Lexicon Pharmaceuticals, Inc.

Good day and welcome to the Lexicon Pharmaceuticals third quarter 2024 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. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Lisa DeFrancesco, Head of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Dave. Good afternoon and welcome to the Lexicon Pharmaceuticals Third Quarter 2024 Financial Results Conference Call. Joining me today are Dr. Mike Exton, Lexicon's Chief Executive Officer and Director, Tom Garner, Senior Vice President and Chief Commercial Officer, Dr. Craig Granowitz, Senior Vice President and Chief Medical Officer, and Dr. Alan Main, Executive Vice President, Innovation and Chemical Sciences. Earlier this afternoon, Lexicon issued a press release announcing our financial results for the third quarter of 2024, 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 also 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 related to the safety, efficacy, clinical development, regulatory status, and therapeutic and commercial potential of Impefas, Zynquista, LS9211, LS9851, and our other drug programs, as well as our business generally. These statements may also include characterizations and projections relating to our commercial launch of Impefa and heart failure, as well as the clinical development, regulatory status, and market opportunity for all of our drug programs. This call may also contain forward-looking statements relating to our growth and future operating results, discovering 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, and we refer you to our most recent annual report on Form 10-K and other SEC filings for detailed information describing such risks. I would now like to turn the call over to Mike Exton.

Thanks, Lisa, and good day, everyone. Thanks for joining us on the call. Before we begin our discussion on Lexicon's results and business update for the third quarter of 2024, I'd like to discuss the progress we've made throughout this year, specifically over the last quarter, where there have been a considerable number of important achievements. To summarise, in just the last few months we've completed the resubmission of our NDA for the inquisitor for glycemic control in people with type 1 diabetes and chronic kidney disease. The FDA held an advisory committee meeting for our NDA on October 31st, and we're continuing to work towards the Purdue for Gold date of December 20th of this year. We're planning for multiple outcome scenarios as we approach the PDUFA date in a few weeks. We also completed a strategic repositioning and continued focus promotion of Inpeper to targeted high prescribers. Furthermore, we have two major assets undergoing late stage clinical development and we're making excellent progress in the development of both. A Phase 3 study for Sotagliflozin in Hypertrophic Cardiomyopathy, or HCM, is underway and the study is making good progress in sites open and enrolling patients. A Phase 2B study for LX9211 in Diabetic Peripheral Neuropathic Pain, or DPNP, has crossed a big milestone by completing enrollment screening earlier than anticipated. Now we anticipate top-line data in the first quarter of 2025. From our early clinical pipeline, we've made progress with our exciting novel drug candidate LX9851, an oral therapy with IND enabling studies underway for obesity and associated cardiometabolic disorders. Last week, we were able to share important data on this asset at Obesity Week. We believe LX9851 has the potential to become an innovative next generation treatment in this, and we also know, booming and yet evolving market. And lastly, but importantly, we've taken steps to reinvigorate our business development efforts with a substantial near-term focus on partnering. One result of these efforts was the recent exclusive licensing agreement we completed for Sotagliflozin outside of the U.S. and Europe with Beatrice, a company with strong cardiometabolic expertise and a successful track record of commercializing medicines. So I'm going to begin our business overview today by sharing an update on Zynqvista, following our recent adcom. The committee voted 11 to 3 that the benefits of Zynqvista do not outweigh the risks in adults with T1D and CKD, as defined by Lexicon as the T1D CKD population in the primary voting question. Now importantly, following the vote of the initial population, There were additional robust discussions surrounding the benefit risks for Zynquista in the 60 to 90 population, which was predefined and discussed at length during both the lexicon and FDA presentations. As a part of the discussion, additional committee members expressed support for Sotagliflozin in this subpopulation, where they believe the benefits potentially outweigh the risks. Indeed, we saw an overwhelming outpouring of support reflective of the unmet need that exists in this population. The meeting was widely attended by patient communities, advocates and healthcare professionals and included 23 presentations shared during the public hearing and a total of 148 submissions to the MDAC docket. Though there have been few advancements in insulin and CGN technology, the vast majority of people with T1D struggle to maintain glycemic control. Glycemic control is especially critical in the higher risk population of people with both T1D and CKD to slow the progression of kidney disease, heart failure, and death. So the Lexicon team remains hard at work towards our Purdue for date of December 20th. And while we work towards the PDUFA date and remain committed to launch readiness in order to bring Zinquista to patients if approved, we're vigilant about our cash position and spending. Accordingly, we're preparing for all PDUFA outcome scenarios, with each plan mindful of both cash and focusing resources on the opportunities provided by our strong pipeline. Presently, we've paused any new spending related to launch preparation until we have more clarity on the path forward. However, in the event that we do have a successful outcome at PDUFA, our goal is to make Zynquista available to the appropriate patients as quickly as possible and as early as the first quarter of 2025. We've done a significant amount of planning and preparation for this launch and have a number of key tailwinds, including an established supply chain and manufacturing capabilities ready to scale, given our