Veru Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2022. Filed May 12, 2022. Veru is a biopharmaceutical company developing treatments for COVID-19 and other diseases, breast and prostate cancers, and commercializing FC2 and ENTADFI. ENTADFI was FDA-approved in December 2021 but was not yet available for sale pending FDA approval of product-release criteria.
Financial performance and liquidity
| Metric | Three months ended March 31, 2022 | Six months ended March 31, 2022 |
|---|---|---|
| Revenue | $13.0 million | $27.2 million |
| Gross profit / margin | $11.2 million / 86% | $23.0 million / 85% |
| Research and development | $15.5 million | $25.6 million |
| Selling, general and administrative | $7.4 million | $14.1 million |
| Net loss | $14.2 million, or $0.18 per share | $20.6 million, or $0.26 per share |
| Cash used in operating activities | Not presented for the quarter alone | $12.6 million |
At March 31, 2022, cash and cash equivalents were $112.0 million, working capital was $119.2 million, and stockholders’ equity was $136.0 million. Management said cash on hand and expected product-sale cash generation should fund planned operations for at least 12 months; it also noted that plans or capital needs could change.
The former $10.0 million SWK term loan was repaid in August 2021. The continuing FC2 residual royalty agreement requires payments equal to 5% of FC2 revenue; its recorded liability was $15.0 million ($3.8 million short-term, $11.1 million long-term). Veru estimated approximately $3.8 million of payments in the 12 months after March 31. Lease liabilities totaled $5.3 million.
Changes versus comparable periods
- Quarterly revenue fell 2% year over year; six-month revenue fell 3%. FC2 unit sales declined 49% in both comparisons, while average selling price per unit rose 92% for the quarter and 97% for the six-month period, principally reflecting a greater U.S. prescription-channel sales mix.
- Quarterly U.S. prescription FC2 revenue rose 12%, while global public health revenue fell 53%. For six months, U.S. prescription revenue rose 19% and global public health revenue fell 48%. Prior-year tender shipments to Brazil and South Africa did not recur in the periods described.
- Gross margin improved from 82% to 86% for the quarter and from 78% to 85% for six months, driven mainly by the higher-margin U.S. prescription-channel mix and lower unit sales.
- Quarterly R&D expense more than doubled, and six-month R&D expense rose from $13.3 million to $25.6 million, reflecting multiple clinical programs and personnel costs. SG&A also increased, including commercialization and telemedicine-platform costs.
- The six months ended March 31, 2021 included an $18.4 million pretax gain on the PREBOOST business sale; the 2022 period did not. Accordingly, the prior-year six-month result was net income of $14.4 million, versus a $20.6 million net loss in 2022.
- Cash declined by $10.3 million from September 30, 2021. Operating cash use was $12.6 million, partly offset by $2.0 million of investing cash inflows, chiefly collection of a $2.5 million PREBOOST-sale note.
Outlook, developments and risks
- Sabizabulin for COVID-19: After quarter-end, an April 2022 interim analysis led the independent monitoring committee to stop the Phase 3 trial for positive efficacy; the company reported a 55.2% relative reduction in deaths (p=0.0043) and no identified safety issues. Following a May 10 FDA pre-EUA meeting, Veru said it planned to submit an EUA application in Q2 calendar 2022. FDA positions at the meeting do not guarantee authorization or preclude further requests, delay or denial.
- Other clinical programs: The filing described four ongoing Phase 3 trials and two Phase 2 trials during the first half of fiscal 2022, including enobosarm breast-cancer studies, sabizabulin oncology studies and VERU-100. Veru expected continued elevated R&D spending as programs advanced.
- ENTADFI: Veru expected greater clarity from FDA on release of product during Q3 calendar 2022. Commercial launch plans included telemedicine, internet pharmacy and traditional distribution channels, with potential U.S. and international partners.
- FC2: The company received a South Africa tender award for 57% of a tender covering up to 120 million units over three years and reported receiving initial orders. It did not anticipate further shipments under the Brazil tender. Tender awards do not guarantee purchases of the maximum quantity.
- Key risks: Revenue and receivables are concentrated among a small number of customers; tender timing and shipment mix can cause substantial variability. Management cited public-sector price pressure, rising raw-material, logistics and energy costs, and potential supply or manufacturing disruptions. Sabizabulin also faces regulatory, scale-up, third-party manufacturing, funding, competition and changing public-health-priority risks. Cash needs may exceed current expectations.
- The filing reported no material pending legal proceedings, no material change to previously disclosed risk factors other than added sabizabulin/COVID-19 risks, and effective disclosure controls.
Most important facts for investors to verify
- Whether FDA action on the sabizabulin EUA occurred, and what evidence, conditions or additional requirements the FDA imposed.
- Whether the reported interim Phase 3 efficacy result is confirmed in the final trial data and supports regulatory and commercial use.
- Whether ENTADFI received FDA release authorization and generated sales, and whether the planned launch and distribution channels materialized.
- FC2 unit volumes, pricing, customer concentration and fulfillment of the South Africa tender, especially given lower public-health-sector revenue and tender variability.
- Cash burn and R&D spending relative to management’s stated 12-month funding outlook, including residual royalty payments and potential additional financing.