Lexicon Pharmaceuticals, Inc. (LXRX) Q3 2022 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Lexicon Pharmaceuticals Inc. Third Quarter 2022 Earnings Conference Call. At this time all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on November 09, 2022. I would now like to turn the conference over to Mike Kelly. Please go ahead, sir.

Thank you, Michelle. Good afternoon and welcome to the Lexicon Pharmaceuticals third 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 afternoon, Lexicon issued a press release announcing our financial results for the third 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 the 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'll be making forward-looking statements, including statements relating to the safety, efficacy, regulatory status and 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. This call may also contains forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, launch and 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 our NDA 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 in preclinical studies of sotagliflozin, LX9211 and our other drug candidates; our dependence upon strategic alliances and other third-party relationships; 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 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, Mike. Good afternoon everyone and thank you for joining us. As expected, the third quarter of 2022 was an active period for both of our lead programs sotagliflozin, our dual SGLT1 and 2 inhibitor that we're developing for heart failure and LX9211, our AAK1 inhibitor that we are developing for neuropathic pain. Let me jump in and tell you that I'm very pleased to report we had our mid-cycle review meeting with the FDA earlier this week for NDA for sotagliflozin for the treatment of heart failure. The agency indicated that there were no significant review issues that may impact approvability of the NDA that it had identified no major safety concerns and that it has no plans to hold in an advisory committee meeting. So everything remains on track for an anticipated PDUFA target action date in May of 2023. We continue to believe the unique data from our SOLOIST-WHF trial and recent and worsening heart failure may provide a point of differentiation and strong entry into the heart failure market if approved. Just this past weekend, unique new data from the SOLOIST-WHF trial was presented at the American Heart Association Scientific Sessions demonstrating sotagliflozin significant effects in reducing cardiovascular mortality and the risk of hospital readmission at 30 and 90 days following discharge after an initial event. This is a significant finding that we believe could provide tremendous benefit to patients, physicians, hospitals and payers and help differentiate sotagliflozin within the current heart failure treatment paradigm. We look forward to continuing to work with FDA throughout the remainder of the review period. And if approved for marketing, we are expected to commercially launch sotagliflozin in the U.S. in the first half of next year and preparations for which are already well underway. Moving to our LX9211 program for neuropathic pain. As you know, we announced positive top line results from our Phase II proof-of-concept study of LX9211 in painful diabetic neuropathy earlier this year. Final data from this successful trial will be presented this coming Monday at the 16th Annual Pain Therapeutic Summit in Washington, D.C., which will be followed by a conference call discussing the final results in detail and their importance in this area of significant unmet medical need. Also we completed enrollment in a second Phase II proof-of-concept study of LX9211 in post-herpetic neuralgia earlier this quarter with top line results anticipated to readout before the end of this year. We believe LX9211 represents an innovative approach to treating neuropathic pain and if approved could provide a significant improvement to the treatment landscape for the benefit of patients. Now I will turn the call over to Jeff to put into context some of the recent analysis from the sotagliflozin program. Jeff?

Thank you, Lonnel. More than 6 million people in the United States are living with heart failure with about a million new cases diagnosed each year and these numbers are on the rise. Failure is already a very large multi-billion dollar market that is poised for substantial growth due both to increasing prevalence and to the anticipated adoption of SGLT inhibitors as an important element of the standard of care driven in part by new guidelines recently issued by major cardiology societies in the United States and elsewhere recommending their use in treating heart failure. Heart failure is the leading cause of hospitalization for Americans over 65 with approximately 1 million hospitalizations for heart failure annually. Patients who are hospitalized for heart failure are very likely to return with approximately 25% of patients being readmitted to the hospital within 30 days of discharge and 65% within one year. These hospital readmissions are burdensome for the patient, the provider and the healthcare system overall. There is a substantial unmet need for better treatment options for patients and a strong incentive for providers and hospitals to identify new approaches to reduce hospital readmissions. As Lonnel mentioned, Dr. Bertram Pitt presented an important post hoc analysis of some unique data from the SOLOIST-WHF trial at the American Heart Association Scientific Sessions this past weekend assessing sotagliflozin's effects in reducing cardiovascular mortality and the risk of hospital readmissions at 30 and 90 days following discharge from a heart failure hospitalization. I will now turn the call over to Craig to review some of the data from Dr. Pitt's AHA presentation and to discuss the importance of these findings.

