VERU US Equity☆

10-K

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veru-20200930x10k.htm

10-K

20200930 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



For the fiscal year ended September 30, 2020





For the transition period from to



Commission file number 1-13602



Veru Inc.

(Name of registrant as specified in its charter)





(Address of principal executive offices) (Zip Code)



Registrant’s telephone number, including area code (305) 509-6897



Securities registered pursuant to Section 12(b) of the Act:





Title of each class Trading Symbol(s) Name of each exchange on which registered

Common stock, $0.01 par value VERU NASDAQ Capital Market





Securities registered pursuant to Section 12(g) of the Act:

None



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☑ Smaller reporting company ☑

 Emerging growth company ☐



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐



Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐No☑



The aggregate market value of the common stock held by non-affiliates of the registrant as of March 31, 2020, was approximately $162.3 million based on the per share closing price as of March 31, 2020 quoted on the NASDAQ Capital Market for the registrant’s common stock, which was $3.27.



There were 70,075,460 shares of the registrant’s common stock, $0.01 par value per share outstanding on December 7, 2020.



DOCUMENTS INCORPORATED BY REFERENCE:



Portions of the Proxy Statement for the 2021 Annual Meeting of the Shareholders of the Registrant are incorporated by reference into Part III of this report.



As used in this report, the terms “we,” “us,” “our,” “Veru” and the “Company” mean Veru Inc. and its subsidiaries collectively, including Aspen Park Pharmaceuticals, Inc. from and after October 31, 2016, unless the context indicates another meaning, and the term “common stock” means shares of our common stock, par value of $0.01 per share.

Table of Contents

VERU INC.

INDEX







PART I Page



Item 1. Business 5

Item 1A. Risk Factors 30

Item 1B. Unresolved Staff Comments 57

Item 2. Properties 57

Item 3. Legal Proceedings 58

Item 4. Mine Safety Disclosures 58



PART II



Item 6. Selected Financial Data 60

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 74

Item 8. Financial Statements and Supplementary Data 74

Item 9A. Controls and Procedures 74

Item 9B. Other Information 75



PART III



Item 10. Directors, Executive Officers and Corporate Governance 76

Item 11. Executive Compensation 76

Item 14. Principal Accountant Fees and Services 77



PART IV



Item 15. Exhibits and Financial Statement Schedules 78

 Signatures 83





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FORWARD LOOKING STATEMENTS



Certain statements included in this Annual Report on Form 10-K which are not statements of historical fact are intended to be, and are hereby identified as, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the anticipated or potential impact of COVID-19 and the global response thereto on our financial condition or business, future financial and operating results, plans, objectives, expectations and intentions, costs and expenses, debt repayments, outcome of contingencies, financial condition, results of operations, liquidity, cost savings, objectives of management, business strategies, clinical trial timing and plans, the achievement of clinical and commercial milestones, estimated future sales or market sizes, the advancement of our technologies and our products and drug candidates, and other statements that are not historical facts. Forward-looking statements can be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “opportunity,” “plan,” “predict,” “potential,” “estimate,” “should,” “will,” “would” or the negative of these terms or other words of similar meaning. These statements are based upon the Company’s current plans and strategies and reflect the Company’s current assessment of the risks and uncertainties related to its business and are made as of the date of this report. These statements are inherently subject to known and unknown risks and uncertainties. You should read these statements carefully because they discuss our future expectations or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results to differ materially from those currently anticipated include the following:



· product demand and market acceptance;

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· risks related to our growth strategy;



All forward-looking statements in this report should be considered in the context of the risks and other factors described above and in “Risk Factors” in Item 1A. of this report. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this report or to update them to reflect events or circumstances occurring after the date of this report except as required by applicable law.



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PART I



Item 1. Business



General



Veru is an oncology biopharmaceutical company with a focus on developing novel medicines for the management of prostate and breast cancers.



The Company’s prostate cancer drug pipeline includes VERU-111, VERU-100 and Zuclomiphene citrate.



VERU-111 for the treatment of men with metastatic castration resistant prostate cancer who have also become resistant to one androgen receptor targeting agent



VERU‐111 is an oral, first-in-class, new chemical entity that targets, crosslinks, and disrupts alpha and beta tubulin subunits of microtubules to disrupt the cytoskeleton. VERU‐111 is being evaluated in open label Phase 1b and Phase 2 clinical studies in men with metastatic castration and androgen receptor targeting agent resistant prostate cancer. The Phase 1b clinical study completed enrollment of 39 men and is ongoing. The Phase 1b study has yielded promising efficacy and safety clinical data. Based on the Phase 1b study results, the recommended Phase 2 dose is 63mg oral daily continuous dosing for 21-day cycles. Daily chronic drug administration appears feasible and safe. At the recommended Phase 2 dose, there were no reports of neutropenia, neurotoxicity, or Grade 3 diarrhea. The Phase 2 clinical study has completed enrollment of approximately 40 men with metastatic castration resistant prostate cancer who have also become resistant to androgen receptor targeting agents, such as abiraterone, enzalutamide, or apalutamide, but prior to proceeding to IV chemotherapy. In July 2020, the Company had an FDA meeting and received positive input from the FDA on the pivotal Phase 3 trial design for VERU-111. The Company received regulatory clarity that the indication of treatment in men with metastatic castration resistant prostate cancer who have failed one androgen receptor targeting agent, but prior the IV chemotherapy was acceptable, that an open label, randomized study using an alternative androgen receptor targeting agent as the active control is reasonable, and that the primary endpoint may be radiographic progression-free survival. By allowing radiographic progression-free survival as the primary endpoint, the sample size of the Phase 3 study could be potentially between 200 and 300 men. The Company anticipates starting the Phase 3 pivotal study evaluating VERU‐111 for men with metastatic castration resistant prostate cancer who have also become resistant to one androgen receptor targeting agent in the first quarter of calendar year 2021.



VERU-100 for the palliative treatment of advanced prostate cancer



VERU‐100 is a novel, proprietary long-acting gonadotropin-releasing hormone (GnRH) antagonist peptide three-month subcutaneous depot formulation designed to address the current limitations of commercially available androgen deprivation therapies (ADT). Androgen deprivation therapy is currently the mainstay of advanced prostate cancer treatment and is used as a foundation of treatment throughout the course of the disease. Furthermore, ADT is continued even as other endocrine, chemotherapy, or radiation treatments are added or stopped. Specifically, VERU‐100 is a chronic, long-acting GnRH antagonist peptide administered as a small volume, three-month depot subcutaneous injection without a loading dose. VERU‐100 immediately suppresses testosterone with no testosterone surge upon initial or repeated administration, a concern that occurs with currently approved luteinizing hormone-releasing hormone (LHRH) agonists used for ADT. There are no GnRH antagonist depot injectable formulations commercially approved beyond a one-month duration. A Phase 2 study to evaluate VERU‐100 dosing is anticipated to begin early in the first quarter of calendar year 2021.



Zuclomiphene citrate for the treatment of men who have hot flashes caused by androgen deprivation therapy for advanced prostate cancer



Zuclomiphene citrate is an oral nonsteroidal estrogen receptor agonist being developed to treat hot flashes, a common side effect caused by ADT in men with advanced prostate cancer. The Company is planning an End of Phase 2 meeting with the FDA.



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The Company’s new breast cancer drug pipeline includes Enobosarm and VERU-111.



Enobosarm, selective androgen receptor targeting agonist, for thetreatmentof androgen receptor positive (AR+), estrogen receptor positive (ER+) and human epidermal growth factor receptor 2 (HER2-) metastatic breast cancer



Enobosarm is an oral, first-in-class, new chemical entity, selective androgen receptor agonist that targets the androgen receptor (AR) in AR+/ER+/HER2- metastatic breast cancer without the unwanted virilizing side effects. Enobosarm is the first new class of targeting endocrine therapy in advanced breast cancer in decades. Enobosarm has extensive nonclinical and clinical experience having been evaluated in 25 separate clinical studies in over 2,100 subjects, including five prior Phase 2 clinical studies in advanced breast cancer involving more than 250 patients. In the twoPhase 2 clinical studies conducted in women with AR+/ER+/HER2- metastatic breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated cohorts and was well tolerated with a favorable safety profile. In October 2020, the FDA agreed to the Phase 3 registration clinical trial design to evaluate the efficacy and safety of enobosarm, selective androgen receptor targeting agonist, versus active control, either exemestane or tamoxifen (physician’s choice) for the treatment of ER+/HER2- metastatic breast cancer in approximately 240 patients who have failed a nonsteroidal aromatase inhibitor (anastrozole or letrozole), fulvestrant and a CDK4/6 inhibitor and prior to IV chemotherapy.The primary endpoint is radiographic progression-free survival. The pivotal Phase 3, open label, randomized, active control study is anticipated to commence in the first half of calendar year 2021.



VERU-111 for treatment of taxane resistant metastatic triple negative breast cancer



Metastatic triple negative breast cancer (TNBC) is an aggressive form of breast cancer that occurs in 15% of all breast cancers. This form of breast cancer does not express ER, progesterone receptor (PR), or HER2 and is resistant to endocrine therapies. The first line of treatment usually includes IV taxane chemotherapy. Almost all women will eventually develop taxane resistance. VERU‐111 is an oral, first-in-class, new chemical entity that targets, crosslinks, and binds to alpha and beta tubulin subunits of microtubules to disrupt the cytoskeleton and is not a substrate for P-glycoprotein drug resistance protein. Over expression of P-glycoprotein is a common mechanism that results in taxane resistance in TNBC. Preclinical studies in human triple negative breast cancer grown in animal models demonstrate that VERU‐111 significantly inhibits cancer proliferation, migration, metastases, and invasion of triple negative breast cancer cells and tumors that have become resistant to paclitaxel (taxane). Using the safety information from the Phase 1b and Phase 2 VERU‐111 prostate cancer clinical studies in a total of approximately 80 men, the Company plans to meet with the FDA in first half of calendar year 2021 and to commence a Phase 2b clinical study in the fourth quarter of calendar year 2021 to evaluateoral daily dosing of VERU‐111 in approximately 100 women with metastatic TNBC that has become resistant to taxane IV chemotherapy.



Anti-Viral and Anti-Inflammatory Drug Candidate – COVID-19



VERU-111 for the treatment of SARS-CoV-2 in subjects at high risk for acute respiratory distress syndrome(ARDS)



VERU‐111 is also being evaluated in a Phase 2 clinical trial to assess the efficacy of VERU‐111 in combating COVID-19 to prevent ARDS. VERU‐111 by targeting microtubules may have broad antiviral and strong anti-inflammatory effects including the potential to treat the cytokine release syndrome that is associated with the high COVID-19 mortality rates. If the clinical results of the Phase 2 clinical trial are positive, the Company intends to apply for grant funding through third party agencies.

Sexual Health Division



The Company's Sexual Health Division includes a drug candidate, TADFYN®, for the treatment of BPH and a commercial product,the FC2 Female Condom/Internal Condom® (FC2), an FDA-approved product for the dual protection against unintended pregnancy and sexually transmitted infections.



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TADFYN® (tadalafil 5mg and finasteride 5mg combination capsule) is being developed to treat urinary tract symptoms caused by benign prostatic hyperplasia (BPH). Tadalafil (CIALIS®) is currently approved for treatment of BPH and erectile dysfunction and finasteride is currently approved for treatment of BPH (finasteride 5mg PROSCAR®) and male pattern hair loss (finasteride 1mg PROPECIA®). The co-administration of tadalafil and finasteride has been shown to be more effective for the treatment of BPH than by finasteride alone. The Company had a successful pre-New Drug Application (NDA) meeting with the FDA and expects to submit the NDA for TADFYN® in early calendar year 2021. The Company’s Sexual Health Business segment will include future revenues for TADFYN®. Costs associated with the development of TADFYN® are currently included in our Research and Development segment.



