Lexicon Pharmaceuticals Inc (LXRX) 2011 Q1 法說會逐字稿

Thank you for holding. Welcome to Lexicon Pharmaceuticals' first-quarter 2011 conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at Lexicon's request.

At this time I would like to introduce our host for today's call, Wade Walke, Senior Director of Communications and Investor Relations. Please go ahead, Dr. Walke.

Good morning, and welcome to the Lexicon Pharmaceuticals first-quarter 2011 conference call. I am Wade Walke, and with me today are Dr. Arthur Sands, Lexicon's President and Chief Executive Officer, and Jeff Wade, Lexicon's Executive Vice President of Corporate Development and Chief Financial Officer.

We expect that you have seen a copy of our earnings press release that was distributed this morning. During this call, we will review the information provided in this release, discuss the status of our clinical programs and answer any questions you may have.

The call will begin with Dr. Sands, who will discuss our key accomplishments for the first quarter and review the status of our programs. Mr. Wade will review our financial results for the first quarter and discuss our financial guidance for 2011. We will then open the call to your questions.

Before we begin, I would like to state that we will be making forward-looking statements, including statements relating to Lexicon's research and development of LX1031, LX1032, LX1033, LX2931 and LX4211, and the potential therapeutic and commercial potential of those drug candidates. This call may also contain forward-looking statements relating to Lexicon's future operating results, financing arrangements, cash and investments, discovery and developing of products, strategic alliances and intellectual property.

Various risks may cause Lexicon's actual results to differ materially from those expressed or implied in such forward-looking statements, including uncertainties relating to the timing and results of clinical trials and preclinical studies of our drug candidates; our dependence upon strategic alliances and ability to enter into additional collaboration and license agreements; the success and productivity of our drug discovery efforts; our ability to obtain patent protection for our discoveries; limitations imposed by patents owned or controlled by third parties; and the requirements of substantial funding to conduct our drug discovery and development activities. For a list and a description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission.

I will now turn the call over to Dr. Sands.

Thank you, Wayne, and good morning, everyone. This morning, we have chosen to not use slides and a webcast, and that is because we are planning on quite a large program at our Research & Development Day next week, on Thursday, May 12, to be held in New York City. And that will also be webcast.

So I would like to provide my brief update on the status of our programs in the context of the agenda that we will have at next week's meeting, as I walk through this with you and give you a preview of some of the things we will be discussing in depth regarding our pipeline.

So again, it will be in New York City on May 12, and we will start out with a review of the LX4211 program in type 2 diabetes. We will be highlighting two aspects of this program.

One is the mechanistic studies that we completed in the first quarter, and I think was one of the major accomplishments of the first quarter, was the discovery that our compound stimulates GLP-1 secretion and PYY secretion, two important G.I. hormones. And so Dr. Brian Zambrowicz will be going through those data in detail, as well as additional preclinical studies that we've conducted here at Lexicon, using the knockout mice for both SGLT1 and SGLT2, the dual targets of that compound.

Next, we'll have our new Chief Medical Officer providing a discussion of the Phase 2b clinical trial design. This is Dr. Pablo Lapuerta, who will be discussing the Phase 2b plans and other aspects of the advanced development of LX4211.

We will then follow that presentation with a discussion of LX1032 in carcinoid syndrome. This will be led by Dr. Lapuerta, and he will be providing a clinical trial enrollment update. As mentioned in the press release today, we are on track to complete enrollment of the Phase 2b study in Q2, this quarter, and we will be discussing then our anticipation of the results -- the release of the results from that trial, which should be shortly thereafter. So it will be either the end of this quarter, Q2, or it will be in early July, based on the actual completion of the last patient dosing in that trial.

Dr. Zambrowicz will then also discuss a new application of this compound in inflammatory bowel disease and some of our preclinical data around that, and our current thinking on the clinical trial design for a proof-of-concept trial in that indication, which we hope to initiate in Q3 of this year.

