Good afternoon. My name is Natalia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lexicon Pharmaceuticals Inc. Third Quarter 2021 Financial Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Mr.

Chas Schultz, Executive Director of Corporate Communications and Investor Relations. Please go ahead, sir..

Thank you, Natalia. Good afternoon, and welcome to the Lexicon Pharmaceuticals third quarter 2021 financial results conference call. Joining me today are Lonnel Coats, Lexicon's Chief Executive Officer; Jeff Wade, Lexicon's President and Chief Financial Officer; and Dr. Craig Granowitz, Lexicon's Senior Vice President and Chief Medical Officer.

Earlier today, Lexicon issued a press release announcing our financial results for the third quarter of 2021, which is available on our website at www.lexpharma.com and through our SEC filings. A webcast of this call, along with the slide presentation is available on our website.

During this call, we will review the information provided in the release, provide a corporate update and then use the remainder of our time to answer your questions.

Before we begin, let me remind you that we will be making forward-looking statements, including statements relating to the safety, efficacy and the therapeutic and commercial potential of sotagliflozin, LX9211 and other drug candidates.

These statements may include characterizations of the expected timing and results of clinical trials of sotagliflozin, LX9211 and other drug candidates; and the regulatory status and market opportunity for those programs.

This call may also contain forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, launch and commercialization plans for any approved products, strategic alliances and intellectual property as well as other matters that are not historical facts or information.

Various risks may cause our actual results to differ materially from those expressed or implied in such forward-looking statements.

These risks include uncertainties relating to the timing and outcome of our planned NDA filing for sotagliflozin in heart failure and our discussions with the FDA regarding sotagliflozin relating to heart failure and type 1 diabetes, the success of our commercialization efforts with respect to any approved products, the timing and results of clinical trials and preclinical studies of sotagliflozin, LX9211 and other drug candidates; our dependence upon strategic alliances and other third-party relationships; our ability to obtain patent protections for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial funding to conduct our research and development activities.

For a list and a description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission. I would now like to turn the call over to Lonnel Coats..

Thank you, Chas. Good afternoon, everyone, and thank you, as always, for joining the call. It was a very busy and very exciting third quarter for Lexicon. We continue enrolling patients in both of our Phase II studies for LX9211, and we remain very focused on obtaining top line results from those studies in the first half of 2022.

Later in the call, we will remind you of the uniqueness of this program. However, we will spend most of our time this afternoon laying out the exciting opportunity with sotagliflozin in heart failure.

Perhaps the most important scientific event in the quarter came from new heart failure guidelines established by the European Society of Cardiology or ESC. We believe a new market will down for SGLT inhibitors and heart failure as a result of these new guidelines. Next slide.

SGLT inhibitors have traditionally been viewed as highly effective type 2 diabetes therapies. However, new evidence has emerged in the last couple of years, supporting the benefits of SGLT inhibitors for people suffering from various forms of heart failure.

Clinical data from 3 therapies in SGLT class, empagliflozin, dapagliflozin and our investigational drug, sotagliflozin have been the primary drivers of an increasing body of evidence showing that heart failure patients can also benefit from these therapies.

Many of these benefits are being observed in particularly challenging areas of heart failure, where there are currently no effective treatment options such as heart failure with preserved ejection fraction or referred to as HFpEF.

During the quarter, the European Society of Cardiology, 1 of the most preeminent medical associations in heart failure issued new guidelines for the diagnosis and treatment of acute and chronic heart failure, which clearly established SGLT inhibitors as part of the standard of care.

We believe additional guideline changes from other respective medical associations will follow also elevating SGLT inhibitors to part of the frontline treatment for heart failure. For many of you who have followed Lexicon over the last number of years, this was my prediction, and it's really pleasing to see it come to fruition.

As you can see on the next slide, the heart failure market is projected to rapidly expand over the next several years. Global data estimates that the market will grow from $3.7 billion and overall gross sales in 2018 to over $22 billion in 2028, representing a compound annual growth rate of over 19.5%.

This growth is expected to be driven primarily by the adoption of SGLT inhibitors as part of the standard of care. If approved, sotagliflozin will have an opportunity to play a major competitive role in this rising market.

Much of our confidence lies in the differentiating advantages we believe are provided by sotagliflozin's dual SGLT1/2 inhibition, including unique benefits for worsening heart failure. Dr.

Craig Granowitz will take you through some of the data that gives us this confidence in SGLT class and the unique opportunity sotagliflozin may have to help the class grow in heart failure. Jeff Wade will then share how we are thinking about efficiently entering the market and leveraging the opportunity. Craig, I'll turn the call to you..

Thank you, Lonnel, and good afternoon, everyone. I appreciate the opportunity to share some of these important new medical advances in the SGLT2 class for the treatment of heart failure. I would like to take another look at the treatment guideline slide.

