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Good day and welcome to Lexicon Pharmaceuticals Second Quarter 2024 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lisa DeFrancesco, Head-Investor Relations and Corporate Strategy. Please go ahead.

Thank you, Betsy. Good afternoon, and welcome to the Lexicon Pharmaceuticals second quarter 2024 financial results conference call. Joining me today are Dr. Mike Exton, Lexicon's new Chief Executive Officer and Director; Jeff Wade, President and Chief Financial Officer; 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 financial results for the second 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, relating to the safety, efficacy, clinical development, regulatory status and therapeutic and commercial potential of INPEFA,

Thanks Lisa and good day everyone. Thanks for joining us on the call. Before we begin our discussion on Lexicon's results for the second quarter of 2024, let me start by saying that even in my first few weeks here as CEO, I can already see what a tremendous opportunity we have to bring innovative new therapies to patients, transform the treatment landscape of multiple therapeutic areas, and indeed transform Lexicon as a company. Now moving on to our accomplishments for the year, which are indeed incredibly significant. First of all, our INPEFA business continued to grow modestly. We saw progress across all areas of focus in this highly competitive market. Importantly, we also resubmitted our NDA for

Thank you, Mike. I'd like to begin with our INPEFA results. Net sales for the second quarter of 2024 were $1.6 million and $2.7 million for the first half of 2024. We saw improvements in filled TRx and number of new prescribers, a modest expansion in access and greater pull through. This progress is due to the strong efforts of the team assembled by and aligned under Tom Garner since he had joined the company last year. Achieving better market access remains the key to more significant growth for INPEFA in heart failure. Our goal has been and remains to achieve formulary access that is favorable for patients and equitable in light of INPEFA’s value, and we are continuing to have discussions with payers driven by INPEFA’s value and differentiating data. Payer coverage improved slightly in the second quarter to 48%. Although most of this coverage still requires step through of competing therapies, an obstacle that we're focused on eliminating. Some payers have been taking longer to make coverage decisions due to uncertainties associated with the IRA, particularly around the prices to be announced by CMS on September 1 for the first group of products selected for negotiation, a group that includes three major heart failure medications. We expect improvements in coverage as these uncertainties are resolved and as we continue to demonstrate the value of INPEFA for patients, providers and payers. It's important to note that SGLT use remains highly underpenetrated in heart failure, with significant room for growth. Despite strong recommendations within the ACC treatment guidelines and consensus statements for both HFrEF and HFpEF, recommendations that are based in substantial part on INPEFA data, especially as it relates to initiation of therapy after a hospitalization. I'd now like to move to

Yes, thanks, Jeff. Look, in summary, the next 18 months for Lexicon includes several important planned catalysts. First of all, we've got the potential to launch

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Yasmeen Rahimi with Piper Sandler. Please go ahead.

Great. Thank you so much, team, for all the updates. A few questions on

Thanks a lot, Yasmeen. I heard two big buckets, not sure if you had a third, but let me pass the first one to Craig for the AdCom and what we’re thinking of timing and expectations, et cetera.

Yes. Thank you for the question, Yas. And at this point, we expect that we will get an AdCom from the FDA and it really would focus on the risk benefit of treatment. As I think we’ve shared at prior calls and at other meetings and communications that we’ve really worked hard to find a population where the risk benefit is more favorable. We currently are committed, and the FDA has been committed to our target action date of December 20 of this year. I think I’ll just take a moment on the risk benefit in that we believe that this group of patients with chronic kidney disease are at much higher rate of disease progression to end stage disease across a range of underlying diseases, such as end stage kidney disease, heart failure, stroke, myocardial infarction, severe retinopathy and other diseases. So glycemia is actually a marker for that. And the indication we’re seeking, as a reminder is a glycemic control indication with that group of patients with underlying chronic kidney disease. So we’re not seeking an indication right now for preventing necessarily progression of the chronic kidney disease, but that is a marker of patients that are going to have much more rapidly progressive disease across a range of complications of type 1 diabetes. So I think in that regard, we’ve gotten great feedback from the patient and physician community and on the need for this therapy, I think in prior communications from FDA, some which publicly that they acknowledge that insulin alone is not enough in type 1 diabetes patients, they’ve acknowledged that those that don’t have tight glycemic control are at risk of progression of more rapidly progressive disease. So we look forward to the opportunity, if there is an AdCom, that we’ll be able to share all of this with both the FDA and the medical community.

Yes. Great. Thanks, Craig. We feel very confident going into that AdCom and look forward to presenting all of our and independent data at that time. So I’ll throw at the second question, the second big bucket to Tom, the Chief Commercial Officer, which really focusing on the commercial footprint for

Absolutely, yes. Thanks, Mike, and thanks for the question, Yas. So I think, as you’re well aware, we’ve spent significant amounts of time and effort really building a highly capable commercial infrastructure, and that crosses field sales, access, and going as deep as kind of patient support programs as well. I’ve taken some time since I joined the company as well, just to make sure that we’re focusing all of our efforts in the right place with high zone [ph] INPEFA but kind of with knowing that

Thanks, Tom.

