Lexicon Pharmaceuticals Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2024

There are 12 speakers on the call.

Operator

Good day, everyone, and welcome to the Lexicon Pharmaceuticals First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen only mode. Following management's prepared remarks, we will hold a brief question and answer session. As a reminder, this call is being recorded today, May 2, 2024. I'll now turn the call over to Lisa Difrancesco, Head of Investor Relations and Strategy for Lexicon.

Operator

Please go ahead, Lisa.

Speaker 1

Thank you, Jamie. Good afternoon, and welcome to the Lexicon Pharmaceuticals' 1st quarter 2024 financial results conference call. Joining me today are Lonnel Coats, Lexicon's Chief Executive Officer and Director Jeff Wade, Lexicon's President and Chief Financial Officer Doctor. Craig Granowitz, Lexicon's Senior Vice President and Chief Medical Officer and Tom Gardner, Lexicon's Senior Vice President and Chief Commercial Officer. Earlier this afternoon, Lexicon issued a press release announcing financial results for the Q1 of 2024, which is available on our website at www.lexpharma.com and through our SEC filings.

Speaker 1

A webcast of this call along with a 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 related to the safety, efficacy, clinical development, regulatory status and therapeutic and commercial potential of Empepa, sotagliflozin, Zynquista, LX9211, LX9851 and our other drug programs. These statements may also include characterizations and projections relating to our commercial launch of IMpepfa in heart failure as well as the clinical development, regulatory status and market opportunity for all of our drug 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.

Speaker 1

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 commercial launch of Empefa, our discussions with the FDA and other regulatory authorities regarding our drug programs, the timing and results of clinical trials and preclinical studies of our drug candidates our dependence behind 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 requirement of substantial funding to conduct our planned research, development and commercialization activities. I would now like to turn the call over to Lonnel Coats. Lonnel?

Speaker 2

Thank you, Lisa. Good afternoon, everyone, and thank you for joining us on the call. Now before I begin our discussion Lexicon's results for the Q1 of 2024, I want to acknowledge the press release that went out earlier this week announcing my retirement from Lexicon, which will be effective on my upcoming 10th anniversary with the company on July 7. I am truly blessed to have had the opportunity to spend the last decade leading this remarkable company. I've had the privilege to work with an outstanding Board that continues to support the company and the many amazing and talented employees who are dedicated to Lexicon's mission.

Speaker 2

It was important to me as I made the decision to embark on the next phase of my personal journey that I lead this company in the strongest possible position. I'm happy to say Lexicon has never been stronger than it is today. As we outlined at our recent Investor Day, Lexicon has a significant portfolio and pipeline of exciting opportunities. We have a remarkably strong leadership team with the capital to execute on these opportunities to create value for stakeholders. With that, I'd like to turn this call over to our President and CFO, Jeff Wade to begin our discussions of the results.

Speaker 3

Thank you, Lonnel. As Lonnel mentioned, Lexicon has never been stronger than it is today and we have made very substantial progress just in the past quarter. We continue to make progress on our heart failure launch with expanded market access which we expect to broaden significantly starting mid year and continuing thereafter, providing the key to potentially unlock a substantial inflection in our launch trajectory in the second half of this year. We see encouraging leading indicators supporting that potential, which Tom will discuss shortly. We achieved a path forward this past quarter for a resubmission of our new drug application for Zynquista for Type 1 diabetes, offering the potential for another near term and very substantial commercial opportunity for the company.

Speaker 3

We expect to be in a position to achieve a mid year resubmission of the NDA, seeking the approval of Zynquista as an adjunct to insulin therapy improve glycemic control in adults with Type 1 diabetes and chronic kidney disease. We believe the approval of Zynquista would help address significant unmet needs in a population with no real treatment options beyond insulin to manage their blood sugar. We have also begun our efforts to expand sotagliflozin's label into hypertrophic cardiomyopathy, part of an overall strategy to seek medically important and high value indications that are both unique to sotagliflozin among SGLT inhibitors and for which there is evidence for an advantage in inhibiting SGLT1. Start up activities for our pivotal Phase 3 study in are well underway and we expect to begin patient enrollment around the middle of this year. We are making continued good progress in the enrollment of our Phase 2b study of LX9211 for diabetic peripheral neuropathic pain, which continues to be on track for top line data in the Q2 of 2025.

Speaker 3

We are increasingly confident in the opportunity for LX9211 to address a tremendous area of unmet need both in DPNP, the focus of this study, but also in neuropathic pain more broadly. At our Investor Day 2 weeks ago, we revealed LX9851, a promising new oral drug candidate for chronic weight management that addresses a novel target, ACSL-five with compelling biology. LX9851 provides additional evidence that Lexicon's unique Genome 5,000 discovery platform founded in a systematic approach to mammalian genetics continues to produce. And finally, but very importantly, we were able to raise $250,000,000 in an oversubscribed offering with strong shareholder participation to support the execution of these exciting programs. I'll now turn the call over to Tom Garner, Lexicon's Chief Commercial Officer to talk more about MpepEF for heart failure and where we are with the launch.

Speaker 3

Tom?

Speaker 4

Thank you, Jeff, and good afternoon, everyone. It's a pleasure to be able to speak with you all today. As you will see, Q1 represented another quarter of continued positive progress with the ongoing launch of IMpepha. As a reminder, the commercial organization is fully aligned and focused on 2 key areas as it relates to the ongoing launch, namely driving an awareness and demand for IMpepha amongst the cardiology community, while also working hard in parallel with major payers to secure profitable and equitable access for patients who can benefit from this medicine. We've also taken thoughtful and deliberate steps to evolve and significantly strengthen the commercial organization to ensure that we can maximize the opportunities that exist for IMpeper and more broadly Lexicon in both the near and midterm.

