LENZ - NASDAQ

Good morning, ladies and gentlemen, and welcome to the LEN

Thank you. Good afternoon, and thank you to everyone for joining us today to discuss LEN

Thank you, Dan and good afternoon everyone. The third quarter of 2024 has been highlighted by multiple significant corporate achievements. They reflect the consistent pattern of execution by the LEN

Thank you, Eef, and good morning, everyone. It goes without saying that the commercial potential for an effective presbyopia treatment represents one of the largest eye care market opportunities. Presbyopia impacts an estimated 128 million people in the U.S., a population incidence that is nearly 4 times larger than those impacted by dry eye. It is also more than the combined U.S. population suffering from dry eye, childhood myopia, macular degeneration, diabetic retinopathy, and glaucoma. As we continue to advance towards potential approval by our PDUFA date of August 8th next year, we wanted to take this opportunity to share significant and insightful perspective gained from eye care professionals through primary market research, confirming what we have understood to be anecdotally true. Reflecting on eye care professional patients, our survey found that most patients seen are presbyopic and the recommendation for a retinal eye exam is already built into their standard eye care exam process. Based on the feedback from 426 eye care professionals, the average ECP will see 300 to 400 patients per month. Of those, 61% are reported to be presbyopes. Further, the ECPs in the survey indicated that 80% -- 87% of the annual eye exams they perform already include a retinal exam to evaluate retinal pathology. We anticipate such a retinal exam will be recommended by the FDA, and we believe it integrates seamlessly into the existing exam process and will not be a burden to prescribe. Next, we wanted to survey eye care professionals to get a sense if their prior experience with [Indiscernible] had impacted their interest levels in the treatment of presbyopia as well as their impressions of LN

Thank you, Shawn. As both Eef and Shawn have highlighted, the third quarter and recent period has been very productive. In early July, we were very pleased to have completed a $30 million PIPE financing with Ridgeback, bringing a strong and well-respected investor into our shareholder base and further strengthening our balance sheet. To that end, we ended the third quarter 2024 with approximately $217.2 million in cash, cash equivalents, and marketable securities, which as we have guided previously, is anticipated to fund the company's cash runway to post-launch positive operating cash flow. Turning now to our third quarter results. Our operating expenses and resulting cash burn for the third quarter were once again substantially in line with our plan. Total operating expenses for Q3 2024 were approximately $12.9 million compared to $19.9 million for the same period in 2023. Our Q3 2024 cash burn, net of interest income was approximately $9 million. Sequentially, our total operating expenses decreased quarter-over-quarter by approximately 10% from $14.4 million in the second quarter of 2024. On previous earnings calls, we highlighted that we would anticipate a decline in our research and development expenses due to the conclusion of our positive Phase 3 CLARITY study, while shifting our research and development focus and spend towards pre-approval manufacturing activities, which we have seen in the third quarter. Total R&D expenses decreased to $6.5 million in Q3 2024 compared to $17 million for the same period in 2023. Sequentially, research and development expenses decreased quarter-over-quarter by approximately 7% from $6.9 million in the second quarter of this year. Total SG&A expenses increased to $6.5 million in Q3 2024 compared to $2.9 million for the same period in 2023. This increase was driven primarily by increases in commercial headcount and pre-commercial planning activities. Sequentially, SG&A decreased quarter-over-quarter by approximately 12% from $7.4 million in the second quarter 2024, driven primarily by decreases in non-commercial G&A administrative expenses, including outside legal services and other corporate expenses. We expect our SG&A expenses or our sales and marketing expenses to be more specific to begin to ramp from here as we approach a mid-2025 approval for LN

Thanks Dan. As you can see, the third quarter and recent period has been a very productive time, and we feel the team continues to build momentum into the end of the year. It goes without saying that it is an exciting time at LEN

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Yigal Nochomovitz with Citi. Please go ahead.

Hi guys. Thank you very much for taking the questions. I had a few here. So, first off, you mentioned, I believe, the survey, there was 80% optometrists, 20% ophthalmologists. I'm just curious if the conclusions of the survey were consistent amongst those two subgroups? And then the second question, obviously, with this very, very large market, over 100 million potential patients, I'm curious what level of investment in the social media access. I think you mentioned influencers are you expecting for the launch? And then thirdly, just could you remind us as far as the manufacturing of the product, where is it manufactured? Is it within the United States? Or is it ex-U.S.? And do you have multiple suppliers? Thank you.

