Q2 2021 Lexicon Pharmaceuticals Inc Earnings Call
Good morning, My name is Lisa and I will be your conference operator today.
At this time I would like to welcome everyone.
1 for the Lexicon Pharmaceuticals, Inc. Second quarter 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number 1 on your telephone keypad.
If you would like to withdraw your question press the pound key. Thank you I would now like to turn the call over to Mr. Chad. So please go ahead Sir.
Thank you Lisa good morning, and welcome to the Lexicon Pharmaceuticals second quarter 2021 financial results conference call joining.
Joining me today are lanell coats lexicons, president and chief.
Heath Executive Officer, and Jeff Wade Lexicons, Executive Vice President of corporate and administrative affairs, and Chief Financial Officer.
Earlier today lexicon issued a press release announcing our financial results for the second quarter of 2021 which is available on our website at www dot likes farm of Dot com and through our S.
Pat filings.
The webcast for this call along with a slide presentation is available on our website.
During this call we will review of the 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.
Looking statements, including statements relating to the safety efficacy and the therapeutic and commercial potential of Alex 91, 1 set of closing and the other drug candidates.
These statements May include characterizations of the expected timing and results of the clinical trials of <unk> 9 to 1.1 so to the flows in and other drug candidates and.
C C auditory 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 strategic alliances and intellectual property as well as other matters that are not historical facts or information.
Various risks may cause our actual.
In the regular the differ materially from those expressed or implied in such forward looking statements.
These risk include uncertainties related to the timing and outcome of our planned NDA filing for sort of good flows and in heart failure and our discussions with the FDA regarding sort of come flows of them relating to heart failure and type 1 diabetes, the timing and results of clinical trials and preclinical.
The nickel studies of Alex 91, 1 set of of flows the and other drug candidates our dependence upon the 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 research and development.
The activities.
For a list and the description of the risks and uncertainties that we face. Please of the reports we have filed with the Securities and Exchange Commission.
I would now like to turn the call over to the Lanell coats.
Thank you Chad good morning, everyone and thank you for joining us on the call.
As we noted in our press release. This morning, we remain on track.
And our new drug application for <unk> of closing and heart failure late this year with.
With rising confidence in our opportunity to deliver unique value in an area of high unmet need our confidence the supported by the data from our solar study in patients who have recently been hospitalized for worsening heart failure.
And results from both our soloist and scored studies that demonstrated a reduced risk of cardiovascular death hospitalization for heart failure and urgent business for heart failure that was consistent across the full spectrum of left ventricular ejection fraction the.
The results of these studies address the areas of greatest unmet need in heart.
<unk> better treatment.
The options for patients hospitalized for worsening heart failure and effective treatment options for the large population of patients with normal or preserved left ventricular ejection fraction for whom there are essentially no approved therapies.
Series of recent developments since our last quarterly call have further reinforce.
Failures of our confidence in the value of soda saga, Flolan and validated important areas of differentiation and ways that we believe will translate into benefit benefits for millions of people with heart failure and type 2 diabetes.
Importantly, as well we have completed the work we have described on previous.
And for dolls to more fully evaluate the intended market for soda. Good flows of it has become clear that this is the market with a concentrated prescriber base..1 that we believe can be efficiently addressed with a focused and modestly sized sales force.
Slide 4 let's.
Previous to some of the metrics of the the market opportunity now there are nearly a million of hospitalizations per year, the United States for heart failure heart failure is the leading cause of hospitalizations of Americans 65 and older.
Hospital physician setting in patients with worsening heart failure is exactly where our soloist study generate important.
Let's get evidence about the impact of soda the flows of it.
A majority of heart failure patients have heart failure with preserved ejection fraction or have pet that has left ventricular ejection fraction greater than or equal to 50%.
It is these have per patients who are in the greatest need for effective therapies.
Given that the present, they essentially have no real approved treatment options.
Finally, heartfelt gets very frequently associated with type 2 diabetes some of the <unk>.
Most recent evidence suggests that approximately 44% of heart failure patients have type 2 diabetes and this proportion of appears to.
