The Female Health Company / Veru Healthcare (NASDAQ:FHCO) (the
Company) today reported its financial results for the fiscal 2017
first quarter ended December 31, 2016. The Company’s fiscal 2017
first-quarter financial results include the operations of Aspen
Park Pharmaceuticals, Inc. since the acquisition date, October 31,
2016.
“We are excited about the progress we are making to advance our
multiple drug candidates and the incredible growth opportunities
they represent,” said Mitchell Steiner, MD, President and Chief
Executive Officer of The Female Health Company / Veru Healthcare.
“Given the size of our company, to have this many high quality
shots on goal is quite unique. In recent weeks, we have
strengthened our leadership team and, with guidance from our board
of directors, refocused our strategy to rapidly move our drug
portfolio forward.”
“With regard to our proprietary Tamsulosin DRS (Delayed Release
Sachet) product, a slow release granule formulation that addresses
the large patient population of men with benign prostatic
hyperplasia (BPH), we plan to initiate the formulation selection,
single dose bioequivalence clinical trial next month. Our
sales and marketing team is working to add new revenues from FC2
available as a prescription product for reimbursement, by
capitalizing on existing Federal and State laws that mandate
coverage of female condoms. As we are facing a sexually transmitted
disease (STD) epidemic in the US and FC2 provides dual protection
against unwanted pregnancies and STDs, we believe FC2 is without
equal as a contraception product for women who want to take control
of their sexual health and protect themselves from STDs.”
“Building on the positive momentum from our recent meeting with
the FDA Advisory Committee held on December 6, 2016, we are
preparing an Investigational New Drug (IND) application for
MSS-722, our proprietary oral drug candidate for the treatment of
male infertility. We believe our product has the potential to
improve sperm count and sperm quality in infertile men thereby
potentially avoiding more intrusive and expensive alternatives for
couples trying to have children. And finally, we have requested a
pre-IND meeting with the FDA for APP-944, our product for the
treatment of hot flashes in men with advanced prostate cancer who
are receiving hormonal therapies.”
Commenting on the Company’s financial results, Dr. Steiner
added, “Last year’s first quarter included extraordinarily large
tender shipments of FC2 to the Brazilian Ministry of Health.
Excluding this unusual Brazilian tender, FC2 unit sales were the
same in the current year first quarter compared with the prior-year
first quarter. Our fiscal 2017 first quarter financial performance
was impacted by non-recurring acquisition-related costs, as well as
fees associated with securing our intellectual property. We
received a $2.8 million payment related to a past due obligation
from Brazil, strengthening our balance sheet and providing
additional financial flexibility, and we are optimistic that we
will receive additional payments related to past due obligations in
2017. Nonetheless, these financial results continue to support the
rationale for the Company’s recent merger as a revenue
diversification and growth strategy. We are now positioned for
financial growth from multiple new near-term sources of revenue
that will add to our inconsistent global public health sector
business. We anticipate immediate and near term revenues from FC2
commercial business and Tamsulosin DRS, respectively.”
Recent Highlights
- Unit sales of FC2 were 6.3 million in the fiscal 2017 first
quarter. This compares with the prior year first quarter unit sales
of 15.4 million, which included an unusually large tender of 9.1
million units to the Brazil Ministry of Health as well as 6.3
million from other customers. Excluding the Brazilian order, unit
sales were the same in the fiscal 2017 first quarter compared with
the same period last year.
- In January, 2017, established a dedicated sales and marketing
team, with the goal of coordinating prelaunch, launch, and sales
and marketing activities to gain market share and drive business
growth for the Company’s currently marketed products, as well as
its drug development candidates.
- On January 4, 2017, announced that, through its exclusive
distributor in Brazil, Semina Indústria e Comércio Ltda (Semina),
the Company received a payment of $2.8 million related to past due
obligations from the Brazilian Ministry of Health. The payment
represents the full amount owed on the two oldest open invoices and
reduces the amount owed on 2015 invoices from $8.0 million to $5.2
million. The amount owed for 2016 invoices is $7.8 million, for a
total outstanding balance of $13.1 million after the payment.
Semina has informed the company that additional payments are
expected in 2017.
