LENZ Therapeutics Inc (LENZ) 2024 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the LENZ Therapeutics second-quarter 2024 conference call.

(Operator Instructions)

As a reminder, this call is being recorded.

At this time, I would like to turn the call over to Dan Chevallard, Chief Financial Officer. Please go ahead.

Thank you. Good afternoon and thank you to everyone for joining us today to discuss LENZ's second quarter 2024 financial results and recent highlights. My name is Dan Chevallard, Chief Financial Officer of LENZ Therapeutics.

We are joined today by Eef Schimmelpennink, our President and Chief Executive Officer; and Shawn Olsson, our Chief Commercial Officer. In addition, Dr. Marc Odrich, our Chief Medical Officer, will join us for the question-and-answer session.

Before we begin, I would like to remind you that this call will contain forward-looking statements regarding lens's future expectations, plans, prospects, corporate strategy, regulatory and commercial plans and expectations, cash runway projections, and performance. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors and risks. Including those discussed in our filings with the Securities and Exchange Commission and which can also be found on our website. In addition, any forward-looking statements represent only our views as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. The company encourages you to consult the risk factors contained in our SEC filings for additional detail, including in our 2nd quarter 2024410Q, which was filed today.

With that, I will now turn the call over to Evert.

Thank you, Dan, and good afternoon, everyone. The first half of 2024 and recent period has been transformational for LENZ. In short succession, we made our debut on the public markets with a strong investor base and balance sheet.

Delivered the results of our Phase III clery trials which we believe support LNG 100 as the potential best in class treatment for presbyopia concluded a $30 million pipe financing and importantly submitted our NDA to the FDA.

I am incredibly proud of the continued excellent execution across the organization and highly confident that we are well on our way to deliver the first and only psycho-based eye drop for the improvement in their vision in people with presbyopia.

Looking ahead and in line with our previous guidance, we continue to work towards a potential approval by the FDA in mid 2025, and if approved, US launched as early as the second half of 2025.

Before I review our key achievements in more detail and as a quick reminder, presbyopia is the inevitable loss of near vision that impacts the daily lives of nearly all people over the age of 45, as the crystalline lens in her eyes hardens with age, the eye is less able to accommodate and focus the incoming light for near vision on the retina, resulting in blurry near vision.

Although the progression of presbyopia is gradual, presbyopes often experience an abrupt change in their daily life as the symptoms become more pronounced, starting in their mid-40s when reading glasses or other corrective aids are suddenly necessary to read texts or conduct close-up work.

To address the daily challenges faced by Presby Oops, we are developing a once daily eyedrop that in our clarity trials have shown to be capable of improving their vision throughout the full workday without the need for reading glasses.

More specifically, in April we reported positive Phase III data which we complemented with capstone data in June in which LNG 100, our cycle and base part candidates, continue to show strong performance and best in class potential.

Highlighting some of the key results of the trial, and for a moment focusing on the results of Clarity 2, as this is the direct vehicle control trial, we saw a rapid onset effect with 71% of participants achieving 3 lines or more of near vision improvement at 30 minutes on the very first day of use of the product.

At three hours, a primary endpoint, we also observed a three line or more spun the rate of 71%. And we maintained these high levels for the full work day with 40% of participants still achieving three lines or more of near vision improvement at 10 hours, the last time point measured in our efficacy trials.

And these 3 line gas turned out to be only the beginning. 84% of participants achieved at least a 4 line gain during the study, and a staggering 52% at least 5 lines. We also saw a very impressive near universal response to LNG 100, with 95% of participants achieving at least two lines of near vision improvements.

This is an important measure because it is seen as clinically meaningful. Notably, 69% of the participants still reported this improvement at the end of the day, 10 hours after dosing. Interestingly, we also observed a statistically significant, at least one line of distance vision improvements across the population.

In terms of safety, LNG 100 was seen to be well tolerated with no treatment-related serious adverse events observed in the over 30,000 treatment days across all three clarity trials. Of all reported adverse events, 95% were less 5 was mild, believed to be transient, and consistent with those observed in previous trials.

