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Edited Transcript of LXRX earnings conference call or presentation 31-Jul-19 12:00pm GMT

Q2 2019 Lexicon Pharmaceuticals Inc Earnings Call

The Woodlands Aug 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Lexicon Pharmaceuticals Inc earnings conference call or presentation Wednesday, July 31, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey L. Wade

Lexicon Pharmaceuticals, Inc. - Executive VP of Corporate & Administrative Affairs and CFO

* Kimberly Lee

Lexicon Pharmaceuticals, Inc. - Head of IR & Corporate Strategy

* Lonnel Coats

Lexicon Pharmaceuticals, Inc. - President, CEO & Director

* Pablo Lapuerta

Lexicon Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer

* Praveen Tyle

Lexicon Pharmaceuticals, Inc. - EVP of Research & Development

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Conference Call Participants

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* Jessica Macomber Fye

JP Morgan Chase & Co, Research Division - Analyst

* Kevin Kedra

G. Research, LLC - Research Analyst

* Vasiliana Vireen Moussatos

Wedbush Securities Inc., Research Division - MD of Equity Research

* Yigal Dov Nochomovitz

Citigroup Inc, Research Division - Director

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Presentation

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Operator [1]

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Welcome to the Lexicon Pharmaceuticals Second Quarter 2019 Financial Results and Business Update Conference Call. (Operator Instructions) As a reminder, this call is being recorded today, July 31, 2019.

I will now turn the call over to Dr. Kimberly Lee, Head of Investor Relations and Corporate Strategy. Please go ahead.

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Kimberly Lee, Lexicon Pharmaceuticals, Inc. - Head of IR & Corporate Strategy [2]

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Thank you. Welcome to the Lexicon Pharmaceuticals Second Quarter 2019 Financial Results and Business Update Conference Call. (Operator Instructions) Joining me on today's call are: Lonnel Coats, Lexicon's President and Chief Executive Officer; Alex Santini, Executive Vice President and Chief Commercial Officer; Dr. Pablo Lapuerta, Executive Vice President and Chief Medical Officer; and Dr. Praveen Tyle, Executive Vice President of Research and Development; and Jeff Wade, Executive Vice President of Corporate and Administrative Affairs and Chief Financial Officer.

After our formal remarks, we will open the call up for a Q&A.

Earlier today, Lexicon issued a press release announcing our financial results for the second quarter of 2019, 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, will be accessible in the Investor Relations section of our website.

During this call, we will review information provided in the release, provide an update on our clinical programs 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 and efficacy and the therapeutic and commercial potential of XERMELO, Zynquista and our other drug candidates. These statements may include characterizations of the current status of Lexicon's collaboration with Sanofi and the effect of such status on Zynquista program and Lexicon's business; the commercial performance of XERMELO; the expected timing and outcome of regulatory review of applications for approval of Zynquista; the expected timing and results of clinical trials of sotagliflozin, telotristat ethyl and our other drug candidates; and the market opportunity for these programs.

This call may also contain forward-looking statements relating to Lexicon's growth and future operating results, discovery and development of other drug candidates, strategic alliances and intellectual property as well as other matters that are not historical facts or information. Various risks may cause Lexicon's actual results to differ materially from those expressed or implied in such forward-looking statements. These risks include uncertainties related to Lexicon's collaboration with Sanofi; the success of our commercialization efforts for XERMELO; the regulatory review of applications for the approval of sotagliflozin; the timing and the results of clinical trials and preclinical studies of sotagliflozin, telotristat ethyl and our other drug candidates; our dependence upon strategic alliances and other third-party relationships, including with Sanofi; 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, development and commercialization 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'd now like to turn the call over to our President and CEO, Lonnel Coats.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thank you, Kim, and good morning, everyone, and thanks for joining us on the call today. The last few days, it goes without saying, has been very challenging for all Lexicon stakeholders. We appreciate your flexibility in joining the call a day earlier than had been originally announced.

