Veru Inc.

VERU Details

Veru Inc. (NASDAQ: VERU) is a biopharmaceutical company focused on developing novel treatments for prostate and breast cancer patients. Sabizabulin (VERU-111), VERU-100, and Zuclomiphene Citrate are among VERU's prostate drug prospects, while Enobosarm and Sabizabulin are breast cancer drug candidates. Recently, VERU is actively commercializing FC2, an FDA-approved prescription for dual protection against both gestations and sexually transmitted infections, in the commercial and public health sectors in the United States, after the sale of its PREBOOST business on December 8, 2020.

Positive Phase 1b/2 Sabizabulin Clinical Trials: On June 25, 2021, VERU enrolled the first patient in its Phase 3 clinical trial of Sabizabulin, a novel chemical entity for treating Metastatic Castration-Resistant Prostate Cancer (MCRPC) in men. The company will test the findings of Phase 3 at 45 clinical facilities across the United States.

Submission of New Drug Application (NDA) for TADFIN: On February 23, 2021, VERU stated that it submitted an NDA to the US Food and Drug Administration (FDA) for TADFIN capsules to treat benign prostatic hyperplasia (BPH). TADFIN is scheduled to receive FDA approval by the end of 2021.

9MFY21 Results: The company reported a sharp uptick of 47.89% in net revenues to USD 45.61 million during 9MFY21 (ended June 30, 2021) compared to USD 30.84 million during 9MFY20, primarily due to growth in FC2 revenues from the US prescription channel. Net income for 9MFY21 was USD 11.69 million vs. a net loss of USD 7.14 million during 9MFY20. As of June 30, 2021, its cash and cash equivalents were USD 123.16 million, and total debt (including residual royalty agreement liability) amounted to USD 11.66 million.

Key Risks: VERU only sells one commercial product (FC2) at present. If novel medications and therapies fail to reach the commercialization stage, which usually takes a long time, the company's revenues might take a major hit in the long run. Furthermore, the company's top two clients combined accounted for 71% of the net revenues generated during 9MFY21. Therefore, excessive reliance on a few clients might be detrimental to the company's financial stability in the future.

Outlook: Phase 3 ARTEST Clinical Trial for AR+ ER+ Metastatic Breast Cancer (MBC) in the Third Line, Phase 2b Combination Clinical Trial for AR+ ER+ MBC in the Second Line, and Phase 2b Clinical Trial for Metastatic Triple-Negative Breast Cancer in the Second Line, are expected to commence in H2CY21. VERU also plans to promote and distribute TADFIN through telemedicine and telepharmacy sales channels if it is authorized (Prescription Drug User Fee Act (PDUFA) scheduled for December 2021).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VERU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VERU's share price has surged 243.12% in the past 12 months and is currently leaning towards the mid-band of the 52-week range of USD 2.30 to USD 24.57. On the technical front, the stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 73.81. It is in a downward trend but gained 33% during the last eight trading sessions. It faces a stiff resistance at USD 9.50. Indicators suggest booking profits at current levels as stock may soon retreat to USD 8.10. We have valued the stock using the EV/Sales multiple-based relative valuation methodology and arrived at a target price of USD 8.37. Considering the massive rise in the stock price, we believe the current trading levels adequately reflect the decent business fundamentals. Hence, we recommend a "Sell" rating on the stock at the current price of USD 9.25, up 15.91% as of August 27, 2021, 3:04 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

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