The Company sells FC2 in both the commercial sector in the U.S. and in the public health sector in the U.S. and globally. In the U.S., FC2 is available by prescription through the Company’s multiple telemedicine (telemedicine being the remote diagnosis and treatment of patients by means of telecommunications technology) and internet pharmacy partners and retail pharmacies. It is also available to public health sector entities such as state departments of health and 501(c)(3) organizations. In the global public health sector, the Company markets FC2 to entities, including ministries of health, government health agencies, U.N. agencies, nonprofit organizations and commercial partners, that work to support and improve the lives, health and well-being of women around the world.



Most of the Company’s net revenues are currently derived from sales of FC2 in the commercial and public health sectors.



PREBOOST® Sale



On December 8, 2020, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Roman Health Ventures Inc. (the “Purchaser”). Pursuant to, and subject to the terms and conditions of, the Purchase Agreement, the Purchaser purchased substantially all of the assets related to the Company's PREBOOST® business. PREBOOST® is a 4% benzocaine medicated individual wipes for the treatment of premature ejaculation and was a commercial product in the Company’s Sexual Health Division during fiscal 2020. The transaction closed on December 8, 2020. The purchase price for the transaction was $20.0million, consisting of $15.0million paid at closing, $2.5million payable 12 months after closing and $2.5million payable 18 months after closing.



Risk Factors Summary



Our business is subject to a number of risks of which you should be aware before making an investment decision. The following summary highlights some of the risks you should consider with respect to our business and prospects. This summary is not complete and the risks summarized below are not the only risks we face. For a more complete understanding of the risks related to our business and an investment in our common stock, we encourage you to read and consider the discussion in “Risk Factors” in Item 1A. of this report. These risks include, but are not limited to, the following:



· We are subject to extensive and costly governmental regulation;

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Company History



Veru is a Wisconsin corporation that is the successor to The Wisconsin Pharmacal Company, Inc. (Wisconsin Pharmacal), a company which manufactured and marketed disparate specialty chemical and branded consumer products. Wisconsin Pharmacal was originally incorporated in 1971. In 1996, we completed a series of actions which resulted in our acquisition of worldwide rights to our first-generation female condom, the divestiture of Wisconsin Pharmacal’s other businesses and the change of our name to “The Female Health Company.” On October 31, 2016, we completed our acquisition of Aspen Park Pharmaceuticals, Inc. (the “APP Acquisition”), which transitioned us from a single product company selling FC2 to a biopharmaceutical company with multiple drug products under development for urology and oncology. On July 31, 2017, we changed our corporate name from “The Female Health Company” to “Veru Inc.” reflecting our focus on developing and commercializing biopharmaceutical products for oncology.



Strategy



Veru is an oncology biopharmaceutical company with a focus on developing novel medicines for the management of advanced prostate and breast cancers. Our strategy is primarily to focus on the clinical development and commercialization of oncology drugs for the management of two of the most prevalent cancers globally – prostate cancer and breast cancer.



Prostate cancer is the most commonly diagnosed cancer in men with estimated 191,930 new cases and 33,330 deaths expected for 2020 in the U.S. One in nine men will develop prostate cancer in their lifetime. Prostate cancer has become a chronic disease with new challenges as prostate cancer develops resistance to current drugs and spreads throughout the body and as the patient suffers from the long-term side effects of these cancer treatments like hot flashes, bone loss and fractures, loss of libido, erectile dysfunction, and loss of muscle strength and frailty.



Breast cancer is the most commonly diagnosed cancer in women with estimated 276,480 new cases and 42,170 deaths expected for 2020 in the U.S. One in eight women will develop invasive breast cancer in their lifetime. Breast cancer is a heterogenous disease with diverse clinical and molecular characteristics. Estrogen is one of the main drivers of breast cancer proliferation, tumor progression, and metastasis. Consequently, treatments that target the ER are the mainstay of breast cancer therapy, but unfortunately almost all women will eventually develop resistance to endocrine therapies and alternative treatment approaches will be required including IV chemotherapy. Another form of breast cancer that occurs in 15% of all breast cancers is called triple negative breast cancer (TNBC). Triple negative breast cancer does not have ER or PR and does not make HER2. As a consequence, TNBC is an endocrine resistant, aggressive cancer that grows and spreads faster than ER+ and/or HER2+ breast cancers. Triple negative breast cancer also develops resistance to currently used chemotherapy drugs like taxanes and anthracyclines, and as such, treatment options for TNBC are limited.



Accordingly, we are dedicated to the development and commercialization of drug candidates to address unmet medical needs for prostate and breast cancer management while continuing to sell the commercial product in our sexual health business to help fund part of this development. The key elements of our strategy are as follows:

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Products



The following table summarizes the current status of the Company’s product portfolio:





 U.S.

 REGULATORY DEVELOPMENT

PRODUCT INDICATION PATHWAY PHASE

Oncology Drug Candidates – Prostate







Oncology Drug Candidates – Breast







Anti-Viral and Anti-Inflammatory Drug Candidate





Sexual Health Division Drug Candidate





Commercial Product





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Oncology Drug Candidates – Prostate Cancer



VERU-111, an oral, first-in-class alpha and beta tubulin inhibitor/cytoskeleton disruptor small molecule for the treatment of metastatic castration resistant and androgen receptor targeting agent resistant prostate cancer.



Scientific Overview. In 2020, there were an estimated 191,930 new cases and 33,330 deaths of prostate cancer in the U.S. In the U.S., 5% of men with prostate cancer will have metastatic cancer and up to 30% of men with high-risk, localized prostate cancer will develop metastatic cancer following initial therapy. The median survival of patients with metastatic prostate cancer ranges from 3.2-4.5 years. For these men, the first line therapy is ADT, or medical castration. Although most will initially respond, nearly all these patients will progress to metastatic castration resistant prostate cancer and have a poor prognosis with an average survival of 1.5 years. New second line androgen receptor targeting agents, like XTANDI® (enzalutamide) and ZYTIGA® (abiraterone/prednisone) have resulted in an additional four to five months of average survival, but again, nearly all men on these agents will eventually develop progressive metastatic castration resistant and androgen receptor targeting agent prostate cancer within 12-15 months.



VERU‐111 is an oral, first-in-class small molecule that targets, binds to, and crosslinks the alpha and beta tubulin subunits of microtubules and intermediate filaments of cells resulting in disruption of the cytoskeleton. Furthermore, VERU‐111 causes apoptosis, or cell death by cleaving poly ADP ribose polymerase (PARP) which is important for DNA repair in cancer cells. VERU‐111 has high oral bioavailability; less possibility for drug resistance as it does not interact with multiple drug resistance proteins (P-glycoprotein); and minimal potential for drug to drug interactions. VERU‐111 has shown in preclinical studies to have efficacy against many tumor types including castration resistant prostate cancer, triple negative breast cancer resistant to anthracyclines and taxanes as well as ovarian cancer, cervical cancer, lung cancer, melanoma, leukemia, glioma, and pancreatic cancer. In current clinical prostate cancer studies, VERU‐111 appears to be well tolerated with minimal neurotoxicity and no neutropenia, which are common side effects of taxanes and vinca alkaloids anti-microtubule chemotherapy agents.



Development Plan. The Company plans to develop VERU-111 as a treatment for men with metastatic castration resistant prostate cancer who have also become resistant to androgen receptor targeting agents like ZYTIGA® (abiraterone) or XTANDI® (enzalutamide) and prior to proceeding to IV chemotherapy. In September 2018, the Company completed a pre-Investigational New Drug Application (IND) meeting with the FDA for VERU-111 in which the FDA agreed with the Company’s plans for a Phase 1b and Phase 2 clinical trials. The Company submitted an IND and initiated an open label Phase 1b clinical trial in January 2019 at Johns Hopkins Cancer Center and four other clinical centers. The Phase 1b clinical study has completed enrollment of 39 men with castration resistant prostate cancer who have become resistant to androgen receptor targeting agent and may have had taxane IV chemotherapy. Although the Phase 1b clinical study is ongoing, it has yielded interim promising clinical efficacy and safety data. Evidence of antitumor activity was based on PSA declines and responses as well as objective and durable antitumor responses. Based on the Phase 1b clinical study, the recommended Phase 2 dose is 63mg oral daily continuous dosing for 21-day cycles as daily chronic drug administration appears to be feasible and safe. The recommended Phase 2 dose is well tolerated as there have been no reports of neutropenia, neurotoxicity, or Grade 3 diarrhea. The Phase 2 clinical study has completed enrollment of approximately 40 men with metastatic castration resistant prostate cancer who have also become resistant to androgen receptor targeting agents, such as abiraterone, enzalutamide, or apalutamide, but prior to proceeding to IV chemotherapy. In addition, in July 2020, the Company received input from the FDA in the design the Phase 3 VERU-111 clinical registration study. The Company received regulatory clarity that the indication, men with metastatic castration resistant prostate cancer who have failed one androgen receptor targeting agent, but prior to proceeding to IV chemotherapy was acceptable, and that an open label, randomized study using an alternative androgen receptor targeting agent as the active control is reasonable. Furthermore, the primary endpoint for the Phase 3 study may be radiographic progression-free survival. By allowing radiographic progression-free survival as the primary endpoint, the sample size of the Phase 3 study could be potentially between 200 and 300 men. The Company anticipates starting the Phase 3 clinical registration study called the VERACITY study evaluating VERU-111 for men with metastatic castration resistant prostate cancer who have also become resistant to one androgen receptor targeting agent in the first quarter of calendar year 2021.



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Market. In the U.S., the annual market for oral hormone therapies for prostate cancer is $6.5 billion per Decision Resources Group and Allied Market Research. The first indication for which VERU‐111 is being developed is metastatic castration resistant and androgen receptor targeting agent resistant prostate cancer. Furthermore, VERU‐111 can be expanded to a broader oncology market as it has shown in preclinical studies to have efficacy against many other tumor types including triple negative breast cancer resistant to anthracyclines and taxanes as well as ovarian cancer, cervical cancer, lung cancer, melanoma, leukemia, glioma, and pancreatic cancer.



VERU-100, a novel, proprietary, long-acting, GnRH antagonist peptide three-month depot small volume, subcutaneous injection formulation for androgen deprivation therapy for advanced prostate cancer.



Scientific Overview. Androgen deprivation therapy remains the mainstay primary first line therapy for advanced prostate cancer, but current ADT products, such as LUPRON® and ELIGARD® (leuprolide), FIRMAGON® (degarelix), and ZOLADEX® (goserelin) have several important shortfalls. LUPRON, ELIGARD, and ZOLADEX are LHRH agonists whose initial administration leads to an initial 14 to 21-day testosterone surge (flare) and interval micro elevations (spikes or escapes) in testosterone blood concentrations. FIRMAGON, a GnRH antagonist, is a large-volume subcutaneous injection formulation designed for only a single month release. FIRMAGON requires a loading dose of two 3 mL subcutaneous injections followed by a monthly maintenance dose of 4 mL subcutaneous injection repeated. In contrast, VERU-100 is designed to address a number of these important shortfalls of currently marketed ADT products: VERU-100 is a long-acting GnRH antagonist designed to be administered as a small volume (<2 mL) subcutaneous three-month depot injection without a loading dose. VERU-100, as a GnRH antagonist, immediately suppresses testosterone with no testosterone surge upon initial or repeated administration unlike what occurs with the currently approved LHRH agonists. Furthermore, as a class, GnRH antagonists have been shown to have fewer cardiovascular adverse events than LHRH agonists in men on ADT.