Adding overtime pay.
Patients with diabetes, Moreover, tend to be overrepresent, it and the higher unmet need area of half path. Thanks.
Slide.
Our soloist clinical trial was designed to evaluate <unk> of closing in the context of worsening heart failure pace.
Patients who were medicine.
B Groh of hospital with the episode of acute Decompensate of the heart failure, where initially stabilize then where random randomized to either soda the flolan or placebo on top of standard of care either before or within 3 days following discharge from the hospital.
About half of patients started therapy before discharge from the.
With the balance starting therapy promptly following discharge.
It's a unique study design addressing the unique needs and challenges of worsening heart failure and the results were compelling with of 33% relative risk reduction in the primary endpoint of cardiovascular death hospitalization for.
Hospital failure and urgent visits for heart failure. We recognize this was a significant risk to take and going after this population and we were pleased with the remarkable outcome.
Now why is that important.
For 1 of the developments since our last earnings call debt has increased.
Our Hearts conference and the opportunity for sort of the flows in.
At the American College of Cardiology scientific sessions of May.
Data were presented from a recently completed study of the leading brand of heart failure medication, a multibillion dollar drug which failed to show a benefit in worsening heart failure. I believe this result came as a surprise to me.
<unk> given the product's commercial success in heart failure.
The result, obviously opens an opportunity relative to the market leader given that results from soloist showed a clear benefit from treatment with soda. Good flows on the people who have recently been hospitalized for worsening heart failure.
But it's also reminded of worsening heart failure.
Attentions of distinct set of patients the success in heart failure generally does not necessarily translate to the unique needs and challenges of this patient population and that the results of the solar study offered an opportunity for sustained differentiation given us focus on those unique needs and challenges.
On.
For your robot turning to half past, specifically not only does the population of <unk> patients have the greatest unmet need. It has also been growing as a proportion of overall heart failure patients. This particular figure shows how the proportion of <unk> patients in hospital line setting has been increasing.
The next thing over time.
Over the years, a number of new therapies have been introduced for treatment of heart failure with reduced ejection fraction or have rep. The wild data has come.
Come from others, and we shall see so far only silicon flows and has published data showing clear clinical benefit of.
Increasing the full range of the more difficult to treat population.
In this regard at the same American College of Cardiology scientific sessions in May that I mentioned above Dr. Deepak Bhatt presented pooled data from soloist and scored shown here demonstrating <unk> flows has.
The cross fit across the full spectrum of left ventricular ejection fraction, including patients with reduced ejection fraction below 40%.
Patients with mid range ejection fraction between 40% and 50% and patients with preserved ejection fraction.
Later, Dan will equal to 50% we believe.
Leave that the data presented were very well received as the current leading branded heart failure of medication as indicated with label outlining that benefits us seen primarily in patients with below normal left ventricular ejection fraction and there are no approved therapies for people with the ejection fraction equal or greater than.
It's been a per cent.
You can clearly see and these data the impact of soda good flows.
All patient populations across the entire spectrum of left ventricular ejection fraction.
And the traditional half rep population of the ejection fraction less than 40% that was a 22% relative risk reduction in the primary.
Mary endpoint of the studies of total cardiovascular death hospitalization due to heart failure and urgent heart failure visits.
In the mid range ejection fraction that was a 39% relative risk reduction and on the right. You see that are highly significant relative risk reduction of 37.
1% was achieved in the half the population a robust result that has not been seen from any other therapy to date.
So to recap, we have rising confidence and the opportunity for us to brings total flows into market.
Importantly, in the United States, which we think is.
The most substantial market opportunity with or without a partner.
We have compelling data from soloist and scored that addressed the areas of greatest unmet need in heart failure.
Treatment option for patients hospitalized for worsening heart failure and effective treatment options for large population of patients would have path.
There are.
Essentially no approved therapies.
We believe that this will be rapidly growing market. It may actually grow more rapidly if there are more treatment options for <unk>.
Which represents.
A majority of heart failure patients for whom to date, there have been no truly effective options and the.
