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What changed in VERU INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of VERU INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+556 added−617 removedSource: 10-K (2023-12-08) vs 10-K (2022-12-05)

Top changes in VERU INC.'s 2023 10-K

556 paragraphs added · 617 removed · 228 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

79 edited+103 added−152 removed120 unchanged
Biggest changeIn addition, we intend to capitalize on the strong reputations of the members of our management and board of directors with academic institutions, hospitals, physicians, pharmacists and distributors to expand our customer base and to introduce potential new products. 8 Table of Contents Our Products and Product Candidates The following table summarizes the Company’s current product and development portfolio: DEVELOPMENT PRODUCT INDICATION PHASE COVID-19 Drug Candidate Sabizabulin – oral microtubule disruptor with dual antiviral and anti-inflammatory activities Hospitalized moderate to severe COVID-19 patients at risk for ARDS Request for EUA submitted in the U.S. and similar applications in the EU and several other jurisdictions Oncology Drug Candidates - Breast Enobosarm – selective androgen receptor agonist AR+ ER+ HER2- metastatic breast cancer with sufficient AR (3 rd line metastatic setting) Phase 3 ARTEST ongoing Sabizabulin – oral microtubule disruptor AR+ ER+ HER2- metastatic breast cancer with sufficient AR (3 rd line metastatic setting) Planned Phase 2b Enobosarm + abemaciclib combination therapy – selective androgen receptor agonist + CDK 4/6 inhibitor AR+ ER+ HER2- metastatic breast cancer with sufficient AR (2 nd line metastatic setting) Phase 3 ENABLAR-2 ongoing Oncology Drug Candidates - Prostate Sabizabulin – oral microtubule disruptor Metastatic castration and androgen receptor targeting agent resistant prostate cancer Phase 1b/2 completed, Phase 3 VERACITY ongoing VERU-100 – long-acting GnRH antagonist peptide subcutaneous 3-month depot injection Advanced hormone sensitive prostate cancer Phase 2 ongoing; Planned Phase 3 Zuclomiphene citrate – oral, nonsteroidal, estrogen receptor agonist Hot flashes in men on ADT with advanced prostate cancer Phase 2 completed Planned Phase 2b Sexual Health Program Commercial Products ENTADFI ™ – tadalafil 5mg and finasteride 5mg capsule Initial treatment of men with lower urinary tract symptoms from an enlarged prostate Marketed FC2 Female Condom ® (internal condom) Unintended pregnancy and prevents STIs Marketed Our Clinical Trials Program and Our Drug Candidates Infectious Disease Program Sabizabulin 9mg for the treatment of hospitalized moderate to severe COVID-19 patients at high risk for ARDS Scientific Overview.
Biggest changeIn addition, we intend to capitalize on the strong reputations of the members of our management and board of directors with academic institutions, hospitals, physicians, pharmacists, and distributors to expand our customer base and to introduce potential new products. ‎ 9 Table of Contents Our Products and Product Candidates The following table summarizes the Company’s current product and development portfolio: DEVELOPMENT PRODUCT INDICATION PHASE Metabolic Disease Candidate Enobosarm – selective androgen receptor modulator A treatment to augment fat loss and to prevent muscle loss in sarcopenic obese or overweight elderly patients receiving a GLP - 1 RA who are at-risk for developing muscle atrophy and muscle weakness Planned Phase 2b Oncology Drug Candidate – Breast Enobosarm – selective androgen receptor modulator with or without abemaciclib CDK 4/6 inhibitor AR+ ER+ HER2- metastatic breast cancer (2 nd line metastatic setting) Phase 3 stage 1b ENABLAR-2 active but not currently recruiting Viral-related ARDS Sabizabulin – oral microtubule disruptor, broad host targeted antiviral and anti-inflammatory agent Hospitalized patients with mild to severe viral-induced ARDS Planned Phase 3 Sexual Health Program Commercial Product FC2 Female Condom ® (internal condom) Unintended pregnancy and prevents STIs Marketed Our Clinical Trials Program and Our Drug Candidates Obesity and Overweight Program - Enobosarm Scientific Overview.
Our management team has significant expertise and experience in urology, oncology, and infectious diseases as well as drug development, regulatory matters, marketing and sales, and business development which we believe facilitates effective management of our preclinical studies and clinical trials of drug candidates, potential launch planning, effective collaboration activity and product commercialization.
Our management team has significant expertise and experience in urology, oncology, endocrine, and infectious diseases as well as drug development, regulatory matters, marketing and sales, and business development which we believe facilitates effective management of our preclinical studies and clinical trials of drug candidates, potential launch planning, effective collaboration activity and product commercialization.
The FTC regulates OTC drug and non-restricted medical device advertising and promotional materials under the Federal Trade Commission Act (FTC Act), which prohibits unfair or deceptive acts or practices as well as the dissemination of any false advertisement that is likely to induce the purchase of drugs and non-restricted medical devices.
Federal Trade Commission (FTC) Regulation of Advertising. The FTC regulates OTC drug and non-restricted medical device advertising and promotional materials under the Federal Trade Commission Act (FTC Act), which prohibits unfair or deceptive acts or practices as well as the dissemination of any false advertisement that is likely to induce the purchase of drugs and non-restricted medical devices.
Its external ring remains outside the vagina, partially covering the external genitalia. The internal ring is used for insertion and helps keep the device in place during use. In the U.S., FC2 is available by prescription through multiple telemedicine and internet pharmacy channels as well as retail pharmacies.
Its external ring remains outside the vagina, partially covering the external genitalia. The internal ring is used for insertion and helps keep the device in place during use. In the U.S., FC2 is available by prescription through telemedicine and internet pharmacy channels as well as retail pharmacies.
The ACA guidance further requires health plans to cover at 100% payment of at least one form of contraception within each of the 16 different categories identified by the FDA in its current Birth Control Guide in which FC2 is in a standalone category of its own.
The ACA guidance requires health plans to cover at 100% payment of at least one form of contraception within each of the 16 different categories identified by the FDA in its current Birth Control Guide in which FC2 is in a standalone category of its own.
The results of product development, nonclinical studies, and clinical trials are submitted to the FDA as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. The FDA may convene an advisory committee to provide clinical insight on application review questions.
NDA Submission and Review by the FDA. The results of product development, nonclinical studies, and clinical trials are submitted to the FDA as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. The FDA may convene an advisory committee to provide clinical insight on application review questions.
Other existing drugs currently prescribed for advanced breast cancer are nonsteroidal aromatase inhibitors including, FEMARA ® (letrozole) tablets, for oral use and ARIMIDEX ® (anastrozole) tablet, for oral use; irreversible steroidal inhibitors including AROMASIN ® (exemestane) tablets, for oral use; selective estrogen receptor degraders including FASLODEX ® (fulvestrant) injection, for intramuscular use; and CDK 4/6 inhibitors including IBRANCE ® (palbociclib) capsules, for oral use, KISQUALI ® (ribociclib) tablets, for oral use, and VERZENIO ® (abemaciclib).
Other existing drugs currently prescribed for advanced breast cancer are nonsteroidal aromatase inhibitors including, FEMARA ® (letrozole) tablets, for oral use and ARIMIDEX ® (anastrozole) tablet, for oral use; irreversible steroidal inhibitors including AROMASIN ® (exemestane) tablets, for oral use; selective estrogen receptor degraders including FASLODEX ® (fulvestrant) injection, for intramuscular use; Orserdu ® (elacestrant) tablets, for oral use; and CDK 4/6 inhibitors including IBRANCE ® (palbociclib) capsules, for oral use, KISQUALI ® (ribociclib) tablets, for oral use, and VERZENIO ® (abemaciclib).
Other customers in the global public health sector include ministries of health or other governmental agencies, which either purchase directly or via in-country distributors, local sexual health distributors and non-governmental organizations (NGOs). The Company has sold more than 700 million female condoms worldwide and FC2 has been distributed in the U.S. and 149 other countries.
Other customers in the global public health sector include ministries of health or other governmental agencies, which either purchase directly or via in-country distributors, local sexual health distributors and non-governmental organizations (NGOs). The Company has sold more than 750 million female condoms worldwide and FC2 has been distributed in the U.S. and 149 other countries.
STI prevention) benefits FC2 offers since it can be used with many other forms of contraception. 17 Table of Contents We have built the infrastructure to allow for broad access across the U.S.
STI prevention) benefits FC2 offers since it can be used with many other forms of contraception. 16 Table of Contents We have built the infrastructure to allow for broad access across the U.S.
The Company’s operations in Malaysia are audited and certified against ISO 14001, the environmental management standard that was developed by the International Organization for Standardization (ISO) to help organizations manage the environmental impacts of their processes, products, and services. Raw Materials The principal raw material used to produce FC2 is a nitrile polymer.
The Company’s operations in Malaysia are audited and certified against ISO 14001, the environmental management standard that was developed by the International Organization for Standardization (ISO) to help organizations manage the environmental impacts of their processes, products, and services. 27 Table of Contents Raw Materials The principal raw material used to produce FC2 is a nitrile polymer.
If other female condoms enter the U.S. market, we may face increased competition in the U.S., which may put downward pressure on pricing for FC2 and adversely affect sales of FC2 in the U.S. The pharmaceutical industry is highly competitive and is characterized by extensive research efforts and rapid technological progress.
If other female condoms enter the U.S. market, we may face increased competition in the U.S., which may put downward pressure on pricing for FC2 and adversely affect sales of FC2 in the U.S. 28 Table of Contents The pharmaceutical industry is highly competitive and is characterized by extensive research efforts and rapid technological progress.
These agencies and other federal, state, and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, recordkeeping, tracking, approval, import, export, advertising, and promotion of our products. 18 Table of Contents FDA Regulation of Female Condoms .
These agencies and other federal, state, and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, recordkeeping, tracking, approval, import, export, advertising, and promotion of our products. FDA Regulation of Female Condoms .
In the two Phase 2 clinical studies conducted in women with AR+ ER+ HER2- metastatic breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated cohorts and was well tolerated with a favorable safety profile.
Enobosarm for the treatment of AR+ ER+ HER2- metastatic breast cancer. In the two Phase 2 clinical studies conducted in women with AR+ ER+ HER2- metastatic breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated cohorts and was well tolerated with a favorable safety profile.
In addition, the FDA may require Phase 4 post - marketing studies to monitor the effect of approved products and may limit further marketing of the product based on the results of these post - marketing studies. Post - Approval Requirements for Pharmaceutical Products.
In addition, the FDA may require Phase 4 post - marketing studies to monitor the effect of approved products and may limit further marketing of the product based on the results of these post - marketing studies. 21 Table of Contents Post - Approval Requirements for Pharmaceutical Products.
The Company did not incur environmental expenses in fiscal 2022 or 2021, nor does it anticipate environmental expenses in the foreseeable future.
The Company did not incur environmental expenses in fiscal 2023 or 2022, nor does it anticipate environmental expenses in the foreseeable future.
FC2 Female Condom for dual protection against unintended pregnancy and transmission of sexually transmitted infections and HIV/AIDs Product . FC2 is the only FDA-approved internal condom for the prevention of pregnancy, sexually transmitted infections, and HIV/AIDs.
FC2 Female Condom for dual protection against unintended pregnancy and transmission of sexually transmitted infections and HIV/AIDs Product . FC2 is the only FDA-approved single use internal condom for the prevention of pregnancy, sexually transmitted infections (STIs), and HIV/AIDs.
Information on the Company's website is not part of this report. 30 Table of Contents
Information on the Company's website is not part of this report. 29 Table of Contents
We are also seeking to grow revenues in the public health sector in key U.S. and global markets via partnerships/distribution agreements with regional distributors/players. Capitalize on expertise and reputation of our management team and board members .
We are also seeking additional commercial partnership opportunities while continuing to grow revenues in the public health sector in key U.S. and global markets via partnerships/distribution agreements with regional distributors/players. Capitalize on expertise and reputation of our management team and board members .
Company History Veru is a Wisconsin corporation that is the successor to The Wisconsin Pharmacal Company, Inc. (Wisconsin Pharmacal), a company which manufactured and marketed disparate specialty chemical and branded consumer products. Wisconsin Pharmacal was originally incorporated in 1971.
See “Forward Looking Statements.” Company History Veru is a Wisconsin corporation that is the successor to The Wisconsin Pharmacal Company, Inc. (Wisconsin Pharmacal), a company which manufactured and marketed disparate specialty chemical and branded consumer products. Wisconsin Pharmacal was originally incorporated in 1971.
Further, under this legislation, manufacturers will have drug product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death. 22 Table of Contents Federal Trade Commission (FTC) Regulation of Advertising.
Further, under this legislation, manufacturers will have drug product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.
The patents and applications relating to s abizabulin and related compounds have statutory expiration dates from 2029 to 2041. Patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time. Other Non-Sabizabulin Antitubulin Compounds License.
The patents and applications relating to sabizabulin and related compounds have statutory expiration dates from 2029 to 2039. In the U.S., patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time.
The confidentiality agreements are designed to protect our proprietary information and, in the case of agreements or clauses requiring invention assignment, to grant us ownership of intellectual property that is developed through a relationship with a third party. 26 Table of Contents Significant Customers The Company's two largest customers in fiscal 2022 accounted for 73% of the Company’s net revenues.
The confidentiality agreements are designed to protect our proprietary information and, in the case of agreements or clauses requiring invention assignment, to grant us ownership of intellectual property that is developed through a relationship with a third party. 26 Table of Contents Significant Customers The Company's two largest customers in fiscal 2023 accounted for 47% of the Company’s net revenues, including The Pill Club, which represented 24% of the Company’s net revenues.
Enobosarm has extensive nonclinical and clinical experience having been evaluated in 25 separate clinical studies in approximately 1,450 subjects dosed, including three Phase 2 clinical studies in advanced AR+ ER+ HER2- metastatic breast cancer involving more than 250 patients.
Enobosarm has extensive nonclinical and clinical experience having been evaluated in 25 separate clinical studies in approximately 1,450 subjects dosed, including three Phase 2 clinical trials in advanced breast cancer involving more than 191 patients.
As a result, the Company has established its own dedicated direct to patient telemedicine (telemedicine being the remote diagnosis and treatment of patients by means of telecommunications technology) platform and we have recently partnered with highly reputable telemedicine pharmacy fulfillment partner to bring our much-needed FC2 product to patients in a cost-effective and highly convenient manner.
As a result, the Company has established its own dedicated direct to patient digital telemedicine (telemedicine being the remote diagnosis and treatment of patients by means of telecommunications technology) platform to bring our much-needed FC2 product to patients in a cost-effective and highly convenient manner.
Human Capital Management As of October 31 , 2022 , the Company had 233 full-time employees, including 65 located in the U.S., 11 in the U.K., 156 in Malaysia, and one in another country to implement training and programs .
Human Capital Management As of October 31 , 2023 , the Company had 189 full-time employees, including 32 located in the U.S., 11 in the U.K., 145 in Malaysia, and one in another country to implement training and programs .
Additionally, the federal practitioner payment sunshine requirements within the ACA and its implementing regulations require certain manufacturers of drugs and medical devices for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians, certain other health care practitioners and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, such practitioners or teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members. 23 Table of Contents In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Additionally, the federal practitioner payment sunshine requirements within the ACA and its implementing regulations require certain manufacturers of drugs and medical devices for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians, certain other health care practitioners and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, such practitioners or teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.
The Company has received all such purchase price payments. Government Regulation The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products and medical devices.
Government Regulation The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products and medical devices.
If we fail to comply with these obligations or other obligations to the licensor, the licensor might have the right to terminate the license, in which event we would not be able to commercialize these drug candidates. The U.S. patent application and any patents issuing from the PCT patent applications would expire in April 2042. VERU-100 Patent Applications.
If we fail to comply with these obligations or other obligations to the licensor, the licensor might have the right to terminate the license, in which event we would not be able to commercialize these drug candidates. Any patents issuing from these patents and patent applications would expire in April 2042. 25 Table of Contents FC2 Patents.