Development Plan. The Company had a Pre-IND meeting with the FDA in May 2019 clarifying the requirements for regulatory development pathway. The FDA agreed to an expedited regulatory development pathway for VERU‐100. The Company plans to conduct a single Phase 2 open label, multicenter clinical study of up to three doses of VERU‐100 in men with advanced prostate cancer (n=35-60) for a single three-month injection, and a single Phase 3-open label single arm study in men with advanced prostate cancer (n=100) as the pivotal, registration study for NDA submission. The Company plans to initiate the Phase 2 dose finding study in the first quarter of calendar year 2021 and Phase 3 registration study in 100 men in the second half of calendar year 2021.



Market. VERU-100 is a long-acting GnRH antagonist for ADT designed to be administered as a small volume subcutaneous three-month depot injection without a loading dose. Currently, there are no GnRH antagonists commercially approved beyond a one-month depot injection, making VERU-100, if approved, the only commercially available GnRH antagonist three-month depot. Global sales of ADT drugs in 2018 were $2.6billion.

Zuclomiphene citrate for the treatment of hot flashes caused by prostate cancer hormonal therapies in men with advanced prostate cancer.



Scientific Overview. In 2020, there were an estimated 191,930 new cases and 33,330 deaths of prostate cancer in the U.S. The estimated prevalence of prostate cancer in the U.S. is 3 million cases for which over one-third will have received ADT. ADT results in very low, castrate levels of testosterone. Eliminating testosterone is an effective therapy as testosterone is a powerful growth factor for prostate cancer. As estrogen is derived from testosterone in men, low levels in testosterone also results in very low levels of estrogen. Low estrogen side effects include hot flashes, bone loss and fractures, loss of libido, memory disturbances, and adverse blood lipid changes.



Hot flashes, also known as vasomotor symptoms, are one of the most common and debilitating side effects of prostate cancer hormonal therapies. Hormone therapies include ADT, like LUPRON® and ELIGARD® (leuprolide), FIRMAGON® (degarelix), ZOLADEX® (goserelin), as well as the newer agents approved to treat advanced prostate cancer such as ZYTIGA® (abiraterone) and XTANDI® (enzalutamide). Up to 80% of men on ADT complain of hot flashes with 30-40% having moderate to severe hot flashes. Patients on ADT report significant effects on daily functioning and quality of life. Hot flashes are one of the main reasons that prostate cancer patients want to delay or stop being treated by ADT.

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Hormonal and nonhormonal therapies have been used off-label to treat hot flashes in men on prostate cancer hormonal therapies. In general, use of off-label hormonal agents, especially estrogens, have been shown to be helpful for treating hot flashes. However, off-label estrogen treatment is complicated by lack of consistent dosing, and known side effects such as gynecomastia (breast enlargement), gynecodynia (painful breasts), and increase in thromboembolic events like deep venous thrombosis, pulmonary embolus, and stroke. Progesterone hormone agents, like MEGACE® (megestrol), have also been used off-label but the side effects include weight gain, increase in thromboembolic events like deep venous thrombosis, pulmonary embolus, and stroke, and the potential to stimulate the growth of prostate cancer. Nonhormonal agents that also have been used off-label include antiseizure agents and antidepressants that have serious and unwanted side effects. Moreover, nonhormonal agents have demonstrated less effectiveness than hormonal therapies for the treatment of hot flashes. There are no FDA-approved therapies for hot flashes caused by prostate cancer hormonal therapy in men with advanced prostate cancer. As estrogen deficiency is the reason for the hot flashes, we believe that Zuclomiphene citrate, a nonsteroidal estrogen receptor agonist, has the potential to replace estrogen and be an efficacious and well tolerated treatment for hot flashes caused by ADT in men with advanced prostate cancer.



Development Plan.In June 2018, the Company submitted an IND with the FDA for Zuclomiphene citrate. In September 2018, the Company enrolled its first subject in the Phase 2 double-blind randomized placebo-controlled dose finding study evaluating two doses of oral daily Zuclomiphene citrate (10mg or 50mg) treatment versus placebo in approximately 95 men with advanced prostate cancer who have ADT induced moderate to severe hot flashes. The clinical study had a treatment duration of 12 weeks and was being conducted in 24 clinical centers in the U.S. The primary endpoint was the frequency of moderate to severe hot flashes. Secondary endpoints included severity of hot flashes and improvement in bone marker. In October 2019, the Company announced that it had achieved full enrollment for its Phase 2 clinical study.



A topline interim analysis of the Zuclomiphene citrate Phase 2 study was performed in which 93 men with ADT-induced hot flashes were enrolled. The objectives of the study were to evaluate the estrogenic activity of Zuclomiphene citrate on hot flashes, to confirm a no-effect dose (the 10mg dose), and to evaluate the effect of a higher dose (the 50mg dose) of Zuclomiphene citrate on the frequency of moderate to severe hot flashes at Day 42. The topline interim clinical results demonstrated that a statistically significant decrease in moderate to severe hot flashes from baseline was observed in the 50mg treatment group (p<0.001). The 10mg treatment group, as expected, did not show a statistically significant reduction in hot flashes from baseline (p=0.15). Based on this result, the 10mg dose group was established as a no-effect dose as was planned for in the study. Furthermore, when comparing the 50mg treatment group (-41% reduction in hot flashes from baseline) versus the 10mg treatment group (-21% reduction in hot flashes from baseline), a statistically significant reduction (p=0.03) in the frequency of moderate to severe hot flashes at Day 42 is observed. Moreover, the observed estrogenic activity of the 50mg group was statistically different from 10mg and placebo groups (p<0.0001). Zuclomiphene citrate appears to be well tolerated as there have been no reports of drug related serious adverse events nor drug related severe adverse events and no observations of adverse events of special interest, such as breast enlargement or pain, or venothromboembolic events (blood clots in legs or lungs, or stroke) in the safety database for the Phase 2 clinical study. Adverse events of special interest are side effects commonly seen with off-label use of steroidal estrogens and progestins for hot flashes. The 50mg treatment group shows statistical and clinically meaningful reductions in moderate to severe hot flashes from baseline without any clinically relevant safety findings. The Company plans to meet with the FDA for an End of Phase 2 meeting in the last quarter of calendar year 2021.



Market. Hot flashes are the most common side effect of prostate cancer hormone therapy, with hot flashes occurring in approximately 80% of men receiving one of the common forms of ADT, including LUPRON® (Leuprolide), ELIGARD® (Leuprolide), and FIRMAGON® (degarelix) and about up to 40% of such men experience moderate to severe hot flashes. Approximately 600,000 men annually in the U.S. are on ADT for advanced prostate cancer. There are currently no FDA-approved therapies for hot flashes associated with prostate cancer hormonal therapies. Based on independent market research sponsored by the Company, U.S. peak sales for Zuclomiphene citrate to treat hot flashes in men with prostate cancer in ADT are estimated to be approximately $600-800 million.



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Oncology Drug Candidates- Breast Cancer



Enobosarm, selective androgen receptor targeting agonist, for the treatment of androgen receptor positive (AR+), estrogen receptor positive (ER+), and human epidermal growth factor receptor 2 (HER2-) metastatic breast cancer.



Scientific Overview. In the U.S., breast cancer is the most commonly diagnosed cancer in women with an estimated 276,480 new cases and 42,170 deaths expected for 2020 with one in eight women developing invasive breast cancer in their lifetime. Breast cancer is heterogenous disease with diverse clinical and molecular characteristics. The initial molecular assessment is to determine hormone receptor status, ER and PR, as well as HER2 status. Estrogen is one of the main drivers of breast cancer proliferation, tumor progression, and metastasis. Consequently, treatments that target the ER are the mainstay of breast cancer therapy, but unfortunately almost all women will eventually develop resistance to endocrine therapies and alternative treatment approaches will be required including IV chemotherapy.



Targeting the AR has the potential to be the next important endocrine therapy for women with breast cancer. 1) AR is the most abundantly expressed steroid receptor in breast cancer being detected between 70 to 95% of breast cancer specimens; 2) Androgen receptor agonists inhibit cellular proliferation and have anti-tumor efficacy in ER+ human breast cancer models; and, 3) the presence of AR in breast cancer specimens predicts favorable disease-free survival and overall survival.



Targeting AR using both steroidal androgens and synthetic androgens (e.g. fluoxymesterone and medroxyprogesterone acetate) have been shown to have efficacy in the treatment of breast cancer similar to first line tamoxifen. Most recently, a contemporary retrospective study in 103 women with AR+ ER+ breast cancer who have failed a median of 3 endocrine therapies (range 1-10) were treated with fluoxymesterone with a clinical benefit rate at 6 months of 43% and evidence of objective tumor responses (2 complete responses and 7 partial responses). Unfortunately, the use of synthetic androgens has been limited by their unacceptable side effects including virilization, increase in hematocrit, liver toxicity, and inability to source the drugs.



Enobosarm is an oral, first-in-class, new chemical entity, selective androgen receptor targeting agent, for the treatment of AR+/ER+, HER2- metastatic breast cancer, but prior to IV chemotherapy. Enobosarm is a member of a new class of endocrine therapy called selective androgen receptor agent which means it is both an agonist and an antagonist depending on the tissue type. Enobosarm binds to the AR in breast tissue and inhibits AR+ ER+ breast cancer cell proliferation and tumor growth in animal models. Unlike testosterone, enobosarm cannot be aromatized to estrogen. Enobosarm has selective clinical properties that could have potential benefit in women with AR+ ER+ breast cancer. Preclinical studies have shown that enobosarm builds and heals cortical and trabecular bone with the potential to treat osteoporosis and skeletal related cancer events. Enobosarm has been shown to build muscle and reduce fat and improve physical function in clinical studies involving elderly subjects and patients with cancer cachexia including breast cancer. Furthermore, the tissue selectivity of enobosarm also results in a favorable side effect profile with no virilization (facial hair and acne), no polycythemia, and no liver toxicity.



Development Plan. Enobosarm has extensive nonclinical and clinical experience having been evaluated in 25 separate clinical studies in over 2,100 subjects, including five prior Phase 2 clinical studies in advanced breast cancer involving more than 250 patients. In the two Phase 2 clinical studies conducted in women with AR+/ER+/HER2- metastatic breast cancer, enobosarm demonstrated significant antitumor efficacy in heavily pretreated cohorts and was well tolerated with a favorable safety profile.



The first Phase 2 clinical trial (G200801) was a single arm study evaluating 9mg oral daily dose of enobosarm in a heavily pretreated endocrine resistant cohort of 22 subjects with AR+/ER+/HER2- metastatic breast cancer. The patients participating in the study on average had 3 (range 1-5) previous lines of endocrine therapy and 68% had previous chemotherapy. The clinical benefit rate at 6 months was 35.3% (90% CI:16.6%, 58%). Progression free probability was 57.5% at Day 84 and 50.5% at Day 168. The 6-month Kaplan-Meier estimate for radiographic progression free survival was 43.8%. Enobosarm was well tolerated without evidence of virilization, no polycythemia, and no liver toxicity.