prior launch of Soda Good Flosen, as in PEPA for heart failure, Proven commercial leadership expertise and a highly experienced team with significant launch experience and operating in a highly concentrated market. Know that 80% of people with T1D and CKD are treated by a concentrated group of approximately 4,000 endocrinologists, which will allow us the opportunity to have a significant impact with our existing field teams. and most importantly, Zynqvista has the potential to be the first and only adjunct therapy to insulin for glycemic control. There's been a dearth of innovation for this patient population despite the significant need and we believe Zynqvista could satisfy a strong pent-up demand if and when we align with the FDA on the right patient population to benefit from this therapy. So moving on now next to briefly discussing PEPFAR for heart failure. Net sales for the third quarter of 2024 were $1.7 million, which represents 8% quarter-on-quarter growth, yielding $4.5 million year-to-date for 2024. Through Q3, we saw improvements in filled TRX volumes across both commercially insured and Medicare patients, with gross unit volume increasing by 26%, driven predominantly by increased depth of prescribing among the growing base and repeat in PEPFAR prescribers. This progress continues to be driven by the focused efforts of our sales team, even with the strategic repositioning that included a 50% reduction in field force, which was effective in September. Continuing with the discussion of Sotoflozin, which remains a pipeline and appeal opportunity for Lexicon, we have made significant progress in our clinical development strategy for patients with symptomatic HCM. Enrollment is now underway for Sonata HCM, a pivotal Phase III placebo-controlled study with a targeted enrollment of 500 patients with obstructive or non-obstructive HCM. The primary endpoint of the study is change from baseline in KCCQ score, an endpoint that has been accepted by the FDA as the primary endpoint in this and other label-enabling HCM trials. and with which we've previously achieved success in our soloist heart failure trial. Importantly, Sonata HCM is studying a broader patient population than that studied in other ongoing trials in HCM as we allow patients to be on cardiac myosin inhibitors as well as allowing the use of beta blockers and calcium channel blockers. If approved, this clinical approach would potentially enable broad adoption and ease of use as there would There will be no need necessarily to change the current treatment regimen. We've obtained feedback from the FDA that success in this single study could support a broad label for Sotagliflozin in HCM. Once again, this fits our Lead to Succeed strategy as an important area of growing unmet need where we have the potential to be the only indicated SGLT inhibitor. Current estimates suggest that approximately 1 million patients in the US today have HCM. Many are not diagnosed. In part, given the non-specific nature of HCM symptoms, the diagnostic rates have been rising rapidly, a trend which is expected to continue over the next decade with increased awareness and understanding of this disease. Looking further into our pipeline, I really want to spend some time today on LX9211 as we near the finish line of our Phase 2B study. LX9211 is another pipeline and appeal opportunity for Lexicon with what we believe to be a multi-blockbuster potential across numerous possible therapeutic applications in important areas of need. These include diabetic peripheral neuropathic pain which is currently under evaluation but also in other forms of neuropathic pain such as post-hepatic neuralgia and potentially in forms of spasticity LX9211 offers the opportunity to potentially redefine the standard of care in DPNP Targeting the enzyme AAK1, LX9211 is a non-opioid medication and has the potential to be the first new oral treatment for neuropathic pain in more than two decades. LX9211 has received, excuse me, fast track designation from the FDA for development in DPNP. So as you can tell, we're really excited about the potential of this program. And our progress phase to be dose optimization study completed screening for enrollment this past quarter. That's significantly ahead of schedule. We now anticipate top line data in the first quarter of 2025, so that's really right around the corner for us. We believe this study was really well designed. Like our previous proof of concept study, it's placebo controlled, allows patients to remain on stable dose of standard of care therapy rather than removing all pain medications. That's really consistent with how novel DPNP drugs are likely to be used in real world practice. There are approximately 20 million patients in the U.S. suffering from neuropathic pain and about 5 million of those have diabetic peripheral neuropathic pain. So if approved, we believe that LX9211 could offer real benefit to patients and to the clinical community who are looking for better options to improve outcomes for patients with various types of neuropathic pain. So we're really looking forward to these results. The protocol of the study was also designed to find the correct dose and to optimize the Phase 3 program, both in terms of length and overall study size. So while Lexicon is well positioned to continue the clinical development for DP&P, we've been actively discussing potential partnerships to realize the full value and potential for this access. Our newest drug candidate is LX-9851, a novel compound currently in preclinical studies for obesity and associated metabolic disorders. We believe that LX-9851 has the potential, like our other assets, to be developed in additional indications and to be used as a potential combination therapy. 