Thinly traded micro-cap Veru Inc VERU has added about 62% year to date — a commendable performance compared to the broader biotech sector. The iShares NASDAQ Biotechnology Index IBB is up about 10%. Has the stock run out of breath following the recent rally, or is there further upside to capitalize on?
After peaking at just under $10 and forming a double-top in late 2013, Veru stock was in a free fall for the next two years, selling off steeply. Since 2016, the stock has begun consolidating around lower levels, moving mostly in a tight range of $1-$2, with occasional short breakouts in either direction.
Source: Y Charts
A Peek Into Veru's History
Veru's origins can be traced back to the Wisconsin Pharmacal Company, which was incorporated in 1971 and marketed specialty chemical and branded consumer products.
A series of actions undertaken in 1996 led to the acquisition of worldwide rights to the female condom and the divestiture of Wisconsin Pharmacal's other businesses, with the company changing its name to The Female Health Company.
Following the completion of the development of the second-generation female condom, or FC2, in March 2007 and its approval as a Class III medical device, the company began selling it in the U.S. in August of 2009 and later internationally.
The real turnaround in fortunes came in 2016, when the company completed the purchase of Aspen Park Pharma for an estimated price of $19.81 million.
The acquisition transformed Veru from a single-product company selling FC2 into a biopharma company with several pipeline assets focused on urology and oncology. The company changed its name to Veru Inc. in July of 2017.
Commercially Marketed Products
Veru's commercial products include:
- FC2 Female Condom to prevent unintended pregnancy and sexually transmitted infections
- PREBOOST (4% benzocaine wipes) for premature ejaculation, launched in January of 2017.
The company' four largest customers are UNFPA, USAID, Sekunjalo and Semina.
Unlike most clinical-stage biotechs, which don't report revenues and continue to bleed until one or more of their pipeline assets click, Verus has managed to fund most of its development costs through its commercial products.
"VERU has built a pipeline of what we view as compelling assets, which are funded, in part, by the company's female condom business and now, Preboost, both of which we think have the potential to provide non-dilutive funding for the company to support continued investment in its pipeline," StreetInsider quoted Cantor Fitzgerald analyst Brandon Folkes as saying.
- VERU-944, chemically zuclomiphene citrate, a Phase 2 asset is being for hot flashes in men on prostate cancer hormonal therapies (a $600-million market opportunity).
- VERU-111, chemically bisindole in an oral formulation. The Phase 1/2b asset is being evaluated for metastatic prostate, breast, ovarian and pancreatic cancer. Metastatic prostate cancer is a $4.5-billion annual global market opportunity, as the investigational asset is targeted at men with metastatic castration-resistant prostate cancer who have failed androgen-blocking agents such as Johnson & Johnson JNJ's Janssen unit's Zytiga and Xtandi, which is co-marketed by Pfizer Inc. PFE and ASTELLAS PHARMA/ADR ALPMY.
- VERU-100 in advanced prostate cancer. Veru reached an agreement with the FDA April 22 regarding an expedited regulatory pathway following a pre-IND meeting.
- Tamsulosin delayed release sachet: a bioequivalence study in benign prostatic hyperplasia, or BPH, is complete.
- Tamsulosin XR capsules: a bioequivalence study in BPH completed
- Tadalafil/finasteride combo tablet (5mg/5mg): a bioequivalence study in BPH and erectile dysfunction is complete.
- Topline results from the Phase 2 study of VERU-944: Summer 2019.
- Commencement of Phase 2 study of VERU-111: Fall 2019.
- Decision on patent application filed for Tadfin in BPH. If issued, the patent is to have an expiry of 2040.
- NDA filing for Tadfin in BPH: late 2019/early 2020, with an NDA filing likely in 2020.
- IND submission for VERU-100: no later than the first quarter of 2020.
Veru reported net revenue of $15.9 million in the fiscal year ended Sept. 30, 2018, up 16% from the $13.7 million reported for 2017.
The loss per share widened year-over-year from 25 cents to 44 cents. Pipeline-rich Veru is spending heavily on R&D, with expenses ballooning from $3.3 million in 2017 to $10.9 million in 2018.
As of Sept. 30, 2018, the company had cash on hand of $3.8 million compared to $3.3 million in the previous year.
In October, the company raised $9.2 million in net proceeds by offering 7.14 million shares of its common stock at $1.40 each. For the second quarter ended in March, the company reported revenue of $7 million, more than double the $2.6 million reported for the year-ago quarter, with FC2 U.S. prescription revenues climbing 75.3% to $2.6 million and FC2 public sector channel revenues improving 88% to $4.2 million.
The net loss narrowed from 7 cents to 6 cents.
Analysts, on average, expect the loss for the fiscal third quarter that ended in June to narrow notably from 15 cents to 4 cents on roughly 47% revenue growth to $8.07 million.
Approximately 68% of the 62.79 million outstanding shares are held as float, and the short interest ratio of 0.2 is not an alarming number.
Notwithstanding the short-term uptrend seen since late May 2019, the 14-day RSI suggests the stock is still in neutral territory. On the downside, the stock has support around its 50-day SMA of $2.077 and 200-day SMA of $1.586.
Source: Y Charts
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