Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the pharmaceutical excuse me lexicon Pharmaceuticals first quarter 2020 financial results engine business update call. All lines have been placed on mute to prevent any background noise.
Following management's prepared remarks, there will be will hold a question and answer session.
Hey reminder, this call is being recorded today April 27th 2020, I will now turn the call over to Dr., Dan Kimberly Lee head of Investor Relations and corporate strategy. Please go ahead.
Thank you.
Morning, and welcome to the Lexicon Pharmaceuticals first quarter 2020 financial results and business update conference call. Joining me on today's call Arlon, LCOS Lexicons, President and Chief Executive Officer, Alex Santini, Executive Vice President and Chief Commercial Officer, Dr., Pablo Lapuerta Executive Vice President.
Chief Medical Officer, Dr., Praveen trial, Executive Vice President of research and development and Jeff Wade Executive Vice President of corporate and administrative affairs and Chief Financial Officer.
After formal remarks, we will open the call up for acuity.
Earlier today lexicon issued a press release announcing our financial results for the first quarter up 2020, which is available on our website at www dot dot com and through our FCC filings.
A webcast of this call along with a slide presentation will be accessible in the Investor Relations section of our website.
During this call we will we view the information provided in the release provide an update on our clinical programs and then use the remainder of hard time to answer your question.
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 mellow.
And quickstep, Alex nine to one one and our other drug candidates.
These statements May include characterization of the commercial performance of their mellow expected timing and results of clinical trials of Telotristat ethyl Alex 91, one 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 the growth and future operating results discovery and development of a drug candidates strategic alliances and intellectual property as well as other matters that are not historical faster information.
Parish, which may cause our actual results to differ materially from those expressed or implied in such forward looking statements.
These risks and uncertainties related to the success of our commercialization efforts wasn't mellow the timing and results of clinical trials in preclinical studies of Telotristat ethyl Alex nine to one one and our other drug candidates are dependent upon strategic alliances and other third party relationships.
Ability to obtain patent protection for discoveries limitations imposed by pads owned or controlled by third parties and never climates and substantial funding to conduct our research development and commercialization activities.
For a list and description other risks and uncertainties that we face. Please see the reports we have filed with the Securities and Exchange Commission.
But that I'd like to now I'll turn the call over to our president and CEO when LCOS.
Thank you Kim good morning, everyone and thanks for joining us on the call today.
In the first quarter, we continue to grow the Marvel at double digits and make progress you know pipeline, while effectively managing our resources and spend.
I will elaborate on some of the key achievements and would then turn the call over to Pablo and Jeff, We're updating our pipeline development and financial results respectively.
Starting with them out which have U.S. net sales of $7.9 billion in the first quarter of 2020 up 17% from the corresponding period in 2019, we saw a continued strong demand growth and dispensers and had stable inventory.
The year, we remain on track to see percentage growth in U.S. net sales year over year in the mid teens.
We're making good progress on stage two blocks that people study and below your truck cancer with the first that's because the cohort no fully enrolled.
In addition, we're gearing up to initiate the proof of concept study for Alex not you wouldn't want in diabetic peripheral neuropathy pain.
After the purchase will be speaking about these programs shortly.
We continue to believe that the benefit risk profile. So to the slogan is positive for people with type one diabetes.
With this in my we're evaluating next steps for Sotagliflozin and pursuit of an approval in the United States.
As announced last month, we're closing out the two sort of good flows outcome studies score and solace in type two diabetes heart failure in chronic kidney disease.
We continue to work closely with investigators to complete the near term closed up all of these studies.
Going forward, we're being a better position being to prioritize and focus our investments owns a model in carcinoid syndrome, diarrhea, and below your track cancer and Alex nine to one one in neuropathic pain as well as the advancement of our discovery pipeline.
We ended the first quarter, what approximately $249 million in cash and short term investments.
We will continue to prudently manage our balance sheet, we expected our working capital should be sufficient to support our operating expenses through 2021.