Using a 40% AR staining cutoff, CBR at 24 weeks for ≥ 40% AR was 52% and ≥ 40% AR staining was 34% and ≥ 40% AR was 5.47 months (95% CI 2.83-11.13) versus In summary, treatment with enobosarm, a novel oral selective androgen receptor agonist, resulted in clinically significant objective tumor responses, improvement in quality of life, and favorable safety profile in a heavily pretreated population of women with AR+ER-HER2- metastatic breast cancer.
Using a 40% AR staining cutoff, CBR at 24 weeks for ≥40% AR was 52% and 13 Table of Contents In summary, treatment with enobosarm, a novel oral selective androgen receptor modulator, resulted in clinically significant objective tumor responses, improvement in quality of life, and favorable safety profile in a heavily pretreated population of women with AR+ER-HER2- metastatic breast cancer.
We hold an exclusive worldwide license to twelve issued U.S. patents, ten pending U.S. patent applications and 107 patents and patent applications in countries outside the United States, including issued patents in the EU and Japan, relating to our s abizabulin drug candidates and related compounds.
Sabizabulin and Related Compounds License. We hold an exclusive worldwide license to twelve issued U.S. patents, three pending U.S. patent applications and 84 patents and patent applications in countries outside the United States, including issued patents in the EU and Japan, relating to our sabizabulin drug candidates and related compounds, and oncology methods of use.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug candidate, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
The results of Phase 4 studies can confirm the effectiveness of a drug candidate and can provide important safety information. 19 Table of Contents Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug candidate, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
Consequently, treatments that target the estrogen receptor (ER) have been the mainstay of breast cancer therapy, but unfortunately almost all women will eventually develop resistance to endocrine therapies and alternative treatment approaches will be required including IV chemotherapy. 7 Table of Contents Our breast cancer pipeline includes enobosarm and sabizabulin.
Consequently, treatments that target the estrogen receptor (ER) have been the mainstay of breast cancer therapy, but unfortunately breast cancers in almost all women will eventually develop resistance to endocrine therapies with tumor progression, and alternative treatment approaches will be required including IV chemotherapy.
The U.S. patent and any patents issuing from the foreign patent applications would expire in July 2035. Patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time. FC2 Patents.
In the U.S., patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time.
We are working to restore historical ordering patterns with these partners in future quarters and we are working to grow revenues from our dedicated telemedicine solution while leveraging opportunities that help couples better understand how FC2 can help them take control of their sexual and reproductive health. FC2 is currently reimbursable by prescription under the Affordable Care Act (ACA).
We remain focused on growing FC2 sales and revenues in future quarters from our dedicated telemedicine solution while leveraging opportunities that help couples better understand how FC2 can help them take control of their sexual and reproductive health. FC2 is currently reimbursable by prescription under the Affordable Care Act (ACA).
Enobosarm introduces a novel endocrine therapy to patients with breast cancer that have exhausted endocrine therapies targeting ER, but prior to IV chemotherapy. Development Plan: Current and Planned Clinical Trials. Phase 3 clinical study – Enobosarm as a 3rd line treatment of AR+ER+HER2- metastatic breast cancer.
Enobosarm introduces a novel endocrine therapy to patients with breast cancer that have exhausted endocrine therapies targeting ER, but prior to IV chemotherapy. Development Plan: Current and Planned Clinical Trials.
Depending on the circumstances, failure to comply with these laws can result in penalties, including criminal, civil, and/or administrative criminal penalties, damages, fines, disgorgement, exclusion of products from reimbursement under government programs, “qui tam” actions brought by individual whistleblowers in the name of the government, refusal to allow us to enter into supply contracts, including government contracts, reputational harm, diminished profits, and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our business.
Depending on the circumstances, failure to comply with these laws can result in penalties, including criminal, civil, and/or administrative criminal penalties, damages, fines, disgorgement, exclusion of products from reimbursement under government programs, “qui tam” actions brought by individual whistleblowers in the name of the government, refusal to allow us to enter into supply contracts, including government contracts, reputational harm, diminished profits, and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our business. 23 Table of Contents The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system in ways that could affect our ability to sell our products profitably.
FC2 patents have been issued by the United States, South Africa, Mexico, Brazil and India. The patents cover key aspects of FC2, including its overall design and manufacturing process. The patents have expiration dates in 2023 and 2024. Trademarks.
FC2 patents have been issued by the United States, South Africa, Mexico, Brazil and India. The patents cover key aspects of FC2, including its overall design and manufacturing process. The patents have expiration dates in 2023 and 2024. Trademarks. The Company has a registration for the trademark “FC2 Female Condom” and the FC2 Female Condom stylized logo in the U.S.
We hold an exclusive worldwide license to sixteen issued U.S. patents, seven pending U.S. patent applications and 67 patents and patent applications in countries outside the United States, including issued Composition of Matter and Method of Use patents in the EU and Japan, relating to our enobosarm drug candidate and related compounds.
We hold an exclusive worldwide license to 16 issued U.S. patents, six pending U.S. patent applications, 74 patents and patent applications in countries outside the U.S., and one pending PCT application, including issued molecule and polymorph composition of matter and method of use patents in the U.S, EU and Japan, relating to our enobosarm drug candidate and related compounds, and their use in breast cancer.
Estrogen is one of the main drivers of breast cancer proliferation, tumor progression, and metastasis.
Up to 85% of breast cancers are ER+, and consequently, estrogen is one of the main drivers of breast cancer proliferation, tumor progression, and metastasis.
FC2 has MSAP and ISO13485 approval by regulatory authorities which covers Australian TGA, Brazil ANVISA, Health Canada, and other jurisdictions. Also, FC2 received the CE Mark which allows it to be marketed throughout the EU.
FC2 has MSAP and ISO13485 approval by regulatory authorities which covers Australian TGA, Brazil ANVISA, Health Canada, and other jurisdictions. Also, FC2 received the CE Mark which allows it to be marketed throughout the EU. The Company’s facility may also be subject to inspection by UNFPA, USAID, International Organization for Standardization (ISO), and country specific ministries of health.
This facility is subject to periodic inspection by the FDA to ensure compliance with cGMP, as well as the Germany-based notified body, which is responsible for CE and ISO accreditation.
This facility is subject to periodic inspection by the FDA to ensure compliance with cGMP, as well as the Germany-based notified body, which is responsible for CE and ISO accreditation. Competition FC2 participates in the same market as male condoms; however, it is not seen as directly competing with male condoms.
On May 10, 2022, the Company had a pre-EUA meeting with the FDA to discuss next steps including the submission of an EUA application regarding sabizabulin for COVID-19.
On May 10, 2022, we had a pre-EUA meeting with the FDA to discuss next steps including the submission of an EUA application regarding sabizabulin for COVID-19. In June 2022, we submitted a request for FDA Emergency Use Authorization. In February 2023, the FDA declined to grant our request for Emergency Use Authorization for sabizabulin.
The patents relating to enobosarm and related compounds have statutory expiration dates from 2024 to 2034. Patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time. Zuclomiphene Citrate Patent and Patent Applications.
In the U.S., patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time.
Some studies also include a data safety monitoring board (DSMB) or independent data monitoring committee (IDMC), which receives special access to unblinded data during the clinical trial and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. 19 Table of Contents In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap. Phase 1—Studies are initially conducted to test the drug candidate for safety, dosage tolerance, absorption, metabolism, distribution, and excretion in healthy volunteers or patients. Phase 2—Studies are conducted with groups of patients with a specified disease or condition to provide enough data to evaluate the preliminary efficacy, optimal dosages and dosing schedule, and expanded evidence of safety.
In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap. Phase 1—Studies are initially conducted to test the drug candidate for safety, dosage tolerance, absorption, metabolism, distribution, and excretion in healthy volunteers or patients. Phase 2—Studies are conducted with groups of patients with a specified disease or condition to provide enough data to evaluate the preliminary efficacy, optimal dosages and dosing schedule, and expanded evidence of safety.
Enobosarm is an oral, first-in-class, new chemical entity, selective androgen receptor agonist that targets the AR in AR+ ER+ HER2- metastatic breast cancer without unwanted masculinizing side effects. Enobosarm is the first new class of targeted endocrine therapy in advanced breast cancer in decades.
Enobosarm is a new class of endocrine therapy for advanced breast cancer. Enobosarm is an oral, new chemical entity, selective androgen receptor modulator designed to activate the AR in AR+ ER+ HER2- metastatic breast cancer and thereby suppress tumor growth without the unwanted masculinizing side effects.
In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product.
None of the Company’s drug candidates currently under development are expected to follow the Section 505(b)(2) approval pathway. 20 Table of Contents Orange Book Listing. In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product.
An EUA terminates when the emergency determination underlying the EUA terminates, and EUAs can be revoked under other circumstances, the timing of which may occur unexpectedly or be difficult to predict. Outside the U.S., the emergency use of medical products is subject to regulatory processes and requirements that differ from those in the U.S.
An EUA terminates when the emergency determination underlying the EUA terminates, and EUAs can be revoked under other circumstances, the timing of which may occur unexpectedly or be difficult to predict.
In the two Phase 2 clinical studies conducted in women with AR+ ER+ HER2- breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated patients and was well tolerated with a favorable safety profile.
In one of the Phase 2 clinical trials conducted in women with AR+ ER+ HER2- metastatic breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated cohorts that failed estrogen blocking agents, chemotherapy and/or CDK 4/6 inhibitors and was well tolerated with a favorable safety profile.
The Company has distribution agreements and other arrangements with commercial partners which market FC2 as a consumer health product through distributors and retailers in 22 countries, including Brazil, Spain, France, and the United Kingdom. These agreements are generally exclusive for a single country.
However, conditions in these countries can be volatile and result in unpredictable delays in program development, tender applications, and processing orders. The Company has distribution agreements and other arrangements with commercial partners which market FC2 as a consumer health product through distributors and retailers in several countries, including Brazil, Spain, France, and the United Kingdom.
Unlike latex, FC2’s nitrile polymer quickly transfers heat. FC2 can warm to body temperature immediately upon insertion, which may enhance the user’s sensation and pleasure. Unlike the male condom, FC2 may be inserted before sex, eliminating disruption during sexual intimacy. FC2 is also an alternative to latex sensitive users who are unable to use male condoms without irritation.
Unlike the male condom, FC2 may be inserted before sex, eliminating disruption during sexual intimacy. FC2 is also an alternative to latex sensitive users who are unable to use condoms without irritation. To the Company's knowledge, there is no reported allergy to the nitrile polymer.
We hold an exclusive worldwide license to two U.S. patent applications and one world patent application (PCT) from which we could enter many countries outside the U.S. This license is relating to non-sabizabulin anti-tubulin compounds. This license contains provisions requiring diligence milestones, and upfront, milestone and royalty payments to the licensor (University of Tennessee Research Foundation).
This license is relating to non-sabizabulin anti-tubulin compounds. This license contains provisions requiring diligence milestones, and upfront, milestone and royalty payments to the licensor (University of Tennessee Research Foundation).
While the market conditions are favorable for continued growth, the brand has seen decreasing sales due to lower volume from telemedicine customers because of some business challenges experienced by our customers which has resulted in a slow-down in orders over the past two quarters.
While the market conditions are favorable for continued growth, the brand has seen decreasing sales due to lower volume from digital telemedicine customers because of consolidation in the industry.
The Company’s facility may also be subject to inspection by UNFPA, USAID, International Organization for Standardization (ISO), and country specific ministries of health. 24 Table of Contents Intellectual Property We will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and enforceable patents or is effectively maintained as trade secrets.
Intellectual Property We will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and enforceable patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element of our business. 24 Table of Contents Enobosarm and Related Compounds License.
In the U.S. market, the Company has experienced fast growth in prescription sales of FC2 in prior years largely through supply agreements with leading telemedicine providers. Because FC2 is multipurpose prevention technology that provides prevention of pregnancy and transmission of STIs, including HIV/AIDS, it is an integral part of HIV/AIDS prevention and family planning programs throughout the world.
Because FC2 is multipurpose prevention technology that provides prevention of pregnancy and transmission of STIs, including HIV/AIDS, it is an integral part of HIV/AIDS prevention and family planning programs throughout the world.
In the U.S., breast cancer is the most commonly diagnosed cancer in women with an estimated 290,560 new cases and 43,780 deaths expected for 2022 with one in eight women developing invasive breast cancer in their lifetime. Breast cancer is heterogenous disease with diverse clinical and molecular characteristics.
Breast cancer is the most commonly diagnosed cancer in women with an estimated 300,590 new cases and 43,700 deaths from breast cancer expected for 2023 in the U.S. Breast cancer is a heterogenous disease with diverse clinical and molecular characteristics. Estrogen is one of the main drivers of breast cancer proliferation, tumor progression, and metastasis.
The Company procures its component sheaths from one of the leading manufacturers of nitrile surgical gloves. 27 Table of Contents Manufacturing We manufacture and warehouse FC2 within a leased facility with approximately 45,800 square feet of space in Selangor D.E., Malaysia. P roduction capacity at this facility is approximately 100 million units of FC2 annually.
Appropriate plant trials and testing have been conducted to show the new facility is capable of supplying our current nitrile grade. Manufacturing We manufacture and warehouse FC2 within a leased facility with approximately 45,800 square feet of space in Selangor D.E., Malaysia. P roduction capacity at this facility is approximately 100 million units of FC2 annually.
Competition FC2 participates in the same market as male condoms; however, it is not seen as directly competing with male condoms. Rather, studies show that providing FC2 increases use of female as well as male condoms. Male condoms cost less and can have brand names that are more widely recognized than FC2.
Rather, studies show that providing FC2 increases use of female as well as male condoms. Male condoms cost less and can have brand names that are more widely recognized than FC2. In addition, male condoms are generally manufactured and marketed by companies with significantly greater financial resources than the Company. Other parties have developed and marketed female condoms.
The AKS prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs.
Our business activities must comply with numerous healthcare laws, including but not limited to, the federal health care program anti-kickback statute (the “AKS”) and state equivalents, the Federal False Claims Act and state equivalents, federal and state health care practitioner payment sunshine laws, federal and state health information privacy laws, state price increase transparency laws, and various federal laws requiring price reporting or discounted pricing to the government. 22 Table of Contents The AKS prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs.
It is also the only non-hormonal, latex free contraceptive option available to women that can be used with most other forms of contraception providing “layering” benefits.
It comes pre-lubricated and is also the only non-hormonal, latex free contraceptive option available to women that can be used on its own or in conjunction with most other forms of contraception providing “layering” benefits. It is easy to use and covered by most insurance companies with zero out-of-pocket costs due to the Affordable Care Act.
The median duration of clinical benefit was not reached for the 9mg group (8.2 month - Not reached) and for the 18mg group was 14.1 months (11 months - 16.5 months). A post-hoc AR expression subset analysis using the AR testing measure used in G200802 was also performed in this population with known AR status and measurable disease (n=84).
A post-hoc AR expression subset analysis using the AR testing measure used in G200802 was also performed in this population with known AR status and measurable disease (n=84). Objective tumor responses correlated with the degree of % AR staining.
In addition, we seek to operate and grow our sexual health program to help fund our oncology and other clinical development efforts. The key elements of our strategy are: 6 Table of Contents Develop and launch high value, novel biopharmaceutical products for COVID-19 and other viral ARDS-related diseases.
In addition, we seek to operate and grow our sexual health program to help fund our clinical development efforts. We will need substantial capital to support our drug development and any related commercialization efforts for our drug candidates. The key elements of our strategy are: Develop enobosarm for metabolic diseases.
Oral sabizabulin could provide a non-endocrine oral therapy. Both enobosarm and sabizabulin could be an option in hormone receptor positive metastatic breast cancer patients that have exhausted endocrine therapies targeting ER, but prior to IV chemotherapy.
