LENZ - NASDAQ

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

Thank you. Good afternoon, and thank you for joining us today. My name is Dan Chevallard, Chief Financial Officer of LEN

Thank you, Dan, and good afternoon, everyone. 2024 has been a highly successful year for LEN

Thank you, Eef, and good afternoon, everyone. As we have discussed on previous calls, the commercial potential for an effective presbyopia treatment represents one of the largest eye care market opportunities in the United States. Presbyopia impacts an estimated 128 million people in the U.S. a population incidence that's nearly 4x larger than those impacted by dry eye, and nearly 6x larger than those impacted by Demodex Blepharitis. For further context, presbyopia impacts more than the combined population in the U.S., suffering from dry eye Demodex Blepharitis, childhood myopia, macular degeneration, diabetic retinopathy and glaucoma combines. The first eye dropped treatment for presbyopia was approved in 2021 and confirmed that there is strong consumer desire for an eye drop to treatment as evidenced by initial paid new scripts of up to 6,000 per week. Long term usage beyond the trial period of this product did not materialize as pilocarpine, even at the high concentration of 1.25%, cannot deliver the consumer required performance. Other attempts at a lower dose bid strategies are being pursued, but given the efficacy profile is very similar to that of Vuity. We do not believe they will clear the consumer hurdle for performance. Or the ECP desire for a pupil-selective option. We continue to believe the category is wide open for an eye drop solution that can deliver what consumers desire. A once a day eye drop that provides seamless near vision for the full workday for the majority of presbyopia. Unlocking this market requires an ideal presbyopia eye drop and we are excited for the prospect of a site leading based LN

Thank you, Shawn. As both Eef and Shawn have highlighted, the fourth quarter in recent period has been a critical time, as we have now pivoted to a pre-commercial company. We ended 2024 in a position of financial strength with approximately $209.1 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 fourth quarter financial results, our operating expenses and resulting cash burn were generally consistent with prior quarters and in line with our operating plan. Total operating expenses for Q4 2024 were approximately $15.2 million compared to $25 million for the same period in 2023. In general, this decrease was specifically driven by the fact that we were in the midst of our Phase 3 CLARITY study in Q4 of last year, which makes these figures less relevant to compare. Perhaps more comparable, on a quarter-over-quarter and sequential basis, our total operating expenses increased by approximately 18% from $12.9 million in the third quarter. From a cash perspective, our Q4 2024 operating cash burn net of interest income was approximately $8.1 million, which was consistent with the $9 million in net cash burn last quarter. Total sales, general and administrative expenses increased to $9.4 million in Q4 2024 compared to $5.5 million for the same period in 2023, driven primarily by an increase in commercial headcount and other pre-commercial, pre-launch commercial planning activities. Sequentially, SG&A increased quarter-over-quarter by approximately 44% from $6.5 million in the third quarter due to significant relative increases in sales and marketing as we continue to ramp our allocation of spend to support our consumer-driven brand planning and the addition of key sales force leadership. As we have discussed on previous calls, we expect our SG&A expenses and more specifically our sales and marketing expenses to continue to ramp from here as we approach our potential August 2025 approval for LN

Thanks, Dan. As you can see, the fourth quarter and recent period has been an extremely productive time. And we're making significant strides in our pre-commercial preparations. As we are now less than five months from our PDUFA target action date, we believe we are well positioned to deliver a once daily safe and rapidly acting treatments to 128 million individuals living with presbyopia in the United States and very much looking forward to doing so. With that, I’d like to open up the call for questions.

[Operator Instructions] And our first question comes from the line of Yigal Nochomovitz from Citigroup.

Appreciate all the updates. So first off, I think Sean mentioned that the sales force is going to call on 15,000 ECPs. The digital campaign was targeting 30,000 or over 30,000. Could you just comment on how you’re filtering that down to focus on the 15,000? What are the parameters there?

Hi, Yigal. This is Shawn. Thanks for that question. It’s a really good question. So when you look across the landscape of eye care professionals, there’s obviously a lot out there. When you look at the 40,000 optometrists and 20,000 ophthalmologists, when we think of targeting in terms of our sales force, we’re looking at those that are high prescribers of Beauty and therefore we know that 15,000 ECPs represent roughly 85% or a little more than 85% of all the beauty scripts. So that’s our focus for our sales force. But we also know that the other doctors and with presbyopia being so prevalent, driving early disease state awareness is helpful across a broader group of ECPs. And so that’s why you’ll see our unbranded promotion is driving more broader awareness, while the field will focus truly on the earliest adopters of eye care professionals and those who represented over 85% of all the beauty scripts.