The European Society of Cardiology is one of the most important medical associations in the cardiology space with a global reach and impact that includes the United States. Its annual meeting was held at the end of August during which it issued the first major update to the heart failure treatment guidelines since 2017.

Traditionally, there have been 3 pillars of therapy constituting the cornerstone of care and heart failure. These include the ACE, ARB and ARNI class beta blockers and MRAs. Ideally, patients have prescribed drugs from each of these pillars of care.

To give you a perspective on use, approximately 90% of heart failure patients are on a beta blocker and 80% plus are on an ACE or ARB. As you can see in this graphic, SGLT inhibitors were added by EFC as a new pillar in its standard of care for heart failure.

SGLT inhibitors were given its highest level of confidence with a 1A rating, which reflects the guideline committee's high confidence in the quality and rigor of the clinical data supporting their use in the treatment of heart failure.

So essentially, overnight, the ESC guidelines catapulted SGLT inhibitors from not being included on the list for heart failure treatment to being established as part of the standard of care, along with these other treatment agents.

Currently, SGLT inhibitors are used in only approximately 5% of heart failure patients, so we expect to see a tremendous growth opportunity for their utilization in this space. On this slide, the impact of the ESC guidelines on the sequencing of treatment is quite striking.

In a review published in the European Journal of Heart failure shortly after the publication of the ESC guidelines, leading experts such as Dr. Milton Packer out of the United States and Professor John McMurray out of Europe, laid out the impact on the sequencing of care for new heart failure patients.

Conventional sequencing of treatment for a new heart failure patient has called for the initiation of an ASR, followed by a beta blocker, then an mRNA and ARNI and finally, an SGLT inhibitor. As you can note at the bottom of the slide, this treatment paradigm generally takes 6 months or more for each step.

ARNI's and step 4 are represented by the market-leading therapy, which had worldwide net sales were approximately $2.5 billion in 2020. Those sales should provide some perspective on the market potential for a new heart failure treatment.

On the right, you can see the new sequencing of treatments that doctors Packer and McMurray are proposing, given the new ESC guidelines and the growing body of clinical evidence for SGLT inhibitors. As you can see, they are proposing a schedule which initiates a beta blocker, an SGLT inhibitor immediately upon patient starting new treatment.

We believe this paradigm shift in the treatment of heart failure will be transformative and provide the potential for substantial growth as SGLT inhibitors are established as the new standard of care. When you dig deeper into the new ESC guidelines, you will see their specific recommendations around the use of SGLT inhibitors in heart failure.

At the base of the pyramid, they identified 5 SGLT inhibitors, including sotaglifosin as showing benefit in reducing cardiovascular events in high-risk patients for future major cardiovascular events. Of the 5 drugs, sotagliflozin is the only 1 not currently approved or on the market.

As you move up the pyramid, you'll see that 3 drugs, dapaglifloin, empagliflozin and sotagliflozin are recommended for the treatment of heart failure with reduced ejection fraction or HFrEF in patients with diabetes to reduce future heart failure-related events.

At the top of the pyramid, you see only 1 drug, sotagliflozin, which was identified for the treatment of worsening heart failure. Worsening heart failures when the heart failure patient experiences an acute event requiring urgent treatment or hospitalization.

Our SOLOIST Phase III outcome study was conducted in this exact patient population, and sotagliflozin is the only SGLT to date with outcomes data in patients in this acute hospital setting.

We believe this particular point in the heart failure patient journey represents a unique potential competitive advantage for sotagliflozin and will be the primary point of engagement if we receive regulatory approval and bring sotagliflozin in the market. Our goal is very specific.

When a patient enters the hospital with an acute event of worsening heart failure, we want sotagliflozin to be the preferred option for initiation before leaving the hospital. We think these updated ESC guidelines recognize this uniqueness of sotagliflozin. On this slide, it is important to understand the impact of heart failure on the patient.

Unlike many areas of cardiovascular heart health and disease such as elevated cholesterol. In heart failure, there is a tremendous burden on patients that greatly impacts their lives on a daily basis. Heart failure is not a silent disease. Heart failure patients truly feel this disease and readily appreciate the impact it has on their daily lives.

These are some representative quotes from patients living with heart failure from a qualitative study published earlier this year. A common complaint is shortness of breath that is associated with fluid buildup and the inability for the heart to effectively distribute oxygen-rich blood to the body.

This affects their ability to focus and create tremendous physical burden for patients to accomplish their normal activities. As you can see, the daily impact is tremendous. However, the biggest impact comes from acute events requiring hospitalization.