We also saw that in the rare cases, more specifically 7.6% placebo corrected, that participant noticed a mostly mild and transient headache following insulation of the drop. This appears to be tachaphylactic and for most no longer appearing with prolonged use of LNG 100.

These strong clinical results and the promise they bring for 128 millions in the US alone allowed us to further strengthen our balance sheet with a $30 million investment from Rich back Capital in July. We appreciate the significant support and confidence shown by the richback team and are pleased to add this additional capital as we aim to make LNG 100 the best in class, if not only in class, therapeutic option for the treatment of presbyopia.

Lastly, I'm very excited to highlight that we have submitted our NDA for LNG 100 to the FDA, marking a key milestone for the company. RNDA is a culmination of a development program that along the way incorporated the value of feedback and guidance from the FDA.

We believe that we have compiled a dossier with strong clinical manufacturing and quality data, and we look forward to working with the agency as they review our submission. The first step in this and following a positive initial review would be the formal acceptance of our MDA within 60 days of submission.

Once the FDA accepts our NDA, the agency must complete their review within 10 months. The date at the end of this period is referred to as the PDUFA date, and once the FDA has provided us with it, we will communicate this with you.

As mentioned earlier and in line with previous guidance, we believe that this PDUFA date can be in the middle of next year and if our submission leads to approval, could lead to the launch of LNG 100 in the US in the second half of 2025.

To highlight some of the key areas of focus as we begin to prepare for a potential launch, I will now hand the call over to Shawn Olsson, Chief Commercial Officer. Shawn?

Thank you, Evert, and thank you all for joining us today. The commercial potential for an effective preSDobia treatment represents one of the largest eye care market opportunities. As they've stated, Presby opium tax is an estimated 128 million people in the US, an incident population that is nearly 4 times greater than those impacted by dry eye.

It is also more than the combined population suffering from dry eye, childhood myopia, macular degeneration, diabetic retopathy, and glaucoma in the US. The first eye drop treatment for Prestopia was approved in 2021 and confirmed that strong consumer desire for an eye drop treatment.

As evidenced by initial paid new scripts of 3,000 to 5,000 per week. Long term usage beyond the trial period of this product did not materialize as pilocarbene, even at the high concentration of 1.25% couldn't deliver the consumer required performance.

We believe this leaves the category wide open for a non-ylocarine prestopia eye drop solution that can deliver what consumers desire, unlocking this market requires an ideal presbyopia eye drops, and we are excited for the prospect of our cyclidine-based LNZ 100.

We believe the commercial potential of LND 100 was validated in our Phase III clarity study with 90% of participants noticing an improvement in your vision and 75 participants indicating they would continue to use LND 100 after the study, of which 81% plan to use the product 4 to 7 days per week.

Together with our broad inclusion criteria, we believe this positions LNZ 100 well for the estimated $3 billion dollar market potential opportunity. And in what could potentially be a category of one. In parallel to our recent effort towards our NDA submission, our commercial launch preparedness is well underway. In February 2024, Lns launched its unbranded I am campaign to educate and excite eyecare professionals about future Presbyopia solutions.

Over 50 key opinion leaders are involved in the campaign, of which many are featured at I am selective.com, that is eye amselective.com, where eyecare professionals can learn about the importance of ideal pupil size, iris muscle selectivity.

And expected early consumer adopters of PresBO eye drops. Continuing on that momentum and to support the projected launch following potential FDA approval, lens has fully staffed its commercial leadership team across marketing, sales, and commercial operations with expertise in eye care, direct consumer, influencer, and consumer products goods.

From an infrastructure standpoint, lens is actively building out its US commercial capabilities, highlighted by completion of our third-party logistics contracting, all in preparation for a potential launch of LND 100 as early as the second half of 2025.

As we think about the commercialization of LND 100, our strategy is clear and based on three primary pillars, first, we want doctors to recommend us. This requires calling on approximately 15,000 eyecare professionals who represent over 85% of the beauty scripts with our potential best in class product to educate and equip them to recommend LNZ 100 and to integrate our solution into their patient offering.