On Monday morning, Lexicon's 8-K was published, disclosing the material circumstances relating to the dispute with Sanofi, including termination rights and associated timing. We have been moving quickly to affirm our understanding of the state of the Zynquista type 2 diabetes Phase III program, led by Sanofi, what will be required to complete the program and who has the obligation to fund it so that we may be in a position to communicate with great specificity to our stakeholders.

So let me jump in. On July 23, we received from Sanofi a summary of preliminary top line results for the first 3 Phase III Zynquista studies in type 2 diabetes, SOTA metformin, SOTA chromic kidney disease stage 3 and SOTA chronic kidney disease stage 4. We characterize these results as preliminary as Sanofi has not yet provided us with the clinical data underlining its summary of top line results. That said, we are pleased to see that Zynquista succeeded in the metformin study and in the overall population in its CKD 3 study. In patients with severe or stage 4 chronic kidney disease, Zynquista achieved a clinically meaningful effect but narrowly missed statistical significance in A1c versus placebo. While we will need to make our own assessment once Sanofi provides us with a technical -- with a clinical data set, we are very encouraged by the overall profile of Zynquista and the benefits we believe the drug has shown in renally impaired population.

Shortly after presenting these preliminary results to Lexicon, Sanofi sent to us a notice of its decision to terminate the alliance. We were surprised and disappointed at this rapid turn of events, not least because we believe that Sanofi has no right to terminate the agreement at this juncture. We immediately informed Sanofi that this notice was invalid and that we consider this to be a breach of contract. Nevertheless, Sanofi proceeded to publicly announce its purported termination of our agreement. We believe this wrongful act has resulted in significant damages that we intend to pursue against Sanofi.

It's my belief that Sanofi's decision to terminate the alliance reflect this prioritization defined more than a month ago during one of its business updates. They expressed a clinical focus on 4 areas: oncology, immunology, vaccines and rare disease. This streamlined clinical focus was once again highlighted during the second quarter earnings call on Monday.

Given Sanofi's stated strategic focus, we believe this alliance will ultimately conclude. Our objective, at this point, is to work with Sanofi on fulfilling their obligation for funding the program through submission in the U.S. and in Europe and ensuring that program advances without further risks to patients nor reputation.

So let me speak directly to Sanofi's obligation to fund through submission. In the event of a valid termination of the agreement, what is not in dispute is Sanofi's obligation to fund the cost of Zynquista type 2 diabetes development through 12 months after the effective date of termination. In our view, Lexicon's view, the earliest date on which Sanofi could even potentially deliver a valid termination notice under the terms of our agreement would be near year-end, and it's not clear that Sanofi would have any right to terminate our agreement even then.

As you can see on Slide 3, the contractually required post-termination funding by Sanofi, regardless of the termination date, will be expected to cover the completion of the core Phase III studies along with a significant portion of the 2 outcome studies and extend well past the anticipated type 2 regulatory submissions in the U.S. and in Europe in the first half of 2020. The core Phase III studies are required to support regulatory filings with yellow arrows indicating the data needed for the filings.

Based on what Sanofi has recently provided us, I'm pleased to report that the core studies are all near completion and on schedule to conclude in 2019. Based on information received from Sanofi, the SCORED study, which is an outcomes trial designed to demonstrate cardiovascular and renal benefits, is over 90% randomized. Also important to the long-term interest of the brand is China. There are 4 clinical studies being run in China, which speaks to the global nature of this program, and we need to better understand the time lines of these trials. We will need to better understand the remaining funding needs for the outcomes trials and the China studies beyond Sanofi's post-termination funding obligations.

In summary, we are encouraged by the preliminary Phase III results from the type 2 diabetes program, particularly in the chronic kidney disease studies where we believe there is evidence of benefit. Although the CKD 4 study appears to have narrowly missed the primary endpoint, we found the results to be compelling and more data from the CKD patients will become available through this program, especially the SCORED study.

