Veru Inc Aktie

Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call.

[Operator Instructions]

Please note that this event is being recorded. I would now like to turn the conference over to Mr. Sam Fisch, Veru Inc.'s Executive Director, Investor Relations and Corporate Commute.

The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations or intentions regarding its business, operations, regulatory interactions, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time.

I would now like to turn the conference call over to Dr. Mitchell Steiner, Vera Inc.'s Chairman, CEO and President.

Good morning. With me on this morning's call are Dr. Gary Barnette, the Chief Scientific Officer; Michelle Greco, the Chief Financial Officer and Chief Administrative Officer; Phil Greenberg, General Counsel; and Sam Fisch, the Executive Director of Investor Relations and Corporate Communications. Thank you for joining our second quarter fiscal year 2020 and earnings call.

Veru is a late clinical stage biopharmaceutical company focused on developing innovative medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 novel small molecules, enobosarm and sabizabulin. The first one on enobosarm is an oral selective androgen receptor modulator, SARM and is being developed as a next-generation drug that when combined with GLP-1 receptor agonist makes weight reduction more tissue selective for fat loss and preservation of lean mass and physical function, which is intended to lead to greater weight loss compared to a GLP-1 receptor agonist treatment alone with a focus on older patients with obesity.

Our second asset, sabizabulin is a microtubule disruptor and it's being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression or promote the regression of atherosclerotic cardiovascular disease.

This morning, we'll focus on an update of the clinical development progress of enobosarm in our obesity program. We will also provide financial highlights for fiscal 20,262nd quarter ended March 31, 2026. GLP-1 receptor agonist have been shown to produce significant weight loss in patients who have -- are overweight or have obesity. Unfortunately, this weight loss is tissue nonselective with the significant indiscriminate loss both lean mass and fat mass. Of the total weight loss up to 50% is attributable to lean mass. Although GLP-1 receptor agonist treatments have resulted in substantial weight loss for many patients. The strategy for the next generation of obesity drugs should be a combination therapy with a GLP-1 receptor agonist to cause patients who own and lose that while preserving lean mass and physical function and bone real density with the highest quality weight reduction.

And Veru has focused the clinical development of enobosarm for weight loss on older patients who have obesity. More specifically, the focus has been on older patients who have sarcopenic obesity, which means they have both obesity and low muscle mass and are potentially at the greatest risk for reaching a critically low muscle mass, which may lead to physical function decline, taking the currently approved GLP-1 receptor agonist. According to the European working group on Sarcopenia and older people too. Sarcopenia is defined by reduced muscle strength and function as the primary diagnostic criteria on confirmed by low muscle quantity of quality, while the impaired physical performance reflects disease severity.

As you can see, the working group emphasis is on physical strength and function. Thus, muscle loss alone does not define sarcopenia. As a consequence, we have chosen to also objectively evaluate and measure physical function by stair climb test in the Phase II quality clinical study. And Veru's completed the Phase IIb quality clinical trial was a multicenter, double-blind, placebo-controlled randomized dose-finding clinical trial designed to evaluate safety and efficacy of enobosarm 3 milligrams, enobosarm 6 milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in 168 older patients that's greater than equal to 60 years of age, receiving semaglutide for weight reduction.

After the efficacy dose-finding active weight loss portion of the Phase IIb clinical trial was completed at 16 weeks. Participants continued into a Phase IIb maintenance extension study where all patients discontinue semaglutide treatment, but continue to receiving either placebo, enobosarm 3 milligrams and enobosarm 6 milligram, as monotherapy in a double-blind fashion for 12 weeks. Phase IIb quality clinical trial was a positive study that demonstrated that preserving lean mass and physical function with enobosarm plus semaglutide led to greater fat loss.

As I mentioned, Veru focused on the impact of weight loss on physical function, not just lean mass and older patients with obesity in the Phase IIb quality clinical study. Physical function was measured by the stair climb test, which is a common activity of daily living. Declines in physical function, as measured by the stair climb test we predict in older patients at high risk of mobility disabilities, gate difficulties, falls and bone factors, hospitalizations and mortality. It has been reported that stair climb power declined by 1.38% annually with aging. Now it should be noted that the Phase IIb quality clinical study is the first human study to demonstrate that the weight reduction in older patients who have obesity receiving a GLP-1 receptor agonist puts them at a higher risk for accelerated loss of lean mass with physical function decline.

A prespecified responder analysis was conducted using a greater than 10% decline in stair climb power as a cutoff at 16 weeks, which is a significant loss as it represents loss of stair climb power that would naturally occur with aging over a 7- to 8-year period in older patients. In a Phase IIb quality study, the loss in lean mass matter, as 44.3% of patients on placebo for semaglutide group had at least a 10% decline in stair climb power physical function at 16 weeks. And what happened to the study group that received enobosarm combination with the GLP-1 receptor agonist. In the Phase IIb quality clinical study, enobosarm treatment preserved lean mass, which translated into a reduction in the proportion of patients that had a clinically significant stair climb physical function decline when compared to patients receiving a GLP-1 receptor alone.

More specifically, the enobosarm 3-milligram plus semaglutide group had a statistically significant, clinically meaningful 59.8% relative reduction in proportion of patients that lost at least 10% stair climb power compared to the placebo plus semaglutide group, and that value is 0.0006. In the enobosarm 6 milligram group, plus semaglutide. There was a 44.1% relative reduction in the proportion of patients with at least a 10% decline in stair climb power from baseline first placebo plus semaglutide group, and that found 0.051.

Based on the results of this short-term study, we believe there is an urgent unmet need for a drug that prevents a loss of muscle and physical function as well as augment a loss of fat for greater weight loss and at risk older patients with sarcopenic obesity receiving a GLP-1 receptor agonist for weight reduction.

The next important question is can you potentially have greater weight loss by adding enobosarm to a GLP-1 receptor agonist treatment. First of all, as the Phase IIb quality clinical studies demonstrated Patients receiving enobosarm had greater fat loss. Plus, if you're able to preserve muscle and physical function with enobosarm, while taking a GLP-1 receptor agonist, we would expect and more calories will be burned, which is expected to result of greater weight loss compared to GLP-1 receptor agonist alone, especially in the long study.

Now let's turn to the current progress of our Phase IIb plateau clinical study. A common clinical and therapeutic challenge with GLP-1 receptor agonist treatments is that 88% of patients after 1 year on a GLP-1 receptor agonist hit a weight-loss plateau where they stop losing additional weight. Based on the SURMOUNT-1 study conducted by Eli Lilly & Company, 62.6% of these patients, unfortunately, still have clinical obesity at the time it reaches weight loss Plateau in 1 year. One explanation might be that the loss of muscle caused by nonselective tissue weight loss may reach a point that now stimulates the appetite in patients receiving a GLP-1 receptor agonist, so they consume more calories, which in term cause patients to stop losing weight to hit that wind loss plateau.

Again, enobosarm shown clinical studies to directly burn fat and to preserve muscle to increase physical function and burn more calories. Thus by preserving muscle, appetite stay suppressed while more calls of burn, which can help to break through the weight loss plateau leading to incremental reduction.

Now let's turn to the design of the Phase IIb plateau clinical study. Which is a double-blind, placebo-controlled study to evaluate the effect of enobosarm 3 milligrams of total body mass -- excuse me, total body weight, fat mass, lean mass and physical function, bond metal density and safety in approximately 200 older patients, age greater than or equal to 65, we have obesity BMI greater or equal to 35% and are initiating semaglutide GOVI GLP-1 receptor agonist treatment for weight reduction. The primary efficacy endpoint of the study is the percent change for baseline in total by way at 68 weeks. Interim analysis will be conducted 36 weeks to assess the percent change from baseline in lean body mass and total fat mass as measured by DXA scan.

The key secondary endpoints to the overall study, a total fat, total lean mass, physical function again measured by sterilants, mobility, disability assessment bone meal density and patient-reported outcome questionnaires for physical function, HbA1c and insulin resistance. The objective of the Phase IIb plateau clinical trial is to focus on the effect of longer-term GLP-1 receptor agonist treatment in older patients who have obesity. The Phase IIb plateau clinical study will also assess the ability of enobosarm to break through the white loss plateau. Observed in patients receiving a GLP-1 receptor agonist treatment to achieve clinically meaningful incremental weight reduction as well as to preserve muscle mass and physical function by 68 weeks. The interim analysis of the clinical study will occur when all patients have been treated for 36 weeks.

Now semaglutide was selected as a GLP-1 receptor agonist for the Phase II study to build on Veru's previous clinical experience using enobosarm in combination with semaglutide in the positive Phase II quality clinical study. Further, the clinical data from the Phase IIb plateau clinical study using injectable semaglutide may support the use of oral semaglutide and oral enobosarm fixed-dose combination in future Phase III clinical studies.

In contrast, there are no approved oral formulations which is apatite. On March 9, 2026, we announced the enrollment the first patient in the Phase IIb plateau clinical study. I'm very pleased with the current enrollment rate, and we're on track for results of the 36 interim analysis, which is expected in Q1 calendar year 2027.

Now Veru is targeting the at-risk older patients with sarcopenic obesity. So how large is that market? How about the total market for obesity? The Wall Street Journal reported last week that there are more than 1 billion people in the world with obesity. The World Health Organization estimates that there are 2.5 billion adults globally, either overweight or obese with the rate of adult obesity more than doubling since 1990. And right now, we're only 2 companies, Lilly and Novo Nordisk that together are treating less than 2% of them. Hope of the total market for sarcopenic obesity.

The overall prevalence of obesity and low muscle mass is almost 30 million adults in the U.S. How about the total market of the patients who are 65 years and older with obesity. The prevalence of obesity in patients who are 65 years and older is 41.5% among the 47.4 million patients enrolled in Medicare Part D plans, and that's about $20 million potential patients. As you can see, taken together, the market opportunity for enobosarm in combination with GLP-1 receptor agonist in older patients with sarcopenic obesity is very large.

I will now turn the call over to Michele Greco, CFO and CEO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. Let's review the results for the 3 months ended March 31, 2026. Research and development costs decreased to $3.1 million from $3.9 million in the prior quarter. The decrease is primarily due to wind down of the Phase IIb quality clinical study for enobosarm as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. Personnel costs also decreased primarily due to the reduced share-based compensation expense. Selling, general and administrative expenses were $4.1 million compared to $5.2 million in the prior quarter. The decrease is primarily due to a decrease in the share-based compensation expense.

We recognized a gain on the sale of ENTADFI assets of $974,000 in the prior year's quarter. which is based on nonrefundable consideration received related to promissory notes previously due to Bureau. As the promissory notes are now settled, no additional gain is expected in future periods. During the prior fiscal year, the company entered into a settlement agreement with Onconetix, which included payment of Series D preferred stock and warrants. During the current period, the increase in fair value of the equity securities received was $3.9 million as a result of the realized gain from the conversion of the preferred stock and then sale of the underlying common stock and change in the fair value of the remaining preferred stock and warrants. Favorable antidilution provisions triggered by the Onconetix reverse stock split during the period contributed to the increase in the fair value.

The bottom line result for continuing operations was a net loss of $3.1 million or $0.13 per diluted common share compared to a net loss of $7.9 million or $0.54 per diluted common share in the prior year's quarter. During the quarter, the company recognized an additional gain on sale of the FC2 business of $351,000 and for the net proceeds received from Clear Future in the settlement of the dispute related to a pre-closing tax receivable and liability, which is included as income from discontinued operations. In the prior year period, Veru sold the FC2 Female Condom business to Clear Future. In our financial statements, all direct revenues, costs and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations, net of tax, in the statement of operations.

Net loss was $2.7 million or $0.12 per diluted common share compared to a net loss of $7.9 million or $0.54 per diluted common share in the prior quarter.

Now turning to the results for the 6 months ended March 31, 2026. The Research and development costs decreased to $4.5 million from $9.6 million in the prior period. The decrease is primarily due to a wind down of the Phase IIb quality clinical study for Nova as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025. Personnel costs also decreased primarily due to the reduced share-based compensation expense. Selling, general and administrative expenses were $8.2 million compared to $10.4 million in the prior period. The decrease is primarily due to a decrease in the share-based compensation expense.

We recognized a gain on the sale of the ENTADFI assets of $1.7 million in the prior period. In conjunction with the sale of the FC2 Female Condom business during the prior fiscal year, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the SWK Holdings residual royalty agreement. During the current period, the company recorded a gain of $3.8 million from the increase in the fair value of equity securities compared to a loss from the decrease in fair value of equity securities of $0.3 million in the prior period. The increase in fair value of the equity securities during the current year period is the result of a realized gain from the conversion of the Onconetix preferred stock and sale of the underlying common stock and change in fair value of the remaining preferred stock and warrants. Favorable antidilution provisions triggered by the Onconetix reverse stock split during the period contributed to the increase in fair value.