Speaker 4

Beginning on the next slide, you can see that heart failure remains a significant burden in the United States today. You can see that there are about 7,000,000 patients suffering with heart failure in the United States in 2019. This number is expected to grow by nearly 27% by the end of the decade to about 8,500,000 patients, reflecting a growing and very substantial patient population where unmet needs remain. As anticipated growth is also projected to have a substantial impact on the healthcare system as a whole. At the start of the decade, heart failure costs are estimated to be about $44,000,000,000 and by the end of the decade, this number is expected to increase to nearly $70,000,000,000 This clearly reflects a significant drain on resources and we believe that INPEFR is very well positioned as a cost effective solution, which brings me to the next slide.

Speaker 4

On Slide 7, you can see how hospitalizations and readmissions are driving the majority of these heart failure related costs. In fact, according to the latest estimates, hospitalizations account for nearly 80% of overall costs. And when patients leave the hospital, in many cases, they are readmitted very quickly with up to 25% returning within 30 days. As we've shared previously, much of our clinical data for IMpephur, specifically from the SOLOIST trial where the NNT was 4 and hospital readmissions reduced by 50% at both 30 90 days is received very positively, both for clinicians who are treating patients in the inpatient setting, but also for those who are treating patients in the outpatient setting with the goal of preventing readmissions, which is one of the objectives central to guideline directed medical therapy. Turning to the next slide, you can see the treatment with SGLTs is really in its infancy in terms of uptake for the treatment of heart failure.

Speaker 4

IMpephra is now one of 3 SGLT medications that are referenced in the ACC guidelines. As the only dual inhibitor of SGLT1 and SGLT2, coupled with compelling clinical evidence, we believe that Impella offers significant value to HCPs, to patients and to payers. Despite the strong recommendation within the heart failure guidelines as one of the 4 pillars of guideline directed medical therapy, the SGLT class still remains somewhat under penetrated. As of today, only around 11% of patients are actually being started on SGLT therapy for heart failure, representing a significant future opportunity for the class, including in PEPA. This is an area where the medical community is really pushing very hard.

Speaker 4

The American Heart Association has a Get With the Guidelines program for heart failure with the primary goal of ensuring the updated guidelines are consistently pulled through into clinical practice with the goal of improving patient care and outcomes. Turning to Slide 9, we're very excited about 2 recent additions to the joint guidelines established in 2022 by the American College of Cardiology or ACC, the and the Heart Failure Society of America. Firstly, last year, the ACC released a consensus statement for the treatment of heart failure with preserved ejection fraction, which went even further than the 2022 joint guidelines in recommending SGLT inhibitors as first line foundational therapy for all patients who have HEPF. And then just a few weeks ago, we were also very pleased to see the updated consensus statement for HEPREF, which reclassified the SGLT2 class as the SGLT class, SGLT class in expressed recognition of IMpepho's differentiated mechanism of an action inhibiting both SGLT1 as well as SGLT2. Taken together, we anticipate this continued support from experts in the heart failure community will result in continued growth and accelerating adoption for the SGLT inhibitor class as a whole, including IMpeffer across the spectrum of heart failure patients.

Speaker 2

Now pivoting

Speaker 4

to our results for the quarter, we continue to observe encouraging results from our efforts to accelerate adoption of IMpepha for the treatment of heart failure. Awareness of IMpepho continues to trend positively upwards and has grown by nearly 10% since January and is now in the 88% range. At the same time, we are also seeing that intention to prescribe is increasing as more of our target customers are reached by our sales specialists and our non personal efforts. Encouragingly, once cardiologists have started a patient on IMpephr, they indicate very high product satisfaction, which is above similar benchmarks for comparable products in the cardiology space at this point in the product life cycle. Taken together, these metrics give us confidence that Impella's differentiated value proposition and core messaging is resonating with our customers demonstrates the great potential we see for continued growth throughout 2024 and beyond.

Speaker 4

Turning to Slide 11. As a reminder, we have focused our in person sales efforts on the highest volume heart failure prescribers with a team of highly tenured cardiovascular specialists. The priority focus for this team is on segments A through C, where we see the highest volumes of heart failure patients, with the A and B targets alone accounting for more than 60% of the overall heart failure volume in the United States. As we move to the next slide, you will see that this focused strategy is starting to pay dividends. As you can see from the chart on the left, nearly 80% of the Impella script volume is currently coming from our A through C highest volume heart failure treaters.

Speaker 4

Moving to the chart on the right, you can see how we are penetrating each priority segment. Encouragingly, we are seeing increased adoption of Impella amongst these top tier customers. We focused on the very most important segment A and B customers, adoption of Impella within this group grew by over 40% in Q1 versus Q4. While we continue to see increasing adoption, we should also note that we have significant room for continued growth across both of these segments. And this is something that the sales team is fully focused on continuing to deliver as we broaden the prescriber base.

Speaker 4

Moving to Slide 13, you can see the continued progress we're making with the adoption of Impella across the entire cardiology community as a whole. Through the end of March, we had around 1900 writers of IMpeffer, adding in excess of 600 new customers in the Q1, representing an increase of over 45% versus the prior quarter. This positive momentum has continued through the early part of Q2. We're really pleased with this progress and expect it to continue as we further enhance our in person promotional tools, our strengthened omni channel approach, while also working hard to broaden access, which may be still be viewed by customers as a barrier to product adoption at this point in the launch window. On Slide 14, you will see that we are continuing to build ongoing prescription volumes even as we work to improve access conditions for IMpeper.