In this slide, shows a typical progression of patients occurring in those suffering from heart failure. As you can see, patients are subjected to chronic impact of the disease that gradually erode their cardiac function over time. The body does its best to compensate for this decline.

And however, there are typically multiple acute events where the patients suddenly and rapidly declines requiring hospitalization for treatment. Patients typically become severely short of breath and incapacitated due to the fluid buildup, often resulting in a sensation of drowning. Patients in this condition may be in a life or death situation.

By definition, their current treatment is not working. So there is a high need and openness to change in the treatment regimen, both from the patient and health care providers' perspectives.

Unfortunately, patients may likely face these acute events multiple times throughout their lives with about 1 in 4 patients requiring rehospitalization within 30 days following hospital discharge. And 2/3 of these patients within their first year of hospitalization.

The circled events on this slide marked the exact point of engagement we studied in the SOLOIST clinical study where we initiated treatment with sotagliflozin in hospital setting or within 3 days after hospital discharge.

Our data in this regard are unique to date amongst the SGLT class and provide specific insights on how sotagliflozin could benefit patients in this potential life or death situation.

Looking forward, we believe that sotagliflozin has the potential to show meaningful differentiation in the treatment of heart failure and in other aspects of cardiovascular benefit amongst the SGLT class, given its unique dual SGLT1 and SGLT2 inhibition.

Our data in heart failure was generated from 2 large Phase III clinical outcome studies called SOLOIST and SCORED, both of which were published in the 2 concurrent New England Journal of Medicine articles and included many groundbreaking first.

Our SOLOIST study was conducted more than 1,000 patients with diabetes who had recently been hospitalized for an acute event of worsening heart failure. This was the first study in the class to show benefit in this particular point in the patient journey.

SCORED was a longer-term outcome study conducted in more than 10,000 patients with diabetes, chronic renal disease and other risk factors for cardiovascular disease, and shared the same primary endpoint as SOLOIST.

Taking a quick look back at the diagram for the heart failure patient journey, you can see how our 2 Phase III outcome studies demonstrated the benefits of sotagliflozin on heart failure. In the SOLOIST study, we look specifically at patients with type 2 diabetes who have been hospitalized as a result of an acute event of worsening heart failure.

Patients were initiated on sotagliflozin or placebo, either before discharged from a hospital or within a few days after discharge. The SCORED study was designed to evaluate the benefits of sotagliflozin in patients with type 2 diabetes who are at risk of heart failure or a MACE event.

This slide shows data from our SOLOIST study looking at the primary endpoint of total CV death, hospitalization for heart failure and urgent heart failure visits in patients with type 2 diabetes. There are 3 important points I'd like to note on this data. The first is the extraordinarily high rate of these very expensive events.

You will see that the placebo arm had 98 events for 100 patients over the 18-month study period. This means that, on average, each patient had approximately 1 event over 1.5 years.

This really speaks to the point we highlighted earlier that people suffering from chronic heart failure are expected to experience multiple acute event over their lives that will require them to suddenly enter the hospital.

Second, when you look at the sotagliflozin treatment arm represented in orange, you'll see a very meaningful benefit of a 33% risk reduction or 28 fewer events over the 18-month study period in these very expensive hospitalizations. Third, the benefit is seen rapidly with a statistically significant separation established by day 28.

This is important because once someone is hospitalized for heart failure, you want to keep them out of the hospital and hospitals are often evaluated based at least in part on short-term readmissions with sizable potential penalties for readmissions within 30 days.

We believe the magnitude of the benefit and the rapid onset of the benefit makes the data from SOLOIST, especially compelling. Not only do patients feel better, they feel better quickly, and they come back to the hospital less often, which patients, physicians and hospitals want to avoid and payers want to avoid paying for.

On this next slide, you will see that the SCORED data mirrored the results seen in SOLOIST. Once again, in this study, we looked at patients with type 2 diabetes who are not hospitalized, but have risk factors for cardiovascular disease.

So this is evaluating more of the chronic condition of heart failure as opposed to the acute condition evaluated in SOLOIST study.

These 2 studies shared the same primary endpoint and we saw again a quite significant reduction, 26% relative risk reduction in total cardiovascular death, hospitalization part failure and urgent hospital -- urgent heart failure visits. Results were statistically significant with substantial relative risk reductions in both studies.

As noted earlier, there is a growing body of evidence that the additional inhibition of SGLT1 provided by sotaglifozin may provide an extra level of cardio benefit in addition to the benefits seen with SGLT2 inhibition alone.

In our SCORED study, we saw a significant benefit in both MI and stroke, which has not been seen before with the other SGLT only inhibitors. In the SCORED study, we noted there was a 32% reduction in fatal and nonfatal myocardial infarction and a 34% reduction in fatal and nonfatal stroke.