With that I'll turn the call over to Pablo to review our pipeline.
Excellent.
We continue to make progress with I was another lifecycle management program.
We have recently published additional data and gastrointestinal benefits and carcinoid syndrome, and we have presented more data consistent with our vision of what potential anti tumor effect. We are also exploring the potential for some analysts to address fibrosis.
The next slide covers our recent publications and carcinoid syndrome.
We published data and the journal gastrointestinal cancer, describing the time to reduction in bowel movement frequency and our two randomized double blind placebo controlled phase three trials in patients with carcinoid syndrome.
That's developed over the course of about 12 weeks.
These data can help physicians and patients appreciate that 12 weeks isn't about should be considered in order to see the full response to treat.
We also published in the journal pancreas observational data on the usage or mellow an actual practice.
I'm pensions, receiving terminals do not have severe diary.
But they still have symptoms of course, right syndrome that deserve to be treated and this study patients with relatively few bowel movements forget.
Reported to nurses significant reductions in the urgency abdominal pain nausea, and flush it was significantly better stool consistency when they used for umbrella.
The safety has her mellow in this population supported shoes and that is relevant to safety for other patients with other cancer types patients, who do not have background diarrhea, when enrolling in our studies.
The next slide reviews, our work with another cancer type biliary tract cancer.
Contacted US open label Phase two study has been supported by preclinical evidence and safety today has been satisfactory recently, we reached our goal of having 20 patients enrolled in the second quarter 2020.
They should allow us to report efficacy data for the initial efficacy cohort of the study 20 patients in this fourth quarter of 2020.
Our last quarterly call, we describe medical records data that were presented at ASCO Gi.
These data showed that patients with carcinoid syndrome on standard background therapies experienced a significant reduction in tumor size after receiving personnel.
More recently in March the European Neuroendocrine tumors society or units.
We presented information on progression free survival and other outcomes for the same patients.
Most patients had no tumor progression at 612 18 months following initiation of even though.
The median time tumor progression was 39.8 months.
The majority of patients also experienced progression free survival and appeared following initiation as you're not along with the median.
Yes, that's 23.7 months.
In addition in a subset of 22 patients with reported biomarker data I mean, certainly levels decreased significantly in the period following initiation of Chanel.
Patients improved on carcinoid syndrome symptoms and those were able to maintain or improve body weight and performance status.
The next slide presents an overview of the numerous investigator initiated studies of Telotristat pencil.
They will help inform whether development of the dry.
Turning to Alex nine to one one.
End of 2019, we announced positive top line data from the phase one multiple ascending dose study of Alex 91, one.
In healthy volunteers.
Data demonstrated a favorable safety and pharmacokinetic profile supportive of once daily dosing.
We believe that 8-K, one inhibition as a promising mechanism for treatment of neuropathic pain.
And we expect to begin enrolling patients with diabetic peripheral neuropathic pain in a phase two study midyear, while continuing additional work in other areas of neuropathic pain.
I'll now turn the call over to Jeff to review our financial.
Thank you problem.
Good morning, I will discuss key aspects of our 2021st quarter financials more financial details can be found in our form 10-Q, which will be filed shortly.
Now please refer to slide 11 of our presentation.
As indicated in our press release today revenues for the first quarter decreased $8 million from $9.2 million for the corresponding period in 2019, primarily due to lower revenues recognized under collaboration and license agreements, partially offset by higher net product revenues.
Net product revenues for the first quarter of 2020 were $7.9 million from net sales observed in the U.S. up 17% over the prior year quarter.
Cost of sales related to sales of your mellow was zero point $6 million during each of the first quarters of 2020 and 2019.
Research and development expenses for the first quarter increased to $55.2 million from $12 million for the corresponding period in 2019.
Primarily due to increases in external clinical development cost relating to started a pleasant subsequent to lexicon regaining the rights and responsibilities for development and commercialization of said it was pursuant to the termination the seem to be alliance.
