Lexicon Pharmaceuticals, Inc. (LXRX) Q1 2022 Earnings Report, Transcript and Summary

Good morning. This is Jesse, and I will be your conference operator today. At this time, I would like to Welcome everyone to the Lexicon Pharmaceuticals, Inc’s First Quarter 2021 Earnings Conference Call. Please note 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 will now turn a call over to your host, Char 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 the 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 the statements relating to the safety, efficacy, and the therapeutic and commercial potential of sotagliflozin, LX9211 and our other drug candidates. These statements may include characterizations of expected timing and results of clinical trials of sotagliflozin, LX9211 and our other drug candidates; and a 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 plants 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 plan NDAs resubmission for sotagliflozin and heart failure, and our discussions with the FDA regarding sotagliflozin relating to heart failure and 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 dependents 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 list in a description of the risk 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, Charles, and good morning, everyone for joining us on the call. 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 SGLT1/2 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 receive 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 relative 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 heart failure market. If approved, the overall heart failure market is already a very large multi-billion 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 and 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 many 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%. Now 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 three pillars of therapy, constituting the cornerstones of care in heart failure ACE, ARBs and ARNIs, beta blockers and MRA’s. New guidelines issued by major medical associations of both the United States and Europe have now established SGLT inhibitors as a fourth pillar of therapy and the standard of care for heart failure. European guidelines were issued in August of 2021. And the United States guidelines were jointly issued by the three 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 are on an ACE [or ARC]. 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. In the most recent guidelines SGLT2 inhibitors were elevated to first line prevention and treatment of heart failure by the three largest U.S. cardiology societies. Specifically SGLT2 inhibitors received the top endorsement for the prevention of heart failure and patients with a 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 in 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 LX9211 - on the next slide LX9211, which is our selective inhibitor of AAK1. We believe that LX9211 has to 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 two ongoing Phase II proof-of-concept studies and expect top-line results and in near-term. For RELIEF-DPN, our study in Diabetic Peripheral Neuropathic Pain, I’m 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 post-herpetic neuralgia, we continue to enroll patients and expect to report top-line results in the third quarter of 2022. With that, I would 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 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 filing. 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 trench 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 financial flexibility, as we approached the planned resubmission of our NDA for sotagliflozin in heart failure and expect the top-line results from the two 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 at sotagliflozin. In total, net loss for the first quarter of 2022 was $23.5 million or $0.16 per share as compared to and 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 non-cash stock based compensation expense of $2.8 million and $2.9 million respectively. I would now like to turn the call back to on 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 would like to pause now and ask the operator to open the call to take your questions.

Thank you speakers. Participants we will now begin the question and answer session. [Operator Instructions] First question is from the line of Yigal Nochomovitz of Citi. Your line is now open.

Hi this is [Carli] (Ph) 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 have worked. Does that impact at all how you are thinking about the marketing angle for sotagliflozin?

Well Carli great question and so let me give some perspective and then I will turn it over to Craig, our Chief Medical Officer. We anticipated that they would 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 half math and half path. And so we see that is happening and that is consistent. And that is good news because that gives everyone confidence that the SGLTs truly can become the primary standard of care in this market. So that is the good news. However, we have 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 awards in heart failure. With that I'm going to turn over to Craig to give his perspective.

Thank you, Lonnel. I just want to make sure you can hear me alright.

Yes, we can hear you, Craig.

Terrific. Well, Carli, I think there are three or four are main points that I would 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 a 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 a hundred percent of the patients had been hospitalized and 50% of them were started on sotagliflozin during their hospitalization and the other 50% within three 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 DELIVER and EMPEROR-Preserved is that 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, ARNI and MRA. 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 valued proposition we believe of the dual inhibition of both SGLT1 and 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 and the benefit and rapid onset of benefits in those with a recent heart failure event.

Great. That is really helpful. Yes. And I guess just one follow-up related to that. We also wanted to get your latest perspective on the EMPULSE 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 plan to make the argument that SOTA is the better choice when initiating therapy in the hospital or very soon after discharge.

Great question, Carla, but I'm going to allow Craig to maybe dismiss some of the similarities you just exempt - you just listed, but Craig.