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The second Phase 2 clinical trial (G200802) was a 2-arm study evaluating 9mg and 18mg enobosarm daily oral dosing in 136 women with ER+ HER2- advanced breast cancer who previously responded to endocrine treatment. The patients in this study were also heavily pretreated having failed an average of 4 endocrine treatments and 88% had received prior chemotherapy. Enobosarm showed efficacy with a clinical benefit rate at 6 months which for 9mg was 32% (95% CI 19.5%,46.7%) and for the 18mg cohort was 29% (95% CI 17.1%,43.1%). The median duration of clinical benefit was not reached for the 9mg group (8.2 month - Not reached) and for the 18mg group was 14.1 months (11 months - 16.5 months). The best overall objective tumor response rate based on RECIST 1.1 which was determined through a central read was: 2 complete responses and 10 partial responses for the 9 mg cohort and 5 complete responses and 5 partial responses for the 18 mg cohort. The median progression free survival in the evaluable subjects was 5.6 months (2.9, 27.5) in the 9 mg group and 4.2 months (2.8, 11.0) for the 18 mg group. Quality of life assessments showed significant improvement from baseline for both the 9mg and 18mg enobosarm cohorts. Enobosarm was well tolerated without unwanted virilizing effects at both the 9mg and 18mg doses.



Overall, these studies of enobosarm clearly establish the clinical relevance of targeting the AR with a selective AR agonist, both from an efficacy perspective and with additional other clinical benefits. Owing to its high tissue selectivity, enobosarm increases in lean body mass (muscle) and physical function, decreases in fat mass, improves bone strength, and lacks androgenic adverse side effects including virilization, liver toxicity, and polycythemia. By targeting the AR in ER+ HER2- metastatic breast cancer, enobosarm introduces a novel endocrine therapy to patients with breast cancer that have exhausted endocrine therapies targeting ER, but prior to IV chemotherapy.



In October 2020, the FDA agreed to the Phase 3 registration clinical trial study to evaluate the efficacy and safety of enobosarm, selective androgen receptor targeting agonist, versus active control, either exemestane or tamoxifen (physician’s choice), for the treatment of metastatic ER+/HER2- breast cancer in approximately 240 patients who have failed a nonsteroidal aromatase inhibitor (anastrozole or letrozole), fulvestrant, and a CDK4/6 inhibitor, but prior to IV chemotherapy. The primary endpoint is radiographic progression-free survival. The Phase 3, open label, randomized, active control registration ARTEST Phase 3 study is anticipated to commence in the first half of calendar year 2021.



Market. Enobosarm represents the first new class of targeted endocrine therapy in advanced breast cancer in decades. Enobosarm targets AR in ER+ HER2- metastatic breast cancer as a potential second line and/or third line oral daily dosing endocrine therapy option in breast cancer patients that have exhausted endocrine therapies targeting ER, but prior to IV chemotherapy. The global annual market for an oral agent in an ER endocrine resistant setting would be similar to CDK 4/6 inhibitor drugs which is a $6 billion dollar market.



VERU-111, an oral, first-in-class alpha and beta tubulin inhibitor/cytoskeleton disruptor small molecule, for the treatment of taxane resistant metastatic triple negative breast cancer



Scientific Overview. Breast cancer is the most commonly diagnosed cancer in women with estimated 276,480 new cases and 42,170 deaths expected for 2020 and one in eight women will develop invasive breast cancer in their lifetime. Breast cancer is a heterogenous disease with diverse clinical and molecular characteristics. Metastatic triple negative breast cancer is an aggressive form of breast cancer that occurs in 15% of all breast cancers. This form of breast cancer does not express ER, PR, or HER2 and is resistant to endocrine therapies. The first line of treatment usually includes IV taxane chemotherapy. Almost all women will eventually develop taxane resistance. VERU-111 is an oral, first-in-class, new chemical entity that targets, crosslinks, and disrupts alpha and beta tubulin subunits of microtubules and is not a substrate for P-glycoprotein drug resistance protein. Over expression of P-glycoprotein is a common mechanism that causes taxane resistance in breast cancer. Preclinical studies in human triple negative breast cancer grown in animal models demonstrate that VERU-111 significantly inhibited cancer proliferation, migration, metastases, and invasion of triple negative breast cancer cells and tumors that have become resistant to paclitaxel (taxane).



Development Plan. Based upon the strong in vitro and in vivo animal preclinical data of VERU-111 in triple negative breast cancer models and using the safety information from the Phase 1b and Phase 2 VERU-111 prostate cancer clinical studies in over 80 men, the Company plans to meet with the FDA in first half of calendar year 2021 and to commence a single arm, open label, Phase 2b clinical study in Q4 2021 to evaluate VERU-111 in women with metastatic triple negative breast cancer that has become resistant to IV taxane chemotherapy.



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Market. The number of new U.S. breast cancer cases in 2020 totaled 276,480 with triple negative breast cancer accounting for 10-15% or approximately 41,472 patients. The majority of women will receive IV chemotherapy including taxanes. Almost all these women will develop taxane resistance and will be a candidate for VERU-111. The annual U.S. market for taxane resistant metastatic triple negative breast cancer is over $1 billion annually.



Anti-Viral and Anti-Inflammatory Drug Candidate – COVID-19



VERU-111, an oral, first-in-class alpha and beta tubulin inhibitor/cytoskeleton disruptor small molecule, for the treatment of COVID-19 patients at high risk for acute respiratory distress syndrome



Scientific Overview. Drugs like VERU-111 that target microtubules have broad antiviral activity by disrupting the intracellular transport of viruses such as SARS CoV-2, along microtubules. Microtubule trafficking is critical for viruses to cause infection. Furthermore, microtubule depolymerization agents that target alpha and beta tubulin subunits of microtubules also have strong anti-inflammatory effects including the potential to treat the cytokine release syndrome (cytokine storm) induced by the SARS-CoV-2 viral infection that seems to be associated with high COVID-19 mortality rates. VERU-111 could therefore have a two-pronged approach to the treatment of SARS-CoV-2 (COVID-19) virus infection and the debilitating and sometimes lethal respiratory effects of the virus. First, as an antiviral, it would have direct effects on S protein-microtubule trafficking with the potential to reduce the production of infectious virions particularly affecting viral replication and assembly and virion egress. Secondly, as an anti-inflammatory agent, it may reduce virally induced severe inflammation in the respiratory system and reduce the incidence of cytokine storm and septic shock that can occur in patients that progress.



Development Plan. Veru is currently enrolling a double-blind randomized (1:1) placebo-controlled Phase 2 clinical trial evaluating daily oral doses of VERU-111 versus placebo for 21 days in 40 hospitalized patients who tested positive for the SARS-CoV-2 virus and are at high risk for ARDS. The primary efficacy endpoint is the proportion of patients that are alive and without respiratory failure at Day 22. Secondary endpoints include the measured improvements on the WHO Disease Severity Scale (8-point ordinal scale) which captures COVID-19 disease symptoms and signs including hospitalization to progression of pulmonary symptoms to mechanical ventilation as well as death. If the clinical results of the Phase 2 clinical trial are positive, the Company intends to apply for grant funding through third party agencies including the Biomedical Advanced Research and Development Authority of the U.S. Department of Health and Human Services (BARDA) and the Defense Advanced Research Projects Agency of the U.S. Department of Defense (DARPA). There can be no assurances that any such grant funding will be provided.



Market. Approximately 20% of symptomatic cases require hospitalization with 5% ending up in the ICU. In the U.S. there are an estimated 250,000 new COVID cases per week resulting in 2,500 patients per week being eligible for VERU-111 treatment or 130,000 patients per year with a market value of greater than $600 million.



Sexual Health Division



Drug candidate



TADFYN® (tadalafil 5mg and finasteride 5mg combination capsule) for the initial treatment of men with lower urinary tract symptoms and enlarged prostate



Scientific Overview. Tadalafil and finasteride combination product in capsules is a new, proprietary formulation that addresses men who have lower urinary tract symptoms and restricted urinary stream because of an enlarged prostate. CIALIS® (tadalafil 5mg) and PROSCAR® (finasteride 5mg) co-administration is indicated for the initial treatment of BPH for up to 26 weeks. CIALIS® (tadalafil 5mg) is a phosphodiesterase 5 (PDE5) inhibitor and PROSCAR® (finasteride 5mg) is a Type 2, 5 alpha reductase inhibitor. Tadalafil 5mg daily has been approved for the treatment of erectile dysfunction and BPH. Finasteride 5mg has been approved for the treatment of BPH: to improve symptoms, to reduce risk of acute urinary retention and the need for prostate surgery, and to prevent progression of BPH.



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Development Plan. In a November 2017 Pre-IND meeting, the FDA confirmed that the tadalafil and finasteride combination qualifies for a 505(b)(2) regulatory pathway. The FDA also agreed that a single bioequivalence study and no additional nonclinical, clinical efficacy and/or safety studies will be required to support the approval of the tadalafil and finasteride combination for the initial treatment of lower urinary tract symptoms in men with enlarged prostates. The purpose of the meeting was to discuss the proposed NDA and to confirm the clinical, non-clinical, and chemistry, manufacturing and controls (CMC) requirements for the Company's NDA submission utilizing the FDA expedited 505(b)(2) regulatory pathway. The Company submitted a pre-NDA briefing document to the FDA that outlined the Company's preliminary data package being prepared for the NDA submission, including bioequivalence and bioavailability clinical study results, CMC and other regulatory elements for a 505(b)(2) submission. In June 2018, the Company announced that it concluded its pre-NDA meeting with the FDA for TADFYN® (tadalafil 5mg and finasteride 5mg combination capsule) for the treatment of BPH. The Company believes it has reached agreement with the FDA on the regulatory data package requirements that will be sufficient for submission. The FDA requested that the Company submit 12-month stability data on manufacturing batches to support the expiry date of TADFYN® at the time of the NDA submission. The Company plans to submit an NDA for TADFYN® in very early calendar year 2021.



Market. The worldwide prevalence of BPH lower urinary symptoms is estimated to be 10-25% of the male population and was estimated to grow to 1.1 billion men by 2018. Other men who may benefit from this combination include: 1) men who have a suboptimal response to 5 alpha reductase inhibitors alone (PROSCAR® (finasteride) or AVODART® (dutasteride)); 2) men who have a suboptimal response to an alpha blocker alone (FLOMAX® (tamsulosin), HYTRIN® (terazosin), UROXATRAL® (alfuzosin), CARDURA® (doxazosin), and RAPAFLO® (silodosin)) or in combination with a 5 alpha reductase inhibitor (JALYN® (dutasteride/tamsulosin combination)); and 3) men who have an optimal response to 5 alpha reductase inhibitors, but who also have erectile dysfunction. A tadalafil 5mg and finasteride 5mg combination is not currently available. TADFYN®, if approved, would be the first fixed combination of tadalafil and finasteride approved by the FDA. TADFYN®would provide clinical benefit both by increasing dosing convenience and drug compliance as poor compliance with a BPH medicine could lead to an increased chance of acute urinary retention, urosepsis, and death. The Company plans to sell TADFYN® through men’s health telemedicine internet channels in the U.S. and to out-license TADFYN® to urology specialty pharmaceutical marketing and sales organizations for upfront payment, milestones, and royalties in the U.S. and in territories outside the U.S.



Commercial product



FC2 for dual protection against unintended pregnancy and transmission of STIs



Product. FC2 is the only currently available female-controlled product approved for marketing by the FDA and cleared by the World Health Organization (WHO) for purchase by U.N. agencies that provides dual protection against unintended pregnancy and the transmission of STIs. The Centers for Disease Control and Prevention has referenced the use of condoms, including the female condom, as a means to reduce the risk of transmitting STIs, including HIV/AIDS, and the transmission of Zika by sex. FC2 was approved for market by the FDA in 2009.