Second, we want consumers to request us by name. This requires developing a product brand and consumer campaign that will elicit a strong emotional connection. And promotional sensitivity to direct to consumer advertising.

And third, we want to ensure ease of product access for consumers with a seamless journey to use. This requires enabling the consumer to experience the product and move quickly from trial to usage. To support this, our team is building out consumer sampling capabilities and commercial access with multiple channels, including the traditional retail pharmacy as well as home delivery.

We look forward to providing further updates and progress on our pre-commercial preparations in the quarters to come as we approach potential approval and launch. With that, I'd now like to hand the call over to Dan Chevallard, our CFO, to step through our financial results.

Thank you, Shawn. As has been mentioned, the team has continued to execute across the organization in the second quarter in recent period. On the financial front, we were very pleased to have completed the $30 million private investment in public equity, or PIP with Ridgeback in mid-July.

I would like to reiterate its comments to say that we're pleased to welcome an investor of Ridgeback's caliber, adding to what is an already strong and supportive investor base in lens. Inclusive of the $30 million in proceeds on a pro forma basis, we ended the second quarter with approximately $226.2 million in cash equivalents, and marketable securities, which is anticipated to fund the company's cash runway to post launch positive operating cash flow.

Turning now to our second quarter operating results, our operating expenses and resulting cash burden for the second quarter were substantially in line with our plan. Total operating expenses for Q2 2024 were approximately $14.4 million compared to $15 million for the same period in 2023.

Sequentially, our total operating expenses decreased quarter over quarter by 11% from $16.1 million in the first quarter of 2024 as we moved away from costs associated with the recent merger transaction and reduced overall clinical development spend.

On our first quarter call, we highlighted that we would anticipate a sharp decline. In our research and development expenses in subsequent quarters due to the recent conclusion of our Phase III clarity study, which we certainly have realized in the second quarter.

Total R&D expenses decreased to $6.9 million in Q2 2024 compared to $12.6 million for the same period in 2023. Sequentially, R&D expenses decreased quarter over quarter by 34% from $10.5 million in the first quarter of this year. We anticipate R&D costs to continue to decline over the balance of the year while shifting our development focus towards pre-approval manufacturing activities.

Similarly, and further to our go forward reallocation of capital towards the commercial organization, total SG&A expenses increased to $7.4 million in Q2 2024 compared to $2.3 million for the same period in 2023. It sequentially increased quarter over quarter by 32% from $5.6 million in the first quarter of this year.

This change was directly attributable to key personnel editions within our commercial leadership team and increases in our pre-commercial planning initiatives.

Finally, our net loss per share, both basic and diluted, was $0.40 per share in the second quarter of 2024 on a net loss of $10.3 million compared to a net loss per share of $7.53 per share in the second quarter of 2023 on a net loss of $14.7 million.

As was noted on our first quarter call, we again wanted to remind you that these loss per share figures calculated on a GAAP basis consider only weighted average common shares outstanding, which were considerably different in the comparative periods. For example, as a public company with a single class of stock outstanding, Q2 2024, net loss per share was calculated on approximately 25.6 million weighted average common shares outstanding.

Compare this to Q2 2023 when as a then private company with multiple classes of preferred and common stock outstanding, net loss per share was calculated on approximately 2 million weighted average common shares outstanding.

Putting the nuances of of loss per share aside and the lack of comparability to 2023, we ended Q2 of this year with approximately 25.8 million shares of common stock outstanding. To roll this forward through our July 2024 pipe, we had approximately 27.4 million shares outstanding following that financing.

With that, I'll conclude the financial update for what has been a very productive quarter in recent period, and I'll now turn the call back over to Evert for final remarks.

Thanks, Dan. In summary, we are very pleased with the progress that the team has made on all fronts. The recent period has been and promise, promises to continue to be a very exciting time at lengths.

