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spk08: Good day and welcome to the Lexicon Pharmaceuticals Second Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone, and to withdraw your question, please press star then two. Please note, this event is being recorded. I'd now like to turn the conference over to Kari Sturgeiser. Please go ahead.
spk01: Thank you, Cam. Good afternoon, and welcome to the Lexicon Pharmaceuticals Second Quarter 2023 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 afternoon, Lexicon issued a press release announcing our financial results for the second quarter of 2023, 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 statements relating to the safety, efficacy, clinical development, regulatory status, and therapeutic and commercial potential of MPEFA, LX9211, and our other drug programs. These statements may also include characterizations of our commercial launch of MPEFA and heart failure, as well as the clinical development, regulatory status, and market opportunities for all of our drug 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 our commercial launch of MPEFA, our discussions with the FDA and other regulatory authorities regarding our drug programs, the timing and results of clinical trials and preclinical studies of our 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. I would now like to turn the call over to Lynelle Coates.
spk04: Thank you, Carrie. Good afternoon, everyone, and thank you for joining us on the call. Second quarter of 2023 was an important and productive quarter for Lexicon with the achievement of a transformational milestone for the company and important advancements for our business. First, we received FDA approval of Impefa for the treatment of heart failure. Impefa was granted a broad label across the full range of left ventricular ejection fraction and for patients with and without diabetes. We have fully launched into the market with product made available and sales representatives deployed within 30 days of approval. Our ability to swiftly launch into market was a direct result of the significant investments we made over the last 12 months and the dedication across all of our teams to bring a new innovation into the heart failure market. Turning to LX9211. We have also announced this quarter our plans to move into late stage development in diabetic peripheral neuropathic pain with a clinical program that was designed to de-risk phase three based on FDA feedback and accelerate time to completion for a 2027 pilot. Neuropathic pain is a very large market opportunity, and we have aligned our development plan with the FDA feedback and are moving forward with a strategy that is designed to optimize development time and efficiency while increasing the likelihood of a successful path to regulatory approval. I will now turn the call over to Jeff to review additional key milestones from this quarter.
spk06: Thank you, Lionel. As highlighted on the slide, we delivered on a number of key milestones this quarter. including the closing of a public offering and concurrent private placement that resulted in aggregate gross proceeds of $143.7 million, providing capital to invest in both our commercial launch of MPEPA and our clinical development plans. And as Lonnell noted earlier, we continued our execution on launch readiness activities for MPEPA, enabling launch of product in the market within 30 days of FDA approval. These launch readiness activities included appropriate pre-approval information exchanges with payers across national and regional accounts, government and institutions, and continuation of the groundwork that enabled us to make bid submissions within days of FDA approval. We brought on board, trained, and deployed a field force of experienced cardiovascular sales professionals. We finalized wholesaler and distribution agreements and put product into channel. And we launched a number of promotional resources, including our HCP-facing website, highlighting our key messages and differentiation. And finally, we launched our Impepa Together program of patient support offerings, which we'll talk more about shortly. Turning to the FDA's approval of Impepa, we wanted to summarize four key critical elements. First, IMPEFA was granted a broad label in heart failure across the full range of left ventricular ejection fraction, including half-PEF and half-REF, and for patients with and without diabetes. Second, and an important and differentiating element of that label, IMPEFA reduced the risk of total occurrence of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits by 33% compared to placebo in the soloist WHF study of worsening heart failure patients who initiated on therapy in the hospital or promptly following discharge. Third, recently adopted guidelines support the use of SGLT inhibitors like Impepa in all heart failure patients. The only class of therapy recommended is foundational treatment regardless of left ventricular ejection fraction and they specifically cite the solo SWHF study. Finally, a reminder that Impepa is the first compound to demonstrate a reduction on both mortality and heart failure events when initiated during or shortly after discharge from a heart failure hospitalization. Based on our post hoc analysis looking at cardiovascular death and heart failure events occurring within 30 and 90 days post discharge, Impefa resulted in a significant relative risk reduction versus placebo of approximately 50% of the composite of cardiovascular death and readmission for heart