Veru Inc. — Q1 FY2022 Form 10-Q
Reporting period: Three months ended December 31, 2021. The filing compares results with the three months ended December 31, 2020. Veru is developing oncology and other drug candidates and sells FC2 female condoms; ENTADFI was FDA-approved in December 2021 but had not yet contributed reported revenue.
Financial performance
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $14.1 million | $14.6 million |
| Gross profit / margin | $11.8 million / 84% | $10.8 million / 74% |
| Research and development | $10.1 million | $5.7 million |
| Selling, general and administrative | $6.7 million | $4.4 million |
| Operating income (loss) | $(5.0) million | $19.2 million |
| Net income (loss) | $(6.4) million; $(0.08) per share | $17.2 million; $0.25 basic, $0.23 diluted per share |
| Cash from (used in) operations | $(8.7) million | $0.7 million |
- FC2 revenue was $14.1 million, up about 3%. U.S. prescription-channel revenue rose 27% to $11.6 million; global public-health revenue fell 45% to $2.6 million. FC2 unit sales fell 49%, while average selling price per unit increased 102%, principally due to a higher U.S. prescription-channel sales mix.
- Cash and cash equivalents were $116.1 million at quarter-end, down from $122.4 million at September 30, 2021. Working capital was $131.8 million; total assets were $172.2 million and stockholders’ equity was $148.0 million.
- The SWK term loan was repaid in August 2021, leaving no obligations under that credit agreement. A separate residual royalty arrangement remains: it requires a 5% payment on FC2 revenue and had a recorded liability of $13.2 million, including embedded derivatives. The company estimated approximately $3.6 million of payments over the following 12 months. These obligations are not described as conventional principal debt.
Material changes versus prior period
- Net income of $17.2 million became a $6.4 million net loss. The prior-year quarter included an $18.4 million pretax gain from the PREBOOST business sale; the current quarter did not.
- Gross margin improved to 84% from 74%, reflecting the increased share of higher-margin U.S. prescription-channel FC2 sales and lower cost of sales.
- R&D expense increased 77% as more clinical programs advanced; SG&A increased 53%, including higher personnel and share-based compensation costs and ENTADFI commercialization costs.
- Operating cash flow shifted from $0.7 million provided to $8.7 million used, including increased prepaid expenses and lower accrued liabilities. The company collected $2.5 million on a PREBOOST-sale note receivable during the quarter.
Outlook, commentary and risks
- Management said existing cash and expected commercial-product receipts were adequate to fund planned operations for at least the next 12 months, while anticipating continued cash consumption to develop drug candidates. Future capital needs remain uncertain.
- ENTADFI was approved for benign prostatic hyperplasia; commercialization was underway, with first commercial sale expected in the first half of calendar 2022. The company planned direct-to-patient telemedicine and telepharmacy distribution and cited a GoodRx partnership.
- Clinical milestones described included anticipated sabizabulin Phase 3 COVID-19 trial results in the first half of calendar 2022; planned starts in Q1 2022 for a sabizabulin Phase 2b breast-cancer study and the ENABLAR-2 Phase 3 study; and expected VERU-100 Phase 2 results in the first half of 2022. These are forward-looking expectations, not reported outcomes. The company also said it suspended further work on its planned metastatic triple-negative breast-cancer Phase 2b study.
- Key risks include trial delays or unsuccessful results, regulatory uncertainty, COVID-related enrollment and operating disruption, reliance on a limited number of major customers, variable public-health tenders and order timing, pricing pressure, and increased raw-material costs. A supplier-site fire had disrupted FC2 component supply; the supplier repaired the line and supply resumed in January 2022. Management reported no material sales impact through the quarter and expected no significant future impact based on orders then available.
- The company reported no material pending legal proceedings, no material change to previously disclosed risk factors, and effective disclosure controls.
Most important facts for investors to verify
- Whether clinical trial enrollment, results, and stated timelines—including the COVID-19 and oncology programs—were achieved, and whether regulatory approval follows.
- Whether ENTADFI generated commercial sales as expected and whether its launch requires additional investment.
- Whether U.S. prescription-channel growth can offset weaker public-health sales, tender volatility, and customer concentration.
- Cash burn relative to management’s 12-month funding assessment, and the effect of R&D spending and residual royalty payments on liquidity.
- FC2 supply continuity, material-cost and pricing trends, and the assumptions underlying the Level 3 embedded-derivative valuation.