
- ENTADFI sales, pricing, distribution reach and commercial adoption after launch.
- Cash burn, remaining liquidity and financing needs; the filing’s cash sufficiency statement is an estimate, not a guarantee.
- Potential effects of the residual royalty agreement and dilution from equity compensation or future capital raises.