Executive Summary / Key Takeaways

• Veru has strategically transformed into a pure biopharmaceutical company, divesting its legacy FC2 business to focus resources on its late-stage drug pipeline, primarily enobosarm for high-quality weight loss and sabizabulin for atherosclerotic cardiovascular disease.
• The company's lead candidate, enobosarm, an oral SARM, has shown promising Phase 2b results in combination with semaglutide, demonstrating statistically significant preservation of lean mass (71% relative reduction in loss) and greater selective fat loss, addressing a critical unmet need associated with GLP-1 therapies.
• Upcoming catalysts, including unblinded Phase 2b safety and extension study data (Q2 calendar 2025), Phase 1 data for a novel oral formulation (H1 calendar 2025), and an End of Phase 2 FDA meeting for Phase 3 clarity (Q3 calendar 2025), are crucial for validating the investment thesis and attracting a strategic partner.
• Despite positive clinical momentum, Veru faces significant financial challenges, operating with negative cash flow and a cash runway currently projected only into Q4 calendar 2025, necessitating substantial external funding, ideally through a non-dilutive partnership, to advance its costly Phase 3 program.
• The company operates in highly competitive markets dominated by large pharmaceutical players with vastly superior resources, making the successful execution of its clinical strategy and securing a favorable partnership paramount to overcoming financial risks and realizing the potential value of its differentiated technology.

A Strategic Transformation: Focusing the Pipeline for High-Quality Growth

Veru Inc. has undergone a significant strategic evolution, shedding its historical identity rooted in the Female Health Company and its FC2 Female Condom business to emerge as a focused late clinical stage biopharmaceutical entity. This transformation, punctuated by the recent sale of the FC2 business on December 30, 2024, and the earlier divestiture of ENTADFI assets in April 2023, marks a decisive pivot towards developing novel medicines for cardiometabolic and inflammatory diseases. The company's current narrative centers on its promising pipeline candidates, enobosarm and sabizabulin, and the critical need to translate early clinical success into late-stage development and potential commercialization.

The biopharmaceutical industry is characterized by intense competition, dominated by large players like AstraZeneca (AZN), Pfizer (PFE), Roche (RHHBY), and Merck (MRK), possessing extensive R&D capabilities, vast financial resources, and established global commercial infrastructures. Veru, with its significantly smaller scale and limited financial runway, operates as a niche player, seeking to carve out market share through differentiated technology and targeted clinical development. While large competitors boast robust profitability (e.g., AZN's 13% net margin, PFE's 13%, RHHBY's 13%, MRK's 27% TTM net margins) and generate billions in cash flow, Veru currently operates at a significant loss (TTM Net Income: -$37.80M) with negative operating cash flow (TTM Operating Cash Flow: -$21.68M), underscoring the disparity in resources. Veru's strategy is not to compete head-to-head across broad portfolios but to leverage its specific technological advantages to address unmet needs within large, valuable markets, aiming to attract partnerships that can provide the necessary scale and funding for late-stage development and commercialization.

At the core of Veru's current strategy is enobosarm, an oral selective androgen receptor modulator (SARM). This technology targets the androgen receptor, a well-established mechanism, to drive tissue-selective effects. Unlike non-selective weight loss approaches, enobosarm has demonstrated the ability to increase lean mass and decrease fat mass, improve muscle strength and physical function, while showing neutral prostate effects and no masculinizing effects in women in previous studies. This differentiation is particularly relevant in the burgeoning obesity market, where current GLP-1 receptor agonists, while effective for weight reduction, unfortunately cause significant non-selective weight loss, with 20% to 50% of total weight loss attributed to lean mass loss. This muscle loss is a critical concern, especially in older and sarcopenic obese patients who are already at risk for muscle weakness, frailty, falls, and fractures. The recent update to the Wegovy package insert highlighting increased pelvic and hip fractures in older patients receiving the drug underscores the clinical urgency of this issue.