Accordingly this.
The market that our work in the cage can be addressed with a focused modestly sized sales force. These.
These factors combine to give us the opportunity to generate significant value by bringing soda sort of of close to market on our own and or to set a bar by which to judge the value of any potential partnership.
As the.
Finally, we are encouraged by the feedback from our recently completed pre NDA meeting with the FDA, which has added to our sense of urgency and factored into our decision to accelerate our efforts to prepare for potential U S. Commercial launch in 2022.
1 of the important elements of this.
The acceleration of these preparations.
Just announced this morning.
This coming Monday, Dr. Craig <unk> will be joining us as our chief Medical officer. Many of the you probably know of Dr credit, which who has been who have extensive industry experience and scientifically differentiating cardiovascular medicines as demonstrated by its track.
Record of Ameren and Merck among others, Craig had a lot of work ahead, and we welcome him to our leadership team.
Now onto type 1 diabetes.
We continue to believe the soda the flows on the demonstrated a positive benefit risk profile and the largest phase III development program ever conducted in type 1 diabetes.
Please and debt it has the potential to become an important new treatment option as an adjunct to insulin for type 1 diabetes patients.
We requested an opportunity for an administrative hearing with the FDA on whether there are grounds for us previous denial of our NDA for type 1 diabetes I am pleased.
To say this week the FDA indicated that it is willing to have a good face discussion with lexicon on of potential path forward for the sort of the flows of the NDA and we are working with Cedar on a joint request.
To hold the administrative hearing process in abeyance, while those discussions our pursuit.
While it.
<unk>, we are looking forward to those discussions and we're hopeful that together with the FDA. We can quickly find the potential path forward.
Let me move to the next slide on Alex non tier 1 wireless.
We have seen of meaningful pickup in enrollment in our 2 phase II proof of concept studies for <unk>.
9.
It is around 1 of neuropathic pain, while maintaining us of prior to the importance of per.
Per patient selection that is built into the study design.
Our mitigation efforts have begun to take effect and the COVID-19 environment has improved relative earlier this year, but not enough to achieve top line results by the year end.
And we now expect to have top line results from these studies in the first half of 2022.
I'd like to take a quick moment to wrap up with the with our pipeline.
We continue to make great strides in advancing our pipeline that has been built on a rich scientific.
The platform and years.
For research and development. In addition to the programs that we are developing directly we do have interest in the form of milestones and royalties and other programs that have been developed or facilitate it using our technology, we have of milestone and royalty interest relating to the service development and potential future commercialization of to launch debt equal in biliary tract cancer.
In accordance with the terms of the agreement under which we sold to large debt Ito and related assets to the Sarah last year. We also have a milestone and royalty interest in <unk> 101, 47% of Genentech IL 22 FC debt is in phase II clinical development.
Under the terms of our longstanding target.
In Biotherapeutics Alliance with Genentech.
Our scientific platform continues to provide continued opportunities for value both internally internally with collaborators and other third parties.
I would like to stop at this moment and pass the call over to Jeff to walk us through our financial results for the second quarter and provide financial guidance.
Guidance for 2021, Jeff.
Thank you Lyle to begin I will discuss key aspects of our second quarter financials more financial details can be found in the press release that we issued earlier today and in our upcoming 10-Q SEC filings.
As indicated in our press release, we had revenues of <unk>.
Describe $2 million in the second quarter the <unk>.
<unk> from $9.2 million for the course.
Corresponding period in 2020 was primarily due to the absence of product revenues in the 2021 second quarter as the results of our sale of til interest at Apple during the third quarter of 2020.
Research and development expenses for.
For the second quarter decreased to $10.3 million from $57.3 million for the corresponding period in 2020.
This was primarily due to decreases in external clinical development costs related to surgical pleasant, resulting from the completion of clinical studies.
Selling general and administrative.
<unk> expenses for the second quarter decreased to $7.9 million from $14.1 million for the same period in 2020.
Primarily due to lower salaries and benefit cost as a result of reductions in personnel and September 2020, and lower marketing expenses.
In total we added net.