The bottom line results for continuing operations was a net loss of $8.4 million or $0.39 per diluted common share compared to a net loss of $9.6 million or $0.66 per diluted common share in the prior period. The net loss was $8.1 million or $0.38 per diluted common share compared to a net loss of $16.8 million or $1.15 per diluted common share in the prior period.

Looking at the balance sheet. As of March 31, 2026, our cash, cash equivalents and restricted cash balance was $27.6 million compared to $15.8 million as of September 30, 2025, and on both March 31, 2026 and September 30, 2025, there was $0.1 million of restricted cash related to the sale of the FC2 Female Condom business.

Our net working capital was $28 million on March 31, 2026 compared to $11.1 million on September 30, 2025. On October 31, 2025, Veru completed an underwritten public offering of 1.4 million shares of our common stock, prefunded warrants to purchase up to 7 million shares of our common stock. Accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per share of common stock and the accompanying Series A and Series B warrants. Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting discounts and commissions and costs paid by the company.

The company is not profitable and has had negative cash flows from operations. Based on the company's current operating plan, our cash as of the issuance date of these financial statements is expected to be sufficient for the company to fund operations beyond the Interim analysis in the Phase IIb clinical study that would be performed to assess percent change from baseline in lean body mass and fat mass as measured by DXA scans.

During the 6 months ended March 31, 2026, we used cash of $15.1 million for operating activities compared with $19.1 million used for operating activities in the prior period. We generated cash from investing activities of $2.5 million for the 6 months ended March 31, 2026, compared to $18.4 million in the prior year period. The cash generated during the current period represents proceeds from the sale of the on kinetics equity securities of $3.2 million and $0.3 million for the settlement of a dispute related to pre-closing tax matters related to the sale of the FC2 business.

The cash generated in the prior period relates to proceeds from the sale of the FC2 Female Condom business of $16.3 million, proceeds of $1.7 million from the sale of entity assets and proceeds of $393,000 from the sale of equity securities. Net proceeds provided by financing activities for the 6 months ended March 31, 2026, was $23.4 million, which were the proceeds from the sale of common stock and warrants in an underwritten public offering net of commissions and costs. We used cash and financing activities for the 6 months ended March 31, 2025, of $4.2 million related to the change of control payment to SWK pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 Female Condom business.

I'd now like to turn the call back to Dr. Steiner. Dr. Steiner.

Thank you, Michelle. With that, I'll now open the call to questions. Operator.

[Operator Instructions]

Ladies and gentlemen, at this time, we will begin the question-and-answer session.

[Operator Instructions]

The first question today comes from Leland Gershell with Oppenheimer.

A couple of questions from us. Assuming success in the plateau study, would you expect to need 2 Phase IIIs or could you perhaps get by with 1 pivotal and perhaps use plateau as supportives? And I also wanted to ask, in further studies with enobosarm given the development of evolving agents for obesity, some orals are putting through there's want to know if the design would after those as well as the delta labeled diagnostic to the primary weight loss agent? Would you need to study specific weight loss agents to have those reflected in the indication label for enobosarm.

So thank you, Leland. So the first question is basically, if we're successful, was the next step and you go to a Phase III. So let's be very clear what that means. As you know, the FDA has come back and told us that incremental weight loss of greater than 5% for the efficacy portion of the study is sort of the anchor, okay? So you have greater than 5%, that stands on its own. If you want to add the function benefits and the bone benefits, then you have to show those separately, but you -- at least you're moving forward with incremental weight loss. If you have -- if your incremental weight loss is less than 5% then you have 2 ways to move forward. One is physical function as a primary endpoint.

And the reason the Phase IIb is so important is because we're doing a lot of work on physical function to make sure that we have a very clear understanding of the Phase III endpoint for physical function as a claim. And furthermore, we're collecting bone mineral density information, as you know, the FDA has recently reported back in December of 2025 that BMD alone can be a surrogate endpoint in place of fractures. And so that could be very interesting as we know GLP-1s can cause bone loss in this patient population undergoing this accelerated weight loss. So if the incremental weight loss is greater than 5%, then that will be the primary endpoint with function and BMD secondary endpoints.

If incremental weight loss was less than 5%, then you have 2 ways forward. One is a functional endpoint and BMD or BMD alone. So we have some. That's why this trial is so critical. It's a perfect trial because it's measuring all these things and body composition that can inform us on what the Phase III programs would look like. And if you notice, all the competitors are still in Phase II, working out dose, working out safety, working out which direction they're going to take. So this is not just for enobosarm. Myostatin inhibitors, if you want to have incremental weight loss and function in BMD, you have to measure those all separately, and they have to be separate claims and you have to make sure you have the data to do that. And we're the only company that really is focused on function with the very objective measurement.

So that's why this trial will be interesting. As you know, we've derisked a lot of it with the Phase II quality study that we've done -- but the palm of the quality study is 16 weeks and even more than that time to see weight loss, incremental weight loss. And so we're doing the definitive study to answer that question.

To answer your second question, yes, the field is -- just to refresh everybody's memory, the second question is if we do move forward and we've got all these companies coming out with weight loss agents, orals and non-orals, is the claim going to be enobosarm with any GLP-1 receptor agonist or the studies have to be specific to the GLP-1 receptor agonist in the form of the formulation of that agonist. And the answer is, my understanding is that certainly initially, it's going to be based on the specific GLP-1 receptor agonist. So that's why it was important for us to focus on semaglutide initially.

But I think since each of these have different -- each of these GLP-1 receptor agonists have different effects on weight loss that you're probably going to have to do whether it's us or anybody else is probably have to combine it with the specific weight loss agent initially. And then we'll see what happens in the field later. It may get some point that GLP-1 alone or GLP-1, GLP-1 alone. But initially, it's -- in my opinion, it's going to be specific to the GLP-1 receptor agonist.

Now Gary Barnett is on the call. He's our Chief Scientific Officer. What do you think about that question, Gary?

Yes, it's a great question. I think that at some point, I can envision -- remember, the consequence that we're treating with enobosarm is weight loss and weight loss occurs with all of the GLPs and all of the incretins and all of them will have a similar issue with the loss of lean mass and the plateau that we're addressing in the Plateau study. I think that not to see a world where we include multiple different incretins as in our Phase II. But Mitch is exactly correct. The FDA's long-time mantra is you get in your label once you study in your Phase III. So right now, our plan is to really focus on 1 or 2 increases in the Phase III program.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dr. Mitchell Steiner for any closing remarks.

Thank you, operator. I appreciate everyone who joined us on today's call, and I look forward to updating all of you on our progress in our next investors call. Have a great day.

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The conference call has now concluded. Thank you for attending today's discussion.

Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference call over to Mr. Sam Fisch, Veru Inc.'s Executive Director, Investor Relations and Corporate Communications. Please go ahead.

Good morning. The statements made on this conference call may be forward-looking statements. Forward-looking statements may include but are not necessarily limited to statements of the company's plans, objectives, expectations or intentions regarding its business operations, regulatory interactions, finances and development and product portfolio.

Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time.

I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc.'s Chairman, CEO and President.

Good morning. With me on this morning's call are Dr. Gary Barnette, our Chief Scientific Officer; Michele Greco, our Chief Financial Officer and Chief Administrative Officer; Phil Greenberg, General Counsel; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our first quarter fiscal year 2026 earnings call.

Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 new chemical entity small molecules, enobosarm and sabizabulin.

The first one, enobosarm, is an oral selective androgen receptor modulator, SARM, and is being developed as a next-generation drug that when combined with a GLP-1 receptor agonist, and as demonstrated in our company's recently completed Phase II QUALITY study makes weight reduction more tissue selective to fat loss and preservation of lean mass and physical function, which is intended to lead to greater weight loss compared to GLP-1 receptor treatment -- receptor agonist treatment alone with a focus on older patients with obesity.

Our second asset, sabizabulin, a microtubule disruptor is being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression or promote the regression of atherosclerotic cardiovascular disease. This morning, we will focus on the update of our obesity program, and we will also provide financial highlights for fiscal 2026 first quarter ended December 31, 2025. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who overweight or have obesity.

Unfortunately, this weight loss is tissue nonselective with the indiscriminate significant loss of both lean mass and fat. Of the total weight loss, up to 50% is attributable to lean mass. Although the GLP-1 receptor agonist treatment has resulted in profound weight loss for many patients, the strategy for the next generation of obesity drugs should be a combination therapy with a GLP-1 receptor agonist for patients to lose fat only while preserving lean mass and physical function and bone mineral density for the highest quality weight reduction.

Veru's completed positive Phase IIb quality clinical trial conducted in 168 older patients with obesity provided a proof of concept that enobosarm could be that next-generation drug in combination with the GLP-1 receptor agonist to make the weight loss journey more selective for only fat loss while preserving lean mass and physical function during the active weight loss period, but also notably, after semaglutide was discontinued, enobosarm monotherapy significantly prevented the regain of both weight body weight and fat mass such that by the end of the 28-week study, there was greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group.

In September of 2025, we announced a successful FDA meeting, providing regulatory clarity for the development of enobosarm in combination with GLP-1 receptor agonist for greater quality weight loss and treatment of obesity. According to FDA feedback, there are at least 2 possible regulatory pathways for the development of the enobosarm in combination with GLP-1 receptor agonist treatment for obesity with preservation of lean mass, which are based on incremental weight loss.

First, incremental weight loss with at least a 5% placebo-corrected weight loss difference at 52 weeks of maintenance treatment with the enobosarm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor agonist treatment alone may be an acceptable primary endpoint to support efficacy for approval. Second, if the incremental weight loss is less than 5% corrected weight loss, including similar weight loss at 52 weeks of maintenance treatment with enobosarm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor agonist treatment alone.

But the enobosarm treatment group demonstrates a clinically significant positive benefit such as a statistically significant and clinically meaningful benefit in the preservation of physical function. This may also be acceptable to support efficacy for approval. FDA also confirmed that enobosarm 3 milligrams is an acceptable dosage for future clinical development.

Now coincidentally, on December 19, 2025, the FDA announced that total hip bone mineral density, that's BMD, assessed by DXA scan qualifies as a validated surrogate endpoint for drug development in postmenopausal women with osteoporosis at risk for fracture instead of the current standard that requires Phase III clinical studies must use bone fractures as a primary endpoint. This is relevant for our enobosarm obesity program as it's been reported in the scientific literature the GLP-1 receptor agonist therapy affects body composition by also reducing hip BMD.

In fact, the semaglutide Wegovy FDA label has recently been updated to include the safety concern of increased risk of hip and pelvic fractures based on the SELECT cardiovascular trial, which is sponsored by Novo Nordisk in over 17,000 subjects. In the SELECT trial, 4 to 5x more hip fractures of the hip and pelvis were reported on Wegovy than in placebo in female patients and in all patients aged 75 and older.

The good news for our enobosarm obesity program is that in previously published preclinical studies and rat models of postmenopausal female osteoporosis, enobosarm has been shown to have both anabolic and antiresorptive activities that result in increased bone mineral density. Consequently, this means that distinct from incremental weight loss, muscle preservation and physical function as primary endpoint, improving BMD in postmenopausal women with obesity receiving a GLP-1 receptor agonist who also have osteoporosis can be another primary endpoint going forward for enobosarm to seek regulatory approval for improving body composition.

Now let's turn to the current status of our planned Phase IIb PLATEAU clinical study. A common and serious clinical and therapeutic challenge of GLP-1 receptor agonist treatment that 88% of patients with obesity after 1 year on a GLP-1 receptor agonist drug hit a weight loss plateau where they stop losing additional weight. This is based on the SURMOUNT-1 study conducted by Eli Lilly and Company. Unfortunately, 62.6% of these patients still have clinical obesity at the time they reach a weight loss plateau.

One explanation might be that the loss of muscle may stimulate appetite in patients receiving a GLP-1 receptor agonist to consume more calories, which may be an important reason why patients hit that weight loss plateau. Enobosarm has been shown in clinical studies to directly burn fat to preserve muscle to increase physical function and to burn more calories, which could help break through the weight loss plateau, leading to incremental weight reduction.

Veru's planned Phase IIb PLATEAU clinical study is a double-blind, placebo-controlled study to evaluate the effect of enobosarm 3 milligrams on total body weight, fat mass, lean mass, physical function, bone mineral density and safety in approximately 200 older patients aged greater or equal to 65 years of age who have obesity with a BMI of greater or equal 35 and are initiating semaglutide treatment for weight reduction. The primary efficacy endpoint of the study is the percent change from baseline and total body weight at 68 weeks.

An interim analysis will be conducted at 34 weeks to assess the percent change from baseline in lean body mass and fat mass as measured by DXA scan. The key secondary endpoints are total fat mass, total lean mass, physical function using the stair climb test, bone mineral density and a patient reported outcome questionnaires for physical function, HbA1c and insulin resistance. Semaglutide was selected as a GLP-1 receptor agonist for the Phase IIb plateau study to build on Veru's previous clinical experience using enobosarm in combination with semaglutide in the Phase IIb quality clinical study.