And then on this EYEAMSELECTIVE unbranded awareness campaign, I’d be super interested to get a better understanding quantitatively of how you’ve ratcheted up the awareness. Do you have data on the percent awareness before you started the campaign and how that’s improved today in terms of knowledge of not only presbyopia, but your Phase 3 data specifically?

Yes. So for the unbranded, we’re really focused on the disease state awareness and we’ve just in general, we’ve seen a lot of interest growth in the sorry, a lot of growth of interest in the concept at all of our conventions and across the board on LinkedIn. It’s great to see actually is the fact that we’ll be at our convention and people come up and I don’t know, can’t tell you how many times it comes to that. I’ve been seeing all of your ads on LinkedIn about your EYEAMSELECTIVE campaign. And so we’re really pleased with how it’s coming along. We’ll continue to share more information at the upcoming commercial days.

And then just the last one on the timing of the launch, obviously the PDUFA August 8th. And then Eef mentioned that you’re going to have product available in the channel, I believe starting fourth quarter. Is the delta there a function of just needing more time to produce the commercial sufficient commercial material or training the sales force or are there other factors we should be aware of?

Great question, Yigal. This is Evert. Thanks for allowing us to double click on that a little bit. That’s purely a factor of practicality. This we believe is going to be a very high volume launch as you can imagine. As I’ve shared in the prepared remarks, the manufacturing team has started production of the quantities that we believe will support a successful launch. That will all sit in bulk as we await final labeling discussions with the FDA and have a final approved label, insert, and cotton. We will then obviously start printing that, which would happen after approval, package all those quantities, ship them to our 3PLs, and get them into the field. So that's purely, that time that we guide there between PDUFA and a Q4 product in the market is, again, purely determined by those steps. The sales force, importantly, will be trained up in general prior to PDUFA date, final training on final labeling, and then immediately hit the field. So you can expect that immediately upon approval, the sales force will actually be out there promoting the product. They can get a couple of sales cycles in, which we like, prepare the doctors for what's to come, and then start delivering samples as soon as we have them available for the [Indiscernible] field.

Our next question comes from the line of Marc Goodman from Leerink Partners.

Hi. This is Madhu on the line for Marc. Just a couple from us today. First, how long do you expect the, like, significant sampling to go on for until, most of those target ECPs have gotten experience with LN

Great. Thank you for those questions. So from a sampling perspective, this product lends itself extremely well for sampling. If you look at the clinical data that we generated in our Phase 3 studies, you'll see that these are obviously in the patients endpoint is our three, day one. But within 30 minutes, which is the first time point that we've measured, you see that we have 71% of patients hitting three lines, 95% of patients hitting two lines of improvement. Because it lends itself so well for sampling, we feel that this is a unique tool that we have as a company that we will use widely. We don't really look at this as something that we will only do initially to give doctors the experience, but truly something that allows patients or consumers a very easy test or sample point to see does the product work for them, which, again, looking at the clinical data, I think we can be highly confident that the answer should be yes. And then do they like to continue to use that? That's why we've got that sample pack of five out there that, to re-answer your question, will continue to pull through as the years pass by. Also, because there's actually 4 million new presbyopia every year. So there's a large volume of new patients that we will continue to reach with those samples. So that's on the sampling side. On the regulatory side, just reiterating a little bit what I mentioned in the prepared remarks, we're very pleased with how things are going with the FDA. We've had very engaged discussions with them, frankly, from like three years ago as we were talking through the setup of a clinical trial with them. And obviously, since we've submitted the NDA, as I've mentioned, those interactions continue to be very productive. The mid-cycle review was very benign, just like you like it. And importantly, we now have seen them starting the inspections of our clinical trials. So showing that that progress continues to be made. So all in, very pleased with how the FDA interactions are going and continue to be very confident that we’re working nicely towards that August 8th PDUFA date.

Our next question comes from the line of Joe Catanzaro from Piper Sandler.

