Lexicon Pharmaceuticals Inc (LXRX) 2022 Q1 法說會逐字稿

Good morning. This is Jesse, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Lexicon Pharmaceuticals Inc. Fourth Quarter 2021 (sic) [First Quarter 2022] Earnings Conference Call.

(Operator Instructions)

I'll now turn the call over to your host, Chas Schultz, Executive Director, Corporate Communications and Investor Relations.

Sir, you may now begin.

Thank you, Jesse. Good morning, and welcome to the Lexicon Pharmaceuticals First Quarter 2022 Financial Results Conference Call. Joining me today are Lonnel Coats, Lexicon's Chief Executive Officer; Jeff Wade, Lexicon's President and Chief Financial Officer; and Dr. Craig Granowitz, Lexicon's Senior Vice President and Chief Medical Officer.

Earlier this morning, Lexicon issued a press release announcing our financial results for the first quarter of 2022, which is available on our website at www.lexpharma.com and through our SEC filings. A webcast of this call, along with a slide presentation, is available on our website. During this call, we will review information provided in the release, provide a corporate update and then use the remainder of our time to answer your questions.

Before we begin, let me remind you that we will be making forward-looking statements, including statements relating to the safety, efficacy and the therapeutic and commercial potential of sotagliflozin, LX9211 and other drug candidates. These statements may include characterizations of the expected timing and results of clinical trials of sotagliflozin, LX9211 and our other drug candidates; and the regulatory status and market opportunity for those programs.

Call may also contain forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, launching commercialization plans for any approved products, strategic alliances and intellectual property as well as other matters that are not historical facts or information. Various risks may cause our actual results to differ materially from those expressed or implied in such forward-looking statements.

These risks include uncertainties related to the timing and outcome of our planned NDA resubmission for sotagliflozin in heart failure and our discussions with the FDA regarding sotagliflozin relating to heart failure in type 1 diabetes; the success of our commercialization efforts with respect to any approved products; the timing and results of clinical trials and preclinical studies of sotagliflozin, LX9211 and our other drug candidates; our dependence upon strategic alliances and our other third-party relationships; our ability to obtain patent protections for our discoveries; limitations imposed by patents owned or controlled by third parties; and the requirements of substantial funding to conduct our planned research, development and commercialization 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 would now like to turn the call over to Lonnel Coats.

Thank you, Chas, and good morning, everyone, for joining us on the call.

So let me jump right to Slide 3. We expect that the second quarter of 2022 will be a pivotal quarter for Lexicon with major anticipated milestones for both our dual SGLT1 and 2 inhibitor, sotagliflozin and our AAK1 inhibitor, LX9211. We plan to resubmit our new drug application for sotagliflozin for the treatment of heart failure this month. Our dialogue with the FDA regarding the resubmission has been ongoing, and we received confirmation from the FDA in late April that is aligned with our resubmission plans.

This alignment was a significant step, and we expect to have a relatively straightforward path to resubmit in the next few weeks. We believe the data from our SOLOIST Phase III trial provides compelling support for unique label for sotagliflozin and recent and worsening heart failure, which would provide us with a strong entry point into the heart failure market, if approved. The overall heart failure market is already a very large multibillion-dollar market and is anticipated to further grow at nearly 20% per year for most of this decade, which we feel could enable peak blockbuster potential for sotagliflozin.

Pending market approval from the FDA, we are planning to launch sotagliflozin in the first half of next year. Also in this quarter, we expect to announce top line results from our Phase II study of LX9211 in diabetic peripheral neuropathic pain. Neuropathic pain is a very large market that is extremely underserved and unsatisfied. We believe LX9211 has the potential to provide an innovative approach to treating neuropathic pain without the mini treatment issues that we see with the current treatment options.

Slide 4. Let me spend a quick moment on what we are now seeing play out in the heart failure market. These figures are from a 2019 report in which global data estimated that the heart failure market will grow to $22 billion in 2028, representing a compound annual growth rate of nearly 20%. Not only did they project that the market will grow at this tremendous rate over the next decade, but they also forecasted that, that growth would be largely driven by the adoption of SGLT inhibitors for the treatment of heart failure, which we are now seeing play out with major heart failure treatment guideline revisions both in the United States and in Europe.

Let me go to Slide 5. Traditionally, there have been 3 pillars of therapy constituting the cornerstones of care in heart failure, ACE, ARBs and ARNIs, beta blockers and MRAs. New guidelines issued by major medical associations of both the United States and Europe have now established SGLT inhibitors as a fourth pillar therapy in the standard of care for heart failure. The European guidelines were issued in August of 2021, and the United States guidelines were jointly issued by the 3 largest cardiology societies just this last month.