Further, there's now an oral form of semaglutide, which may be used in combination with oral enobosarm in future Phase III clinical studies, making the potential bridging of the future Phase III clinical studies data to the Phase IIb PLATEAU enobosarm plus injectable semaglutide data possible. In contrast, tirzepatide injectable does not have an oral formulation. The principal investigator for the Phase IIb PLATEAU clinical trial will be again, Steven Heymsfield, MD, Professor and the Director of the Body Composition-Metabolism Laboratory at the Pennington Biomedical Research Center in Baton Rouge, Louisiana.

The clinical study is expected to begin this quarter and interim analysis to assess change in lean body mass and fat mass as measured by DXA will be conducted at 34 weeks, which is anticipated to be in the first quarter of calendar year 2027. I will now turn the call over to Michele Greco, CFO and CAO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. On October 31, 2025, Veru completed an underwritten public offering of 1.4 million shares of our common stock, prefunded warrants to purchase up to 7 million shares of our common stock, accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per share of common stock and the accompanying Series A and Series B warrants.

Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting costs and discounts paid by the company. In the prior year period, on December 30, 2024, Veru sold the FC2 Female Condom business to Clear Future Inc. In our financial statements, all direct revenues, costs and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations, net of tax in the statements of operations.

Now let's review the results for the 3 months ended December 31, 2025. Research and development costs decreased to $1.3 million from $5.7 million in the 3 months ended December 31, 2024. The decrease is primarily due to a wind down of the Phase IIb quality clinical study for enobosarm as a treatment to augment fat loss and prevent muscle loss, which was completed during fiscal 2025.

General and administrative expenses were $4.1 million compared to $5.2 million in the prior quarter. The decrease is primarily due to a decrease in share-based compensation. We recognized a gain on the sale of ENTADFI assets of $695,000 in the prior quarter, which is based on nonrefundable consideration received related to promissory notes previously due to Veru. As the promissory notes are now settled, no additional gain is expected in future periods.

In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8.6 million in the prior year's quarter related to the termination of the residual royalty agreement. During the prior fiscal year, the company entered into a settlement agreement with Onconetix Inc., whereby the company received a cash payment of $6.3 million in Series D preferred stock and warrant, which had a combined fair value of $2.5 million.

The loss associated with the change in fair value of securities held related to Onconetix was $0.1 million compared with $0.3 million for the prior period. The bottom line result was a net loss of $5.3 million or $0.26 per diluted common share compared to a net loss of $8.9 million or $0.61 per diluted common share in the prior year's quarter. For the prior period's quarter, the net loss included a net loss of $7.1 million from discontinued operations.

Now looking at the balance sheet. As of December 31, 2025, our cash, cash equivalents and restricted cash balance was $33 million compared to $15.8 million as of September 30, 2025. On both December 31, 2025, and September 30, 2025, there was $0.1 million of restricted cash related to the sale of the FC2 Female Condom business. Our net working capital was $29.7 million as of December 31, 2025, compared to $11.1 million as of September 30, 2025.

The company is not profitable and has had negative cash flow from operations. Based on the company's current operating plan, our cash as of the issuance date of these financial statements is expected to be sufficient for the company to fund operations through the interim analysis in the Phase IIb PLATEAU clinical study to assess percent change from baseline in lean body mass and fat mass as measured by DXA scans.

During the 3 months ended December 31, 2025, we used cash of $6.2 million for operating activities compared with $11.3 million used for operating activities in the prior period. There was no cash generated from investing activities in the current period. For the 3 months ended December 31, 2024, we generated cash from investing activities of $17.2 million, primarily from proceeds from the sale of the FC2 Female Condom business of $16.2 million.

Net cash provided by financing activities for the 3 months ended December 31, 2025, was $23.4 million, which were the proceeds from the sale of common stock and warrants in an underwritten public offering, net of commissions and costs. We used cash in financing activities for the 3 months ended December 31, 2024, of $4.2 million related to the change of control payment to SWK pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 female condom business.

Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

Thank you, Michele. With that, we'll now open the call to questions. Operator?

[Operator Instructions] Our first question comes from Edward Nash with Canaccord.

I wanted to first ask a couple of questions. One was why not use the oral semaglutide in this study as opposed to having the optionality in the Phase III? Is it just because of it's relatively new now, it's lack of real-world data?

I think the reason is that we're trying to minimize the potential difference between what we saw in the Phase IIb QUALITY study and what we want to see in the PLATEAU study. And so the oral form is not exactly the same as the injectable. The injectable is a little bit better. So that means that we show what we need to show in the Phase IIb PLATEAU study, then we should see even a better response with an oral semaglutide doesn't do as well as the injectable. So really, it has been calculated took a step back and said, why do we want to change in tirzepatide now and essentially created a completely different study with different outcomes potentially. So we're trying to be safe as we move towards.

Now with that said, semaglutide is the active ingredient in both the injectable and the oral. And so that could be easily bridged. And what you're trying to bridge is not the efficacy because we're going to be testing the efficacy in the Phase III. What you want to bridge is into all the safety, and you should be able to do that.

Got it. And just one follow-up is on the -- with regards to the function aspect, functional aspect of the FDA allowing that as a potential approval pathway, preservation of function. Did you guys specifically discuss with the agency about stair climb test and the specific questionnaires that you're looking to employ to determine whether or not they consider those to be sufficient to -- for that endpoint?

Yes. So yes, we did speak to the agency specifically about stair climb. As you know, we've done 5 now with the QUALITY studies, 6 studies previously done with enobosarm and done by our company here at Veru with 1,000 patients using stair climb. So we have 20 years' experience with stair climb. And it's not just talking to the agency with this trial and other trials, but also every major scientific group.

And stair climb still comes out as the best way to measure what's happening in this patient population. It's most sensitive to declines and it's very sensitive to anabolic intervention. With that said, the main comment that the FDA brought up was in the conduct of the study, we wanted to make sure that we did a duplicate stair climb runs. In other words, patient goes up to stairs once and it goes up second and then you average that. And they also want to make sure that in addition to loaded that we did unloaded.

What that means is that when a patient goes up to stairs, the unloaded means they just go up just as they are. Loaded means that you add a backpack with some weight and the concept there is kind of clever, is that we're trying to normalize weight. And the way you normalize weight is that you just add back the weight that they lost when they come back to that final visit and you do that with the plate. And so this way, you're actually measuring and challenging the patient's muscle.

So -- and that's why it becomes such a sensitive measure of intervention. And so we had those kinds of discussions with the FDA. What's open is -- and what we're going to focus on in the plateau study is also what happens with the patient-reported outcomes and how the patient reported outcomes helps to further define how patient functions and feels. And so that's why the Phase II makes more sense than jump into a Phase III because that will help with the clinical meaningfulness of what we're actually measuring objectively.

And the next question comes from Rohan Mathur with Oppenheimer.

This is Rohan on for Leland. I just wanted to ask on the interim analysis plans. Are there any prespecified decision rules with respect to futility or alteration of the sample size that are part of the criteria there?

So I have Dr. Gary Barnette, our Chief Scientific Officer. Gary?

Yes. No, there's no futility analysis or sample size reestimation associated with this interim analysis.

And as you know, the primary endpoint is weight loss. And so the interim analysis is looking at lean mass and fat mass. And so the real purpose of it is to gain confirmation that we're heading in the right direction, meaning that you're seeing the lean mass preservation and the additional fat mass loss that would at 34 weeks, that should translate to 68 weeks a weight loss benefit.

And so from a statistical standpoint, by not looking at total weight loss, plus it's too early anyway, at 34 weeks, you're not taking a statistical penalty or an alpha hit at the interim, which will affect the amount of alpha spend you have at the end of the study.

Got it. And just one more for me. If you go down the route of assessing functional benefit in the case that maybe less than 5% weight loss is observed, is there any sense for what degree of weight loss needs to be seen? And is that counterbalanced by the magnitude of functional benefit?

Yes. So as I said in my public statements that, that question has come up before. So greater than 5% alone is weight loss -- incremental weight loss you're in. If it's less than 5%, and the weight loss could be similar to the GLP-1 receptor agonist alone, meaning that you didn't see an incremental weight loss difference at all. But you showed the physical function benefit, then that could be a basis for approval going forward.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dr. Mitchell Steiner for any closing remarks.

Thank you. I appreciate everyone who joined us on today's call, and we look forward to updating you all on our progress in our next investor call. Thank you again.

A digital replay of the conference call will be available beginning approximately 12:00 p.m. Eastern Time today, February 11, by dialing 1 (855) 669-9658 in the U.S. and 1 (412) 317-0088 internationally. You will be prompted to enter the replay access code, which will be 7414536. Please record your name and company when joining. The conference call has now concluded. Thank you for attending today's discussion.

Good morning, ladies and gentlemen, and welcome to Veru Inc. Investors Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference call over to Mr. Sam Fisch, Veru Inc. Executive Director, Investor Relations and Corporate Communications. Please go ahead.

The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations or intentions regarding its business, operations, regulatory interactions, finances and development of product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings as well as in our press releases from time to time.

I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc's. Chairman, CEO and President.

Good morning. With me on this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the Chief Financial Officer and Chief Administrative Officer; Philip Greenberg, General Counsel; and Sam Fisch, Executive Director of Investor Relations and Corporate Communications. Thank you for joining our year end fiscal year 2025 earnings call.

Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 new chemical entity small molecules, enobosarm and sabizabulin. First one is enobosarm, an oral selective androgen receptor modulator, SARM, is being developed as a next-generation drug that makes weight reduction by GLP-1 receptor agonist drugs more tissue selected at fat loss with preservation of lean mass. This activity is intended to lead to greater weight loss by improved body composition and physical function compared to a GLP-1 receptor agonist treatment alone with a focus on older patients with obesity.

Our second asset is sabizabulin, a microtubule disruptor and is being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation to slow the progression of promoted regression of atherosclerotic cardiovascular disease.

This morning, we will focus on the update of our obesity program, and we'll also provide the financial highlights for our year-end fiscal year 2025.

Now let's set the stage with the recent FDA guidance on obesity drug development. The FDA defines obesity as a disease of excess body fat and as such, the medical objective to treat obesity should be to reduce excess body fat, not to reduce lean mass. Reduction of fat mass ultimately leads to the improvements in morbidity and mortality associated with obesity.

GLP-1 receptor agonist have been shown to produce significant weight loss in patients who are overweight or have obesity. Unfortunately, the weight loss is tissue nonselective with the indiscriminate loss of both significant lean mass and fat. Of the total weight loss up to 50% is attributable to lean mass. Although the GLP-1 receptor agonist treatment results in profound weight loss, the strategy for the next generation of obesity drugs should be a combination therapy with GLP-1 receptor agonist to only lose fat while preserving lean mass in physical function for a quality weight reduction.

Now when we started our Phase IIb quality clinical trial evaluating enobosarm as a muscle preserving drug in patients with obesity receiving a GLP-1 receptor agonist for weight reduction about 2 years ago, it was unknown at the time how any muscle anabolic drug would perform in this unique new patient population. The companies that were in Phase II testing stage were Lilly, Versanis, Scholar Rock and Regeneron with injectable agents in the myostatin inhibitor class and Veru with an oral enobosarm from a different class called SARM. Fast forward to today, all these companies, including Veru have reported their Phase II clinical results.

In fact, Veru was the first company to report these clinical data in January of 2025. And by September of 2025, Veru also obtained FDA regulatory clarity to advance the clinical development of enobosarm in combination with GLP-1 receptor agonist as a muscle preservation agent in [ augment ] fat loss. Our completed positive Phase IIb quality clinical trial results were critical as they demonstrated that oral enobosarm could be that next-generation drug in combination with GLP-1 receptor agonist to make the weight loss journey more selective by losing fat while preserving lean and physical function in older patients who have obesity with a positive safety profile.

Now turning to the results of the Phase IIb clinical trial, this time with a focus on the 3-milligram enobosarm dose that has been selected for the next clinical trial. First, I will highlight the results for the 16-week active weight loss period of the treatment with enobosarm 3-milligrams or placebo in combination with semaglutide. The enobosarm 3-milligram plus semaglutide group met the primary endpoint of the study, preservation of total lean mass with a statistically significant 100% average preservation of total lean mass compared to placebo plus semaglutide treatment group at 16 weeks.

The enobosarm semaglutide treatment resulted in a dose-dependent greater loss of fat mass compared to placebo plus semaglutide with the enobosarm 3-milligram group having a 12% greater fat loss at 16 weeks. Even with having preserved lean mass, enobosarm 3 milligrams for semaglutide treatment resulted in a similar mean body weight loss and semaglutide alone at 16 weeks. However, it should be noted in a subset analysis of the subjects receiving enobosarm 3 milligrams who had a baseline BMI of greater than equal to 35, incremental weight loss was observed at 16 weeks.

