Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) Q1 2023 Earnings Call Transcript
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) Q1 2023 Earnings Call Transcript May 2, 2023
Operator: Good day everyone, and welcome to the Lexicon Pharmaceuticals First Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note this event is being recorded. And at this time, I would now like to turn the conference over to Carrie Siragusa. Ma'am, please go ahead.
Carrie Siragusa: Thank you, Jamie. Good afternoon, and welcome to the Lexicon Pharmaceuticals first quarter 2023 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 this afternoon, Lexicon issued a press release announcing our financial results for the first quarter of 2023, 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, regulatory status and 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 our 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 related to our NDA for sotagliflozin in heart failure and our discussions with the FDA regarding sotagliflozin, LX9211 and our other drug candidates; 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 our other drug candidates; our dependence upon strategic alliances and other third-party relationships; our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties; and the requirements of substantial funding to conduct our planned research, development and commercialization activities.
For a list and 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.
Lonnel Coats: Thank you, Carrie. Good afternoon, everyone, and thank you for joining us on the call. First quarter of 2023 was another significant period for Lexicon, as we continue to advance in both of our lead programs sotagliflozin our dual SGLT1 and 2 inhibitor that we're for heart failure and LX9211, our AAK1 inhibitor that we're developing for neuropathic pain. Starting with LX9211 program for neuropathic pain, as many of you know, we reported on the results of two Phase 2 proof-of-concept studies last year and diabetic peripheral neuropathic pain and pulserpatic neuralgia. Bolstered by these results, we have continued to move forward with development plan for late stage development and expect to have feedback from the FDA on these plans in the second quarter of this year.
Turning to sotagliflozin. As shared in our last quarterly call, we had our late cycle review meeting with FDA in late February for NDA for the treatment of heart failure. The agency indicated that, there were no substantial review issues and again confirmed that, it has no plans to hold an Advisory Committee Meeting. But we believe everything remains on track for our PDUFA target date on May 27th. Now since our last call, we also wanted to highlight the significant progress we have made across all functions of the Company to be launched ready for PDUFA, including but not limited to very productive label discussions and negotiations with the FDA. Appropriate and pre-approval information exchanges with payers across national and regional accounts, government and institutions, the recruitment of experienced cardiovascular sales professionals, of which the majority are already on board with the Company, presentations at two major medical meetings including a feature presentation on the time to clinical benefit of sotagliflozin which Dr. Granowitz will speak further about shortly.
And finally, we are finalizing wholesaler and distribution agreements to be ready to ship product within the U.S. shortly following approval. We look forward to continuing to work with FDA over the next few weeks, and during the review period and are planning to commercially launch sotagliflozin in the U.S. in the second quarter promptly following regulatory approval. I will now turn the call over to Jeff to review the sotagliflozin program and to further review the status of our commercial launch preparations. Jeff?
Jeff Wade: Thanks, Lonnel. There are nearly 7 million people in the United States living with heart failure, a number that is expected to increase to 8 million by 2030. Heart failure is the leading cause of hospitalization for Americans over 65, with approximately 1.3 million hospitalizations for heart failure annually. Patients who are hospitalized for heart failure are highly likely to return with approximately 25% of patients being readmitted to the hospital within 30 days of discharge and 65% within one year. Hospital readmissions are burdensome not only for patients but also to the healthcare system, annual cost from heart failure expected to increase to nearly $70 billion by 2030 with 80% of those costs due to hospitalizations.
There is a substantial unmet need for better treatment options for patients, and as these data make clear, a strong incentive for providers, hospitals and payers to identify new approaches to reduce hospital readmissions. We also know that, it is important to prioritize when patients are started on therapy in order to increase the likelihood that they remain on therapy following a hospitalization; as you can see from the data shown on this slide from Journal of American College of Cardiology, starting patients on therapy at the time of hospital discharge results in significantly higher percentage of patients, receiving appropriate treatment at 60 and 90 days and at 12 months follow-up. I will now turn the call over to Craig to discuss recent updates to the heart failure treatment guidelines and decision pathways prioritizing SGLT inhibitors and to review important data from two recent major scientific meetings, from the AHA meeting late last year regarding sotagliflozin's effects in reducing cardiovascular mortality and the risk of hospital admissions at 30 and 90 days following discharge and from the ACC meeting in March regarding sotagliflozin's time to clinical benefit and consistent effects across left ventricular ejection fraction.