Overall, there was a 23% reduction in MI and stroke with a significant p-value of 0.002. Once again, a significant differentiating finding has not been reported to date from studies of other members of the SGLT class. On this slide, 1 of the most interesting findings from these 2 studies are shown.

In a pooled analysis of both trials, we looked at the hazard ratio across the entire spectrum of left ventricular ejection fraction in heart failure patients. As you can see from the graph, there is a trend showing that as ejection fraction increases, the risk reduction remains significantly better than placebo.

Most previous studies of other SGLT inhibitors tend to show waning efficacy as ejection fraction increases, especially above 60%. So we believe this may be another point of differentiation with sotagliflozin.

We are especially excited about the robust risk reduction observed in these studies across the entire spectrum of preserved ejection fractions with type 2 diabetes who currently have limited treatment options.

At this point, I'd like to turn the call over to Jeff to discuss how our SOLOIST and SCORED data may provide a unique competitive opportunity for Lexicon.

Jeff?.

Thank you, Craig, and good afternoon. As Craig mentioned, patients with heart failure often require hospitalization for acute events, frequently multiple hospitalizations over their lifetimes. These events are among the most important drivers for both the initiation of therapy and changes in the treatment regimen for heart failure.

A hospitalization for heart failure may be the first time a patient is diagnosed, something that is particularly common among patients who have heart failure with preserved ejection fraction or HFpEF, and therefore, a driver for the initiation of therapy.

For previously diagnosed patients, a worsening heart failure hospitalization has a tremendous impact on the desire of both patient and physician to change the patient's treatment regimen, not only to reduce the likelihood of -- requiring hospitalization, but also to better address the patient's day-to-day burden of disease.

Importantly, though, it is not just patients and physicians who are driven to act. Hospitals and payers are also highly motivated to reduce the recurrence of heart failure events requiring hospitalization.

Reducing rehospitalizations within 30 days of discharge, for example, is a particularly, particular importance to hospitals, which face penalties for readmissions within 30 days through reduced Medicare payments and lower ratings.

From a payer perspective, hospitalizations for heart failure are extremely costly, requiring multiple overnight hospital stays and resulting in one of the highest financial burdens to the health care system. Everyone involved the patient, physician, hospital and payer is strongly motivated to reduce the recurrence of heart failure hospitalization.

This alignment of interest tied to the urgency of action associated with symptomatic burden and the frequency at which these high-cost hospitalization events occur, sets heart failure apart from many other cardiovascular indications managed with drug therapy.

Overall, we believe hospitalization due to worsening heart failure is a key leverage point with potential as a prime competitive opportunity for sotagliflozin. As I mentioned before, this key leverage point for the initiation or change of therapy is a very frequent event.

In fact, heart failure is the leading cause of hospitalization for Americans over the age of 65, with about 1 million hospitalizations annually.

These hospitalizations involve substantial burdens not only for patients, but also for the health care system, where there is a high level of interest in reducing and managing the associated cost especially given the concentration among Medicare patients.

Our studies were conducted in people with type 2 diabetes, which will represent about 44% of hospitalized heart failure patients. This patient population has been growing over time, a trend that will likely continue as the overall population continues to age and rates of diabetes and cardiovascular disease continue to increase.

Cardiology specialists are the primary decision makers regarding heart failure treatment. Among cardiologists, there's an even more concentrated group that account for most heart failure treatment decisions.

Based on our analysis, taking into account prescriptions for branded heart failure medications, approximately 8,000 cardiologists account for approximately 60% and perhaps more of the overall market opportunity. An audience that we believe we can effectively and efficiently engage with the field force of fewer than 100 people.

Along with the concentrated prescriber base, there is also a geographical concentration of local and regional centers where heart failure patients are treated, further enabling our efficient engagement with a modest highest field force.

We are currently building out the leadership of our launch readiness team and working through a spectrum of other activities in preparation for a potential launch next year. If approved, we are very much looking forward to bringing this potential new therapy to patients suffering from heart failure and living with type 2 diabetes.

In summary, we believe sotagliflozin has differentiating advantages in a market that is poised for growth.

We are poised to enter the market as SGLT inhibitors are being adopted in the standard of care in HDrEF an opportunity, if approved, to be 1 of 3 participants indicated for the treatment of heart failure in a class that has the opportunity to grow from minimal to very substantial share aided by favorable data and now prioritization and treatment guidelines.

We believe that if approved, sotagliflozin will be well positioned as well to address the particular challenges of HFpEF which has been almost entirely lacking in treatment options and represents more than half of all patients suffering from heart failure.

SOLOIST Phase III outcomes data in worsening heart failure represents a unique potential competitive advantage for sotagliflozin. At the most important leverage point for the initiation or change of therapy.