Speaker 4

We have seen encouraging upward momentum in TRx volumes throughout the quarter and have seen this trend continue into the early part of Q2. Accelerating and improving patient pull through will remain a critical focus for the team to ensure that we not only continue to accelerate new to brand script demand, but are able to continue and retain ongoing scripts for Mpephar prescribers and for their patients. The IMpephr together program has been carefully designed to ensure that patients prescribed IMpephr can be appropriately started and supported on their treatment journey irrespective of their insurance type. So as you can see from the previous slides, we are pleased with the continued positive momentum in leading indicators for Impella demand as customers become ever better acquainted with the clinical value proposition that Impella offers for their patients. It's worth noting that our overall access did not change considerably from the roughly 40% as of last quarter, yet we have continued to see ongoing increases in total script volumes.

Speaker 4

We're currently in the midst of the 2025 Medicare bid cycle with the value and access team fully engaged in important and meaningful discussions with all major pay PBMs across both the commercial and Medicare books of business. We've been pleased by the receptivity payers have indicated to the product as they recognize there is clinical differentiation with IMpepha and that the value proposition is compelling. They continue to express interest in reviewing Impella for coverage and increasingly adding Impella to their formularies. With that, I will hand over to Jeff to talk about type 1 in ZYNQUISTA.

Speaker 3

Thanks, Tom. It has been a particular passion of our company to improve the lives of people with type 1 diabetes and we are pleased to have found a path forward for the resubmission of our NDA for Zynquista as an adjunct to insulin therapy for the substantial proportion of this population who also suffer from chronic kidney disease. Type 1 diabetes is a substantial opportunity in an area of high unmet need. Because Type 1 diabetes involves complete insulin deficiency due to the autoimmune destruction of beta cells in the pancreas, people with Type 1 diabetes retire rely entirely on insulin therapy, either multiple daily injections or insulin pumps to provide the insulin they need. But while insulin is life saving, it is also very challenging to manage with the result that between 75% 80% of people with Type 1 diabetes failed to meet targets for A1C, a measure of average glucose.

Speaker 3

The difficulties in managing insulin therapy also mean that unmet needs for glycemic control in Type 1 diabetes go far beyond A1C with glucose variability and maintaining time and range being particular challenges. Maintaining good glucose control is important to the day to day lives and well-being of people with type 1 diabetes, but it is also important for reducing long term complications, which include diabetic retinopathy, diabetic neuropathy, higher rates of cardiovascular disease and chronic kidney disease. Notably, among the 1,700,000 adults with Type 1 diabetes between 20% 25% have chronic kidney disease and many more are at risk for progression. Moving to Slide 18, following a series of discussions with the FDA, we are preparing to resubmit our NDA for patients living with Type 1 diabetes and chronic kidney disease in the middle of this year. In doing so, we are leveraging the extensive clinical data generated in what was and remains the largest ever Phase 3 program of an oral adjunct insulin in Type 1 diabetes.

Speaker 3

We have the opportunity to reference a tremendous amount of additional supportive data that were generated after our original filing for approval in type 1 diabetes. In a separate population, but still relevant providing evidence of benefits on cardiovascular death, heart failure, myocardial infarction and stroke and kidney protection. And we have the benefit of recently published additional data from long term longitudinal studies that shows the importance of better glycemic control in slowing the progression of chronic kidney disease in the Type 1 diabetes population. Together these elements open the opportunity for our resubmission for the use of Zynquista as an adjunct to insulin with the potential to improve glycemic control for people living with Type 1 diabetes and chronic kidney disease. On Slide 19, the significant unmet needs in Type 1 diabetes more broadly are shared by and often have particular importance in the population of people who also have chronic kidney disease.

Speaker 3

These needs include reaching A1C goals, reducing glycemic variability including time and range, controlling complications and reducing weight gain with the overall goal of preventing further conditions or complications including cardiovascular and kidney related diseases. The data from our Phase 3 program of sotagliflozin in Type 1 diabetes provide compelling evidence addressing many of these unmet needs with results consistent among the overall Type 1 diabetes population studied and also the subgroup with type 1 diabetes and chronic kidney disease. On Slide 20, you can see from the patient journey in type 1 diabetes that there are no real treatment options beyond insulin therapy to improve glycemic control and thus potentially prevent the complications that ultimately result from suboptimal glycemic control and that sotagliflozin has a unique opportunity to fill a gap and address an important area of need in this population. I'd like to pivot beginning with Slide 21 to discuss our plans for a potential commercial launch. The treatment of type 1 diabetes is highly concentrated among endocrinologists where the top 1,000 are treating about 2 thirds of type 1 diabetes patients and the top 3,000 are treating over 90%.

Speaker 3

The concentration of prescribers and their geographic distribution supports a focused modest sized field force likely 120 or fewer in size. We are continuing our planning and preparations for commercialization as we prepare to resubmit and post acceptance and through the review process and expect to hire the T1D focused field force very close to the potential launch early next year. Moving to Slide 22, we are not the only ones who are enthusiastic about the opportunity for sotagliflozin to benefit people with Type 1 diabetes. There are a number of studies including some large studies focused on outcomes beyond glycemic control in the T1D population that are utilizing sotagliflozin and from which we expect to add to our body of evidence over the next several years. This includes a study called sugar and salt, which is designed to assess the outcomes of treatment with sotagliflozin in patients with Type 1 diabetes and chronic kidney disease, SOFIST, which looks at heart failure in type 1 diabetes and Steno-one, which looks at a reduction in cardiovascular risks in type 1 diabetes.

