Lexicon Pharmaceuticals Inc (LXRX) 2015 Q1 法說會逐字稿

Good afternoon, my name is Stephanie and I will be your conference operator today. At this time I would like to welcome everyone to the Lexicon Pharmaceutical First Quarter 2015 conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. (Operator Instructions.) Thank you. I would now like to turn the conference over to Mr. Chas Schultz, Senior Director of Finance and Communications, please go ahead sir.

Thank you, Stephanie. Good afternoon and welcome to the Lexicon Pharmaceuticals first quarter 2015 conference call. I'm Chas Schultz and with me today are Lonnel Coats, Lexicon's President and Chief Executive Officer, Dr. Pablo Lapuerta, Lexicon's Executive Vice President and Chief Medical Officer, Jeff Wade, Lexicon's Executive Vice President of Corporate and Administrative Affairs and Chief Financial Officer, and John Northcott, Lexicon's Vice President of Marketing, Commercial Strategy and Operations.

We expect that you have seen a copy of our earnings press release that was distributed this afternoon. During this call, we will review the information provided in the release, provide an update on our clinical programs and then use the remainder of our time to answer your questions. If you would like to view the slides for today's call, please access the Lexicon Web site, at www.lexpharma.com. You will see a link on the home page for today's Webcast

Before we begin, I would like to state that we will be making forward-looking statements, including statements relating to Lexicon's clinical development of Telotristat Etiprate and Sotagliflozin.

These statements may include characterizations of the results of and projected timing of clinical trials of such compounds and the potential therapeutic and commercial potential of such compounds. This call may also contain forward-looking statements relating to Lexicon's growth and future operating results, discovery and development of products, strategic alliances and intellectual property, as well as other matters that are not historical facts or information.

Various risks may cause Lexicon's actual results to differ materially from those expressed or implied in such forward-looking statements. These risks include uncertainties related 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, 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 development commercialization activities.

For a list and a description of the risks and uncertainties that we face, please see the reports we have filed with Securities and Exchange Commission. I will now turn the call over to Mr. Coats.

Thank you Chas and thank you everyone for joining us on today's call. I would remind everyone that our objective in creating stakeholder value is deeply rooted in advancing our two late stage assets; one is Telotristat Etiprate for carcinoid syndrome and Sotagliflozin for type 1 diabetes.

We believe very strongly that each of these assets by themselves will create great value for our stakeholders. If both of these assets should be successful then we think we create even greater value. It's also strategically important to us that we maintain and prepare ourselves for the U.S. market for the carcinoid program, Telotristat Etiprate which we'll speak a little to today, this afternoon.

With that being said, let's talk a little bit about how we're executing to our plan. One is that we've completed the enrollment in our pivotal Phase 3 clinical trial, Telotristat Etiprate, we have commenced enrollment in our Phase -- pivotal Phase 3 clinical trial of Sotagliflozin, we've commenced screening in our Phase 2 clinical trial of Sotagliflozin in young adults with our partner, JDRF, we've expanded our collaboration with Ipsen to include rights for the commercialization of Telotristat Etiprate in Canada and we've advanced a development candidate into IND-enabling studies for neuropathic pain with our partner, BMS.

If I could remind you that Telotristat Etiprate our Phase 3 program is progressing towards completion. The Phase 3 program is designed to satisfy requirements for approval both in the United States and in Europe. The Phase 3 randomized placebo control double-blind study has 135 patients on Somatostatin analog therapy and the treatment period is 12 weeks followed by a 36-week open-label extension.

The primary endpoint is change from baseline in the number of daily bowel movements. Again, we're very pleased to say enrollment has completed and this program is indeed advancing.

Going back again to our strategy of partnering outside of the United States we expanded our agreements with Ipsen in Canada and we believe this will best position us to continue to accelerate our preparation here in the United States for introduction of Telotristat Etiprate upon success in leveraging the relationship with Ipsen and their knowledge in this overall carcinoid market.

We're very confident that Lexicon can indeed introduce and commercialize Telotristat Etiprate on our own. As you look at Slide 7 here it's clear to us where the business is and it's clear to us exactly how we can go after this business with a manageable-sized sales force with low to mid-sized investment and I believe a significant return on that investment.