Dr. Craig Granowitz: Thank you, Jeff. Heart failure is a multi-billion dollar market that is poised for substantial growth. Along with the increasing disease prevalence, this anticipated growth is being driven by new guideline recently issued by major cardiovascular societies in the United States and Europe, recommending the use of SGLT inhibitors as a pillar of care for treating heart failure. In addition, just last week, ACC issued a new document in the April addition of JAK entitled 2023 ACC Expert Consensus Decision Pathway on the management of heart failure with preserved ejection fraction. The consensus recommended that SGLT inhibitors should be initiated in all individuals with HFpEF lacking contraindications. Consider together with the previous consensus guidelines, the SGLT class is the only medical therapy recommended in all HF patients regardless of ejection fraction.
It is also important to note that, the SOLOIST Worsening Heart Failure study of sotagliflozin in recently hospitalized patients resulted in significantly lower total number of deaths from cardiovascular causes and hospitalizations, and urgent visits for heart failure than placebo regardless of left ventricular ejection fraction. Currently, of those $1.3 million hospitalizations a year, due to heart failure, data suggests that fewer than 10% of these patients are currently discharged with a prescription for an SGLT inhibitor. This provides an exceptional opportunity for sotagliflozin given its unique data showing its significant impact on that transition of care patient population. Turning to the next slide. As you can see, this group of patients from the SOLOIST trial while improving in their clinical journey remains at risk for future heart failure events as Jeff has noted in prior slides.
As a reminder, the SOLOIST trial enrolled approximately 1,200 patients who had been hospitalized for heart failure and were transitioning out of the hospital. Double-blind randomized treatment began either in the hospital or within three days following their discharge. They were approximately 50% of patients in each of those two categories. As you can see in this slide and as a reminder, the primary endpoint of the trial was achieved with a statistically significant and clinically meaningful reduction of 33% in the composite total cardiovascular death, hospitalization for heart failure, and urgent heart failure visits with the need to treat only four patients for one year to avoid one endpoint event, a finding which is unsurpassed within the SGLT inhibitor class.
Photo by The Tonik on Unsplash
The objective of the post hoc analysis presented by Dr. Bert Pitt at last year's American Heart Association Scientific Sessions was to evaluate the efficacy of sotagliflozin versus placebo at reducing hospital readmissions and mortality within 30 and 90 days after discharge from a heart failure hospitalization among the patients who began study treatment on or before the date of discharge. As a reminder, there were no differences between these two groups of patients for baseline characteristics or the primary endpoint. Presented here are the results for cardiovascular death and heart failure related events for 30 and 90 days post-discharge. You can see the sotagliflozin arm in blue begins to separate from placebo arm in red very early on and showed the treatment with sotagliflozin resulted in a statistically relative risk reduction versus placebo of approximately 50% for readmission, for non-fatal heart failure events, and for the composite of cardiovascular death and readmission for heart failure at both 30 and 90 days following hospital discharge.
These findings are unique. They also underscore the benefit of early initiation of evidence-based heart failure therapy. Sotagliflozin is the first compound to demonstrate a reduction on both mortality and heart failure events for a treatment initiated during a heart failure hospitalization. Finally, we wanted to highlight key data just presented at the American College of Cardiology 72nd annual scientific session held in March of 2023 on the time to clinical benefit of sotagliflozin, which has also been published in the Journal of the American College of Cardiology, shortly thereafter. The study authors concluded that treatment with sotagliflozin led to a statistically significant reduction in the risk of the primary outcome by day 27 post randomization.