Given the severity of the situation for patients and the costs involved for payers and hospitals, we believe this leverage point offers a prime competitive opportunity for sotagliflozin.

Especially in this setting, but also in heart failure, generally, therapeutic decisions are made by a concentrated base of cardiologists, which we believe we can effectively engage with a focused field force.

Given the emerging growth opportunity for the SGLT inhibitor class in indicated for heart failure, the characteristics of the heart failure market and the particular strength of our data, we feel that we can be highly competitive in the marketplace and effective in building value for our stakeholders.

In addition to sotagliflozin, we continue to advance a number of other innovative programs with the potential to drive long-term value. I wanted to spend a few moments to update you on the status of some of these programs.

Lexicon has a history of bringing innovative discoveries from our own labs into and through development and to approval end market. If we are successful with sotagliflozin and heart failure, it will be the third time we successfully received regulatory approval for 1 of our innovations.

To date, we have brought one drug from our own labs through development and regulatory approval into market, XERMELO, which we sold last year to TerSera and relating to which we have a continuing milestone and royalty interest, which I will describe in a moment.

Noted on this pipeline chart, we received approval for sotagliflozin in treatment for type 1 diabetes in Europe. We're continuing to seek a potential path forward in the United States for type 1 diabetes having previously received a complete response letter from the FDA for that indication.

We believe sotagliflozin demonstrated a positive benefit risk profile in the largest Phase III development program ever conducted in type 1 diabetes and has the potential to become an important new treatment option as an adjunct to insulin for type 1 diabetes patients, and we are currently pursuing an administrative pairing with the FDA on whether there are grounds for its previous denial of our NDA for type 1 diabetes.

The administrative pairing process is currently on hold while we engage in good discussions with the FDA and hope that, together, we can find a potential path forward in this indication. We will share more as these discussions continue.

Other than sotagliflozin, LX9211 is our most advanced program in development, and we believe it has the potential to have millions of people suffering from neuropathic pain.

LX9211 is completed Phase I successfully and is currently being evaluated in 2 Phase II clinical trials, both of which we expect to read out top line results in the first half of next year.

In addition to the programs that we are developing directly, we also have interest in the form of potential milestones and royalties and other programs that have been developed or facilitated using our technology. We have a milestone and royalty interest in telotristat ethyl for biliary tract cancer.

Telotristat ethyl is discovered, developed and commercialized as Lexicon, as XERMELO, which I mentioned earlier.

We sold the product to TerSera last year for a significant upfront payment and are eligible for up to $65 million in milestone payments and mid-teens royalties moving forward if they are successful in developing it for biliary tract cancer.

We also have a milestone and royalty interest in UTTR1147A, which is currently in Phase II clinical development for immune system disorders. This program came out of our long-standing target discovery and biotherapeutic alliance with Genentech.

As you can see, there is a deep development pipeline with multiple opportunities to build additional value in the future. Before getting into the Q3 financials, I wanted to spend a moment to talk in more detail about LX9211.

Neuropathic pain affects a large portion of the population with the worldwide market projected to grow at over 13% a year to $13.2 billion by 2026. There is estimated to be a prevalence of about 12 million people worldwide suffering from diabetic peripheral neuropathic pain and 600,000 people suffering from postherpetic neuralgia in 2026.

Despite neuropathic pain affecting millions of people, there remains a high level of unmet need for those suffering from the condition. The current approved therapies are limited by a lack of efficacy, compounded by debilitating side effects.

As a result, many people turn to opioids to experience some level of relief, which, of course, carry their own risks of potential abuse and addiction. We feel LX9211 may overcome many of the shortcomings of current therapies.

LX9211 is a potent, orally delivered, selective small molecule inhibitor of AAK1, a pathway, we believe, may have utility in reducing neuropathic pain while avoiding the addictive downsides of the opioid pathway or the somnolence or difficulty concentrating seen with gabapentinoids.

Late last year, LX9211 received fast track designation from the FDA for the treatment of diabetic peripheral neuropathic pain. To date, our preclinical data for LX9211 has demonstrated excellent CNS penetration, and reductions in pain behavior in animal models of neuropathic pain without the motor impairment seen in such models with gabapentinoids.

Very importantly, we have conducted several preclinical tests to confirm LX9211's independence from the opioid pathway. And so far, we have found no concerns around addiction with LX9211. We have conducted single and multiple ascending dose Phase I studies in healthy volunteers to study the safety, tolerability and pharmacokinetics of LX9211.

These studies supported the preclinical profile and LX9211 was well tolerated with dose proportional pharmacokinetics that are supportive of once-daily dosing. There were no drug-related serious adverse events and the most common adverse events were headache and dizziness.