Speaker 3

To summarize on Slide 23, we expect to resubmit our NDA mid year and given the nature of the resubmission anticipate a 6 month review. Pre launch planning activities are well underway and we expect further investments related to field force to occur closer to potential approval. There is a significant unmet need and substantial advocacy group support for treatment to manage glycemic control for people who have Type 1 diabetes and chronic kidney disease and we expect the body of evidence will continue to grow and expand over time. We couldn't be more excited here at Lexicon to be on this journey to bring sotagliflozin to people with Type 1 diabetes. I will now turn the call over to Craig to talk about hypertrophic cardiomyopathy and why we believe that this is a great opportunity to improve care for patients who still need better treatment options.

Speaker 5

Thank you, Jeff. We shared a lot of detail on our rationale to pursue sotagliflozin in HCM at our recent Investor Day a couple of weeks ago, which is still available for review on our website. So I'll just briefly summarize here. Our enthusiasm about HCM as an opportunity for sotagliflozin was driven in part by a post hoc analysis of our SCORE data demonstrated that sotlafossen reduced the risk of cardiovascular events in patients with left ventricular hypertrophy without hypertension. This cohort shares phenotypic and physiologic traits of patients with HCM and may actually include undiagnosed cases of HCM.

Speaker 5

This analysis provides insight into the potential efficacy of sotagliflozin in patients with HCM. And there are a lot of other physiology that would support the impact of SGLT1 expression on HCM and why sotagliflozin might work on the myocardium itself to achieve that end. After reviewing this data and discussing with the FDA, we believe that sotagliflozin has the potential to address key unmet needs with the scientific rationale to support development. The timing of our study could also be beneficial as heavy disease awareness efforts currently underway in the industry through new treatments as new treatments become available could also provide additional benefit. We believe that the rate of diagnosis of HCM will likely outpace the growth of the disease itself.

Speaker 5

Moving to the study design on Slide 26, our proposed indication is to improve symptoms and physical limitations, which is what all of the agents that are currently approved are designed to do. All the CMIs and all of the other agents have been designed and approved to improve physical functioning, not improve long term outcomes. We have already demonstrated long term CV outcomes from our vast heart failure clinical data set. And importantly, we are including both obstructive and non obstructive HCM patients in the upcoming trial. So we have a single 500 patient study with 200 patients each with obstructive and non obstructive hypertrophic cardiomyopathy.

Speaker 5

Our KCCQ primary endpoint has been validated by the FDA as an endpoint for non obstructive hypertrophic cardiomyopathy in registration trials of other agents. And importantly, a much broader group of patients are eligible to be included in our trial than those of the current CMIs because we're allowing patients actually remain on a CMI, to remain on their beta blocker and to be on their CCB and we will allow an ejection fraction inclusion criteria down to 50%, not the 60% that is in the CMI trials, because the major risk of use of CMIs is that patients may develop heart failure and we're actually indicated to reduce the development of heart failure. Moving to Slide 27, we believe that there are significant stakeholder needs and opportunities in the HCM treatment paradigm for which sotagliflozin can address. For patients, sotagliflozin has the potential for symptom improvement with very limited or no added side It also has the potential to be cost effective without the need for significant patient monitoring. In this case, there would be no significant added burden to HCP offices and payers and all stakeholders could potentially benefit.

Speaker 5

Because of the way that it will be studied, it would also be available for use across the treatment paradigm of HCM regardless of their current therapy or OA obstructive or non obstructive HCM status. Moving now to LX9211. We believe that LX9211 has a promising profile based on 2 completed proof of concept studies and a substantial market opportunity. LX9211 has the potential to overcome many of the shortcomings of current therapies and could become a welcome new innovation for those suffering from diabetic peripheral neuropathic pain or Diabetic peripheral neuropathic pain is a large and growing market with significant unmet medical need. It is estimated that more than 20,000,000 Americans experience neuropathic pain and approximately 5,000,000 BPNP patients were identified in the U.

Speaker 5

S. In 2022. LX9211 has the potential to be a first to market novel non opioid therapy in a multibillion dollar market. Our progress Phase 2b study has an 8 week treatment duration and is enrolling adult patients with a diagnosis of type 1 or type 2 diabetes with moderate to severe diabetic peripheral neuropathic pain. It is a 4 arm placebo controlled study with approximately 400 patients or 100 per arm.

Speaker 5

It also allows patients to remain on their underlying DPNP therapy, which reflects a more real world use approach. As we have shared in previous updates, we have advanced LX9211 into late stage development with a clinical program directed towards DPMP regulatory approval. The progress study began enrollment in December. It is designed to be a dose optimization study in order to enable a more efficient Phase 3 study execution, increased probability of success as well as derisked investment while maintaining overall development program costs and timelines. Enrollment remains on track and we expect the top line data in Q2 2025.

Speaker 5

Now moving on to LX9851 for obesity and weight management. Beginning on Slide 34, we recently revealed an exciting pipeline opportunity, a novel oral development candidate for chronic weight management, which we are calling LX9851. With this ACS L5 inhibitor, we see the potential to address the significant opportunities beyond weight loss with GLP-one receptor agonists. In oral agent, production in body fat that spares lean muscle mass and improved metabolic profile and benefits beyond weight loss including potential in additional related indications such as metabolic syndrome and MASH. Our work here begins with an assessment of the compelling phenotype we observed in knocking out the ACSL5 gene in mice representing what we might expect from a drug inhibiting the protein target encoded by that gene.