These results were consistent across the left ventricular ejection fraction range, a finding that aligns with the recent ACC consensus statement that was just recently referenced. We believe that these data support and further extend the 30-day reduction in readmission results for sotagliflozin presented at the 2022 AHA meeting. That treatment with sotagliflozin results in an early and significant reduction in heart failure events in cardiovascular death, in the high cost, high risk, recently hospitalized patient with worsening heart failure. I'll now turn the call back over to Jeff to share more about our commercial launch preparations.
Jeff Wade: Thank you, Craig. As Lonnel referenced earlier, commercial launch preparations for sotagliflozin have been underway for well over a year and have progressed meaningfully throughout Q1. We have invested significantly in infrastructure to support a commercial launch in heart failure in the U.S. in the first half of 2023, and we have the required resources currently in place. This includes the full market access and medical teams who have been having the appropriate pre-approval information exchanges with key stakeholders since late last year. As we noted last quarter, we brought on our sales leadership team towards the end of last year. As of today, we have filled the majority of the sales representative positions to be ready for deployment following approval.
Further, we have substantially completed contracting with the major wholesaler and distribution networks in the U.S., and we are well prepared to deploy comprehensive patient support programs to provide appropriate assistance when needed as we ramp up our access during launch. Based on all the foundational work done to date, we feel confident that we have the right talent and resources to be ready for a very successful commercial launch following regulatory approval in the coming weeks. To summarize, we believe we have a tremendous opportunity for sotagliflozin bolstered by three key factors. One, updated heart failure treatment guidelines; two, a growing unmet medical need with SGLT adoption still in the early part of the adoption curve; and three, a unique data set for sotagliflozin, specifically addressing the effectiveness in patients hospitalized for heart failure.
Capitalizing on those three factors, we are making launch preparations with a focused commercial strategy using targeted messaging based on areas of clinical differentiation and where our value proposition is expected to have the most impact, including with cardiologists and hospital systems and payers that bear the cost of hospitalizations and re-hospitalizations. We will now turn briefly to our LX9211 program. LX9211 is a potent highly selective small molecule inhibitor of a novel target adapter associated kinase 1 or AAK1. In a number of relevant animal models of neuropathic pain, LX9211 has demonstrated consistent, significant reductions in pain scores even when compared to positive controls such as gabapentin. LX9211 achieves high levels of drug in the CNS, and importantly, the mechanism of action of LX9211 is independent of the opioid pathway.
In Phase 1 studies LX9211 was shown to be well tolerated with a pharmacokinetic profile supportive of once daily dosing. Lexicon has been granted fast track designation by the FDA for diabetic peripheral neuropathic pain. From a market perspective, the neuropathic pain market is expected to grow by more than 13% worldwide between 2020 and 2026 and is projected to be worth more than $13.2 billion. Currently, available therapies are limited by lack of efficacy, side effects and potential for abuse. As a result, there is a tremendous opportunity for new and innovative treatments such as LX9211 to enter this growing market with a great unmet need. I will now turn the call back to Craig to briefly review the key results from our Phase 2 studies in two distinct types of neuropathic pain that read out last year.
Dr. Craig Granowitz: Thank you, Jeff. As we discussed during our last quarterly call, the primary endpoint of the RELIEF-DPN-1 study was achieved with a statistically significant reduction in the average daily pain score or ADPS at week 6 compared to placebo in the low dose arm. There was an absolute reduction in ADPS from baseline of 1.39 points with a p-value of 0.007 compared to placebo. High dose arm achieved a reduction from baseline of 1.27 points with a p-value of 0.03 compared to placebo narrowly missing the significant threshold in the study of 0.028, but showing consistent effects. We also noted during the blinded five week placebo runoff period, there was a gradual tapering of efficacy in both treatment arms, with no evidence of rebound pain or withdrawal symptoms.