Veru's Phase 2b QUALITY study directly addresses this unmet need by evaluating enobosarm in combination with semaglutide (Wegovy) in older, at-risk patients. Topline results from the 16-week portion of this study were highly encouraging, demonstrating that the enobosarm-semaglutide combination met its primary endpoint by achieving a statistically significant and clinically meaningful preservation of total lean body mass compared to semaglutide alone, showing a 71% relative reduction in lean mass loss (p=0.002). The 3mg dose of enobosarm was particularly effective, showing a greater than 99% mean relative reduction in lean mass loss (p<0.001). Furthermore, the combination resulted in a dose-dependent greater loss of fat mass, with the 6mg dose showing a 46% greater relative loss compared to placebo plus semaglutide (p=0.014). While the net mean weight loss was similar between groups, the tissue composition of that loss shifted dramatically towards selective fat reduction with enobosarm treatment (3mg dose: 0.9% lean mass loss, 99.1% estimated fat loss). Critically, enobosarm treatment also translated into a significant reduction in the proportion of patients experiencing a clinically significant decline in physical function as measured by the Stair Climb Test (54.4% relative reduction in >=10% decline for all enobosarm, p=0.0049). These results provide strong proof-of-concept for enobosarm's potential to deliver "high-quality" weight loss by preserving muscle and function while augmenting fat reduction.

Beyond the current formulation, Veru is developing a novel, patentable modified release oral formulation for enobosarm, with an expected patent expiry in 2045 if issued. This new formulation has completed animal trials and is anticipated to enter Phase 1 bioavailability trials in the first half of calendar 2025, with the goal of being available for Phase 3 studies and commercialization. This technological development aims to enhance the product profile and extend intellectual property protection, potentially strengthening Veru's competitive moat against rivals.

Sabizabulin, Veru's other late-stage candidate, is an oral microtubule disruptor that targets the colchicine binding site. While initially explored for viral-induced ARDS, the company is now pivoting its development strategy to focus on atherosclerotic cardiovascular disease (ASCVD). This shift is informed by the recent FDA approval of colchicine as the first anti-inflammatory drug for reducing cardiovascular events in ASCVD patients, validating the therapeutic approach of targeting inflammation in this disease. However, colchicine has significant safety concerns, particularly drug-drug interactions with commonly used cardiovascular medications like statins, due to its metabolism via CYP3A4 and transport by P-glycoprotein. Sabizabulin, in contrast, is not a substrate for these pathways, offering a potentially safer profile for combination therapy with statins. Preclinical data show sabizabulin suppresses key inflammatory cytokines, and it has a safety database from previous clinical studies (266 patients). Veru has held a pre-IND meeting with the FDA for this indication, receiving concurrence on the unmet need and the general design of a small Phase 2 study using coronary CT angiography (CCTA) imaging to measure plaque volume changes. The FDA has requested chronic nonclinical toxicology studies, which Veru anticipates completing to support a new IND submission by the first half of calendar 2026, with approximately $2.0M budgeted for these studies through H1 2026. While this program offers a second potential avenue for value creation, it is currently contingent on securing additional funding beyond the enobosarm program.

Financially, Veru's recent performance reflects its transitional phase and R&D focus. For the six months ended March 31, 2025, the company reported a net loss from continuing operations of $9.66 million, compared to $16.37 million in the prior year period. This improvement was significantly influenced by an $8.62 million gain on extinguishment of debt related to the termination of the Residual Royalty Agreement upon the FC2 sale. Operating expenses for continuing operations increased to $20.04 million from $17.20 million, primarily driven by higher R&D costs ($9.65M vs $4.64M) associated with the enobosarm Phase 2b study. The discontinued FC2 operations resulted in a net loss of $7.18 million for the six months ended March 31, 2025, including a $4.2 million loss on the sale of the business, compared to a $1.93 million net loss in the prior year period.

As of March 31, 2025, Veru held $20.02 million in cash, cash equivalents, and restricted cash, down from $24.92 million at September 30, 2024. Net cash used in operating activities was $19.07 million for the six months ended March 31, 2025. While net cash provided by investing activities was $18.39 million, this was largely driven by the $16.3 million net proceeds from the FC2 sale and $1.7 million from the ENTADFI asset sale. Net cash used in financing activities was $4.22 million, primarily for the SWK payment. The company's working capital stood at $15.8 million.