Okay, Jeff. As a reminder, the SOLOIST-WHF trial enrolled approximately 1,200 patients with type 2 diabetes and worsening heart failure. Double-blind randomized treatment began either in the hospital or within three days following discharge. There are approximately 50% of patients in each of these categories. The primary endpoint for this trial was achieved with a statistically significant and clinically meaningful reduction of 33% in the composite of total cardiovascular death, hospitalization for heart failure and urgent heart failure visits with the need to treat only four patients to avoid one event, a finding which is unsurpassed within the SGLT inhibitor class. The objective of Dr. Pitt's post hoc analysis was to evaluate the efficacy of sotagliflozin versus placebo at reducing hospital readmissions and mortality within 30 and 90 days after discharge from a heart failure hospitalization among the patients who began study treatment on or before discharge. As a reminder, there were no differences between these two groups for baseline characteristics or the primary endpoint, presented here are the results for cardiovascular death and heart failure related events for the first 30 days post-discharge. You can clearly see the sotagliflozin arm in blue begins to separate from the placebo arm in red very early on reaching a significant reduction in events of 51% compared to placebo by 30 days with a P value of zero equals 0.023. Now extending to 90 days post-discharge, you can see that the separation and reduction are maintained with a reduction in events of 46% compared to placebo by 90 days with a P value of 0.004. The authors concluded that sotagliflozin significantly reduces the 30 and 90 day rates of cardiovascular mortality and heart failure related events, as well as total mortality by 90 days post discharge when administered prior to hospital discharge after an episode of worsening heart failure. These findings are unique and they underscore the benefits of early initiation of evidence-based heart failure therapy. Sotagliflozin is the first compound to demonstrate a reduction on both mortality and heart failure events for treatment initiated during a worsening heart failure hospitalization. We certainly agree with the author that these results have important implications for patient quality of life and healthcare costs and expect that these data to be key points of differentiation in the marketplace should sotagliflozin obtain regulatory approval. Now, turning briefly to our LX9211 program. LX9211 is a potent, highly selective small molecule inhibitor of a novel target, the adapter associated kinase one or AAK one in a number of clinically relevant animal models of neuropathic pain. LX9211 demonstrated consistent significant reductions in pain scores even when compared to positive controls such as gabapentin. LX9211 achieves high levels of drug in the CNS and importantly, the mechanism of action of LX9211 is independent of the opioid pathway. In Phase 1 studies LX9211 was shown to be well tolerated with a pharmacokinetic profile supportive of once daily dosing. Lexicon has been granted fast track designation by the FDA for diabetic peripheral neuropathic pain. As we discussed during our last quarterly call, the primary endpoint of the relief DPN 1 study was achieved with a statistically significant reduction in average daily pain score or ADPS at week six compared to placebo in the low dose arm. It was an absolute reduction in ADPS from baseline of 1.39 points with a P value of 0.007 compared to placebo. The high dose arm achieved a reduction from baseline of 1.27 points with a P value of 0.03 compared to placebo narrowly missing the significant threshold of 0.28 but showing consistent effects. Importantly, the therapeutic effect was seen early during treatment with separation from placebo being evident and statistically significant by week one in both arms and remaining throughout the treatment period. Also, the drug effect was remarkably consistent across a range of baseline factors including age, sex, background medication, and baseline pain score. Importantly, the patient's reported outcomes, which are a measure of patient's overall wellbeing or experience in the study showed greater improvement in those treated with LX9211 compared to placebo. Adverse events were more frequent in the LX9211 treatment arms, particularly at the higher dose. As expected based on our experience in Phase 1, the most common adverse events observed were dizziness, headache, and nausea would nearly all reported as mild or moderate in nature. What we did not observe in the safety profile of LX9211 were some of the limitations of current therapies for painful diabetic neuropathy such as peripheral edema, increased appetite blurred vision, for dry mouth. The adverse events tended to occur early in treatment suggesting the possibility that they may be associated with the loading dose and given the rapid onset of effects on ADPS, offering the potential for further optimized dosing for both tolerability and efficacy. To summarize, we believe the results of the RELIEF-DPN 1 study support AAK 1 inhibition as a potential new mechanism of action for treating neuropathic pain and the rapid advancement of LX9211 in development for treatment of diabetic neuropathic pain. We believe that 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 are continuing to work to identify and optimize the proper dosing regimens and we are planning to engage in a dialogue with FDA on how best to advance the program into Phase 3 development as quickly and efficiently as possible. We believe this program would benefit from a partnership that offers the right strategic fit for our organization and stakeholders and are engaged in discussions in this regard which we believe will yield a positive outcome. In the meantime, we are proceeding with our plans for further development without pause. Lastly, a reminder that the final results of the RELIEF-DPN trial beyond which we have already reported as top line results will be presented at an oral presentation this upcoming Monday, November 14 at the 16 Annual Pain Therapeutic Summit in Washington DC. Immediately following the presentation, we will host a conference call at 5:00 PM Eastern time to review the final results and we invite you all to participate the details for which can be found on our website. I'd now like to turn the call back to Jeff to take us through the financial results for the third quarter of 2022.