We will then move on to a discussion of LX1031 and 1033 for IBS. 1033 is the follow-on compound, which is significantly more potent than the compound LX1031, for which we have established proof-of-concept on the -- over the mechanism. And LX1033 will be having a status report as to the Phase 1 trial, which is ongoing now in healthy, normal volunteers, and some of the endpoints we will be looking for there.

And then last on the clinical program agenda will be LX2931 in rheumatoid arthritis. And there, we will be focusing on some of our latest analyses from the Phase 2a trial that we had conducted in rheumatoid arthritis patients. And I think some of those analyses will be very informative with respect to our next steps, which do include moving forward with a dose escalation trial in rheumatoid arthritis patients. So there will be some new retrospective analyses presented for LX2931.

We will then finish the morning session -- this is about a 3 hour, 3.5 hour program -- by reviewing the basic science and the data we have -- preclinical data we have to date for some of our new drug candidates in preclinical development, LX7101 for glaucoma, LX5061 for osteoporosis and LX 2311 for autoimmune disease. So we have a significant amount of data to share there. And that discussion will be led by Dr. Alan Main, our Executive vice president of Pharmaceutical Research at our Princeton, New Jersey site.

We will then have ample time for, I think, a thorough question-and-answer session. And we look forward to participation for as many of those who can attend in person. And then of course if you can join on the web, that would also be very much welcome.

So with that brief status report, I will now turn the call over to Jeff Wade.

Thank you, Arthur. I will provide a brief financial update. As indicated in our press release today, we had first-quarter revenues of $0.6 million, a decrease of 64% from $1.6 million for the corresponding period in 2010. The decrease was primarily due to reduced revenues under our alliance with Taconic Farms.

Our research and development expenses for the 2011 first quarter were $23.9 million, an increase of 13% from $21.1 million for the corresponding period in 2010. The increase was primarily due to increased external research and development costs, preclinical and clinical research and development costs and increased severance costs resulting from our continued reallocation of resources from earlier stage research towards our most advanced drug discovery and development programs.

In connection with our acquisition of Symphony Icon, we made an initial estimate of the fair value of our liability for the base and contingent payments. Changes in that liability based on the development of the programs in the time until the payments are expected to be made are recorded in our consolidated statement of operations. The associated increase in fair value of Symphony Icon purchase liability was $1.1 million for the 2011 first quarter.

Our general and administrative expenses for the 2011 first quarter were $4.8 million, a decrease of 14% from $5.5 million for the corresponding period in 2010. The decrease was primarily attributable to decreased legal and patent fees.

Our net loss for the 2011 first quarter was $29.6 million or $0.09 per share compared to a net loss of $26.1 million or $0.13 per share in the corresponding period in 2010. For the 2011 first quarter, net loss included non-cash stock-based compensation expense of $1.5 million compared to $1.3 million in the corresponding period in 2010.

Let me now turn to our cash and investments. As of March 31, 2011, we had $188.9 million in cash and investments as compared to $211.1 million as of December 31, 2010.

Now let's turn to our forward-looking guidance -- financial guidance for 2011, which remains essentially unchanged from the guidance we provided earlier this year. We continue to expect contractual revenues from existing agreements in 2011 of around $1 million. Consistent with past practice, while we are in conversations with pharmaceutical companies about potential collaborations and alliances, we are not including forecasted revenues from those potential arrangements in our guidance. That said, we believe our productive pipeline will provide us with attractive opportunities for future alliances.

We expect operating expenses in 2011 to be in the range of $110 million to $120 million. Non-cash expenses are expected to comprise approximately $18 million of that total, which includes $7 million in increase in fair value of Symphony Icon purchase liability, $5 million in stock-based compensation and $6 million in depreciation and amortization.

Taking into account cash received under existing contractual relationships only, we expect our 2011 net cash used in operations to be in the range of $92 million to $97 million. I will now turn the call back to Arthur.