This was weight loss of 4. 7% for semaglutide versus a minus 5.58% for enobosarm 3 milligrams plus semaglutide treatment group. But when you look at the proportion of patients that lost at least 5% of the body weight at 16 weeks, it was 47.4% for semaglutide versus 65.4% for enobosarm 3 milligrams plus semaglutide treatment group. This weight loss occurred even with 84% preservation of lean mass in the subset of patients receiving semaglutide on enobosarm 3 milligrams.

Now the tissue composition of the total body weight loss on average was 34% lean mass and 66% fat mass in the placebo semaglutide group, whereas for enobosarm 3 milligrams and semaglutide group, the weight loss was 0% lean and 100% fat mass. Now we measured physical function by the stair climb test. This was a prespecified responder analysis, and this was conducted using greater than 10% decline in stair climb power as a cutoff at 16 weeks, which is a decline that represents approximately 7 to 8 years of loss of stair climb power that naturally occurs with aging, but it occurred in this case in 16 weeks.

Semaglutide alone resulted in a loss of physical function as much as 44.8% of the placebo plus semaglutide group had at least a 10% decline in stair climb power at 16 weeks. The Phase IIb QUALITY study is the first to confirm that older patients with obesity receiving a GLP-1 receptor agonist indeed had a significant and relevant physical function decline and picked up as early as 16 weeks on treatment. In contrast, enobosarm 3-milligram treatment reduced the proportion of patients receiving semaglutide to 17.6% who experienced a greater than 10% decline in stair climb power. This represents a 59.8% relative reduction in the proportion of patients receiving enobosarm who experienced a greater than equal 10% decline in stair climb power.

Now for the maintenance extension portion of the study, where all patients discontinued semaglutide treatment but continued receiving placebo enobosarm 3 milligrams as monotherapy for 12 weeks, results were: For the placebo monotherapy group, they actually regained 43% of their body weight that was previously lost during the active weight loss period of the Phase IIb QUALITY study, the mean percentage change of 2.57%, basically 5 pounds, they gained back in body weight compared to 1.41% or 2.73 pounds for the 3-milligram enobosarm group. This means that the 3-milligram enobosarm monotherapy significantly reduced body weight regained by 46% after discontinuing the semaglutide.

But by the way, the mean tissue composition of the body weight that was actually regained was 100% lean mass, not fat for the enobosarm 3-milligram group compared to 28% fat and 72% lean mass in the placebo group. In fact, by the end of the 28-week study, the enobosarm 3-milligram plus semaglutide arm followed by the enobosarm 3-milligram monotherapy regimen was more effective in preserving 100% lean mass and losing 58% more fat compared to the group receiving placebo plus semaglutide followed by placebo monotherapy alone.

As for safety, at the end of the 16-week active weight loss period, enobosarm and semaglutide combination had a positive safety profile and enobosarm did not have any added gastrointestinal adverse events compared to semaglutide alone. For the maintenance extension period of the clinical trial, where semaglutide was stopped for 12 weeks, enobosarm monotherapy also had a positive safety profile. And after discontinuation of semaglutide, there were essentially no gastrointestinal side effects. No evidence of drug-induced liver injury, no increases in obstructive sleep apnea were observed at any dose of enobosarm compared to placebo monotherapy. There were no adverse events related to masculinization in women, and there was no adverse events related to increases in prostate-specific antigen, which is PSA, in men.

So in summary, Phase IIb QUALITY clinical trial confirms that by preserving lean mass and physical function with enobosarm plus semaglutide led to greater fat loss during the active weight loss period and after semaglutide was discontinued, enobosarm monotherapy significantly prevented the regain of body weight and fat mass such that by the end of the 28-week study, there was a greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group.

Next, I will update you on the enobosarm clinical development plan. Because this field is very new, the regulatory landscape continues to evolve for muscle preservation drugs for the treatment of obesity. According to the FDA feedback on Veru's clinical development program for enobosarm, FDA has guided us that there are at least 2 possible regulatory pathways forward for the development of enobosarm in combination with GLP-1 receptor agonist that are based on incremental weight loss.

First, incremental weight loss with at least a 5% placebo-corrected weight loss difference at 52 weeks of maintenance treatment with enobosarm in combination with GLP-1 receptor agonist treatment compared to GLP-1 receptor treatment alone is an acceptable primary endpoint to support efficacy for approval.

Second, and alternatively, if the incremental weight loss difference of less than 5% is less than 5%, including similar weight loss is observed at 52 weeks of maintenance treatment, but you have a clinically significant positive benefit such as a clinically beneficial preservation in physical function, enobosarm in combination with a GLP-1 receptor agonist may also be acceptable to support efficacy for approval. Accordingly, with this feedback from the FDA and building on the clinical data from the Phase IIb clinical -- excuse me, Phase IIb QUALITY study, what would be the best patient population with obesity to target with a combination of enobosarm and a GLP-1 receptor agonist.

An emerging common and serious clinical and therapeutic challenge with GLP-1 receptor agonist monotherapy is that most patients with obesity by the end of 1 year of GLP-1 receptor agonist maintenance treatment hit a weight loss plateau. The weight loss plateau occurs when the patient with obesity stops losing additional weight while on the GLP-1 receptor agonist. In the SURMOUNT-1 clinical study conducted by Eli Lilly and Company, about 88% of patients with obesity receiving tirzepatide reached a weight loss plateau by 60 to 72 weeks. Unfortunately, 62.6% of these patients still had clinical obesity at the time they reached the weight loss plateau.

Further, if they start the GLP-1 treatment with a baseline BMI of greater or equal to 35, then these patients was, on average, still found to have clinical obesity at the time they hit the weight loss plateau. Interestingly, one of the therapeutic interventions being considered for this patient population is bariatric surgery to address the GLP-1 receptor weight loss plateau. To address this growing weight loss plateau population, a novel combination of a GLP-1 receptor agonist, which works by telling the brain to reduce appetite, combined with enobosarm, which is designed to directly burn fat and to directly preserve muscle to increase physical function and burn more calories could break through this weight loss plateau, leading to incremental weight reduction, thereby increasing the number of patients with obesity who actually achieve and maintain a normal BMI and weight.

Our next study will target this patient population. The planned Phase IIb PLATEAU clinical trial will measure incremental weight loss in this target population who have more weight to lose with a BMI greater than 35 and more at risk for physical decline in physical limitations, aged greater than equal to 65 to assess the ability of enobosarm treatment to break through the weight loss plateau and help us also to better inform the design of the Phase III development program.

Now for the planned Phase IIb PLATEAU clinical trial, we will evaluate the effect of enobosarm 3 milligrams on total body weight, physical function and safety in approximately 200 patients who have obesity, BMI greater than equal to 35 and who are older, age greater than equal to 65 and are initiating a GLP-1 receptor treatment for weight reduction. The primary efficacy endpoint of the study will be the percent change from baseline in total body weight at 72 weeks. An interim analysis will be conducted at 36 weeks to assess the percent change from baseline lean body mass and fat mass as measured by DEXA scan.

Since we want to continue to evaluate enobosarm as a muscle preservation and body composition drug, the key secondary endpoints will be function endpoints, physical function stair climb test, mobility disability status, which is functional limitations and patient-reported outcome questionnaires for physical function such as the SF36, PF10 and the IWQOL-lite CT physical function PROs. As well as body composition endpoints, total fat mass, total lean mass and bone mineral density.

As for our financial position to fund the Phase IIb program, as of September 30, 2025, our cash and cash equivalents and restricted cash balance was $15.8 million. And subsequent to September 30, 2025. On October 31, 2025, we completed a public offering that resulted in net proceeds to the company of approximately $23.4 million. The clinical study is expected to begin in the first quarter of calendar year 2026. An interim analysis to assess change in lean mass and fat mass as measured by DEXA will be conducted at 36 weeks and is anticipated to be in the first quarter of calendar year 2027.

I will now turn the call over to Michele Greco, CFO, CAO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. On December 30, 2024, Veru sold the FC2 Female Condom business to Clear Future Inc. The purchase price was $18 million in cash, subject to adjustment as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 Female Condom business were approximately $16.5 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK Holdings pursuant to a residual royalty agreement for a 2018 financing transaction.

The loss on the sale of the FC2 Female Condom business was approximately $4.1 million. The difference between the estimated net proceeds of $16.5 million and the total carrying value of the FC2 business of $20.6 million. On December 30, 2024, the carrying value of the FC2 Female Condom business was comprised primarily of deferred income tax assets of $12.3 million, accounts receivable of $4.6 million and inventory of $3.4 million, partially offset by accrued expenses and other current liabilities of $1.5 million. Liabilities associated with the residual royalty agreement, which totaled $9.9 million at September 30, 2024, were extinguished.

The sale of the FC2 Female Condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development and also affects how we present our operations and financial results. In our financial statements, all direct revenues, costs and expenses related to the FC2 Female Condom business are classified within loss from discontinued operations net of tax in the statement of operations.

On October 31, 2025, the company completed an underwritten public offering of 1.4 million shares of our common stock, prefunded warrants to purchase up to 7 million shares of our common stock, accompanying Series A warrants to purchase up to 8.4 million shares of our common stock and accompanying Series B warrants to purchase up to 8.4 million shares of our common stock at a public offering price of $3 per common share of stock and the accompanying Series A and B warrants. Net proceeds to the company from this offering were approximately $23.4 million after deducting underwriting discounts and commissions and costs paid by the company.

Now let's review the results for the fiscal year ended September 30, 2025. Research and development costs increased to $15.6 million in fiscal 2025 from $12.8 million in the prior year. The increase is due to an increase in expenses incurred related to the company's Phase IIb QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, partially offset by a decrease in expenditures related to the company's other drug development programs that were terminated in previous years and a decrease in personnel costs.

Selling, general and administrative expenses were $19.9 million in fiscal 2025 compared to $24.6 million in the prior year. The decrease is primarily due to a decrease in the expense related to share-based compensation. We recognized a gain on sale of ENTADFI assets of $10.8 million in fiscal 2025 compared to a gain of $1.2 million in the prior year, which is based on nonrefundable consideration received related to promissory notes due to Veru. During the year, the company entered into a settlement agreement with Onconetix, whereby the company received a cash payment of $6.3 million in Series D preferred stock and a warrant, which had a combined fair value of $2.5 million.

In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million. which included an embedded derivative for the change of control provision at fair value of $4.7 million.

The loss associated with the change in fair value of equity securities in fiscal 2025 was $0.3 million compared with $0.2 million for fiscal 2024. This is due primarily to the change in the fair value of the shares of Onconetix common stock we previously held, which were sold during fiscal 2025.

The bottom line result from continuing operations for the fiscal year was a net loss of $15.7 million or $1.07 per diluted common share compared to a net loss of $35.3 million or $2.61 per diluted common share in the prior year. For fiscal 2025, net loss from discontinued operations, net of taxes related to the FC2 business were $7 million or $0.48 per diluted common share, including the $4.1 million loss on the sale of the FC2 business compared to a net loss of $2.5 million or $0.19 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $4.5 million is due to the loss on the sale of the FC2 Female Condom business of $4.1 million, a reduction in gross profit of $4.3 million and an increase in the loss from the change in fair value of the derivative liabilities of $2.9 million, partially offset by a decrease in operating expenses of $5.5 million.

Now looking at the balance sheet. As of September 30, 2025, our cash, cash equivalents and restricted cash balance was $15.8 million compared to $24.9 million as of September 30, 2024. The restricted cash as of September 30, 2025, was $54,000 related to the sale of the FC2 Female Condom business. Subsequent to September 30, 2025, we completed a public offering that resulted in net proceeds to the company of approximately $23.4 million. Our net working capital was $11.1 million on September 30, 2025, compared to $23.4 million on September 30, 2024.

The company is not profitable and has had negative cash flow from operations. We will need additional capital to support our drug development candidates. Based on the company's current operating plan, our cash as of the issuance date of these financial statements is sufficient for the company to fund operations through the interim analysis in the Phase IIb PLATEAU clinical study to assess percent change from baseline in lean body mass and fat mass as measured by DEXA scan. During the year, we used cash of $30 million for operating activities compared with $21.7 million used for operating activities in the prior year.

We generated cash from investing activities of $25.1 million for fiscal 2025 compared with $0.1 million from investing activities in the prior year. The cash generated in the current year relates to net proceeds from the sale of the FC2 Female Condom business of $16.5 million and proceeds of $8.3 million from the sale of the ENTADFI assets. We used cash in financing activities for fiscal 2025 of $4.2 million related to the change of control payment pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 Female Condom business. In the prior year, we generated $36.8 million from financing activities.

Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

Thank you, Michele. And with that, I'll now open the call to questions. Operator?

[Operator Instructions] The first question today comes from William Wood with B. Riley Securities.