Enobosarm targets AR in AR+ ER+ HER2- metastatic breast cancer as a potential second line oral daily dosing endocrine therapy. Enobosarm with or without a CDK 4/6 inhibitor could be a new and important option in hormone receptor positive metastatic breast cancer patients who have exhausted endocrine therapies targeting estrogen or ER, but prior to IV chemotherapy.
The patients in this study were also heavily pretreated having failed an average of 3.7 endocrine treatments, 90% had received prior chemotherapy, and 12% had prior treatment with CDK4/6 inhibitor. Enobosarm showed efficacy with a CBR at 6 months which for 9mg was 32% (95% CI 19.5%,46.7%) and for the 18mg cohort was 29% (95% CI 17.1%,43.1%).
The Phase 2 clinical trial (G200802) was a 2-arm study evaluating 9mg and 18mg enobosarm daily oral dosing in 136 women with AR+ ER+ HER2- metastatic breast cancer. The patients in this study were also heavily pretreated having failed an average of 3.7 endocrine treatments, 90% had received prior chemotherapy, and 12% had prior treatment with CDK4/6 inhibitor.
It is easy to use and covered by most insurance companies with zero out-of-pocket costs due to the Affordable Care Act. 16 Table of Contents FC2 offers several benefits over natural rubber latex, the raw material most used in male condoms. FC2’s nitrile polymer is stronger than latex, reducing the probability that the female condom sheath will tear during use.
FC2 offers several benefits over natural rubber latex, the raw material most used in male condoms. FC2’s nitrile polymer is stronger than latex, reducing the probability that the female condom sheath will tear during use. Unlike latex, FC2’s nitrile polymer quickly transfers heat. FC2 can warm to body temperature immediately upon insertion, which may enhance the user’s sensation and pleasure.
Non - compliance with any of these requirements can result in, among other things, fines, injunctions, civil penalties, recalls, total or partial suspension of production, and criminal prosecution.
Non - compliance with any of these requirements can result in, among other things, fines, injunctions, civil penalties, recalls, total or partial suspension of production, and criminal prosecution. 18 Table of Contents Because FC2 is a commercially distributed medical device, the facilities in which FC2 is manufactured and tested are subject to periodic FDA inspection to ensure compliance with regulatory requirements, including the QSR and MDR regulations.
The Company has filed applications or secured registrations in 40 countries or jurisdictions around the world to protect the various names and symbols used in marketing its Female Condoms. 25 Table of Contents We cannot be certain that any of our pending patent applications, or those of our licensors, will result in issued patents.
The Company has filed applications in the U.S. for the trademarks “Veru” and “Veru” together with the chevron. The Company has filed applications or secured registrations in 40 countries or jurisdictions around the world to protect the various names and symbols used in marketing its Female Condoms.
FC2 is the only FDA approved for market female use product that protects against unintended pregnancies, the transmission of STIs and HIV/AIDs.
According to the CDC, data suggests that STIs in U.S. continued to increase in 2021 – an all-time high for the 6th straight year increasing from 2.4 million to 2.5 million. FC2 is the only FDA approved for market female use product that protects against unintended pregnancies, the transmission of STIs and HIV/AIDs.
(the “APP Acquisition”), which transitioned us from a single product company selling FC2 to a biopharmaceutical company with a robust drug development program. On July 31, 2017, we changed our corporate name from “The Female Health Company” to “Veru Inc.” reflecting our focus on developing and commercializing biopharmaceutical products.
(the “APP Acquisition”), which transitioned us from a single product company selling FC2 to a biopharmaceutical company with a robust drug development program.
Many of the competitors with respect to our pharmaceutical products under development have substantially greater research and development and regulatory capabilities and experience, and substantially greater management, manufacturing, distribution, marketing and financial resources, than we have or will have. 28 Table of Contents Sabizabulin is a first-in-class oral therapy that targets and crosslinks both alpha and beta tubulin and is being developed for hospitalized moderate to severe COVID-19 patients at high risk for ARDS and for breast and prostate cancers.
Many of the competitors with respect to our pharmaceutical products under development have substantially greater research and development and regulatory capabilities and experience, and substantially greater management, manufacturing, distribution, marketing and financial resources, than we have or will have.
USAID, a U.S. government funded agency, prefers to procure from the FDA product approval for market; however, there can be exceptions. Outside of the U.S., the Company has experienced increasing competition and pricing pressures for FC2.
None of these female condoms marketed or under development by other parties have secured FDA market approval. FDA market approval is required to sell female condoms in the U.S. USAID, a U.S. government funded agency, prefers to procure from the FDA product approval for market; however, there can be exceptions.
The Company has completed positive Phase 2 and positive Phase 3 clinical studies evaluating sabizabulin in hospitalized moderate to severe COVID-19 patients at high risk for ARDS and death.
We have completed positive Phase 2 and positive Phase 3 COVID-19 clinical trials, which have demonstrated that sabizabulin treatment resulted in a mortality benefit in hospitalized moderate to severe patients with COVID-19 viral lung infection at high risk for ARDS and death. The FDA granted Fast Track designation to our COVID-19 program in January 2022.
ENTADFI is now commercially available nationwide and may also be marketed and distributed through telemedicine (telemedicine being the remote diagnosis and treatment of patients by means of telecommunications technology) partnership channels in the U.S. o We are working toward the goal of returning to revenue growth from FC2 in the U.S. market through prescription sales via our established dedicated direct to patient telemedicine and pharmacy services portal, while leveraging our relationships with telemedicine and pharmacy internet providers and distributors.
We remain focused on increasing revenue from FC2 in the U.S. market via our established dedicated direct to patient telemedicine and pharmacy services portal, while leveraging our relationships with telemedicine and internet pharmacy providers and distributors.
Because FC2 is a commercially distributed medical device, the facilities in which FC2 is manufactured and tested are subject to periodic FDA inspection to ensure compliance with regulatory requirements, including the QSR and MDR regulations. The Company’s most recent FDA inspection of its U.K. and Malaysian facilities was completed in September 2010 and November 2019, respectively.
The Company’s most recent FDA inspection of its U.K. and Malaysian facilities was completed in September 2010 and November 2019, respectively. FDA Regulation of Prescription Pharmaceutical Products.
Enobosarm is an oral, first-in-class, new chemical entity, selective androgen receptor targeting agonist, for the treatment of AR+ER+HER2- metastatic breast cancer, but prior to IV chemotherapy.
Our oncology drug pipeline is focused on the clinical development of enobosarm 9mg, an oral selective androgen receptor modulator, for the treatment of AR+ ER+ HER2- metastatic breast cancer.
Under these agreements, the Company sells FC2 to the distributor partners, who market and distribute the product to consumers in the established territory. Sale of PREBOOST ® Business On December 8, 2020, the Company entered into an Asset Purchase Agreement, pursuant to which the Company sold substantially all of the assets related to the Company's PREBOOST ® business.
These agreements are generally exclusive for a single country. Under these agreements, the Company sells FC2 to the distributor partners, who market and distribute the product to consumers in the established territory.
PREBOOST ® is a 4% benzocaine medicated individual wipe for the treatment of premature ejaculation. The transaction closed on December 8, 2020. The purchase price for the transaction was $20.0 million, consisting of $15.0 million paid at closing, $2.5 million payable 12 months after closing and $2.5 million payable 18 months after closing.
The purchase price for the transaction was $20.0 million, consisting of $6.0 million paid at closing, $4.0 million payable by September 30, 2023, $5.0 million payable 12 months after closing, and $5.0 million payable by September 30, 2024, plus up to $80.0 million based on BWV’s net revenues from ENTADFI after closing (the “Milestone Payments”).
We are enrolling a Phase 3 multicenter, open label, randomized (1:1), active control clinical study, named ENABLAR-2 to evaluate the efficacy and safety of enobosarm plus abemaciclib combination therapy versus an alternative estrogen blocking agent (fulvestrant or an aromatase inhibitor) in subjects with AR+ ER+ HER2- metastatic breast cancer who have failed first line palbociclib (a CDK 4/6 inhibitor) plus an estrogen blocking agent (non-steroidal aromatase inhibitor or fulvestrant) and have a sufficient AR nuclei staining in their breast cancer tissue.
On March 30, 2023 and November 3, 2023, we met with the FDA to discuss the design of our Phase 3 clinical trial in patients with AR+ ER+ HER2- metastatic breast cancer who have tumor progression while receiving palbociclib (a CDK 4/6 inhibitor) plus an estrogen blocking agent (nonsteroidal aromatase inhibitor or selective estrogen receptor degrader).
The FDA agreed that the request for the EUA is supported by efficacy and safety from our positive Phase 3 COVID-19 study in hospitalized moderate to severe COVID-19 patients who are at high risk for ARDS and death and no additional clinical trials are required to support an NDA submission.
We have completed positive Phase 2 and positive Phase 3 COVID-19 clinical trials, which have demonstrated that sabizabulin treatment resulted in a mortality benefit in hospitalized moderate to severe patients with COVID-19 viral lung infection at high risk for ARDS and death. The FDA granted Fast Track designation to our COVID-19 program in January 2022.
These processes and requirements also vary widely from country to country, region to region, and regulatory authority to regulatory authority. 20 Table of Contents The COVID-19 pandemic has been designated as a national emergency in the U.S.
These processes and requirements also vary widely from country to country, region to region, and regulatory authority to regulatory authority. 505(b)(2) Approval Process.
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Business Overview Veru is a biopharmaceutical company with a drug development program for the treatment of hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome (ARDS) and other viral-related ARDS and for the management of advanced breast and prostate cancers, as well as a sexual health program which includes two FDA-approved products, ENTADFI™, for the treatment of benign prostatic hyperplasia (BPH) and the FC2 Female Condom® (Internal Condom).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business The COVID-19 pandemic has disrupted, and may continue to disrupt, our operations and the operations of our suppliers and customers. Our FC2 business may be affected by contracting risks with government and other international health agencies. The FDA issued a final order reclassifying female condoms as Class II medical devices, which may result in increased competition for FC2 in the U.S. market. We may experience competition, especially for sabizabulin as a treatment for COVID-19, if authorized, ENTADFI, and FC2. We may not be able to successfully implement our strategy to grow sales of FC2 or ENTADFI in the U.S. market or, if authorized, sabizabulin in the U.S. or any foreign market. We may not be able to sustain price levels for FC2 in the U.S. market. An inability to identify or complete future acquisitions could adversely affect our future growth. We may experience difficulties in integrating strategic acquisitions. We depend on two major customers for a significant portion of our net revenues. Since we sell FC2 in foreign markets, we are subject to international business risks that could adversely affect our operating results . Increases in the cost of raw materials, labor, and other costs used to manufacture FC2 could increase our cost of sales and reduce our gross margins. Currency exchange rate fluctuations could increase our expenses. We rely on a single facility to manufacture FC2, which subjects us to the risk of supply disruptions. Uncertainty and adverse changes in the general economic conditions may negatively affect our business. Material adverse or unforeseen legal judgments, fines, penalties, or settlements could have an adverse impact on our profits and cash flows. Our business and operations would suffer if we sustain cyber-attacks or other privacy or data security incidents that result in security breaches. Any failure to comply with the FCPA and similar anti-bribery laws in non-U.S. jurisdiction could materially adversely affect our business and result in civil and/or criminal sanctions. We will need to increase the size and complexity of our organization in the future, and we may experience difficulties in executing our growth strategy and managing any growth. Uncertainties in the interpretation and application of tax rules in the various jurisdictions in which we operate could materially affect our deferred tax assets, tax obligations and effective tax rate. Our effective tax rate may be negatively impacted if we are unable to realize deferred tax assets or by future changes to tax laws in jurisdictions in which we operate. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. ‎ 32 Table of Contents Risks Relating to Our Intellectual Property We may be unable to protect the proprietary nature of the intellectual property covering our products. Our or our licensors’ patents may expire or be invalidated, found to be unenforceable, narrowed or otherwise limited or our or our licensors’ patent applications may not result in issued patents or may result in patents with narrow, overbroad, or unenforceable claims. We are dependent in part on some license relationships. We may face claims that our intellectual property infringes on the intellectual property rights of third parties.
Biggest changeThese, and potential similar or related lawsuits or investigations, could result in substantial legal fees, fines, penalties or damages and may divert management’s time and attention from our business. Our business and operations would suffer if we sustain cyber-attacks or other privacy or data security incidents that result in security breaches. Any failure to comply with the FCPA and similar anti-bribery laws in non-U.S. jurisdiction could materially adversely affect our business and result in civil and/or criminal sanctions. We will need to increase the size and complexity of our organization in the future, and we may experience difficulties in executing our growth strategy and managing any growth. Uncertainties in the interpretation and application of tax rules in the various jurisdictions in which we operate could materially affect our deferred tax assets, tax obligations and effective tax rate. Our effective tax rate may be negatively impacted if we are unable to realize deferred tax assets or by future changes to tax laws in jurisdictions in which we operate. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. ‎ 31 Table of Contents Risks Relating to Our Intellectual Property We may be unable to protect the proprietary nature of the intellectual property covering our products. Our or our licensors’ patents may expire or be invalidated, found to be unenforceable, narrowed or otherwise limited or our or our licensors’ patent applications may not result in issued patents or may result in patents with narrow, overbroad, or unenforceable claims. We may not have sufficient intellectual property protection for enobosarm as a treatment to augment fat loss and to prevent muscle loss in sarcopenic obese or overweight elderly patients receiving GLP-1 RA who are at-risk for developing muscle atrophy and muscle weakness. We are dependent in part on some license relationships. We may face claims that our intellectual property infringes on the intellectual property rights of third parties.
The trading price of our common stock could decline or fluctuate in response to a variety of factors, including: our failure to meet market expectations for our performance; the timing of announcements by us or our competitors concerning significant product developments, acquisitions, or financial performance; adverse results or delays in our clinical trials for our drug candidates; changes in laws or regulations applicable to our business; competition from new products that may emerge; actual or anticipated fluctuations in our financial condition or operating results; substantial sales of our common stock; issuance of new or updated research reports from securities analysts; announcement or expectation of additional debt or equity financing efforts; additions or departures of key personnel; general stock market conditions; 63 Table of Contents attacks by short sellers or substantial short interest in our common stock; or other economic or external factors.
The trading price of our common stock could decline or fluctuate in response to a variety of factors, including: our failure to meet market expectations for our performance; the timing of announcements by us or our competitors concerning significant product developments, acquisitions, or financial performance; adverse results or delays in our clinical trials for our drug candidates; changes in laws or regulations applicable to our business; 60 Table of Contents competition from new products that may emerge; actual or anticipated fluctuations in our financial condition or operating results; substantial sales of our common stock; issuance of new or updated research reports from securities analysts; announcement or expectation of additional debt or equity financing efforts; additions or departures of key personnel; general stock market conditions; attacks by short sellers or substantial short interest in our common stock; or other economic or external factors.
Our need to manage our operations, growth and various projects effectively requires that we: improve our operational, financial, management and regulatory compliance controls and reporting systems and procedures; attract and retain sufficient numbers of talented employees; manage our commercialization activities for our drug candidates effectively and in a cost-effective manner; manage our relationship with our partners related to the commercialization of our drug candidates; manage our clinical trials effectively; manage our internal manufacturing operations effectively and in a cost-effective manner while increasing production capabilities for our current drug candidates to commercial levels; and manage our development efforts effectively while carrying out our contractual obligations to partners and other third parties. 55 Table of Contents In addition, historically, we have utilized and continue to utilize the services of part-time outside consultants to perform a number of tasks for us, including tasks related to preclinical and clinical testing.