9851 is a small molecule inhibitor of the novel target ACSL5, an enzyme that is highly expressed in the intestinal mucosa. Its unique ileal break mechanism appears to provide benefit versus known limitations of GLP-1s, such as lean muscle loss, dose-related adverse GI side effects, and weight rebound post-discontinuation. We believe 9851 could be given orally for chronic weight management, alone or in combination with incretin mechanisms, with a target product profile that reduces body fat and improves overall metabolic profile. On the next couple of slides here, I'd like to show some preclinical data which was presented last week at Obesity Week. The first slide shows the significant reduction in body weight observed with diet-induced obese, or DIO, mice fed a high-fat diet. Notably, the addition of LX-9851 to semaglutide resulted in significantly greater weight loss than that achieved by semaglutide alone. Furthermore, We also presented data on what happens to weight loss if semaglutide is discontinued and then LX9851 treatment is initiated. Here you'll see the blue line that shows weight loss associated with administration of semaglutide. Importantly, when semaglutide treatment is withdrawn after day 14, it quickly rebounds back to baseline. If, however, LX9851 treatment commences upon semaglutide discontinuation, the green line shows how weight loss is substantially maintained. Look, we're really enthused about the promise of these early results and other preclinical data we've generated demonstrating improvements in cholesterol, triglycerides and insulin sensitivity, which may give way for additional related indications in metabolic syndrome and MASH. As we know, the obesity and weight management space is an area of tremendous interest in the industry and we're very excited about the potential for an oral therapy that complements and enhances current therapies alone or in combination. So we continue to advance our IND enabling studies and are actively preparing for IND filing by mid-2025. So in summary... We've made really great progress across every one of our invested pipeline assets as we explore the potential applications of our novel unique products. And we're focused on making progress across the board on this pipeline in 2025. Let's now touch on the financials for the quarter, and then I'll talk a little bit more in depth about our partnering strategy. We ended the quarter with $258.4 million in cash and investments, That doesn't include the upfront payment of $25 million that we received from the licensing agreement with Vietris, which was received in the fourth quarter. As indicated in our press release this afternoon, we had $1.8 million in revenues in the third quarter of 24, almost all of that from net sales of Mimpefa. R&D expenses for the third quarter of 24 increased to $25.8 million from $17.6 million for the corresponding period of 2023. Now, that was primarily due to investments in our late-stage development programs, including the commencement of Sonata Phase 3 study of Sotagliflozin in HCM and the earlier recognition of expenses related to the Progress Phase 2b due to the enrollment acceleration. Selling general and administrative expenses for the third quarter Thank you very much. or $0.18 a share compared to a net loss of $50.5 million or $0.21 a share in the corresponding period of last year. For the third quarters of 2024 and 2023, net loss include non-cash stock-based compensation expense of $2.8 million and $3.9 million respectively. Now let me just pivot and talk a little bit more about our strategy for partnering, which as I mentioned earlier is going to be a key value driver for Lexicon going forward. We've really reinvigorated our business development efforts over the last quarter, and that's going to be a key part of our Lead to Succeed strategy moving forward. We have really three key priorities when it comes to evaluating partnership opportunities to create value. Augmenting our commercial capabilities, advancing our pipeline in any or all potential indications, and expanding access to new geographies or territories to deliver on the innate value of our product. Importantly, any partnerships would be a major source of non-dilutive capital to invest in our future. A fantastic lead example of this strategy in action, we announced this quarter an exclusive licensing arrangement with Beatrice, a company with strong cardiometabolic expertise, a global commercial capability, and successful track record of launching medicines in new territories. This deal represents an exclusive opportunity to expand the reach of Sotogaflosin potentially across all indications to patients in other markets outside of the U.S. and outside of the EU. Now, as I mentioned earlier, the deal included a $25 million cash upfront payment and close to $200 million in potential regulatory and sales milestone payments, as well as tiered royalties from the low double digit to high teens. We're excited to work with Beatrice and even in these early weeks they've already been an engaged and motivated partner. We are confident that they are the right collaborator for Sotocliflozin in these territories. With a renewed emphasis on BD, we've reshaped our BD team who are laser focused on our pipeline and potential near-term partnering opportunities. Both LX9211 and LX9851 are focused in disease areas with proven or clearly articulated multi-blockbuster potential for new medicines. We continue our engagement with potential partners in this space and are sharing important data as they progress. Importantly, we also now have a focused lead generation program against additional undisclosed targets from Genome 5000 in preclinical validation within the cardiometabolic and neuroscience spaces. 2024 has been transformative for Lexicon and the next 12 to 18 months promises to be just as pivotal. We have several important potential catalysts coming in the relatively near term. We'll know for certain whether we have the ability to launch Synquista in just a few short weeks. And as I stated earlier, we're ready today for multiple scenarios. Our Sinaita Phase 3 study of Sotocflosin in HCM is well underway and we look forward to continuing to enrol patients. We expect that our progress phase 2b study of LX9211 in DPNP will report top line data in the early part of next year, which is coming very, very quickly. And the IND enabling studies of LX9851 in the rapidly evolving area of obesity and associated cardiometabolic disorders are underway with an IND filing anticipated middle of next year. Each of these opportunities have large potential in areas of significant unmet need and clearly represent large commercial opportunities. Any one of these is successful and has the potential to redefine Lexicon's future and create significant value for stakeholders, including the patients that we are all so committed to. Now, with that said, I'll turn the call back to the operator and I look forward to your questions.