Now, if I move to Sotagliflozin, Lexicon has advanced Sotagliflozin into Phase 3 for type 1 diabetes to remind everybody we have two pivotal trials with 750 patients in each study, two doses at 200 milligram and 400 milligrams once daily and placebo; the primary endpoint is reduction of A1c versus placebo on optimized insulin with the additional objectives of reducing variability in blood glucose levels, lower insulin needs, weight loss and patient-reported outcomes.

We have an additional exposure study of 1400 subjects with type 1 diabetes as 400 milligrams once daily versus placebo and the primary outcome or primary endpoint is glycemic control. We feel very strongly and confidently about this endpoint.

Next I'd like to report to you our collaboration with JDRF for type 1 diabetes is now underway. To remind you the collaboration involves JDRF funding to support a Phase 2 clinical trial to evaluate the efficacy and safety of Sotagliflozin in a younger population with type 1 diabetes. The design is a Phase 2 randomized placebo-control double-blind study up to 84 individuals with type 1 diabetes younger than 30 years of age with A1C levels greater than nine and the treatment period is 12 weeks looking for your primary endpoint to be a reduction in A1C at 12 weeks of once daily 400 milligram Sotagliflozin versus placebo as an adjunct to insulin treatment.

Again, we feel pretty confident about this study as it is now underway. The things that you should continue to focus on with us as we continue to execute throughout 2015 is that in Quarter 3 of 2015 we will have the Phase 3 top-line data, the Telotristat Etiprate in carcinoid syndrome.

In Q1 of 2016 we have the potential to file our first NDA for Telotristat Etiprate in carcinoid syndrome, also in Q1 of 2016 we should have a call out of the JDRF study relative to the high unmet need area for type 1 diabetic population.

In Q3, in Q4 2016 upon success of FDA approval, Lexicon will have its first commercial launch which will be Telotristat Etiprate for carcinoid syndrome.

In Q4 2016 we will have the Phase 3 top-line data for Sotagliflozin in type 1 diabetes so all in total Lexicon stays remarkably focused on executing our plan and ensuring that we stay on target, on time, on schedule, to continue to create shareholder value as we move forward throughout the rest of this year.

I'm going to stop there and turn it over to Jeff Wade our Chief Financial Officer.

Thank you Lonnel. I will provide a brief financial update. As indicated in our press release today we have revenues for the 2015 first quarter of $1.8 million, an increase from $0.3 million in the prior year period. The increase was primarily due to revenues recognized from our license and collaboration agreement with Ipsen.

Our research and development expenses for the 2015 first quarter decreased 13% to $20.9 million from $24 million in the prior year period. The decrease was primarily due to reductions of personnel costs as a result of our restructuring in 2014, partially offset by increases and external clinical research and development costs.

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 this liability based on the development of the programs and the time until such payments are expected to be made are recorded in our consolidated statements of operations.

The associated increase in fair value of Symphony Icon purchase liability was $1.8 million in the first quarter and $1.1 million for the prior year period. Our general and administrative expenses for the 2015 first quarter were $5.7 million consistent with the prior year period.

Our net loss for the 2015 first quarter was $21.8 million or $0.04 per share compared to a net loss of $30.8 million or $0.06 per share in the prior year period. For the 2015 first quarter our net loss included non-cash stock-based compensation expense of $2 million compared to $2.3 million in the corresponding period in 2014. Finally, as of March 31, 2015 we had $315.1 million in cash and investments as compared to $339.3 million as of December 31, 2014.

On the next slide I will update our forward-looking guidance for 2015. Due to the expansion of the Ipsen agreement to include Canada we now expect contractual revenues from existing agreements in 2015 to be around $3 million. We continue to expect that our operating expenses in 2015 will be in the range of $130 to $140 million. Non-cash expenses are expected to be approximately $12 million at this total including $7 million in stock-based compensation, $4 million in the increase in fair value of Symphony Icon purchase liability and $1 million in depreciation and amortization.

Taking into account cash received under existing contractual relationships only we expect our 2015 net cash used in operations to be in the range of $150 to $160 million. I should note that these operating expenses and net cash used expectations reflect the cost of full scale Phase 3 clinical trials for Sotagliflozin and type 1 diabetes.

Today we also announced that Lexicon will be enacting a 1-for-7 reverse stock split effective at 5:00 P.M. Eastern Time on May 20, 2015 and our common stock will commence trading on a split adjusted basis as of the opening of trading on May 21, 2015.

