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

Welcome to the Morgan Stanley Life after COVID: 2021 Thematic Conference. I'm Jeff Hung, the biotech analysts. Before we start, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have Sheldon Koenig, CEO of Esperion. Welcome, Sheldon.

Jeff, thanks for having me.

Thank you. For those who may not be familiar with Esperion, can you provide a brief introduction?

Absolutely. Again, thank you. It's great to be a part of the conference today, and really happy to be here representing Esperion Therapeutics. So just as a quick aside, Esperion is an organization that spun out the Pfizer back in 2008. And the asset that is under Esperion is our main asset bempedoic acid under the brand name of NEXLIZET and NEXLETOL. Bempedoic acid is NEXLETOL and NEXLIZET is a combination of bempedoic acid with ezetimibe. And what's interesting about that is both of these assets, these are the first assets in the last 20 years from an oral small molecule that have actually been launched in the last 20 years. The last one being a product I used to manage when I was at Merck called ezetimibe. And I think what's also interesting about these assets, especially -- specifically bempedoic acid is that this is a first-in-class product. This is a novel mechanism of action. It's what's called an ATP citrate lyase, which is ACL for short. And it works upstream of the HMG-CoA reductase inhibition pathway was essentially a statin. So it's not often, and what I say to the folks here at Esperion, that you have the opportunity to sell and commercialize and bring to patients and physicians breakthrough products with novel mechanism of action. These products were approved last year. They were launched back in March, which unfortunately, was right in the midst of COVID. But we're excited and passionate with how these products can really fit an unmet need today in managing LDL cholesterol.

Great. This is your first week as CEO. But you've been at Esperion for a number of months now. So can you talk about what attracted you to Esperion before you joined? And why is now an appropriate time for someone with your background to lead the company?

Yes. Great. So I joined December 14 of 2020, I've been here for about 5 months, and this is day 4 as the -- or day 3.5 as the CEO. I come from a pretty significant background in cardiovascular disease. I'm not a physician or a scientist, but I'm a commercial operations person. And I go back all the way to 1990 when I sold a product called Mevacor, lovastatin, which was the first HMG-CoA reductase inhibitor or statin. And then became commercially involved since 2003, since ZOCOR and have essentially managed every LDL lipid-lowering product that there is. My first exposure to bempedoic acid was at Merck. We are familiar with this acid. I managed ezetimibe and Vytorin for some time at Merck. I then went to Sanofi, where I managed PRALUENT. And again, came across the development of bempedoic acid. This was always a product that interested me for the very reasons that I gave earlier as we started, just a very unique asset. And when you look at the efficacy, so when you look at the efficacy of even NEXLETOL on its own -- it's at 18% with the statin. If you take a look at NEXLETOL plus Zetia, so NEXLIZET, we see LDL efficacy in our Phase III clinical trials at 38% reduction. We have actually heard reports back from the field that this can be as high as 50%. So performing better than the label. So the efficacy always intrigued me. The mechanism intrigued me. And I think the coup de grace if you will, is the fact that we have this large outcome study, the CLEAR Outcome study, which has over 14,000 patients. This is the first time ever that an outcome study is truly focusing on statin intolerant patients, define the statin intolerant patients. We have significant parameters that differentiate this study from other outcome studies that have been done recently. And so we're -- that excited me as well. And when I received the call to join the organization as the Chief Operating Officer, to me, I was -- this allows me to get back into the lipid field. I know a lot of the key opinion leaders. And look, this is the #1 killer. You'll hear me say this many times, despite all the treatments that are out there, cardiovascular disease is the #1 killer. There's a significant unmet need. And I want to be a part with our team here at Esperion to do something about that and address that.

And during your tenure as COO, some changes were already implemented to the sales strategy. I guess, could you go over what those changes were? And how far are you into implementing those changes? When should we expect to begin, I guess, seeing the impact from those?