Congrats on a successful year. I'm just kind of curious, in your press release for PLATEAU, you noted that there's going to be an inclusion of GLP-1 whereas at least in the past, you've spoken of using only tirzepatide, which is highlighted in your most recent deck. During PLATEAU, there's the potential for 2.4 mg sema, 7.2 mg sema 25 mg oral sema and then [ oral ] and then obviously also tirzepatide to all be approved. So I'm just curious, will any GLP-1 be allowed in your Phase IIb? Or will it be limited to just tirzepatide? And curious how we should sort of view the potential to achieve this 5% weight loss bar when placed with various agents. Do you feel that, that remains the same or it sort of lower or higher initial weight loss better to sort of set you up for success.

Great question. Thank you for the question. So basically, the question is, we're seeing GLP-1 receptor agonist. We get -- we're putting tirzepatide. in the placeholder in the study, raise the question, are you going to allow both semaglutide and tirzepatide, which are the 2 approved GLP-1 receptor agonists that are out there right now. And the answer is we have to pick one, because they are different. And the last thing you want to do is add variability to the study by having tirzepatide and semaglutide together. We're in the process of chatting and trying to secure one or the other. And so based on that, we'll determine ultimately which one it will be. At this point, the placehold is tirzepatide, but it could be semaglutide. But in either case, it should be one or the other and not allowing for both.

Got it. That's helpful. And then also, when thinking about sort of the Phase I to Phase III transition. Do you have any insight on -- I know you said that the FDA would allow for -- if you don't achieve that 5% bar, they would allow to incorporate or to look towards, say, a functional improvement like strength, specifically stair climb. But how does that set up in Phase III? Is that set up a dual endpoint in Phase III where you have to have where it's sort of an and/or dual primary endpoint? Or would they allow just a functional endpoint? How should we be thinking about that?

So I'll tell you exactly how to be thinking about it. It's a great question. So the reason we didn't go to Phase III is because we wanted to answer that question before you move to an expensive Phase III, okay? So the idea is do a Phase IIb and make the primary endpoint incremental weight loss. And so we know exactly how this agents are going to behave just like in a Phase III setting. So they have the titration period, the maintenance period of 52 weeks, same exact criteria that the FDA wants through the Phase III. So it's basically a mini Phase III. And so -- then we'll know exactly what that incremental weight loss over time will be.

Then to make sure that it's very clear that we're focusing on body composition and function the second -- key secondary end points, as I mentioned in my comments, are going to be heavily weighted on getting an understanding of what happens at 72 weeks. So basically, your titration period followed by your maintenance period. Again, understand exactly what's going to happen in the Phase III setting in the Phase II -- using the Phase II setting. So we'll know exactly which of these points.

Is it going to be stair climb power? Is it going to be the clinical outcome measure? Is it going to be bone mineral density? Is it going to be functional limitations, patients come in with functional limitation, mobility disability question. There's 2 questions. And do they improve and not improve? So we're learning a lot of information in what happens on 16 weeks, but what happens now at 72 weeks.

And so based on that, and to be very clear, we found that the FDA's feedback was very positive because it gave us options now that can range from incremental weight loss you hit, and you can bring all the physical function body composition stuff in, if clinically meaningful in the label. And you're different. You're not an incretin within incretin okay? Or it becomes clear incremental weight loss, it could be a challenge. We don't think it will be, but let's say it is, you're not dead in the water. Now you have your physical function endpoints that can serve as your primary endpoint, your primary endpoint in the Phase III. So you can see how we're using our Phase II to guide us in our Phase III program.

Yes. No, that's helpful. And I guess just actually one quick last one. I know you've mentioned in the past again that you were going to sort of go for all comers but stratify. It looks like you're only targeting the greater than 65 patient population now in PLATEAU, and that's actually sort of up from the greater than 60 years old in QUALITY. So maybe just clarify what population you're targeting? And was that more FDA guidance or Medicare reimbursement dynamics or just sort of the most in-need population kind of [indiscernible].

So the way to think of it is if we hit our incremental weight loss, okay? Then you feel more comfortable. And if you hit on incremental weight loss in patients over 65, you're going to be finding the incremental weight loss in patients less than 65, okay?

But for physical function, which is where we see ourselves benefiting and showing clinical meaningfulness, then the greater than 65 in our Phase IIb QUALITY study with the patients that were most in need, meaning they probably have a touch or more than a touch of sarcopenia and they already have physical limitations. They're the most informative population for physical function. If you go back and say, oh, if I look at STEP 1 or look at SURMOUNT studies, the performance looks better in patients that lose weight. It does because the average age is like 50.

But if you go over 65, I haven't seen a single study in which they take out patients that are 65 and older and ask the same question. They don't. And so the purpose of the Phase II is to find the patient population that's most in need. The FDA has guided that if you choose as a primary endpoint, physical function and body composition endpoints, that being older greater than 65 and quite frankly, even being younger than 65, there's no indication. So even if you hit incremental weight loss and you want a secondary endpoint of physical function, you have to say what patient population has to be prespecified. If you read the guidance, it says you have to prespecify it.

So in other words, if a 32-year-old linebacker, if you're going to lose weight and not have to get into trouble because they have a lot of muscle reserve, then that will be a bad patient to tell you whether or not you're going to make the functional limitations better. So even in the setting where incremental weight loss you hit and you want your secondary endpoint to be physical function, you can do a prespecified subset and put that into the full Phase III. So you do all comers and then you prespecify a subset, in this case, greater than 65.

So by having this Phase IIb PLATEAU study, we'll know exactly how that patient population will behave. And so we hit incremental weight loss, we expanded to all patients, and we prespecify an older patient population that we want to have functional endpoints measured. Again, you read the guidance, that's acceptable. On the other hand, if you don't hit incremental weight loss and you go forward being older than 65 is not a disease. And so therefore, you have to say, older than 65 and functional limitations, older than 65, something in the patient problems with average activity of daily living, problems with functional tests like stair climb. So this Phase IIb really will give us the information that we need to make sure that if we go with a primary endpoint of physical function that we have the right indication in the right patient population.

So as you see, we set ourselves up for all the options. And now on the study, take a step back between the Phase IIb QUALITY study and the Phase IIb PLATEAU study. Now you're going to feel pretty good you derisk the program for multiple opportunities -- multiple options going forward. So again, incremental weight loss with a secondary endpoint, physical function in the right patient population or physical function is your primary endpoint, incremental weight loss is not because you're at the same weight loss. But you have the right patient population, sarcopenic obese patient over the age of 65 that is afraid to go on GLP-1s.

Can you help that patient population, which by the way, 44 million Americans on Part D of Medicare, of which half can benefit from a weight loss drug. It's a massive market. So we're playing with big numbers.

While we're waiting for the next question, I just have a couple of comments to make. So first of all, as we reflect back over the year because this is year-end, maybe some personal comments from me. First of all, we went into a field that was completely unknown. We had data in cancer patients. We had data in older patients, but are these patients with pharmacological induced low-calorie situation different? And guess what, they are different. They are different.

And so much so that when you look at these myostatin inhibitors because now these other companies have reported, if not complete Phase II, partial Phase II data, it's hard to hold on to lean mass. It's hard to hold on to lean mass. And you'll see the 6-month data and even the year data. So this is a different patient population. With that said, enobosarm performed very nicely. So we were able to show 100% lean mass, we burn fat, good physical function. And then the statement came back, how about safety because safety took us some more time to get safety because the study was still blinded. Safety came back great. And in fact, we look like we make GI toxicity better for the GLP-1. And so we're very, very excited about that. So from a year -- looking back at the year, we did -- I think we achieved what we needed to do with the trial.

Then the competitive landscape, the other companies, Scholar Rock, Regeneron, Versanis, Lilly reported. And that was very, very helpful. Remember, we're oral, they're an injectable. And they have their own unique interesting safety signals. And that's because myostatin inhibitors are very ubiquitous and we're still learning about them. But the point is that we learned from that. What do we learn?

One of the things I heard over and over, oh Mitch, if you hold on to muscle, muscle weighs more than fat, that you're going to have people that actually gain weight on your anabolic agent. And forget about incremental weight loss, you may be in a situation where you have to accept less weight loss. It didn't happen. It didn't happen for us, it didn't happen for them. So if you give an anabolic agent, there's not an instance where you loss less weight, in fact, with time and with time and holding on to more lean mass, as shown by the Versanis Lilly data that by 72 weeks, they had a 6.4% incremental weight loss .6.4% incremental weight loss.

What that's supporting is that if you hold on to metabolic muscle that burns more calories every day than other tissue that ultimately the turtle wins the race, not the rabbit, the turtle wins the race and you end up with more weight loss. So that was important. Then the statement came back, okay, now we need regulatory clarity. Well, guess what? Yes, it's evolving. Yes, the FDA changed their mind because why would we do a 16-week study if incremental weight loss was the primary endpoint. That makes no sense. But that's because the FDA told us that incremental weight loss by itself would not work in the case of our drug functional endpoints, it function and should be the endpoint. That's what we did.

Why did we pick 16 weeks? Because in all the previous 5 other studies in 1,000 patients, 16 weeks will show it. Guess what? It did. And then the FDA changed their thinking and actually gave us an option to -- now that we know incremental weight loss and anabolic agents can happen, and we saw in some of our data that we saw weight loss in some of the cancer patients who are obese. This could be very, very interesting. This is -- sometimes I say the FDA moves to goal posts. In this case, they moved to [ assist ] us because they gave us an opportunity to have multiple ways to get the physical function information into the label. So I'm very happy about that.

And so our new trial design, as I just went through with questions from Dr. Wood. You'll see that we've set this up to have multiple opportunities for us to understand what the Phase III program could be from an extreme. Everybody in a subset of physical function to just the patients most in need that need a GLP-1, but can't take it because they have sarcopenic obesity, and that's a big number.

And finally, we raised money. We have money. We raised -- we had a public offering. We had money in the bank. We put ourselves in a position to move forward on the trial. So we're very happy that's behind us. Some pushback was the IP. The IP, okay, we're a new chemical entity, our method of use patents, which are now about 5 of them, if issued, will get us to 2043. 2043 is a long time from now. And then to be sure, we made sure we made a new formulation of enobosarm. We've reported that we have that new formulation of enobosarm. We filed patents on that new formulation. That will take it to 2046 expiry.

And in the Phase III in commercial, that will be the only formulation that will be used. Enobosarm is a new chemical entity. It doesn't exist out there. It's never been approved. So we put ourselves in a good position. And finally, pharma validation. And so we're working on. And so I think we've checked all the boxes to show that we have a robust program. And this year has been a really pivotal year to put us in a very strong footing to be an oral agent that could be potentially combined with some of the oral agents that are being developed by big pharma, where they're noticing that the oral agents aren't quite matching the injectables in terms of weight loss. So an oral agent, small molecule that's for weight loss incretin in combination with enobosarm could be very interesting. And particularly if you can potentially have similar weight loss with the combination therapy as you do with the injectables.

The next question comes from Rohan Mathur with Oppenheimer.

This is Rohan on for Leland. Thanks for the update, just one question for me. As you think about the different outcomes from the PLATEAU study and the obvious benefits of the enobosarm, do you expect there to be any flexibility around regulatory discussions that would follow when it comes to showing a certain degree of weight loss from muscle function?

Yes. So the degree of weight loss, this stake in the ground looks like 5% or greater placebo-corrected gets you the incremental weight loss. And if you have the incremental weight loss and all the secondary stuff will come in based on clinical meaningfulness. And so that gets to the next question, that is for a part of our homework in the Phase IIb PLATEAU study, and you can see we put a lot of options on physical function. We did physical function test, which is stair climb test, function test. They don't like strength tests. We're doing clinical outcomes questionnaires that have been used in many of these STEP 1, SURMOUNT studies as well. So we have data there. And if we can show an older patient population, there's an improvement. And in terms of clinical meaningfulness.

And then what's interesting new one is this mobility disability assessment. It turns out that there's an ICD code to diagnose clinicians use to diagnose frailty in older patients and for mobility, disability that contains 2 questions. Question one is, can you walk through city blocks? And question two is, can you climb stairs, something like that. And so to assess patients coming into our Phase IIb PLATEAU study, and show that we can make people with functional limitations coming into study better, that could be interesting. And so there's multiple ways to come back and present our case for the best way to measure physical function. One of those or all of those.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the call back over to Dr. Mitchell Steiner for any closing remarks.

Great. Thank you, operator. I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress in the next investors call. Thank you for being with us.

The digital replay of the conference call will be available beginning approximately 12:00 p.m. Eastern Time today, December 17, by dialing 1 (855) 669-9658 in the U.S. and 1 (412) 317-0088 internationally. You will be prompted to enter the replay access code, which will be 2225332. Please record your name and company when joining.

The conference call has now concluded. Thank you for attending today's discussion. Goodbye.

Good morning, ladies and gentlemen, and welcome to Veru Inc.'s Investors Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference call over to Mr. Michael Purvis, Veru Inc.'s General Counsel and Executive Vice President of Corporate Strategy. Please go ahead.