Ideally, patients are prescribed drugs from each of these pillars of care. To give your perspective of use, approximately 90% of heart failure patients are on a beta blocker and 80-plus percent are on an ACE or an ARB. SGLT inhibitors are currently only used in approximately 5% of heart failure patients. So we are currently at the very beginning of a tremendous growth opportunity for the utilization in this space.

Let's turn to Slide 6. And the most recent guidelines, SGLT2 inhibitors were elevated to first-line prevention and treatment of heart failure by the 3 largest U.S. cardiology societies. Specifically, SGLT2 inhibitors received the top endorsement for the prevention of heart failure in patients with high cardiovascular risk.

For the treatment of symptomatic heart failure, SGLT2 inhibitors were adopted as a standard of care for heart failure with reduced ejection fraction and received a stronger recommendation than any other class of therapy for heart failure with mildly reduced [ejection] fraction and heart failure with preserved ejection fraction. The United States guidelines are also highlighted the need to improve optimization of medical therapies during heart failure hospitalizations when changing therapy can have a long-term benefit to patients. This particular point of treatment intervention was the focus of our SOLOIST recent heart failure study, which was cited in the guidelines.

I want to provide a quick update to -- on the next slide, LX9211, which is our selective inhibitor of AAK1. We believe LX9211 has the potential to overcome many of the shortcomings of current therapies and could become a welcome new innovation for those suffering from neuropathic pain on a daily basis. We made significant progress over the last few months in our 2 ongoing Phase II proof-of-concept studies and expect top line results in the near term.

For RELIEF-DPN, our study in diabetic peripheral neuropathic pain, I am pleased to report that we have completed enrollment and the final patients are now reaching the end of their treatment periods. I can also report that we exceeded our patient number goal for the study, and we expect to report top line results by the end of June 2022. For RELIEF-PHN, our study in postherpetic neuralgia, we continue to enroll patients and expect to report top line results in the third quarter of 2022.

With that, I'd like to invite Jeff to take us through the financial results for the first quarter of 2022. Jeff?

Thank you, Lonnel. I will provide some key aspects of our first quarter 2022 financial results. More financial details can be found in the press release that we issued earlier today and in our upcoming 10-Q SEC filings. We ended the quarter with $86.5 million in cash and investments. During the first quarter, we entered into a loan facility with Oxford Finance that provides us with up to $150 million in borrowing capacity, of which an initial $25 million tranche was funded at closing.

This loan facility provides us with access to a committed source of funding to support commercial preparations and the potential launch of sotagliflozin in heart failure, along with substantial flexibility -- financial flexibility as we approached the planned resubmission of our NDA for sotagliflozin and heart failure and expected top line results from the 2 Phase II proof-of-concept studies of LX9211 in neuropathic pain.

Current capital and the flexibility to draw down from the loan facility upon FDA acceptance and approval of our planned sotagliflozin new drug application resubmission, we anticipate that we will have sufficient resources to manage our operations through the planned launch of sotagliflozin into market. As indicated in our press release this morning, we had minimal revenues for the first quarters of both 2022 and 2021.

Research and development expenses for the first quarter of 2022 increased to $14.9 million from $12.6 million for the corresponding period in 2021, primarily due to increases in professional and consulting costs related to our new drug application for sotagliflozin.

Selling, general and administrative expenses for the first quarter of 2022 increased to $8.5 million from $8.3 million for the same period in 2021, primarily due to increases in personnel and external expenses relating to preparations for the commercial launch of sotagliflozin. In total, net loss for the first quarter of 2022 was $23.5 million or $0.16 per share as compared to a net loss of $21 million or $0.15 per share in the corresponding period of 2021. Our net loss for the first quarter of 2022 and 2021 included noncash stock-based compensation expense of $2.8 million and $2.9 million, respectively.

I would now like to turn the call back to Lonnel.

Thanks, Jeff. Before taking your questions, I would like to close out by summarizing our key anticipated milestones and events: First, we plan to resubmit the new drug application for sotagliflozin and heart failure this month and plan to launch sotagliflozin in heart failure if approved in the first half of 2023; next, we are expecting top line results from our RELIEF-DPN study by the end of June, and we anticipate the top line results from our RELIEF-PHN study in Q3.

With that, I'd like to pause now and ask the operator to open the call to take your questions.

(Operator Instructions)

Speakers, our first question is from the line of Yigal Nochomovitz of Citi.

This is Carly on for Yigal. I know we don't have too many details at this stage, but we wanted to get your thoughts on this morning's announcement that the DELIVER study for DAPA in has HFpEF worked, does that impact at all how you're thinking about a marketing angle for sotagliflozin?