Our need to manage our operations, growth and various projects effectively requires that we: improve our operational, financial, management and regulatory compliance controls and reporting systems and procedures; attract and retain sufficient numbers of talented employees; manage our commercialization activities for our drug candidates effectively and in a cost-effective manner; manage our relationship with our partners related to the commercialization of our drug candidates; manage our clinical trials effectively; manage our internal manufacturing operations effectively and in a cost-effective manner while increasing production capabilities for our current drug candidates to commercial levels; and manage our development efforts effectively while carrying out our contractual obligations to partners and other third parties. 51 Table of Contents In addition, historically, we have utilized and continue to utilize the services of part-time outside consultants to perform a number of tasks for us, including tasks related to preclinical and clinical testing.
Our international operations subject us to risks, including: economic and political instability; currency fluctuations; global pandemics, as governments reallocate their health or development budgets to other health areas; changes in international regulatory requirements, import duties, or export restrictions, including limitations on the repatriation of earnings; disruptions and price increases in the global transportation network, such as work stoppages, strikes or shutdowns of ports of entry or such other transportation sources, or delays or difficulties in products clearing customs; difficulties in staffing and managing foreign operations; greater difficulty in collecting accounts receivable and longer collection periods; the uncertainty of protection for intellectual property in some countries; multiple, conflicting and changing laws and regulations such as privacy regulations, including GDPR, tax laws, export and import restrictions, employment laws, immigration laws, labor laws, regulatory requirements and other governmental approvals, permits and licenses; complications in complying with trade and foreign tax laws and greater risk of a failure of foreign employees, distributors or other agents to comply with both U.S. and foreign laws, including antitrust regulations, the FCPA and other anti-bribery or corruption laws, and trade regulations ; price controls and other restrictions on foreign currency; and difficulties in our ability to enforce legal rights and remedies.
Our international operations subject us to risks, including: economic and political instability; currency fluctuations; global pandemics, as governments reallocate their health or development budgets to other health areas; changes in international regulatory requirements, import duties, or export restrictions, including limitations on the repatriation of earnings; disruptions and price increases in the global transportation network, such as work stoppages, strikes or shutdowns of ports of entry or such other transportation sources, or delays or difficulties in products clearing customs; difficulties in staffing and managing foreign operations; greater difficulty in collecting accounts receivable and longer collection periods; the uncertainty of protection for intellectual property in some countries; 47 Table of Contents multiple, conflicting and changing laws and regulations such as privacy regulations, including GDPR, tax laws, export and import restrictions, employment laws, immigration laws, labor laws, regulatory requirements and other governmental approvals, permits and licenses; complications in complying with trade and foreign tax laws and greater risk of a failure of foreign employees, distributors or other agents to comply with both U.S. and foreign laws, including antitrust regulations, the FCPA and other anti-bribery or corruption laws, and trade regulations ; price controls and other restrictions on foreign currency; and difficulties in our ability to enforce legal rights and remedies.
Our future capital requirements will depend upon a number of factors, including: the size, complexity, results and timing of our development programs and clinical trials; our ability to successfully commercialize our drug candidates, if approved; our ability to obtain sufficient supply of the compounds necessary for our drug candidates at a reasonable cost; the time and cost involved in obtaining regulatory approvals; the time and cost involved in developing any required companion diagnostics for any of our product candidates, including enobosarm; the terms and timing of any potential future collaborations, licensing or other arrangements we may establish; cash requirements of any future acquisitions, in-licenses or the development of other drug candidates; our receipt of funds from other potential sources, including cash flow from licenses and sales, and payments on outstanding receivables; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; the costs involved in manufacturing and commercializing our drug candidates; the amount of sales or other revenues from drug candidates that we may commercialize, if any, including the selling prices for such drug candidates and the availability of adequate third-party coverage and reimbursement; regulatory changes; changes to federal, state or local health care or prescription drug programs; market and economic conditions; and competing technological and market developments.
Our future capital requirements will depend upon a number of factors, including: the size, complexity, results and timing of our development programs and clinical trials; our ability to successfully commercialize our drug candidates, if approved; our ability to obtain sufficient supply of the compounds necessary for our drug candidates at a reasonable cost; the time and cost involved in obtaining regulatory approvals; the time and cost involved in developing any required companion diagnostics for any of our product candidates, including enobosarm; the terms and timing of any potential future collaborations, licensing or other arrangements we may establish; cash requirements of any future acquisitions, in-licenses or the development of other drug candidates; our receipt of funds from other potential sources, including cash flow from licenses and sales, and payments on outstanding receivables; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; the costs involved in manufacturing and commercializing our drug candidates; the amount of sales or other revenues from drug candidates that we may commercialize, if any, including the selling prices for such drug candidates and the availability of adequate third-party coverage and reimbursement; regulatory changes; changes to federal, state or local health care or prescription drug programs; 43 Table of Contents market and economic conditions; and competing technological and market developments.
If a third party asserts that we infringe its patents or other proprietary rights, we could face a number of risks that could adversely affect our business, financial condition, results of operations and prospects, including the following: infringement and other intellectual property claims would be costly and time-consuming to defend, whether or not we are ultimately successful, and could delay the regulatory approval process, consume our capital and divert management's attention from our business; we may have to pay substantial damages for past infringement if a court determines that our products or technologies infringe a competitor's patent or other proprietary rights; a court may prohibit us from selling or licensing our technologies or future products unless a third party licenses its patents or other proprietary rights to us on commercially reasonable terms, which it is not required to do; 59 Table of Contents if a license is available from a third party, we may have to pay substantial royalties or lump sum payments or grant cross licenses to our patents or other proprietary rights to obtain that license; or we may need to redesign our products so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
If a third party asserts that we infringe its patents or other proprietary rights, we could face a number of risks that could adversely affect our business, financial condition, results of operations and prospects, including the following: infringement and other intellectual property claims would be costly and time-consuming to defend, whether or not we are ultimately successful, and could delay the regulatory approval process, consume our capital and divert management's attention from our business; we may have to pay substantial damages for past infringement if a court determines that our products or technologies infringe a competitor's patent or other proprietary rights; a court may prohibit us from selling or licensing our technologies or future products unless a third party licenses its patents or other proprietary rights to us on commercially reasonable terms, which it is not required to do; if a license is available from a third party, we may have to pay substantial royalties or lump sum payments or grant cross licenses to our patents or other proprietary rights to obtain that license; or we may need to redesign our products so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
If we or our partners were to face infringement claims or challenges by third parties relating to our drug candidates, an adverse outcome could subject us to significant liabilities to such third parties and force us or our partners to curtail or cease the development of some or all of our drug candidates, which could adversely affect our business, financial condition, results of operations and prospects. 57 Table of Contents Our or our licensors’ patents may expire or be invalidated, found to be unenforceable, narrowed or otherwise limited or our or our licensors’ patent applications may not result in issued patents or may result in patents with narrow, overbroad, or unenforceable claims.
If we or our partners were to face infringement claims or challenges by third parties relating to our drug candidates, an adverse outcome could subject us to significant liabilities to such third parties and force us or our partners to curtail or cease the development of some or all of our drug candidates, which could adversely affect our business, financial condition, results of operations and prospects. 53 Table of Contents Our or our licensors’ patents may expire or be invalidated, found to be unenforceable, narrowed or otherwise limited or our or our licensors’ patent applications may not result in issued patents or may result in patents with narrow, overbroad, or unenforceable claims.
Section 382 of the Code imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss carryforwards and certain recognized built-in losses. 56 Table of Contents Risks Relating to Our Intellectual Property We may be unable to protect the proprietary nature of the intellectual property covering our products.
Section 382 of the Code imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss carryforwards and certain recognized built-in losses. 52 Table of Contents Risks Relating to Our Intellectual Property We may be unable to protect the proprietary nature of the intellectual property covering our products.
Further, third parties, such as hosted solution providers, that provide services to us, could also be a source of security risk in the event of a failure of their own security systems and infrastructure. 54 Table of Contents The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be significant.
Further, third parties, such as hosted solution providers, that provide services to us, could also be a source of security risk in the event of a failure of their own security systems and infrastructure. 50 Table of Contents The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be significant.
Failure to obtain or maintain trade secret protection could adversely affect our competitive business position. 61 Table of Contents Risks Related to Ownership of Our Common Stock Ownership in our common stock is highly concentrated and your ability to influence corporate matters may be limited as a result.
Failure to obtain or maintain trade secret protection could adversely affect our competitive business position. 57 Table of Contents Risks Related to Ownership of Our Common Stock Ownership in our common stock is highly concentrated and your ability to influence corporate matters may be limited as a result.
Depending on the extent of these or any other FDA required studies, approval of any NDA or authorization of any EUA application, including that for sabizabulin, that we submit may be significantly delayed, possibly for years, or may require us to expend more resources than we have available or can secure.
Depending on the extent of these or any other FDA required studies, approval of any NDA or authorization of any EUA application that we submit may be significantly delayed, possibly for years, or may require us to expend more resources than we have available or can secure.
In such cases, the trading price of our common stock could decline. 33 Table of Contents Risks Related to the Regulation and Commercialization of Our Products and Drug Candidates We have limited experience in obtaining regulatory approval or emergency use authorization for a drug.
In such cases, the trading price of our common stock could decline. 32 Table of Contents Risks Related to the Regulation and Commercialization of Our Products and Drug Candidates We have limited experience in obtaining regulatory approval or emergency use authorization for a drug.
Such foreign regulation may be equally or more demanding than corresponding U.S. regulation. The ACA mandates coverage of FC2 by U.S. health insurance plans. The ACA is periodically subject to legal challenges and a continuing political effort to limit its scope or even potentially repeal it.
Such foreign regulation may be equally or more demanding than corresponding U.S. regulation. 38 Table of Contents The ACA mandates coverage of FC2 by U.S. health insurance plans. The ACA is periodically subject to legal challenges and a continuing political effort to limit its scope or even potentially repeal it.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. Coverage and reimbursement may not be available for our products.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. 40 Table of Contents Coverage and reimbursement may not be available for our products.
We may encounter challenges or delays in entering into or maintaining these relationships, and any such delays or challenges may have a material adverse impact on our business, financial condition, results of operations and prospects. 36 Table of Contents We expect to rely on third party manufacturers for our drug candidates and we rely on third party manufacturers for our marketed products.
We may encounter challenges or delays in entering into or maintaining these relationships, and any such delays or challenges may have a material adverse impact on our business, financial condition, results of operations and prospects. We expect to rely on third party manufacturers for our drug candidates and we rely on third party manufacturers for our marketed products.
Difficulties encountered by this facility, such as fire, accident, natural disaster, labor disruptions, or an outbreak of a contagious disease, including COVID-19, could halt or disrupt production at the facility, delay the completion of orders, or cause the cancellation of orders. Any of these risks could increase our expenses or reduce our net revenues.
Difficulties encountered by this facility, such as fire, accident, natural disaster, labor disruptions, or an outbreak of a contagious disease, could halt or disrupt production at the facility, delay the completion of orders, or cause the cancellation of orders. Any of these risks could increase our expenses or reduce our net revenues.
While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our likelihood of launching a product and on the profitability of any marketed product. Third parties may obtain FDA regulatory exclusivity to our detriment.
While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our likelihood of launching a product and on the profitability of any marketed product. 41 Table of Contents Third parties may obtain FDA regulatory exclusivity to our detriment.
The integration of acquired companies and their operations into our operations involves a number of risks, including: the acquired business may experience losses that could adversely affect our profitability; unanticipated costs relating to the integration of acquired businesses may increase our expenses; possible failure to accomplish the strategic objectives for an acquisition; the loss of key personnel of the acquired business; difficulties in achieving planned cost-savings and synergies may increase our expenses or decrease our net revenues; diversion of management’s attention could impair their ability to effectively manage our business operations; the acquired business may require significant expenditures for product development or regulatory approvals; 51 Table of Contents the acquired business may lack adequate internal controls or have other issues with its financial systems; there may be regulatory compliance or other issues relating to the business practices of an acquired business; we may record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential impairment charges and we may also incur amortization expenses related to intangible assets; and unanticipated management or operational problems or liabilities may adversely affect our profitability and financial condition.
The integration of acquired companies and their operations into our operations involves a number of risks, including: the acquired business may experience losses that could adversely affect our profitability; unanticipated costs relating to the integration of acquired businesses may increase our expenses; possible failure to accomplish the strategic objectives for an acquisition; the loss of key personnel of the acquired business; difficulties in achieving planned cost-savings and synergies may increase our expenses or decrease our net revenues; diversion of management’s attention could impair their ability to effectively manage our business operations; the acquired business may require significant expenditures for product development or regulatory approvals; the acquired business may lack adequate internal controls or have other issues with its financial systems; there may be regulatory compliance or other issues relating to the business practices of an acquired business; we may record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential impairment charges and we may also incur amortization expenses related to intangible assets; and unanticipated management or operational problems or liabilities may adversely affect our profitability and financial condition. 46 Table of Contents Additionally, we may borrow funds or issue equity to finance strategic acquisitions.
Budget issues, spending cuts, and global health spending priorities affecting government health agencies may also adversely affect demand for FC2 and our net revenues. The FDA issued a final order reclassifying female condoms as Class II medical devices, which may result in increased competition for FC2 in the U.S. market.
Budget issues, spending cuts, and global health spending priorities affecting government health agencies may also adversely affect demand for FC2 and our net revenues. 44 Table of Contents The FDA issued a final order reclassifying female condoms as Class II medical devices, which may result in increased competition for FC2 in the U.S. market.
Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming. 44 Table of Contents We could experience misconduct by our employees. We will be exposed to the risk of employee fraud or other misconduct.
Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming. We could experience misconduct by our employees. We will be exposed to the risk of employee fraud or other misconduct.
Quarterly variations in operating results may cause us to fail to meet market expectations for our operating results and may tend to depress our stock price during such quarters. 53 Table of Contents Material adverse or unforeseen legal judgments, fines, penalties, or settlements could have an adverse impact on our profits and cash flows.
Quarterly variations in operating results may cause us to fail to meet market expectations for our operating results and may tend to depress our stock price during such quarters. Material adverse or unforeseen legal judgments, fines, penalties, or settlements could have an adverse impact on our profits and cash flows.
These third-party logistics companies may experience disruptions to the transportation channels used to distribute our products, including disruptions caused by the COVID-19 pandemic, increased airport and shipping port congestion, a lack of transportation capacity, increased fuel expenses, and a shortage of manpower or capital or due to other business interruptions.
These third-party logistics companies may experience disruptions to the transportation channels used to distribute our products, including disruptions caused by pandemics, increased airport and shipping port congestion, a lack of transportation capacity, increased fuel expenses, and a shortage of manpower or capital or due to other business interruptions.
Disruptions to or significantly increased costs associated with transportation and other distribution channels for our products may adversely affect our margins and profitability. We expect to rely on the uninterrupted and efficient operation of third-party logistics companies to transport and deliver our products, including sabizabulin, if authorized, ENTADFI and FC2.
Disruptions to or significantly increased costs associated with transportation and other distribution channels for our products may adversely affect our margins and profitability. We expect to rely on the uninterrupted and efficient operation of third-party logistics companies to transport and deliver our products, including FC2.
If we are slow or unable to adapt to any such changes, our business, prospects and ability to achieve or sustain profitability would be adversely affected. We may fail or elect not to commercialize our drug candidates or our approved or authorized products.
If we are slow or unable to adapt to any such changes, our business, prospects and ability to achieve or sustain profitability would be adversely affected. 37 Table of Contents We may fail or elect not to commercialize our drug candidates or our approved or authorized products.
We incurred a charge to earnings in fiscal 2020 resulting from the APP Acquisition, and additional charges to earnings resulting from the APP Acquisition in the future may cause our operating results to suffer.
We incurred charges to earnings in fiscal 2020 and in fiscal 2023 resulting from the APP Acquisition, and additional charges to earnings resulting from the APP Acquisition in the future may cause our operating results to suffer.
Adverse changes may occur as a result of adverse global or regional economic conditions, fluctuating oil prices, supply chain problems, inflation, political instability, declining consumer confidence, a continuation or worsening of the COVID-19 pandemic or another pandemic, unemployment, fluctuations in stock markets, contraction of credit availability, or other factors affecting economic conditions generally.