FC2 is manufactured from a nitrile polymer formulation that is exclusive to the Company and consists of a soft, loose fitting sheath and two rings: an external ring of rolled nitrile and a loose internal ring made of flexible polyurethane. FC2’s soft sheath lines the vagina, preventing skin-to-skin contact during intercourse. Its external ring remains outside the vagina, partially covering the external genitalia. The internal ring is used for insertion and helps keep the device in place during use.



FC2’s primary raw material, a nitrile polymer, offers a number of benefits over natural rubber latex, the raw material most commonly used in male condoms. FC2’s nitrile polymer is stronger than latex, reducing the probability that the female condom sheath will tear during use. Unlike latex, FC2’s nitrile polymer quickly transfers heat. FC2 can warm to body temperature immediately upon insertion, which may enhance the user’s sensation and pleasure. Unlike the male condom, FC2 may be inserted before sex, eliminating disruption during sexual intimacy. FC2 is also an alternative to latex sensitive users who are unable to use male condoms without irritation. For example, 7% to 21% of the individuals with significant exposure to latex rubber (i.e., health care workers) experience such irritation. To the Company's knowledge, there is no reported allergy to the nitrile polymer. FC2 is pre-lubricated, disposable, and approved for single use to prevent pregnancy and the transfer of STIs.



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U.S. Market. The market for FC2 in the U.S., as the only FDA approved for market female use product that protects against the transmission of STIs and unintended pregnancies, is rapidly growing. FC2 is currently reimbursable by prescription under the ACA and the laws of 20+ states prior to enactment of the ACA. The ACA was signed into law in March 2010 and was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry and impose additional health policy reforms. Among these many rules, the ACA requires non-grandfathered health plans and health insurance issuers to provide 100% coverage of preventive care services. ACA guidance defines preventive services to include contraception methods. The ACA guidance further requires health plans to cover at 100% payment of at least one form of contraception within each method identified by the FDA in its current Birth Control Guide. As a result, with FC2 currently reimbursable by prescription under the ACA, as well as the laws of 20+ states prior to enactment of the ACA, prescription sales of FC2 in the U.S. have grown rapidly and growth of prescription sales in the U.S. is a key part of our strategy for FC2. As FC2 is nonhormonal, it is a viable alternative for many U.S. women who have reported dissatisfaction with the side effects of hormonal birth control. Moreover, there are unique groups of women such as breast cancer survivors who desire contraception and cannot take hormonal birth control because of this underlying condition.



We have built the necessary infrastructure to allow for broad access across the U.S. As a result, FC2 is now available through multiple access channels including: 95% of major retail pharmacies, community-based organizations, by prescription, telemedicine, universities, direct purchase and 340B qualified health care clinics, and directly to the public health sector without distributors. In particular, we have partnered with fast-growing, highly reputable telemedicine firms (telemedicine being the remote diagnosis and treatment of patients by means of telecommunications technology) to bring our much-needed FC2 product to patients in a cost-effective and highly convenient manner. Marketing and educational programs, both traditional and by digital and social media, are being developed for the U.S. public health sector and implemented to target health care providers, community-based organizations, and women to coordinate awareness and access to FC2 that is fully reimbursable and to educate on the use of FC2.



Global Public Health Sector Market. FC2’s primary use is for disease prevention and family planning, and the global public health sector has been the main market for FC2. Within the global public health sector, various organizations supply critical products such as FC2, at no cost or low cost, to those who need but cannot afford to buy such products for themselves.



The Company currently has a limited number of customers in the global public health sector, who generally purchase in large quantities. Over the past few years, significant customers have included large global agencies, such as the United Nations Population Fund (UNFPA) and the United States Agency for International Development (USAID), the Brazil Ministry of Health either through UNFPA or Semina Indústria e Comércio Ltda (Semina), the Company’s distributor in Brazil, and the Republic of South Africa health authorities that purchase through the Company’s various local distributors. DKT, a new distributor for FC2, is one of the world’s largest providers of family planning and HIV/AIDS prevention products and services with offices in 24 countries. DKT has started registration processes to distribute FC2 in several countries this year to expand market access. These DKT countries include Afghanistan, Argentina, Bolivia, Chile, Colombia, Ecuador, Ethiopia, Ghana, Nigeria, Pakistan, Paraguay, Peru, and Uruguay. Other customers in the global public health sector include ministries of health or other governmental agencies, which either purchase directly or via in-country distributors, and non-governmental organizations (NGOs).



FC2 has been distributed in the U.S. and 149 other countries. A significant number of countries with the highest demand potential are in the developing world. The incidence of HIV/AIDS, other STIs, and unintended pregnancy in these countries represents a remarkable potential for significant sales of a product that benefits some of the world’s most underprivileged people. However, conditions in these countries can be volatile and result in unpredictable delays in program development, tender applications, and processing orders.



The global market for condoms is estimated to be $9.4 billion annually. The female condom market represents a very small portion of the total global condom market, yet 50% of individuals living with HIV/AIDS are women. As a result, a number of independent women’s groups are advocating for increased investment in and distribution of female condoms on a gender equality basis.



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The Company has distribution agreements and other arrangements with commercial partners which market FC2 as a consumer health product through distributors and retailers in 22 countries, including Brazil, Spain, France, and the United Kingdom. These agreements are generally exclusive for a single country. Under these agreements, the Company sells FC2 to the distributor partners, who market and distribute the product to consumers in the established territory.



On August 27, 2018, the Company announced that through six of its distributors in the Republic of South Africa, the Company had received a tender award to supply 75% of a tender covering up to 120 million female condoms over three years. In October 2020, the Company was awarded 20 million units through its distributor in Brazil under the new Brazil Female Condom tender. The units under the Brazil tender are to be delivered over two years.



Government Regulation



The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products and medical devices. These agencies and other federal, state, and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, recordkeeping, tracking, approval, import, export, advertising, and promotion of our products.



FDA Regulation of Female Condoms. FC2 was approved for market by the FDA, via a Premarket Approval Application (PMA), as a Class III medical device in 2009. On September 21, 2018, the FDA issued a final order reclassifying female condoms from Class III to Class II medical devices, renaming them “single-use internal condoms” and requiring new devices in this category to submit a 510(k) premarket notification and comply with various “special controls.” Special controls are a battery of product clinical testing which includes, but is not limited to, determining product effectiveness against pregnancy and against infection transmission, and product tolerability. Companies seeking clearance of new single-use internal condoms may now do so by demonstrating to the FDA in a 510(k) submission that a proposed condom is substantially equivalent to FC2 with respect to intended use and technology.



All marketed devices cleared or approved by the FDA are subject to continuing regulation by the FDA. For example, we are required to register our manufacturing establishments with the FDA and list FC2 with the FDA as a commercially distributed device. We must comply with the FDA’s Quality System Regulation (QSR), which requires that devices be manufactured and records be maintained in a prescribed manner with respect to, among other things, manufacturing, testing, and control activities. We must comply with the Medical Device Reporting (MDR) regulation requires that we provide information to the FDA whenever evidence reasonably suggests that one of our FC2 devices may have caused or contributed to a death or serious injury, or where a malfunction has occurred that would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. We must also maintain records of any corrections or removal of FC2 and make reports to the FDA of certain corrections or removals. Further, we are required to comply with FDA requirements for labeling, promotion and advertising. Any future modifications to the design, components, methods of manufacturing, or labeling of FC2 that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, require a new 510(k) clearance. Non‐compliance with any of these requirements can result in, among other things, fines, injunctions, civil penalties, recalls, total or partial suspension of production, and criminal prosecution.



Because FC2 is a commercially distributed medical device, the facilities in which FC2 is manufactured and tested are subject to periodic FDA inspection to ensure compliance with regulatory requirements, including the QSR and MDR regulations. The Company’s most recent FDA inspection of its U.K. and Malaysian facilities was completed in September 2010 and November 2019, respectively.



FDA Regulation of Prescription Pharmaceutical Products. The process required by the FDA before pharmaceutical product candidates may be marketed in the United States generally involves the following:



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The testing and approval process requires substantial time, effort, and financial resources. Prior to commencing the first clinical trial with a drug candidate, we must submit an IND to the FDA. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30‐day time period, raises safety concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development. Further, an independent institutional review board (IRB) for each medical center proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial commences at that center. Regulatory authorities, an IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Some studies also include a data safety monitoring board (DSMB), which receives special access to unblinded data during the clinical trial and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.



In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.









The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a drug candidate and can provide important safety information.



Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug candidate, as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.



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505(b)(2) Approval Process.Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FDCA), which was enacted as part of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Act, provides an expedited regulatory pathway to FDA approval for new or improved formulations or new uses of previously approved drug products. Specifically, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely upon the FDA's findings of safety and effectiveness for an approved product that acts as the Reference Listed Drug (RLD). The FDA may require 505(b)(2) applicants to perform additional studies or provide other data to support any change from the RLD. The FDA may then approve the new drug candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.



We expect our Zuclomiphene citrate, TADFYN®, and VERU-100drug candidates to be submitted under the 505(b)(2) regulatory pathway because they are or will be based, in part on data or information already in the public domain. On May 24, 2017, the FDA agreed with the Company’s plans to enter the Phase 2 dose finding clinical trial to evaluate Zuclomiphene citrate for the treatment of hot flashes in men on ADT. In November 2017, the FDA also agreed in Pre-IND meetings that the Tadalafil/Finasteride combination qualifies for the 505(b)(2) regulatory pathway.



Orange Book Listing. In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book. Any applicant who files a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is not sought until after patent expiration; or (iv) the listed patent is invalid, unenforceable or will not be infringed by the proposed new product. This last certification is known as a Paragraph IV certification. If the competitor has provided a Paragraph IV certification to the FDA, the competitor must also send notice of the Paragraph IV certification to the holder of the NDA for the RLD and the patent owner once the application has been accepted for filing by the FDA. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the FDA from approving the application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the applicant. The applicant may also elect to submit a “section viii statement” certifying that its proposed label does not contain, or carves out, any language regarding the patented method‐of‐use rather than certify to a listed method‐of‐use patent.



505(b)(1) Approval Process.Drug development via Section 505(b)(1) of the FDCA is typically used for novel drugs that have not previously been approved by FDA for commercial sale in the United States. 505(b)(1) drug development stipulates that all of the studies required for approval are conducted by or for the Company. VERU-111 for metastatic castration and androgen receptor targeting agent resistant prostate cancer and VERU-111 for taxane resistant metastatic triple negative breast cancer, as well as enobosarm for ER+/HER2- metastatic breast cancer, is expected to follow this regulatory pathway.



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NDA Submission and Review by the FDA. The results of product development, nonclinical studies, and clinical trials are submitted to the FDA as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. The FDA may convene an advisory committee to provide clinical insight on application review questions. The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product’s identity, strength, quality, and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Once the NDA submission has been accepted for filing, which occurs, if at all, within 60 days after submission of the NDA, the FDA’s goal to complete the review process for a non‐priority review of an NDA under 505(b)(2) or 505(b)(1) is ten months and for a priority review is six months to complete the review process for the application and respond to the applicant, which can take the form of either a complete response letter or approval. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information for the FDA to reconsider the application. If, or when, those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The review process is often significantly extended by the FDA requests for additional information, studies, or clarification. The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information, and/or require post‐marketing testing and surveillance to monitor safety or efficacy of a product. FDA approval of any NDA submitted by us will be at a time the FDA chooses. Also, if regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be marketed. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require Phase 4 post‐marketing studies to monitor the effect of approved products and may limit further marketing of the product based on the results of these post‐marketing studies.