failure at both 30 and 90 days following hospital discharge. These findings are unique and underscore the benefits of early initiation of evidence-based heart failure therapies. When looking at the heart failure market dynamics, the updated guidelines and growing clinical evidence continue to help fuel the growth of the heart failure indicated SGLT inhibitors. Use in heart failure of the two other SGLT inhibitors approved for that indication has more than doubled since the beginning of 2022, and the heart failure branded market has grown by almost 40% from 2021 to 2022. With the approval of MPEPA and its broad label, we can compete across all of heart failure. However, our primary focus at launch is on the sweet spot of care, which is the transition of care patient. Based on the unique data in our soloist WHF trial, patients who are hospitalized for heart failure are ideal candidates for MPEPA once stabilized and before leaving the hospital or soon thereafter. To summarize, we believe we have a tremendous commercial opportunity for MPEPA bolstered by updated heart failure treatment guidelines, a growing unmet medical need with SGLT adoption still in the early part of the adoption curve, and a unique clinical data set for MPEPA specifically addressing patients recently hospitalized for heart failure. And we are combining these factors into a focused commercial strategy using targeted messaging based on areas of clinical differentiation and directed to those providers where the messages are expected to have the most impact, including cardiologists and those systems that bear the cost of hospitalizations and rehospitalizations. As mentioned earlier, a key platform we launched at the end of June was our collection of patient support offerings, which we have launched under the name Impepa Together. These programs are designed to reduce barriers for healthcare professionals and their patients who are prescribed MPEFA and can be accessed through our MPEFA Together website to help address each patient's unique situation. While we rapidly pursue payer coverage, these programs will be important to ensure eligible patients are able to fill their prescriptions and provide options if MPEFA is not yet covered by their insurance plan. These programs include an option for a 30-day voucher under which patients may receive their first 30-day prescription of Impepa for no out-of-pocket costs. Finally, and importantly, we wanted to provide an update on the key launch metrics we have committed to sharing. The data is limited this quarter as it represents activity from only our first week of launch, but it does show the early impact we were able to have in that short timeframe. Ex factory shipments, which translate into our gross sales, were approximately 1,200 bottles shipped to 15 distribution partners. These initial shipments to wholesalers and our distribution partners were the first step in enabling a patient to obtain access to an Impepa script from pharmacies across the United States. Looking at prescription activity, we saw six new prescriptions in the first five days of launch. In addition to the prescription activity available via IQBIA, we will also share in future calls certain internal data from our MPEFA Together program offerings, which represent additional scripts not captured in the publicly available data set. Turning to our market access discussions for plan coverage, we have currently submitted 16 bid submissions covering 198 million lives across both commercial and Medicare books of business and across both national and regional accounts. As shared at the time of our launch, during 2023, we will be focused on gaining access. And this quarter, we have made important steps in the contracting process with several payers, which are a key first step in order to have MPEPA added to formularies. We will continue to actively pursue insurance coverage of MPEPA and expect to have new updates on our coverage status in our next quarterly call. We also continue to pursue access to MPEPA on formularies within integrated delivery networks and have identified several key accounts where we expect to have the opportunity to achieve wins for MPEPA in the next few months. We look forward to sharing with you additional updates on our launch progress and our upcoming calls. We will now turn briefly to our LX9211 program. LX9211 is a potent highly selective small molecule inhibitor of a novel target, adapter associated kinase 1 or AAK1. In a number of 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 level of the drug in the CNS, and importantly, the mechanism of action of LX9211 is independent of the opioid pathway. In phase one studies, LX9211 was shown to be well tolerated with a pharmacokinetic profile supportive of once daily dosing. Plexicon has been granted fast track designation by the FDA for diabetic peripheral neuropathic pain. We believe LX9211 has a promising profile based on two completed proof of concept studies and a substantial market opportunity. LX9211 has the potential to overcome many of the shortcomings of current therapies and could become a welcome new innovation for those suffering from diabetic peripheral neuropathic pain or DPNP on a daily basis. This is a large and growing market with a high-end medical need with more than 20 million Americans experiencing neuropathic pain and approximately 5 million DPNP patients in the U.S. in 2022. I would now like to turn the call over to Craig to provide further details about these late stage clinical development plans for LX9211.