Carly, great question. And so let me give some perspective and then I'll turn it over to Craig, our Chief Medical Officer. We anticipated that they will have success here, just like Jardiance has had success. And I give perspective only to say, in order for this market to grow the way we believe it will, SGLTs across the board have to be consistent to some degree in how it delivers this data relative to this new category of HFmEF and then HFpEF. And so we see that happening and that's consistent, and that's good news because that gives everyone confidence that the SGLTs truly can become the primary standard of care in this market. So that's the good news.

However, we've always stood by the uniqueness of sotagliflozin and its ability -- when you add the SGLT1 into the mix, you do get some uniqueness, particularly in certain populations, such as how we define recent and worsening heart failure. With that, I'm going to turn it over to Craig to give his perspective.

Well, Carly, I think there are 3 or 4 main points that I'd like to cover, and I think Lonnel did a good job framing it already is that we believe that the top line announcement from AstraZeneca this morning via press release reaffirms the importance of SGLT inhibitors as the foundation of care in the treatment of patients with heart failure. The second is there were no surprises in our view, from the DELIVER results because we believe they are very similar to the EMPEROR-preserved population. And as a reminder, that is a population of patients that have a history of heart failure, but not necessarily recent heart failure. And in fact, the results from DAPA on the DELIVER study are only about 10% of the patients had a recent hospitalization for heart failure defined by less than 30 days.

So we believe that it reaffirms the uniqueness of the SOLOIST population where 100% of the patients had been hospitalized and 50% of them were started on sotagliflozin during their hospitalization and the other 50% within 3 days of the relief from the hospital of those patients for a heart failure hospitalization.

The other important difference between SOLOIST and DELIVER similarly between the DELIVER and EMPEROR-preserved is a very low or relatively low percentage of patients are on guideline directed medical treatment when you think about the other pillars of care being beta blockers, ACE, ARBs, ARNIs and MRAs. So we believe that the DELIVER results reaffirm the benefits of the class, but also reinforce the uniqueness of the SOLOIST population. And frankly, it is the value proposition, we believe, of the dual inhibition of both SGLT1 and the SGLT2 with the benefits, as we showed at ACC in reduction in stroke and heart attack in at-risk patients for heart failure and the uniqueness in the benefit and rapid onset of benefit in those with a recent heart failure event.

Great. That's really helpful. Yes. And I guess just one follow-up related to that. We also wanted to get your latest perspective on the Impulse data from Lilly as it seems they now have data for EMPA in a pretty similar patient population to SOLOIST. So I guess, how do you make the argument that sota is the better choice when initiating therapy in the hospital or very soon after discharge.

Great question, Carly, but I'm going to allow Craig to maybe dismiss some of the similarities you just listed, but Craig?

Yes. Thank you, Lonnel. Again, we believe actually, it reinforces the value proposition of sotaglifosin. And if you look at the Impulse study, they did not have hard clinical endpoints as their primary endpoint. It was, let's call it, a win ratio, which combines patient-reported outcome benefits and the hard endpoints that composite endpoint of cardiovascular death, hospitalization for heart failure, and unscheduled emergency heart failure visits. If you try to compare like versus like, which is just the hard endpoints, that 3 composite endpoint of cardiovascular death and then the others heart failure, hospitalization and unscheduled emergency visits.

If you look at the Impulse results at 30 days, they actually show a p-value, point estimate, that is to the right of what. So actually, they do not show a reduction in those hard endpoints unlike sotagliflozin at 30 days and at 90 days, that endpoint still does not achieve significance. And I think as we've shown repeatedly with SOLOIST, and I hope that other data throughout the year will continue to reinforce that is, again, we see that benefit in reduction in early readmissions for heart failure-related events that we, again, are attributing likely to the unique and added benefits of SGLT1 inhibition.

Got it. And then just one last question, I guess, in terms of the NDA resubmission, have there been any unexpected hurdles or issues in that process?

Another great question, Carly. No, when we found the technical error that we -- we initiated a conversation with the FDA and we drew our application. We took the time and care to go through our entire application again, go through everything that we did from soup to nuts to make sure that we captured everything we need to capture. We did ask for meeting with the FDA because on our plan to resubmit, we want to make sure that there was great alignment between us and the agency. They granted us that meeting, which was good for that to happen. And then ultimately, we walk them through what we have done to make sure that we have gone through our data -- gone through our entire submission, and we have great confidence that we'll be submitting a high-quality application. That meeting took place very recently here toward the end of April. And now at this point, we have a pretty clear path to refiling the resubmitting the application in the next few weeks.

Your next question is from the line of Jessica Fye of JPMorgan.

I wanted to ask on 9211 heading into the Phase II data. What's the effect size or the delta that you want to see to have confidence that this will be a product that can drive a clinically meaningful benefit once you move into a Phase III, right? Like do you want to have some cushion in the Phase II result to kind of give you that increased confidence? And what is that number?