Post‐Approval Requirements for Pharmaceutical Products. Any pharmaceutical products manufactured or distributed by us pursuant to FDA approvals will be subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences. Drug and biologic manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third‐party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the NDA.



The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy, purity, and potency that are supported by appropriate evidence. Generally, these are found in the approved prescribing information. Failure to comply with these requirements can result in adverse publicity, warning or untitled letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Such off‐label uses are common across medical specialties. Physicians may believe that such off‐label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off‐label use.



The Drug Supply Chain Security Act imposes obligations on manufacturers of finished pharmaceutical human drug products related to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain information regarding the drug products to individuals and entities to which product ownership is transferred, label drug products with a product identifier, and maintain certain records regarding the drug product. The transfer of information to subsequent product owners by manufacturers will eventually be required to be done electronically. Manufacturers are also required to verify that purchasers of the manufacturers’ products are appropriately licensed. Further, under this legislation, manufacturers will have drug product investigation, quarantine, disposition, and notification responsibilities related to counterfeit, diverted, stolen, and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.



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Federal Trade Commission (FTC) Regulation of Advertising.The FTC regulates OTC drug and non-restricted medical device advertising and promotional materials under the Federal Trade Commission Act (FTC Act), which prohibits unfair or deceptive acts or practices as well as the dissemination of any false advertisement that is likely to induce the purchase of drugs and non-restricted medical devices. The FTC requires that all express and implied claims must be substantiated. The FTC has historically applied a standard of competent and reliable scientific evidence for health-related claims. This standard is defined generally to require tests, analyses, research or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results. In some instances, the FTC has interpreted this standard as requiring randomized, double-blind, placebo-controlled clinical trials. The FTC is authorized to issue cease-and-desist orders enforceable by injunctions, civil penalties, and criminal contempt proceedings for violating the FTC Act, as well as to proceed directly in federal court for injunctive relief and to obtain ancillary consumer redress.



Other Healthcare Regulations. Our business activities, including but not limited to, research, sales, promotion, distribution, medical education, and other activities will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, the Department of Health and Human Services and its various divisions, including the Centers for Medicare and Medicaid Services, and state and local governments. Our business activities must comply with numerous healthcare laws, including but not limited to, the federal health care program anti-kickback statute (the “AKS”) and state equivalents, the Federal False Claims Act and state equivalents, federal and state health care practitioner payment sunshine laws, federal and state health information privacy laws, state price increase transparency laws, and various federal laws requiring price reporting or discounted pricing to the government.



The AKS prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting, or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any item or service reimbursable under Medicare, Medicaid, or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing, or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti‐Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case‐by‐case basis based on a cumulative review of all of its facts and circumstances.



The federal False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government.



We and our business activities are subject to the Medicare/Medicaid civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.



Additionally, the federal practitioner payment sunshine requirements within the ACA and its implementing regulations require certain manufacturers of drugs and medical devices for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report information related to certain payments or other transfers of value made or distributed to physicians, certain other health care practitioners and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, such practitioners or teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.



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In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. The Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and its implementing regulations, imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to business associates—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Outside the U.S., we are impacted by the privacy and data security requirements at the international, national and regional level, and on an industry specific basis. Legal requirements in the countries in which we do business relating to the collection, storage, handling and transfer of personal data and potentially intellectual property continue to evolve with increasingly strict enforcement regimes. More privacy and security laws and regulations are being adopted, and more are being enforced, with potential for significant financial penalties. In the European Union (EU), the General Data Protection Regulation (GDPR) took effect in May 2018 and imposes increasingly stringent data protection and privacy rules.



Depending on the circumstances, failure to comply with these laws can result in penalties, including criminal, civil, and/or administrative criminal penalties, damages, fines, disgorgement, exclusion of products from reimbursement under government programs, “qui tam” actions brought by individual whistleblowers in the name of the government, refusal to allow us to enter into supply contracts, including government contracts, reputational harm, diminished profits, and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our business.



The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payers in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.



Anti-Corruption Laws. The Foreign Corrupt Practices Act (FCPA) prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Other countries where the Company conducts business have similar anti-corruption laws, including the United Kingdom’s Bribery Act.



Foreign and Other Regulation. In addition to regulations in the U.S., we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the U.S. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement vary greatly from country to country.



FC2 has been approved by regulatory authorities in Brazil, Canada, and other jurisdictions.



FC2 also received the CE Mark which allows it to be marketed throughout the EU. In conjunction with the U.K.’s exit from the EU, we were required to change our Notified Body. As a result, our EU accreditation will cease on December 31, 2020. We are currently seeking new accreditation under the Medical Devices Directive and do not believe that this will have a material impact on our business in fiscal 2021.



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The Company’s facility may also be subject to inspection by UNFPA, USAID, International Organization for Standardization (ISO), and country specific ministries of health.



Intellectual Property



We will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and enforceable patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element of our business.



VERU-111 and Related Compounds License. We hold an exclusive worldwide license to eleven issued U.S. patents, seven pending U.S. patent applications and 79 patents and patent applications in countries outside the United States, including issued patents in the EU and Japan, relating to our VERU-111 drug candidates and related compounds. This license contains provisions requiring upfront, milestone and royalty payments to the licensor (Ohio State Innovation Fund). If we fail to comply with these obligations or other obligations to the licensor, the licensor might have the right to terminate the license, in which event we would not be able to commercialize these drug candidates. The patents relating to VERU-111 and related compounds have statutory expiration dates from 2029 to 2034. Patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time.



VERU-100 Patent Applications.We have two U.S. patent applications and twelve patent applications in countries outside the United States relating to the long-term release of a GnRH antagonist hormone for ADT for men with advanced prostate cancer. The U.S. patent and any patents issuing from the foreign patent applications would expire in January 2038.



Enobosarm and Related Compounds License. We hold an exclusive worldwide license to thirteen issued U.S. patents, two pending U.S. patent applications and 64 patents and patent applications in countries outside the United States, including issued Composition of Matter and Method of Use patents in the EU and Japan, relating to our enobosarm drug candidate and related compounds. This license contains provisions requiring milestone and royalty payments to the licensor (University of Tennessee Research Foundation). If we fail to comply with these obligations or other obligations to the licensor, the licensor might have the right to terminate the license, in which event we would not be able to commercialize our drug candidate. The patents relating to enobosarm and related compounds have statutory expiration dates from 2024 to 2034. Patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time.



Zuclomiphene Citrate Patent and Patent Applications.We have three issued U.S. patents and twelve patents and patent applications in countries outside the United States related to substantially pure zuclomiphene for the treatment of hot flashes, osteoporosis, bone fractures, and loss of bone mineral density, especially in men on prostate cancer hormone therapies. The U.S. patent and any patents issuing from the foreign patent applications would expire in July 2035. Patent term adjustments or patent term extensions could result in later expiration dates with a maximum five-year patent term extension expected because of clinical development and FDA review time.



FC2 Patents. FC2 patents have been issued by the United States, South Africa, Mexico, Brazil and India. The patents cover key aspects of FC2, including its overall design and manufacturing process. The patents have expiration dates in 2023 and 2024.



Trademarks.The Company has a registration for the trademark “FC2 Female Condom” in the U.S. and has filed applications in the U.S. for the trademarks “Veru” and “Veru” together with the chevron. The Company has filed applications or secured registrations in 40 countries or jurisdictions around the world to protect the various names and symbols used in marketing its Female Condoms.



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We cannot be certain that any of our pending patent applications, or those of our licensors, will result in issued patents. In addition, because the patent positions of biopharmaceutical companies are highly uncertain and involve complex legal and factual questions, the patents we own and license, or any further patents we may own or license, may not prevent other companies from developing similar or therapeutically equivalent products. Patents also will not protect our product candidates if competitors devise ways of making or using these product candidates without legally infringing our patents. In recent years, several companies have been extremely aggressive in challenging patents covering pharmaceutical products, and the challenges have often been successful. We cannot be assured that our patents will not be challenged by third parties or that we will be successful in any defense we undertake. Failure to successfully defend a patent challenge could materially and adversely affect our business.



In addition, changes in patent laws, rules or regulations or in their interpretations or enforcement in the U.S. and other countries by the courts may materially diminish the value of our intellectual property or narrow the scope of our patent protection, which could have a material adverse effect on our business and financial condition.



The term of an individual patent depends upon the legal term for patents in the country in which such patent is obtained. In most countries, including the United States, the patent term is 20 years from the earliest filing date of a non-provisional patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office (the “USPTO”) in examining and granting a patent or may be shortened if a patent is terminally disclaimed over an earlier filed patent. The term of a patent that covers a drug or biological product may also be eligible for patent term extension when FDA approval is granted, provided statutory and regulatory requirements are met. In the future, if and when our product candidates receive approval by the FDA or foreign regulatory authorities, we expect to apply for patent term extensions on issued patents covering those products, depending upon the length of the clinical trials for each medicine and other factors. There can be no assurance that any of our pending patent applications will issue or that we will benefit from any patent term extension or favorable adjustment to the term of any of our patents.



As with other biopharmaceutical companies, our ability to maintain and solidify our proprietary and intellectual property positions for our product candidates will depend on our success in obtaining effective patent claims and enforcing those claims if granted. However, certain patent applications that we have filed or may file, or that we have licensed or may license from third parties, may not result in the issuance of corresponding patents. We also cannot predict the breadth of claims that may be allowed or enforced in our patents. Any issued patents that we may receive in the future may be challenged, invalidated or circumvented. For example, we cannot be certain of the priority of inventions covered by pending third-party patent applications. If third parties prepare and file patent applications in the United States that also claim intellectual property to which we have rights, we may have to participate in proceedings in the USPTO to determine invention rights, which could result in substantial costs to us, even if the eventual outcome is favorable to us. In addition, because of the extensive time required for clinical development and regulatory review of a product candidate we may develop, it is possible that any related patent may remain in force for a short period following commercialization, thereby reducing any advantage of any such patent.



In addition to patents, we rely upon unpatented trade secrets and know-how and continuing innovation to develop and maintain our competitive position. We seek to protect our proprietary information, in part, by using confidentiality agreements with any future collaborators, scientific advisors, employees and consultants and by using invention assignment agreements with our employees. We also have agreements requiring assignment of inventions with selected consultants, scientific advisors and collaborators. The confidentiality agreements are designed to protect our proprietary information and, in the case of agreements or clauses requiring invention assignment, to grant us ownership of intellectual property that is developed through a relationship with a third party.



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Significant Customers



The Company's three largest customers in fiscal 2020 accounted for 76% of the Company’s net revenues. In the U.S. market, the Company has experienced fast growth in prescription sales of FC2 in fiscal 2020 largely through supply agreements with leading telemedicine providers.One of these telemedicine providers has become one of our largest customers and accounted for 42% of the Company’s net revenues in fiscal 2020.



Because FC2 provides dual protection against both the transmission of STIs, including HIV/AIDS, and unintended pregnancy, it is an integral part of both HIV/AIDS prevention and family planning programs throughout the world. These programs are typically supplied by global public health sector buyers who purchase products for distribution, at low cost or no cost, to those who need but cannot afford to buy such products themselves. Within the global public health sector are large global agencies, such as UNFPA, USAID, the U.K.’s Department for International Development (DFID), and Population Services International (PSI), other social marketing groups, various government health agencies, and NGOs. Within the global public health sector, the Company’s most significant customers are either global public health sector agencies, country specific ministries of health, or those who facilitate their purchases and/or distribution.