Thank you so much.

Thanks.

The next question comes from Andrew Tsai with Jefferies. Please go ahead.

Hey, thanks. Appreciate you’re taking my questions. Maybe just on the AdCom actually, going back to the AdCom, would it be safe to presume that you’re preparing for hypothetical voting decisions or questions around the risk benefit and as well as a risk mitigation strategy of

Great. Same order, I’ll throw to you first with Craig, then Tom.

Thank you, Andrew. Again, we really feel strongly that based on all of the discussions that we've had with the FDA over this past number of months that they really are going to focus on the risk benefit. I think what we've talked about is that – in this subgroup, which has much higher risk of progression to the complications of diabetes, that tight glycemic control was even more important. And the data is shown convincingly, both overall in the entire inTandem program, nearly 3,000 patients, but also in that renal subgroup that you have similar and highly significant control of glycemia, whether on baseline insulin or optimized insulin therapy, and that tight glycemic control will be associated with less progressive disease. And we've also shown and published that the risk of diabetic ketoacidosis seems to be similar in that subgroup of patients with underlying CKD than in the overall population. So we feel quite strongly that the primary questions that FDA will ask is about overall risk benefit.

Great. Thanks, Craig. Tom, to you.

Absolutely. Thanks for the question, Andrew. So as we think about

Makes sense. Thank you.

Just, if you allow me, Andrew, to just add to that, is that in fact that's how we see the rest of the pipeline. I think as we go through the strategic review, I think we see that each of our assets offers this opportunity for a pipeline in a pill, which is multiple indications. And those indications are in spaces where, like for

Right. Congratulations on executing on that front as well as everything else.

Thanks so much.

[Operator Instructions] The next question comes from Joe Pantginis with H.C. Wainwright. Please go ahead.

Everybody, good afternoon. Thanks for taking the question. First, I wanted to focus on the HCM program. It's good. The program's up and running. And I wanted to sort of talk about your views about the evolution of the space. So when you recently had your R&D Day, you positioned sotagliflozin sort of in between the beta blockers, et cetera, on the front end and the CMIs on the back end. And your current study you're going to be also including for the CMIs. But I guess, how do you envision sotagliflozin fitting in as of this point, since you can also include the CMI population?

Yes, great question. Over to you again, Craig.

Yes. So, again, I think they have different mechanisms of action that are complementary. And since we are enrolling patients that are symptomatic, they're symptomatic regardless of their underlying therapy. So whether they're on nothing or a beta blocker, calcium channel blocker, or a CMI, or all combinations thereof, the inclusion criteria is those with a KCCQ score of less than 80. So we think that it provides the maximum flexibility to providers to manage the symptomatic relief in these patients, which is the key reason why patients with HCM present in general, and why they require treatment and the goal of treatment. And as a reminder, the other agents that are in development right now, particularly in non-obstructive disease, FDA has also allowed KCCQ as the primary endpoint, just like the endpoint, primary endpoint of the SONATA HCM trial.

That's very helpful. Thank you. And then – sorry. And then, just curious about the potential timelines. I don't know if you're ready to think about that now, since it's just started, and disclosure. And the second question, maybe for Mike, you mentioned in the prepared comments and in the press release, and in one of your answers, talking about strategy and resources and strategic review, obviously, you're not prepared now to show your hand, but wanted to sort of get a sense of what potential outcomes or goals are you looking for as part of that?

Yes. Fantastic, Craig, firstly, for the timeline of HCM.

Yes, I think we've shared in general some of the timelines previously. And again, as a reminder, we got this study up and running extraordinarily quickly, and we're really looking at having a final data towards the end of 2026, early 2027. So, I think that's the timeline that we're looking at. As a reminder, and as Jeff Wade showed in his slides, we really have a treatment duration that's quite a bit shorter because the drug has already been proven in a number of heart failure related indications. So we're looking at a 26-week treatment duration, not a 52-week treatment duration, which will accelerate timelines quite a bit.