We made the decision to seek shareholder authorization for, and ultimately to proceed with, this reverse split primarily to respond to requests by both current and perspective investors that we clear away obstacles to their investment in Lexicon.

At our recent annual meeting our stockholders voiced strong support for this measure with 98.6% of the shares at the meeting voting in favor and 94.8% of our total shares outstanding voting.

The reverse split will reduce the number of shares outstanding from approximately a $725.1 million shares to approximately $103.6 million shares. There will be no fractional shares issued as a result of the reserve split. And, in lieu of the fractional shares, we will make cash payments equal to the fraction multiplied by the closing price as the common stock is reported on May 19, 2015.

For a period of 20 trading days following the reverse split our stock symbol is expected to be attended by Nasdaq with the Letter D after which it will return to our normal stock symbol as LXRX.

I will now turn the call back to Lonnel.

Well we're very pleased to say Lexicon is, indeed, advancing our late stage pipeline toward market. We looked at Telotristat Etiprate for Phase 3 study TELESTAR; enrollment is complete. The commercial preparations are underway in the U.S., the collaboration with Ipsen has now been expanded established in the U.S. but a commercialization of Telotristat Etiprate in Europe is also ongoing.

As for Sotagliflozin we're now in Phase 3 and we are now in Phase 2 with the JDRF study and both are progressing well. So we were very pleased to report that we are, indeed, advancing Lexicon and our assets toward market.

With that I want to thank everyone for joining us today and we will stop here and take questions.

(Operator instructions.) Your first question comes from the line of Jessica Fye with JP Morgan.

Hey guys, thanks for taking the question. I guess first on the neuropathic pain asset you've identified with Bristol, can you talk about the timeline there? How long are you expecting for the IND-enabling studies and when could this actually move into Phase 1?

And then also just on the decision to partner Canada with Ipsen, was this something that was initiated by them or by you?

Well let me start with Ipsen and I'll turn it over to Jeff, is that okay? We've been in discussion with Ipsen for quite some time and it has always been their desire to have rights in Canada and we felt given the advancement of our relationship with them and the capabilities that we have witnessed that it was most appropriate to execute this arrangement with them and feel very confident about it.

With that being said I'll turn the BMS question over to Jeff.

We've selected a candidate, a development candidate, and that development candidate is being moved into IND-enabling studies. That usually takes between 12 to 18 months or so but we haven't outlined -- this is obviously a partnership and we haven't outlined specific timelines for that program as of yet.

Okay, great thanks. And maybe one more if I can; just, are there any comments on the enrollment progress for the Phase 2 JDRF study?

Just that that study has commenced enrollment and that we are pleased with how things are going so far and the same with the Phase 3 study as well. That's been enrolling quite well.

Thanks.

And to your point Jessica, we expect to hit our timelines that's been outlined.

Thank you.

Your next question comes from the line of Alan Carr with Needham & Company.

Hi, this is [Ester] sitting in for Alan, thanks for taking my question. Can you guys hear me?

We can hear you, maybe a little bit louder would be great.

Hello, is this better?

Yeah.

Okay, so could you remind us what's the powering assumptions for the Phase 3 trial for Telotristat are?

Very good question and I'll let Dr. Pablo Lapuerta answer that question.

In our Phase 3 program for TELESTAR the primary endpoint is the reduction in bowel movement frequency averaged over the course of the 12 weeks of the study and the specific reduction in frequency that we're powered for is on the order of one bowel movement per day from a baseline that we expect to range somewhere between approximately five and six.

However, the powering is done in order to give us the best chance to show robust efficacy. So our expectation is based on Phase 2 experience where we showed reductions in bowel movement frequency on the order of 40% in our open label study and on the order of 25% in our short-term placebo-controlled study.

So the -- we powered for a robust program, our expectation is that Phase 3 results should look like Phase 2.

Okay, so what would clinically meaningful change look like?

A clinically meaningful change for an individual with this condition would be a reduction in bowel movement frequency of approximately 25% to 30%. So that would be a reduction from, say, six bowel movements a day to 4.5 or four. For a mean change in a clinical trial, the mean change may be a little bit less because there are some responders on Telotristat Etiprate and responders on placebo.

So we suggest that when the results come out you look for both the mean change in the population overall but also the proportion of patients with at least a 30% reduction in bowel movement frequency from baseline to Week 12 under two different treatment groups.

Okay. And could you remind us where these clinical sites are?