Speaker 5

The observed phenotype suggested that an ACSL-five inhibitor had the potential to counter all aspects of metabolic syndrome to reduce obesity, improve glucose tolerance and reduce cholesterol and triglycerides among other metabolic benefits. In particular, as seen in Slide 36, in our large scale assessment of nearly 5,000 different genes, we saw a much lower cholesterol and triglyceride and moderately lower body fat with no effect on lean body mass on a standard diet. And in Slide 37, evaluating the effects of a high fat diet revealed another important characteristic of the target substantially lower body fat, 25% less with no difference in lean muscle mass. We have broadly reproduced these weight loss and metabolic effects with small molecule inhibitors of ACSL-five and our drug discovery efforts have now yielded a development candidate called LX9851. As we think about the opportunities for chronic weight management, the data from one of our more recent studies help demonstrate that opportunity with LX9851 producing weight loss on its own, a and semaglutide having a greater reduction in body fat overall than either agent on its own.

Speaker 5

And in Slide 39, as we consider the opportunity specifically for weight management after initial weight loss with a GLP-one receptor agonist, You can see when we stopped treatment with semaglutide after day 14, we saw a return to baseline weight similar to what has been seen in humans after discontinuation of a GLP-one receptor agonist treatment. However, when we added 9,851 after initial weight loss of semaglutide, we saw a preservation of weight loss. In summary, we have identified a promising new development candidate for chronic weight management addressing a novel target that is entering IND enabling studies that address many of the most important opportunities beyond initial weight loss for the GLP-one receptor agonist, an oral agent that reduces body fat and spares lean muscle mass that leads to an improved metabolic profile and has benefits beyond weight loss and potential in additional related indications like metabolic syndrome and MASH. We presented these results at our Investor Day 2 weeks ago with significant additional details and we have already received a considerable amount of interest in the target and compound from potential partners. I'd now like to turn the call over to Jeff to take us through the financial results for the Q3 of 2024.

Speaker 3

Thank you, Craig. I will review some of the key elements of our Q1 2024 financial results. You can find more financial details in the press release that we issued earlier today in our 10 Q that's filed with the SEC. We ended the quarter with $355,600,000 in cash and investments. We believe that our existing capital resources provide us with the appropriate level of funding to support the commercial launch of VINpePA to prepare for and potentially launch Inquesta in Type 1 diabetes and to make planned investments in research and clinical development, including our Phase 3 study of sotagliflozin in HCM and our Phase 2b study of LX9211 in diabetic peripheral neuropathic pain.

Speaker 3

We anticipate that our existing cash and investments together with expected product revenues will provide us with sufficient resources to manage our operations into 2026 and potentially significantly longer if we achieve the partnerships that may be optimal for certain programs. For example, enabling the Phase 3 global development of LX9211 across multiple types of neuropathic pain. As indicated in our press release, we had $1,100,000 in revenues in the Q1 of 2024 almost all from net sales of Mpepah and had minimal revenues in the same period in 2023. Research and development expenses for the Q1 of 2024 increased to $14,400,000 from $12,000,000 for the corresponding period in 2023, primarily due to higher external R and D expenses. Selling, general and administrative expenses for the Q1 of 2024 increased to $32,100,000 from $19,100,000 for the corresponding period in 2023 reflecting our investment in the commercial launch of Mpepah including higher salaries and benefits associated with the addition of the Mpepa sales force and other increased primarily commercial headcount as well as increased travel and marketing costs.

Speaker 3

In total, net loss for the Q1 of 2024 was $48,400,000 or $0.20 per share as compared to a net loss of $31,900,000 or $0.17 per share in the corresponding period of 2023. For the 1st quarters of 20242023, net loss included non cash stock based compensation expense of $4,300,000 $3,400,000 respectively. As we typically do with our Q1 earnings, we are introducing our current view of our 2024 full year expense guidance. This includes expected R and D expenses of between $70,000,000 $80,000,000 SG and A expenses of between $140,000,000 and $155,000,000 and total operating expenses of between $210,000,000 to $235,000,000 These figures include non cash expenses of $18,000,000 to $20,000,000 for stock based compensation, depreciation and amortization. As we near the end of our prepared remarks, I think it's worth highlighting the extent of our accomplishments to date and what remarkable opportunities we have ahead.

Speaker 3

We have an improved and marketed product in EMPAPA that originated from our own discovery engine in a large and fast growing market. In addition, we have a strong and deep pipeline encompassing label expansion and lifecycle management opportunities for sotagliflozin along with promising drug candidates addressing novel targets in large markets with high unmet needs like LX9211 for neuropathic pain and LX9851 for obesity and weight management. Together these assets offer remarkable opportunities both for growth and for value generating partnerships. As we wrap up on Slide 45, you can see the significant number of potential catalysts that you'll be able to track and use to measure our progress over the next 18 to 24 months. And expected inflection in the Mpepka launch in the second half of this year, our NDA resubmission in type 1 diabetes and initiation of enrollment in our study in HCM both in the middle of this year, expected completion of enrollment this year for LX9211 in diabetic peripheral neuropathic pain with top line data in the Q2 of 2025 and progress on our new development candidate for obesity and weight management.

Speaker 3

We are looking forward to a productive remainder of the year and to sharing our progress and achievements with our stakeholders. I would like to now open up the call to take your questions.