Maybe two questions interrelated on the competitive landscape. So, Shawn, you made some brief comments on Vuity and pilocarpine and pilocarpine BID. There’s been some recent Phase 3 data for carbachol based product. Wondering if you guys have any thoughts there on that product’s profile and maybe how it compares and contrasts to LN

Hi, Joe. This is Shawn. Thanks for the question. When we look at this area and opportunity for eye drops or presbyopia, we have said before, we really see this as a category of one and we continue to see this as a category of one. If you really want to drive the efficacy and the near vision improvement that the consumers desire the consumers’ desire requires two key things. It really requires a pupil size below two millimeters, which we achieved. And when you look at our commercial data, it’s very clear the capabilities of our product. And what’s really important is that you have the right meiotic to do it, which is aceclidine, which is pupil-selective and it’s the only pupil-selective meiotic. So when I look at this space, when I look at the competition, I really see this as a category of one and we’re really defined instead of part by our ability to achieve the performance with the sub two millimeter pupil and aceclidine puts us in that place where we can be the only one with that opportunity.

Maybe just adding to that, Joe, just building on what Shawn said, the -- an online successful product is a once a day, fast acting, long lasting eye drop. So do you overlay that on the clinical data that’s out there? We truly believe that our data is the only ones that show that. You mentioned carbachol and just to for everyone on the call that used to be Visus that product is now owned by 10 points. We’ve not seen that Phase 3 data. The press release highlighted that they met the clinical trial endpoints, but did not disclose or they choose not to show any of that data, which is therefore a little unsure what that means. If you go by the Phase 2 data, which is available again, we feel that that doesn’t meet what the consumers are after. So that’s just to answer your question on the Phase 3 data from carbachol.

And then maybe on the follow-up on like Phase 4 studies that you maybe could potentially perform, if they’re even necessary again to kind of sort of reinforce the competitive profile you have here?

Yes. No, we’re obviously focused on bringing this to the market. Phase 4 studies can be part of that. We know that there's ophthalmologists and doctors out there that have interest in testing the product. We'll work with them as appropriate to do those for Phase 4 studies. I will report on that as we are starting them.

Our next question comes from the line of Stacy Ku from TD Cowen.

Congrats on the progress and thanks so much for taking our questions. We have three. So the first question is around kind of your last year around the educational campaign. Maybe talk about your 15,000 target ECPs. Where are we in the campaign? What's the level of awareness of LEN

So thank you for the question, Stacy. I appreciate it. Again, this is Shawn. So looking at the educational campaign, so we've been really pleased by this educational campaign. When we were looking at what we want to do to drive awareness of the important things to look for in the future of presbyopia eye drops, we really wanted to bring forward the eye care professionals as the voice of that campaign. And that's how we came up with that concept of EYEAM. And we allowed those doctors to really talk about what is it to them that's important and what makes them excited for the future of presbyopia solutions. In terms of reaching out to those 15,000 ECPs, we're making great progress. As we shared, we've had over 2 million digital impressions with that campaign and targeting actually over 30,000 ECPs of the broader group, which means these eye care professionals are seeing the campaigns multiple times over. And that is driving a lot more awareness of LEN

Thanks, Shawn. Just adding to that and Stacy, thanks for your initiation this week. We appreciate it and a lot of great insights that you did there. And I think you mentioned actually in your question and the survey work that you guys did, which was a lot. There was no shortage of awareness around LN

Moving on to your second question on, we said that and shared that we’re working on final messaging on our campaigns. So we’re very excited about where we’re at in terms of our marketing materials. And we’ll break them into two groups. One is for our eye care professional side and one is for our consumer side. When I speak to doctors and when we see what resonates with them and when we test what’s important, I think one of the most important things they always bring up is this isn’t pilo, is it, right? So when we think of our messaging to doctors, it’s very important that we get across that this is not pilocarpine. So really when you think of promotion to doctors after approval, focus is going to be on MOA, which will lead heavily into the not pilocarpine, moves very quickly then into the efficacy and the safety profile. All that testing is continuing and we’re looking forward to sharing more at the upcoming commercial day. On the consumer side, you are exactly right. What we don’t want to do is over promise. What we saw from the previous launch with this space was promises were made that were not in line with the efficacy of the product, right. So it was a take one drop and it lasts all day, right, or one drop a day. What we really want to highlight here is we want to provide real expectations. So one example, which you just mentioned is how we’re approaching it. Yes, in our data we see a lot of patients still having a very strong response at ten hours. That being said, in a strategy not to overpromise, we want to focus on a messaging of up to ten hours. And then we also shared that we’re leaning into that lifestyle brand. So we spent a lot of time seeing with the consumers to invoke what’s the emotion they feel that presbyopia has on them. And again, we don’t refer to presbyopia to them, but they’re blurry near vision and eliciting that actual feeling and turning that into a campaign. So when they see it, they want to click it and they want to learn about the product and they have a desire to be on the product. So that’s really where we’re at working on the messaging.