We have 84 sites in North America, Europe and Australia.

And, sorry, one more. What kind of endpoints will you disclose in 3Q?

Well, we'll let Jeff Wade answer that one.

So we're going to disclose top-line results so the primary endpoint, results and the primary endpoint, and we'll provide indications of efficacy and this will be the primary thing to release.

Okay, thanks so much for taking my questions.

Thank you for the question.

Your next question comes from the line of Stephen Willey with Stifel.

Hi, thanks for taking the question. Just wondering, you know, to what extent, if any additional safety data from TELECAST may be a rate limiting step in filing the NDA and I'm presuming you can probably get the submission started on a rolling basis and then supplement this as it comes in?

So, our plan right now is predicated on having the TELECAST studies as we noted today, TELECAST enrollment is scheduled to end tomorrow and we will -- we expect to have the data in a timely fashion to keep our timelines on the NDA filing so it is a supportive study but we expect to have the data -- we won't have the top-line data at the same time that we have the top-line data from the pivotal study but we will have it in a timely manner to support the NDA filing.

Okay, so should we expect another kind of top-line efficacy announcement out of TELECAST between the top-line TELESTAR announcement and then the eventual filing?

Well, I think that TELECAST is really a supportive study designed to bolster our safety database so that's the primary purpose of that study. The TELESTAR is the study that is going to provide us with efficiency of efficacy and that's, those, are the top-line results that I think we should be focused on.

Okay, and then -- just lastly, I know that there was a lot of discussion around cardiovascular outcomes in type 2 at the FDA panels for the DPP-4s and there's some discussion around maybe future requirements being dictated within kind of a mechanism-specific context and I'm just kind of wondering if in your discussions with FDA you've gotten any kind of feedback that would suggest that SGLT1 as a mechanism would be something that would kind of require a full MACE readout or maybe just a couple of MACE subsets, thanks?

You know, I'll certainly give my general thought and then I'll have Pablo to answer any follow-up but, no, we've had no such conversations with the agency. I think we're perceiving it as we are relative to the advice that's been given and I think we need to show that the drug is both effective and safe against the standards that you would with any type 1 product and do not believe the requirements that are in for type 2 drugs, extend themselves over to -- I mean, type 2 diabetes, extend themselves over to type 1. But Pablo, I'll let you follow with anything you want to add.

We'll be learning a lot about the SGLT2 class in terms of cardiovascular outcomes as a couple of the first studies read out over the next six months and I think that would really be the basis for thinking about the class and the implications.

In terms of SGLT1, we believe our SGLT1 inhibition is in the gastrointestinal tract and because of that we've never had any concerns about cardiovascular mechanisms related to dual mechanism of action.

Okay, thank you.

Thank you Stephen.

(Operator Instructions.) Your next question comes from line of Cristina Ghenoiu with Cowen.

Hi, thank you for taking my question and congratulations on your progress. I had a quick question about Telotristat, can you remind me, how variable are these bowel movements in patients like once you establish a baseline for a patient like in the placebo group typically did you see any patient kind of vary like, you know, from like two, three to like five, six going back to two, three or something like that?

Dr. Lapuerta?

What we've seen in general is that this endpoint of mean bowel movement frequency average over the 12 weeks of the study is very precise. It's very precise because patients are giving you assessments every single day. Now, in terms of week to week, we haven't seen that much variability in patients, just a little bit, because patients take these injections of Octreotide and so some patients in screening will have a little bit of reduction in Octreotide and unfortunately for them the affect wears off early. So, you're asking about our screening periods, we've seen some patients who start out with three bowel movements or five bowel movements per day, after an Octreotide injection, but by the end of the screening are up to six or seven since it's warn off.

Okay, thank you. And the other question I had, besides the BMS to collaboration are there any other collaborations that you have ongoing and that we may expect to hear news from in the coming months? Thank you.

Yeah, I would simply say we remain opportunistic and we have a pretty strong library of assets and as opportunities present themselves we will communicate to market if we so should choose to do a deal.

(Operator Instructions.) We'll pause for just a moment. At this time there are no additional questions in the queue.

Again, let me close out by saying thank you to all of you who have joined the call and just close by saying, again, that Lexicon continues to make substantial progress and we'll keep you informed as we make additional progress throughout the next quarter. Thank you.

Thank you, this does conclude today's conference call, you may now disconnect. Speakers if you'll hold the line.