Loss for the second quarter of $18.1 million or <unk> 13 per share as compared to the net loss of $69.1 million or <unk> 65 per share in the corresponding period of 2020.
Our net loss for the second quarter of 2021, and 2020 included noncash stock based compensation.
<unk> expense of $2.8 million and $4.3 million respectively.
We ended the second quarter of 2021 with $118.5 million in cash and short term investments as compared to $152.3 million as of December 31, 2020.
The financial guidance for 2021 has not changed from the guidance given on our first quarter of 2021 financial results Conference call.
We continue to expect our 2021 operating expenses to be in the range of $85 million to $100 million.
Which is the sizable decrease from the 200 for $4 million in operating expenses.
We had in 2020.
We expect the noncash noncash.
Non cash expenses to be approximately $11 million of our total operating expenses.
Research and development expenses are expected to continue to be in the range of $60 million to $70 million. This estimate includes the expected spend for our ongoing to phase.
<unk> II clinical studies of Alex line to 1.1 of the remaining closeout of our set of the Pleasant studies and the expected cost to submit a new drug application for sort of a pleasant and heart failure.
It also includes investment in medical affairs activities and in preclinical and discovery stage programs.
We also.
We continue to expect G&A expenses, including pre commercial launch activities for sort of the closing and heart failure to be in the range of $25 million to $30 million I.
I will now turn the call back to line out.
Hey, Jeff.
I want to thank everyone for joining us. This morning, we will open the lineup now for any questions.
At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number 1 on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Yigal knuckle Mobic with Citigroup.
Now, Jeff and Chad. Thank you very much for taking the questions. So now the emperor preserved is right up.
Obviously becomes harder for you to make the argument that soda as the only <unk> to the demonstrated positive data on the composite of CV debt.
HHS and urgent of heart failure visit.
Based on the pooled analysis of soloist and scored.
So with that being said can you help us understand where you see stood us differentiation in the heart failure space in light of this recent emperor of preserve data. Thank you.
So at this point, we don't actually know what the emperor of preserve data or other.
Other than that they met the endpoint. So we're looking forward to seeing those data on August 27th at the.
We will also be presenting some data at ESC and look forward to.
Giving us the opportunity to review some additional data from from lexicon.
We do continue to believe that sort of the president will.
We will be differentiated.
I think that the opportunity is both in worsening heart failure, as we discussed and in heart failure with the preserved ejection fraction.
As we also mentioned I think it's important to realize that the.
The portion of the patient population with heart failure with the preserved ejection fraction has been very underserved.
And 1 of the opportunities here is that.
Is that there are competitors this is likely to be a more rapidly growing market and if not.
And we think that we're going to have some unique advantages based on our differentiated mechanism and thats going to be something that provides us with the with long.
Term value.
Across both worsening heart failure, where we have really unique data.
And in the pet space, where there is such tremendous unmet need.
Got it.
You got I would just add that the I think everyone should weighted.
Before they make judging.
Judging MIT about where.
Everybody is going to land in this area. So what we know today for sure to Jeff's point.
Yes, there would have been a assumption of the current market leader would've wood of 1 and worsening heart failure and they didn't.
And we are very clearly.
Position of worsening heart failure today, regardless.
As of what's going to happen with others, because others did not conduct the same type of the trial design. So as we seek the indication I think that will have a uniqueness. The second 1 is to Jeff's point.
The preserved population is growing at a fairly nice rate there are no therapies and.
If there are going to be competition.
That I think it will be good because of the help grow the market much faster and increase our opportunity to participate relative to our uniqueness I also would just less lastly, say is that we look forward to seeing what the data is going to look like from others, but today. There is no 1 else who is present at the same data that were.
Presented to date and so we'll have to wait and see what other say later.
Okay makes sense and so it sounds based on your comments that you've done more work on the heart failure space.
Now you think you could potentially launch independently.
Just give us a sense as to what size of the sales force you might.
You might envision.
For launching in the United States.
Yes, it's a great question.
I've said this before when we got started in the beginning of the year.