With these important achievements and milestones, we now turn our full focus towards preparing for the potential approval and commercialization of LNG 100, and we believe we are well positioned to deliver a once daily, safe, and rapidly acting treatment to the 128 million individuals living with presbyopia in the United States.

With that, I'd like to open up the call for questions.

Pavan Patel, Bank of America.

This is Pavan Patel on for Jason Gerberry. Congrats on your recent NDA submission and thanks for taking our questions. The first question is, can you give us an idea of when we should expect SG&A spend to pick up as you begin, to incur more meaningful pre-launch investment on your P&L.

And then our second question is maybe if you can remind us how you're thinking about the market opportunity and identifying the patients who would be good candidates for a pharmacotherapy treatment of loss of near near vision versus reading glasses.

Great questions. I'll hand the first one over to Dan.

I kind of -- as we said for this quarter, we did see a 32% quarter on quarter increase in SG&A, and I think that you should expect us to have a modest ramp over the balance of this year. I think where you'll really start to see is as we move into, 2025 and then subsequently preparing for a commercial, commercialization, sales force, hiring, et cetera as we approach the mid-year of next year.

And then as for which patients we would prioritize, Shawn?

Yeah. So looking at how we identify the patients that would be good candidates for this job. So when we think about our products, we had a very broad inclusion criteria. So you know we want to develop a product that did work for everybody, and that's why we're focused on an all eyes all day solution.

Now that being said, there are people that are more prone to be early adopters of an eye drop solution. We commissioned a very large study to do market research in this space, and we really found three groups of individuals that stood out as the earliest adopters, and those three groups fall into people that are in contacts now entering pricetopia and want to stay in contacts.

They've been looking for -- they've been in a glasses-free lifestyle and want to continue that. And a big reason for reason for drop out of of contacts is because of Presopia.

The second one are people that have had refractive surgery in the past. So again, people who paid for LASIK, invested in glasses-free lifestyle, and want to continue it. And thirdly, we found a high correlation to people that have been to a medi spa in the past 12 months. Each one of those groups are north of 10 million individuals.

Yigal Nochomovitz, Citi.

Hi Evert and team. I had a few -- I'm just curious with respect to the target prescriber audience, the optometrists, can you just give some perspective as to what percent of the optometrists pool in the United States are currently able to write prescriptions for Lens 100. And then also, what percent of the optometrists have the basic ability to perform the retinal eye exam, to to prescribe one's 100.

Absolutely. So this Shawn Olsson again. So when we think of LNG 100, upon potential approval, Those that are able to prescribe it, when we think of the optometrists, nearly all the optometrists across the across the US will have the ability to prescribe LNZ 100.

So it falls into the category of meiotics, and with the exception of a couple of states, they will have the ability to prescribe on day one. And so that really covers the vast majority of all optometrists in terms of doing retinal eye exams.

Retinal eye exams are going to be a very common process done for again, nearly every optometrist across the US. They will be able to do those retinal eye exams. So in terms of access, we see ourselves in a very good position for access upon approval.

And then one other question we've been getting from investors is if you could talk a bit about how you ran your studies and the data that supports the use of lens 100 in lower light conditions, for example, if you're out at a at a meal at a at a restaurant and you need to read the menu, for example, could you just talk about about that aspect of the product profile?

Absolutely. So we did all our near vision measurements in what's called mesopic conditions. So mesopic is low light just to give you an idea of what that means. So we actually have one of our KOLs described that very adequately in our KOL event.

That basically means that you lower the lights in the room to almost candle light conditions. So it's very low lights in the room, and then you have them read a backlit screen screen. So it's truly low light conditions that we've measured all our new vision in.

So if you will, it's it's it's the most challenging condition. Because we definitely wanted to avoid that we, brightened the room in a way that it would impact positively near vision that we could not ascribe to our products.

So again, very low dim lit conditions in the room. And I just to, back up a little bit into Sean's statement on the retina exam. That's something that all optometrists pretty much do already, so it's a very standard exam. So it's not something that we need to train them on or that we need that they need to add to the practice to be able to prescribe a drug again, very common practice in optometry.