Operator

Our first question today comes from Yajal Makhanevitz from Citigroup. Please go ahead with your question.

Speaker 6

Hi, team. This is Amin on for Yigal. Thank you for taking our questions. We have 2 here. So for the first one, for Empefa, can you talk about

Speaker 7

the a bit more about

Speaker 6

the granularity and the main factors that will lead into the inflection in the second half? And second question is on hypertrophic cardiomyopathy. Can you talk about what mechanistically do you expect any differences in clinical outcomes between the obstructive and non obstructive types of HCM?

Speaker 2

Thank you, Minh. Let me take the first question and turn it over to Tom. I believe it's what do we believe in terms of inflection and what's leading us to believe the inflection happened in the second half. Let me start off the first part. I've said this consistently that we launched in the summer and we launched off cycle.

Speaker 2

So it's going to take time for us to build access and coverage. And we're now at that point where we're starting to get that access and coming up very shortly, we feel very confident we're going to gain even greater access. And to the point that Tom made earlier, we're seeing good growth in the absence of the kind of access is going to need to accelerate. But once we get it, then that should be the few that accelerates. But Tom, I would turn it over to you to have more to give more specificity.

Speaker 2

And then Craig, if you can answer the question around HCM. Tom?

Speaker 4

Thanks, Lonnel. So I think you kind of summarized it well. Per the comments I shared earlier on, so if we look at how we're kind of doing in terms of driving demand, we are encouraged by some of the leading indicators that we see around just the customer perspective on Impeffer as a whole. Clearly, when our reps get in front of our customers, they are converting them into trial lists. And I think as we continue to broaden the adoption for the product with the numbers now increasing all the time, 2,000 writers.

Speaker 4

We're actually pleased with that kind of continued uptake. And we see on an ongoing basis accelerating claims, but also we're seeing now accelerating pull through in terms of TRx volume as well. And per Lonnel's comments, the team are now very actively engaged with all of the payers given where we are with the 2025 bid cycle. So I think you pull all of those factors together and just given what we're hearing from payers in particular regarding the value proposition and the fact that they do seem to be quite willing and open to be considering adding Impella to their formularies with utilization management taken off the table. I think if we can do that coupled with all of the efforts that we have in this growing prescriber base that we feel good about where we'll be in the second half of the year.

Speaker 4

So it's that combination of demand and access. And as you're probably well aware, those two things are always linked in a launch window, access begets demand, demand begets access. We're making sure that we're working very hard on both fronts to achieve that. So Craig, maybe I'll hand over to you about HCM.

Speaker 5

Thank you, Tom. So I'll just restate the question that it was about, are there mechanistic differences that we believe are in place between obstructive and non obstructive hypertrophic cardiomyopathy? Great question. And as a reminder, HCM is largely due to a number of gene defects, but most of them relate to actin and myosin and the interaction of actin and myosin. And that results in what is considered diastolic dysfunction.

Speaker 5

So largely is an issue of relaxation of the myocardium and limiting the ability of the myocardium to fill adequately in diastole. What is interesting is that a lot of the benefits that are seen mechanistically with sotagliflozin are acting directly on the myocardium, which we believe will actually improve that basic underlying defect. It's also important to note that in many patients with obstructive HCM that undergo septal reduction therapy, they often progress and continue to symptomatically progress. And so again, we believe that there are more similarities in the underlying mechanism for which sotagliflozin might be uniquely beneficial than our differences between what is obstructive and non obstructive hypertrophic cardiomyopathy.

Speaker 6

Okay, great. Thank you. Thank you for answering the questions and congratulations on the retirement 1L.

Speaker 2

Thanks, Amin. Appreciate it.

Operator

Our next question comes from Yasmeen Rahmati from Piper Sandler. Please go ahead with your question.

Speaker 7

Hey, team. This is Jung Vu on for Yas. Just first wanted to thank Lonnel on behalf of the Piper team for your contribution. We have two questions. The first one is, in regards to 9,851, what types of IND studies still need to be completed?

Speaker 7

And what duration tox package are you aimed at before entering the clinic? And for the second question, considering there's actually a lot of off label use for SGLT2s in non obstructive patients, is there a biological basis why sotagliflozin's differentiated mechanism of action could actually possibly work better for these patients?

Speaker 2

Great two questions. Craig, why don't you start with the first one HCM and then we have our Head of Innovation available today to talk about 9,851 to answer your first question. So Craig, why don't we start with you?

Speaker 7

Yes,

Speaker 5

thank you. If you could just it got just a bit garbled at the end, so I didn't catch the whole question. Could you just restate the last part of that on the differences? I just missed the first part of it.

Speaker 7

Yes. Is there a biological basis why sotagliflozin's differentiated mechanism of the action could actually work possibly better in these non obstructive HCM patients?

Speaker 5

Yes. It's great question. As we said in part to the last question, the fact that there are SGLT1 receptors on the myocardium itself both at baseline, but are also induced during stress conditions both experimentally and in patients as well as Mendelian genetic studies that show that patients that have knocked down mutations in SGLT1 actually have less heart failure. We believe that the benefits that you'll see with sotagliflozin will be even better than those that you might see with an SGLT2 inhibitor. So the combination of both SGLT1, which is acting directly on the myocardium and on the endothelium and in the GI tract as well as on the kidney, plus the more systemic effects that you see with SGLT2 inhibitors and lowering fluoren volume, increasing hemoglobin and some other factors that you can get potentially 2 bangs for your buck sotagliflozin, both of which would be beneficial in patients with HCM.

