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spk05: 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 Earnings Conference Call. Please note 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'd like to ask a question during this time, simply press the star key followed by the number one from your telephone keypads. If you'd like to withdraw your request, You may press the pound key. Thank you. I'll now turn the call over to your Hulse, Cash Hulse, Executive Director, Corporate Communications, and Investor Relations. Sir, you may now begin.
spk07: Thank you, Jesse. Good morning, and welcome to the Lexicon Pharmaceuticals first quarter 2022 financial results conference call. Joining me today are Lynelle Coates, 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 sotocoplosum, LX9211, and other drug candidates. These statements may include characterizations of the expected timing and results of clinical trials of Sotocloplozin, LX9211, and our other drug candidates, and the regulatory status and market opportunity for those programs. The 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 or 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 sotocloplozin and heart failure and our discussions with the FDA regarding sotocloplozin 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 Sotocloplozin, 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 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.
spk01: Thank you, Chas, and good morning, everyone, for joining us on the call. Let me jump right to slide three. We expect that the second quarter of 2022 will be a pivotal quarter for Lexicon, with major anticipated milestones for both our dual SCLT1 and 2 inhibitor, stodogaflozin, in our AAK1 inhibitor, LX9211. We plan to resubmit our new drug application for Sotocoflozin 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 it's 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 a unique label for sotocoflozin 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 Sotagiflozin. Pending market approval from the FDA, we're planning to launch Sotagiflozin 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 four. 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 five. Traditionally, there have been three pillars of therapy constituting the cornerstones of care in heart failure, ACE, ARBs and ARNs, 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. 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 prospective abuse 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 six. 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 in 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 injection fraction and heart failure with preserved ejection fraction. The United States guidelines 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 A 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 LX9 on the next slide, LX9211, which is our selective inhibitor of AAK1. 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 made significant progress over the last few months in our two ongoing phase two 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 post-hepatic 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, Lionel.
spk04: 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 10Q 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 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 sudden heart failure, along with substantial flexibility, financial flexibility, as we approach the planned resubmission of our NDA for Sotocliflozin and heart failure and expected top line results from the two phase two 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 Sotocliflozin new drug application resubmission, we anticipate that we will have sufficient resources to manage our operations through the planned launch of sodium flows 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 costs related to our new drug application for sodiumplasm. 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 sodiumplasm In total, net loss for the first quarter of 2022 was $23.5 million, or 16 cents per share, as compared to net loss of $21 million, or 15 cents 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 Lionel.
spk01: 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 Sotocliflozin and heart failure this month and plan to launch Sotocliflozin and 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.
spk05: Thank you, speakers. Participants, we will now begin the question and answer session. As a reminder, you may press star 1 from your telephone keypads to ask a question over the phone. To withdraw your request, you may press the pound key. Our first question is from the line of Yagal Machamovitz of Citi. Your line is now open.
spk02: Hi. This is Carly on for Yagal. Thanks for taking our question. 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 HFPAF worked. Does that impact at all how you're thinking about the marketing angle for total closings?
spk01: Oh, Carla, great question. And so let me get some perspective, and then I'll turn it over to Craig, our chief medical officer. We anticipated that they would have success here, just like Jardians has had success. And I give perspective only to say, in order for this market to grow the way we believe it will, SCOTs across the board have to be consistent to some degree in how it delivers this data relative to this new category of HFMF and then HFPEF. And so we see that's 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 Sotocoflozin 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.
spk03: Thank you, Linnell. I just want to make sure you can hear me all right. Yeah, we can hear you correct. Terrific. Well, Carly, I think there are three or four main points that I'd like to cover, and I think Linnell 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 100% of the patients had been hospitalized and 50% of them were started on 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 SOLOIDS and the liver, similarly between the liver 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, RNAs, 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 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 benefit in those with a recent heart failure event.
spk02: Great, that's really helpful. Yeah, and I guess just one follow-up related to that, we also wanted to get your latest perspective on the mPulse 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?
spk01: Great question, Carla, but I'm going to allow Craig to maybe dismiss some of the similarities you just listed. But, Craig,
spk03: Yeah, thank you, Lynelle. Again, we believe actually it reinforces the value proposition of soda glyphosate. And if you look at the MPulse study, they did not have hard clinical endpoints as their primary endpoint. It was what's called a win ratio, which combines patient reported outcome benefits and the hard 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 heart endpoints, that three composite endpoint of cardiovascular death and then the others, heart failure, hospitalization, and unscheduled emergency visit, 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 sotocloposin, 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.
spk02: 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?
spk01: Another great question, Carla. Now, you know, when we found the technical error that we initiated a 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 to capture. We then asked for a meeting with the FDA because our plan to resubmit, we wanted 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 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 resubmitting the application in the next few weeks.
spk02: Thanks so much.
spk01: You bet.
spk05: Here's next questions from the line of Jessica Fye of JPMorgan. Your line is now open.
spk00: Hey, guys. Good morning. Thanks for taking my question. I wanted to ask on 9211 heading into the Phase 2 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 three, right? Like, do you want to have some cushion in the phase two result to kind of give you that increased confidence? And what is that number?
spk01: Jessica, always great questions, and we have not disclosed that number. What I will say, this is the first time that we've put LX9201 into uh into a phase two trial like this and what we're looking for is that translation of what we saw pre-clinically into human use and we've given us ourselves a good chance of being able to see a strong signal we powered our our studies to to 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 uh 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 one study, you want to validate in the other because the neuropathic pain market is a very large market made up 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 three study. So we'll give you a lot more clarity once we present the data when we have it in-house.
spk02: Great. Thanks a lot.
spk01: You bet.
spk05: Again, participants, it's star one to ask a question over the phone or the pound key to withdraw your request. Next question is from the line of Joseph Stringer of Needham & Company. Your line is now open.
spk06: Hi, good morning. Thanks for taking our questions. Two quick ones from us. One, can you provide us with any updates on XUS partnership discussions and how those have been playing out? And then secondly, on the pain program, do you see the assuming positive signals from the DPN trial in July, excuse me, in June with the post-herpetic results in 3Q22, that would be gating in any way to sort of advancing the pain program. Thanks for taking our questions.
spk01: Let me turn both those over to Jeff.
spk04: Yeah, so the first, your first question on the XUS partnership, I mean, I'm assuming you're talking about . 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 and heart failure is going to bolster that effort, and so we're moving along activities on the partnering front in parallel with with our work on 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 and the two different studies. I mean, both of these studies are independent views in two 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. Post-herpetic 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 mechanisms. I would not say that the post-herpetic 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, you know, that's going to stand on its own and be independent evidence of the value of the mechanism. So, hopefully that provides a little bit of perspective. If you have any other questions to follow up, happy to take those.
spk01: Yeah, and I think if I would add is you know, 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, you know, all across neuropathic pain. As you know, when you start to produce or do work in this area for phase three studies, you have to do a number of phase three studies. And so studying that signal and the level of signal you get across two unique populations, will help inform how we would develop further phase three 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 and both of these, then I think it'll set the pathway for phase three development.
spk06: Great. Thank you.
spk05: Thank you, participants. I'll now turn the call back over to CEO Lynell Coates for any closing remarks.
spk01: 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 perhaps 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 Sotica flows and holds and the value proposition we've 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 Sotica flows. And then to LX9211, to the questions that were asked, you know, should we get the strong signals that we're looking for in DPN? And certainly if that carried 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 something remarkably special. Very unique target that was discovered in our collaboration with BMS, a 10-year discovery collaboration that Lex County 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.
spk05: Thank you, speakers. This concludes today's conference call. Thank you all for joining. You may now disconnect.
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