Thank you, Jeff, and we can now take any questions you may have.

(Operator Instructions) David Friedman.

Thanks for taking the question. It is actually about 2931 and the dosing. I was wondering if you could just discuss some of the preclinical work that helped you settle on the doses that you initially went forward with. And then how does that preclinical work help inform why you should be going up on dose, and is there a certain new level of dosing that you think will be the right balance of efficacy and safety?

Yes, David, certainly. The preclinical data we have been guided by was with respect to the decrease in lymphocyte counts, total lymphocyte counts, achieved in healthy, normal volunteers at increasing doses. And in healthy normals, we saw a fairly precipitous decrease, from about 100 milligrams once a day, maximizing at about 150 or even 125 or 130. So it seemed to be a fairly narrow range in which we saw this robust decrease in total lymphocyte counts, on the order of 30% to 50% decrease.

And so we extrapolated from there that -- or we reasoned that would be the appropriate range, because we knew that such a decrease in lymphocyte counts correlated in preclinical models with the most robust anti-inflammatory effect. So we had that established in preclinical animal models.

So as it turns out, as we have the results from the study in patients, the patients seem to be more resistant to the actions of the drug with respect to their lymphocyte count levels, total lymphocyte counts. And therefore, it appears that more drug is required in the setting of pathological inflammation as compared to a normal physiologic state.

And so we have -- as I indicated in my introductory statement, we have additional data, which I won't be highlighting here now, that reinforces that view, that we are at the early part of a dose response curve. We have identified target doses and a protocol that we think will work to tease this out. And again, we will be going into quite some detail in terms of this in-depth analysis at the R&D day on next Thursday.

And just one last question. Can you remind us what the dose-limiting toxicity was for this drug in animals?

We did not identify a dose-limiting toxicity per se in animals. It is a very well-tolerated drug. We've gone up to 1000 milligrams per kilogram in our three-month monkey toxicology study, which is a very large dose, and there, the toxicity that was identified was really pharmacology, which was a small (inaudible) -- small lymphoid organs, a small thymus gland, in particular, shrunken, which would actually fit with the mechanism of action.

So the drug was very well-tolerated in animals through its safety profile, and we believe we have plenty of room to dose up, as required, in humans.

Okay, great. Thank you.

Stephen Willey.

Good morning and thanks for taking the questions. Just a couple on carcinoid. With respect to the Phase 2 data we are going to see in the patients that have been enrolled, how much variability do you expect to see in baseline serotonin between patients? And should we expect to see a dose response curve based on that baseline variability? And then, if there is anything anecdotal that you can tell us from the open-label trial that is ongoing in Europe, that would be helpful as well.

Thank you, Stephen. Thanks for mentioning that. I forgot to mention that we are anticipating sharing some information from the open-label trial in Europe at next week's meeting, which will address part of your question, your next question, which was what is the effect on baseline serotonin and the heterogeneity of the disease state.

So I do believe that -- well, we knew going into this that the tumor burden varies significantly between patients, and the phenotype of the carcinoid tumors themselves does vary. Even though they all have the commonality of a histologic diagnosis of carcinoid tumor and carcinoid syndrome, the various differences -- there are differences in the actual type of tumor and the amount of hormone secreted by these neuroendocrine tumors. And that is well-known. We knew that going into the study.

So we've seen heterogeneity like that, and I believe that the data will be studied according to those tumors that, number one, in fact are high producers of serotonin, which is the classic medical definition of carcinoid syndrome, that the tumor is producing large amounts of serotonin, as well as other active peptides. And then number two will look at other patients and see if they have a different level of serotonin that may not fit that classical definition.

Now, of course, we are blinded to the US study. The European study is open-label and ongoing, and I think it will be somewhat informative. We are hoping to be able to do -- basically present some case studies -- case reports from the European trial, and that is what we are working on this week as we prepare.