Initially we were going to wait and see how partnerships went before we decided the advanced the NDA. We just preliminary work of our lines of that probably wasn't smart.
We need to advance the Anda ourselves. So we started advancing the <unk> NDA fairly quickly, which which we're glad we did particularly since we've had the pre NDA feedback the second thing is.
We started the do more work coming into the second quarter and analyzing the market ourselves, particularly as we saw.
Some of the weakness that was coming out in data from others.
We thought we had of strength and so we took that to market and we challenged.
We challenge ourselves to get a better understanding from kols from payers.
From.
Folks from the pricing marketplace.
And I have to tell you when we got.
The we got the results back on where we would place ourselves and we could play so to the flows in the market regardless of what other is going to call out in the future.
He was quite remarkable and I also believe the reason it was remarkable remarkable is because you have a significantly unmet needs in the marketplace that is not addressed by current therapies.
Fees and is growing at a pretty nice clip and so as a result of that.
We feel as though we can go after kind of concentrated base of cardiologists. This as a cardiology drug and we will go after cardiologist I won't get into the numbers today, but I will tell you you should be thinking in the size more of.
The 100 or so range at best.
Got it thanks and I'll now.
And Jeff just on the on the on the cash situation. So you have of about $120 million, how far does that get you in terms of the runway.
And when do you believe you're going to need to take steps to finance the company again.
Again in order to prepare to independently launch soda in heart failure.
So the activities that we have planned for this year fit within our previously announced guidance for this year.
Obviously, we launch will require some more resources and we'll address that when we need to bid for.
For the near term I think we're in good shape.
We will be.
Marshaling, our resources to do what we need to do between now and the NDA filing time period.
Yes, and you've got I think 1 of the first things of that we've done 1 of the first things that are important. So we didn't just wake up and decide to do this.
The hiring of Dr. Craig <unk>.
Was carefully planned.
Cause we believe in order to differentiate.
And highlight the differentiation of our products because we do expect to have competition in the market.
You need you need folks, who understand that and how best to do that scientifically and so the first step for us and the investment is to bring.
Him in and I think he will start to assemble his medical team us.
To begin the do the work scientifically to start to the engagement of Kols and creating the value proposition that we will take the payers.
Got it thanks, and if I could just squeeze 1 last question.
Just remind us what is the the.
The reason why release VPN us.
The 4 times larger than relief PHN on the enrollment targets for that just because of the size of the indication or is there. Some other strategic region reason why the trials of so differently side.
Yes.
The 2 reasons 1 is that.
This is of more heterogeneous.
The newest population.
The people with PHN.
A little bit more consistency in their condition and with people at the VPN.
It's more heterogeneous in terms of their background index.
The experience that they have with the with diabetic neuropathic.
The other is that diabetic neuropathic pain it tends to have a larger placebo effect and more variability and as a result of that we felt it was important to have a larger sample size because we wanted to give ourselves the best opportunity to be successful in the study.
So those are the doesn't really the 2 reasons I guess theres 1 other us that the VPN study is a 3 arm study. So 1 just the 1 placebo arm and 2 dose arms, whereas the PHN studies 2 arm study.
Got it yes, what I would add what I would add to that which is which is which adds to some degree of the.
Time it takes to do this work is that the number 1 reason drugs fill in this category of CNS, particularly in paying us.
Paul sample size.
And so we've tried to avoid that the second 1 is that.
You have to put some inclusion of exclusionary criteria to make sure you get the right patients when you do that your.
Generally going to run into a higher.
Screen failure rate and so.
So we're pleased with what we're seeing because we're starting to feel as though we are getting the right patients and so it's important for us to take the time to engineer.
A successful trial versus the speedy trial. So the way. This is designed us to give ourselves the increased chance of success.
And reducing the placebo.
Effect.
As well as having the proper synthesize to overcome it.
Great. Thank you very much.
You bet.
Once again, if you would like to ask a question. Please press Star then the number 1 on your telephone keypad.
Your next question comes from the line of Joseph Stringer with Needham <unk> Company.
