Dear Shareholders,

It has been a very productive year for Veru building the foundation for growth. Veru is now well positioned to become a leading urology and oncology biopharmaceutical company. We are focused on low cost, near- term, and high reward pharmaceuticals using an expedited regulatory pathway known as 505(b)(2). Our goal is to have several near-term and mid-term products progressing at the same time to have “multiple shots” to ensure that we file and commercialize several drugs in urology and oncology putting our company on a trajectory of solid growth.

We are delivering on this goal. We have advanced Tamsulosin DRS, 0.4mg (Tamsulosin HCl extended release for oral suspension) —a new slow release granule formulation for the most popular medicine for symptoms of an enlarged prostate causing difficulty in urination (also called benign prostatic hyperplasia or BPH) —and currently marketed under the FLOMAX® brand name. As is stated in the FDA package insert, FLOMAX® capsules should not be crushed, chewed or opened, because it may lead to serious side effects of low blood pressure and dizziness. A slow release granule formulation will allow us to target up to the 60% of men in long-term care or nursing homes and the 15% of men in the general population over 60 years of age that have difficulty or cannot swallow tablets or capsules. On August 2016, FDA agreed that a single small bioequivalence study would be all that is required clinically for the new drug application (NDA).

When we conducted the bioequivalence studies, we discovered that this new granule formulation, unlike FLOMAX, does not have to be taken with meals. Because there appears to be no food requirement with our slow release granules compared to the existing FLOMAX formulation, we plan to put these proprietary granules into a capsule as Tamsulosin XR capsules. Tamsulosin XR capsules will allow us to target the broader urology and primary care markets including those men who can swallow tablets or capsules. The final bioequivalence study will be conducted in, and the NDA will be filed in, 2018.

We also purchased a proprietary Solifenacin DRG (delayed release granule) formulation which uses the same delivery technology platform used to create our Tamsulosin DRS slow release granule formulation. Solifenacin is the active ingredient in VESIcare®, a drug for treatment of overactive bladder (urgency, urge incontinence and frequency) in both men and women. Like FLOMAX, the FDA package insert states that solifenacin tablets must be swallowed whole. There are no granule formulations available for men and for women who have the common condition of overactive bladder and who have difficulty or cannot swallow tablets. In November 2017, FDA agreed that a single bioequivalence study would be acceptable for a 505(b)(2) NDA filing. We plan to conduct the bioequivalence study in 2018 and to file the NDA in early 2019. The overactive bladder market is a multi-billion dollar opportunity. The initial target population would be men and women in long-term care facilities that have difficulty or cannot swallow tablets and will utilize the same sales channel that would be in place for Tamsulosin DRS.

To further ensure we have multiple urology products progressing at the same time, we purchased another new proprietary formulation—Tadalafil/ Finasteride combination capsules. This proprietary formulation contains the active ingredients of CIALIS® (tadalafil—approved for the treatment of symptoms BPH and erectile dysfunction) and PROSCAR® (finasteride—approved for shrinking enlarged prostates). The Tadalafil/Finasteride combination formulation will allow us to offer a family of BPH drugs that have different mechanisms to treat the symptoms and signs of BPH. Tamsulosin treats immediate symptoms of BPH in men with smaller prostates, whereas Tadalafil/Finasteride combination capsules treat symptoms and shrink the size of the prostate in men who have enlarged prostates. In November 2017, FDA agreed that a single bioequivalence study would be acceptable for a 505(b)(2) NDA filing for the Tadalafil/Finasteride combination tablet as well. We plan to conduct the bioequivalence study in 2018 and to file the NDA in early 2019.

We are well positioned to take advantage of the multi-billion dollar BPH and overactive bladder market opportunities. These four products, Tamsulosin DRS granules, Tamsulosin XR capsules, Solifenacin DRG granules, and Tadalafil/Finasteride combination capsules, should allow us to file, launch and partner, when and where appropriate, multiple urology drugs over the next two and a half years.

The next wave of urology or oncology pharmaceuticals will come from VERU-944 (cis-clomiphene citrate) for the treatment of hot flashes in men who are on hormone therapy to treat advanced prostate cancer. In May 2017, FDA agreed that we may advance into a Phase 2 dose finding clinical trial. We should file the IND and initiate the Phase 2 clinical trial in early 2018. Finally, an FDA Advisory Committee met to review VERU-722 (fixed clomiphene citrate ratio) for the treatment of male infertility in December 2016. Based on their feedback, VERU-722 is ready to advance into Phase   2 clinical studies. We will continue to be opportunistic in both internally developing and/or finding new pharmaceutical products to license in urology and oncology.

