Esperion Therapeutics, Inc. (ESPR) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Jason Russell with the Morgan Stanley healthcare investment banking team. Thanks for joining us for the Esperion fireside chat. I've got the pleasure to have Tim Mayleben, CEO of Esperion, and we're going to jump into things momentarily. Before we jump in, I would like to read a brief disclaimer. Please note that this webcast is for Morgan Stanley client and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclaimers, please see the Morgan Stanley Research Disclosures website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. With that quite a mouthful, I'd like to jump right in. I think Tim is actually going to kick off. For those of you who may not be quite as familiar with Esperion, I'm going to actually hand it to Tim and let him provide a little bit of a background on the Esperion story. And after Tim's gone through a few slides, we'll jump into a little bit of Q&A. Tim?

Hey, thank you, Jason, and I want to thank you and the team at Morgan Stanley for the opportunity to talk with everyone today. I'm going to start with prepared comments, as Jason indicated, and then we can move to Q&A. So as Jason indicated, we're Esperion. We're the lipid management company. We're focused on oral, once-daily, non-statin medicines for lowering bad cholesterol. That's our mission. Our patient population is 18 million people in the U.S. that continue to struggle with high levels of bad cholesterol, half of whom either can't or won't take statins or considered statin-intolerant, others that are on what's called the maximally tolerated dose of the statin and still need non-statin means of lowering LDL-cholesterol. But both these patient populations need inexpensive, accessible, convenient, once-daily, oral medicines, non-statin oral medicines to lower their cholesterol. And that's been missing until NEXLETOL, until NEXLIZET were approved earlier this year. They were approved in Q1 here in the U.S., in Q2 in the EU. And we commercially launched them in the U.S., unfortunately, at the height of the pandemic in April. And they will be launched in the EU next quarter. And actually, I'm going to focus most of my comments today on our commercial launch progress. So if you would, if you're following along online, if you would move to Slide 3, Esperion Today. We know that all eyes are on us. I think as most of you know, IQVIA and Symphony prescription data come out every week, every week on a Friday morning. The good news is that there's high interest in this data and in our company and medicines. And as we've always done even during clinical development and regulatory process and of course, the Symphony and IQVIA data enhance this, is just transparency about our launch progress. You'll be able to track it each week. We're certainly tracking it each week. We're highly encouraged by the fact that our medicines are meeting and actually exceeding expectations of health care providers, payers and patients. And I'll just share a brief anecdote for myself. So I turned 60 this summer. I've seen a cardiologist for the last 20 years because I've got a family history of cardiovascular disease. My own father died in his 40s from a heart attack. And my cholesterol had gotten to about 100. My physician, my cardiologist wanted it to be obviously below 70 since that's the -- since -- the guideline for folks at high risk for cardiovascular disease. Tried statin, couldn't take it, got on NEXLETOL at the end of July, and just last week had my first lipid test or blood test after getting on the medicine. And again, this is just my personal experience, but I saw 39% LDL-cholesterol lowering with NEXLETOL. It's like I'm not even taking the medicine. I don't see any side effects or feel any side effects, but 39% LDL-cholesterol lowering, so that my lipid panel showed an LDL-cholesterol level of mid-50s, so 55 or 57, something like that. So when I say that our medicines are meeting or exceeding expectations of physicians, that's the kind of anecdotes that we're hearing from physicians through our sales team, who are in touch with physicians on a regular basis. So even obviously with the COVID-19 headwinds, this pandemic, we're literally muscling through this pandemic. Again, I know a lot of focus on the week-to-week prescription data, hasn't been tremendous inflections yet, but I'm confident that we are going to achieve the successful launch of our medicines. And I'll just share a quote from Henry Ford. I think he was quoted as saying, "When everything seems to be going against you, remember, airplanes take off against the wind, not with it." And we are certainly facing strong, strong winds. I'm going to move to the next slide then. Just our singular focus on LDL-cholesterol lowering. So we are -- just as we were committed to the development and approval of our medicines, we're committed to the commercial success of our medicines, NEXLETOL and NEXLIZET. So even as COVID-19 becomes the #3 cause of death in the U.S., maybe not surprisingly but if you're not tracking it, you wouldn't know that it remains far behind cardiovascular disease, which remains the #1 cause of death in the U.S. And of course, we're the only company focused exclusively on LDL-cholesterol lowering. We're applying our full attention to introducing these medicines now in a way that other companies simply could not whether in this environment or any other. And I think this focus