And maybe, Joe, if you allow me just to pile on a little on to the first question, because, yes, while we foresee sotagliflozin potentially being an adjunct to all indicated therapies for HCM, clearly there's a huge timeline gap between initiation of basal therapies, CCB's or for beta blockers through to CMIs. Just because of the complexity and the logistics that the centers face in initiating those later therapies, and where we have a demonstrated safety profile, an easy oral therapy, we see that it can be form a place within that position in the treatment paradigm, as the team has explained previously, but not exclusively so. And I think that gives us a unique position actually across the HCM. Now, I appreciate the question on the strategic review. We're well into it. I've started that with my team pretty much immediately when I started, and we're getting great insights as a part of that. What are we looking to achieve? It's overall a very simple equation. And that is we have a lot of opportunities, actually more than what a company outsize probably deserves or has and yet we need to be very thoughtful at how we deploy our resources across those opportunities to maximize them all because they're all fantastic medicines in unique indications. And so that's really the answer that we're searching for is across the sort of current therapies, across our pipeline therapies, where do we place our resources and effort to maximize the return for the organization. And that's where we're at. And you're right, I'm not going to steal my hand quite yet.

Absolutely. Thank you very much for all the details.

I appreciate it. Thanks.

The next question comes from Roanna Ruiz with Leerink Partners. Please go ahead.

Great afternoon, everyone. So maybe continuing with questions about the Phase 3 SONATA trial in HCM, I was curious, what has the feedback been from trial sites and investigators so far? As you're kicking it off and could you remind us about what standards you plan to use to ensure tight execution of that trial as well?

Right. Another one for you, Craig.

Yes, Roanna, it's a great question. And the feedback I have to say, has been really positive. We've identified all of the sites that we need for the trial in a number of countries around the world. I think you've seen or can see on clintrials.gov that the trial activated around the end of June, and that we're operating in a large number of countries, but the single largest contributor of sites will be the United States. And we really have a top notch group of HCM centers around the country that are participating. And I think the things I really like about the trial are many of the topics that Jeff already covered, is that it's a therapy that has very little friction to get patients on, can be used either alone or on top of existing therapies. It's oral once-daily, has an ejection fraction down to 50%. You don't require all the echoes. It has a pragmatic and straightforward and relatively easy to administer endpoint of a KCCQ. You don't have all the CPAD [ph] and all the other things. The feedback on trial execution from a study site standpoint has been very positive because it's a whole lot easier to include patients on. I think there's also a general expectation that there's this sort of understanding that, yes, I think this drug is going to work. I mean, the most common thing I hear from investigators is, yes, it makes sense it's going to work. And especially because many of them in obstructive disease, where they said, well, gee [ph] if you remove the obstruction, does that solve the problem? But when they think about it, many of those patients in a few years are back with symptomatic disease again. And that’s why we included both obstructive and non-obstructive is the underlying genetic default in pathophysiology between the two is far more similar than dissimilar. So that’s really where including both obstructive and non-obstructive on top of or instead of other therapies with an EF down to 50 KCCQ score as the primary endpoint, a relatively shorter duration of therapy with an agent and class that they’re familiar, I think, really all stack up in a very favorable way.

Roanna, you talked about what controls or mechanisms do we have to see that it gets executed appropriately? I think, in fact, Craig and his team has shown their execution excellence in clinical trials with LX9211 and have really been able to demonstrate in a study that obviously was coming from another study that had some issues. But we’re on track with recruitment, and that’s powering along and the timeline that Craig and his team met to get SONATA up and running was incredibly tight. And so the ability to recruit the number of sites that they have ever since the protocol was finalized is pretty amazing. So we are running with this very, very fast and look forward to updating on progress in the near future.

Got it. And a quick follow-up for me. I wanted to ask about the obesity program as well. Could you just elaborate a bit more? What excites you about LX9851 and how this product profile could layer into the treatment paradigm in the future, assuming that there could be more products approved by them and more combo regimens?

Yes, absolutely. So I’ll turn it over to Alan in the first instance to give a little bit of background on his baby. I mean, LX9851. And so, Alan, why don’t you take us through and then a couple of others may, may lay some other opinions on top.

Yes, absolutely, absolutely. Obviously, the weight management field is incredibly exciting. Treatment is evolving. But despite the success of the GLP‐1 agonists, I think there’s still some important questions, cost and ease of use, reduction of lean body mass and tolerability. And with LX9851, we think we’re addressing all of those issues. It’s a small molecule, relatively easy to manufacture. It’s oral product. In our preclinical studies, in our knockout studies, we’ve seen a very nice reduction in fat only with no change in lean body mass and tolerability. In our preclinical studies so far, we’ve never seen any evidence of diarrhea, and that includes our knockout mice. And if you think about it, the enzyme is inhibited 100% for their entire lives. And we haven’t seen any diarrhea or anything like that in mice or any of the other preclinical species we’ve looked at. So we’re very excited about this agent. It’s a totally new mechanism that was discovered by our gene knockout work. Through our knowledge, nobody else is working on this. And we think it really addresses a lot of the current issues in terms of treatment of weight management.

Maybe I’ll ask Craig to just throw some comments from a clinical perspective, what he views with [indiscernible].