To further increase shareholder value, we are also developing a novel, new chemical entity for the treatment of metastatic prostate, breast, ovarian, endometrial, and other cancers called VERU-111. VERU-111 is an oral anti-tubulin therapy that targets alpha and beta tubulin of microtubules. We are completing the required preclinical studies and should be ready for initial trials in patients who have advanced cancer by the second half of 2018. We are working with The Johns Hopkins Cancer Center. We will initially target men with metastatic prostate cancer and women who have metastatic breast, ovarian, or endometrial cancers in a Phase 1/2 open label clinical trial. In the Phase 2 portion of the clinical study, we will target men with metastatic prostate cancer who have become resistant to, or who have failed, ZYTIGA® (abiraterone) or XTANDI® (enzalumatide). These are blockbuster hormone prostate cancer drugs that are generating several billion dollars in annual revenue today. In addition, VERU-111 can be developed as an oral drug (pill form) for other tumor types that are currently being treated by intravenously given anti-tubulin chemotherapies (with a pill form being highly preferable to intravenous administration), which is a large market opportunity as well at over $5 billion of annual revenue today. The initial investment for this program over the next 2 years would be relatively modest and would increase when VERU-111 enters into Phase 2 clinical trials.

We have accomplished quite a lot this past year. We were able to do this with our existing resources and without undertaking a separate debt or equity financing. We paid for these activities this past year in part by the revenue produced from our commercial products: the FC2 Female Condom® Business from The Female Health Company Division and PREBOOST®.

The Female Health Company Division has revenue from both the global public health sector and the US market. In the global public health sector, FC2 is the world’s leading female condom. With growing international competition, now, more than ever, we need to protect our brand, beat our competition, and aggressively grow our product revenues in the global public sector. The global public sector is the channel where FC2 is purchased in bulk quantities by governments and non-governmental donor agencies for public health distribution. This past year we felt the impact of two of our largest customers, Brazil and South Africa, who did not place orders due to their normal procurement cycles. We believe fiscal year 2018 should be better as Brazil is awarding a 50 million unit tender for this year and South Africa is expected to award this year a 40 million unit tender per year for three years totaling 120 million units. We are confident that we will get orders from these tenders in 2018.

In the US market, FC2 is uniquely positioned as the only FDA approved female condom to prevent both unwanted pregnancies and the sexual transmission of STIs including HIV/AIDs and the Zika virus. Our challenge was to create the distribution and marketing in the US to serve this market and we are seeing traction in these new areas of market access. FC2 is reimbursable with a prescription by both public and private payers under the Affordable Care Act (ACA) and under the laws of numerous States prior to the ACA. We now have the pharmacy distribution, market access and reimbursement infrastructure in place so that FC2 is available and reimbursable in over 98% of retail pharmacies across the country. We have a small sales force that markets to OB/GYN and primary care physicians. We have eliminated the “middle men” FC2 distributors and we now sell directly to Departments of Health and community organizations with better margins. We have signed a master service agreement to sell directly to 340B covered entities (approximately 56,000 entities) such as HIV and STD clinics. We have partnered with the “HeyDoctor” telemedicine application so that an FC2 prescription can be obtained by the patient via an Apple or Android smartphone where the prescription is sent to their local pharmacy or shipped to their home by a specialty pharmacy. We have an Uninsured or Underinsured Assistance Program where an individual can purchase FC2 at a discount from our website. Finally, we have an active Colleges and Universities Program that continues to grow. We now have proof that revenue can be generated and is growing in the US market.

Our other revenue opportunity is PREBOOST (4% benzocaine wipes) for the prevention of premature ejaculation. We received positive final results from our Phase 4 PREBOOST clinical trial which was press released by the American Urological Association during their scientific meeting in May 2017. We launched PREBOOST via digital and social media marketing. We also entered into a co-promotion and distribution agreement with Timm Medical Technologies, Inc., a specialty urology sales organization.

Fiscal year 2017 has been a transformational year for Veru. We have established a foundation to make Veru the leading urology and oncology biopharmaceutical company. We have several near-term and mid-term products progressing at the same time to have “multiple shots” to have drugs filed and launched in urology and oncology. We aspire to file at least one NDA each year for the next 5 years. This will provide the engine for growth as we continue to develop and commercialize existing 505(b)(2) products in our portfolio or seek new, outside 505(b)(2) products. We are excited about VERU-111 as a novel targeted oral therapy for multiple types of cancer and look forward to partnering this drug at the right time. We will continue to drive value through lower cost and expedited clinical development for large market opportunities. We are committed to becoming the leading biopharmaceutical company focused on urology and oncology while enhancing stakeholder value.

Sincerely,
Mitch Steiner
Mitchell Steiner, MD FACS
President and Chief Executive Officer