has allowed us, for example, to price our medicines at a very attractive, historically relevant price just the way statins and Zetia and Vytorin were priced when they were on the market and branded. We price them for patient access, which has led to the broadest and highest quality managed care coverage in almost a decade. And I think you've heard us reference 80% commercial coverage, over 50% Medicare Part D. And all of this coverage is going to be coming online by October 1. So within the next 30 days or so, you'll see yet, I think, even greater inflection in the prescription volumes than we've seen so far. If you move to the next slide then, we've got a -- I would say a graphic here on Slide 5 of a bunch of laws. You might say, "Gee, what's the relevance here?" And one of the best things that we could come up with to perhaps demonstrate that the weekly script data has been -- and I want to forecast the future and tell you it's going to continue to be choppy, choppy, okay? This is typical during the early stages of a launch but especially so during the pandemic. Some weeks that you've seen are going to be up significantly. The last couple of weeks prior to this most recent holiday week, you saw 15%, 25% increase. And then this last week was a little bit flat because of the holiday. And that's the way it's going to be, some weeks, up significantly; a handful of weeks, flat to slightly down. But overall, the trend is definitely up even -- like I said, even with this choppiness. And again, continue the metaphor, we're chopping each week. And I think what you're going to see in the weeks and months and especially the quarters ahead that all of the chopping that we're doing on the commercial side, our commercial team is doing is going to add up. And that's just going to be the reality. And maybe just giving you a few examples. Aside from the managed care coverage, as I mentioned, continues to come online. I mentioned October 1, but September 1 was also a big day in terms of a significant plan coming online. So we should see even more increases in the approval rates for our medicines both on the commercial and Medicare Part D side. Second, engagement with HCPs by our territory managers remains at this 75% of pre-COVID levels. And of course, that's going to continue to drive the cumulative effect of our territory managers engaging with HCPs. And I'm really happy to say that next month, we are going to launch Phase 1 of what we call our direct-to-patient promotion efforts. Now this is not DTC TV, not DTC TV but everything else as it relates to direct-to-patient promotion. So think about streaming services, social media, Google searches and things of that nature. HCPs are actually very excited for us to reach out to patients directly to help reduce this medical distancing phenomenon that has come along with the social distancing that we've been advised to follow. And I think together, managed care coverage, the continued HCP engagement and, of course, now this direct-to-patient is going to drive prescription volume growth in the months and quarters ahead even -- as I said, even as we see continued choppiness in the week-over-week data. And again, just to remind everybody, we had about 2,000 scripts in total in June, 4,000 in July by our numbers, more than 5,500 in August, which is not one of the strongest months for chronic drug prescription growth, but nevertheless, we saw some nice growth. And in that light, I just want to highlight Slide 6 as well, if you move to Slide 6, so one early success. And again, we hold ourselves to a higher standard, believe me, than anybody else. But what our team has achieved in the midst of this pandemic is that even with the COVID-19 headwinds, we have seen our medicines, prescription volumes easily pass the combined volumes of the PCSK9s back in 2015. What makes us even more dramatic other than the COVID-19 headwinds is that more than 5x the promotional resources were put behind those medicines as we're putting behind ours. And again, tip of the hat to the PCSK9s on the way by. You won't hear us talk about them going forward because it won't be relevant in the future, and you can quote me on that. As we get more access to HCP offices, as more HCPs become aware and gain the kind of highly positive experience that I just related to you with our medicines, as we're covered by more and more payers that is implementation of these formulary wins at preferred brand tier on more and more formularies, and then as we motivate patients to reach out to their HCPs through our direct-to-patient promotion efforts, our prescription volumes for our medicines are going to continue to grow. So moving on to Slide 7. I just want to give you a little bit of a history lesson here about Esperion if you're new to the story. The underlying fundamentals of our business are stronger than ever. We have a track record for success. That is for accomplishing what many, whether it's in the investment community or elsewhere, didn't think we could or when we said we could. And this includes most recently the approval of NEXLETOL and NEXLIZET in both the U.S. and Europe earlier this year with great labels; financial strength from our partnerships with Daiichi Sankyo Europe, Oberland, Otsuka; and driving revenue of $150 million last year, well over $200 million so far this year, near-record cash reserves of $300 million as of June 30. We have incredibly robust IP that provides exclusivity at least