Moving to XERMELO. We achieved U.S. net sales of $7.4 million in the second quarter of 2019, up 24% from the corresponding period in 2018. We remain on track to see 20% growth or greater year-over-year in U.S. net sales per our guidance. We ended the quarter with approximately $106 million in cash and short-term investments. We have and will continue to prudently manage our cash, which will be even more important as we work towards a resolution with Sanofi. In our pipeline, we have started advancing a number of promising programs, but we will likely need to place some early-stage programs on hold until we have more visibility on our dispute with Sanofi.

With that, I'll turn the call over to Dr. Lapuerta to discuss the Zynquista program.

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Pablo Lapuerta, Lexicon Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [4]

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Thanks, Lonnel. I'll be focusing much of the discussion on the type 2 diabetes program. Sanofi has been running a robust Phase III clinical development program called the InSynchrony program, centered on the opportunity for differentiation in patients with renal impairment. Since declining renal function is a hallmark of type 2 diabetes, demonstrating benefits in this patient population Zynquista an attractive option for a significant proportion of type 2 diabetes patients. As Lonnel mentioned earlier, we announced preliminary top line results from the first 3 studies from the InSynchrony program, a metformin study called SOTA-MET and 2 renal studies, SOTA-CKD3 and SOTA-CKD4, shown here on Slide 5. SOTA-MET is a randomized, double-blind, placebo-controlled, parallel group, multicenter 26-week Phase III study evaluating the efficacy and safety of ZynquIsta added to metformin in 518 patients with type 2 diabetes who have an adequate glycemic control on metformin alone. The study met the primary endpoint, demonstrating superiority of Zynquista 400 milligrams versus placebo on A1c reduction in this population with statistical significance.

Zynquista was well tolerated. SOTA-CKD3 is a randomized, double-blind, placebo-controlled 3-arm, parallel group multicenter 52-week Phase III study evaluating the efficacy and safety of Zynquista in 780 patients with type 2 diabetes and moderate chronic kidney disease. The patients have an adequate glycemic control at baseline. Zynquista 400 milligrams showed a statistically significant reduction in A1c in the entire population of patients with Stage 3 chronic kidney disease. That's a glomerular filtration rate, or EGFR, of 30 to 59. Zynquista also showed statistically significant reduction in A1c in Stage 3a CKD patients with EGFR of 45 to 59 compared to placebo at 26 weeks.

Although Zynquista demonstrated numerical improvement on A1c, a statistically significant reduction in A1c was not achieved in the subpopulation of Stage 3 CKD patients with EGFR 30 to 44. Zynquista demonstrated a generally well-tolerated safety profile during the 26-week treatment period, and the study continues to gather safety data up to 52 weeks.

SOTA-CKD4 is a randomized, double-blind, placebo-controlled, 3-arm, parallel group, multicenter, 52-week Phase III study evaluating the efficacy and safety of Zynquista 200 and 400 milligrams once daily in 276 patients with type 2 diabetes and severe renal impairment. That's an EGFR of 15 to 29 in the setting of inadequate glycemic control. Zynquista 400 milligrams demonstrated a clinically meaningful improvement on A1c, but based on preliminary results provided by Sanofi, the study narrowly missed the primary endpoint of demonstrating superiority for Zynquista 400 versus placebo on A1c reduction in this population at 26 weeks.

Zynquista demonstrated a generally well-tolerated safety profile during the 26-week treatment period, and like SOTA-CKD3, the study continues to gather safety data up to 52 weeks. We look forward to top line results for the remainder of the core Phase III studies for Zynquista in type 2 diabetes later this year.

Evidence continues to build that SGLT inhibitors should become treatment of choice for patients with type 2 diabetes given the strong A1c, metabolic, cardiovascular and renal benefits. We continue to believe that the SGLT1 component of Zynquista's mechanism offers opportunity for differentiation in patients with kidney disease. We've recognized the attractive cardiovascular profile of Zynquista and look forward to completion of enrollment soon in the SCORED Study, which will examine cardiovascular and renal outcomes in a population with kidney disease.