Thanks and looking forward to kind of the commercial day.

Just wanted to touch in on last question there Stacy and we’ll keep it brief, but the background of the sales force. Shawn, you want to take that? You want me to?

Yes. So we’ve had a tremendous amount of interest in joining LEN

Our next question comes from the line of Jason Gerberry from Bank of America.

On the sampling initiative and how you'll leverage e-pharmacies. I'm wondering. Ultimately, if the e-pharmacies will share with you kind of sample conversion to patients opting in to monthly supply, and if that's a metric that you'll be kind of sharing with the street, just to kind of give some sense of how that's progressing with utilization and adoption? And then my second question, just with early adopters. Curious from a patient perspective, if you think that patients with other ocular comorbidities would be more or less likely to get treatment with. A presbyopia drop therapy, or -- if you think it's patients who probably have a low medication burden, just kind of curious how you're thinking about that dynamic. And at the Commercial Day, you think you'll share any comps for launch ramp outside of the early duty adoption dynamic? So those are my questions.

Great, thanks Jason. This is Shawn again. So, yeah, let me dive deeper a little bit into the sampling process and strategy e-pharmacy because it's a great question. So, when we think of the samples, what will happen with the samples is those five day sample packs again, very similar to how contacts are provided to samples. They're really a bridge until the consumer gets started. So, those sample packs will be delivered to the optometrist by the rep, so by the representative. So the rest will show up on at the optometrist, let's, for example, say, they leave 10 samples. When they come back on their next visit, we'll take a look at the samples and make sure that they're well stocks and that they're appropriately being dispensed. Now, the e-pharmacy is disconnected from the sample. That's a separate process. So, when the patient receives their sample, and they're checking out with their optometrist, the optometrist will ask, where would you like your script to be sent? And they'll have two options. There can be sent to the e-pharmacy, or it can be sent to the retail pharmacy. No, our preference is it sent to the e-pharmacy, right? When it's sent to the e-pharmacy, what actually happens is the patient gets a text on their phone and they actually click the text, pay for their product and that shifts to their home every single month. So that's the way that e-pharmacy is set up. And now from the e-pharmacy, we'll get data directly from the e-pharmacy on a number of scripts and how often those are being ordered the samples is separate from that. That's really delivered by the rep and separate from the e-pharmacy. The great thing about the samples are since they're delivered at the optometrist location, they won't get caught up in any of your script data, if you're monitoring script data for sales.

So very concretely, Jason, to your question, there’s no correlation to be seen or will be shared between samples and conversion to scripts. So second question was around --

The early adopters to the patients. So when we think about the first patients going into the doctor, so when we first get approval, our primary focus will be educating the doctors. So our earliest patients will be those that are already going into the practice. And actually this works out well, because if we think of comorbidities, right, one of the most important things that we see when we look at consumers that are interested in this product, a group that really stands out are those that are in contacts today and over 45. And the great thing about those patients, they’re already going into the doctor every year for their annual eye exam. So we’re already going to be seeing those patients at the doctor already before we even turn on DTC. And also what we saw on our survey that we revealed last quarter, those doctors are seeing over 200 presbyls every single month already. And they’re in a place where they’re excited to prescribe LN

And then last question here was on launch cups. So at the commercial day, we’re not going to be talking about launch and launch ramping. I think you and others have done a very good job at putting your models together. So I think the consensus is what most people will look for and look at as we launch and in the quarters to follow. So we’ll stick with that for now.

Our next question comes from the line of Lachlan Hanbury-Brown from William Blair.

So I’ve heard across the industry that it’s been getting harder at least in some places for sales reps to actually get in and see a doctor. So I’m wondering if you sort of have heard anything similar particularly as it pertains to your targets. And if so, like how what can you do if anything to get around those hurdles?