Yes. Thank you, Lonnel. Again, we believe actually reinforces the value proposition of sotagliflozin. And if you look at the EMPULSE study, they did not have hard clinical endpoints as their primary endpoint. It was what is called the wind ratio, which combines patient reported outcome benefits, and the heart endpoint that composite endpoint of cardiovascular death, hospitalization for heart failure, and unscheduled emergency heart failure visit. If you try to compare like versus like, which is just the hard endpoints, that three composite endpoint of cardiovascular death, and then the others, heart failure hospitalization and unscheduled emergency visits. If you look at the EMPULSE 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 endpoint unlike sotagliflozin at 30-days. And at 90-days that end point still does not achieve significance. And I think as we have shown repeatedly with SOLOIST, and I hope that other data throughout the year we 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. Has there been any unexpected hurdles or issues in that process?

Another great question Carla. No, when we found the technical error that we initiated conversation with the FDA, and withdrew 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 needed after. We didn't asked for a meeting with the FDA, because 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 walked them through what we have done to make sure that, we have gone through our entire submission and we have great confidence that we will 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 or resubmitting the application in the next few weeks.

Perfect. Thanks so much.

You bet.

Your next questions from the line of Jessica Fye of JP Morgan. Your line is now open.

Hey guys. Good morning. Thanks for taking my question. Wanted to ask on 9211 heading into the Phase II data. What is 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? 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 have put LX9211 into a Phase II trial like this, and what we are looking for is that translation of what we saw pre-clinically into human use. And we have given 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 will be very clear once we have the data in hand here very shortly. When we communicate, we will communicate exactly what that Delta is. This is a very unique mechanism. This is a very different mechanism. AAK1 is a very different me. We are running it in multiple studies because we want to validate whatever you find in one study. You want to validate any other, because their neuropathic pain market is a very large market made with 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 Phase III study. So, we will give you a lot more clarity once we present the data, when we have it in-house.

Great. Thanks a lot.

You bet.

[Operator Instructions]. Next questions from the line of Joseph Stringer of Needham & Company. Your line is now open.

Hi. Good morning. Thanks for taking our questions. 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, do see the assuming positive signals from the DPN trial in June, would the posturepedic neurogenic results in 3Q 2022, that those be gating in any way that sort of advancing the pain program? Thanks for taking our questions.

Let me turn both those over to Jeff.

Yes. So your first question on ex-U.S. partnership. I'm assuming you are talking about sotagliflozin, and so sotagliflozin is a product that we as a Company don't really have any ambition 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 and heart failure is going to bolster that effort. And so we are moving along activities on the partnering front in parallel with our work on the MBA. So I think that is still something that we have an ambition to do but I wouldn't try to lead people to think that it is going to happen in the very near-term. The second is relating to LX9211 and the two different studies. I mean, both of these studies are they are independent views from two different types of neuropathic pain. Diabetic peripheral neuropathic pain is a more heterogeneous indication, and it had more variability, which is one of the reasons why we did a larger study. And we are also doing dose ranging in that study. posturepedic neuralgia tends to be more homogeneous, but that is 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 more attractive indication. So that is 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 the posturepedic neuralgia study is gating in any way, it is going to provide us with additional information, but if we succeed in diabetic peripheral neuropathic pain study that is going to stand on its own and be independent evidence of the value of the mechanism. So hopefully that provides a little bit perspective if you have any other or questions to follow-up, happy to take those.

Yes. I think Jeff if I would add is that what we have 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 a level signal you get across two unique populations we 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, then I think it will set the pathway for Phase III development.

Great. Thank you.

You bet.

Thank you, participants. I will 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 are 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 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 and the value proposition we have always shared about going into hospitals and pushing out from hospitals with the SOLOIST data that holds the three 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 and a remarkable pathway for sotagliflozin. And into LX9211 to the questions that were asked, should we get the strong signals that we are looking for in DPN and certainly that carried forward to the PHN, it really informs us on and 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 that was discovered in our collaboration with BMS a 10-year of discovery collaboration, 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 coming up in the next couple of months, and so we will keep communicating as we have more to say. Thank you very much again and I will end the call here.

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