Hi, good morning, everyone. Thanks for taking the questions.
So.
You've taken some initial steps here.
In terms of.
Soda for heart failure in terms of commercializing on your own.
I guess I'm, just curious would there be any scenario in which you would still consider us.
Partnership for this.
And would you.
Would you still be open to that for.
First question second question is around the sales fall.
I'm just curious if the.
Yes.
I know that you had previously.
Open some more sites for some of these to help speed along the enrollment of just curious how those.
How that's played out.
Kevin Covid related headwinds there.
Did you ever consider opening additional sites or maybe give us. Some addition.
The color there thanks.
The only create great questions. Let me first start with the partnership piece, we have in the end the discussions.
And there are interested parties.
What I will say is that as we did the work our confidence just got greater and greater we can do to do this ourselves what we understand better today.
Today is what is the value of this asset we clearly have a better understanding of that today than we ever had at any point in time.
Particularly since others have turned over their cards and we see what's happening with the the market leader and the opportunity to differentiate against the market leader.
As well as feedback we received from Kols on our profile as well as what we've seen.
Seen from payers. So today, we have a better sense of what we could do on our own and that then says.
Any partner, who wants to discuss this with US going forward has to discuss what they can do for us greater than the us doing it on our own.
Now have that work and I think that's the only beneficial to all our stakeholders that we have done that.
1 of the things I would say about partnership discussions.
They tend to like to do a slow dance here, we break dams and so I believe the market and the the regulatory discussions we're having are moving out of an accelerated pace, where we cannot be slow dancing. This and if we're going to create value then the best.
We do it is to control the great the speed.
And.
The strategy that creates that value. So we're not for close to a partner, but the rate and the and the timing of which we do that will be distinctly based on what value they bring us above and beyond what we do all of our own the.
The second 1 in terms of increasing the size.
First weighted.
For non 2 <unk>, yes, we saw early on and we've said this in previous calls.
We started to see the effect of the COVID-19.
Patient on a patient enrollment and we tried to start to mitigate that.
Coming out of the first quarter by adding additional sites it takes a lot.
It takes a long time to add additional sites.
But what we are seeing us a much better environment since vaccinations have occurred the environment is improving the mitigation plans that we put in place of adding new sites is adding value is just not enough essentially to be able to have the top line results by the end of this year.
Sites, So we felt it better to <unk>.
Make sure we have good sites that are giving us the right patients and keep working those and nurturing those and extending the time line to ensure ourselves that we get we get a good sample size and a good sense of how the drug is working with good sites and so.
We moved the time line as a result.
Great. Thanks for taking my question.
Okay.
At this time there are no further questions are there any closing remarks.
Yes, let me just thank everyone for joining us this morning.
Im extremely excited.
We've done the work.
We truly believe sort of flow.
So there's going to be a remarkably important priority product introduced in the market next year for for heart failure, particularly those patients living with type 2 diabetes, we think we will be unique we.
We will have to wait and see what others are going to say and do but at the end of the day. It is a growing market that is facilitated.
Bye good science, and we can see what the <unk> is a dog in the half ref.
And I think it's early days in terms of what you are saying the impact of <unk> and heart failure, particularly have rep and us really markedly early days in the area of path and I think youre going to see just an expanding market and expanding opportunity most.
As of the ethically for soda good flows in and we're really looking forward to getting that work started as.
We build out our team the.
The second thing is I am just I'm, just thrilled with our engagements that we've had with the FDA recently not just in the area of heart failure, which is encouraging us to accelerate this program forward.
In this indication.
And the recent developments that we've had in our conversations with them too.
To sit down and have more conversations about the path for for type 1 diabetes. So I couldnt be more excited relative to those engagements.
1 of that lease.
Very encourage about Alex non tier 1.1 of our goal is to engineer a successful.
The trial.
Not the speed through it but to engineered so we have every chance of success I think we're on path to do that so I remain remarkably bullish on our near term catalysts that we're creating here at lexicon.
With that I'll say, thank you for joining us and we look forward to the next conference call.
This concludes today's conference you may now disconnect.
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