Employees



As of November 30, 2020, the Company had 339 full-time employees, including 28 located in the U.S., 12 in the U.K., 297 in Malaysia, and two in other countries to implement training and programs. The Company does not currently have any collective bargaining agreements with its employees, and the Company believes that its employee relations are good.



Environmental Regulation



The Company believes there are no material issues or material costs associated with the Company's compliance with environmental laws. The Company did not incur environmental expenses in fiscal 2020 or 2019, nor does it anticipate environmental expenses in the foreseeable future. The Company’s operations in Malaysia are audited and certified against ISO 14001, the environmental management standard that was developed by the International Organization for Standardization (ISO) to help organizations manage the environmental impacts of their processes, products, and services.



Raw Materials



The principal raw material used to produce FC2 is a nitrile polymer. While general nitrile formulations are available from a number of suppliers, the Company has chosen to work closely with the technical market leader in synthetic polymers to develop a grade ideally suited to the bio-compatibility and functional needs of a female condom. As a result, the Company relies on supply for its principal raw material for FC2 from one supplier that could produce the raw material from multiple supply points within its organization. The principal partiallyfinished component used to produce FC2 is a dipped nitrile polymer sheath. The Company procures its component sheaths from one of the leading manufacturers of nitrile surgical gloves. These sheaths are sourced from multiple manufacturing sites controlled by this vendor.



Manufacturing



The Company manufactures and warehouses FC2 within a leased facility with approximately 45,800 square feet of space in Selangor D.E., Malaysia. Production capacity at this facility is approximately 100 million units of FC2 annually. This facility is subject to periodic inspection by the FDA to ensure compliance with cGMP, as well as the U.K.-based notified body, which is responsible for CE and ISO accreditation.



The Company expects to rely on third-party contract manufacturers and other third parties to produce, package, label and store sufficient quantities of any future drug candidates.



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Competition



FC2 participates in the same market as male condoms; however, it is not seen as directly competing with male condoms. Rather, studies show that providing FC2 is additive in terms of prevention and choice. Male condoms cost less and have brand names that are more widely recognized than FC2. In addition, male condoms are generally manufactured and marketed by companies with significantly greater financial resources than the Company.



Other parties have developed and marketed female condoms. None of these female condoms marketed or under development by other parties have secured FDA market approval. FDA market approval is required to sell female condoms in the U.S. USAID, a U.S. government funded agency, prefers to procure from the FDA product approval for market; however, there can be exceptions. Outside of the U.S., the Company has experienced increasing competition and pricing pressures for FC2. In addition to FC2, three female condoms have successfully completed the WHO prequalification process and been cleared by UNFPA for purchase by U.N. agencies: the Cupid female condom (which was prequalified by WHO in July 2012 and cleared by UNFPA thereafter), the Velvet female condom marketed by Hindustan Latex Limited (which was prequalified by WHO and cleared by UNFPA in March 2016) and the female condom marketed by PATH (which was prequalified by WHO and cleared by UNFPA in March 2016). The PATH female condom lost its prequalification in 2019, which leaves only two other competitive female condoms with WHO prequalification in addition to FC2. It is possible that other female condoms may complete the WHO prequalification process. The female condom marketed by Hindustan Latex Limited, which is the Company’s former exclusive distributor in India, is substantially similar in design to FC2, except it is made of latex. FC2 has also been competing with other female condoms in markets that do not require either FDA market approval or WHO prequalification. Reflecting increased competition, competitors received part of the last three South African tenders and the last two Brazilian tenders. Increasing competition in FC2’s markets has, and will likely continue to, put pressure on pricing for FC2 and may also adversely affect sales of FC2. Some customers, particularly in the global public health sector, prioritize price over other features where FC2 may have an advantage. The FDA’s reclassification of female condoms in 2018 from Class III medical devices to Class II medical devices may reduce the barriers for other types of female condoms to enter the U.S. market. If other female condoms enter the U.S. market, we may face increased competition in the U.S., which may put downward pressure on pricing for FC2 and adversely affect sales of FC2 in the U.S.



The pharmaceutical industry is highly competitive and is characterized by extensive research efforts and rapid technological progress. The success of our pharmaceutical products will depend on our ability to acquire, develop and commercialize products and our ability to establish and maintain markets for any products for which we receive marketing approval. Potential competitors in North America, Europe and elsewhere include major pharmaceutical companies, specialty pharmaceutical companies and biotechnology firms, universities and other research institutions and government agencies. Many of the competitors with respect to our pharmaceutical products under development have substantially greater research and development and regulatory capabilities and experience, and substantially greater management, manufacturing, distribution, marketing and financial resources, than we have or will have.



VERU-111 is a first-in-class oral therapy that targets both alpha and beta tubulin and will be initially developed for prostate, breast and ovarian cancers. All currently available tubulin targeting agents are chemotherapies that are given IV and include Vinca Alkaloids such as VELBAN® (vinblastine), ONCOVIN® (vincristine) and NAVELBINE® (vinorelbine). These chemotherapies are primarily used for hematologic malignancies (leukemia, lymphoma, myeloma, sarcoma), and some neuroblastoma, thyroid cancer and non-small cell cancer of the lung. Taxanes such as TAXOL® (paclitaxel), TAXOTERE® (docetaxel) and JEVTANA® (cabazitaxel) are primarily used for solid tumors such as breast, ovarian, endometrial, cervical, lung, head and neck, esophageal, bladder, gastric and prostate. TAXOTERE® (docetaxel) and JEVTANA® (cabazitaxel) are indicated for advanced metastatic prostate cancer, are given IV and bind to the taxane site of tubulin. The Trop-2 directed antibody and topoisomerase inhibitor, TRODELVY ® (sacituzumab govitecan-hzyl), PARP inhibitors, LYNPARZA® (olaparib) and TALZENNA® (talazoparib), capecitabine, TECENTRIQ ® (atezolizumab) and ABRAXANE® (albumin-bound paxlitaxel) and platinum-based chemotherapies including cisplatin and PARAPLATIN ®(carboplatin) are indicated for advanced breast cancers such as triple negative breast cancer.



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VERU-100 is a long-acting GnRH antagonist for ADT designed to be administered as a small volume subcutaneous three-month depot injection without a loading dose. As a GnRH antagonist, it should immediately suppress testosterone with no testosterone surge upon initial or repeated administration and no testosterone micro-increases which may adversely affect patient outcomes—a problem which potentially occurs with approved LHRH agonist drugs like LUPRON®, ZOLADEX® and ELIGARD®. Currently, there are no GnRH antagonists commercially approved beyond 1 month, making VERU-100, if approved, the only commercially available GnRH antagonist three-month depot.



Enobosarm is an oral, first-in-class, new chemical entity, selective androgen receptor targeting agonist, for the treatment of AR+/ER+, HER2- metastatic breast cancer, but prior to IV chemotherapy. Other existing drugs currently prescribed for advanced breast cancer are nonsteroidal aromatase inhibitors including, FEMARA® (letrozole) and ARIMIDEX® (anastrozole), irreversible steroidal inhibitors including AROMASIN® (exemestane), selective estrogen receptor degraders including FASLODEX®(fulverstrant), and CDK 4/6 inhibitors including IBRANCE®(palbociclib), KISQUALI ®(ribociclib), and VERZENIO®(abemaciclib). Chemotherapy agents used for the treatment of advanced breast cancer include the taxanes TAXOL® (paclitaxel), TAXOTERE®(docetaxel), ABRAXANE® (albumin-bound paclitaxel), ADRIAMYCIN®(doxorubicin), ELLENCE®(epirubicin), capecitabine, CYTOXAN®(cyclophosphamide) and PARAPLATIN®(carboplatin).



Although there are no FDA-approved drugs for the treatment of hot flashes in men who have advanced prostate cancer as a side effect of prostate cancer hormone therapies, there are several drugs being used off-label including steroidal estrogens and selective serotonin reuptake inhibitor antidepressants including EFFEXOR® (venlafaxine) and anticonvulsants like NEURONTIN® (gabapentin) which could be competitive with our Zuclomiphene citrate drug candidate for the treatment of hot flashes in men who have advanced prostate cancer as a side effect of prostate cancer hormone therapies.



All drugs currently used to treat BPH symptoms are sold in tablets or capsules. These drugs include those that decrease size of the prostate, like 5 alpha reductase inhibitors which include PROSCAR® (finasteride) from Merck & Co., Inc. and AVODART® (dutasteride) from GlaxoSmithKline. The other major class of drugs treat BPH by relaxing the smooth muscles of the prostate and bladder neck and include alpha blockers like FLOMAX® (tamsulosin HCI) from Boehringer Ingelheim Pharmaceuticals, HYTRIN® (terazosin), UROXATRAL® (alfuzosin), CARDURA® (doxazosin), and RAPAFLO® (silodosin) from Allergan as well as Phosphodiesterase 5 (PDE5) inhibitors like CIALIS ® (tadalafil) from Eli Lilly. One class of drugs combines a drug that shrinks and another that relaxes the prostate called JALYN® (dutasteride/tamsulosin combination) from GlaxoSmithKline. Boehringer Ingelheim has a tablet (non-powder) version of FLOMAX® called FLOMAX® CR now available in Canada that can be taken with or without food. Similarly, there is a tablet Tamsulosin product available in the U.K. called Cositam XL 400 microgram that can be taken independently of food.



Available Information



The Company maintains a corporate website for investors at https://verupharma.com/investors/ and it makes available, free of charge, through this website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports that the Company files with or furnishes to the Securities and Exchange Commission (SEC), as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC. Information on the Company's website is not part of this report.



Item 1A. Risk Factors



Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Annual Report and our other SEC filings, in considering our business and prospects. The risks described below are not the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. In addition, there is significant uncertainty regarding the COVID-19 pandemic and its impact on the economic environment and our business which could affect the risk factors set forth below. If any of the events or circumstances described in the following risks occurs, our business, financial condition, results of operations or prospects could be materially adversely affected. In such cases, the trading price of our common stock could decline.



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Risks Related to the Regulation and Commercialization of Our Products and Drug Candidates



We have no experience in obtaining regulatory approval for a drug.



Although our President and Chief Executive Officer and our Chief Scientific Officer have experience in obtaining regulatory approval for a drug under development, the Company has never obtained regulatory approval for, or commercialized, a drug. It is possible that the FDA may refuse to accept any or all of our planned NDAs for substantive review or may conclude, after review of our data, that our applications are insufficient to obtain regulatory approval of any of our drug candidates. The FDA may also require that we conduct additional clinical or manufacturing validation studies, which may be costly and time-consuming, and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA required studies, approval of any NDA that we submit may be significantly delayed, possibly for years, or may require us to expend more resources than we have available or can secure. Any delay or inability in obtaining regulatory approvals would delay or prevent us from commercializing our drug candidates, generating revenue from these proposed products and achieving and sustaining profitability. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve any NDA we submit. In addition, if the requirements for approval of any of our drug candidates under Section 505(b)(2) are not as we expect, it will likely take significantly longer, cost significantly more and be significantly more complicated to gain FDA approval for these drug candidates, and in any case may not be successful. If any of these outcomes occur, we may be forced to abandon our planned NDAs for one or more of our drug candidates, which would materially adversely affect our business.