Speaker 2

Alan, you want to take the second question relative to 985-1 and IND work?

Speaker 8

Sure, absolutely. So we're just beginning the IND enabling work. The first part of that is manufacturing enough GMP material to do the toxicology studies and safety studies. And we're planning to do a 1 month bulk study in 2 species. So that will allow us to treat the first patients for up to 1 month.

Speaker 8

This is I think the 10th IND that we've done at Lexicon, so we have a pretty well oiled machine to do the IND enabling studies.

Speaker 2

Thank you, Alan.

Operator

Our next question comes from Ruana Ruiz from Leerink Partners. Please go ahead with your question.

Speaker 9

Great. Afternoon, everyone. For INPEFA, I was curious what feedback are you getting from physicians and reps in the field on IMpephas clinical profile and differentiating features and particularly what's attracting more prescribers to IMpepha?

Speaker 2

Great question. Tom, you want to take that?

Speaker 4

Sure. So, I think I mentioned some of the data earlier on. I mean, if you take the 2 main studies that we have, which is SOLOIST and SCORED, obviously, SOLOIST was somewhat unique in that it was the only study of an SGLT in patients who have been hospitalized or recently hospitalized. And I think when customers see that data, in particular, the NNT of 4, and as I mentioned, the fact that we reduce hospital admissions both at days 30 by over 50%. I think that that's seen as very compelling when those two data points are taken together.

Speaker 4

I think when they then look when customers then see the score data on top, which is obviously more of the kind of patients who you'd be wanting to prevent coming into the hospital, they can clearly see that Impella has a profile that actually fits across the entire range of heart failure patients, whether they be early heart failure patients where you may be looking to prevent them entering the hospital or they've actually had a episode of hospitalization and they've recently left or about to leave, you may want to prescribe the drug then. Or if they've been recently discharged, that you ensure that they go on to the best possible treatment. So I think that those profile, those kind of key data sets taken together are seen as compelling. The mode of action, think, is also seen as compelling for those people who appreciate the data that we have. And obviously, the evidence that we're continuing to generate around the product, specifically around areas like 3.MACE and stroke, which we have data coming out of ACC is also seen as very differentiating versus the other SGLT treatment.

Speaker 4

So I think that that's the high level story. On top of that, those messages are also resonating with payers, especially payers that are dealing with both the pharmacy and the medical benefits, because obviously reducing and stopping these patients having to come back into the hospital after a period of hospitalization is something that is a priority across the board. So we're pleased with the general reaction to the profile on this on the whole. And as I mentioned earlier on, we are making significant efforts to really bolster our commercialization efforts, both in terms of in person selling, but also thinking about 3rd party and omni channel approaches as well.

Speaker 9

Interesting. Thanks. And one more from me. Given your upcoming Phase III in HCM, could you just help frame why KCCQ is an important measure across both obstructive and non obstructive HCM patients, particularly in the context of the fact that a lot of us are focused on like other things like peak VO2, with some of the CMI trials and things like that?

Speaker 2

Great question. Craig?

Speaker 5

Yes. Thank you, Lonnel. And again, I think, Roanne, it's a great segue from ending the last question is that physicians who have already started using EMPEFA in the clinic have had really good results that patients are satisfied with the therapy. And as Tom mentioned in our prepared remarks, something along the order of over 90% of patients are satisfied, healthcare providers are satisfied with the therapy. And I think that is really another foundational support for why we're so excited about what we're doing with HCM.

Speaker 5

And as a reminder, what you hear from clinicians and experts is that all of these agents are approved for symptomatic relief. The CMIs are not approved for long term clinical benefit. And increasing what you're seeing from providers and from the FDA is that some of these other physiologic markers, 6 minute walk or peak VO2, it's very hard to communicate that to patients and that being a meaningful benefit. But when you ask them, is your life better? Can you walk another flight of stairs?

Speaker 5

Do you not get winded? Do you not have a lot of the symptomatic problems that bedevil the daily lives of patients. That's what's most meaningful. And I think that's why the FDA has evolved in their own thinking and in the more recent trials with these agents that they have allowed KCCQ as the primary endpoint. And as a reminder, the inclusion criteria for our study is all symptomatic patients with a KCCQ below 85.

Speaker 5

And so again, it's not a matter of saying, are we looking for another 10 meters walking in a 6 minute walk test. I mean, we're really focusing on the activities of daily living. And I got to give the FDA a lot of credit that they've evolved in their thinking about what is most important to patients. And importantly, we have at the key secondary endpoint, the New York Heart Association, which is the counterpoint. So New York Heart is the healthcare provider assessment of patient functionality.

Speaker 5

KCCQ is the patient self assessment of functionality. And I think having it in that order with the patient reported outcome as the primary and the healthcare provider assessment as the key secondary is a good way to go. And there's a lot of excitement in the field to participate in this trial.

Operator

Our next question comes from Andrew Tsai from Jefferies. Please go ahead with your question.

Speaker 10

Hi, thanks. Congrats, Lonnel, on the retirement. Best wishes to you and everything. It's been a pleasure. Maybe the first question is about Empeza.

Speaker 10

You've directionally guided to sales to accelerate in second half twenty twenty four. So just how much do you think sales can inflect specifically in Q3 and Q4? Just curious how you would define an acceleration from the current sales trajectory. And then secondly, would you need to rebuild or refocus on payer access again if Type 1 diabetes was approved? Or can you leverage the work you've done in heart failure and apply it to Type 1 diabetes?