So I do think that it will be an informative study, both these studies will be very informative insofar as helping us plan the Phase 3 design, based on the biomarker data and the symptomatic relief data that we hope to have.

If I remember correctly, the European trial has both octreotide refractory and naive patients as well?

It allows for both, that's correct. However, I believe they have all been octreotide refractory. And under sort of the regime -- the protocols we've established, we found that we have really been enrolling very sick patients with advanced disease, and these tend to have been on a number of medications by then. And I think we have all octreotide refractory patients with concomitant dosing of octreotide.

And then just lastly -- I know you are going to cover a lot of this next week -- but with respect to some of the enrollment challenges you've seen thus far in carcinoid, does this change at all, I guess, how you plan on developing this thing going forward? And are you actually more incentivized to try to push the FDA to get this directly into Phase 3, kind of knowing that a Phase 2 stepdown was probably going to prolong the process a bit significantly?

Yes, we are planning to -- our current plan is to move forward to a Phase 3 program, in discussion with the FDA. Because any one of these trials takes, as we've seen, a long time. And rather than waste patients in another Phase 2 trial, if the results support, we would be inclined to go into the Phase 3 program straightaway.

And I also think that we'll learn a lot from these trials, these current trials, as to how to engineer the trial to enroll more rapidly, place the drug in a treatment paradigm that it could be used perhaps earlier, and a number of things that I think will aid the next trial. So we are eager to get through this step and move on to the next step.

Thanks for the insight.

Liana Moussatos.

Can you give us the status of the LX4211 metformin study?

Yes. So we have completed the dosing in the drug-drug interaction study, which is the study I think you are referring to -- it's a Phase 1 study done in healthy, normal volunteers -- simply to establish that the two drugs don't interact with respect to their pharmacokinetics.

So we do not have the results yet from that study. We will be showing those results at the meeting coming up next week. But we don't anticipate there being any drug-drug interaction. There hasn't been any evidence for that to date.

Thank you.

Phil Nadeau.

Good morning. Thanks for taking my questions. Just first, on the upcoming medical meetings, do you have any data presentations expected at ADA or ASCO later this spring?

Yes, actually, we do have a poster that we are presenting at ADA that is going to be featured as part of the audio tour. And we also have a clinical trials and progress poster that we will be presenting at ASCO.

Okay.

So the ADA poster, I think, is focusing on mechanistic aspects of 4211 action.

Yes.

Okay, great. That's helpful. And then second, on 4211 -- and I may be jumping the gun here -- I'm guessing this is something that you're going to cover next week -- but could you give us a little bit more -- a few more details on the design of the Phase 2b. For example, are you still expecting to maybe include Januvia as a comparator arm?

So yes, I can give you a little bit. We are not expecting to include Januvia as a comparator arm at this stage of development. But we are going on top of metformin, and of course we will have a placebo-controlled arm where the patients are receiving metformin. So that becomes, we think, an informative comparator, if you will.

But again, we will have the advantage next week of having Dr. Lapuerta there to discuss all the thinking behind this and why the sequencing of events makes sense in terms of when you actually do another comparator study.

Okay, great. Thanks for taking my questions.

Cory Kasimov.

Hi there. It's actually Matt Lowe in for Cory today. Many of my questions around 4211 have actually been answered already. So I guess just around the carcinoid data from the US trial, is it possible at all to be more specific around the exact timing of when we might expect that data?

Well, we have to identify the last patient dosing day, and then we will know more explicitly. But I can tell you that it will either be the very end of this quarter or early July. So we don't anticipate it to be far off the end of this quarter with regard to having the data set. So I'm giving you a window of a few weeks, I guess.

That's great. Thanks very much.

And there are no more questions at this time.

All right. I appreciate everyone participating, and I hope to see a good number of you at our Research Day, when we will go into quite some detail on it's -- I think we will be covering seven or eight drug programs. So a lot to cover then. Again, thanks for your participation. Goodbye.

And this does conclude today's conference call. You may now disconnect.