- On December 7, 2016, announced its plan for a Phase 2 clinical
trial for MSS-722, the company’s proprietary oral drug candidate
for the treatment of male infertility, following the company’s
presentation and FDA guidance resulting from the Bone, Reproductive
and Urologic Drugs Advisory Committee of FDA on December 6,
2016.
Fiscal First Quarter Results: 2017 vs. 2016
For the first quarter of fiscal 2017, net revenues were $3.2
million. This compares with the near record net revenues for the
first quarter of fiscal 2016 of $8.2 million, which included net
revenues of $4.8 million from Brazil. Gross profit was $1.7
million, or 51% of net revenues, compared with $5.4 million, or 66%
of net revenues, for the first quarter of fiscal 2016. Operating
expenses were $3.5 million, which includes non-recurring
acquisition-related expenses of $826,000 and amortization of
intangible assets of $27,000, as well as increased employee
compensation expense, legal expense and costs associated with
intellectual property rights. The $826,000 of non-recurring
acquisition-related expenses includes warrant expense of $543,000
for warrants to the Company’s outside financial advisor, Torreya,
as part of the acquisition. This compares with operating expenses
of $3.0 million for the prior year first quarter. Net loss was $1.4
million, or $0.04 per share, versus net income of $1.5 million, or
$0.05 per diluted share, for the first quarter of fiscal 2016.
Significant quarter-to-quarter variations in the
Company’s results have historically resulted from the timing and
shipment of large orders rather than from any fundamental changes
in the business or the underlying demand for female condoms. Two of
the largest customers for FC2 operate in markets where the
government health ministries are either still under a multi-year
tender or have had a multi-year tender recently expire, and as a
result significant orders from these customers during the remainder
of fiscal 2017 are unlikely. The Company is also currently seeing
pressure on spending for FC2 by large global agencies and donor
governments in the developed world. As a result, the Company may
continue to experience challenges for unit sales of FC2 in the
global public sector for the remainder of fiscal 2017.
The Company expects to host a conference call in early to
mid-March to update investors on the Company’s product
commercialization and drug development progress. Shareholders and
other interested parties with questions may contact Kevin Gilbert
at 312-366-2633 or KGilbert@veruhealthcare.com.
About The Female Health Company / Veru
HealthcareThe Female Health Company / Veru Healthcare is a
pharmaceutical and medical device company, with a focus on the
development and commercialization of pharmaceuticals that qualify
for the FDA's 505(b)(2) accelerated regulatory approval pathway as
well as the 505(b)(1) pathway. The Company does business both as
"Veru Healthcare" and as "The Female Health Company" and is
organized as follows:
- Veru Healthcare manages the Pharmaceuticals Division, which
develops and commercializes pharmaceutical products for men's and
women's health and oncology.
- Veru Healthcare manages the Consumer Health / Medical Devices
Division, which is focused on commercializing sexual healthcare
products and devices for the consumer market, including the
Company's FC2 Female Condom® in the consumer health products sector
and PREBOOST® medicated individual wipes, which are a male genital
desensitizing drug product that helps in the prevention of
premature ejaculation.
- The Female Health Company manages the Global Public Health
Division, which is focused on the global public health sector FC2
business. This division markets the Company’s Female Condom (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.
More information about the Female Health Company/ Veru
Healthcare and its products can be found at www.femalehealth.com,
www.veruhealthcare.com and www.femalecondom.org. For corporate and
investor-related information about the Company, please visit
www.FHCinvestor.com.
"Safe Harbor" statement under the Private Securities
Litigation Reform Act of 1995:The statements in this
release which are not historical fact are "forward-looking
statements" as that term is defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements in this
release include statements relating to the regulatory pathway to
secure FDA approval of the Company's drug candidates, the impact of
FHC's strategies on operating results, long-term demand for female
condoms, PREBOOST®, Tamsulosin DRS and MSS-722, the expectation of
additional payments from the Brazilian Ministry of Health in 2017,
and anticipated immediate and near-term revenues. 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 release. The Company assumes no obligation to update any
forward-looking statements contained in this release as a result of
new information or future events, developments or circumstances.