We are currently conducting 2 Phase II proof-of-concept studies of LX9211, one is in diabetic peripheral neuropathic pain and the other 1 is in postherpetic neuralgia. They are both double-blind placebo-controlled parallel group multicenter studies. The DPNP study is a 3-arm study, while the PHN study is a 2-arm study.

They both share the same primary endpoint change from baseline to week 6 in average daily pain score. Patient enrollment is ongoing in each of these Phase II clinical studies. We expect top line results from the studies in the first half of 2022.

Turning to key aspects of our third quarter financials, you will see that we ended the quarter with $120.9 million in cash and investments. This puts us in a strong financial position to fund our prelaunch activities for sotagliflozin and our ongoing clinical activities for LX9211 and our planned discovery efforts.

If approved, the commercial launch of sotagliflozin will require additional resources for which we will be looking to options that include a potential strategic partnership for the commercialization of sotagliflozin outside of the United States.

As indicated in our press release this afternoon, we had minimal revenues during the quarter as compared to $6.6 million from the third quarter last year due to the absence of product revenues in the current quarter, resulting from the sale of XERMELO during the third quarter of last year.

Research and development expenses for the third quarter decreased to $15.7 million from $40.1 million for the corresponding period in 2020. This was primarily due to decreases in external clinical development costs relating to sotagliflozin, resulting from the completion of clinical studies.

Selling, general and administrative expenses for the third quarter decreased to $7.3 million from $12 million for the same period in 2020, primarily due to lower salaries and benefit costs as a result of the reductions in personnel in September 2020 and lower marketing expenses, all associated with the sale of XERMELO.

In total, we had a net loss for the second quarter of $23.1 million or $0.16 per share as compared to net income of $82.6 million or $0.71 per diluted share in the corresponding period of 2020, which included a $132.8 million gain from the sale of XERMELO.

Net loss for the third quarter of 2021 and 2020 included noncash stock-based compensation expense of $2.7 million and $1.9 million, respectively. Overall, we are in a good position to continuing to advance both sotagliflozin and LX9211. I would now like to turn the call back to Lonnel..

Thank you, Jeff. I'd like to close out today's call by highlighting some key anticipated milestones of events that you can expect as we advance sotagliflozin and LX9211. We continue to work diligently to submit the NDA for sotagliflozin in heart failure around year-end.

Our launch readiness teams are gearing up on both the commercial and medical sides as we prepare for a potential launch in the U.S. next year. As Jeff mentioned, we are actively seeking a strategic partner to commercialize sotagliflozin outside the United States.

We plan to continue highlighting the data from our sotagliflozin studies at upcoming congresses and through peer-reviewed publications. On LX9211 front, we're looking forward to top line data from our 2 Phase II studies reading out in the first half of next year.

With that, I'd like to thank you for listening today, and thank you for your continued support of Lexicon, and I will welcome any questions you may have at this time. Operator, please open the line for questions..

[Operator Instructions] Your first question is from the line of Yigal Nochomovitz with Citigroup..

Curious, what do you make an effect that ESC included sotagliflozin in the heart failure guidelines in type 2 diabetes, even though sotagliflozin is the only 1 that has yet to be approved in this setting?.

Yigal, great question. We were very pleased to have that happen. I think what they look at is the preponderance of evidence of clinical evidence that has been published and they make their decisions based on that overall evidence.

And so we were very pleased that they accepted our evidence as it was in the absence of actually having it approved at this point. So it was a very significant win for us. And we certainly look forward to leveraging that win going forward as we seek regulatory approval..

And one for Jeff on the neuropathic pain program, Jeff, -- Could you just talk a little bit about what you need to see on the efficacy side in the 2 Phase IIs that you believe would be the kind of profile that you would need to advance 9211 in the pivotal trials in both diabetic peripheral neuropathic pain and postherpectic neuralgia?.

Sure. So the first thing I would say, these are proof to concept studies. So these are the first studies that we've done in patients. So what we're really looking for is a signal in neuropathic pain in these studies. And then we'll be making decisions about next steps in development post that time period.

So that's mostly what we're looking at is to prove the concept of AAK1 inhibition and neuropathic pain. And following that, we'll decide whether we can go or we need to do more desk ranging, whether we can go into some other Phase II/III setting or the like, but that will basically depend on the outcome of these studies..

Advanced both in the Phase III, if both indications that is?.

Diabetic peripheral neuropathic pain is obviously a much larger market opportunity than postherpetic neuralgia. Obviously, we're going to look at the data from both of these studies. And I would just say that preclinically, we have evidence of an effect in multiple different areas, in multiple different models of neuropathic pain.

Our goal with this overall or what we would envision is that there is an opportunity across multiple types of neuropathic pain and would ultimately want to be developing it broadly across different types of neuropathic pain.