On Slide 6, recent publications have supported the value of Zynquista. A genomic study last year in the Journal of the American College of Cardiology showed that individuals with reduced function polymorphisms in the SGLT1 gene have less type 2 diabetes, less obesity, less congestive heart failure and less death. These genomic findings add to the recognized cardiovascular benefits of SGLT inhibition and they support the rationale for dual SGLT1 and SGLT2 inhibition with Zynquista and the SCORED study. Zynquista in type 1 diabetes also remains a priority, and we believe there should be a reasonable way to move forward with this compound. We will continue to work with the FDA to make this drug available to type 1 patients as soon as possible. Recent publications have supported the value of the SGLT1 and SGLT2 mechanism in type 1 diabetes.

In April, a meta-analysis of Zynquista clinical trials came out in the British Medical Journal. The authors concluded that in addition to providing glycemic control, Zynquista significantly reduced both moderate and severe hypoglycemia and their data also indicated a strong potential for renal protection. They indicated that DKA risk in type 1 diabetes could be mitigated with attention to patient selection and insulin dosing.

Another article on Zynquista hypoglycemia data was also published in Diabetes Technology and Therapeutics. Based on 52-week data from the inTandem program it concluded at any A1c level, the use of Zynquista in type 1 diabetes on top of optimized insulin is associated with significant reductions in clinically relevant hypoglycemic events.

Now I'd like to turn the call over to Jeff who will provide financial highlights.

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Jeffrey L. Wade, Lexicon Pharmaceuticals, Inc. - Executive VP of Corporate & Administrative Affairs and CFO [5]

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Thank you, Pablo. This morning, I will discuss key aspects of our second quarter 2019 financials. More financial details can be found in our 10-Q, which will be filed shortly.

Now please refer to Slide 8 of our presentation. As indicated in our press release today, second quarter of 2019 revenues totaled $9.7 million, down from $13.8 million from the prior year quarter, primarily due to lower revenues recognized from our collaboration and license agreement with Sanofi, partially offset by an increase in net product revenues. Net product revenues for the second quarter of 2019 consisted of $7.4 million from net sales of XERMELO in the U.S. and $1.3 million from the sales of both XERMELO tablets to Ipsen. Cost of sales related to sales of XERMELO was $1.3 million and $0.8 million, respectively, for the second quarter of 2019 and 2018.

Research and development expenses for the second quarter of 2019 decreased to $12.6 million from $26.5 million for the corresponding period in 2018, primarily due to lower external clinical development costs related to Zynquista.

Selling, general and administrative expenses for the second quarter of 2019 decreased to $14.3 million from $16.8 million for the same period in 2018, primarily due to decreased marketing costs. Net loss for the second quarter of 2019 was $23 million or $0.22 per share compared to a net loss of $34.5 million or $0.33 per share in the corresponding prior year period.

For the second quarter of 2019 and 2018, net loss included noncash stock-based compensation expense of $3.8 million and $2.9 million, respectively. We ended the second quarter of 2019 with $106 million in cash and short-term investments as compared to $160.1 million as of December 31, 2018.

We expect our cash to be sufficient to fund our ongoing operations for at least a year, notwithstanding the Sanofi dispute. We will be reviewing our expenses, prioritizing programs and seeking further opportunities to extend our cash runway as we work through the issues associated with the Sanofi dispute.

Turning to our financial guidance for 2019, we continue to expect U.S. XERMELO net sales growth in the range of 20% or greater year-over-year. And in the second quarter, we had been carefully managing our expenses and even prior to our dispute with Sanofi we were tracking to operating expenses in the range of $100 million to $120 million, down from our prior guidance of $115 million to $135 million.