spk05: Thank you, Jeff. As we shared a few weeks ago, we are advancing LX9211 into the late stage development in the second half of this year in a clinical program directed towards DPNP regulatory approval. We have also received feedback from the FDA that aligns with our proposed development plans, including the average daily pain score, or ADPS, remaining the primary endpoint for future studies, and targeting a DPNP patient population similar to those enrolled in our phase two proof of concept study. The FDA also agreed with the potential for inclusion of the phrase early onset of pain relief with persistent effect in the label, as well as our approach for dose selection of the phase three studies. Turning to the next slide, You will see an illustration of our late stage program design that begins with the phase 2B dose optimization study and follows through two planned phase 3 studies to an NDA filing. The phase 2B dose optimization study will have an eight-week treatment duration that will also include an extension period designed to satisfy ICH requirements for long-term exposure. We plan to continue the extension phase to run in parallel with the pivotal Phase III studies. We expect the startup of the Phase IIb will begin in the third quarter of 2023 with expected initiation of patient dosing in Q4 2023. In addition, our strategy of employing a Phase IIb dose optimization study with an open label extension running in parallel with the start of Phase III is designed to enable satisfaction of regulatory requirements in a timely fashion leading to a target NDA filing in 2027. I'd now like to turn the call back over to Jeff to take us through the financial results of the second quarter of 2023. Thank you, Craig.
spk06: I will provide some key aspects of our second quarter of 2023 financial results. More financial details can be found in the press release that we issued earlier today in our 10Q that will be filed shortly with the SEC. We ended the quarter with $256.7 million in cash and investments. We believe that our existing capital resources provide us with the right level of funding to support the commercial launch of MPEFA and to make appropriate investments in research and clinical development. Our loan facility with Oxford Finance, which offers up to $50 million in additional borrowing capacity, provides additional financial flexibility as we continue the launch of MPEPA in the second half of this year. We anticipate that our existing cash investments, together with capacity under the loan facility, will provide us with sufficient resources to manage our operations well into the launch of MPEPA into the market. As indicated in our press release this afternoon, we had $320,000 in revenues in the second quarter of 2023 and had minimal revenues in 2022. Revenues from this quarter included net product revenues of approximately $290,000 and royalties and other revenues of approximately $26,000. Research and development expenses for the second quarter of 2023 increased to $14.5 million from $13.4 million for the corresponding period in 2022, primarily due to manufacturing costs in preparation to market in PEPA for heart failure and higher clinical external research development expenses relating to the LX9211 program, partially offset by lower professional and consulting fees. Selling general and administrative expenses for the second quarter of 2023 increased to $30 million from $10.7 million for the corresponding period in 2022, primarily due to the onboarding of our field sales force, as well as marketing and other professional and consulting costs relating to preparations for the commercial launch of MPEPA in Hartville. In total, net loss for the second quarter of 2023 was $44.9 million, or 22 cents per share, as compared to a net loss of $24.6 million, or 16 cents per share, in the corresponding period in 2022. For the second quarters of 2023 and 2022, net loss included non-cash stock-based compensation expense of $3.8 million and $2.8 million, respectively. For this quarter, We are also including a view of our 2023 full-year expense guidance. This includes expected R&D expenses of between $60 and $70 million, selling general and administrative expenses of between $120 and $130 million, and total operating expenses of between $180 and $200 million. This includes non-cash expenses of about $17 to $18 million for stock-based compensation, depreciation, and amortization. I would now like to open the call to take your questions.
spk07: Thank you. We will now begin the question and answer session.
spk08: To ask a question, you may press star then 1 on your touchtone phone. And if you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
spk07: We'll just pause momentarily at this time to assemble our roster. Thank you. Your first question comes from Yagol Neshamovitz from Citi. Please go ahead.
spk00: Hi, team. This is Carly on Furryazol. Thanks so much for taking our questions. We have two. So first, can you talk a bit more just about your expectations for the IMPEFA launch ramp over the second half of this year and then into next year as you work through getting on formularies and just how long you expect it to take to secure broad payer coverage? That's the first question. And then the second question, obviously, it's still very early, but just curious if you have any insight based on the first month of the launch into sort of the profile of patients wherein PESA is being used? Is it primarily that transition of care, hospitalized population, studied in soloists, or are you seeing broader usage? Thanks so much.