The statements made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, statements of the company's plans, objectives, expectations or intentions regarding its business, operations, regulatory interactions, finances and development and product portfolio. Such forward-looking statements are subject to known and unknown risks and uncertainties, and our actual results may differ significantly from those projected, suggested or included in any forward-looking statements. Risks that may cause actual results or developments to differ materially are contained in our 10-Q and 10-K SEC filings, as well as in our press releases from time to time.

I would now like to turn the conference call over to Dr. Mitchell Steiner, Veru Inc.'s Chairman, CEO and President.

Thank you, Michael. Good morning. With me on this morning's call are Dr. Gary Barnette, Chief Scientific Officer; Michele Greco, the Chief Financial Officer and Chief Administrative Officer; and Michael Purvis, General Counsel and Executive Vice President of Corporate Strategy. Thank you for joining our Q3 fiscal year 2025 earnings call.

Veru is a late clinical stage biopharmaceutical company focused on developing novel medicines for the treatment of cardiometabolic and inflammatory diseases. Our drug development program consists of 2 clinical stage drug candidates, enobosarm and sabizabulin. Enobosarm is an oral selective androgen receptor modulator, also known as SARM, is being developed as a novel drug that makes GLP-1 receptor agonist weight reduction more tissue selective by preserving lean mass in muscle while causing greater fat loss in older patients who overweight to have obesity. Sabizabulin is an oral microtubule disruptor being developed as a broad anti-inflammatory agent to reduce vascular plaque inflammation and slow the progression or promote the regression of atherosclerotic cardiovascular disease.

This morning, we'll focus our update only on our chronic weight loss management program. As defined by FDA, obesity is a disease of excess body adiposity or fat. Therefore, the medical objective to treat obesity by weight reduction drug or drugs in combination should be to reduce the excess body fat, not lean mass, to improve the morbidity and mortality associated with obesity. GLP-1 receptor agonists have been shown to produce significant weight loss in patients who overweight or have obesity. Unfortunately, the weight loss is tissue nonselective and the indiscriminate loss of both fat and lean mass. Of the total weight loss, up to 50% of the total weight loss is attributable to lean mass. We must do a better job of getting rid of fat tissue only.

As we previously presented the clinical data as they became available for our Phase II program, I will now present a summary of all of these important findings. Now we have demonstrated in the Phase IIb QUALITY study that enobosarm is a next-generation drug that makes GLP-1 receptor agonist weight loss more tissue selective for fat loss while preserving lean mass and physical function. In January of 2025, the company announced positive top line and efficacy data results from the Phase IIb QUALITY clinical study, which is a multicenter, double-blind, placebo-controlled randomized dose-finding clinical trial designed to evaluate the safety and efficacy of enobosarm 3 milligrams, enobosarm 6 milligrams or placebo as a treatment to augment fat loss and prevent muscle loss in 168 older men -- excuse me, older patients greater than 60 years of age, receiving semaglutide for chronic weight management.

Enobosarm plus semaglutide group met the primary endpoint of the study with a statistically significant 100% average preservation of total lean mass compared to placebo plus semaglutide at 16 weeks and that p-value is less than 0.001. The enobosarm plus semaglutide treatment resulted in a dose-dependent greater loss of fat compared to placebo plus semaglutide with the enobosarm 6-milligram dose having a 42% greater relative loss of fat mass compared to the placebo semaglutide group at 16 weeks and that p-value of 0.017. The enobosarm 3-milligram group had a 12% greater fat loss.

Even with having preserved the lean mass, the enobosarm plus semaglutide treatment resulted in a similar mean body weight loss as semaglutide alone in 16 weeks. And the tissue composition of the total body weight loss was 34% lean mass and 66% fat mass for the placebo plus semaglutide group, whereas it was 0% lean mass and 100% fat mass for the enobosarm 3 milligrams for the semaglutide group.

Physical function was measured by the stair climb test. Responders analysis was conducted using greater than the 10% decline in stair climb power as the cutoff at 16 weeks, which represents approximately 7 to 8 years loss of stair climb power that naturally occurs with aging. The Phase IIb QUALITY clinical trial is the first human study to demonstrate that older patients who are overweight will have obesity receiving semaglutide or at higher risk for accelerated loss of physical function as 44.8% of the placebo plus semaglutide group had at least a 10% decline in stair climb power physical function at 16 weeks. Enobosarm treatment preserved the lean mass, which translated into a reduction in the proportion of patients that had a clinically significant stair climb physical function decline with 17.6% of the enobosarm 3-milligram plus semaglutide group having at least a 10% decline in stair climb power function in 16 weeks, which is a 59.8% relative reduction in the proportion of patients that lost at least 10% stair climb power compared to placebo semaglutide group, and that p-value was 0.006.

In May of 2025, the company announced that enobosarm and semaglutide combination had a positive safety profile in the Phase IIb QUALITY clinical trial. Now after the trial participants completed the efficacy dose finding portion of the Phase IIb QUALITY clinical trial, 148 participants continued to the Phase IIb Maintenance Extension study. This is a double-blind study, where all patients discontinued semaglutide treatment but continued receiving placebo, enobosarm 3 milligrams or enobosarm 6 milligrams as monotherapy for 12 weeks. In June of 2025, the company announced positive top line efficacy and safety results in the maintenance extension portion of the Phase IIb QUALITY clinical study that showed that enobosarm significantly reduced body weight regain, prevented fat regain and preserved lean mass after semaglutide discontinuation.

As a point of reference, at the end of the Phase IIb QUALITY study active weight loss period of 16 weeks, body weight loss was similar across treatment groups with the semaglutide plus placebo group losing an average of about 11.88 pounds. After the 12-week Maintenance Extension period where all treatment groups discontinued semaglutide, the placebo monotherapy group regained 43% of the body weight that was previously lost during the Phase IIb QUALITY study for a mean percentage change of 2.57%, which is 5 pounds compared to 1.41%, which is 2.73 pounds for the 3-milligram group and that p-value of 0.038 and 2.87%, which is 5.29 pounds for the 6-milligram enobosarm group. This means that the 3-milligram enobosarm monotherapy significantly reduced the body weight we gained by 46% after discontinuation of semaglutide. By the way, the mean tissue composition of the body weight regained was 100% lean mass in both the 3-milligram and 6-milligram groups, whereas it was 28% fat and 72% lean mass in the placebo group.

Enobosarm plus semaglutide followed by enobosarm monotherapy regimen was more effective in preserving lean mass and causing and maintaining greater loss of fat by the end of the study. So the placebo plus semaglutide followed by placebo monotherapy group experienced loss of lean mass, while the enobosarm plus semaglutide group followed by enobosarm monotherapy group significantly preserved more than 100% of lean mass with the enobosarm 3-milligram p-value less than 0.001 and enobosarm 6 milligrams, a p-value equals 0.004. The enobosarm plus semaglutide followed by enobosarm monotherapy patients had a 58% greater loss of fat with enobosarm 3 milligrams, a p-value of 0.085 and 93% greater loss of fat with enobosarm 6 milligrams and that p-value is 0.008 compared to placebo plus semaglutide followed by placebo monotherapy.

Now adverse events and adverse events of special interest in this double-blind Phase IIb Maintenance Extension trial, enobosarm monotherapy had a positive safety profile. After discontinuation of semaglutide, there's essentially no gastrointestinal side effects, no evidence of drug-induced liver injury by Hy's law and no increases in obstructive sleep apnea observed at any dose of enobosarm compared to placebo monotherapy. And there were no adverse events of increases in prostate-specific antigen in men, and there was no adverse events related to masculinization in women, and there were no reports of suicidal ideation observed.

In summary, the Phase IIb QUALITY Maintenance Extension clinical trial confirms that preserving lean mass with enobosarm plus semaglutide led to greater fat loss during the active weight loss period. And after semaglutide was discontinued, enobosarm monotherapy significantly prevented the regain of both weight and fat mass during the maintenance period such that by the end of the study, there's greater loss of fat mass while preserving lean mass for higher quality weight reduction compared to the placebo group.

On August 11, 2025, the company announced the selection of a novel modified release oral formulation for chronic weight management -- chronic weight loss management following a pharmacokinetic clinical study. A single-dose open-label pilot study evaluated the plasma concentration versus the time profile of a proprietary patentable modified release formulation of enobosarm 3 milligrams. The new formulation demonstrated the intended distinct target product release profile, which includes a reduction in maximum plasma concentration, which is called Cmax, a delayed time to maximum plasma concentration called Tmax and a distinct secondary peak concentration and a similar extent of absorption, which is called AUC, compared to historical values for enobosarm immediate-release capsules. The novel modified release oral enobosarm formulation is planned to be available for the Phase III clinical study and for commercialization.

The novel enobosarm oral formulation's unique manufacturing process is protected by issued global patents with protection through 2037. And the new patents on the novel modified release oral enobosarm formulation itself have been filed and if issued, expiry is expected to be in 2046.

Now, we expect regulatory clarity for the GLP-1 receptor agonist and enobosarm combination Phase III program as we have had an end of Phase II FDA meeting scheduled this quarter. So we'll hear it this quarter. The proposed indication is enobosarm is a selective androgen receptor modulator indicated as an adjunct to GLP-1 receptor [indiscernible] function and preservation of lean mass in older, greater than 60 years of age adult patients with obesity.

Now, during our previous pre-IND FDA meeting, FDA provided general comments about the regulatory path forward for enobosarm as a drug that improves body composition during chronic weight management, including input on the Phase III clinical program design. So we have some preliminary information -- previous information that we received from the FDA when we started with our pre-IND meeting. Some of these FDA comments from the pre-IND meeting were: Enobosarm in combination with an approved incretin drug, so like a GLP-1 needs to show that there is some stabilization in lean mass that's clinically meaningful; imaging-based changes in lean mass would need to be directly linked to improvements in how a patient feels, functions and survives in order to support an indication related to preservation of lean mass; improvement in stair climb performance measure is clinically meaningful, so that's one way to do it; and would need to be linked to observed improvements in lean mass rather than weight loss itself. Stair climb test has been accepted by the FDA, again, as a point of reference for previous drug approvals and pivotal trials. So for the treatment of Duchenne muscular dystrophy and also pivotal Phase III cancer cachexia studies that -- for the 504 and 505 lung cancer studies have used stair climb as a primary endpoint in a Phase III program.

Finally, we're focusing our Phase III clinical program on an older population that could benefit from a weight reduction drug for chronic weight management, but who are at higher risk for muscle weakness and falls because of age-related loss of muscle. Now in general, there's 47.4 million patients over the age of 60 enrolled in Medicare Part D, of which 41.5% of them could benefit from a drug for overweight or obesity. Furthermore, up to 34.4% of patients over the age of 60 with obesity in the United States have what's called sarcopenic obesity. Sarcopenic obesity means these are patients who have obesity and 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 receptor agonist.

Although older patients represent a large market alone, success in this patient population could be a segue into the combination of enobosarm and GLP-1 treatment in younger patients who have obesity, as well as diabetic and frailty populations. We're looking forward to receiving the FDA regulatory clarity for this novel unmet medical need soon.

I will now turn the call over to Michele Greco, CFO, CAO, to discuss the financial highlights. Michele?

Thank you, Dr. Steiner. On August 8, 2025, the company effected a 1-for-10 reverse stock split of its issued and outstanding common stock. As a result of the reverse split, each 10 shares of issued and outstanding common stock were automatically converted into 1 share of common stock. The reverse stock split did not change the total number of shares authorized or par value per share. The reverse stock split was approved by the company's shareholders on July 25, 2025. All share and per share amounts presented in our financial statements as of June 30, 2025, have been retroactively adjusted for all periods presented. There were no fractional shares issued in connection with the reverse stock split.

Now reviewing the results for the 3 months ended June 30, 2025. Research and development costs decreased to $3 million from $4.8 million in the prior quarter. The decrease is due primarily to the wind down of the company's Phase IIb QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, which was completed during the quarter ended June 30, 2025. The company initiated the Phase IIb QUALITY clinical study during the quarter ended June 30, 2024.

Selling, general and administrative expenses were $5 million compared to $5.8 million in the prior quarter. The decrease is primarily due to a decrease in share-based compensation.

We recognized a gain on sale of ENTADFI assets of $485,000 compared to $110,000 in the prior quarter. The gain represents nonrefundable consideration received related to promissory notes due to Veru.

The bottom line result for continuing operations was a net loss of $7.3 million or $0.50 per diluted common share compared to a net loss of $10.3 million or $0.71 per diluted common share in the prior year's quarter. Net loss from discontinued operations net of taxes related to the FC2 Female Condom business, which was sold on December 30, 2024, was $9,700 or $0.00 per diluted common share compared to a net loss of $629,000 or $0.04 per diluted common share in the prior quarter. The net loss from discontinued operations during the current quarter represents changes in an estimate made at the time of the FC2 business sale, while the net loss for the prior year quarter represents the operations of the FC2 business during that period.