through mid-2031 and then very robust manufacturing and supply chain capabilities. And we are just now beginning to show our commercial strength as we muscle our way through this pandemic. So in closing on Slide 8, in closing my prepared comments, I just want to give recognition to one other piece of news. This is a development piece of news that we shared last month. Critical to our future, the future of our medicines, is the 14,000-patient CLEAR Outcomes CVOT trial. This is a landmark Outcomes study in patients considered statin-intolerant. Everybody who's enrolled in this study is statin-intolerant. This is the first time this has done -- been done in history. And our team has progressed the study despite the pandemic. And we've been able to preserve the CVOT, the integrity of the CVOT in its entirety and not to mention, as we announced last month, that the study has accumulated 50% of the primary MACE end points this quarter. So with that, we'll go to questions. And Jason, thanks for giving me that time.

Yes. Absolutely, Tim. And congratulations on all the progress, and we're looking forward to seeing great things to come from you and the team. Also, congratulations to you on the personal anecdote. I think you, as the leader of the company, can be the #1 spokesperson for the benefit of your medicines. And so maybe I'll dive in there a little bit. We're all familiar with the size and breadth of the market opportunity for NEXLIZET and NEXLETOL. You referenced that you personally were statin-intolerant, and you touched on the Outcomes trial that you're running today. But could you just help frame for us what is the magnitude of the opportunity that you're targeting? Is it only the statin-intolerant population? Is it broader than that? And you made reference to the PCSK9s and that they won't be relevant for you. Maybe just help peel that on your back for us a little bit to explain why you view that.

Yes. No. Thanks. Thanks, Jason. So when we think about the opportunity, we think about patients obviously, and the patients that we're focused on are those that are both considered statin-intolerant, which we estimate -- we and others estimate total about 18 million patients. And they're sort of evenly divided between -- roughly evenly divided between those patients who are considered statin-intolerant. And we -- again, as we studied this patient population, what we have found out is it's not just patients who have tried a statin and had bad muscle effects or seeing significant increases in their HbA1c levels or those that have described brain fog, just not clear thinking as a result of being on a statin. But it's those that have had family members or a wife or a cousin or a friend who had a bad experience with a statin. And so they're afraid of taking a statin now because of that experience or something they've heard or even we've heard of patients who have read about things on the Internet that is -- again, a lot of stuff flows around the Internet, but it drives an aversion to taking a statin. So all of those patients are considered statin-intolerant. You can't make a patient take a statin. And they're very frustrating to physicians obviously because there haven't been good, non-statin, LDL-cholesterol lowering drugs available that would get statin-like LDL-cholesterol lowering. Zetia has been available for 20 years, almost 20 years, but it only provides 15% to 20% LDL-cholesterol lowering. And depending on the statin, if the patient is on less -- a low-dose statin or even a higher-dose statin, they don't get great incremental LDL-cholesterol lowering from Zetia. So it has not been the answer. And I think the thing that we did early on was recognize that if we put these 2 non-statin -- oral, non-statin medicines together that we could get statin-like LDL-cholesterol lowering efficacy. And I would even go further to say that it's PCSK9-like non-statin LDL-cholesterol lowering efficacy. And so as a result of that, when we are talking to patients at this early -- or physicians at this early stage of our launch, what we're hearing is that in their practices, if they're going to try -- when they're trying NEXLETOL or NEXLIZET, they are going to go to their toughest patients, their patients who won't take a statin. And so early on, it seems like we're hearing more anecdotes from physicians who said, "I put it on my toughest patient, patient who wouldn't take anything, and they've had a great experience with it." And so I think that won't always be the case. That won't be the majority of patients long term. But I think at this early stage of the launch, we're hearing more about the patients who are statin-intolerant being the ones that physicians are going to first. And then I think over time, what we will see is that other 9 million patients who are taking a statin, obviously taking a maximum tolerated dose of a statin but still needing additional LDL-cholesterol lowering -- and I'll just remind everybody listening that you can't take 2 statins. You have to have a non-statin addition to a statin drug if you're going to get additional LDL-cholesterol lowering. And again, that's the beauty of being able to add on either NEXLETOL or NEXLIZET to your maximally tolerated statin and getting that incremental LDL-cholesterol lowering and avoiding those side effects that I mentioned earlier, whether it's the brain fog or whether it's the muscle weakness or muscle pain, the myalgias or the increases in HbA1c.