Selling general and administrative expenses for the first quarter were $14.7 million compared to $14.1 million the same period in 2019.
Net loss for the first quarter was $66.6 million were 63 cents per share as compared to net loss of $21.8 million or 21 cents per share and the corresponding period in 2019.
For the first quarter of 2020 net loss included noncash stock based compensation expense of $4.4 million, but the first quarter of 2019 net loss included noncash stock based compensation expense of $3.4 million.
We ended the first quarter of 2020 with $249.1 million in cash and short term investment as compared to $271.7 million as of December 30, Onest 2019.
We expect that our current working capital together with revenues expected from Zormelo net product sales will be sufficient to support operating expenses 320 21.
We will continue to prudently manage our balance sheet and most seek further opportunities to extend our cash runway.
Turning to our financial guidance for 2020 as one out mentioned earlier, we continue to expect percentage growth of U.S. Your mellow net sales in the mid teens for the full year.
We are revising our 2020 operating in R&D expense guidance that was previously set on my last earnings call in light of the early close out scored and so.
We are reducing total operating expenses to be in the range of $235 million to $255 million down from $245 million to $275 million, we expect R&D expenses to be in the range of $180 million to $190 million down from $190 million to $210 million, but the heavier weighting in this.
Second quarter relative to the third and fourth as result of the scored and soloist close out.
We continue to expect SGN expenses for the year to be in the range $55 million to $65 million.
As a reminder are noncash expenses are expected to be approximately $22 million up our total operating expenses, consisting of $17 million or stock based compensation and $5 million of depreciation and amortization.
As an additional reminder, under the terms of our settlement agreement Sampi committed to pay lexicon $260 million that total the first installment in the amount of $208 million was paid in September of last year. The second installment in the amount of $26 million was paid in March of this year and the final installment in the amount of 26.
<unk> million dollars is payable to September.
The $52 million and payments due this year will not affect this year as revenues because the full revenue impact settlement was recorded in 2019, but they will obviously benefit our 2020 cash flow.
I'll now ask the operator to begin our culinary session.
At this time, if he would like to ask a question. Please press star one on your Touchtone phone.
Your first question comes from the line of you go no go much did from Citigroup.
Hi, Good morning, guys. Thanks for taking the question well now he mentioned next steps in terms of pursuing an approval for type one diabetes I'd be curious to know if he could expand a little bit on on what those next steps might look like and then secondly for Jeff regarding soloist.
Or could you just give us a little bit more color on I'm much more you have to spend to wind down those two trials. Thanks.
Are you going thanks for the questions. Let me first start.
By saying that.
We have the feedback we've analyzed the feedback that the agency has given us and we still do not agree.
From from our perspective as to the risk benefit of started a closing for patients with type one diabetes their number different steps that we can take a we've decided to hold it for now under the cobot maintaining bomb it because we since we do not believe we'll make great progress until this settles down a with the prior beside the agency, which I believe our I've.
Absolutely correct the focus on cobot, Nike, but as we get on the other side of this then we will certainly inform.
Our stakeholders as to what our next step in process will be but at this point, we still believe risk benefit.
Swings to favorite building up sort of good flows in and there are some additional steps that we can take inside of the agency.
Have you heard on this matter and we intend to take those steps, but not at this moment until we can get on the other side of course at 19.
With that Jeff I'll turn it over to you.
Jeff you maybe on mute.
Sorry, I am on me its [laughter]. Appreciate the reminder, you got all these are at.
Our very large studies with large number of patients and so there is a meaningful cost to two when these studies down appropriately most of that cost will be incurred in the second quarter and that's why I had mentioned that the the waiting.
Our expenses is likely to be more heavily in the second quarter.
But the total of that is gonna be included in the amount that we have reflected in our overall overall R&D expenses this year.