Such forward-looking statements are inherently subject to known and
unknown risks and uncertainties. The Company's actual results and
future developments could differ materially from the results or
developments expressed in, or implied by, these forward-looking
statements. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking
statements include, but are not limited to, the following: product
demand and market acceptance; competition in the Company's markets
and the risk of new competitors and new competitive product
introductions; risks relating to the ability of the Company to
obtain sufficient financing on acceptable terms when needed to fund
development and operations; risks related to the development of the
Company's product portfolio, including clinical trials, regulatory
approvals and time and cost to bring to market; many of the
Company's products are at an early stage of development and the
Company may fail to successfully commercialize such products; risks
related to intellectual property, including licensing risks;
government contracting risks, including the appropriations process
and funding priorities, potential bureaucratic delays in awarding
contracts, process errors, politics or other pressures, and the
risk that government tenders and contracts may be subject to
cancellation, delay or restructuring; a governmental tender award
indicates acceptance of the bidder's price rather than an order or
guarantee of the purchase of any minimum number of units, and as a
result government ministries or other public sector customers may
order and purchase fewer units than the full maximum tender amount;
the Company's reliance on its international partners in the
consumer sector and on the level of spending on the female condom
by country governments, global donors and other public health
organizations in the global public sector; the economic and
business environment and the impact of government pressures; risks
involved in doing business on an international level, including
currency risks, regulatory requirements, political risks, export
restrictions and other trade barriers; the Company's production
capacity, efficiency and supply constraints; risks related to the
costs and other effects of litigation; the Company’s ability to
identify, successfully negotiate and complete suitable acquisitions
or other strategic initiatives; the Company’s ability to
successfully integrate acquired businesses, technologies or
products; and other risks detailed in the Company's press releases,
shareholder communications and Securities and Exchange Commission
filings, including the Company's Form 10-K for the year ended
September 30, 2016. These documents are available on the "SEC
Filings" section of our website at
www.veruhealthcare.com/investors.
FINANCIAL SCHEDULES FOLLOW
| The Female Health Company |
| Unaudited Condensed Consolidated Balance
Sheets |
| |
|
|
|
|
|
December 31, |
|
September 30, |
|
|
|
2016 |
|
|
2016 |
| Cash |
$ |
3,485,424 |
|
$ |
2,385,082 |
| Accounts receivable,
net |
|
8,390,949 |
|
|
10,775,200 |
| Income tax
receivable |
|
2,196 |
|
|
2,387 |
| Inventory, net |
|
2,522,281 |
|
|
2,492,644 |
| Prepaid expenses and
other current assets |
|
720,944 |
|
|
634,588 |
| Total current
assets |
|
15,121,794 |
|
|
16,289,901 |
| |
|
|
|
| Other trade
receivables |
|
7,837,500 |
|
|
7,837,500 |
| Other non-current
assets |
|
178,579 |
|
|
189,219 |
| Plant and equipment,
net |
|
798,247 |
|
|
825,087 |
| Deferred income
taxes |
|
8,872,764 |
|
|
13,482,000 |
| Intangible assets,
net |
|
20,873,271 |
|
|
0 |