So as we think about how to develop this further, we're going to be looking at that and looking at these first 2 concept studies is launching point off for different elements of neuropathic pain..

Your next question is from the line of Yasmeen Rahimi with Piper Sandler..

It's [indiscernible] on the line for Yas. I have a couple of questions here, as I'll just start out one. So based on the efficacy data generated today from all the SGLT inhibitors and the recently updated EC guidelines. I was just wondering if you could just opine on how you think of sotagliflozin could be positioned if approved.

And what would be the critical point of care for this drug? And I had an additional question after that..

Well, I think it's a great question. So I'm going to have Craig restate some of the things I keep carried forward in the presentation. Craig, your thoughts..

Yes. Thank you, Lonnel, and thank you for the question.

We believe that the data set as we went through in the data, particularly in the recent worsening heart failure is differentiating at this point, and will really be the only 1 with that data and assuming we achieve the outcome with the FDA regarding patient indication that we will be indicated for that use. So I think the data is compelling.

We hope all of it that was presented today provides that background.

But I think in summary, it is really the breadth of the data, the speed of the onset and the magnitude of the benefit particularly across the patients with the range of ejection fractions and with the additional MACE benefit, particularly the stroke signal and particularly with specific outcomes data in recent and worsening heart failure are 3 key milestones that others that have studied other agents in the SGLT class do not have..

And then my follow-up second question here.

Do you think the initiation of sotagliflozin treatment in the hospital setting could resonate well with patients and could lead to better adherence compared to patients in the outpatient setting with less severe heart failure on 2 inhibitors -- And I just wonder to see if you've had any feedback from cardiologists who treat hospitalized HF patients?.

Well, that's a really, really good question. I'm going to turn it back over to Craig..

Yes, we agree. I've worked in the industry a long time. I've worked across products that were indicated shortly after discharge from the hospital when the patient goes back to the community cardiologists. I think what you have to remember in the group of patients with recent worsening art failures, they're really teetering on a -- edge.

And they are really playing this very delicate dance between their kidney and their heart regarding the amount of fluid that is not too little that they go into heart failure because they don't have enough volume or too much and they go into heart failure because they've got too much volume.

And so they -- generally, the hospitalization is to get the treatment right. As you can see, there's lots of drugs these patients are on, and this is just for their heart failure. They're on many other medications as well.

So we believe that when the patient to use the terminology in the hospital gets tuned up in the hospital, they don't want to change that regimen. Nobody wants to change that regimen when the patient shortly leaves the hospital, a patient, the provider, the payer.

If the patient is stable when they leave the hospital and they spent a couple of days getting to that point, everybody is incentivized to really give this new regimen or a good trial.

So we believe that's the ideal time because if you're trying to get the patient shortly after the discharge who's going to stop and change the patient's care, right? It's a very timely and challenging clinical scenario, get it right when they're in a hospital, discharge them are in good shape.

And hopefully, they'll stay at a hospital at least for 30 days and hopefully, much longer..

Your next question is from the line of Jessica Fye with JPMorgan..

With this data for sotagliflozin, what's your latest thinking on an ex U.S.

partner to help you maximize the potential of the product?.

Jessica, great question. Subsequent to the ESC guidelines, I would say that I would say those entries have grown. And so our confidence is growing that we most likely will get a partner outside of the United States..

Got it. And have you tried to pursue breakthrough designation at all for sotagliflozin? I think I saw that EMPA got it for HFpEF. So wondering if that's something you've got..

We were very curious about it because generally, breakthrough designation is assigned to Phase II products where you have more engagement with the FDA around the program going into Phase III. So we're a little bit surprised about that outcome.

The other thing is that once you seek breakthrough designation, it sometimes can slow you down in terms of what you want to accomplish. So for us, we've made the decision to just push ahead and go as fast as we can to get the NDA submitted. They were in a unique position because the product was already in market.

They only really had to do 1 additional study for SNDA where we have 2 very significant studies. And so it takes a little bit more work for us to get that done. But I'm very pleased to see the got breakthrough designation.

And just to the point we've made earlier, it just puts more emphasis on SGLT class being an incredibly important class for heart failure. And from our perspective, they can lay the groundwork and lay the path, and we'll be happy to get on that path and run with them because we believe the market is absolutely going to grow astronomically..

Okay. Got it.

Maybe shifting gears, -- Is it possible to refine at all your expectations for timing for the pain data?.

No, I think we're going to stick with first half of next year. I have not been silent about we've had some challenges around recruiting as we started the study in the middle of the COVID challenges and trying to get patients out of the house and into these studies. So we expanded the time line to give ourselves a little bit more time to get it right.