I think the other important point, and Alan touched on it. But just to put a finer point on it. This enzyme is expressed really in only two tissues. It’s in the apical part of the GI tract, particularly the ileum, and in the liver. And I think all the effects that we’re seeing is really related to the weight management and this ileal break concept, which is really driven by the gut. And then also some of the data that Alan has previously shared, looking at favorable effects on lipid profile and progression of plaque in the coronary arteries of susceptible animals, and also in liver fat overall, I think, are indicative and reflective of the narrow distribution of the expression of this enzyme. So we’re excited that it is a unique mechanism, but also one that’s really tailored in the tissues where a lot of these disease processes are taking place.

Roanna, you can tell that we’re excited by this asset because we all want to have a say, including myself, just commercially, of course we don’t know where the obesity weight management space will be in the years to come. However, I think it’s reasonably easy to predict that there’ll be combination therapies beyond the incretins. And as you know, a lot of the new medicines that are being developed are incretin based different formulations, et cetera. And other somewhat similar metabolic conditions have shown us that new mechanisms of action are always appreciated as combination therapies, diabetes being an obvious choice here. So we’re pretty excited by it, and we’re going to learn a lot more about the clinical development, a lot more about the biology over the coming years, and yes, look forward to continuing to update you all.

Yes, sounds good. Looking forward to more updates. Thanks.

Thanks.

The next question comes from Yigal Nochomovitz with Citi. Please go ahead.

Hi, guys, this is Hosni Mubarak [ph] on for Yigal. Thanks for taking my questions. I just wanted to ask a follow up on the last questions related to the obesity program. It sounds like on the safety front, you believe that this program might be differentiated on diarrhea. But I'm curious if you have any sense of what maybe the nausea profile might look like to the similar question on safety. I think one of the things we're wondering about is that these obesity drugs seem to be, it may be necessary to dose very chronically for long periods of time. So I'm curious how long, in terms of duration of therapy you explored in these sort of preclinical models, especially on the safety side? Thanks.

Great. Yes, thanks very much. So, Alan, over to you for the question on nausea and then duration of therapy, particularly from a safety perspective.

Sure. Thank you. So, nausea, as you probably know, that's rather difficult to look at in preclinical studies. But what I would say is it's important to note that the inhibition of this enzyme doesn't completely reduce the absorption of free fatty acids. What it does is it delays absorption so that it can go further down, the fatty acids can go further down in the GI and then trigger what Craig mentioned, the Ileal Brake Mechanism. So obviously, to really look at nausea, you would have to do we have to look to the studies in Phase 1. So far, I think most of our studies have been only about one month duration, and we'll be doing the IND-enabling tox studies, which will also be a one month duration in two species. But we do have plans on the preclinical side, exactly as I suggested, to do studies of much longer duration for three and six months.

Got it. Thank you.

No, if you allow us also, you go to elaborate a little bit more, there is also some evidence beyond our group that might suggest that nausea is not an issue. Craig, maybe you want to talk a little bit about that.

Yes, hi it's a great question. And the beautiful thing is, we have the knockout mouse models and the tolerability and safety of those over the life of both the mice. But also, there is more recently, some limited human genetics data of knockdown and knockout variants of ACSL5. And those individuals seem to live a full and normal life without any issues. The only issues you see is very early in life, there is a modification of diet that is needed for the first couple weeks, but after that, these children seem to grow on and develop normally into normal adults. So I think we feel that both from the knockout side with the animals and some of the human genetics that have been identified, that we have something that is probably going to be able to be dosed for very, very long periods of time, comfortably. And again, as Alan said, we need to do all the long term tox in the animals, and then the actual human clinical program with this particular inhibitor will need to be done. But I think we have high degree of confidence, based on what we know, that they can be dosed safely for long periods of time.

Got it. That's super helpful. If I could ask one more quick one on the same topic. I'm just really thinking about how this mechanism, if this mechanism has applicability in areas outside of diabetes, but maybe in related areas. We know the GLP1s are in diabetes as well. But and I think more recently, some of the larger players have even talked about heart failure. I'm just wondering if this mechanism has any relevance there as well, for maybe obvious reasons. Thanks.

Yes. The answer is yes. And I could turn to Alan, where we've actually shown data in a number of metabolic conditions, as you would assume from reducing body weight and obesity. Some of it is incredibly exciting, and we're looking to present that data at medical conferences in the near future. So the short answer is yes. There's opportunity within lipidology, opportunity within other metabolic conditions as well. So, looking very, very interesting mechanism here.

Got it. Thank you very much.

Thanks a lot.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

I'd just like to thank you all for attending today's Q2 earnings call. We're incredibly pleased with the progress that has been made today. We've got a busy back half of the year and into 2025, but that provides us many, many opportunities that we're really looking forward to. So look forward to continued dialogue, and we'll speak to you all soon.