Lexicon Pharmaceuticals, Inc.

Good morning. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Lexicon Pharmaceuticals, Inc. Second Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Mr. Chas Schultz. Please go ahead, sir.

Thank you, Lisa. Good morning and welcome to the Lexicon Pharmaceuticals Second Quarter 2021 Financial Results Conference Call. Joining me today are Lynelle Coates, Lexicon's President and Chief Executive Officer, and Jeff Wade, Lexicon's Executive Vice President of Corporate and Administrative Affairs and Chief Financial Officer. Earlier today, Lexicon issued a press release announcing our financial results for the second quarter of 2021, 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 an update on our clinical programs, 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 LX9211, Sotocoflozin, and other drug candidates. These statements may include characterizations of the expected timing and results of clinical trials of LX9211, Sotocoflozin, and other drug candidates, and the regulatory status and market opportunity for those programs. This call may also contain forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, 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, NDA filing for Sotocoflozin and heart failure, and our discussions with the FDA regarding Sotocoflozin relating to heart failure and type 1 diabetes, the timing and results of clinical trials and preclinical studies of LX9211, Sotocoflozin, and 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 research and development activities. For a list and 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 Lynell Coates.

Thank you, Chas. Good morning, everyone, and thank you for joining us on the call. As we noted in our press release this morning, we remain on track to submit our new drug application for Sotocliflozin in heart failure late this year, with rising confidence in our opportunity to deliver unique value in an area of high unmet need. Our confidence is supported by the data from our soloist study in patients who had recently been hospitalized for worsening heart failure, and results from both our soloist and scored studies that demonstrated a reduced risk of cardiovascular death, hospitalization for heart failure, and urgent visits for heart failure that was consistent across the full spectrum of left ventricular ejection fraction. The results of these studies addressed the areas of greatest unmet need in heart failure. Better treatment options for patients hospitalized for worsening heart failure and effective treatment options for the large population of patients with normal or preserved left ventricular ejection fraction for whom there are essentially no approved therapies. A series of recent developments since our last quarterly call have further reinforced our confidence in the value of sotagiflozin and validated important areas of differentiation in ways that we believe will translate into benefits for millions of people with heart failure and type 2 diabetes. Importantly as well, we have completed the work we have described on previous calls to more fully evaluate the intended market for sotagiflozin. It has become clear that this is a market with a concentrated prescriber base, one that we believe can be efficiently addressed with a focused and modestly sized sales force. Slide four, let's get into some of the metrics of the market opportunity. Now, there are nearly a million hospitalizations per year in the United States for heart failure. Heart failure is the leading cause of hospitalizations of Americans 65 and older. The hospitalization setting in patients with worsening heart failure is exactly where our soloist study generated important evidence about the impact of sotagliflozin. A majority of heart failure patients have heart failure with preserved ejection fraction, or HFPEF, that is left ventricular ejection fraction greater than or equal to 50%. It is these HFPEF patients who are in the greatest need for effective therapies, given that at present they essentially have no real approved treatment options. Finally, heart failure is very frequently associated with type 2 diabetes. Some of the most recent evidence suggests that approximately 44% of heart failure patients have type 2 diabetes, and this proportion appears to be growing over time. Patients with diabetes, moreover, tend to be overrepresented in the higher unmet need area of HFpEF. Next slide. Our SOLUS clinical trial was designed to evaluate Sotocoflozin in the context of worsening heart failure. Patients who were admitted to the hospital with an episode of acute decompensated heart failure were initially stabilized, then were randomized to either Sotocoflozin or placebo on top of standard of care, either before or within three days following discharge from the hospital. About half of patients started therapy before discharge from the hospital, with a balanced starting therapy promptly following discharge. This is a unique study design addressing the unique needs and challenges of worsening heart failure. And the results were compelling, with a 33% relative risk reduction in the primary endpoint of cardiovascular death, hospitalization for heart failure, and urgent visits for heart failure. We recognize this was a significant risk to take in going after this population, and we were pleased with the remarkable outcome. Now, why is that important? For one of the developments since our last earnings call that has increased our confidence in the opportunity for Soticoflozin. At the American College of Cardiology scientific sessions in May, data were presented from a recently completed study of a leading brand of heart failure medication, a multi-billion dollar drug, which failed to show a benefit in worsening heart failure. I believe this result came as a surprise to many attendees, given the product's commercial success and heart failure. The result obviously opens an opportunity relative to the market leader, given that results from Soloist showed a clear benefit from treatment with Sotocliflozin in people who had recently been hospitalized for worsening heart failure. But it is also a reminder that worsening heart failure represents a distinct set of patients, that success in heart failure generally does not necessarily translate to the unique needs and challenges of this patient population, and that the results of the SOLUS study offered an opportunity for sustained differentiation, given its focus on those unique needs and challenges. On the next slide, turning to HFpEF specifically, not only does the population of HFpEF patients