Jessica, always great questions, and we have not disclosed that number. What I will say, this is the first time that we've put LX9211 into a Phase II trial like this. And what we're looking for is that translation of what we saw preclinically into him and use. And we've given us ourselves a good chance of being able to see a strong signal. We powered our studies to see a signal, but we haven't identified openly to what that is. But I will say that we'll be very clear once we have the data in hand here very shortly.

When we communicate, we'll communicate exactly what that delta is. This is a very unique mechanism. This is a very different mechanism. AAK1 is a very different mechanism. We're running it in multiple studies because we want to validate. Whatever you find in 1 study, you want to validate any other because the neuropathic pain market is a very large market made of many different indications.

And if we can show a signal across the board in this market, then it would inform us of how do we prepare for a Phase III study. So we'll give you a lot more clarity once we present the data when we have it in-house.

(Operator Instructions)

Next question is from the line of Joseph Stringer of Needham & Company.

Two quick ones from us. One, can you provide us with any updates on ex U.S. partnership discussions and how those have been playing out? And then secondly, on the pain program, the -- do you see the assuming positive signals from the DPN trial in July -- excuse me, in June, with the postherpetic neuralgia results in 3Q '22, that -- would there be gating in any way to sort of advancing the pain program.

Let me turn both those over to Jeff.

Yes. So the first -- your first question on the ex U.S. partnership. I mean -- I'm assuming you're talking about sotagliflozin. And so sotagliflozin is a product that we -- so we, as a company, don't really have any ambition of commercializing outside of the U.S. And so our intention is to try to find a partner. Our expectation is that going through the FDA process and getting an approval in heart failure is going to bolster that effort.

And so we're moving along activities on the partnering front in parallel with our work on the NDA. So I think that, that's still something that we have an ambition to do. But I wouldn't try to lead people to think that it's going to happen in the very near term.

The second is relating to LX9211 in the 2 different studies. I mean both of these studies are -- they're independent views on 2 different types of neuropathic pain. Diabetic peripheral neuropathic pain is a more heterogeneous indication. And it has more variability, which is one of the reasons why we did a larger study and we're also doing dose ranging in that study. Postherpetic neuralgia tends to be more homogeneous, but it's a smaller study. I think both of these have the ability to independently support the mechanism in neuropathic pain.

Obviously, diabetic peripheral neuropathic pain is a more attractive indication. So that's one of the reasons why we invested so much in that indication, but both of them have important things to tell us scientifically about the mechanism. I would not say that postherpetic neuralgia study is gating in any way. It's going to provide us with additional information, but at first, if we succeed in diabetic peripheral neuropathic pain study, that's going to stand on its own and be independent evidence of the value of the mechanism. So try -- hopefully, that provides a little bit of perspective. If you have any other questions to follow up, happy to take those.

Yes. And I think if I would add is that what we've always said is once we have a good clear signal, it really indicates multiple areas that we can approach with this target and this compound all across neuropathic pain. As you know, when you start to produce or do work in this area for Phase III studies, you have to do a number of Phase III studies. And so studying that signal and the level of signal you get across 2 unique populations will help inform how we would develop further Phase III studies.

It also will inform how we also look at other indications that we may pursue with this mechanism. So the field is very, very broad, large and very opportunistic, should we get a strong signal either in either of these, in both of these, and I think it will set the pathway for Phase III development.

Thank you, participants. I'll now turn the call back over to CEO, Lonnel Coats, for any closing remarks.

Well, as always, thank you for joining us this morning. We appreciate it. Many people working very hard here to advance our near-term milestones. I think we have a wonderful opportunity to continue to engage with the FDA and resubmit our application and have further dialogue on the other side of resubmitting an application to make sure we have the opportunity to have an approved product in a very expansive and growing market.

Everything that we see today in terms of what DELIVER has just come out with is predictable. And the benefit that we see for sotagliflozin holds, the value proposition we've always shared about going into hospitals and pushing out from hospitals with the SOLOIST data that holds the 3 large cardiology societies coming on board at this point was much faster than we thought they would come on board very consistent with the ESC in Europe. And so we continue to see a remarkable growing market and growing opportunity in a remarkable pathway for sotagliflozin.

And then for LX9211, to the questions that were asked, should we get the strong signals that we're looking for in DPN and certainly, if that carry forward to the PHN, it really informs us on further development of the compound and the investments that we need to make to really turn this into some remarkably special, very unique target that was discovered in our collaboration with BMS, a 10-year of DISCOVERY collaboration that Lexicon has fully wholly-owned rights to that asset.

And therefore, anything that comes out of that, that we think will be substantial, will create a substantial new opportunity to advance a unique therapeutic option in neuropathic pain. So a lot coming up in the next couple of months, and so we'll keep communicating as we have more to say. Thank you very much again, and I'll end the call here.

Thank you, speakers. This concludes today's conference call. Thank you all for joining. You may now disconnect.