Thank you, Craig. I will provide some key aspects of our third quarter 2022 financial results. More financial details may be found in the press release that we issued earlier today and our 10-Q filed with the SEC. We ended the quarter with $136.2 million in cash and investments. This amount includes net proceeds of $94.3 million from the public offering and concurrent private placement of our common stock that closed in August. Together with our existing capital resources, the proceeds from this recent round of financing provide us with funding to support continued commercial preparations and the potential launch of sotagliflozin in heart failure. Our loan facility with Oxford Finance which provides up to $125 million in additional borrowing capacity gives us substantial financial flexibility as we proceed with preparations for the launch of sotagliflozin, make appropriate investments in research and clinical development and move towards a potential LX9211 partnership. As a result, we anticipate that we will have sufficient resources to manage our operations well into the anticipated launch of sotagliflozin into the market without taking into account any proceeds from or costs assumed by a partner in any partnership that we may establish for LX9211. Now turning to our financial results for the third quarter, As indicated in our press release this afternoon, we add minimal revenues for the third quarters of both 2022 and 2021. Research and development expenses for the third quarter of 2022 decreased to $10.6 million from $15.7 million for the corresponding period in 2021, primarily due to lower external clinical research expenses and professional and consulting costs. Selling, general and administrative expenses for the third quarter of 2022 increased to $12.6 million from $7.3 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 third quarter of 2022 was $23.4 million, or $0.13 per share, as compared to a net loss of $23.1 million, or $0.16 per share, in the corresponding period of 2021. Our net loss for the third quarters of 2022 and 2021 include a non-cash stock-based compensation expense of $2.6 million and $2.7 million respectively. I would like to pause now and ask the operator to open up the call to take your questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Yigal Nochomovitz [Citigroup]. Please go ahead.

Hi. This is Carly on for Yigal. Thanks so much for taking our questions. First, can you confirm whether the FDA requested any additional data or analyses during the recent mid-cycle review meeting?

Great question, Carly. No, they did not request any new data. The package that we submitted was comprehensive enough for their review and therefore we're full steam ahead.

Okay, that's great. And then you had made a comment in the prepared remarks about the potential for a unique label in recent worsening heart failure. Just wondering if you can elaborate a bit on what you believe sort of the ideal label language would look like. Thank you.

Well, that's a great question. I won't get into the specific details as we are certainly engaged with the agency on it, but reasoning worsening heart failure is important. That's the population that SOLOIST studied and therefore we're feeling pretty confident that we will get elements of that population into the label and we'll continue to work through that with the FDA. But we do believe that is a strategically important part of what we're trying to achieve and it is the SOLOIST population, which makes it very, very unique to sotagliflozin.

Okay, great. Thanks for taking our questions.

You bet.

Thank you. The next question comes from Yasmeen Rahimi of Piper Sandler. Please go ahead.

Good afternoon team and congrats on all the updates and also at a great presence at AHA. Maybe we'll start right there for investors who were not able to attend AHA. Can you maybe provide some color on – was there any dataset that was shown from the other SGLT2 class that sparked your interest and that continuously to highlight the differentiation that sotagliflozin brings? Maybe you could provide some commentary there. And then the second question in regards to the Monday's update can you may be shed light on what type of data will we be seeing, we're very much looking forward and then I have a quick follow up.

Well, Yasmeen, thank you very much for the question. I'm going to turn over the call to Craig. I do think just generally the data that we presented at AHA around the 30 to 90 day readmission is very powerful data. And so I'm going to turn it over to Craig to give you his thoughts.

Yes, thank you, Lonnel, and thank you Yas for the question. I guess I'll just answer it by highlighting at the closeout session that was done by the AHA themselves the only SGLT presentation that they highlighted of note was the Pitt 90 day, 30-90 day readmission data. So they specifically called that that data out. And I think that's one of the reasons why we've spent as much time on this call reinforcing that data to show a benefit both in 30 and 90 day hospital readmission and overall mortality I think is meaningful and significant and why AHA themselves called that presentation out for special note in the final closeout session of the meeting.

Thank you. And then…

Yes, and…

Yes, go ahead, Lonnel.

Go ahead. No, no, go ahead, Yas.

No, I was just going to say like maybe for investors who haven't had a chance to look at the other SGLT2 class to generate that type of data. How does that compare? If you could just maybe remind them, that could be very helpful.

