VERU INC. quarterly report, Q2 FY2024

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

MetricThree months ended March 31Six 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 activitiesNot 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.