Adverse changes may occur as a result of adverse global or regional economic conditions, fluctuating oil prices, supply chain problems, inflation, political instability, declining consumer confidence, a pandemic, unemployment, fluctuations in stock markets, contraction of credit availability, or other factors affecting economic conditions generally.
We have never developed a telemedicine platform before. The cost and regulatory complexity required for launching this platform, including costs with collaborators who are helping us develop the platform, who will help us in our efforts to market the platform and FC2 and who will provide telehealth physician consultations, may outweigh any increased sales resulting from this effort.
The cost and regulatory complexity required for launching this platform, including costs with collaborators who are helping us develop the platform, who will help us in our efforts to market the platform and FC2 and who will provide telehealth physician consultations, may outweigh any increased sales resulting from this effort.
In addition, third-party manufacturers may have a limited number of facilities in which our drug candidates or products can be produced, and any interruption of the operation of those facilities due to events such as equipment malfunction or failure or damage to the facility by natural disasters could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available drug candidates or products.
In addition, third-party manufacturers may have a limited number of facilities in which our drug candidates or products can be produced, and any interruption of the operation of those facilities due to events such as equipment malfunction or failure or damage to the facility by natural disasters could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available drug candidates or products. 36 Table of Contents In addition, regulatory requirements could pose barriers to the manufacture of our drug candidates or marketed products.
We intend to rely on CROs to conduct our research and development activities. We do not have the resources to independently conduct research and development activities. Therefore, we intend to and do rely on CROs to conduct research and development activities for our drug candidates and for the execution of our clinical studies.
Therefore, we intend to and do rely on CROs to conduct research and development activities for our drug candidates and for the execution of our clinical studies.
For the foreseeable future, we expect to and do rely on third-party manufacturers and other third parties to produce, package and store sufficient quantities of drug candidates for use in our clinical trials and, in the case of ENTADFI and sabizabulin, if authorized, sufficient to meet demand. These drug candidates and products are complicated and expensive to manufacture.
For the foreseeable future, we expect to and do rely on third-party manufacturers and other third parties to produce, package and store sufficient quantities of drug candidates for use in our clinical trials. These drug candidates and products are complicated and expensive to manufacture.
Risks Related to Our Financial Position and Need for Capital We have incurred net losses in recent fiscal years and expect to continue to incur losses for the foreseeable future. We incurred net loss of $83.8 million during the year ended September 30, 2022.
Risks Related to Our Financial Position and Need for Capital We have incurred net losses in recent fiscal years and expect to continue to incur losses for the foreseeable future. We incurred a net loss of $93.1 million during the year ended September 30, 2023.
Moreover, issues identified through such inspections and reports may require significant resources to resolve. 43 Table of Contents Failure to comply with applicable laws and regulations could lead to the following actions: partial suspension or total shutdown of manufacturing; product shortages; delays in product manufacturing; FDA warning letters or other notifications of violations of law; fines or civil penalties; delays in or restrictions on obtaining new regulatory clearances or approvals; withdrawal or suspension of required clearances, approvals or licenses; product seizures or recalls; injunctions; criminal prosecution; advisories or other field actions; operating restrictions, including the inability to market a product in certain state or local jurisdictions; and prohibitions against exporting of products to, or importing products from, countries outside the U.S.
Failure to comply with applicable laws and regulations could lead to the following actions: partial suspension or total shutdown of manufacturing; product shortages; delays in product manufacturing; FDA warning letters or other notifications of violations of law; fines or civil penalties; delays in or restrictions on obtaining new regulatory clearances or approvals; withdrawal or suspension of required clearances, approvals or licenses; product seizures or recalls; injunctions; criminal prosecution; advisories or other field actions; operating restrictions, including the inability to market a product in certain state or local jurisdictions; and prohibitions against exporting of products to, or importing products from, countries outside the U.S.
Market acceptance of our marketed products, including sabizabulin, ENTADFI, and FC2, and drug candidates by physicians, patients and payors, will depend on a number of factors, many of which are beyond our control, including the following: the clinical indications for which our drug candidates are approved, if at all; acceptance by physicians and payors of each product as safe and effective treatment; the cost of treatment in relation to alternative treatments; the relative convenience and ease of administration of our products in the treatment of the conditions for which they are intended; the availability and efficacy of competitive drugs; the effectiveness of our sales and marketing efforts; the extent to which the product is approved for inclusion on formularies of hospitals and managed care organizations; the availability of coverage and adequate reimbursement by third parties, such as insurance companies and other health care payors, or by government health care programs, including Medicare and Medicaid; limitations or warnings contained in a product's FDA or other applicable regulatory agency’s approved labeling; and prevalence and severity of adverse side effects. 45 Table of Contents Even if the medical community accepts that our drug candidates are safe and efficacious for their approved indications, physicians may not immediately be receptive to the use or may be slow to adopt such products as an accepted treatment for the conditions for which they are intended.
Market acceptance of our marketed product, FC2, and drug candidates by physicians, patients and payors, will depend on a number of factors, many of which are beyond our control, including the following: the clinical indications for which our drug candidates are approved, if at all; acceptance by physicians and payors of each product as safe and effective treatment; the cost of treatment in relation to alternative treatments; the relative convenience and ease of administration of our products in the treatment of the conditions for which they are intended; the availability and efficacy of competitive drugs; the effectiveness of our sales and marketing efforts; the extent to which the product is approved for inclusion on formularies of hospitals and managed care organizations; the availability of coverage and adequate reimbursement by third parties, such as insurance companies and other health care payors, or by government health care programs, including Medicare and Medicaid; limitations or warnings contained in a product's FDA or other applicable regulatory agency’s approved labeling; and prevalence and severity of adverse side effects.
Any of these actions could have a material adverse effect on our business. Any of our products that are tested or marketed abroad are also subject to extensive regulation by foreign governments, whether or not we have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more burdensome than U.S. regulation.
Any of these actions could have a material adverse effect on our business. Any of our products that are tested or marketed abroad are also subject to extensive regulation by foreign governments, whether or not we have obtained FDA approval for a given product and its uses.
We currently maintain limited general commercial liability insurance coverage. However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses.
However, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses.
If a successful product liability claim or series of claims is brought against us for uninsured liabilities or for liabilities in excess of our insurance limits, our assets may not be sufficient to cover such claims and our business operations could be impaired.
If a successful product liability claim or series of claims is brought against us for uninsured liabilities or for liabilities in excess of our insurance limits, our assets may not be sufficient to cover such claims and our business operations could be impaired. We have been named a defendant in stockholder class actions.
Litigation may be necessary to defend against these claims. Such claims may lead to material costs for us, or an inability to protect or use valuable intellectual property rights, which could adversely affect our business, financial condition, results of operations and prospects. We may need to file lawsuits or take other actions to protect or enforce our intellectual property rights.
Such claims may lead to material costs for us, or an inability to protect or use valuable intellectual property rights, which could adversely affect our business, financial condition, results of operations and prospects. 56 Table of Contents We may need to file lawsuits or take other actions to protect or enforce our intellectual property rights.
If we infringe intellectual property rights of third parties, it may increase our costs or prevent us from being able to commercialize our product candidates. We must submit patent certifications in connection with the 505(b)(2) FDA regulatory pathway. We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of our competitors. We may need to file lawsuits or take other actions to protect or enforce our intellectual property rights. We may fail to protect the confidentiality of commercially sensitive information.
If we infringe intellectual property rights of third parties, it may increase our costs or prevent us from being able to commercialize our product candidates. We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of our competitors. We may need to file lawsuits or take other actions to protect or enforce our intellectual property rights. We may fail to protect the confidentiality of commercially sensitive information.
Even the successful defense of legal proceedings may cause us to incur substantial legal costs, may divert management's attention and resources away from our business, may prevent us or our partners from achieving or maintaining market acceptance of the affected product and may substantially increase the costs of commercializing our future products and impair the ability to generate revenues from the commercialization of these products either by us or by our strategic alliance partners.
Even the successful defense of legal proceedings may cause us to incur substantial legal costs, may divert management's attention and resources away from our business, may prevent us or our partners from achieving or maintaining market acceptance of the affected product and may substantially increase the costs of commercializing our future products and impair the ability to generate revenues from the commercialization of these products either by us or by our strategic alliance partners. 49 Table of Contents We currently maintain limited general commercial liability insurance coverage.
Similarly, any use of our equity or a convertible debt security in any acquisition would be dilutive to our stockholders and may affect the market price of our shares. We may experience difficulties in integrating strategic acquisitions.
An inability to identify or complete future acquisitions could limit our future growth. Similarly, any use of our equity or a convertible debt security in any acquisition would be dilutive to our stockholders and may affect the market price of our shares. We may experience difficulties in integrating strategic acquisitions.
It is possible that the FDA or other regulatory authorities may refuse to accept any or all of our EUAs or planned NDAs for substantive review or may conclude, after review of our data, that our applications are insufficient to obtain regulatory authorization or approval of any of our drug candidates, including sabizabulin for the treatment of certain hospitalized COVID-19 patients.
It is possible that the FDA or other regulatory authorities may refuse to accept any or all of our planned NDAs for substantive review or may conclude, after review of our data, that our applications are insufficient to obtain regulatory authorization or approval of any of our drug candidates.
As is common in the pharmaceutical industry, we will employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of our competitors. As is common in the pharmaceutical industry, we will employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors.
We may experience increased costs of raw materials, including the nitrile polymer used in FC2, and increased labor costs. We may not be able to pass along such cost increases to our customers.
Increases in the cost of raw materials, labor, and other costs used to manufacture FC2 could increase our cost of sales and reduce our gross margins. We may experience increased costs of raw materials, including the nitrile polymer used in FC2, and increased labor costs. We may not be able to pass along such cost increases to our customers.
In addition, regulatory requirements could pose barriers to the manufacture of our drug candidates or marketed products. Third-party manufacturers are required to comply with the FDA's cGMPs. As a result, the facilities used by any manufacturers of our drug candidates and marketed products must maintain a compliance status acceptable to the FDA.
Third-party manufacturers are required to comply with the FDA’s cGMPs. As a result, the facilities used by any manufacturers of our drug candidates and marketed products must maintain a compliance status acceptable to the FDA.
We may not be able to gain and retain market acceptance for our drug candidates. Physicians may not prescribe our drug candidates, if approved by the appropriate regulatory authorities for marketing and sale, which would prevent any such drug candidate from generating revenue.
Physicians may not prescribe our drug candidates, if approved by the appropriate regulatory authorities for marketing and sale, which would prevent any such drug candidate from generating revenue.
Similarly, any subsidies that we may offer to patients may be disallowed by regulators at any time. Any of these risks could harm patient acceptance of the platform and our ability to continue to grow FC2 sales.
Similarly, any subsidies that we may offer to patients may be disallowed by regulators at any time. Any of these risks could harm patient acceptance of the platform and our ability to continue to grow FC2 sales. An inability to identify or complete future acquisitions could adversely affect our future growth.
As of September 30, 2022, we had federal and state net operating loss carryforwards of approximately $112.5 million and $50.9 million, respectively, of which $29.7 million and $28.4 million, respectively, if not utilized to offset taxable income in future periods, will begin to expire in 2023 and will completely expire in 2042.
As of September 30, 2023, we had federal and state net operating loss carryforwards of approximately $140.5 million and $62.4 million, respectively, of which $29.7 million and $35.2 million, respectively, if not utilized to offset taxable income in future periods, will begin to expire in 2024 and will completely expire in 2043.
Department of Justice, the Departments of Defense and Veterans Affairs, to the extent our products are paid for directly or indirectly by those departments, state and local governments and their respective foreign equivalents.
Department of Health and Human Services, including its Office of Inspector General, the U.S. Department of Justice, the Departments of Defense and Veterans Affairs, to the extent our products are paid for directly or indirectly by those departments, state and local governments and their respective foreign equivalents.
If other female condoms enter the U.S. market, we may face increased competition in the U.S., which may put downward pressure on pricing for FC2 and adversely affect sales of FC2 in the U.S. 49 Table of Contents We may experience competition, especially for sabizabulin as a treatment for COVID-19, if authorized, ENTADFI, and FC2.
If other female condoms enter the U.S. market, we may face increased competition in the U.S., which may put downward pressure on pricing for FC2 and adversely affect sales of FC2 in the U.S. We may experience competition, especially for enobosarm as a treatment for metabolic diseases, if approved, and FC2.
As of November 30, 2022, our executive officers and directors collectively beneficially owned approximately 23.9% of the outstanding shares of our common stock, including approximately 11.2% beneficially owned by Mitchell Steiner, M.D., our Chairman, President and Chief Executive Officer, and 10.7% beneficially owned by Harry Fisch, M.D., our Vice Chairman and Chief Corporate Officer.
As of December 5, 2023, our executive officers and directors collectively beneficially owned approximately 21.7% of the outstanding shares of our common stock, including approximately 10.0% beneficially owned by Mitchell Steiner, M.D., our Chairman, President and Chief Executive Officer, and 9.4% beneficially owned by Harry Fisch, M.D., our Vice Chairman and Chief Corporate Officer.
We may not be able to obtain a license to such patent on favorable terms or at all. Failure to obtain such license may have a material adverse effect on our business.
We may not be able to obtain a license to such patent on favorable terms or at all.
We have experienced increasing competition in the global public health sector, and competitors received part of the last three South African tenders and the latest Brazilian tender.
There are other polyurethane brands from China that have CE-certification. We have experienced increasing competition in the global public health sector, and competitors received part of the last three South African tenders and the latest Brazilian tender.
There is a risk that we are infringing the proprietary rights of third parties because numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields that are the focus of our development and manufacturing efforts.
Failure to obtain such license may have a material adverse effect on our business. 55 Table of Contents There is a risk that we are infringing the proprietary rights of third parties because numerous United States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields that are the focus of our development and manufacturing efforts.
Clinical trials can be delayed for a variety of reasons, including the following: delays in obtaining regulatory approval to commence a trial; imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities; imposition of a clinical hold because of safety or efficacy concerns by the FDA, a DSMB or IDMC, a clinical trial site's IRB or us; delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites; delays in obtaining required IRB approval at each site; delays in identifying, recruiting and training suitable clinical investigators; delays in recruiting suitable patients to participate in a trial; delays in having patients complete participation in a trial or return for post-treatment follow-up; clinical sites dropping out of a trial to the detriment of enrollment; time required to add new sites; delays in obtaining sufficient supplies of clinical trial materials, including suitable active pharmaceutical ingredients; 34 Table of Contents delays resulting from negative or equivocal findings of DSMB or IDMC for a trial; or delays resulting from shutdowns or quarantines or staffing shortages relating to COVID-19 or other reasons.
Clinical trials can be delayed for a variety of reasons, including the following: delays in obtaining regulatory approval to commence a trial; imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities; imposition of a clinical hold because of safety or efficacy concerns by the FDA, a DSMB or IDMC, a clinical trial site's IRB or us; delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites; delays in obtaining required IRB approval at each site; delays in identifying, recruiting and training suitable clinical investigators; delays in recruiting suitable patients to participate in a trial; delays in having patients complete participation in a trial or return for post-treatment follow-up; clinical sites dropping out of a trial to the detriment of enrollment; time required to add new sites; delays in obtaining sufficient supplies of clinical trial materials, including suitable active pharmaceutical ingredients; delays resulting from negative or equivocal findings of DSMB or IDMC for a trial; or delays resulting from shutdowns or quarantines or staffing shortages relating to a pandemic or other reasons. 33 Table of Contents Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, a pandemic, competing clinical trials, and clinicians' and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.
We have also registered the offer and sale of all shares of common stock that we may issue under our equity compensation plans, including upon the exercise of stock options, and shares of common stock we may issue under our current common stock purchase agreement with Aspire Capital Fund, LLC (Aspire Capital), including 8,375,667 shares of common stock that we have issued under our current common stock purchase agreement with Aspire Capital and a prior agreement through the date of this report.