Hi, Lachlan. This is Shawn. Thanks for the question. So in this area of the industry, particularly around optometry, access to the eye care professional hasn’t been seen as being increasingly challenging for us. So we’re not seeing that on our end. Definitely when COVID came around getting into the hospitals and the pharmacies became more difficult. But for the optometrists, we really don’t see that growing. And I think what’s really great about this product is with our samples, it’s going to be another reason that they’re going to want to see us, because obviously as they provide the product to the patients, they’re going to want to see us again so they can restock their samples. So we see that as a great tool to make sure that that door remains open for our sales force.

Thanks. And then maybe a follow-up. I’ve seen in some prior launches, especially in the more sort of discretionary or aesthetic kind of areas concern around macroeconomic conditions affecting demand. And given there’s been talk over the past month or so of potential recession, I was just wondering if you have any thoughts on like how sort of economically sensitive demand might be, because you sort of outlined, you’re going to be targeting higher income customers anyway. So just interested in sales there.

Yes, great question, Lachlan. This is Eef. So two elements of that one. If you look at aesthetics, and you look at how revenue or volume has been impacted, or frankly, not impacted by recessions, you see that, take both, for example, hardly any impact and the big recession of the late or mid-2000s, definitely not over the last couple of years. So, you don't see that actually, which is partly, and this is as we've been speaking about quite a bit. Yes, there's 128 million presbyopia out there. We're talking about or projecting to get to a $3 billion plus potential market, only about a 6% penetration. And one of the cuts in that is actually income. So, I think this is at least we're projecting this to go to a group of people for whom the discretionary spending is a little bit larger to begin with. So, again, we don't expect any impact on whatever the macro is going to do.

Our next question comes from the line of Gary Nachman from Raymond James.

Hey, guys. Good afternoon. This is Denis Reznik on for Gary Nachman. Congrats on the progress this quarter. Thanks for taking the questions. So, previously, you've segmented the consumer market in a specific way where you've talked about the patients that could be early first adopters, being those who are lens wearers, refractive surgery, or those that go to med spas. Of those three, can you talk about which segment you think will be the easiest to activate and reach and which one will require more work? And then just any quick updates on how we should think about the commercialization plans for LN

Great, thanks for the questions, Shawn again. So, when you think about the early adopters, we see all three of them as very great and accessible targets from a promotional standpoint. In terms of access, when we think of the early days of launch before we turn on DTC, we think of those people in contact lenses. The great news is they're already in the optometrist. So, the good news is we can get them early in terms of the doctor can be our conduit to start speaking to that subset. And then we think of those that have had refractive surgery in the past or those that get a med spa. Again, we see both of these are groups that we can target digitally. And when we look at our media buy companies that we've partnered with and our ad agencies, in terms of if we're focusing on our med spa clients, we can look at their search histories and geo-locations to really target them with the right digital ads. They are extremely motivated and they test very high. They actually test the highest in our analysis of interest for an eye drop solution. And then for those that have had refractive surgery in the past, again, from here, we can target them as well as we can, as we reach out to ophthalmologists, these are people that they've met in the past and have worked on before. So, it's another avenue to get access to that population. So, we really see this all three groups as very accessible.

Thanks, Shawn. Your second question was about Europe. So, I'll take that a little bit broader and in general talk about the ex-U.S. strategy. So, what's clear or should be clear to all of you is that we are obviously focused on commercializing the product in the U.S. ourselves. Ex-U.S. territories will all be up licensing to the right commercial partner there. We do see that there’s a significant ex-U.S. opportunity and that’s reflected in the amount of inbounds that we get from very interested parties, wanting to understand what it would take to get a license to this product. We do want to make sure obviously that we drive the appropriate value for that. And that’s how we’re timing those discussions. The one exception there being China, we’ve licensed China early, if they had to do their own clinical trial. But I’ve seen the results a couple of months ago which were carbon copy of what we’ve seen in the U.S. which again was highly elevating. So they’re about, let’s call it 12 to 18 months or so behind us from a filing and launch perspective. I will keep everyone updated as we progress any other ex-U.S. discussions.

Our next question comes from the line of Matthew Caufield from H.C. Wainwright.

Thanks for the update. You kind of touched on this, but from the commercial standpoint, do you foresee any tangible prescription resistance based on former Vuity experiences or disappointment from that separate pilocarpine profile?

Hi, Matt. This is Shawn, and good question. So when we look at this market, what we really focused on particularly in our last market research study was the excitement and interest for LN