Yes. So seeing as how I joined the organization back in December, the first thing that I wanted to do was meet all of our folks in the field because these are the people that are customer-facing. I wanted to hear what was working and what wasn't working. That took about 4 weeks to do that. But again, our -- the best way to hear what the customers are saying is to listen to the field. And we heard a few things. We heard that communication was difficult sometimes with different groups. We heard there's a lack of awareness of what the positioning should be and how to send the message to physicians. We knew that we were lacking a strategy in Medicare, and that's significant for us because it represents half of our business. And one last aspect is we didn't really have a health economics outcomes research group to really speak to the value proposition of this product. And by the way, that really ties into the effort that our medical science liaisons can do as well. So we immediately put a plan in place to address all of those options. And let me just go through some of those. So one thing that we've just rolled out in April is really a refined strategy that is very specific on messaging and positioning so that representatives know how to speak to physicians, they know what patient to point a physician to, and they can point where to use our product. That was very clear. We implemented a Medicare Part D strategy, and we used the same strategy that I just referred to, and approached our partner at Humana, and we brought both the account team and a clinical team to really paint that picture of where NEXLETOL and NEXLIZET fit. And we're happy to say, as we mentioned in our first quarter earnings, that we were able to achieve formulary status effective May 1, 2021 this year, and we're already seeing pull-through of that contract. And we also utilized our Health Economics Outcomes Research Group to help in that discussion. That group has also been very busy. We just initiated a real-world evidence study with UT Southwest, and that's important because that will generate more data to the community in anticipation of our CLEAR outcomes trial. So that's just -- and we broke down silos of communication. We brought in one leader to manage marketing and sales. We brought in a new leader of market access to really help with our strategy, and we're already looking at other ways to really expand, if you will, our voice by leveraging our medical science liaisons. For the first time ever, we'll be doing continuing medical education. We have 3 programs planned. So we've -- in the past 5 months, we've got a lot started. We're just starting. I'm a big fan in baseball. And we're like in the first inning. We're early in the game here as we launch these products. And I say, launch these products because last year with COVID, there's no doubt about it. The products were launched in the headwinds of COVID, the company did not get the launch that they deserved. And now as we put COVID hopefully in our rearview mirror, more of the population is getting vaccinated, we have a real chance here to demonstrate what we have and to gain awareness.

And so since mid-March, it looks like the scripts have flattened out. And the new scripts have been flattish since late February. Like I realize that it's not the only drug to face headwinds in recent months. But are you hearing anything anecdotally that provides more insights on the recent trend? And I know that's only been a couple of weeks since your earnings call, but trends still seems to remain kind of flat.

Yes. So no question, we did see a flattening in April. And our hypothesis behind that was more around the Easter holiday. There was many more patients or patients -- well, potential patients and people taking vacation. I can tell you, I was on the road for 3 weeks on weekends, and the roads were jammed, n of 1. But to me, with some of the reverberation of as more people are getting vaccinated, more people are getting out there and getting back to their lives and still really weren't back to thinking about their cardiovascular health. There's actually an interesting article that was written by Rob Califf. I'm going to get the title wrong, but it was something to the effect of the Tsunami of Chronic Care Conditions as it relates to -- similar to the theme of this conference post-COVID, at how patients have really been ignoring cardiovascular health, maybe diabetes, et cetera. But he specifically mentioned cardiovascular health. And so my point being is we have seen physicians and more patients go back to the office and then address their cardiovascular health. We had spoken to Peter Toth, who is a significant key opinion leader who also agreed with us that individuals are -- were ignoring their cardiovascular health. They're really worried about COVID. I think what's interesting for us is in these past few weeks of May, we've actually seen some good growth that we're happy with. We've seen growth that is actually points to maybe some of our best weeks ever in growth. And we want to continue that momentum, again, as more patients are vaccinated. The last point I would say is, even going back to a conference that was held in January, we stated that we felt -- and we didn't have a crystal ball at that time, but we felt as vaccines became more available that we'd see from the second half of the year on more patients returning and addressing their cardiovascular health, and we are seeing that. So we're feeling good about that.