Clinical trials involve a lengthy and expensive process with an uncertain outcome and results of earlier studies and trials may not be predictive of future trial results. Failure can occur at any time during the clinical trial process as a result of inadequate performance of a drug, inadequate adherence by patients or investigators to clinical trial protocols or other factors. New drugs in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through earlier clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials as a result of a lack of efficacy or adverse safety profiles, despite promising results in earlier trials. Our future clinical trials may not be successful or may be more expensive or time-consuming than we currently expect. If clinical trials for any of our drug candidates fail to demonstrate safety or efficacy to the satisfaction of the FDA, the FDA will not approve that drug and we would not be able to commercialize it, which will have a material adverse effect on our business, financial condition, results of operations and prospects.



We could experience delays in our planned clinical trials.



We may experience delays in clinical trials that will be required to be conducted for our drug candidates. Our planned clinical trials might not begin on time; may be interrupted, delayed, suspended, or terminated once commenced; might need to be redesigned; might not enroll a sufficient number of patients; or might not be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including the following:



· delays in obtaining regulatory approval to commence a trial;

· delays in obtaining required IRB approval at each site;

· delays in recruiting suitable patients to participate in a trial;

· clinical sites dropping out of a trial to the detriment of enrollment;

· time required to add new sites;

· delays resulting from negative or equivocal findings of DSMB for a trial.



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Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, the ongoing COVID-19 pandemic, competing clinical trials, and clinicians' and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. Any of these delays in completing our clinical trials could increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenue as to the affected drug candidate.



Our clinical trials may be suspended or discontinued.



Before we can obtain regulatory approval for the commercial sale of our drug candidates, we may be required to complete preclinical development with respect to such drug candidates and/or extensive clinical trials in humans to demonstrate the safety and efficacy of the drug candidates. To date, regulatory approval has not been obtained for any of our drug candidates.



Unfavorable results from preclinical studies or clinical trials could result in delays, modifications or abandonment of ongoing or future clinical trials. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be delayed, repeated or terminated. In addition, we may report top-line data from time to time, which is based on a preliminary analysis of key efficacy and safety data. Such top-line data may be subject to change following a more comprehensive review of the data related to the applicable clinical trial. If we delay or abandon our development efforts related to any of our drug candidates, we would experience potentially significant delays in, or be required to abandon, development of that drug candidate. If we delay or abandon our development efforts related to any of our drug candidates, our business, financial condition, results of operations and prospects may be materially adversely affected.



Our clinical trials may be suspended or terminated at any time for a number of reasons. A clinical trial may be suspended or terminated by us, our collaborators, the FDA or other regulatory authorities because of a failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, presentation of unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using the investigational drug, changes in governmental regulations or administrative actions, lack of adequate funding to continue the clinical trial or negative or equivocal findings of the DSMB or the IRB for a clinical trial. An IRB may also suspend or terminate our clinical trials for failure to protect patient safety or patient rights. We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants. In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe the clinical trials are not being conducted in accordance with applicable regulatory requirements or present an unacceptable safety risk to participants. If we elect or are forced to suspend or terminate any clinical trial of any drug candidate we are developing, the commercial prospects of such drug candidate will be harmed and our ability to generate revenue from such drug candidate will be delayed or eliminated. Any of these occurrences may materially harm our business, financial condition, results of operations and prospects.



We may be subject to risks relating to collaboration with third parties.



As part of our business strategy, we may enter into collaboration arrangements with strategic partners to develop and commercialize our drug candidates. For our collaboration efforts to be successful, we must identify partners whose competencies complement our competencies. We may be unsuccessful in entering into collaboration agreements with acceptable partners or negotiating favorable terms in these agreements. Also, we may be unsuccessful in integrating the resources and capabilities of these collaborators with our own. In addition, we may face a disadvantage in seeking to enter into or negotiating collaborations with potential partners because other potential collaborators may have greater management and financial resources than we do. Our collaborators may prove difficult to work with or less skilled than originally expected. If we are unsuccessful in our collaborative efforts, our ability to develop and market drug candidates could be severely limited.



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We intend to rely on CROs to conduct our research and development activities.



We will not have the resources to independently conduct research and development activities. Therefore, we intend to rely on CROs to conduct research and development activities for our drug candidates and for the execution of our clinical studies. Although we will control only certain aspects of our CROs' activities, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities. We cannot be sure that the CROs will conduct the research properly in a timely manner or on a cost-effective basis, or that the results will be reproducible. We and our CROs are required to comply with the FDA's cGCPs, which are regulations and guidelines enforced by the FDA for all of our drug products in clinical development. The FDA enforces these cGCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable or invalid and the FDA may require us to perform additional clinical trials before approving our drug candidates. In addition, to evaluate the safety and effectiveness compared to placebo of our drug candidates to a statistically significant degree, our clinical trials will require an adequately large number of test subjects. Any clinical trial that a CRO conducts abroad on our behalf is subject to similar regulation. Accordingly, if our CROs fail to comply with these regulations or recruit a sufficient number of patients, we may be required to repeat clinical trials, which would delay the regulatory approval process.



In addition, we will not employ the personnel of our CROs, and, except for remedies available to us under our agreements with such organizations, we cannot control whether or not they will devote sufficient time and resources to our research and development and our clinical studies. Our CROs may also have relationships with other commercial entities, including one or more of our competitors, for which they may also be conducting clinical studies or other drug development activities, which could impede their ability to devote appropriate time to our clinical programs. If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised because of the failure to adhere to our clinical protocols or regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates that we seeks to develop. As a result, our financial results and the commercial prospects for our drug candidates that we seek to develop would be harmed, our costs could increase and our ability to generate revenue from such drug candidates could be delayed or ended.



If any of our relationships with these third parties terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. Switching or entering into new relationships with CROs involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially affect our ability to meet our desired clinical development timelines and can increase our costs significantly. We may encounter challenges or delays in entering into or maintaining these relationships, and any such delays or challenges may have a material adverse impact on our business, financial condition, results of operations and prospects.



We expect to rely on third party manufacturers for our drug candidates.



For the foreseeable future, we expect to rely on third-party manufacturers and other third parties to produce, package and store sufficient quantities of drug candidates for use in our clinical trials. These drug candidates are complicated and expensive to manufacture. If our third-party manufacturers fail to deliver our drug candidates for clinical use on a timely basis, with sufficient quality, and at commercially reasonable prices, we may be required to delay or suspend clinical trials or otherwise discontinue development and production of our drug candidates. While we may be able to identify replacement third-party manufacturers or develop our own manufacturing capabilities for these drug candidates, this process would likely cause a delay in the availability of our drug candidates and an increase in costs. In addition, third-party manufacturers may have a limited number of facilities in which our drug candidates can be produced, and any interruption of the operation of those facilities due to events such as equipment malfunction or failure or damage to the facility by natural disasters could result in the cancellation of shipments, loss of product in the manufacturing process or a shortfall in available drug candidates.



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In addition, regulatory requirements could pose barriers to the manufacture of our drug candidates. Third-party manufacturers are required to comply with the FDA's cGMPs. As a result, the facilities used by any manufacturers of our drug candidates must maintain a compliance status acceptable to the FDA. Holders of NDAs, or other forms of FDA approvals or clearances, or those distributing a regulated product under their own name, are responsible for manufacturing even though that manufacturing is conducted by a third-party contract manufacturing organization (CMO). Our third-party manufacturers will be required to produce our drug candidates under FDA cGMPs in order to meet acceptable standards for our clinical trials. Our third-party manufacturers may not perform their obligations under their agreements with us or may discontinue their business before the time required by us to gain approval for or commercialize our drug candidates. In addition, our manufacturers will be subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements. Failure by any of our manufacturers to comply with applicable cGMPs could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspensions or withdrawals of approvals, operating restrictions, interruptions in supply, recalls, withdrawals, issuance of safety alerts and criminal prosecutions, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Finally, we also could experience manufacturing delays if our CMOs give greater priority to the supply of other products over our products or otherwise do not satisfactorily perform according to the terms of their agreements with us.



If any supplier for our drug candidates experiences any significant difficulties in its manufacturing processes, does not comply with the terms of the agreement between us or does not devote sufficient time, energy and care to providing our manufacturing needs, we could experience significant interruptions in the supply of our drug candidates, which could impair our ability to supply our drug candidates at the levels required for our clinical trials and commercialization and prevent or delay their successful development and commercialization.



Changes in law could have a negative impact on the approval of our drug candidates.



The FDA has established regulations, guidelines and policies to govern the drug development and approval process, as have foreign regulatory authorities. Any change in regulatory requirements resulting from the adoption of new legislation, regulations or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes. Such amendments to existing protocols or clinical trial applications or the need for new ones, may significantly and adversely affect the cost, timing and completion of the clinical trials for our drug candidates. In addition, the FDA's policies may change and additional government regulations may be issued that could prevent, limit or delay regulatory approval of our drug candidates, or impose more stringent product labeling and post-marketing testing and other requirements. The political environment in the U.S. could result in significant changes in, and uncertainty with respect to, legislation, regulation and government policy that could significantly impact our business and the health care industry. While it is not possible to predict whether and when any such changes will occur, specific proposals that have been discussed or implemented which could have a material impact on us include, but are not limited to, potential changes to the ACA, recently issued regulations offering employers religious and moral exemptions from the ACA’s requirement to provide insurance covering birth control, and the enactment of the 21st Century Cures Act. If we are slow or unable to adapt to any such changes, our business, prospects and ability to achieve or sustain profitability would be adversely affected.



We may fail or elect not to commercialize our drug candidates.



We cannot be sure that, if our clinical trials for any of our drug candidates are successfully completed, we will be able to submit an NDA to the FDA or that any NDA we submit will be approved by the FDA in a timely manner, if at all, or that the submission of any NDA is commercially feasible. After completing clinical trials for a drug candidate in humans, a drug dossier is prepared and submitted to the FDA as an NDA, and includes all preclinical studies and clinical trial data relevant to the safety and effectiveness of the product at the suggested dose and duration of use for the proposed indication as well as manufacturing information, in order to allow the FDA to review such drug dossier and to consider a drug candidate for approval for commercialization in the United States. If we are unable to submit an NDA with respect to any of our current drug candidates, if any NDA we submit is not approved by the FDA, or we elect not to file an NDA, we will be unable to commercialize that product. The FDA can and does reject NDAs and require additional clinical trials, even when drug candidates achieve favorable results in Phase 3 clinical trials. If we fail to commercialize any of these drug candidates, our business, financial condition, results of operations and prospects may be materially adversely affected and our reputation in the industry and in the investment community would likely be damaged.



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Due to the COVID-19 pandemic, we may find it difficult to effectively recruit new clinical trial patients in a timely manner and to partner with clinical trial investigators and sites, which could delay or prevent us from proceeding with, or otherwise adversely affect, clinical trials of our drug candidates.



Identifying and qualifying patients to participate in, and partnering with investigators and sites to run, clinical trials of our drug candidates is critical to the timely completion of our clinical trials. Patients may be unwilling to participate in our clinical trials because of the ongoing COVID-19 pandemic. The severe burden on healthcare systems caused by the COVID-19 pandemic has also impaired the ability of many research sites to start new clinical trials or to enroll new patients in clinical trials. The imposed mandatory sheltering in place and social distancing restrictions may delay the recruitment of patients and impede their ability to effectively participate in such trials. Significant fees may also be owed to contract research organizations associated with starting and stopping clinical trials, typically more so than delaying the start of a clinical trial.