Now turning to the results for the 9 months ended June 30, 2025. Research and development costs increased to $12.7 million from $9.5 million in the prior period. The increase is due to $4.5 million incurred related to the company's Phase IIb QUALITY clinical study for enobosarm as a treatment to augment fat loss and to prevent muscle loss, partially offset by a decrease in expenditures related to the company's other drug development programs that were terminated in previous years.

Selling, general and administrative expenses were $15.4 million compared to $18.4 million in the prior period. The decrease is primarily due to a decrease in share-based compensation.

We recognized a gain on sale of ENTADFI assets of $2.2 million compared to a gain of $1 million in the prior period, which is based on nonrefundable consideration received related to promissory notes due to Veru. In conjunction with the sale of the FC2 Female Condom business, we recorded a gain on extinguishment of debt of $8.6 million related to the termination of the SWK Holdings residual royalty agreement. This represents the difference between the change of control payment of $4.2 million and the net carrying amount of the extinguished debt of $12.8 million, which included an embedded derivative for the change of control provision at fair value of $4.7 million.

The bottom line results for continuing operations was a net loss of $17 million or $1.16 per diluted common share compared to a net loss of $26.7 million or $2.04 per diluted common share in the prior period. Net loss from discontinued operations net of taxes related to the FC2 business was $7.2 million or $0.49 per diluted common share, including the $4.3 million loss on the sale of the FC2 business compared to a net loss of $2.6 million or $0.20 per diluted common share in the prior period. The increase in the net loss from discontinued operations of $4.6 million is due to the loss on the sale of the FC2 Female Condom business of $4.3 million and the increase in the loss from the change in fair value of derivative liabilities of $3.2 million, partially offset by a decrease in selling, general and administrative expenses of $3.9 million. The purchase price for the sale of the FC2 business was $18 million in cash, subject to adjustments as set forth in the purchase agreement for the transaction. Net proceeds from the sale of the FC2 Female Condom business were approximately $16.3 million after selling costs and other purchase price adjustments, but before a change of control payment of $4.2 million owed to SWK Holdings pursuant to a residual royalty agreement for a 2018 financing transaction. The loss on the sale of the FC2 Female Condom business is approximately $4.3 million. The difference between the estimated net proceeds of $16.3 million and the total carrying value of the FC2 business of $20.6 million. The sale of the FC2 Female Condom business represented a change in strategy, allowing the company to focus all its efforts exclusively on drug development.

Now looking at our balance sheet. As of June 30, 2025, our cash, cash equivalents and restricted cash balance was $15 million compared to $24.9 million as of September 30, 2024. The restricted cash as of June 30, 2025, was $354,000 related to the sale of the FC2 Female Condom business.

Our net working capital was $9.5 million on June 30, 2025, compared to $23.4 million on September 30, 2024. The company is not profitable and has had negative cash flow from operations. We will need additional capital to support our drug development candidates. Based upon the company's current operating plan, our cash as of the issuance date of these financial statements is not sufficient for the company to fund operations for the next 12 months. However, we have sufficient capital to take the company into the next calendar year, which is beyond obtaining regulatory clarity from the FDA end of Phase II meeting for the enobosarm clinical program.

During the 9 months ended June 30, 2025, we used cash of $24.6 million for operating activities compared with $17.3 million used for operating activities in the prior period. We generated cash from investing activities of $18.9 million for the 9 months ended June 30, 2025, compared to $15,000 from investing activities in the prior period. The cash generated in the current year relates to proceeds from the sale of the FC2 Female Condom business of $16.3 million, proceeds of $2.2 million from the sale of the ENTADFI assets and proceeds of $393,000 from the sale of Onconetix equity securities. We used cash in financing activities for the 9 months ended June 30, 2025, of $4.2 million related to the change of control payment pursuant to the residual royalty agreement, which terminated in conjunction with the sale of the FC2 Female Condom business. In the prior period, we generated $36.8 million from financing activities.

Now I'd like to turn the call back to Dr. Steiner. Dr. Steiner?

Thank you, Michele. With that, I'll now open the call to questions. Operator?

[Operator Instructions] And the first question comes from Dennis Ding with Jefferies.

This is Anthea on for Dennis. I have 2 questions, if I may. On the modified release formulation of enobosarm, could you talk a little bit about if this new formulation still allows for fixed dose combinations, particularly with oral GLP-1s potentially down the road?

And then on partnering ex U.S., any updates there? And have you presented potential partners or had conversations about the novel formulation given there is a stronger IP there?

Great. Thank you for the question. So yes, the answer is, we're a small molecule. As you know, Lilly with orforglipron has a small molecule, and they like small molecules because of the fact they're easy to make, not dealing with cold storage, like you do with proteins, they got into trouble. Both Lilly and Novo Nordisk got into trouble because they couldn't keep up with demand with a protein where small molecules can easily plug that into contract manufacturers to get their supply. So there is a lot -- and so the idea is at some point, pricing can be more competitive, you get to more patients. So there is a real push to go into oral weight loss. Oral weight loss drugs, GLP-1 drugs, GLP-1 receptor agonist targets also have the problem of muscle loss. So you could imagine a fixed combination with enobosarm.

And yes, the answer is, it can be done and could add additional patent life. So you have additional patent life you just having the formulation itself. But to have that formulation with a fixed combination with a GLP-1 could be very interesting. So yes, it definitely can be done.

As it relates to partnership discussions, yes, we have been -- as I mentioned before, we have been talking to partners. The way to think about it is really 2 buckets of partners. One is the -- interestingly, there's a lot of noise about the market, but really on the market, it's only 2 main players, Novo Nordisk and Lilly. All the others are trying to get their product approved or further down the pipeline in development.

So with that said, yes, we are talking to partners in the marketplace and also the second bucket of partners, potential partners, big pharma trying to get into the space. And third, potential partners that we're reaching out and having discussions of partners that the 70 companies plus that are working on a GLP-1 of some sort. And there's -- most of them don't have much to differentiate themselves. And again, all of them will have the same issue with lean mass. And so, maybe oral will differentiate them, maybe a long-acting GLP-1 receptor agonist once a week, once a month or something like that could be interesting. But really to differentiate themselves, if they could have a combination therapy with our drug so that they can address the lean mass loss and have the GLP-1 benefits could be interesting as well. So that's another bucket of folks that we're talking to as well. So we're very active.

And our position at this point is to keep those discussions going along so that we can secure nondilutive dollars for funding the future studies.

And your next question comes from Gary Nachman with Raymond James.

Mitch, what are your expectations for the end of Phase II meeting with FDA and the Phase III design that you'll propose to them that you outlined before, where there might be any pushback if there is any, if it would be on the functional endpoint or patient population or maybe something else?

And then how will you communicate the outcome of that meeting? Will you wait for the minutes first? Or will you talk about it sooner with the investment community? And then I have a follow-up.

Great. So I'm going to ask Dr. Gary Barnette to address your first question about our expectations for what we consider a win for the FDA meeting, and he's our Chief Scientific Officer, who heads up our regulatory. So Gary, would you like to comment?

Sure. Yes. As you know, the key to all discussions and interactions with the FDA is obtaining clarity. The FDA has given us clarity before we want to confirm that clarity on the endpoint, the population, the dose, et cetera. I think that the -- I think the FDA is going to continue to present to us and tell us that a physical function measurement is going to be required. It won't be an incremental weight loss. I think that will be a win.

I think that the population, if I had to pick one area where the FDA would want to expand is, and they've already told us this one time is that, if you are retaining muscle in this patient population, all subjects lose muscle on GLP-1 or lose lead mass on GLP-1 RA treatment. I think we have focused on the older population, the greater than 60 because we believe, and I think the FDA does as well that this patient population is the highest risk. However, we also do understand that younger patients could benefit from maintaining lean mass and physical function. And I think that would be the biggest pushback from the agency is really to expand this because they do and have said that they believe that enobosarm could benefit all the patient population -- the entire patient population, not just the older population.

Yes. And as a result of how we plan to communicate the feedback from the FDA, as you know, you have your meeting preliminary comments and then you have an opportunity to have further discussion. And then based on that further discussion, you have to wait for them to put it back officially in writing. So I would say I would guide everybody that September time frame, end of August, September time frame is probably the time frame that we should be looking for the FDA clarity. And as you know, once we get the FDA clarity, then we'll have a much better understanding of Phase III design and what that means in terms of capital needs and that kind of stuff. So at this point now, the good news is, we have great data, and we've got great data in the relevant population. And we have -- the FDA meeting has been granted. The package has been sent way back when, so everything is cooking. And we are the first.

I mean, I know that you've seen results from Scholar Rock and from Regeneron and also from Versanis, which is part of Lilly. And what you saw in those results is lean mass is kind of hard to hold on to. These GLP-1s are pretty powerful and incremental weight loss doesn't occur in at least 6 months or sooner. If you go to a year, 72 weeks, you'll see incremental weight loss. But sooner than that, you don't. You hold on to lean mass, you burning more fat to keep the same weight loss. So we've learned a lot of information. And now we're just waiting for the regulatory part so that we can have full understanding how to take a drug like this into this massive market.

I think you said you had a follow-up.

Yes. Just on the modified release formulation, with the reduction in Cmax and delayed Tmax, would you arguably have an even better side effect profile than the current formulation? And how are you confident it will have the overall same efficacy as the IR?

And then just what do you have to show FDA for them to allow that new formulation in the Phase III?

Gary, can I ask you to address that?

Yes, sure. The safety profile of enobosarm is very good. But as we all know, reducing Cmax and delayed Tmax is something the FDA looks at. So if anything, it will have a better safety profile, but it's hard to make better on what we already have.

So what we're doing is, we run the pilot study, and we're running -- we will be conducting a formal relative bioavailability study. That is what the FDA is going to look at. And as far as the efficacy goes, efficacy in general for this kind of molecule is dependent on the extent of absorption. That means the area under the plasma concentration time curve, that is the key piece, and we are similar between the immediate release capsule formulations in our current modified release formulation. So we believe efficacy is going to be similar with, if anything, a better safety profile due to the lower Cmax levels.

And you're able to bridge by the study that shows that the AUCs are similar.

That's right.

Okay. And you'll show that the bioavailability study to them at the end of Phase II meeting, I presume.

Well, we will be showing it to them as time goes on. The end of Phase II meeting is really focused on the trial design or the meeting we're having with the agency is really focused on the trial design with follow-up discussion on the formulation.

And your next question comes from William Wood with B. Riley Securities.

Congrats on the quarter, team. I have -- just thinking about the sort of the Phase III design. I know this will come up more at the end of Phase II meeting this quarter. But it looks like based on at least the proposed 68-week trial design, it's incorporating sort of 2 RCTs that are sort of combined together, incorporating a dropout portion and then what may be also described as an add-on portion will patients come on or off enobosarm, testing what happens after these sort of changes occur. So, I mean, I guess, could you just discuss this plan, maybe where this sort of -- maybe where you sort of came up with this and what you've incorporated from any peers' learnings thus far and into these designs and endpoints and maybe what endpoints you'll be focused on, including cardiometabolic that may be incorporated in this test?

So I'll make a comment, and then I'll have Dr. Barnette answer the bulk of those questions since he's a gentleman that came up with, I think, a brilliant trial design.

In general, the idea was we had a very successful Phase IIb study and in 168 patients. And the idea for the Phase III is, especially the physical function being the primary endpoint, let's not change too many things because we had a very successful physical function endpoint. And as you know, physical function has been a real problem for other compounds, particularly myostatin inhibitors show function. So the lean mass that they put on may not be as functional as a lean mass you put on using the androgen receptor, which is how testosterone puts on lean mass, and we know testosterone improves performance and enobosarm does the same. So it's no surprise. So we want to take advantage of our strength, no pun intended, and make sure that the trial design matches as much as possible what we've already done.

With that said, there are some other features that Gary built into the -- Dr. Barnette built into the study that I think will help us understand the efficacy and safety a lot better. So Gary?

Yes. In enobosarm, we have really there's 2 buckets of efficacy parameters. One is the shorter term, the lean mass, the physical function, the fat mass, the changes in body composition. Then there's a longer-term. The 2 longer-term assessments are incremental weight loss, which you asked about what we've learned from others. Certainly, we see that from Versanis Lilly bimagrumab product showed incremental weight loss after 72 weeks, not so much in the earlier point. And then the other is bone. We believe that enobosarm is going to have a positive effect on bone mineral density, and it takes 9 to 12 months for that to be -- to really be seen.

So, as Mitch said, we want to keep the shorter term, the lean mass, the physical function, the fat mass, those parameters this short-term study to mimic and replicate what we've already done in the Phase II, which is very successful. But we also want to have this longer-term assessment for bone incremental weight loss and also safety. So the design we've come up with is a implement that. So we have the double-blind, randomized, placebo-controlled first part up to the efficacy portions for lean mass, fat mass and physical function. Then we rerandomize the subjects so that we have really, I would say, we have 2 groups, 1 group continuing enobosarm plus GLP-1 for the entire 12-plus months, 1 group on placebo plus GLP-1 for the entire 12-plus months. Then we have 2 other groups. One is a dechallenge group.