Thanks Yigal. Great questions. Let me kick off with the 80/20 and the manufacturing, and then I'll hand it over to Shawn for the investments. So the 80/20 split between optometrists and ophthalmologists is obviously by design. We see that if you look at the VUITY scripts, that 80/20 split is how the VUITY scripts came about, and we expect that to be reflected for our commercial plan as well. That's why we ended up with 80/20. And the feedback across those two groups is very consistent. So, you don't see any changes between those two groups. Then on manufacturing, we are fully set up to produce at commercial scale. Actually, our Phase 3 trial was produced at that same commercial scale ready to support the launch as is. Manufacturing setup is partly U.S., partly ex-U.S., all European-based. So, European and U.S. manufacturers, both for drug products as well as drug substance, all with ample capacity that we will continue to add to and build redundancy to as we launch.

And turning to the interest from social and influencers to LN

Thank you, Shawn.

Okay. Thank you.

Your next question comes from the line of Marc Goodman with Leerink Partners. Please go ahead.

Yes. Two questions. One is, can you remind us what the incentive is for the optometrist has to recommend the product? And then second of all, thinking about the VUITY launch, help us with expectations for how to think about your launch for the ramp in prescriptions and sales? I mean, should we be expecting it to do as well or not as well or better? Or just help us kind of set the expectations right now. Thank you.

This is Shawn Olsson, Chief Commercial Officer. [Technical Difficulty] presbyopia are really looking for an ideal solution for presbyopia. So our eye drop provides the opportunity for more patients to be [Technical Difficulty] patients that are buying reading glasses off the shelves. [Technical Difficulty] The other benefits in one of our target groups are contact lens. [Technical Difficulty] Ultimately, the product did not work, but they did drive 3,000 new scripts per week in the beginning, and then they increased that to 5,000 new scripts per week after DTC. Obviously, we are not the size of Allergan, but we're going to put the potential marketing power behind this product to have a launch. I think anything in that realm would be good.

And just to maybe add on that a little bit, Marc. So, if you think about timing of that launch before we talk about REM, with our PDUFA date now obviously being set for August 8th next year, we've tightened our guidance as to when we expect to launch, as you've heard us talk about to the fourth quarter of next year. That's the logical and I see everywhere time that will take to we expect it will take to get those product out of the door. So. early in that quarter, we'll start with samples. It is a product that lends itself obviously extremely well for sampling with that very rapid onset. So remember that our clinical trial was truly a day one endpoints on that same day one. So first product, first time that a patient actually obviously use the product within 30 days, we hit those very high efficacy results that we've shared before. So we look at that Q4 truly as a rollouts quarter. Well, we'll start with heavy sampling that then will lead to that transition where patients are going to start filling scripts.

Thanks.

Your next question comes from the line of Joe Catanzaro with Piper Sandler. Please go ahead.

Great. Hi, everybody. Thanks for taking my questions. Congrats on the progress here. So within the ECP survey, you queried physicians on how often they perform retinal exams. And Shawn, I think you mentioned expectations around requirement for retinal exam. So wondering where those expectations stem from relative to the safety profile you observed in comparison to VUITY? And maybe more generally, how the language around retinal risk might compare to VUITY? Thanks. And I have a follow-up.

I'll take that one. So our expectation is that our label will be very similar to that of VUITY, which has a general recommendation, not a requirement, but a general recommendation for an eye exam when using a presbyopia eye drop. And you could argue that, if you look at our safety data and knowing that a second in very different from pilocarpine is actually pupil selective, does not stimulate the Ciliary Body and we know that the Ciliary Body is overstimulation, Ciliary Body is what's often connected to the retinal side effects. So we believe that our data shows and MOA shows that we don't have that impact. At the same time, we believe that the FDA will not go as far as to not have that same general, again, recommendation on our label. We actually believe that that's a good thing. One of the questions earlier was what's in it for eye care professionals. I think that eye exam is one, as we know, that's actually a catch pay for most patients if you do a non-dilated eye exam. So that's a positive for eye care professionals and also a positive actually for patients to just make sure they have your eye checked out on annual base. And as we stated or as we found in the survey, it is standard practice. So your annual standard eye exam almost always includes a retina exam. So it's not something that needs to get done in addition. It's not something new, something that all if not most eye care professionals already do. So again, we feel that it's not a hurdle actually positive in there.

Great. That's really helpful. Maybe my follow-up, so I guess maybe if you have any updated thinking on ex-US, ex-China opportunities or where that stands, whether you pursue that on your own, look for partnerships and any sort of gating factors you see there to pursuing that?

Yes. Great question. What we can definitely say is that following first our results and frankly now seeing Oxtell repeat that ex-US, there's definitely a lot of interest for markets beyond US and China. We are phasing those discussions in appropriate way. Obviously, our focus is to make sure that we get to the market in the US in the best way possible. But you can imagine that those discussions are ongoing. Timing of which is DVD, those discussions usually take a little bit of time and we'll keep the market updated as we progress there.

Okay, great. Thanks for taking my question.

Your next question comes from the line of Pavan Patel with Bank of America. Please go ahead.