And we expect to be able to well incur most of the cost in the second quarter, there will still be some lingering cost in the third and fourth quarter as we wind down the studies and ER and wind down the balance of the type two program, which is mostly complete at this point.
Okay. Thanks, and just one more for Pablo Pablo regarding to the Larry study with the data expected in the end of this year you just give us some sense as to what your expectations are in terms of.
The other types data, we'll see and what what the a bar might be for sort of go no go decision on I'm picking up program forward. Thanks.
Yes, we hope to see good progression free survival and good would be over 50% of patients achieving progression free survival at six months. We also will be reviewing safety and one of the things that we're doing is we're comparing our safety profile to the safety profile, that's been well documented for James.
Yes, and as first line treatment of biliary tract cancer.
See if the addition of your mellow improves the safety.
Because that would be another another indicator of what success.
Right. Thanks, so much.
Your next question comes from the line of Elite you know I know well cycles with when Bush.
Thank you for taking my question any impact of cold. It on your merlo feels like new patient or enrollment of the phase two BTC trial or even starting your.
Peripheral guy neuropathic pain trial.
Thanks, Dan I think a great question.
We've been very fortunate we were able to get to the the 20 patients that we had hoped to get to by this point.
And so we're very pleased and I really think all of the the P. eyes and.
The institutions that are doing this work that prioritize making it happen and so we're very pleased that that it actually did happen.
And so I think we have where to go forward with what's really are track program.
As for the commercial.
Plan I think we were little concerned to be Frank what we saw in at the end of January early February but the drug rebounded quite nicely in February and how to explode extraordinary <unk> extraordinary month in March.
And what we watch very carefully is that you don't start to see inventory build where.
The retailers or the the pharmacy start to build inventory because the people start stocking up so we haven't seen that but we have seen quite remarkable sales unit in the second half of the first quarter and we're very pleased with where that's going Oh going forward with that we remain somewhat conservative in our.
And your estimates that we get for the full year, just because we don't know how to second quarter is going to play out with cobot 19 and in patients.
Patients are continuing to state stay with the program to stay with the product I will say one of the benefits that we had was so good flow asking what jobs the mellow.
Is that is an oral and that oral can be delivered to patients front door and that's turning out to be a remarkable benefit.
In this environment patients do not have to go into institutions and so forth to get there, Matt, but those met to deliver to their doors. So that's turning out to be a very good benefit and ultimately it's it's just standing ourselves as we as a as we make progress as Ford Alex nine to one one we have delayed going into clinic.
Or we have seen signs that a it wouldn't be prudent to do that at this point, but what we are doing is preparing all the site initiation work and all the other work necessary.
So when the environment does I get to a point, we feel confident we can go into clinic and make good progress a relatively investments. We're making then we'll we'll we'll probably do that our best estimate as Dr. purchase set a we hope to be able to enter into the clinic in second quarter here.
Thank you.
You bet.
Your next question comes from a line of Stephen Willey with Stifel.
Hey, good morning, Thanks for taking my questions maybe.
Maybe just one for Pablo.
The into phase two telotristat trial and Billy area.
Are you conducting any kind of baseline genomic or expression analyses of Oh patients' tumors and I only asked the question just because I know that there's.
Some.
Increased a devaluation, though.
Of targeted therapy and Bill your I think there's a soon to start her two trial I know there's Ah that's yes, our inhibitor that was just approved so.
Just curious as to whether or not you're.
Collecting that information in these patients though.
We're trying to collect information, it's not easy we're trying to get the thing is.
Is that we're not requiring prospective new biopsies to be conducted as part of the trial.
So what we can do is try to get archival tissue in patients.
But that's not an easy right now during the.
Croda virus epidemic. So we'll continue working on that and we'll see what we can do one biomarker that we are collecting and everybody at baseline is a plasma five h. I am.
And ER in patients with colon cancer, there's a study indicating that size in the five in China is an indicator of prognosis. So that may be an interesting plasma biomarker and will continue to work on saying, what we can do to get archival tissue and inpatients, where it's available.