| Goodwill |
|
6,878,932 |
|
|
0 |
| Total assets |
$ |
60,561,087 |
|
$ |
38,623,707 |
| |
|
|
|
| Accounts payable |
$ |
1,266,122 |
|
$ |
701,035 |
| Accrued expenses and
other current liabilities |
|
3,046,439 |
|
|
2,380,571 |
| Accrued
compensation |
|
61,182 |
|
|
264,871 |
| Total current
liabilities |
|
4,373,743 |
|
|
3,346,477 |
| |
|
|
|
| Other liabilities |
|
1,233,750 |
|
|
1,233,750 |
| Deferred rent |
|
22,424 |
|
|
0 |
| Deferred income
taxes |
|
1,709,260 |
|
|
110,069 |
| Total liabilities |
|
7,339,177 |
|
|
4,690,296 |
| |
|
|
|
| Series 4 preferred
stock |
|
17,981,883 |
|
|
0 |
| Total stockholders'
equity |
|
35,240,027 |
|
|
33,933,411 |
| Total liabilities and
stockholders’ equity |
$ |
60,561,087 |
|
$ |
38,623,707 |
| |
|
|
|
|
|
| The Female Health Company |
| Unaudited Condensed Consolidated Statements of
Operations |
| |
|
| |
Three Months Ended |
| |
December 31, |
| |
2016 |
|
|
|
2015 |
|
| |
|
|
|
|
|
|
| Net revenues |
$ |
3,243,599 |
|
|
|
$ |
8,230,659 |
|
| |
|
|
|
|
|
|
| Cost of sales |
|
1,591,315 |
|
|
|
|
2,828,322 |
|
| |
|
|
|
|
|
|
| Gross profit |
|
1,652,284 |
|
|
|
|
5,402,337 |
|
| |
|
|
|
|
|
|
| Operating expenses |
|
3,526,974 |
|
|
|
|
3,009,782 |
|
| |
|
|
|
|
|
|
| Operating (loss)
income |
|
(1,874,690 |
) |
|
|
|
2,392,555 |
|
| |
|
|
|
|
|
|
| Interest and other
expense, net |
|
(9,621 |
) |
|
|
|
(27,795 |
) |
| Foreign currency
transaction loss |
|
(11,939 |
) |
|
|
|
(44,944 |
) |
| |
|
|
|
|
|
|
| (Loss) income before
income taxes |
|
(1,896,250 |
) |
|
|
|
2,319,816 |
|
| |
|
|
|
|
|
|
| Income tax (benefit)
expense |
|
(530,069 |
) |
|
|
|
829,453 |
|
| Net (loss) income |
$ |
(1,366,181 |
) |
|
|
$ |
1,490,363 |
|
| |
|
|
|
|
|
|
| Net (loss) income per
basic common share outstanding |
$ |
(0.04 |
) |
|
|
$ |
0.05 |
|
| |
|
|
|
|
|
|
| Basic weighted average
common shares outstanding |
|
30,976,140 |
|
|
|
|
28,633,372 |
|
| |
|
|
|
|
|
|
| Net (loss) income per
diluted common share outstanding |
$ |
(0.04 |
) |
|
|
$ |
0.05 |
|
| |
|
|
|
|
|
|
| Diluted weighted
average common shares outstanding |
|
30,976,140 |
|
|
|
|
28,993,943 |
|
| |
|
|
|
|
|
|
| The Female Health Company |
| Unaudited Condensed Consolidated Statements of
Cash Flows |
| |
|
|
|
|
|
Three Months Ended |
| |
|
December 31, |
| |
|
2016 |
|
|
2015 |
|
| Net (loss) income |
$ |
(1,366,181 |
) |
$ |
1,490,363 |
|
| |
|
|
|
|
| Adjustments
to reconcile net (loss) income to net cash provided by (used in)
operating activities: |
| |
|
Depreciation and amortization |
|
89,284 |
|
|
114,406 |
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
26,729 |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
317,311 |
|
|
123,344 |
|
|
|
|
|
|
|
| Warrants
issued |
|
542,930 |
|
|
0 |
|
|
|
|
|
|
|
|
|
| Deferred
income taxes |
|
(591,573 |
) |
|
746,452 |
|
|
|
|
|
|
|
| Loss on
disposal of fixed assets |
|
4,469 |
|
|
111 |
|
| |
|
|
|
|
| Changes
in current assets and liabilities, net of effects of acquisition of
a business |
|
2,142,996 |
|
|
(2,905,907 |
) |
|
|
|
|
|
|
|
|
| Net cash provided by
(used in) operating activities |
|
1,165,965 |
|
|
(431,231 |
) |
| |
|
|
|
|
|
|
| Net cash used in
investing activities |
|
(65,623 |
) |
|
(2,942 |
) |
| |
|
|
|
|
|
|
| Net increase (decrease)
in cash |
|
1,100,342 |
|
|
(434,173 |
) |
| |
|
|
|
|
|
|
| Cash at beginning of
period |
|
2,385,082 |
|
|
4,105,814 |
|
| |
|
|
|
|
|
|
| Cash at end of
period |
$ |
3,485,424 |
|
$ |
3,671,641 |
|
| |
|
|
|
|
|
|
Contact:
Kevin Gilbert: 312-366-2633
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