We have also registered the offer and sale of all shares of common stock that we may issue under our equity compensation plans, including upon the exercise of stock options, shares of common stock we may issue under our current common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), including 3,025,000 shares of common stock that we have issued under our current common stock purchase agreement with Lincoln Park through the date of this report, and shares of common stock we may issue under our Open Market Sales Agreement℠ with Jefferies LLC.
We have only obtained regulatory approval for one of our drugs under development, ENTADFI (tadalafil and finasteride) capsules, for oral use. We have never obtained an EUA in the U.S. or in any other jurisdiction.
We have only obtained regulatory approval for one drug, ENTADFI (tadalafil and finasteride) capsules, for oral use, which we sold to BWV in April 2023. We have never obtained an EUA in the U.S. or in any other jurisdiction.
For companion diagnostics, any such collaborator may be unsuccessful in obtaining regulatory approval for the planned diagnostic and, even if approved, may not be successful in commercializing the diagnostic or achieving widespread adoption of the diagnostic by physicians. If we are unsuccessful in our collaborative efforts, our ability to develop and market drug candidates could be severely limited.
For companion diagnostics, any such collaborator may be unsuccessful in obtaining regulatory approval for the planned diagnostic and, even if approved, may not be successful in commercializing the diagnostic or achieving widespread adoption of the diagnostic by physicians.
The FDA has established regulations, guidelines and policies to govern the drug development and approval process, as have foreign regulatory authorities. Any change in regulatory requirements resulting from the adoption of new legislation, regulations or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes.
Any change in regulatory requirements resulting from the adoption of new legislation, regulations or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes.
Large international agencies and government health agencies which purchase and distribute FC2 for use in family planning and HIV/AIDS prevention programs have historically purchased significant quantities of FC2.
Risks Related to Our Business Our FC2 business may be affected by contracting risks with government and other international health agencies. Large international agencies and government health agencies which purchase and distribute FC2 for use in family planning and HIV/AIDS prevention programs have historically purchased significant quantities of FC2.
Similar risks apply to our Emergency Use Authorization applications in the U.S. and other jurisdictions for sabizabulin for certain hospitalized COVID-19 patients.
Similar risks apply to Emergency Use Authorization applications in the U.S. and other jurisdictions.
We also cannot be sure that the amount of reimbursement available, if any, will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our drug candidates.
We cannot be sure that coverage and reimbursement will be available for our drug candidates, if approved. We also cannot be sure that the amount of reimbursement available, if any, will not reduce the demand for, or the price of, our products.
While we continue to evaluate potential acquisitions, we may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions on satisfactory terms, obtain regulatory approval for acquisitions where required, or otherwise complete acquisitions in the future. An inability to identify or complete future acquisitions could limit our future growth.
We intend to pursue acquisitions of new products, technologies, and/or businesses that enable us to leverage our competitive strengths. While we continue to evaluate potential acquisitions, we may not be able to identify and successfully negotiate suitable acquisitions, obtain financing for future acquisitions on satisfactory terms, obtain regulatory approval for acquisitions where required, or otherwise complete acquisitions in the future.
Additionally, we may borrow funds or issue equity to finance strategic acquisitions. Debt leverage resulting from future acquisitions could adversely affect our operating margins and limit our ability to capitalize on future business opportunities. Such borrowings may also be subject to fluctuations in interest rates.
Debt leverage resulting from future acquisitions could adversely affect our operating margins and limit our ability to capitalize on future business opportunities. Such borrowings may also be subject to fluctuations in interest rates. Equity issuances may dilute our existing shareholders and adversely affect the market price of our shares.
Disruptions to the transportation channels experienced by our third-party logistics companies may result in increased costs, including the additional use of airfreight to meet demand.
Disruptions to the transportation channels experienced by our third-party logistics companies may result in increased costs, including the additional use of airfreight to meet demand. Disruptions to this business model or our relationship with the third party if, for example, performance fails to meet our expectations, could harm our business.
Risks Related to Ownership of Our Common Stock Ownership in our common stock is highly concentrated and your ability to influence corporate matters may be limited as a result. We incurred a charge to earnings in fiscal 2020 resulting from the APP Acquisition, and additional charges to earnings resulting from the APP Acquisition in the future may cause our operating results to suffer. If we fail to maintain effective internal control over financial reporting, our ability to produce accurate financial statements or comply with applicable regulations could be impaired. We are a “smaller reporting company” and will be able to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors. There are provisions in our charter documents, Wisconsin law and our residual royalty agreement that might prevent or delay a change in control of our company. The trading price of our common stock has been volatile, and investors in our common stock may experience substantial losses. If our stock price declines, our common stock may be subject to delisting from the NASDAQ Capital Market. A substantial number of shares may be sold in the market, which may depress the market price for our common stock. Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our shareholders’ sole source of gain.
If we are not able to remediate this material weakness, or we identify additional deficiencies in the future or otherwise fail to maintain an effective system of internal controls, including disclosure controls and procedures, this could result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations. We are a “smaller reporting company” and will be able to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors. There are provisions in our charter documents, Wisconsin law and our residual royalty agreement that might prevent or delay a change in control of our company. The trading price of our common stock has been volatile, and investors in our common stock may experience substantial losses. A substantial number of shares may be sold in the market, which may depress the market price for our common stock. Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our shareholders’ sole source of gain.
We are subject to additional health care regulation and enforcement by the federal government and the states in which we conduct our business.
Such foreign regulation may be equally or more burdensome than U.S. regulation. 39 Table of Contents We are subject to additional health care regulation and enforcement by the federal government and the states in which we conduct our business.
The FDA can and does reject NDAs and require additional clinical trials, even when drug candidates achieve favorable results in Phase 3 clinical trials. Similarly, we may not successfully commercialize our approved or authorized product, ENTADFI, or we may not receive authorization to commercialize sabizabulin.
The FDA can and does reject NDAs and require additional clinical trials, even when drug candidates achieve favorable results in Phase 3 clinical trials.
Any failure to achieve and sustain sales growth for FC2 in the U.S. market may have a material adverse effect on our results of operations. 50 Table of Contents We are currently working to establish our own dedicated direct to patient telemedicine and pharmacy services portal to continue to drive sales growth for FC2.
In addition, we may lack resources to increase FC2 marketing efforts by an amount sufficient to grow revenues and drive awareness of our independent, FC2-dedicated direct to patient telemedicine and pharmacy services portal. Any failure to attain or sustain sales growth for FC2 in the U.S. market may have a material adverse effect on our results of operations.
If any of these outcomes occur, we may be forced to abandon our planned NDAs or EUAs, including that for sabizabulin, for one or more of our drug candidates, which would materially adversely affect our business.
If any of these outcomes occur, we may be forced to abandon our planned NDAs or EUAs for one or more of our drug candidates, which would materially adversely affect our business. Clinical trials involve a lengthy and expensive process with an uncertain outcome and results of earlier studies and trials may not be predictive of future trial results.
Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they will pay for and establish reimbursement levels. We cannot be sure that coverage and reimbursement will be available for our drug candidates, if approved.
Market acceptance and sales for our marketed product, FC2, and drug candidates will depend on coverage and reimbursement policies and may be affected by health care reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they will pay for and establish reimbursement levels.
FDA market approval is required to sell female condoms in the U.S., and WHO pre-qualification is required to sell female condoms to U.N. agencies. The FDA’s reclassification of female condoms from Class III to Class II medical devices may reduce the barriers for other types of female condoms to enter the U.S. market.
The FDA’s reclassification of female condoms from Class III to Class II medical devices may reduce the barriers for other types of female condoms to enter the U.S. market. FC2 has also been competing with other female condoms in markets that do not require either FDA market approval or WHO prequalification.
The cost of compliance with trade and foreign tax laws increases our expenses, and actual or alleged violations of such laws could result in enforcement actions or financial penalties that could result in substantial costs. 52 Table of Contents Increases in the cost of raw materials, labor, and other costs used to manufacture FC2 could increase our cost of sales and reduce our gross margins.
Any of these risks might disrupt the supply of our products, increase our expenses or decrease our net revenues. The cost of compliance with trade and foreign tax laws increases our expenses, and actual or alleged violations of such laws could result in enforcement actions or financial penalties that could result in substantial costs.
Failure to become and remain profitable would impair our ability to sustain operations and adversely affect the price of our common stock and our ability to raise capital. 46 Table of Contents Additional financing may be needed to support our development and commercialization activities.
If we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable would impair our ability to sustain operations and adversely affect the price of our common stock and our ability to raise capital.
Our marketed products, ENTADFI and FC2, and our drug candidates, including sabizabulin as a treatment for COVID-19, are subject to extensive and rigorous domestic government regulation, including regulation by the FDA, the FTC, the Centers for Medicare & Medicaid Services (CMS), other divisions of the U.S. Department of Health and Human Services, including its Office of Inspector General, the U.S.
We are subject to extensive and costly governmental regulation, including healthcare reform measures that may negatively impact sales of FC2. Our marketed product, FC2, and our drug candidates are subject to extensive and rigorous domestic government regulation, including regulation by the FDA, the FTC, the Centers for Medicare & Medicaid Services (CMS), other divisions of the U.S.
Clinical trials involve a lengthy and expensive process with an uncertain outcome and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any time during the clinical trial process as a result of inadequate performance of a drug, inadequate adherence by patients or investigators to clinical trial protocols or other factors.
Failure can occur at any time during the clinical trial process as a result of inadequate performance of a drug, inadequate adherence by patients or investigators to clinical trial protocols or other factors. New drugs in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through earlier clinical trials.
It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any NDA or any EUA, including that for sabizabulin, we submit.
Any delay or inability in obtaining regulatory approvals would delay or prevent us from commercializing our drug candidates, generating revenue from these proposed products and achieving and sustaining profitability. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any NDA or any EUA we submit.
New drugs in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through earlier clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials as a result of a lack of efficacy or adverse safety profiles, despite promising results in earlier trials.
A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials as a result of a lack of efficacy or adverse safety profiles, despite promising results in earlier trials. Our future clinical trials may not be successful or may be more expensive or time-consuming than we currently expect.
You may be unable to sell your stock at or above your purchase price. If our stock price declines, our common stock may be subject to delisting from the NASDAQ Capital Market.
You may be unable to sell your stock at or above your purchase price. A substantial number of shares may be sold in the market, which may depress the market price for our common stock.
It is also possible that other companies will develop a female condom, and such companies could have greater financial resources and customer contacts than us. In addition, other contraceptive and HIV-prevention and treatment methods compete with FC2 for funding and attention in the global public health sector. Other parties have developed and marketed drugs for prevention and treatment of COVID-19.
It is also possible that other companies will develop a female condom, and such companies could have greater financial resources and customer contacts than us.
A summary of the material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: Risks Related to the Regulation and Commercialization of Our Products and Drug Candidates We have limited experience in obtaining regulatory approval or emergency use authorization for a drug. We could experience delays in our planned clinical trials. Our clinical trials may be suspended or discontinued. We may be subject to risks relating to collaboration with third parties. We intend to rely on CROs to conduct our research and development activities. We expect to rely on third party manufacturers for our drug candidates and we rely on third party manufacturers for our marketed products. Disruptions to or significantly increased costs associated with transportation and other distribution channels for our products may adversely affect our margins and profitability. Changes in law could have a negative effect on the approval of our drug candidates. We may fail or elect not to commercialize our drug candidates or our approved or authorized products. Due to the COVID-19 pandemic, we may find it difficult to effectively recruit new clinical trial patients in a timely manner and to partner with clinical trial investigators and sites , which could delay or prevent us from proceeding with, or otherwise adversely affect, clinical trials of our drug candidates. Disruptions at the FDA caused by the COVID-19 pandemic could delay or prevent new drugs from being developed, approved or commercialized in a timely manner or at all, or otherwise prevent the FDA from performing normal business functions on which the operation of our business may rely, which could negatively impact our business. Our pursuit of a COVID-19 treatment candidate is still at the investigational stage.
A summary of the material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to: Risks Related to the Regulation and Commercialization of Our Products and Drug Candidates We have limited experience in obtaining regulatory approval or emergency use authorization for a drug. We could experience delays in our planned clinical trials. Our clinical trials may be suspended or discontinued. We could experience delays or unanticipated costs in connection with our planned Phase 2b clinical trial of enobosarm as a treatment to augment fat loss and to prevent muscle loss in sarcopenic obese or overweight elderly patients receiving a GLP-1 RA who are at-risk for developing muscle atrophy and muscle weakness if the FDA does not accept our trial design. We may be subject to risks relating to collaboration with third parties. We intend to rely on CROs to conduct our research and development activities. We expect to rely on third party manufacturers for our drug candidates and we rely on third party manufacturers for our marketed products. Disruptions to or significantly increased costs associated with transportation and other distribution channels for our products may adversely affect our margins and profitability. Changes in law could have a negative impact on the approval of our drug candidates. We may fail or elect not to commercialize our drug candidates or our approved or authorized products. Our development and commercialization of sabizabulin as a treatment for ARDS will depend on our ability to secure significant funding through government grants, pharmaceutical company partnerships or similar external sources. We are subject to extensive and costly governmental regulation, including healthcare reform measures that may negatively impact sales of FC2. We could experience misconduct by our employees. Coverage and reimbursement may not be available for our products. We may not be able to gain and retain market acceptance for our drug candidates. Our drug products may be subject to governmental pricing controls. Third parties may obtain FDA regulatory exclusivity to our detriment.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe lease has a five-year term that expires in August 2025 and a tenant’s option to cancel in August 2023. The Company manufactures and warehouses FC2 within a leased facility with approximately 45,800 square feet of space in Selangor D.E., Malaysia. P roduction capacity at this facility is approximately 100 million units of FC2 annually.
Biggest changeThe lease has a five-year term that expires in August 2025. 61 Table of Contents The Company manufactures and warehouses FC2 within a leased facility with approximately 45,800 square feet of space in Selangor D.E., Malaysia. P roduction capacity at this facility is approximately 100 million units of FC2 annually.
In June 2017, the Company entered into a sublease for this office space commencing on September 1, 2017 and ending on October 31, 2023. The Company continues to be responsible for performance under this lease until it expires on October 31, 2023. 64 Table of Contents The Company leases approximately 6,400 square feet of office space located in London, England.
In June 2017, the Company entered into a sublease for this office space commencing on September 1, 2017 and ending on October 31, 2023. The Company continues to be responsible for performance under this lease until it expires on October 31, 2023. The Company leases approximately 6,400 square feet of office space located in London, England.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. Neither the Company nor any of its subsidiaries is a party to any material pending legal proceedings at the date of filing of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not Applicable 65 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings. For a description of our material pending legal proceedings, see Litigation in Note 13, Contingent Liabilities , to the financial statements included in this report and incorporated herein by reference. Item 4. Mine Safety Disclosures Not Applicable 62 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 65 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 66 Item 6. R eserved 67 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 68 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 81 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 62 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 63 Item 6. R eserved 63 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 78 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Shares of our common stock trade on the NASDAQ Capital Market under the symbol “VERU”. The number of record holders of our common stock on November 30, 2022 was approximately 154. ‎ 66 Table of Contents
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Shares of our common stock trade on the Nasdaq Capital Market under the symbol “VERU”. The number of record holders of our common stock on December 5, 2023 was approximately 153.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs a result, the Company may experience significant quarter-to-quarter sales variances in the global public health sector due to the timing and shipment of large orders of FC2. In February 2022, the Company received a tender award to supply 57% of a tender covering up to 120 million female condoms over three years in the Republic of South Africa.
Biggest changeIn February 2022, the Company received a tender award to supply 57% of a tender covering up to 120 million female condoms over three years in the Republic of South Africa (the “2022 South Africa Tender”). The Company began shipping units under the 2022 South Africa Tender in the second quarter of fiscal 2023.