And then how do you think about what the next trial might look like another we still need to see data, but I.
I guess presuming you are capable of making go as opposed to Endo decision based on on the data that you.
But you get.
How do you think about the next next trial design would it be something adaptive do you think this would be maybe something that can be upsized into registration or do you. Just go right into a registrational trial, if you surpass that.
Internal.
Internal that's because she threshold.
We're thinking what would be registrational in terms of design it all depends on.
On a biomarkers as you suggested.
So it could be something where are the patient population as a as a subset of all patients with PTC based on plasma five HIV or TPH standing of.
Tissue.
Right or could be a broader population with inclusive.
Okay. Thanks, taking questions.
Your next question comes from the line of the Kevin Kedra with GE research.
Hi, Thanks for taking the questions first maybe start with a.
So sort of flows and just wanted to get a sense of the there's kind of any change the way you're thinking about having discussions with a potential partners I know covert maybe wrapping that now but.
Given the wind down of the outcome studies or does this change the way you think about having those discussions are you might have those discussions with a in the U.S. around the world given that this is a drug that is approved for type one outside the U.S.
Hi, Jeff alternate question are you.
Sure so.
We do as you as you mentioned, we do have an approval for Sunquest, and and Europe, and and do intend to pursue a partnership there are as you as you predict I think it is disruptive what's going on what the current virus and.
But it's it it continues to be our intention to to put together a partnership for Europe to add to be able to commercialize a in Europe.
In the U.S., we as well now mentioned at least we continue to believe there's an opportunity here and and we are continuing to evaluate what's the right path forward with a with the FDA.
Yeah, I will say that by by a closing out the scored in solar studies. It does affect our partnership a you know how we would approach partnership and that we are not pursuing a the heart failure and chronic kidney disease endpoints that we would have pursued in those and those long term study. So there is.
More of an impact is more focused on type one diabetes.
Great. Thanks for calling and then just wanted to ask on some mellow or have you guys are seeing any it's been consistent on kind of the level of a patient's maintaining therapy plus dropping off in new starts I'm just trying to think about that given that a new starts could be pressured with cobot. Thanks.
Great question, Alex I'll turn it over you.
Yes, as a as well now has indicated.
Fortunately for US we continue to seek new starts a in the month of March on the second half when the Cobi.
Planned went into effect, which was around the 16th of Marcia, we saw a continuation of new patients coming onto drug in that second half for the month as well as new clinicians I prescribing the medication as well and we'll keep a close eye on this coming into the second quarter, let's see the trend of new patients coming out the drug and the trend of new.
Prescribers prescribing drug continues into the second quarter as well.
Okay.
Once again, if you would like to ask an audio question. Please press star one on your Touchtone phone lines.
Your next question comes from the line of Alan Carr with Needham and company.
Thanks for taking my questions [noise].
With.
Let's say shelving and it takes two programs for now.
But.
Are you revisiting.
The rest of the.
As a platform the old transgenic platform are there some.
Other drugs that it might be.
The maybe didn't have the resources to pursue but now you might consider.
And it can you elaborate a bit what you might be doing what is your mellow in fiber.
Thanks.
So oh I'll hold the question on Semillon fibrosis Ford for Dr. title to speak to.
In terms of the.
The discovery pipeline [laughter].
You're absolutely correct Alan I think we this opens up stopping those long term tries frees up quite a bit of cash for lexicon.
Also gives us the opportunity to take that looked back at other things that we think we can do from a platform, which we have a lot of targets and a lot of compounds and so.
I think we were already in a.
Very good position to evaluate what what's next.
We are finishing up that work and when we're ready to share that we will show that out, but you're absolutely correct. We do have an opportunity to bring forward.
A couple of the other lexicon discovery programs.
And make that pretty much known to to all stakeholders. So this gives us the opportunity given that we have stop in long trend programs.
To do some work around that and began to bring that forward.