Hey, guys. Thanks for taking my questions. Just two for us. You speak to the recent Phase 3 study readout in China? What's the timeline for approval and how big do you model the opportunity beyond the 400,000 addressable patient population that you've mentioned? And then the second question, maybe if you could speak to commercial launch readiness ahead of the August 2025 PDUFA date. At the time of launch, how many other approved eye drop treatments for presbyopia do you expect on the market? And if you could frame how you expect LN

Sure. This is Dan Chevallard. So I'll take the majority of that question and perhaps Marc Odrich can speak to the data if you wanted clarity around that and how we think about it. But how we think about the economics and modeling of the opportunity. First of all, there are $15 million in development milestones that are outstanding, that are in the agreement as well as $80 million in commercial milestones that are to be obtained based upon net sales in the region. In addition to that, royalties in the 5% to 15% range on net sales in China. So those are the economic terms that are in the agreement. The overall projections and revenue, we're not guiding there at this time. And as far as timeline for their approval, we would guide you to keep an eye on their website, where they'll be providing updates on their regulatory guidance. We will not be guiding on their behalf. The first part of your question was about the data specifically from CORXEL. So if Marc would like to add any comments, go ahead.

Yes. Thank you, Dan. The data really was very validating. Overall, incredibly similar, very strong data and really no surprises whatsoever. So it's good to see that in a somewhat different world, different population, we had the same result, very clinically similar and relevant. I really don't have any more to say than that.

And then turning to the commercial launch readiness, we're very well positioned from our commercial launch readiness here at LEN

So just adding a little additional color there. So if you look at what's obviously, VUITY is still on the market, but Allergan or AbbVie stopped promoting that product about nine months, maybe 12 months after launch a couple of years ago now following a -- as we noted earlier, actually very strong initial launch, very interesting and promising run rate for then patients and doctors called on that the product bank doesn't work. So it's not the target profile that patients are after. So if you think about the target profile as a presbyopia1 is a product that works rapidly. So you put in your eye, it works almost immediately. It needs to work or it needs to be a once a day product. So set it, forget it, you don't want to be messing with adding drops throughout your work day. And obviously, it needs to work long. You really need to cover you for the full work day. That's the profile that patients and doctors are looking forward to the profile that obviously we hit. Clearly, VUITY didn't. And as we all know closely recently or got approved over a year ago, but recently announced that they will be launching with what is, you just look at the public data effectively a similar clinical profile. So a twice a day product that works for some patients, but not many for a limited amount of time. So while they'll be out there and we expect them to be out there when we launch, we don't foresee any a very different outcome for them if you compare to VUITY.

Thank you.

Your next question comes from the line of Lachlan Hanbury-Brown with William Blair. Please go ahead.

Okay. Thanks for taking the question and congrats on the progress this quarter. I know you've been running education awareness campaigns with doctors for a while now. But I was wondering sort of how that will escalate or change as you get into launch over the next 10 months? And then somewhat related, that's just one of the three pillars that you outlined to the launch. Wondering what or how much if anything you can do on the other two pillars prior to an approval? Or do they sort of require the approval so you have the brand name and the product to work on access?

Great. Thanks, Lachlan. So I'll take the very first part of the question on what we're currently doing and then Shawn will provide more color on our three key elements of the commercial strategy and what we can do prior to launch, which is actually quite a bit, but we have assembled now a medical sales liaisons team. So obviously, as we all know, that team can be and is out there currently talking to ECPs. So really sharing the MOA of the product. So how is aceclidine different than pilocarpine? And that's what we continue to hear over and over again that people are not enthusiastic about another pilocarpine product given their experience with BOE and the fact that it's not pupil selective. But on the contrary, are very excited about the aceclidine profile. So we educate our MSL team educates doctors on the MOA, on the profile. Then we obviously talk about our clinical data. That team, again, in a medical to medical discussion can talk about aceclidine and its clinical data. And thirdly, we'll start to talk about patient populations that initially would be the most attractive to use or to get on to the product. Again, that's a medical to medical discussion, the one that only the MSL team can have, and that's completely firewall off from the rest of the organization, and Shawn will talk to you about what we can do there prior to approval.

Yes. So as we continue to progress towards that potential approval, our unbranded campaign will continue to accelerate. So currently, the team actually this week is at the American Academy of Optometry at the convention with our unbranded booth and continuing to share that story on those three key pillars. You can expect that we'll be continuing to be present at upcoming conventions as well as continue to grow our presentation opportunities at those conventions as we announced earlier on the call. When you think of those three pillars, that really aligns to the doctors to recommend us and the prework we can do on the unbranded side. The patients request us by name, the second pillar and the access, the third pillar. Really just diving a little bit more on the access side. Again, this will be less forward in terms of what people see externally. But on the back-end side, as we continue to highlight on these calls, we're putting a lot of that infrastructure in place well ahead of launch. So that way, when the product is available, very quickly, we can get the product into the consumers' hands so they can actually try it and so the eye care professionals can get comfortable with it. Really, those are the two that we'll focus on ahead of approval, the doctors to recommend us as well as the access the patients to request us by name. Again, this is something where we want to make sure the doctors have some time with the product before we turn on direct-to-consumer advertising. So they're comfortable and aware of it, and then we'll come forward with the patients to request us by name with those different DTC strategies we talked about earlier.