So imagine, if you will, you have patient population that is on enobosarm plus GLP-1 for the first part of the study. We see maintenance of lean mass, maintenance of physical function, increased fat mass and then you take the enobosarm away. What happens? I believe that the patient will start losing lean mass, et cetera, and that's what we're going to show with the dechallenge. And that's -- if you look at the FDA's guidances and rules and so on and so forth, that's one of the parameters or one of the ways you assess efficacy is to dechallenge a patient.

The other one is, what I'm going to call a rescue. So in the placebo group, you have patients that in the first part of the studies have lost lean mass, lost fat mass, of course, and lost physical function. Now we're going to take some of that, a proportion of those patients and actually add enobosarm, so to rescue the population. So this would mimic population that's already on lean mass or already on the GLP-1s have a deficit of some sort. And now we're going to give them enobosarm instead of de novo patients, give them enobosarm and then rescue them. We expect to see increase in lean mass, further decreases in fat mass, hopefully further decreases in -- we believe further decreases in body weight and then maintenance or return of physical function. That's the design we've come up with and proposed to the agency. It really encapsulates the short-term efficacy, the long-term efficacy and safety and then this dechallenge and rescue portions that I think is innovative.

And if you think about how this administration is trying to optimize drug development, make drug development more streamlined, more and more informative, I think this study does all those things.

Appreciate that extra color. And just one more, if I may. In terms of expectations on where we may expect the full data from both the induction and the maintenance trials, I'm assuming that's going to be upcoming at a conference later this year or maybe if you could sort of point us in the direction on where we might be expecting that and then what additional color we may gain at these -- at those presentations?

Yes. So at this point now, we're targeting ObesityWeek. So abstracts have been submitted. We have not heard back yet because it's still later in the fall, I think it's November or something like that. And so that will be able to provide more data that we have not provided yet because that will be in the format in a scientific meeting. And then, of course, beyond that will be publications. But I think the next major data point will be in a scientific meeting will be ObesityWeek.

And your next question comes from Leland Gershell with Oppenheimer.

Mitch, congrats on the progress you've been making. I just have a couple of questions on the new formulation. Just as we await issuance of the patents from those applications, just wanted to know if you could share sort of the degree to which -- what your observations were novel and unanticipated based on the technology involved and I guess, speaking to the confidence that you'll get those patents allowed and also speaking to the defensibility of those patents against potential generic pilots down the road.

So, Gary Barnette and myself have to double team on that one, too. I would say that one of the beautiful things about having a novel formulation and a novel formulation formed by existing patents and new patents because of the formulation gives you a lot of -- almost like a composition of matter type patent because the delivery of the drug is different. And because it's different, 2 things. One is the fact that people have to -- you're referring to generics have to match that up and the technology was used almost like a 3D printing technology, where you have multiple, multiple layers of drug being applied to makes it almost impossible for someone to design around that. And so, that's the power of that technology. And we use a very reputable company called Laxxon Medical, and this is what they do.

And so, we knew that to really button up our patent portfolio, which is just to remind everybody, we do have composition matter for polymorphs that run out in 2034 if you had the PTO. We have method of use patents that will run out in 2044. And we have gotten some preliminary feedback from International Patent Office that their search showed that the claims are novel and there's no prior art. So it feels pretty good. And that can be highly defensible. I mean, Verona Pharma and also Chinook had those kinds of patents, and they were taken out for multibillion dollars.

And then finally, the formulation patents, which I think are key, especially since we plan to use them only in Phase III and in commercial. So that's the key point.

And maybe, Gary, you can comment on what makes it different from a patent protection standpoint.

Yes. So it's not an immediate release formulation we've used in the past. We specifically designed this control release formulation that optimizes where the molecule or the enobosarm is released in the GI tract, et cetera, and how long it's retained there and have, what I believe is, optimized the pharmacokinetic profile for optimal efficacy and safety. So as we've talked about before. So that's novel. It's new. It's not consistent with any of the -- it's different, I should say, from the immediate release formulations that we've used. However, from an efficacy standpoint, it's not different from an AUC standpoint, which I've talked about before, which is the key to the efficacy of this type of molecule.

So for the FDA, AUC is important. For generics, it's a whole PK profile because they have to match the Cmax and they have to match the AUC exactly, and they have certain parameters that have to hit it. And by changing that and actually including a second peak and changing the Tmax, which is how things get released and the time they get released, then it becomes really difficult to crack that nut.

Got it. Okay. That's very helpful. And then just a question on the Phase III. Presumably, you'll be building in open-label extension beyond the Phase IIIb. Just wondering if there's any need, do you think from a regulatory standpoint for any additional safety exposure work or if that's pretty much buttoned up with the Phase III and the prior work you've done with enobosarm?

Gary?

Yes. No, at this point in time, we have not designed in an open-label monotherapy extension to the study. We believe if you look at the FDA's requirements for non-life-threatening, non-acute dosing, we believe that we will be in compliance with their safety database that they have documented in their guidances and regulations. So we do not believe that there is a need for an open-label extension for safety reasons.

Now, we might add something in later on to -- right now, the design does not include. We could add some sort of an extension later if there's a need from a commercial standpoint, a potential partner or the FDA asks us to. But right now, we've not designed anything like that.

And your next question comes from Yi Chen with H.C. Wainwright.

This is Eduardo on for Yi. I had a quick question again on the Phase III trial. You mentioned the particular benefit among patients that could be sarcopenic or have osteoporosis. I'm curious if you have any target benchmark for including a specific fraction of the patient population to have those specific comorbidities. Or if you're just hoping by happenstance, naturally by recruiting from this population, you'll get some fraction of them?

I'll make a comment and then I'll invite Gary to make a comment as well. Initially, we thought about that, then it became -- we said this may be really super screened patients for patients that have sarcopenia or mobility disability as a screening inclusion/exclusion type criteria. Then we realized that hold on, that may not be fair because we do know that patients over the age of 60 lose muscle. And as they age, they lose even more muscle. So this is not our first rodeo. Previously, we've done studies in our former company, a former company where Gary Barnette and myself and others have been involved where enobosarm originated where we did work in frailty, we did work in cancer wasting. So we have a pretty good understanding of the patient population, particularly frail patient population. So we took a bet that we would be able to see detriment in the GLP-1 in a patient population. All we did was pick patients over the age of 60 that took a GLP-1. And we learned a lot. The first thing we learned is that, GLP-1s are pretty toxic to muscle, period. And there's a lot of clues to that, that we'll publish on because I think that's very, very important. I mean, so much so that even the competitors of myostatin inhibitors, the best they can do is about 50%, 60% [indiscernible] lean, and we were able to hit 100%. It's tough in a low calorie state to hold on to lean. And again, enobosarm is able to do that.

So what we've learned in our patient population is that, 44% of these patients had a decline in stair climb power of greater than 10%. So essentially, they lost 7 to 8 years of stair climb power in 16 weeks. So I think we have the right patient population as it relates to muscle without having to cut the patient population even tighter.

With bone, same thing. Again, we already know the patients over the age of 60 start to lose bone. And we also have some clues from the WEGOVY label that if you're over the age of 75, that they saw a four to fivefold increase in hip fractures and pelvic fractures. So it's not just loss of bone, but the next bad thing that can happen and the whole reason you worry about loss of bone is it falls in fractures and pelvic fractures and hip fractures are unfortunately, a kiss of death for older patients. So I think the patient population is ideal.

But I'll let Gary answer what does he think.

Yes. So I would answer the muscle and the bone differently. The muscle, what we're really talking about here is drug-induced loss of lean mass and so on and so forth. So we believe that with lean mass, we're talking about changes from baseline. So a patient that may not be completely sarcopenic and remember, there's various definitions of sarcopenia that may not be completely sarcopenic at baseline, they go on GLP-1, they become sarcopenic. That's what we're trying to prevent with the study and with the drug.

So we believe that if we stratify the populations correctly based on age and gender and maybe some other things that we can account for that and gain enough population of each different, meaning patients that have sarcopenia coming in versus not, et cetera, to be able to analyze it meaningfully.

From a bone perspective, remember, about 70%, the FDA requires that 70% of our study be female or meaning one of the genders, at least 30% of each gender. So 70% of our population is going to be female. That's the way it worked out in our Phase II, and I believe that's the way it will work out in the Phase III. With 70% of that population being female, I believe that with the prevalence and incidence of osteopenia and osteoporosis in that population, even in the obese population, I believe that we'll have sufficient numbers to evaluate bone mineral density changes and the effect of enobosarm in that population, if that makes sense.

Yes. Just to add to that, if you go -- again, go back to the WEGOVY label, and I made the comment that males over the age -- patients over the age of 75, males over the age of 75 with hip fractures. The other group that has a fivefold increase in hip fractures and pelvic fractures are just women. So women in general. So they start out with less bone mineral density. And so, I think -- again, I think the issue here is that, GLP-1 is inducing the loss of lean and inducing bone loss. And so, we're trying to stop what's happening from baseline as opposed to going after patient population [indiscernible] full risk.

So does that make sense?

Yes. No, that's really helpful. And regarding those comorbidities, fractures and falls, are you also going to be monitoring that hospitalizations, fractions associated with these falls to see if there's any more robustness of health attributed to the increase in the mass or possible bone density?

Gary?

Yes. We, obviously, any kind of fall fracture would be considered an adverse event. But as we go in the longer study, we will certainly monitor those things, and it will be most likely, in my opinion, will be an adverse event of special interest.

And your next question comes from Robert Sassoon with Water Tower Research.

I have a question -- a couple of questions. The 17% of the population in the 3-milligram enobosarm group that reported a clinically significant decline, physical function loss. Were there any sort of characteristics, obviously, outside of -- given that, that group was generally preserved lean mass. Is there anything -- any particular characteristics of that population, subpopulation that think you caused that statistic?

To understand the question. So the question is you still have 17% of your patients in the 3-milligram group that had a greater than 10% decline in stair climb power. So is there something about that group that makes them different? And I would say, I don't know at this point, except maybe time. So in other words, looking at 16 weeks, would you be able to go to 83%? So can you go to -- can you reduce that by another 50% if you go another month? So it's hard to say, except that people start muscle mass at different levels, right? Some have more, some have less. And so we may be getting those patients have less muscle mass coming in. But I do think with time is muscle mass, we've seen some internal consistencies that when lean mass comes back, function comes back. So stay tuned.

And on your Extension study to the Phase II, you have some pretty robust results when enobosarm became a monotherapy. It seems like that there is quite a large suite of populations. I think I read something like 11% of the adult population in the United States has non-obese sarcopenia. Is that a group of people that you would consider using enobosarm as a monotherapy at some point?

Yes, it's a great question. So it starts out with -- the strategy is as follows, and we'll see how it plays out. Strategy is to start out with a higher-risk patient population, older patients over the age of 60 that are obese, but not diabetic. And that's the first patient population. The second patient population is younger patients that are obese. And then the third population are going to be older patients, younger patients with diabetes because as you know, diabetes, GLP-1s are indicated. And they may not be obese, they may be taking it for diabetes and they could get into trouble.

And then the other special populations would be, for example, osteoporosis because at this point now, enobosarm could be potentially used for monotherapy with osteoporosis and for frailty. But the point I'm trying to make is, there's so many populations that we can go into. So if we can start out with the population that we're doing right now, which has a very defined clinical benefit risk population, that's why we selected them. And we selected them because we felt that it will be more informative in terms of function. So in other words, if you took 32-year-old linebackers that want to lose weight, and you're looking for function detriment. It's going to take a little bit more time to show detriment than, for example, a 75-year-old male that has baseline loss of muscle with age. So we picked the older population to be informative. And guess what, they were informative. It turns out 44% of them did have accelerated loss of lean and accelerated loss of physical function. So that's key because to this date, up to date, most of the data has been in all patients, including young patients. And I think you're going to mask the full effect of the problem until you look at the right patient at the right time. And I think that's what we did.

One more question. How much -- when you go -- when you start to execute on Phase III, how much capital do you think you need to -- do you estimate you need to raise?

Well, at this point now, I think we're so close to getting FDA feedback. I think we should wait and get their feedback because that will sort out what we think the absolute capital raise -- capital needs will be. And what we said and what we proposed is based on effect size in our Phase IIb, and assuming the effect size will drive -- dropouts will drive your Phase III development, that we believe that the Phase III will be in the neighborhood of about 400 patients, 200 per arm. And if that's the case, then we're looking at $40 million over 18 months. But we just don't know at this point until we talk to the FDA.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference call back over to Dr. Mitchell Steiner for any closing remarks.

I appreciate everyone who joined us on today's call. I look forward to updating all of you on our progress in the next investor call. And of course, when we get the FDA feedback, we'll make sure we communicate that as well. Thank you so much for being on today's call.

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