Investing activities Net cash from investing activities was $4.3 million in fiscal 2022, attributed to $5.0 million received on notes receivable from the sale of the Company’s PREBOOST ® business, partially offset by $0.7 million in capital expenditures for manufacturing and office equipment.
Net cash from investing activities was $4.3 million in fiscal 2022, attributed to $5.0 million received on notes receivable from the sale of the Company’s PREBOOST ® business, partially offset by $0.7 million in capital expenditures for manufacturing and office equipment.
Upon execution of the 2020 Purchase Agreement, the Company issued and sold to Aspire Capital under the 2020 Purchase Agreement 1,644,737 shares of common stock at a price per share of $3.04, for an aggregate purchase price of $5,000,000.
Upon execution of the Aspire Purchase Agreement, the Company issued and sold to Aspire Capital under the Aspire Purchase Agreement 1,644,737 shares of common stock at a price per share of $3.04, for an aggregate purchase price of $5,000,000.
The Residual Royalty Agreement will terminate upon (i) a change of control or sale of the FC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Credit Agreement, or (ii) mutual agreement of the parties.
The Residual Royalty Agreement will terminate upon (i) a change of control or sale of the FC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Residual Royalty Agreement, or (ii) mutual agreement of the parties.
The Company evaluates the carrying value of its goodwill and indefinite-lived intangible assets, which consists of in-process research and development (IPR&D), on an annual basis in the fourth quarter of each fiscal year or more frequently when indicators of impairment exist.
The Company evaluates the carrying value of its goodwill and indefinite-lived intangible assets, which consisted of in-process research and development (IPR&D), on an annual basis in the fourth quarter of each fiscal year or more frequently when indicators of impairment exist.
The Company’s significant accounting policies are disclosed in Note 1 to the financial statements included in this report. 78 Table of Contents The Company’s most critical accounting estimates include: valuation of tax assets and liabilities, measurement of fair value, and valuation of goodwill and intangible assets.
The Company’s significant accounting policies are disclosed in Note 1 to the financial statements included in this report. 75 Table of Contents The Company’s most critical accounting estimates include: valuation of tax assets and liabilities, measurement of fair value, and valuation of goodwill and intangible assets.
Adjustments to net income primarily consisted of share-based compensation of $11.2 million and noncash interest expense of $1.7 million, partially offset by a decrease in the fair value of derivative liabilities of $3.6 million.
Adjustments to net loss primarily consisted of share-based compensation of $11.2 million and noncash interest expense of $1.7 million, partially offset by a decrease in the fair value of derivative liabilities of $3.6 million.
From fiscal 2006 through fiscal 2015, the Company generated taxable income on a consolidated basis . However, the Company had a cumulative pretax loss in the U.S. for fiscal 2022 and the three preceding fiscal years.
From fiscal 2006 through fiscal 2015, the Company generated taxable income on a consolidated basis . However, the Company had a cumulative pretax loss in the U.S. for fiscal 2023 and the three preceding fiscal years.
We assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. 79 Table of Contents Fair Value Measurements As of September 30, 2022, the Company’s financial liabilities measured at fair value on a recurring basis, which consisted of embedded derivatives, represents the fair value of the change of control provisions in the Residual Royalty Agreement.
We assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. 76 Table of Contents Fair Value Measurements As of September 30, 2023, the Company’s financial liabilities measured at fair value on a recurring basis, which consisted of embedded derivatives, represents the fair value of the change of control provisions in the Residual Royalty Agreement.
Other than the 212,130 shares of common stock issued to Aspire Capital in consideration for entering into the 2020 Purchase Agreement and the initial sale of 1,644,737 shares of common stock, the Company has no obligation to sell any shares of common stock pursuant to the 2020 Purchase Agreement and the timing and amount of any such sales are in the Company's sole discretion subject to the conditions and terms set forth in the 2020 Purchase Agreement.
Other than the 212,130 shares of common stock issued to Aspire Capital in consideration for entering into the Aspire Purchase Agreement and the initial sale of 1,644,737 shares of common stock, the Company had no obligation to sell any shares of common stock pursuant to the Aspire Purchase Agreement and the timing and amount of any such sales were in the Company's sole discretion subject to the conditions and terms set forth in the Aspire Purchase Agreement.
Management has projected future pretax losses in the U.S. driven by the investment in research and development and based on their analysis concluded that an additional valuation allowance of $25.8 million should be recorded against the U.S. deferred tax assets related to federal and state net operating loss carryforwards as of September 30, 2022.
Management has projected future pretax losses in the U.S. driven by the investment in research and development and based on their analysis concluded that an additional valuation allowance of $19.9 million should be recorded against the U.S. deferred tax assets related to federal and state net operating loss carryforwards as of September 30, 2023.
Significant variances in the Company’s results have historically resulted from the timing and shipment of large orders rather than from any fundamental changes in the business or the underlying demand for FC2. The Company is also currently seeing pressure on pricing for FC2 by large global agencies and donor governments in the developed world.
Significant variances in the Company’s results have historically resulted from the timing and shipment of large orders rather than from any fundamental changes in the business or the underlying demand for FC2. The Company is also currently seeing pressure on pricing for FC2 by large global agencies and governments that donate to those global agencies.
In the global public health sector, the Company markets FC2 to entities, including ministries of health, government health agencies, U.N. agencies, nonprofit organizations and commercial partners, that work to support and improve the lives, health and well-being of women around the world.
In the global public health sector outside the U.S., we market FC2 to entities, including ministries of health, government health agencies, U.N. agencies, nonprofit organizations and commercial partners, that work to support and improve the lives, health and well-being of women around the world.
The U.S. continues to have a full valuation allowance on its deferred tax assets; therefore, activity in the U.S. does not have a material effect on income tax expense. Liquidity and Sources of Capital Liquidity Our cash and cash equivalents on September 30, 2022 was $80.2 million, compared to $122.4 million on September 30, 2021.
The U.S. continues to have a full valuation allowance on its deferred tax assets; therefore, activity in the U.S. does not have a material effect on income tax expense. Liquidity and Sources of Capital Liquidity Our cash and cash equivalents on hand at September 30, 2023 was $9.6 million, compared to $80.2 million at September 30, 2022.
Common Stock Purchase Agreements On June 26, 2020, the Company entered into a common stock purchase agreement (the “2020 Purchase Agreement”) with Aspire Capital which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right, from time to time in its sole discretion during the 36-month term of the 2020 Purchase Agreement, to direct Aspire Capital to purchase up to $23.9 million of the Company’s common stock in the aggregate.
Aspire Capital Purchase Agreement On June 26, 2020, the Company entered into a common stock purchase agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”) which provided that, upon the terms and subject to the conditions and limitations set forth therein, the Company had the right, from time to time in its sole discretion during the 36-month term of the Aspire Purchase Agreement, to direct Aspire Capital to purchase up to $23.9 million of the Company’s common stock in the aggregate.
The decrease in cash from changes in operating assets and liabilities included an increase in accounts receivable of $3.6 million and an increase in prepaid expenses and other assets of $8.6 million, partially offset by a decrease in accrued expenses and other current liabilities of $4.2 million.
The decrease in cash from changes in operating assets and liabilities included a decrease in accrued expenses and other current liabilities of $13.6 million, a decrease in accounts payable of $7.4 million, and an increase in accounts receivable of $4.2 million, partially offset by a decrease in prepaid expenses and other assets of $10.0 million.
Although management uses the best information available, it is reasonably possible that the estimates used by the Company will be materially different from the actual results. These differences could have a material effect on the Company's future results of operations and financial condition.
Veru Biopharma UK Limited has a full valuation allowance of $0.3 million. Although management uses the best information available, it is reasonably possible that the estimates used by the Company will be materially different from the actual results. These differences could have a material effect on the Company's future results of operations and financial condition.
The fair value of the embedded derivatives at September 30, 2022 was $4.3 million compared to $7.9 million at September 30, 2021. The Company recognized non-operating income of $3.6 million to adjust the fair value of these instruments.
The fair value of the embedded derivatives at September 30, 2023 was $1.3 million compared to $4.3 million at September 30, 2022. The Company recognized non-operating income of $3.0 million to adjust the fair value of these instruments.
Cash used in operating activities included net loss of $83.8 million, adjustments to reconcile net income to net cash provided by operating activities totaling an increase of $10.4 million and changes in operating assets and liabilities of $25.9 million.
Our operating activities used cash of $47.5 million in fiscal 2022. Cash used in operating activities included net loss of $83.8 million, adjustments to reconcile net loss to net cash used in operating activities totaling an increase of $10.4 million and changes in operating assets and liabilities of $25.9 million.
During the period the assets are considered indefinite-lived, they are tested for impairment. If the related project is terminated or abandoned, the Company may have a full or partial impairment related to the IPR&D assets, calculated as the excess of their carrying value over fair value.
If the related project is terminated or abandoned, the Company may have a full or partial impairment related to the IPR&D assets, calculated as the excess of their carrying value over fair value.
The Company currently estimates the aggregate amount of quarterly revenue-based payments payable during the 12-month period subsequent to September 30, 2022 will be approximately $1.2 million under the Residual Royalty Agreement.
The Company made total payments under the Residual Royalty Agreement of $0.6 million and $2.6 million during the year ended September 30, 2023 and 2022, respectively . The Company currently estimates the aggregate amount of quarterly revenue-based payments payable during the 12-month period subsequent to September 30, 2023 will be approximately $0.9 million under the Residual Royalty Agreement.
In fiscal 2023, we expect to continue this trend of increased expenses relating to research and development due to advancement of multiple drug candidates. ‎ 74 Table of Contents Results of Operations YEAR ENDED SEPTEMBER 30, 2022 COMPARED TO YEAR ENDED SEPTEMBER 30 , 2021 The Company generated net revenues of $39.4 million and net loss of $83.8 million, or $(1.05) per basic and diluted common share, in fiscal 2022, compared to net revenues of $61.3 million and net income of $7.4 million, or $0.10 per basic common share and $0.09 per diluted common share, in fiscal 2021 .
We expect to continue this trend of investing significant resources in research and development due to advancement of our drug candidates. ‎ 70 Table of Contents Results of Operations YEAR ENDED SEPTEMBER 30, 2023 COMPARED TO YEAR ENDED SEPTEMBER 30 , 2022 The Company generated net revenues of $16.3 million and net loss of $93.1 million, or $(1.10) per basic and diluted common share, in fiscal 2023, compared to net revenues of $39.4 million and net loss of $83.8 million, or $(1.05) per basic and diluted common share, in fiscal 2022 .
The Company sells FC2 in both the commercial sector and in the public health sector both in the U.S. and globally. In the U.S., FC2 is available by prescription through multiple telemedicine and internet pharmacy channels as well as retail pharmacies.
We sell FC2 in both the U.S. commercial sector and in the public health sector both in the U.S. and globally. 67 Table of Contents In the U.S. commercial sector, FC2 is available by prescription through multiple telehealth and internet pharmacy channels as well as retail pharmacies.
On September 30, 2022, the Company had working capital of $63.3 million and stockholders’ equity of $80.8 million compared to working capital of $136.0 million and stockholders’ equity of $152.3 million as of September 30, 2021.
At September 30, 2023, the Company had working capital of $3.2 million and stockholders’ equity of $17.8 million compared to working capital of $63.3 million and stockholders’ equity of $80.8 million as of September 30, 2022.
Income recorded associated with the change in fair value of the embedded derivatives related to Residual Royalty Agreement was $3.6 million in fiscal 2022 compared to expense of $3.7 million in fiscal 2021 . The liabilities associated with embedded derivatives represent the fair value of the change of control provisions in the Credit Agreement and Residual Royalty Agreement.
The gain associated with the change in fair value of the embedded derivatives related to Residual Royalty Agreement was $3.0 million in fiscal 2023 compared to $3.6 million in fiscal 2022 . The liabilities associated with embedded derivatives represent the fair value of the change of control provision in the Residual Royalty Agreement.
Net cash from investing activities was $14.6 million in fiscal 2021, attributed to $15.0 million received from the sale of the Company’s PREBOOST® business, partially offset by $0.4 million in capital expenditures for manufacturing and office equipment.
Investing activities Net cash from investing activities was $6.3 million in fiscal 2023, attributed to $7.0 million received from the sale of the Company’s ENTADFI ® assets, partially offset by $0.7 million in capital expenditures for manufacturing equipment and leasehold improvements.
On May 10, 2022, the Company had a pre-EUA meeting with the FDA to discuss next steps including the submission of an EUA application regarding sabizabulin for COVID-19.
On May 10, 2022, we had a pre-EUA meeting with the FDA to discuss next steps including the submission of an EUA application regarding sabizabulin for COVID-19. In June 2022, we submitted a request for FDA Emergency Use Authorization. In February 2023, the FDA declined to grant our request for Emergency Use Authorization for sabizabulin.
As a result, the Company may continue to experience challenges for revenue from sales of FC2 in the global public health sector. Cost of sales decreased to $8.8 million in fiscal 2022 from $13.3 million in fiscal 2021 primarily due to the decrease in unit sales.
As a result, the Company may continue to experience challenges for revenue from sales of FC2 in the global public health sector. Cost of sales was $8.7 million in fiscal 2023, which is comparable to $8.8 million in fiscal 2022.
See Note 9 to the financial statements included in this report. The fair value of these liabilities were estimated based on unobservable inputs (Level 3 measurement), which requires highly subjective judgment and assumptions. The Company previously determined the fair value of the embedded derivatives using a Monte Carlo simulation model.
See Note 9 to the financial statements included in this report. The fair values of these liabilities were estimated based on unobservable inputs (Level 3 measurement), which requires highly subjective judgment and assumptions. The Company estimates the fair value of the embedded derivative within the Residual Royalty Agreement using a scenario-based method, whereby different scenarios are valued and probability weighted.
The decrease in the fair value of the embedded derivates is due to a decrease in projected FC2 net revenues in future periods and increase in the discount rates used, driven by external market factors. See Note 3 and Note 9 to the financial statements included in this report for additional information.
The decrease in the fair value of the embedded derivates is due to a decrease in projected FC2 net revenues in future periods. See Note 3 and Note 9 to the financial statements included in this report for additional information. Income tax expense in fiscal 2023 was $0.5 million, compared to income tax expense of $0.2 million in fiscal 2022.
Infectious Disease Program: The Company opportunistically developed sabizabulin 9mg, which has both broad anti-inflammatory and antiviral properties as a two-pronged approach to the treatment of COVID-19 virus infection in hospitalized moderate to severe patients at high risk for ARDS and death. We discovered that sabizabulin, which is being developed for cancer indications, also has both broad anti-inflammatory and antiviral properties.
Infectious Disease Program We are developing sabizabulin 9mg, which has both host targeted antiviral and broad anti-inflammatory properties, as a two-pronged approach to the treatment of hospitalized patients with viral lung infection at high risk for ARDS and death.
Interest expense, which is related to the Credit Agreement and Residual Royalty Agreement, was $4.4 million in fiscal 2022, which is a decrease from $4.9 million in fiscal 2021 .
Interest expense, which is related to the accretion of the liability for the Residual Royalty Agreement, was $2.4 million in fiscal 2023, which is a decrease from $4.4 million in fiscal 2022 . The decrease relates to a decrease in actual and projected FC2 sales.
Advancement is limited to available working capital and management’s understanding of the prospects for each product. If future prospects do not meet management’s strategic goals, advancement may be discontinued. We have invested and expect to continue to invest significant time and capital in our research and development operations.
The Company has several products under development and management routinely evaluates each product in its portfolio of products. Advancement is limited to available working capital and management’s understanding of the prospects for each product. If future prospects do not meet management’s strategic goals, advancement may be discontinued.
We are working to restore ordering and utilization patterns in future periods based on growing awareness and demand through increased FC2 marketing efforts, as well as on-going discussions with new distribution partners in the telehealth sector. We are also working to generate additional revenues through our internal telehealth platform.