The second thing that was important was to make sure we work with our CRO, who also had some may have had some challenges along the way that we needed to iron out.

And I think at this point in time, we just have to take the time and effort to make sure we enroll the right patient because, as you know, CNS studies tend to have a very high failure rate. And a lot of that is because patient selection. We don't want to put ourselves in that category.

Our best effort here, as Jeff has said, is we're looking to get a signal and the best way to do that is to have very tight inclusionary and exclusionary criteria, so we can get that signal and better understand how best we go from there..

Your final question is from the line of Joseph Stringer with Needham & Company..

This is [indiscernible] speaking for Joey.

Can you just -- I think you already pretty much reviewed this, but if you could just kind of talk what the potential sotagliflozin label in heart failure look like -- In other words, how would you see that really positioning the drug?.

Great question. I'll turn that one over to Craig..

Thank you for the question.

It really is very much similar to the 2 populations that were in the New England Journal of Medicine papers and we described today, is that we are seeking 2 different populations, both of which with the similar endpoints of heart failure defined by cardiovascular death, hospitalization for heart failure and urgent unscheduled visit in both a high-risk group of patients with diabetes and other risk factors for major cardiovascular events and heart failure and for patients with recent and worsening heart failure or heart failure-related events, and that is really the path that we are taking with the agency.

And we believe we've got the data, as we walk through with you the 2 clinical studies that would support those distinct populations as we try to show in the stylized graphic, both of which have the heart failure endpoints as their primary end point..

Great. And just another question.

If you could just talk about what it would take to commercialize -- and for heart failure on your own and what would be the next steps in terms of building on commercial infrastructure?.

Yes, great question. I'll start, and I'll turn it over to Jeff. We've already started. I think we are -- we have to move a lot faster than we have moved historically.

-- based on our engagement, as I've said in the last call, based on our engagement with the FDA, based on what, I think, Jessica question around breakthrough designation that 1 of the others have received, we fully expect that we're going to be on a pathway this drug would be in market much sooner than later going into next year.

So for us, we have to start that build out much sooner than later. So this year, we've already started. And so from there, we'll be uniquely positioned once the product is submitted. And once we certainly get the designation that we're looking for after we've submitted the NDA, I think you'll see us move even faster.

We're landing groundwork now that allows us to have those trigger points where we can pull the team on pretty fast. I'll stop there and Jeff let you add anything you want to add from there..

Sure. I mean, we're building out our leadership team right now. We expect to have some people in. We already have some people in. We're expecting some others in before the end of the year. And we're engaged in a number of activities with external collaborators and partners to be well prepared for launch.

A lot of what we do will be tied in to the NDA submission and acceptance, which will be happening over the course of the end of this year, beginning of next year for the acceptance. And but we are already doing a lot of work to get ready. We were a relatively short time period off from lunch. So those preparations need to be underway, and they are..

Awesome. I just have 1 last quick one.

Do you think there's any additional gating factors for the NDA submission?.

No. Get us submitted. That's what -- Thanks for the question. I'll turn it back over to operate, there's other questions..

There are no further questions. Are there any….

Yes. Let me take a moment just thank everybody for joining us. It's really this exciting time here at Lexicon. We're managing multiple priorities, and we're very fortunate as a fairly small company with multiple priorities. So we're very, very pleased about that. I think that the ESC guidelines have played out the way we had hoped.

And I believe the American Heart Association may follow suit in the future. It really is laying the is laying down the future for what the SGLT class can do. We believe very strongly we have found a very unique position for sotagliflozin that we can carve out at the point in which there is a great need for change.

And I think we've tried to describe that today where that is. And when we look at that very clearly and concisely we know that we can hire a fairly very well talented a ready group of folks that can get into that space and make a big difference. We certainly will punch above our weight grade. I feel very confident about that.

The first big decision we made, I think, to move into the space -- You heard today that was Dr. Granowitz, who we brought on in August, and we haven't slowed down since then, and we'll continue to bring in the talent as necessary for Lexicon to make a big difference as we go forward. We're keeping a very close eye on 9211.

I think this could be something remarkably special, and we'll have to make sure that we stay very diligent about how we manage the clinical program and not try to rush it and make sure we get the signal that we're looking for. So stay tuned, we have much more to say.

And last but not least, we have been engaged with the FDA around T1D type 1 for sotagliflozin. We will characterize those conversations as we have future closure on some of those conversations that I think will be coming forward in the near future and make sure that we call that back out. So a lot of good things happening at the company.

I want to have to manage it all the way through, but we're very confident that we'll go into 2022, well positioned to take advantage of those opportunities. Thanks again for listening, and we look forward to the next call..

This concludes Lexicon Pharmaceuticals Third Quarter Financial Results Conference Call. Thank you for participating. You may now disconnect..