Operating expenses include the R&D expenses, which we now expect to be in the range of $50 million to $60 million and SG&A expenses also in the range of $50 million to $60 million. Non-cash expenses are expected to be approximately $19 million of this total, including $14 million in stock-based compensation and $5 million in depreciation and amortization.

As Lonnel mentioned earlier, in the event of a valid termination of the alliance agreement with Sanofi, Sanofi is obligated to fund the cost of the clinical studies for 12 months after the effective date of termination. Sanofi's obligation should fund the type 2 diabetes program through regulatory submission in the U.S. and in Europe regardless of the timing of any termination.

I will now turn the call back to Lonnel.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [6]

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Thank you, Jeff. In summary, in our type 2 diabetes business, we are pleased that Zynquista demonstrates significant benefit in adults with type 2 diabetes on metformin and in the overall population of adults with moderate stage 3a chronic kidney disease. And we look forward to results from the remainder of the core Phase III studies for Zynquista this year. In the meantime, we plan to work with Sanofi on a resolution to our dispute.

With that, I now will turn the call back over to the operator for our Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Liana Moussatos with Wedbush.

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Vasiliana Vireen Moussatos, Wedbush Securities Inc., Research Division - MD of Equity Research [2]

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Is Sanofi obligated to pay any milestones between the termination in 12 months? And did Sanofi give any indication why they want to terminate?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [3]

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Thanks, Liana. Two things, one is that from the milestone perspective, we believe that we have achieved success on a couple of things that should have led to that outcome. So that's going to be part of our dispute. In terms of the rationale, their rationale was related specifically to the CKD studies. That is what they share with us.

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Operator [4]

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

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [5]

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A couple of questions. Maybe first, has Sanofi launched in Europe yet? Do you expect them to, if not?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [6]

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Great question, Jessica. We would have expected it and that's one of the points that will be under discussion with Sanofi on why that has not happened thus far. But no, they have not launched at this point. And given what they have asserted or reported as their termination right, I would not expect that to occur.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [7]

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Okay. Great. A couple of follow-ups, if possible. Have you received any feedback from the FDA at this point on whether additional clinical trial work would be needed to support a U.S. approval in type 1?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [8]

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Jessica, I will be very happy to have that conversation with you should this product revert back to Lexicon, but given that it's still Sanofi's obligation, we will not make comments on regulatory interactions.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [9]

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Okay. Assuming that you are able to get approval in type 2, maybe a two-part question here. First, do you think that you could satisfy the FDA's requirements for establishing cardiovascular safety prior study, i.e. based on a meta-analysis of your core Phase III program, call it? Secondly, do you see the possibility that Lexicon might be able to launch type 2 independently in the U.S.?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [10]

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Great questions. Let me take the second question first and then I'll turn the first question to Dr. Lapuerta. Yes, we are examining all options at this point. Should a valid reason for termination actually be executed and the product reverts back to Lexicon, we're currently at the point today where we're evaluating all of our options to how we would advance this compound, not just in the United States, but how does this compound get in the hands of patients around the world. As we talked about earlier, China is a very important market. And so we have to assess what may be the best opportunities for our stakeholders on a well-structured arrangement to advance the program into market upon approval. So let me turn the first question over to meta-analysis relative to CVOT risk to Dr. Lapuerta.

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Pablo Lapuerta, Lexicon Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [11]

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I can comment on our type 1 data as an example. With the type 1 data, we had a cardiovascular safety analysis with a meta-analysis of all the type 1 trials. The hazard ratio for cardiovascular events with sotagliflozin was 0.68%. That's a 32% risk reduction. That's a small point estimate, but based on a lot of events and of wide confidence interval. But it gives us encouragement that consistent with the known profile of SGLT inhibitors, which we've seen in the literature that in type 2 we can see similar cardiovascular safety. That's encouraging in that we will meet the requirements for the FDA for type 2 diabetes.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [12]

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Okay. Got it. And I know you guys need more feedback here, but I think folks are pretty focused on the cash runway of the company. Is there any way to estimate the cost to complete the clinical program for sotagliflozin in type 2 after Sanofi's obligation has concluded?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [13]