Great question. Well, thank you, Yas. So I'll provide a little bit of color to that. And again, I don't want to speak for other companies data, but there was other data that has been similarly presented for empagliflozin and their data does not show a separation until 90 days. At 30 days, there is no difference in the heart endpoints of hospitalization for heart failure or cardiovascular death. There is no benefit in overall mortality at either 30 or 90 days. And at 90 days, the similar endpoints of all cause death or heart failure related events barely achieved significance. And as a reminder and has been presented by Dr. Pitt at 90 days all cause death or heart failure related events for sotagliflozin had a 52% reduction with a P value of 0.0008. So I think that really just summarizes the differences and we believe that it could be in part due to the dual mechanism of action on both SGLT1 as well as SGLT2.

Thank you. And then last quick question on RELIEF-PHN study that's going to readout this quarter. What do you hope to gain from this exploratory analysis? And just remind us also sort of the differentiation of this type of pain versus diabetic neuropathy. And thank you for taking my questions.

Yes, great. Yes, thank you, Yas. And again, I assume that you are referring to what we’re going to be presenting next Monday or for the PHN trial?

Both, yes, both questions actually. What you be presenting on Monday and what will you be presenting from early PHN, yes.

So thank you for the clarification. So on Monday we really hope to present a more fulsome summary of the overall efficacy results, really putting a qualitative metric around the type of pain and the impact across a range of additional factors that are clinically meaningful to patients as we hear from our experts and providers also will be demonstrating or showing data looking at what happens to the patients after they finish treatment because the current standards of care have some liabilities even after you’ve stopped treatment, that it takes a long time for the side effects to resolve. And they have what’s called a rebound effect, where often the patients have an acceleration of their pain if and when they have to stop therapy. So we think that there could be some interesting results presented along those lines in addition to more data on the primary endpoint of the study at the end of six weeks. So we think that Monday will provide some additional very important context regarding the DPN study. Regarding the PHN study that was always designed as a more of a proof-of-concept trial. As a reminder that is a much smaller study and was really looking to validate the mechanism of action and the ability of LX9211 to impact a second neuropathic pain disease state. The traditional advantages of the PHN population is it’s considered a more homogeneous population with a clear etiology of the virus itself damaging the nerve as opposed to DPN, which could have a number of different cause that all result in diabetic painful neuropathy. So while we believe that the PHN results at the end of the year could be interesting and helpful, I think we always anticipated that the DPN study would be the key driver of demonstration of efficacy and the overall safety and tolerability profile of LX9211.

Thank you so much. I’ll jump back into the queue.

Thank you, Yas. Appreciate your questions.

Thank you. The next question comes from Joseph Stringer of Needham & Company. Please go ahead.

Hi, thanks for taking our questions., Two from us. First one, I’m just curious if you can give us your updated thoughts on any potential partnership discussions or sota and HF. Are those still ongoing or active? And then the second question on 9211, just given sort of the unique mechanism of action of that compound. And now that you have some early signals from the DPN trial, would there be any plans to explore other types of pain indications outside of DPN that you could look at? Thanks for taking our questions.

Two great questions. Let me turn them over to Jeff.

Yes. So our plan for surgical placement and heart failure is to get through the FDA process and then we can revisit the outside of the U.S. partnership opportunities. So that’s with respect to the first question. And the second we do have preclinical data across multiple different types of neuropathic pain and models of neuropathic pain. And so we do think that there are other opportunities we’re evaluating what we may want to pursue. The other little element of that that I thought I would probably bring up, just to be sure you’re aware of, is that we did present data just recently in spasticity a couple of different types of spasticity where we have preclinical data. One was in multiple sclerosis related spasticity and the other in spinal cord injury spasticity. Obviously, there are connections between spasticity and pain particularly as it relates to how that operates with the nerves. So there is as we’re thinking about the opportunity for LX9211 more generally, we’re evaluating additional pain states to expand the label. But more generally, there’s a pretty significant opportunity across CNS potentially for LX9211.

Great. Thanks for taking my questions.

Thanks, Joe.

Thank you. There are no further questions at this time. Please continue with closing remarks.

Well, thank you everyone for joining us on the call. And we also appreciate your continued support. So let me close out by summarizing our key milestones. First, we’ve had what I consider to be a successful mid-cycle review meeting with the FDA for our new drug application for sotagliflozin heart failure. We remain track for our PDUFA date, May 2023, and we plan to launch sotagliflozin and heart failure approved in the first half of 2023. So this is a big moment for the company and we’re making the investments to make it real for our investors. Secondly, the final results for the relief DPN study will be presented this Monday, November 14. I really encourage any and all who are interested on just how unique this compound is to perhaps maybe tune into that. That will be at the 16th Annual Pain Therapeutic Summit in Washington, DC And so we will have a lot more data to present and some a lot more color we can put to it when we have our conference call following that meeting. A lot going on here at Lexicon. We’re very proud of where we are. We have good momentum and we look forward to communicating with you as we have more call outs. On that note, thank you again for joining us today.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.