With that I'll turn the second part of your question over to Docs tile.
[noise], Alan Alan what you're doing as well.
We have not only looking at sort of my little but we're also looking a.
But since most of my little bit taught in our discovery pipeline.
I will then be selected the mellow as the candidate for studying carcinoid syndrome diarrhea, we also suffered a little bit programs going on and some of them maybe more suited to study here.
But it is IP up you know idiopathic pulmonary fibrosis corn mash, so what you're doing as we are starting several components, including them a little in preclinical models to figure it out weather.
Number one is a viable but this mechanism of action to see some fibrosis apart ordan number two.
Whether there are other potent inhibitor besides that mellow in our pipeline an artist Toby.
Like buying which must be better suited to pick them into the clinic. So this would have liked what else are some of these are those but at the end of the yield and then we can select yes, watering pic based on political preclinical data so take that one per clinic.
Okay. Thank you and then one last time, what what did the plans with.
20, <unk> 61 and in line.
What you're doing with some Nicholas slows and this is 27 60 went on the shelf for.
Maybe some other development opportunities for that.
Yeah, Alan we put 27 61 on the shelf for diabetes, because our only focus in diabetes at this point will be type one and we believe southern could flows in this most appropriate to continue to pursue type one not just in what we have in Europe wouldn't approved indication, but also to get it here in United States. So 2761 that has been.
Shelf for that for that purpose, but we are looking at other applications for 2761 and Dr. Tom was doing some preclinical work around that but what's the diabetes most likely not.
Great. Thanks for taking my questions.
Your next question comes from the line of Jessica Fye with JP Morgan.
Hey, guys. Good morning. Thanks for taking my question was just hoping you could elaborate a bit on how you're thinking about opex or you know for later in 2020 and as we think about 2021 the questions driven by basically I think your previous runway died and had been for cash kicking it into two.
Anyone and now it's through 2021, so so nice increase in a runway with a relatively modest 10 or 20 million cut to 2020 Opex guidance based on the closing out of the outcome studies. So just curious how that magnitude of an opex cut gets you through 21, and what continued pipeline advancement in 2021.
That outlook reflects.
Oh, Great question, Jessica I'll turn it over to Jeff.
So I think what are the key elements of this yes is that not only are we having an impact on.
2020 financials, but we're having a significant impact on 2021 financials when it comes to the.
Yeah, the close out to be studies.
And so there's quite a there's quite a meaningful impact as we look forward.
The or the <unk>. The overall outlook I think is we were confident that we're gonna have cash that gets us.
Gets us a 320 21 as it relates to our operating expenses, we see continued growth in jamila along the lines that we have forecast for this year and we are looking very closely at our operating expenses and R&D expenses to be sure that were being prudent about how we spend those.
Dollars, but I would say probably the biggest seem to your question is that the they impact that we see as not only on this year, but also on next year in terms of.
The the extension of our runway.
Okay and is there anything you can say about what continued internal pipeline advancement that normally were flat.
Sure. So you know where we upsized highlighted some of the most significant elements that one is the ability to attract program, which were continuing to forecast throughout this time period.
Also a work around Oh, that's nine to one one.
Executing and completing the the.
First proof concept study.
And diabetic neuropathic pain.
But also doing additional proof of concept work with L.. It's meant to one one during this timeframe and doing some work on our early discovery pipeline is all included within that forecast.
Super Great. Thank you.
Once again to ask a question please press star one.
At this time presenters there are no further questions and Mr. coach do you have any closing remarks for us.
Let me just thank everyone for joining us. This morning, I hope everyone is remaining say a these are.
Very interesting times for sure and the Cobot 19 environment and we continue to.
Express to you as we go forward anything that may.
Impact our business in regards to cobot 19, but at this moment, we are managing through it and I'm very proud of the team for a being where we are today, so stay safe and look forward to speak to everybody again in the future.
[music].
This concludes today's conference call you may now disconnect.