There were no observed differences in treatment emergent adverse events between the treatment and placebo arms during the runoff period, and no drug related serious adverse events or deaths were reported in the trial. As we also discussed in our last quarterly call, our second Phase 2 proof-of-concept study in postherpetic neuralgia RELIEF-PHN-1, LX9211 achieved a reduction in the average daily pain score of 2.42 points from baseline at week 6 compared to a reduction of 1.62 points in the placebo arm with a placebo adjusted difference of 0.8 points and a p-value of 0.12. Although these results did not achieved statistical significance on the primary endpoint of the study, overall results demonstrated clear evidence of effect and achieved our goal for this small 79 patient study to support the further development of LX9211 in another neuropathic pain condition.
The results of the RELIEF-PHN-1 trial were frequently presented at the Emerging Science section of the American Academy of Neurology Annual Meeting on April 24th of this year, and will also be presented at the British Pain Society 56th Annual Scientific meeting taking place in Glasgow from May 9th to May 11th. Notably, as you can see on the slide, LX9211 has shown consistent results across these two studies. When placing the graphs from the two studies side-by-side, the separation from placebo and the mean change from baseline create the same shaped curve. In conclusion, we have now completed two Phase 2 proof-of-concept studies of LX9211 that support AAK1 inhibition as a potential new mechanism of action for treating neuropathic pain. We believe that LX9211 has the potential to overcome many of the shortcomings of current therapies and could be a welcome new innovation for those suffering from neuropathic pain on a daily basis.
This is a large and growing market with a high unmet medical need. As a result, we are pursuing the rapid advancement of LX9211 into the late stage development for the treatment of neuropathic pain. We are continuing the work to identify and optimize proper dosing regiments, and we are preparing to receive feedback from the FDA in Q2 on how best to advance the program into late stage development as quickly and as efficiently as possible. I'd now like to turn the call back to Jeff to take us through the financial results for the first quarter 2023.
Jeff Wade: Thank you, Craig. I will review some key aspects of our first quarter, 2023 financial results. More financial details can be found in the press release that we issued earlier today and our 10-Q that will be filed shortly with the SEC. We ended the quarter with $105.9 million in cash in investments. We believe that our existing capital resources provide us with the right level of funding to support continued commercial preparations and make appropriate investments in research and clinical development. Our loan facility with Oxford Finance, which provides up to $100 million in additional borrowing capacity, gives us substantial financial flexibility as we prepare to embark upon the expected launch of episodes in the second quarter of this year.
We just recently executed an amendment with Oxford that allows us to draw up to $75 million upon approval of sotagliflozin, the proceeds of which we would use to further fund our planned launch. We anticipate that our existing cash and investments together with capacity under the loan facility will provide us with sufficient resources to manage our operations well into the anticipated launch of sotagliflozin into the market. As indicated in our press release this afternoon, we had minimal revenues for the first quarters of both 2023 and 2022. Research and development expenses for the first quarter of 2023 decreased to $12.1 million from $14.9 million for the corresponding and period in 2022, primarily due to lower external research and development costs and professional and consulting fees in 2023.
Selling, general and administrative expenses for the first quarter of 2023 increased $19.5 million from $8.5 million for the corresponding period in 2022. This was primarily due to increases in headcount and in professional and consulting fees relating to preparations for the commercial launch of sotagliflozin in heart failure. In total, net loss for the first quarter of 2023 was $23.5 million or $0.16 per share in the corresponding period in $2022. For the first quarters of 2023 and 2022, net loss included non-cash stock-based compensation expense of $3.4 million and $2.8 million respectively. Before we transition to Q&A, I'd like to take this opportunity to reiterate the great progress we have made since our last call in preparation for the launch of sotagliflozin into the heart failure market.
Across every function of the Company, we have made considerable progress to prepare for our PDUFA date of May 27th, and if approved, a prompt launch into the market in Q2 2023. I would like to pause now and ask the operator to open up the call to take your questions.
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