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It's a great question, Jessica. I think that's all going to be part of our discussion with Sanofi. As we said before, they have a remarkably important funding obligation from this point forward based on their assertion. Although based on our assertion, we think that time line which they would have a right to terminate will be much later than what they have said. If that's the case, this is why it's important that, that timeline of where they would have a, if they have it right at all, is much longer, then that gets you further through all of the programs being complete. So this is not a small issue that we will be debating and discussing. And so it's going to be important on how we land on the outcome. So we don't know what the total cost will be until we have those conversations.

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Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [14]

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Okay. Fair enough. And I apologize for monopolizing the time here, but just is there a timeline you can provide to investors within which we might be able to expect to get more clarity on that type of estimate?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [15]

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I don't have a timeline, Jessica, but I will say that as this thing unfolds and should it be a situation where we believe very confidently it will come back to us under the right circumstances, we will be able to communicate with great precision to all of our stakeholders.

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Operator [16]

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Your next question is from Kevin Kedra with G. Research.

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Kevin Kedra, G. Research, LLC - Research Analyst [17]

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I know there's limited what you can say about the data, since you really haven't seen it, but if we get to the point where sotagliflozin is approved with a label that looks a lot like the other SGLT2 inhibitors, so really no differentiation on chronic kidney disease patients, how do you look at the market opportunity for that product given that it's a sizable market and a sizable need, but also late-market entrant? How would you kind of size the opportunity in that situation?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [18]

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It's a remarkably great question, but it's a question that I would love to answer for you in the near-term future should we get the rights back to the product. Right now, all marketing and all marketing plans, strategies are still within the hands of Sanofi. And therefore, we won't make a comment on it. But should the product revert back to us, I'll be very happy to answer that question for you.

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Kevin Kedra, G. Research, LLC - Research Analyst [19]

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Okay. I understand. And then pivoting maybe to XERMELO, I believe comments before were that you potentially had the product on kind of a breakeven run rate by the end of the year. Is that still something that you're targeting?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [20]

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The answer to that is yes, and we're pretty much on schedule.

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Operator [21]

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Your next question comes from the line of Joseph Stringer with Needham.

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Unidentified Analyst, [22]

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This is Joey on for Alan. A couple of quick ones. One on the potential milestone payment for T1D approval in Europe. Do you still sort of expect to receive that or when would you expect to potentially recognize that? And secondly, when it comes to some of the prioritization of the earlier stage programs, in particular the 2761 compound, I think that Sanofi had right to first negotiation to that and how does that work in terms of the current or the most recent events? And maybe an update on 9211 in neuropathic pain, would you look to start a Phase II trial maybe this year?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [23]

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Great couple of questions. First, let me say that we intend to vigorously defend the rights of our stakeholders and our shareholders of what's due to Lexicon in the discussion with Sanofi. And so you can assume that what has or has not happened in Europe will be part of that conversation. Secondly, in terms of our pipeline, 2761 we had already put that on hold until we had an answer around the overall program in type 2 diabetes, which would have given Sanofi a right. Of course, at the current stage we're at this point, we can assume that right does not go forward. The third element of that is, the most important program in development for us is our neuropathic pain program, which I'll turn over to Dr. Tyle to give us an update on 9211.

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Praveen Tyle, Lexicon Pharmaceuticals, Inc. - EVP of Research & Development [24]

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So Joseph, we are continuing to plan for the Phase II proof-of-concept studies for 9211 and the goal would be to finalize the protocol as we finish our Phase I study at the end of this year. So Phase I study, phase IB to be specific is almost at the end of its cohorts. And we are in the final stages of lining up our CRO to conduct proof-of-concept study for 9211. It's actually aggressively moving forward.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [25]

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Yes. So 2 of our priority programs that we will continue to aggressively move forward on this is 9211, neuropathic pain to Dr. Tyle's point. So we wouldn't expect to do anything there. The other one is we're going to continue to advance Telotristat ethyl for BTC. That program is advancing, relative to being able to show a benefit for biliary tract cancer. Those 2 will remain as our priorities. Some of the other programs that we will gear down, hadn't even been publicly disclosed as we did a lot of -- we're doing a lot of preclinical work, determine clinical candidates that we were going to advance forward. Much of that work will be put on hold until we get a better sense of what the future runway is going to be in our discussions with Sanofi.

