Veru Inc. — Form 10-Q Summary
Business context and reporting period. This unaudited filing covers the fiscal quarter and nine months ended June 30, 2021; fiscal Q3 ended June 30. Veru is an oncology biopharmaceutical company developing cancer and other drug candidates, alongside its commercial FC2 female condom business. The filing compares results with the periods ended June 30, 2020.
Financial performance and position
| Metric | Three months ended June 30 | Nine months ended June 30 |
|---|---|---|
| Net revenue | 2021: $17.7 million; 2020: $10.3 million | 2021: $45.6 million; 2020: $30.8 million |
| Gross profit / margin | 2021: $13.9 million / 79%; 2020: $6.5 million / 63% | 2021: $35.6 million / 78%; 2020: $21.2 million / 69% |
| R&D expense | 2021: $11.2 million; 2020: $4.4 million | 2021: $24.4 million; 2020: $13.7 million |
| SG&A expense | 2021: $5.6 million; 2020: $3.5 million | 2021: $14.7 million; 2020: $11.0 million |
| Net income (loss) | 2021: $(2.7) million; 2020: $(3.0) million | 2021: $11.7 million; 2020: $(7.1) million |
| Operating cash flow | Not separately presented for the quarter | 2021: $(14.8) million; 2020: $(1.6) million |
Quarterly diluted loss per share was $(0.03), compared with $(0.05). Nine-month diluted earnings per share were $0.14, versus a loss of $(0.11) in 2020. The 2021 nine-month diluted share count included 7.8 million incremental dilutive shares.
At June 30, 2021, cash and cash equivalents were $123.2 million, working capital was $137.2 million, and stockholders’ equity was $155.0 million. Total assets were $180.1 million and total liabilities were $25.1 million. Current liabilities were $17.2 million. The Credit Agreement liability was $0.9 million; the separate residual royalty agreement liability was $10.8 million, including $3.7 million classified as short-term. The company expects revenue-linked payments of approximately $0.9 million under the Credit Agreement and $3.7 million under the residual royalty agreement in the 12 months after June 30.
Nine-month investing cash flow was positive $14.8 million, primarily from the PREBOOST sale. Financing cash flow was positive $109.5 million, principally from the February public offering. The offering raised $107.9 million net and issued 7.4 million shares at $15.50 per share. Nine-month operating cash use increased from 2020, in part due to higher prepaid R&D and receivables. Management said available cash and expected commercial-product cash generation should fund planned operations for at least 12 months, while noting continued cash consumption as drug candidates are developed.
Changes versus prior period and unusual items
- Quarterly revenue increased 71%; FC2 revenue rose 83%, reflecting 6% growth in units and a 72% increase in average selling price, primarily from a shift toward the higher-priced U.S. prescription channel. U.S. prescription revenue increased 150%, while global public health revenue declined 2%.
- For the nine-month period, revenue rose 48%; FC2 revenue grew 51%, with unit sales up 15% and average selling price up 31%. U.S. prescription revenue increased 79% and global public health revenue increased 6%.
- Higher R&D spending reflected multiple development programs, personnel costs, and initiation of two Phase 3 trials and one Phase 2 trial. Higher SG&A reflected personnel, share-based compensation, patent legal costs, and insurance costs.
- Nine-month 2021 operating income included an $18.4 million pre-tax gain from the December 2020 PREBOOST business sale. The $20.0 million sale consideration comprised $15.0 million received at closing and two $2.5 million notes due 12 and 18 months after closing; $5.0 million remained recorded as notes receivable at June 30.
- The nine-month tax benefit of $2.8 million included a benefit from the U.K. tax rate increase, enacted in June 2021, that raised the rate from 19% to 25% beginning April 2023. The quarter also included a $1.3 million expense from remeasurement of embedded derivatives, versus $0.2 million a year earlier.
Outlook, risks, and contingencies
- Development plans: The company was enrolling patients in Phase 3 studies of sabizabulin for prostate cancer and hospitalized COVID-19 patients, and a Phase 2 study of VERU-100. It anticipated completing the COVID-19 Phase 3 trial in Q4 2021. It planned to begin the enobosarm Phase 3 ARTEST study and an enobosarm combination Phase 2 study in the second half of calendar 2021; a sabizabulin TNBC Phase 2b study was also planned for that half-year. These are forward-looking plans, not guaranteed milestones.
- Regulatory: The FDA accepted the TADFIN NDA in April 2021, with a PDUFA date in December 2021. The filing does not report an approval decision.
- COVID-19 operations and supply: The Malaysian manufacturing facility faced reduced operating capacity and a temporary shutdown in July 2021; management reported sufficient inventory and did not expect a material near-term operating impact. On August 7, 2021, the company learned of a fire at its FC2 sheath supplier’s site, with production expected by the supplier to be affected for at least two months. Management believed inventory would protect Q4 fiscal 2021 sales and limit any impact in Q1 fiscal 2022, but identified supply disruption as a risk.
- Commercial risks: FC2 sales can vary with large public-health orders, tender timing, funding priorities, and shipment schedules. Management cited pricing pressure from large global agencies and donor governments, dependence on a limited number of customers, possible raw-material cost increases, and reliance on a sole supplier for the nitrile polymer sheath. Two customers accounted for 75% of quarterly revenue; three customers represented 90% of net receivables at June 30.
- Other matters: Management reported no material pending legal proceedings and no material changes to previously disclosed risk factors. It stated disclosure controls were effective and reported no materially affecting change in internal control over financial reporting.
Important facts for investors to verify
- Whether the FC2 supplier fire and Malaysian operating restrictions affected production, inventory, shipments, or sales after the filing date.
- Actual enrollment, trial progress, results, regulatory interactions, and financing needs for the clinical programs; the filing’s timelines and outcomes are forward-looking.
- Whether growth in FC2 U.S. prescription sales can offset public-health tender variability and pricing pressure, and whether customer concentration changes.
- Collection and timing of the $5.0 million PREBOOST sale notes and the cash impact of the FC2 revenue-linked Credit Agreement and residual royalty payments.
- Cash burn and dilution following the public offering, given negative operating cash flow and continued planned R&D investment.