“Where there is no hope, it behooves us to invent it.” – Albert Camus
We’ll take a first look at Veru inc. (NASDAQ:VERU) today. The company is one of several biotech companies developing a new Covid-19 vaccines. Its marketing application for its sabizabulin, a therapy against Covid-19, has met with some success here yesterday when it was learned that the emergency use request process would require an AdComm panel. Can stocks recover? We attempt to answer this question through the analysis below.
Veru Inc. is based in Miami, Florida, and is primarily focused on the development of drugs for cancer management. It does, however, have on the market a female condom/internal condom FC2 for dual protection against unwanted pregnancy and the transmission of sexually transmitted infections.
Additionally, its compound sabizabulin is being developed as a Covid-19 therapy in addition to targeting various oncology indications in ongoing trials. The stock is currently trading around $11.50 per share and has a market capitalization just south of $1.2 billion.
Recent developments for Veru:
On August 11, the company announced the second quarter results. The company reported a GAAP loss for the quarter of 28 cents per share as revenue fell just over 45% year-over-year to $9.6 million. The top and bottom numbers missed the consensus. It was a bad neighborhood from many different angles
US Prescription FC2 net revenue decreased 50% to $6.7 million from $13.5 million. The company’s operating loss increased to $21.8 million from a loss of $2.9 million in the same period last year. Part of this was due to lower sales, but research and development expenses also increased to $18.1 million from $11.2 million in 2Q2021.
The company launched ENTADFI™ in August, a daily-use capsule. This product is a new oral treatment for benign prostatic hyperplasia or BPH. This product is intended to effectively treat urinary tract symptoms caused by BPH with less risk of adverse sexual side effects compared to finasteride monotherapy. Management estimates that this product has a maximum sales potential of over $200 million.
On the Covid-19 vaccine front, in late July the company was advised that sabizabulin was eligible for scheduled review to receive authorization in the UK as a Covid-19 treatment for hospitalized COVID-19 patients who are at risk of acute respiratory distress syndrome or ARDS. He was granted the same status in Australia on August 22.
However, in the US approval process, the drug candidate hit a snag yesterday when it was revealed that the sabizabulin application process is set to go to an AdComm committee on October 6. Some of the key issues the panel will focus on will be the therapeutic effect in terms of high placebo mortality and the limited size of the safety database. This could potentially further delay the application process if additional data is deemed necessary. A recommendation from the group would make approval more likely and could pave the way for other potential indications such as similar influenza subsets for example.
Adding to the complication of trying to put a value on VERU is that sabizabulin as well as other compounds in the company’s pipeline are also being developed to treat various cancers.
The company is also developing Enobosarm. It is an oral selective androgen receptor agonist that activates the androgen receptor [AR], a tumor suppressor, in AR+ER+HER2- metastatic breast cancer without causing undesirable masculinizing side effects. VERU is currently recruiting a Phase 3 study called ARTEST. It will be:
A registrational clinical trial design to evaluate enobosarm monotherapy versus physician’s choice of either exemestane ± everolimus or a selective estrogen receptor modulator (SERM) as an active comparator for the treatment of cancer AR + ER + HER2 metastatic breast cancer in approximately 210 patients with AR expression ≥ 40% in their breast cancer tissue who had previously received a nonsteroidal aromatase inhibitor, fulvestrant, and a CDK4/6 inhibitor.“
Earlier this year, the FDA granted Fast Track designation to the ARTEST Phase 3 registration program.
The company is also enrolling patients in a Phase 3 study called ENABLER-2 which is described as:
A study to evaluate the treatment of enobosarm and abemaciclib versus an alternative estrogen blocking agent (fulvestrant or an aromatase inhibitor) in patients with AR+ER+HER2- metastatic breast cancer who failed first-line palbociclib (a CDK 4/6 inhibitor) plus an estrogen blocking agent (nonsteroidal aromatase inhibitor or fulvestrant) and who have AR expression ≥ 40% in their breast cancer tissue in approximately 186 subjects“
Eli Lilly (LLY) is a partner in this trial and will provide abemaciclib, better known under its Verzenio brand. Sabizabulin is also at a much earlier stage of development in this area which is not relevant to this analysis.
Regarding the company’s efforts in prostate cancer, the company is in the process of enrolling another phase 3 trial called VERACITY. This 245-person study will evaluate a 32 mg dose of sabizabulin versus another androgen receptor-targeting agent for the treatment of chemotherapy-naïve men with metastatic castration-resistant prostate cancer who show progression. tumor after having previously received at least one agent targeting androgen receptors.
The company is also developing VERU-100, which is a long-acting, chronic GnRH antagonist peptide administered as a small-volume depot subcutaneous injection for three months without a loading dose. A phase 2 study targeting advanced prostate cancer is being recruited.
Analysts’ comments and results:
In the past two months, five analyst firms have reissued buy ratings on VERU. That includes both Oppenheimer and HC Wainwright after the news broke from the AdComm panel. Price targets offered range from $24 to $55 per share.
The bears targeted the stock with more than one in three stocks currently held short. A director sold just over $2 million worth of stock on Aug. 15. This is the only insider activity in this equity so far in 2022. After posting a net loss of $22.2 million in the second quarter, the company ended the first half of 2022 with approximately 100 million in cash and marketable securities on its balance sheet versus just over $10 million in long-term debt.
The analyst consensus has revenue down just under 20% this year to just over $49 million. They project revenue to grow more than 120% in fiscal 2023 to $110 million, but there is a wide range of estimates ($43.2 million to $230.4 million).
Veru Inc. is a very complicated company”sum of the parts” story. The company is targeting Covid-19 where it could have a nice niche. Veru is also recruiting many late-stage trials targeting both breast and prostate cancer that show promise.
There are many concerns for me around this name at the moment. The AdComm panel is a potential hurdle that could lengthen the timeframe for sabizabulin to be approved as a Covid therapy. The company also appears to need to raise additional capital based on its current cash burn in the near future. Then there is the very large short position in the stock, which is a bit of a concern.
In an ideal scenario, the company would sell off its Sexual Health division with two market-approved products to fund its other potentially more lucrative focus area (cancer and Covid-19). Unless, until sabizabulin is approved as a Covid-19 therapy and funding needs are met, VERU seems like a small one at best”watch the article” position at present.
“Let your choices reflect your hopes, not your fears.” – Nelson Mandela