have the greatest unmet need, it has also been growing as proportion of overall heart failure patients. This particular figure shows how the proportion of HFPEF patients in a hospitalized setting has been increasing over time. Over the years, a number of new therapies have been introduced for treatment of heart failure with reduced ejection fraction, or HFREF, but while data has, may come from others, and we shall see, so far, only sotocoflosum has published data showing clear clinical benefit across the full range of the more difficult to treat HFPEF population. In this regard, at the same American College of Cardiology scientific sessions in May that I mentioned above, Dr. Deepak Bhat presented pooled data from SOLOIS and SCORD, shown here, demonstrating sotocoflosan's benefit across the full spectrum of left ventricular ejection fraction, including patients with reduced ejection fraction below 40%, patients with mid-range ejection fraction between 40% and 50%, and patients with preserved ejection fraction greater than or equal to 50%. We believe that the data presented were very well received as the current leading branded heart failure medication is indicated with a label outlining that benefits are seen primarily in patients with below normal left ventricular ejection fraction, and there are no approved therapies for people with ejection fraction equal or greater than 50%. You can clearly see in these data the impact of sotagliflozin on all patient populations across the entire spectrum of left ventricular ejection fraction. In the traditional HF-REF population with ejection fraction less than 40%, there was a 22% relative risk reduction in the primary endpoint of the studies of total cardiovascular death, hospitalizations due to heart failure, and urgent heart failure visits. In the mid-range ejection fraction, there was a 39% relative risk reduction. And on the right, you see that a highly significant relative risk reduction of 37% was achieved in the HFpEF population, a robust result that has not been seen from any other therapy to date. So to recap, we have rising confidence in the opportunity for us to bring soda flows into market. Importantly, in the United States, which we think is the most substantial market opportunity with or without a partner, we have compelling data from Soloist and SCORD that address the areas of greatest unmet need in heart failure, better treatment option for patients hospitalized for worsening heart failure, and effective treatment options for a large population of patients with HFPEF whom there are essentially no approved therapies. We believe that this will be a rapidly growing market. It may actually grow more rapidly if there are more treatment options for HFpEF, which represents a majority of heart failure patients for whom, to date, there have been no truly effective options. Importantly, this is a market that our work in the cage can be addressed with a focused, modestly sized sales force. These factors combine to give us the opportunity to generate significant value by bringing Soticaflozin to market on our own and or to set a bar by which to judge the value of any potential partnership. Finally, we are encouraged by the feedback from our recently completed pre-NDA meeting with the FDA, which has added to our sense of urgency and factored into our decision to accelerate our efforts to prepare for potential U.S. commercial launch in 2022. One of the important elements of this acceleration of these preparations was just announced this morning. This coming Monday, Dr. Craig Grunowitz will be joining us as our chief medical officer. Many of you probably know of Dr. Grunowitz, who has extensive industry experience in scientifically differentiating cardiovascular medicines, as demonstrated by his track record at Ameren and Merck, among others. Craig has a lot of work ahead, and we welcome him to our leadership team. Now on to type 1 diabetes. We continue to believe that sotagiflozin demonstrated a positive benefit-risk profile in the largest Phase III development program ever conducted in type 1 diabetes, and that it has the potential to become an important new treatment option as an adjunct to insulin for type 1 diabetes patients. We requested an opportunity for an administrative hearing with the FDA on whether there are grounds for its previous denial of our NDA for type 1 diabetes. I am pleased to say This week, the FDA indicated that it is willing to have a good-faith discussion with Lexicon on a potential path forward for the Sotocliflozin NDA, and we are working with CDER on a joint request to hold the administrative hearing process in abeyance while those discussions are pursued. While it is early, we are looking forward to those discussions, and we are hopeful that together with the FDA, we can quickly find a potential path forward. We move to the next slide on LX9211. We have seen a meaningful pickup in enrollment in our two phase two proof of concept studies for LX9211 and neuropathic pain, while maintaining as a priority the importance of proper patient selection that is built into this study design. Our mitigation efforts have begun to take effect, and the COVID-19 environment has improved relative earlier this year, but not enough to achieve top line results by the year end. We now expect to have top-line results from these studies in the first half of 2022. I'd like to take a quick moment to wrap up with our pipeline. We continue to make great strides in advancing our pipeline that has been built on a rich scientific platform and years of research and development. In addition to the programs that we are developing directly, we do have interest in the form of milestones and royalties and other programs that have been developed or facilitated using our technology. We have a milestone in royalty interest relating to Tessera's development and potential future commercialization of telotretate ethyl and biliary tract cancer in accordance with the terms of the agreement under which we sold telotretate ethyl and related assets to Tessera last year. We also have a milestone in royalty interest in UTTR1147A, a Genentech IL-22 FC that is in phase two clinical development. under the terms of our longstanding target discovery and biotherapeutic alliance with Genentech. Our scientific platform continues to provide continued opportunities for value, both internally with collaborators and other third parties. I'd like to stop at this moment and pass the call over to Jeff to walk you through our financial results for the second quarter and provide financial guidance for 2021. Jeff?