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Operator [26]

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(Operator Instructions) Your next question comes from Yigal Nochomovitz with Citigroup.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [27]

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So with respect to completion of the CVOT trials, assuming the timelines are set as you elucidated, Lonnel, that the trigger point for termination is towards the end of the year and then Sanofi is obligated to fund for another 12 months, will you have sufficient funds if necessary to wrap up those CVOT trials if they extend beyond that 12-month window?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [28]

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Yigal, it's a great question. Again, the challenge in answering that question, we won't know the answer to it until we sit down with Sanofi and get all their cost estimates and get the timelines right. Over the last couple of days, we've been working vigorously to pull all this together so that we can communicate out as precisely as we can. We still have a lot of work to do to try to get an understanding of what that all is going to be. But at this point, what I can tell you is a good portion of that program will have been funded and that's the good news. I also can say the submission, the program will be funded through submission, both in U.S. and Europe and that's also good news. So the areas where we have to figure out any additional cost should the termination timeline be set as laid out will be the China studies as well as the completion of the outcomes trials. And that's where we need greater clarity. But those all are going to be under discussion with Sanofi because, as we said before, we believe this wrongful act has caused damage to Lexicon and so we will have further discussions with Sanofi about how that gets righted.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [29]

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Okay. Got you. And then regarding the milestones, again, I know the type 1 approval is a bit complicated given that they haven't launched but -- -- and the milestone is associated to first commercial sales. So I understand that, that's a point of contention. With regards to CKD 3 though in the metformin study, those were clear wins. So is it fair to assume that you are expecting those milestones to be paid for those clinical successes?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [30]

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I think it's fair to say that in those wins there is an expectation from Lexicon that our stakeholders should be appropriately compensated for it and that again will be part of the discussion.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [31]

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Okay. And then just one other question on the data, as you know and as Pablo knows, regarding CREDENCE, they didn't see a very pronounced HBA1C benefit. In fact, the New England Journal Paper characterized that benefit as very modest, and I believe it wasn't even statistically significant at the end of the 42 months. Given that, just curious to your thoughts as to how relevant it is that the CKD 4 study narrowly missed on HBA1C given that the reported outcomes in the renally compromised patients may not really be tied specifically to significant changes in HBA1C.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [32]

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Oh my God, you just asked the billion dollar question. So I'm going to turn it over to Dr. Lapuerta, but you're absolutely spot on. Go ahead, Pablo.

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Pablo Lapuerta, Lexicon Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [33]

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Keep in mind that we only have 26-week data on A1c and the CKD 4 study, but we do have the totality of data that we're starting to look at, and that totality is not just A1c, it's also achieving percent achieving A1c less than 7. It's fasting plasma glucose. It's changes in the albumin-creatinine ratio, stability of EGFR. And we're already seeing some information on hospitalizations for cardiovascular events in these renal disease studies. Overall, it really supports the rationale and the value of the SCORED study, and we believe that SCORED is well positioned for success. And the principles for CREDENCE holds that apart from glycemic endpoints that there is a rationale for using SGLT inhibition in renal disease. I think it's even stronger with SGLT1 inhibition because of the potential value we pointed out in the genomic study. SGLT1 inhibition in patients with renal disease can provide significant benefit and the SCORED is just correctly positioned to provide that data.

It will provide data not just on A1c, it will provide data on cardiovascular events and it will provide on renal events.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [34]

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The SCORED study is designed to be superior. Am I correct?