Joseph Catanzaro, Piper Sandler.

Maybe two for me first as it relates to the NDA, filing. Can you just remind us whether there was any formal engagement with the FDA, like a pre-NDA meeting, ahead of the filing, and if so, any sort of feedback learnings you sort of glean from those interactions and then second, question I guess related to. Early adopters, but less from a patient perspective and more so from a physician perspective, what are you looking for there? Is it simply those who have written a beauty script in the past or are there more things that you're honing in on that could potentially identify early early writers?

Thanks, Joe.

I'll take the first one and then I'll take the next one over to Sean. So yes, there's been definitely a end of Phase III and pre-submission meeting with the FDA. More importantly, we've had many discussions and engagements with them along the years of our development, and that's where most of the feedback.

Actually came from the FDA, so we're very well aligned with them and especially a clinical program, a manufacturing setup, basically everything that was relevant for the development and that actually then made the end of Phase III meeting with them pretty benign.

I think it was hardly any any questions actually that we had left that we wanted to ask. It was merely a confirmation of this is all the data that we've gathered. This is the amount of patients that we have on both the efficacy and the safety side. And they once again confirmed that that was completely aligned with their expectations for our NDA. So we're very confident that the filing has or the submission has everything in it that the FDA wants to see.

And for your second question, when we're identifying early adopters from an eye care professional standpoint, again, we commissioned a very large study and took count many factors. We looked at the prescriptions of UD.

We looked at early adopters of other recent eye care launches.

We also looked at, history of prescriptions for dry eye, as well as different different locations such as urban city centers where we saw a lot of the beauty scripts. Ultimately, when we did all the analysis, what came out and was the primary focus of the targeting was their actual propensity to write Beity and how many scripts they wrote. And that's really where we come up with those 15,000 target ECPs that represent over 85% of all the beauty scripts.

Marc Goodman, Leerink Partners.

If I, could you please review what you've done on CMC, what's left to do. Just give us an update there, please.

Absolutely. Thanks, Mark. Good question. So on the CMC side of the manufacturing side, we've actually produced all our clinical Phase III material at commercial scale. So we're fully set up to produce launch quantities at that scale.

A complete supply network is in very good standing with the FBA, so very confident that our commercial network, commercial manufacturing is all in place there, and that goes for both truck products as well as drug substance or API.

Stability all done, everything you need to do there.

Yeah, so it's all done, so all the stability that we needed to submit our our program, and this is generic for for any submissions. You need to submit with at least 12 months of stability data on your registration badges, which obviously, given the fact that we've submitted, we have that in place and submitted and that they all looks looks stellar.

Great. And then just secondly on the unbranded campaign, can you just go into a little bit of detail, a little more color just on, what.

What's the discussion, what it's like, maybe just, give us a sense of what a what a session would be like and the feedback you're getting.

Thank you.

Yeah, absolutely. So we're really excited about this unbranded campaign. What's unique to Presbyopia is the fact that, when you think about it, everyone knows about reading glasses. We don't have to train them on the disease state. What we have to train people on is how to look for what an ideal presbyopia eyedrop solution is.

So really what we're talking about is what's the ideal pupil size, the importance of an eye drop that focuses on reducing the pupil but avoiding that ciliary muscle.

And then also because there's so many people out there impacted by presbyopia, who are the early adopters. So a lot of that's training on, those three groups I talked about before, people in contacts, people who have had refractive surgery, and people have been to a muddy spa.

And overwhelmingly what we see at the different conventions is excitement for the campaign. It's very ECP forward, so we have over 50 people that are, the face of the campaign across all of our presentations, all of our conventions. And we actually release a new one every week on LinkedIn, and we're getting calls from doctors saying, hey, when is my photo going out because I actually want to, I want to see my photo on LinkedIn. I want to like it. So it's going very well, and I think what's always really important with our product, the first thing people want to know about the product and this is separate from the unbranded because we can't com mingle the two, but they want to know it's not pilocarine. That's A really important thing and that doctors care about as soon as they know it's a non-pilocarine solution on the medical side, they're very excited to learn more about the product and engage. So we've seen this as a very good success. We've seen a lot of traction and a lot of ECPs coming to us that want to share their excitement for the future of Previo Solutions. They want us to tell them more.