Thanks. That's helpful.

Your next question comes from the line of Gary Nachman with Raymond James. Please go ahead.

Hi. Thanks. Good morning. So in terms of your key targeted presbyopes that you'll be going after when you launch, are you still thinking about certain groups like contact lens wearers, people that had refractive surgery or people that go to med spas. So how are you thinking about hitting those different groups once you activate the DTC? And then just back to the sampling with aggressive sampling at launch, how long do you think it will take for that transition to usage to occur? So how much is that going to play into the initial revenue ramp? How long will the sampling go before people start using it? Thanks.

Great. So a couple of comments. So looking at those key targets for presbyopia, so we commissioned a large market research survey to look at the consumers most interested. I think what's great to see is there's broad interest across the full population of presbyopes. But at the same time, we do want to promote and go directly to pupil that over-index on interest for eye drops for presbyopia. As we previously shared, those are pupil that are in contact lenses. Those are pupil who have had refractive surgery and those that have been to a med spine in the past 12 months. So those will be the more primary targets of our DTC. And what we'll do is we've partnered and continue to partner with agencies that work on how do you promote directly to those core groups. So they look at different data that exists on their buying trends, on the websites they visit. So it will be a very digitally focused way on how we target those. We'll also help target those buying our messaging to doctors. As you see in our unbranded campaign, we're already helping doctors to understand which patients are most interested. Each one of those groups are north of 10 million people. So those are all very valuable groups that have a lot of people and highlight the potential of an eye drop for presbyopia. In terms of sampling, it's very important to talk about the sampling of this product because it's a little different than some other products. So with this product in terms of sampling, it is a five-day pack. So if you think about our product, it comes in those preservative-free single-dose vials. So with this sample, they're truly getting a five-day supply to use the product. That's very different than, let's say, products where they come in the multi-dose vial where it could be almost a month supply. So I think that's very important. I think the other important thing here, too, is these samples will be given to the consumer at the optometrist and ophthalmologist location. So it's not going through your retail pharmacy, right? So, they'll actually receive those samples at the optometrist. They can immediately try it for five days. That's very similar to how contacts work actually where you get a five-day supply. And then from there, we'll move right into the actual prescription. So we don't see this one having that same effect that other samples do when it's a one-month supply or picked up at a retail pharmacy.

Okay. Great. And then just one more follow-up. Just on the hiring of the sales force. So just confirming that you're not going to do that until after you have the approval? Will you have some contingency offers out there? And then just maybe the size and structure of the sales force, how you're thinking about it? Thanks.

Yes. So just to clarify on the sales force. So the sales force, we are already beginning to put that team in place. So we've already hired our Vice President of Sales. We've hired our two regional directors. We'll continue to build that out ahead of the PDUFA date. So it won't be brought on after PDUFA. They will be brought on before PDUFA. And what we've shared is that our sales force team will be roughly 100 reps calling on approximately 15,000 eye care professionals that actually represent over 85% of all the beauty scripts.

Okay. But you'll have all the sales reps in before, even prior to the approval, the entire...

Yes, prior.

Okay. Okay. All right. Thanks a lot.

Your next question comes from the line of Matthew Caufield with H. C. Wainwright. Please go ahead.

Hi. Great. Thank you guys and congrats on the progress towards the potential approval and launch, definitely exciting. We just had one follow-up on the Chinese market. Can you remind us if China had the same prescription experience with VUITY with a version to pilocarpine? Or are there any -- is there any greater receptivity in that market for a novel mechanism? Thanks a lot.

Thanks, Matt. So VUITY was not launched anywhere beyond the U.S. So it wasn't therefore beauty also not launched in China. So it's really an open market there. Product pilocarpine obviously is a product that is known for its glaucoma use. So there's definitely a great opportunity to highlight as our partner will do, just like we do here, the fact that aceclidine is very different from pilocarpine. It has that pupil selective mechanism. It has that very clean safety profile, at least shown in trials. And obviously, importantly, it works. So very different from [indiscernible], but beauty was never launched in China.

Great. Very helpful.

Thank you guys and congrats again.

Thank you.

That concludes our question-and-answer session, as I am showing no further questions at this time. With that, I will hand the call back over to Eef Schimmelpennink, CEO for closing remarks.

Thank you, Tricia, and thanks, everyone, for dialing in today. Great to connect with you. And for everyone dialing in, have a great rest of your day. Thank you.