spk04: Thank you, Carly. Appreciate that very much. Let's see, the first question was relating to.
spk05: Launch RAMP.
spk04: Launch RAMP. I think at the last call, I said this launch is going to be about access. And then when we get access, it'll be about access again. And so we are right where we thought we would be. It's going to be about access. And that's why we've done the together MPEFA program. We're trying to make these programs available to patients as we work on access. What I will tell you, I would say that the conversations that we're engaged in for contracting are actually going much better than I assumed they would have gone. And so I think that we will have a great opportunity to have access to Medicare populations this year going into next year. So I think the real gauge for how well this launch go will be better estimated in the first quarter of next year. Over the next few months, it's all going to be about ensuring we get access and sign contracts, particularly get access to Medicare lives. And I think we have a good chance to do that. The other thing I would tell you is that we're very excited that some of the integrated delivery networks actually reached out to us. And so we're engaged in conversations with some of the major IDNs across the country to do something with them on a contract basis. And so we'll have more to say about that in the next quarter, because I feel pretty confident we're going to be able to get some of them on board as well. So I think those conversations are going fairly well, but it will impact net trade sales until we do get broader access. So the best way to judge this launch will probably be more likely in the first quarter of next year when we can tell you exactly how much access we've actually achieved. That then allows us to run even faster in getting the growth curve on the net trade sales. As for the second question, I'll turn it over to the great Jeff Waite.
spk06: All right. Can you remind me what the second question was? Patient profile. Patient profile. So, you know, at this point, because we are not on, not yet on hospital and IV and formularies, we are in a mix of patients, but not primarily in that hospitalized patient, although, we are seeing some indications where people are doing meds to beds type program and patients who are getting, they are starting to get drug in the hospital. But as we get closer to the time when we get on the hospital formularies, that's going to shift a little bit more from that chronic patient and more into that transition of care patient as a share of our patient starts. So hopefully that's a helpful answer.
spk04: I'd also say I did not, I know six are new to RX, our brand doesn't look great, but it's more than I thought we would get in the first few days without any contracted business and not a lot of noise in the marketplace. And so that was a great indication to me that people are paying attention. And once we do get contracted business, we'll probably have a pretty, pretty good brand.
spk00: Okay, great. That's helpful. Thank you for taking that question.
spk07: Thank you. Your next question comes from Andrew Tsai from Jefferies. Please go ahead.
spk03: Hey, thanks. Good afternoon. I appreciate you taking our questions. So maybe just out of curiosity, what percentage of your scripts do include non-type 2 diabetes patients versus just type 2 diabetes? Are you seeing kind of usage across the board? Is it fair to assume, if we were to reconcile, you mentioned 1,200 bottles were shipped in the first week, compared to, you know, reconcile that with IMS data, is it fair to assume nearly all of your reported revenue this quarter was due to stocking? And then secondly, how much stocking should we expect in Q2 compared to organic sales?
spk06: Thanks. So, I'll take the last one. So, you know, necessarily what was then that sales from the second quarter were mostly due to stocking because we only were out in the field for a week. So that was really the initial stocking by wholesalers to make the drug available. And then we had the field force going out in that final week. And then we've continued to see continued uptake over time. So that answers that part of the question.
spk04: Yeah, I think trying to characterize the six scripts is not going to be hard to do. You know, I'm just glad I got the six. But I will say, Andrew, it's a great question. As we get into the next quarter, when I expect to see a much broader swath of prescriptions, and also as we start to nail some contracted business, we'll be able to tell you exactly where it's coming from.
spk05: Yeah, so I'll just answer, Andrew, just looking at all the medical information requests that are coming in. that's not one of them. So it does not seem to be an issue out in the field of people saying, is this only for diabetes or non-diabetes with heart failure? I think people are excited about the drug. The only questions that are coming up related to diabetes is, don't you have great data in glycemic control and diabetes as well? So we're not getting the question of, gee, I can't use you in patients without diabetes. That's just not come across an issue. And explicitly clear that we can be used in all patients regardless of diabetes deaths.
spk03: Got it. And really quick, in Q3, then gross to net, can you give us any flavor where it could fall? And then over time, you know, what's your latest thinking about gross to net at steady state? Thank you.