We are working to increase net revenues in future periods based on growing awareness and demand through increased FC2 marketing efforts, using our telehealth platform, and discussions with potential new distribution partners in the telehealth sector. The increase in FC2 net revenues in the global public health sector is primarily due to increases in the U.S. public sector.
The offering was made pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-239493). 77 Table of Contents SWK Credit Agreement and Residual Royalty Agreement On March 5, 2018, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction.
Net cash provided by financing activities in fiscal 2022 was $1.1 million and primarily consisted of proceeds from stock option exercises of $1.1 million . 73 Table of Contents Sources of Capital SWK Credit Agreement and Residual Royalty Agreement On March 5, 2018, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction.
We have recently seen increases in the cost of the nitrile polymer used to produce FC2, as well as transportation, and may experience increases in other material costs due to the impact of COVID-19 and increased inflation.
We have recently seen increases in the cost of the nitrile polymer used to produce FC2, as well as transportation costs, and may also experience increases in other material costs due to the impact of inflation. Moreover, the Company's decision to adopt an internal telehealth solution means that the expenses associated with acquiring new FC2 users are expected to increase.
We plan to enroll approximately 186 subjects in this Phase 3 clinical study. In January 2022, the Company entered into a clinical trial collaboration and supply agreement through which Eli Lilly and Company supplies abemaciclib for the ENABLAR-2 trial. The Company’s prostate cancer drug pipeline includes sabizabulin, VERU-100 and zuclomiphene citrate.
In January 2022, we entered into a clinical trial collaboration and supply agreement through which Eli Lilly and Company supplies abemaciclib for the ENABLAR-2 trial.
Net revenues decreased 36% year over year. Most of the Company’s net revenues were derived from sales of FC2 in the U.S. prescription channel and global public health sector. FC2 net revenues decreased 35% year over year. There was a 44% decrease in total FC2 unit sales and an increase in FC2 average sales price per unit of 17%.
Net revenues decreased 59% year over year. Most of the Company’s net revenues were derived from sales of FC2 in the U.S. prescription channel and global public health sector. In the U.S. prescription channel, the Company’s customers include primarily telemedicine providers.
During fiscal 2021, we recorded a pre-tax gain on sale of the Company’s PREBOOST ® business of $18.4 million. See Note 2 to the financial statements included in this report for additional information.
There was no impairment charge recorded in fiscal 2022. The Company recorded a pre-tax gain of $5.7 million on the sale of the Company’s ENTADFI assets in fiscal 2023. See Note 15 to the financial statements included in this report for additional information.
The decrease in FC2 net revenues in the U.S. prescription channel is due to lower volume from telemedicine customers as a result of business challenges they experienced, which resulted in a slowdown in orders during the current year.
The decrease in FC2 net revenues in the U.S. prescription channel is primarily due to lower volume from telemedicine customers.
Our operating activities used cash of $15.6 million in fiscal 2021. Cash used in operating activities included net income of $7.4 million, adjustments to reconcile net income to net cash provided by operating activities totaling a reduction of $15.7 million and changes in operating assets and liabilities of $7.3 million.
Cash used in operating activities included net loss of $93.1 million, adjustments to reconcile net loss to net cash used in operating activities totaling an increase of $20.3 million and changes in operating assets and liabilities totaling a decrease of $15.2 million.
The purchase price for the transaction was $20.0 million, consisting of $15.0 million paid at closing, $2.5 million payable 12 months after closing and $2.5 million payable 18 months after closing.
The purchase price for the transaction was $20.0 million, consisting of $6.0 million paid at closing, $4.0 million payable by September 30, 2023, $5.0 million payable 12 months after closing, and $5.0 million payable by September 30, 2024, plus up to $80.0 million based on BWV’s net revenues from ENTADFI after closing.
The Company has also begun to recognize revenues from sales of ENTADFI. These sales are recognized upon shipment or delivery of the product to the customers depending on contract terms.
The Company's revenues are primarily derived from sales of FC2 in the U.S. prescription channel and global public health sector. These sales are recognized upon shipment or delivery of the product to the customers depending on contract terms.
Recent Accounting Pronouncements See Note 1 to the financial statements included in this report for additional information on recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted. 80 Table of Contents Impact of Inflation and Changing Prices Although the Company cannot accurately determine the precise effect of inflation, the Company has experienced increased costs of product, supplies, salaries and benefits, and increased general and administrative expenses.
Impact of Inflation and Changing Prices Although the Company cannot accurately determine the precise effect of inflation, the Company has experienced increased costs of product, supplies, salaries and benefits, and increased general and administrative expenses. The Company has, where possible, increased selling prices to offset such increases in costs.
Sexual Health Program: The Company's sexual health program includes two FDA-approved products: ENTADFI ™ , for the treatment of BPH, and FC2, for the dual protection against unplanned pregnancy and the transmission of sexually transmitted infections.
Sexual Health Program Our sexual health program consists of FC2, the only FDA-approved, female controlled, hormone free female condom indicated for the dual protection against unplanned pregnancy and sexually transmitted infections, including HIV/AIDS.
Goodwill and Intangible Assets The Company has $6.9 million recorded as goodwill at September 30, 2022 and 2021 and $4.0 million recorded as intangible assets at September 30, 2022 and 2021.
The decrease in the fair value of the embedded derivates is due primarily to a decrease in projected FC2 net revenues in future periods. Goodwill and Intangible Assets The Company has $6.9 million recorded as goodwill at September 30, 2023 and 2022 and $6,000 and $4.0 million recorded as intangible assets at September 30, 2023 and 2022, respectively.
Adjustments to net income primarily consisted of $18.4 million for the gain on sale of the PREBOOST® business, $3.6 million of interest paid in excess of interest expense, and $3.6 million of deferred income taxes, partially offset by share-based compensation of $5.1 million and an increase in the fair value of derivative liabilities of $3.7 million.
Adjustments to net loss primarily consisted of share-based compensation of $17.9 million, a provision for credit losses of $3.9 million, and an impairment of intangible assets of $3.9 million, partially offset by the gain on the sale of ENTADFI assets of $5.7 million.
The Company experienced a decrease of 35% in FC2 net revenues in the U.S. prescription channel and a decrease of 34% in FC2 net revenues in the global public health sector.
The Company had net revenues from the U.S. prescription channel of $5.8 million and $30.2 million in fiscal 2023 and fiscal 2022, respectively and net revenues from the global public health sector of $10.5 million and $9.1 million in fiscal 2023 and fiscal 2022, respectively.
Effective October 1, 2009, the Company’s U.K. and Malaysia subsidiaries adopted the U.S. dollar as their functional currency, further reducing the Company’s foreign currency risk. Operating Expenses . The Company manufactures FC2 at its Malaysian facility. The Company's cost of sales consists primarily of direct material costs, direct labor costs and indirect production and distribution costs.
Effective October 1, 2009, the Company’s U.K. and Malaysia subsidiaries adopted the U.S. dollar as their functional currency, further reducing the Company’s foreign currency risk. The Company relies on supply for its principal raw material for FC2 from one supplier who is a technical market leader in synthetic polymers.
Gross profit decreased to $30.6 million in fiscal 2022 from $47.9 million in fiscal 2021. Gross profit margin for fiscal 2022 was 78% of net revenues, which is consistent with that in fiscal 2021. The decrease in gross profit is primarily due to the decrease in the volume of FC2 sales.
There was a decrease in units sold, partially offset by a higher cost per unit sold, due to reduced production volume. Gross profit decreased to $7.6 million in fiscal 2023 from $30.6 million in fiscal 2022. Gross profit margin for fiscal 2023 was 46% of net revenues, compared to 78% of net revenues in fiscal 2022.
Our research and development expenses were $70.6 million and $32.7 million for fiscal 2022 and 2021, respectively.
We have invested and expect to continue to invest significant time and capital in our research and development operations. Our research and development expenses were $51.1 million and $70.6 million for fiscal 2023 and 2022, respectively.
The Company has completed a positive Phase 2 and positive Phase 3 COVID-19 study evaluating sabizabulin in hospitalized moderate to severe COVID-19 patients at high risk for ARDS and death. The Phase 3 clinical study was a double-blind, randomized, placebo-controlled 204 hospitalized moderate to severe COVID-19 patients at high risk for ARDS and death.
We have completed positive Phase 2 and positive Phase 3 COVID-19 clinical trials, which have demonstrated that sabizabulin treatment resulted in a mortality benefit in hospitalized moderate to severe patients with COVID-19 viral lung infection at high risk for ARDS and death. The FDA granted Fast Track designation to our COVID-19 program in January 2022.
Financing activities Net cash provided by financing activities in fiscal 2022 was $1.1 million and primarily consisted of proceeds from stock option exercises of $1.1 million .
Financing activities Net cash provided by financing activities in fiscal 2023 was $11.1 million and primarily consisted of proceeds from the sale of shares under common stock purchase agreements of $4.8 million, proceeds from the sale of shares in a private investment in public equity of $5.0 million, and proceeds from the sale of shares pursuant to the Jefferies Sales Agreement of $1.0 million .
We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. See further discussion in Note 1 to the financial statements included in this report. IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects.
IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. During the period the assets are considered indefinite-lived, they are tested for impairment.
The Company’s most significant customers have been telemedicine providers in the U.S. who sell into the prescription channel and global public health sector agencies who purchase and/or distribute FC2 for use in preventing the transmission of HIV/AIDS and/or family planning.
In the global public health sector, the Company’s customers are primarily health care distributors, large global agencies, non-government organizations, ministries of health and other governmental agencies which purchase and distribute FC2 for use in HIV/AIDS prevention and family planning programs.
The decrease in working capital is primarily due to the decrease in cash and cash equivalents, related to our increased research and development expenditures, and an increase in accounts payable and accrued research and development costs. We anticipate that we will continue to consume cash as we develop our drug candidates.
The decrease in working capital is primarily due to the decrease in cash on hand, related to our increased spend on research and development and drug commercialization costs related to the infectious disease program, partially offset by a decrease in accounts payable and accrued expenses. The Company is not profitable and has had negative cash flow from operations.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Veru is a biopharmaceutical company with a drug development program for the treatment of hospitalized COVID-19 patients at high risk for acute respiratory distress syndrome (ARDS) and other viral-related ARDS and for the management of advanced breast and prostate cancers, as well as a sexual health program which includes two FDA-approved products, ENTADFI™, for the treatment of benign prostatic hyperplasia (BPH) and the FC2 Female Condom® (Internal Condom).
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview W e are a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of metabolic diseases, oncolog y , and ARDS. Our drug development program includes two late-stage new chemical entities, enobosarm and sabizabulin.
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We hypothesized that based on this mechanism of drug action, sabizabulin may serve as a two-pronged approach to the treatment of COVID-19 viral infection, and the subsequent debilitating inflammatory effects that can lead to ARDS and death.
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Enobosarm, a s elective androgen receptor modulator (“SARM”), is being developed for two indications: (i) enobosarm initially as a treatment to augment fat loss and to prevent muscle loss in sarcopenic obese or overweight elderly patients receiving a GLP-1 RA who are at-risk for developing muscle atro p hy and muscle weakness and (ii) subject to the availability of sufficient funding, enobosarm for the treatment of androgen receptor positive (AR+), estrogen receptor positive (ER+) and human epidermal growth factor receptor 2 negative (HER2-) metastatic breast cancer in the 2 nd line setting.
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The primary endpoint was the proportion of patients that died by Day 60. Based on a planned interim analysis of the first 150 patients randomized, the Independent Data Monitoring Committee unanimously halted the study for clear clinical efficacy and identified no safety concerns.
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Sabizabulin, a microtubule disrupto r , is being developed for the treatment of hospitalized patients with viral-induced ARDS. We do not intend to undertake further development of sabizabulin for the treatment of viral-induced ARDS until we obtain funding from government grants, pharmaceutical company partnerships, or other similar third-party external sources .
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Treatment with sabizabulin 9 mg once daily resulted in a clinically meaningful and statistically significant 51.6% relative reduction in deaths compared to placebo. On June 7, 2022, the Company submitted a request for FDA emergency use authorization for sabizabulin in adult hospitalized moderate to severe COVID-19 patients at high risk for ARDS and death.
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W e also have an FDA-approved commercial product, the FC2 Female Condo m ® (Internal Condom), for the dual protection against unplanned pregnancy and sexually transmitted infections .
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The outcome of this meeting was: (i) the FDA agreed that no additional efficacy studies were required to support an EUA application or a new drug application (NDA); and (ii) the FDA agreed that no additional safety data was required to support an EUA application and that collection of safety data under the EUA may satisfy the safety requirement for an NDA.
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Obesity and Overweight Program Our metabolic drug pipeline is focused on the clinical development of enobosarm, an oral SARM, initially as a treatment to augment fat loss and to prevent muscle loss in sarcopenic obese or overweight elderly patients receiving a GLP-1 RA who are at-risk for developing muscle atrophy and muscle weakness.
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The FDA agreed that the request for the EUA is supported by efficacy and safety from our positive Phase 3 COVID-19 study in hospitalized moderate to severe COVID-19 patients who are at high risk for ARDS and death and no additional clinical trials are required to support an NDA submission.
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In third-party clinical trials evaluating currently approved GLP-1 RA in obese patients, trial participants exhibited significant weight loss composed of reductions in both fat and lean (muscle and bone) mass. Of the total weight loss reported in certain of these third-party clinical trials, 20-50% of the total weight loss reported by patients was attributable to muscle loss.
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On June 7, 2022, the Company submitted a request for FDA emergency use authorization. On July 6, 2022, the Company announced the publication of the results from the Phase 3 COVID-19 study evaluating the efficacy and safety of oral sabizabulin in The New England Journal of Medicine Evidence.
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According to the CDC, 41.5% of older adults have obesity and could benefit from weight loss medication. Up to 34.4% of obese patients in the United States over the age of 60 have sarcopenic obesity.
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On November 9, 2022, the FDA’s Pulmonary-Allergy Drugs Advisory Committee (PADAC) met to review sabizabulin for the EUA in hospitalized moderate to severe COVID-19 patients who are at high risk for ARDS.
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Sarcopenic obese patients are patients who have obesity and age-related low muscle mass at the same time and are potentially at the greatest risk for developing critically low muscle mass when taking a currently approved GLP-1 RA for the treatment of obesity.
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The advisory committee voted 8-5 that the known and potential benefits of sabizabulin when used for the treatment of adult patients hospitalized with COVID-19 at high risk of ARDS do not outweigh the known and potential risks of sabizabulin.
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Patients with critically low muscle mass may experience muscle weakness leading to poor balance, decreased gait speed, mobility disability, falls, bone fractures, and increased mortality.
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However, there was additional discussion around the clinical trial design aspects of a potential confirmatory Phase 3 COVID-19 clinical trial as a post emergency use authorization requirement.
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We therefore believe there is an urgent unmet need for a drug that can ameliorate the muscle wasting effects of currently approved GLP-1 RA therapies and also allow for preferential loss of fat mass in at-risk sarcopenic obese or overweight elderly patients.
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The FDA considers the input of the advisory committee as part of their review of the EUA, but the advisory committee decision is not binding and the FDA makes the final decision on the request for EUA application. The UK’s MHRA informed the Company on July 25, 2022, that the sabizabulin marketing authorization application will receive expedited review.
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Enobosarm is an oral, novel SARM that has demonstrated tissue-selective, dose-dependent improvement in body composition with increases in muscle mass and decreases in fat mass, improves insulin resistance, has no masculinizing effects in women, and has neutral prostate effects in men in third-party clinical trials.
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On July 27, 2022, sabizabulin triggered Article 18 in the EU in which the EMA will evaluate sabizabulin to allow emergency use drug access to the EU Member States.
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Data from certain of these third-party clinical trials also demonstrated increases in muscle mass resulting in improvement in muscle strength and physical function. 64 Table of Contents Advanced cancer can cause a “starvation state” where there is significant loss of both lean mass and fat mass.

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