The company explicitly states that its cash and cash equivalents as of the filing date (May 8, 2025) are insufficient to fund operations for the twelve months subsequent to this date, raising substantial doubt about its ability to continue as a going concern. Management estimates current cash is sufficient to fund operations into the fourth quarter of calendar year 2025, strategically timed to get past key upcoming catalysts. Securing additional capital through equity offerings, debt financing, or partnerships is essential. Management is actively pursuing non-dilutive funding, particularly partnerships with large pharmaceutical companies, to finance the anticipated Phase 3 clinical program for enobosarm, which will require significant investment.

Outlook and Critical Factors

Veru's immediate outlook is heavily focused on leveraging the positive Phase 2b enobosarm data to advance the program and secure funding. Key near-term catalysts include the release of unblinded safety data from the Phase 2b QUALITY study and topline efficacy and safety data from the Phase 2b extension maintenance study, both expected in Q2 calendar 2025. These data sets are critical for providing a complete picture of enobosarm's profile in combination with and following discontinuation of GLP-1 RAs. Further clarity on the regulatory path forward is anticipated from an End of Phase 2 meeting with the FDA in Q3 calendar 2025, which will inform the design and cost of the pivotal Phase 3 program. The Phase 1 bioavailability data for the novel oral formulation in H1 calendar 2025 will also be important for the long-term commercial potential and IP protection.

The company's ability to execute its strategic vision is subject to significant risks. The most pressing is the need for substantial additional capital to fund the Phase 3 enobosarm trial and the sabizabulin ASCVD program. Failure to secure this funding on acceptable terms could lead to delays, curtailment of programs, or even cessation of operations, directly impacting the going concern status. The outcome of clinical trials is inherently uncertain, and future results may not replicate the positive Phase 2b findings. Regulatory approval is not guaranteed, and the FDA may require additional studies or disagree with proposed trial designs. Disputes related to the FC2 sale, including a working capital dispute and a potential indemnification claim, could also impact financial resources and management focus. The collectability of remaining payments from ONCO for the ENTADFI assets is uncertain, despite forbearance agreements. Shareholder litigation related to past statements about sabizabulin for COVID-19 poses a risk of substantial costs and potential damages, with a $5 million insurance retention amount. Finally, the Nasdaq delisting notice due to the low stock price adds pressure, potentially requiring a reverse stock split and impacting access to capital markets.

The competitive landscape remains a persistent challenge. While Veru's technology offers a differentiated approach, particularly in addressing muscle loss with enobosarm and potentially offering a safer anti-inflammatory for ASCVD than colchicine, large competitors possess vast financial and operational advantages. Their ability to rapidly advance competing programs, leverage established commercial channels, and absorb R&D costs at scale presents a formidable barrier. Veru's success hinges on demonstrating a sufficiently compelling clinical profile and value proposition to attract a partner willing to invest the significant resources required to compete effectively in these large markets.

Conclusion

Veru Inc. has made a bold strategic shift to focus entirely on its biopharmaceutical pipeline, driven by the potential of enobosarm to address the critical issue of muscle loss in the rapidly growing GLP-1 weight loss market. The positive Phase 2b QUALITY study results provide a strong foundation for this thesis, highlighting enobosarm's ability to preserve lean mass and enhance selective fat loss, potentially redefining the concept of high-quality weight reduction. The pivot of sabizabulin to the ASCVD market offers a secondary opportunity, leveraging its differentiated safety profile compared to existing anti-inflammatory options. However, the company faces a precarious financial situation, with limited cash reserves and a clear need for significant external funding to advance its programs. The upcoming data readouts and regulatory interactions are pivotal moments that will shape the company's ability to attract a strategic partnership, which appears to be the most viable path forward to unlock the potential value of its pipeline and navigate the highly competitive biopharmaceutical landscape. The investment thesis currently rests on the successful execution of these near-term milestones and the ability to secure the necessary funding to transition from a promising late clinical stage company to a commercial entity.