Thanks.

[Tim Lugo], William Blair.

Hey guys, this is Lachlan on for Tim. Thanks for taking the questions. As you've shared the data with a wider audience of physicians over the past few months, are there any new findings or sort of nuances that have emerged about how they're thinking of using it that maybe hadn't really come through fully in your prior market research? And secondly, I believe that the KOL day, one of the physicians said or suggested that they would. Most patients would first TRY the drop in the office. Is that correct or is that what you're expecting?

Thanks, good to hear.

So I'm that first one, and I'll keep that very brief because obviously I want to make sure that one, we don't talk about anything that's not, on the label yet and that that we've not studied, but for sure, the medical community is talking and thinking about uses of how they could see this product being used outside of of of Nearvision. So, yeah, that's something that in that context is discussed, not something for me to elaborate on.

And in terms of the use of the products, we meet with a lot of different eye care professionals across optometry. Many of them want the patient to experience in the office. And what's great about our product is because you have that immediate response that we saw in our trial, people can have that wow effect, right off the bat when they put it in. Now some doctors, especially those that go for the dilated eye exam, are going to want them to take the samples home. And TRY it at home, but we see that, how the ECPs run their practice will decide whether or not they do it in office or outside of the office, it will be a good mix.

Got it thanks.

Just one thing to add that like on the like on the, on the data side, just think about it some more on what you just just asked. 11 of the things that we've realized that we shared during that KLL event that What the data shows is that as your presbyopia gets worse, the actual impact keeps up with that. So the worse your presbyopia, the more likes you gain. That's certainly something that we've heard resonate really well in the medical community. So when maybe people initially were thinking about a presbyopia eye drop as something that, could have an effect early on in in some months presbyopia journey. It's very clear now that actually our drop uniquely because it is unique to our product keeps up with how you are the opia I guess gets gets worse. So if you press the 20/80 or 20/100 and you could, you would need 45, maybe 6 lines, that's what the product actually delivers for you. So it ties into that very broad age range that we've tested in our trial.

Yeah, very interesting, thanks.

Matthew Caufield, H.C. Wainwright.

Hi team.

Some very exciting developments.

For the quarter.

So our question was considering filling a prospective monthly prescription, have you shared how many refills per year could be anticipated among Presbyopia patients if or when ultimately approved? Is the baseline assumption that patients could be using the drops daily or more likely on select days per month per patient kind of based on their scheduling? Any clarity there, thoughts there could be helpful and excited to see the progress.

Thanks.

Great, thank you. This is Sean again. So a couple comments on that. So in terms of what we found in our market research, people are looking for an everyday eye drop that lasts all day, and we see this across multiple different studies. So not only in our consumer research did we see that the majority of patients wanted to use it 4 to 7 times a week. When we actually look at the patient reported outcome from our Phase III.

81% of the patients that would continue to use the product after the study plan to use it 4 to 7 days a week. So we do see this much more like contacts where people want to use it every day. Now that being said, all medicines, most medicines are not 100% compliant, right? If you look across the board, for contacts, about 89% compliance rate for daily contacts. Tervaya had about a 65% refill rate. General medicines about 50%.

So when you look at that $3 billion dollar market cap or $3 billion dollar market size, it assumes a conservative, 5 pills a year or a 42% refill rate. So that's what's built into that $3 billion dollar number. However, when we speak to consumers, they're looking for an everyday eye drop, looking at probably 4 to 7 days per week.

Very helpful. And just to confirm, I heard that right, you said five times per year as sort of an average from your analysis.

Yeah. So if you think of average medicines are 50% compliance. Five refills a year would just be a little bit conservative to that. That'd be a 42% refill rate.

And that concludes our question-and-answer session as I'm showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.