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Pablo Lapuerta, Lexicon Pharmaceuticals, Inc. - Executive VP & Chief Medical Officer [35]

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Yes, it's designed for success.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [36]

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Yes. So that's why, again, I believe this was, in my opinion, a remarkably premature decision. And the point that you're hitting on, Yigal, relative to where the win could or may take place, the data is stacking up in a way in which we should be encouraged that we have every chance of opportunity to get there. And so whatever it takes, Lexicon is locked and loaded and ready to keep pushing forward and also to defend our rights and defend our rights on behalf of our stakeholders.

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Yigal Dov Nochomovitz, Citigroup Inc, Research Division - Director [37]

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Okay. And then just one final question. I sort of touched on before, but in terms of launching SOTA in type 1 and type 2. Is it your position or your supposition that assuming the Sanofi partnership terminates, which seems likely, though the timing is subject to some discussion, that you would strongly prefer to seek a new partner for this asset as opposed to investing in the commercialization independently which obviously would be relatively expensive endeavor?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [38]

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Yes, I think it's in the best interest of our stakeholders for us to continue to look for, a, partners who have a vision forward, as they share our vision of what the future should be; two, have the footprint that allows us to move quickly and to establish the reputation that's necessary to have in the marketplace; and thirdly, it allows us to get to cash flow positive within that arrangement. That's better achieved through a partnership than for us to try to go it alone across both of these indications. However, what I will say for type 1 diabetes, we still believe very strongly we have every possible chance of achieving success here. And this will be our beachhead for where we believe we can invest in The United States in type 1, and we can make a remarkable difference in type 1. So whatever happens going forward, Lexicon will continue to be well placed and position ourselves to launch in type 1. The rest of the world, it will be better for us to try to figure out how we leverage other people's placements and their position in the market to ensure we get value for our stakeholders.

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Operator [39]

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Your next question is a follow-up from Kevin Kedra with G. Research.

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Kevin Kedra, G. Research, LLC - Research Analyst [40]

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Not sure if you can answer these, but just 2 quick ones. First, just based on the timing of some of the other studies, any sense of Sanofi already has access to some of those data readouts that they may not have shared with you, but they at least had access to when they made this decision? And then secondly, any sense of timing of when we could see the data from SOTA-MET in the 2 CKD studies?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [41]

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First, no Sanofi does not -- these studies haven't been unblinded. So no, they will not have access to that data. And so it's still too early for them to have had any access to any additional data than what they have been presented thus far. And I believe your second question was...

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Kevin Kedra, G. Research, LLC - Research Analyst [42]

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When could we see the actual data from these timeline for when that will be presented?

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [43]

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Well, a great question. It will be at a medical meeting, but don't know that yet until we reached a resolution with Sanofi and how we are going to get it out. And we will very much love to get it out because I think it's important for people to see these data and the points that I think Dr. Lapuerta has made that may get in these data. But it will be a medical meeting which allows us to be able to disseminate the data appropriately. But that, again, has yet to be seen until we reach the appropriate agreement with Sanofi.

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Operator [44]

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At this time, there are no additional questions, I would like to turn the call back over to Mr. Coats for closing remarks.

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Lonnel Coats, Lexicon Pharmaceuticals, Inc. - President, CEO & Director [45]

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Again, I'll just close this. Thank you, everyone, for joining us this morning. I appreciate everybody's flexibility as we are moving quickly to make sure we had a good understanding that we can communicate effectively with our stakeholders relative to our understanding. I will just close by saying that I and my team will work vigorously to defend the rights we believe we have to ensure our reputations hold and the brand in which we represent is articulated appropriately and reputations hold as they should in any arrangement that we have in this industry. So with that being said, when we have more to communicate we will certainly get on the phone and get everyone together to communicate it. But thank you for your time and patience.

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Operator [46]

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Thank you. This concludes today's conference. You may now disconnect.