With approval of Veru's (VERU -3.05%) drug sabizabulin for severe COVID-19 in serious question, the company's shareholders have every right to be a bit flighty at the moment. The shares are down 58% in the past six months and its fourth-quarter update on Dec. 5 only brought more grim tidings of crashing revenue and sharply rising costs.
So, will these issues spell the end of the line for Veru stock, or is there a chance that it'll rebound later on?
The case against Veru
The most significant near-term risk to Veru's stock is that regulators at the Food and Drug Administration (FDA) might decide to rebuff its request to commercialize sabizabulin with an Emergency Use Authorization (EUA). In November, a non-binding advisory committee at the FDA voted against the company, finding with an 8-5 vote that the medicine's purported efficacy characteristics were not compelling enough for an expedited approval in light of the known risks of treatment and the ongoing public health need for such therapies.
That promptly caused the stock to go down in flames as the company expected to treat as many as 48,556 patients per month in the U.S. if the drug were approved for sale. But the advisory committee doesn't have the final say over the approval as there's a separate committee that issues binding rulings, so the story isn't over yet.
The clincher will be whether the binding committee at the FDA will vote in accordance with the advisory committee, dashing hopes of commercializing the medicine, or whether it'll ignore their findings and declare that sabizabulin is worth commercializing after all. There's no way to tell what the committee will do in advance, but the binding committee has historically only refuted the other committee's votes around 22% of the time, so the odds aren't great for Veru.
Then there are the other problems aside from sabizabulin, including falling sales of its products on the market already, including its FC2 female condom. In 2021, its total revenue was $61.2 million, and in its fiscal 2022 it reported $39.4 million. So much for the hope that Entadfi, its drug for benign prostatic hyperplasia (BPH), would drive growth after its launch in late 2021.
Wall Street analysts predicted, on average, earlier this year that the biotech would bring in $111.2 million in its fiscal 2024 and a whopping $277 million in 2025. Now, between weaker-than-anticipated sales and the probable curtailing of sabizabulin's prospects, both of those estimates could be revised down sharply, much like investors' expectations. And that would mean the near-term outlook for the stock is decidedly pessimistic.
Things aren't actually that bleak in the long term
Reading the above, it'd be easy to get the idea that Veru doesn't have much in the way of prospects, but that isn't the case. It has seven other late-stage pipeline programs for indications in breast and prostate cancers. And it has the money to keep developing those projects for a while even if it's unprofitable in the meantime. It only burned $42.1 million in cash in fiscal 2022, and it still has $80.1 million left. Furthermore, it has almost nothing in the way of debt.
So that suggests even a rejection from the FDA's binding committee wouldn't be a deathblow for the company's prospects of making more money in the future than it does today. But it'd still be a blow to shareholders, and there's still the risk of its other clinical programs missing the mark. Therefore, there is indeed still some hope for Veru stock, though it might take a few more years before those hopes come to fruition in the form of recovering its recent losses.
If you're comfortable with speculating on biotech-stock catalysts -- and unless you like losing money, you probably shouldn't be comfortable -- investing right now would give you exposure to an outsized upside potential on the off chance that sabizabulin ends up commercialized for COVID-19 despite the recent bump in the road.
On the other hand, a still-risky but more reasonable approach might be to wait for the FDA to issue a rejection, then to buy the dip in hopes of the company's other pipeline programs working out in the years that follow. For most investors, this opportunity is also probably a bit too risky to bother approaching.