spk06: Yeah, so the gross to net for this first quarter is which is based on assumptions for this year, is a bit less than 50%. And the biggest contributor to that in the course of this year, when we're getting a lot of patient starts, is the 30-day voucher as part of that. So the ultimate gross net will be something that develops over time and will develop as we get more contracted business. that will have an effect on that. But to start off with this first quarter, it's less than 50%.
spk04: Yeah, Andrew, I think we'll be able to give you very good color on that as we get toward the end of the year and start knocking down some of this contract to business. And we'll have a pretty good sense of how we're going to land on that as we go into the new year.
spk07: Makes sense. Thank you. Thank you. You bet. Thank you. Your next question comes from Yasmeen Rahami from Piper Sandler. Please go ahead.
spk02: Hi, guys. This is Lauren on for Yaz. Just a few from us. First, what's the current payer coverage status? What do you expect in the next few quarters? And then what are the docs pressing in terms of questions about IMPEFA currently as your sales reps are out in the field? And what percent of these current hospitalized cardiologists have been called on and are going to be called on? Thanks.
spk04: Great questions, Jeff.
spk06: So I'll answer the last question first, which is we have a target list of physicians that we're trying to reach that are the highest prescribers for heart failure. And when we went into this, we had over 20,000 appointments that were set up for the weeks following the approval. And so we've reached a good chunk of those, and we're continuing to work towards reaching the balance of those kind of A and B segment prescribers and the C segment prescribers, which amount to, you know, over 10,000 physicians that are the key treaters for heart failure. So we're making really good progress in reaching that group of physicians, but still have some more to get through that entire group.
spk04: Yeah, I also would say that we don't have a lot of great coverage, right, because we just started. And so I wouldn't expect that to be the case. But what I will say is the number one question that reps are encountering, sales representatives are encountering, is what's your coverage? This is why this is an access battle. It is why we have focused a lot of our resources on, bidding across the board, both Medicare lives and commercial lives, is why we were in a very important position coming right out of the gate to start making those bids, because we did a lot of the pre-work to set ourselves up to make those bids. So we're in a pretty good situation in going into these discussions. It's going to take time for us to do it over the first two quarters, but that is the number one question that comes up with salespeople. It is also why we have implemented the Together, MPEFA Together program, so that a physician can write in PEPFAR with great confidence, knowing that they're actually going to receive the prescription. And so, these are temporary programs as we work through the coverage. But I'm very, very encouraged by the conversations we are having with the major payers, particularly the Medicare payers.
spk06: And we're starting, we've already gotten, we already have access in some areas. That will increase, particularly as we get into the fall and towards the end of the year. And then by January 1, we're expecting to have pretty significant payer coverage in place. That's right.
spk02: Great. Thanks so much, guys.
spk07: Thank you. That concludes our question and answer session for today.
spk08: I would like to turn the call back for some closing remarks. Thank you.
spk04: Well, thank you, everyone, for joining us on the call today. And we really appreciate your continued support. I'd like to close out by summarizing our upcoming key milestones and events. First, we are moving forward with late stage development of LX9211 and diabetic peripheral neuropathic pain. This is another large and growing market still in need of innovative treatments. We were extremely pleased with the engagement we have with the FDA, which allowed us to really put together the program that we have laid out to you now, and we're pretty confident about it. Second, we are highly focused on delivering on a successful launch of IMPEFA. We have had a focused commercial strategy that leverages our unique clinical data and are entering a market that is just beginning to reflect the growth driven by the new treatment guidelines, which include SDOTs as a pillar of heart failure treatment. We're rapidly pursuing market access for IMPEFA across all channels, and expect to be able to share incremental news about our progress on coverage in the fall. As I said in the first call, we will be as transparent as we certainly can be, and we intend to talk to you not only about the IQVIA scripts that you will be seeing, but what data we are collecting internally relative to the Together and PEPFAR program. Finally and importantly, Lexicon is in a strong cash position with the ability to fund operations well past the initial launch of MPEFA. This has been an important quarter for our organization and for our stakeholders as we move closer to the key milestones still ahead in 2023, and we look forward to continuing to update you on our progress over the coming months.
spk07: Thank you. Thank you. That concludes our conference for today. Thank you for attending. You may now disconnect your lines.
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