Great. Thanks, Tim. Very insightful. And as you look out towards your ex U.S. relationships, maybe now is a good time to just comment about how the relationship with Daiichi in Europe is going and your other ambitions with regards to other geographies around the globe, if you could touch on some perspectives there.

Yes. Sure. So Daiichi Sankyo, we have a great relationship with them. I would just highlight that, that was 2 years in the making, 2.5 years maybe. We had built that relationship with them before we signed a partnership with them. We have, over the last 1.5 years of working with them, only deepened that relationship. Again, I'll highlight that -- if you remember, we projected that we get -- we would get our medicines approved in Europe by the end of the second quarter. Instead, we got them approved in Europe at the end of March. And so Daiichi Sankyo was -- Daiichi Sankyo Europe was obviously very pleased with how quickly we got that done. Even more importantly, I think the labels that we negotiated with EMA exceeded their expectations as well, which -- again, we're a good partner on our side. They have been a great partner on their side. And I think one indication of that obviously is the amended agreement that we entered into in June, which provided us acceleration -- accelerated access to the second milestone payment because we had over-delivered not only on the labels but also on the timing for achieving the approvals. Now of course, Europe has been as affected in many places as the U.S. by the COVID-19 pandemic. So Daiichi Sankyo Europe is now planning to launch in the fourth quarter. So this next quarter, they'll be launching the drugs, both what they call them NILEMDO and NUSTENDI in Europe. And again, what we've talked about is they're launching in waves that is in -- there are 26 or 28 countries in the EU. So they will launch in certain countries at different times. There's a multi-pronged market access process at the national -- sort of state and local level. So all of those have to be bridged in order to get the medicines on formulary and reimbursed. As I think we've taken to saying, it is a single-payer system in Europe for sure, but it's 26 or 28 single payers in Europe that have to be negotiated with. And of course, Daiichi Sankyo has 1,000-person cardiovascular commercial organization focused on the successful launch of NUSTENDI and NILEMDO -- NILEMDO and NUSTENDI, similar to what they did 5 years ago when they launched LIXIANA, the fourth-to-market Factor Xa inhibitor in Europe, which turned out as fourth-to-market becoming second biggest seller in Europe. And they're on track to achieve $1 billion in revenue with that drug over the next couple of years. So a lot of success -- a lot of experience and prior success by Daiichi, which we expect them and they expect to replicate with our medicines there. We also, of course, have a partner in Japan, Otsuka, that we signed in April of this year. And they are meeting with PMDA this quarter, so later this month, and then expect to start development -- Japan-specific development in early 2021. And I think we said that we would expect them to be on the market by 2024 or so. And then finally, what we call the true rest of world, so non-EU, non-U.S., non-Japan, we are on track to be able to get something done there by the end of this year. Of course, that is anchored by China. China is the biggest geography outside of the 3 areas that I mentioned. But again, we've got a great track record of doing precedent-setting business development deals, and we expect nothing different here for the rest of the world as well.