Speaker 10

So in that sense, the question is, just trying to gauge how much sales can accelerate even further immediately if you launched in Type 1 diabetes? Thanks.

Speaker 2

Andrew, first let me say thank you for the well wishes and I'm looking forward to my retirement, but because of those tough questions. But I think Jeff has an answer to that. So let me turn it to him.

Speaker 3

So I think when you're looking at our overall coverage, it's around 40%. But a lot of that is subject to utilization management in the terms of step edits, which in this area where the step through drugs have only been approved for heart failure relatively recently and are so early in the adoption curve, that's a pretty big obstacle. And when we're negotiating and working with payers to get on formularies with contracted coverage, we're eliminating those step edits. So when you're kind of looking at our Medicare being single digits and it has a chance to multiply many fold. So and very opportunity to very significantly increase the commercial as well when you're thinking about access without those kind of restrictions, we think that there's an opportunity to really multiply the opportunity for to multiply many fold what we're looking at in terms of the revenues that we're getting from MpepEF.

Speaker 3

So that I think is an important element. The second thing is type 1 diabetes and this is to address your second question. Type 1 diabetes is kind of a different market because unlike in heart failure where we're competing, in Type 1 diabetes we're going to be potentially the only game in town.

Speaker 7

And it's also an

Speaker 3

area where payers are really interested. I mean we're already having discussions. The minute that we announced that we were resubmitting these payer discussions they're asking us about type 1 diabetes. We think that we will be able to have more favorable access in type 1 diabetes than we have in heart failure because it's not a competitive space in terms of particularly as we think about the rebates required to be able to get access. And we're doing the groundwork now to be prepared for that launch.

Speaker 3

So we think that that is going to be an easier road by a good margin and as it relates to access in type 1 diabetes. So hopefully that answers your question.

Speaker 2

Both on both on the access side, the medical side. So that infrastructure will be leveraged to go into T1D. Most important decision we've made in the last 8, 9 months was to bring on an incredible executive like Tom, who knows how to bring all those pieces together well in advance of the launch. So we definitely will be leveraging the infrastructure along with the other things that Jeff laid out.

Speaker 10

Great. Okay. Thank you, guys.

Speaker 2

You bet, Andrew. Thank you.

Operator

And our next question comes from Joseph Springer from Needham and Company. Please go ahead with your question.

Speaker 11

Hi, thanks for taking our questions. You provided some data on the commercial opportunity for Zynquista and T1D, but I suppose how should we think about your commercial strategy targeting patient subgroups or how should we think about the stratification of patients that you would target? For example, what patients would you consider early adopters versus potential late adopters to the drug assuming approval? And is it fair to think about it in terms of say CKD stage or are there other important factors that we should think about? And then last one is on pricing.

Speaker 11

Assuming approval on T1D, how should we think about price and pricing strategy? Thank

Speaker 3

you. So I will I'm going to address the first question is how do we think about this market? So there's 1,700,000 adults who have Type 1 diabetes and about 20% to 25% of those have chronic kidney disease. And most people who have Type 1 diabetes are at risk for progression to chronic kidney disease. What I would encourage you to think about is this is not about treating chronic kidney disease.

Speaker 3

This is about providing benefit to patients, people who have Type 1 diabetes to manage their blood glucose control who have chronic kidney disease, but that's one of multiple different things they're dealing with. And the benefit in this patient population is greater because they're at greater risk of progression of chronic kidney disease. But the benefits that value that are valued by the patient are really about improving their A1C, improving time and range, improving basically reducing their rest for complications across a broad range of areas. So it's really about providing benefits on glycemic control, addressing the core unmet needs in type 1 diabetes patients in a population that's at greater risk for progression in chronic kidney disease. So that's the way I would encourage you to think about it.

Speaker 3

So one of the advantages in this market is that people with type 1 diabetes are very engaged in their own care. They have to be. They don't really have a choice. And so obviously people who are more engaged are probably more likely to be early adopters than people who are less engaged. But because people with type 1 diabetes, even the people who are less engaged have to be pretty much engaged in their care.

Speaker 3

And because they want to avoid hypoglycemia, they want to feel better, they want to reduce glucose variability. We think that there's going to be an opportunity to really have a pretty rapid uptake in this patient population. But the important part really is to frame this is not a chronic kidney disease drug. This is a Type 1 diabetes drug that is that would be indicated in the population that has chronic kidney disease. On pricing, we're still doing pricing work there.

Speaker 3

We're going to we'll do some refinement of that. But we think mostly that our net pricing is just going to be more favorable. That's the main thing that we think will be different. But we're going to do some additional work around how we look at wholesale acquisition costs and also about the level of rebates that would be required. Does that answer your questions?

Speaker 11

Yes, that's great. Thank you for taking our questions. Thank you, Joey.

Operator

And ladies and gentlemen, at this time, I'm showing no additional questions. I'll be turning the floor back over to Jeff Wade for any closing comments.

Speaker 3

Well, thank you everyone for joining us on today's call and really for your continued support of Lexicon. And as we wrap up, I just want to reemphasize how Lexicon really has never been stronger. The company has never been in a better position to focus on next steps. We have a strong management and leadership team in place committed to growth and expansion and that includes seamless execution, targeted and smart capital allocation and exploring and leveraging partnerships to add even more value to the Lexicon assets into the company. And so we really appreciate you joining us and thank you for your attention.

Operator

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

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Earnings Conference Call
Lexicon Pharmaceuticals Q1 2024
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