Okay. Great. Now utilization of the co-pay card, that impacted the net price in Q1. And you indicated that the co-pay card would be adjusted going forward. Can you remind us where you are on that? And what kind of impact should we expect from the co-pay card in Q2 and beyond?

Right. Yes. So we had some of the perfect storm in Q1 where we had a 50% -- essentially a 50% growth from 4Q to first Q. We did have our co-pay card out there. Obviously, with that demand, we drove a lot of prescriptions. So we're actually going through our contracts as well from a rebate perspective. And so it was a double-edged sword. We have this great performance, but we have this erosion of our GTN. We've already been able to diagnose some elements where we can actually, for the lack of better words, down titrate the co-pay card. The co-pay card was really a generous contribution. We've really dialed that back. That will actually be effective on May 21. And the co-pay card will be more of a 3-month gratuity, for lack of better words versus something in perpetuity. And that's where the normal standards of co-pay cards within the industry. So we're more than confident that we can address the things that led to this erosion. There's also some significant background programs that were behind the scenes that assist the co-pay card that we felt that we could eliminate, which, if you don't mind, brings up the secondary question of, do you think doing that -- I don't know if you're going to ask that or not, but down-regulating that will have any effect on patients moving forward? And the answer there is no. Because we have over 95% commercial coverage. We can't be at Esperion, the #1 provider of insurance and the provider of these significant breakthrough therapy. So we really have spent time educating our territory managers, so they know how to do pull-through and really put our contracts to work, and that's what we'll be focusing on. So we are, no doubt, working very quickly and to, again, to mitigate this issue.

And I guess coming back to the changes post-COVID, you've noted that there would be a natural lag of a few months from the initial office visit to a script being written. And as you just mentioned, you have high coverage. So then I guess, can you remind us of the process for new patients and how we should be thinking about that?

Yes. So the one thing and having been in the cardiovascular field for some time, there's a reason why cardiovascular disease is the #1 killer. It's an asymptomatic disease. A long time ago, it used to -- we used to worry about patients taking drug holidays where they would just -- because they feel fine, why should I take this drug, and they'd wait 1 month or 2 months, et cetera. And there's a lot of science around plaque stability and high LDL cholesterol, and that's what leads to heart attack and stroke. And that's why although the disease is asymptomatic -- or because it's asymptomatic, patients sometimes don't really think about the urgency that's necessary and sometimes physicians too. So there's the education aspect. Also because it's asymptomatic, when you go to your doctor, unlike if it's, say, migraine or some type of pain, you get a prescription today, you take it tonight and you feel better tomorrow. With this, you don't know how you feel. And that's, I think, one of the biggest struggles with any asymptomatic disease. But obviously, definitely, cardiovascular disease because there's just so much of it, as I mentioned, over 18 million patients. So as a new patient when you come in, you're evaluated. There's something first that's called TLC, tender loving care, diet, exercise, et cetera, come back in a couple months, we'll see how that works. And typically, that doesn't work. And then it's like, well, you probably need to be put on a statin. So then you're put on a statin. And these days, it could be anywhere between atorvastatin, which was Lipitor; rosuvastatin, which is Crestor, et cetera; sometimes [ lovastatin, ] which is ZOCOR. And then you go on that for 4 to 6 weeks. So now we're about almost 3 months out from that initial visit, get a lipid test or lipid panel, come back to the doctor, doctor evaluates your lipid panel and says, well, okay, you're either okay or maybe you could benefit from a drug such as ezetimibe, which was, again, Zetia. Let's put you on that, let's check you out again in 4 weeks. Now you're 4 months, close to 5. Come back and again, we know there's millions of patients who are taking statins and ezetimibe who are not at LDL goal. Come back and the doctor says, wow, okay, you're still -- and especially with your family history, you have high risk, very, very high risk. You're in LDL, I'm making this up with 125 milligrams per deciliter. I really would like to see you under 100. I really would like to see you at 70. In Europe, it would be 55. So I think it's good that we have NEXLETOL or NEXLIZET, and that's the perfect fit for us. And by the way, that's the last oral option as well before an injectable PCSK9, which we know many patients having managed one, they'd rather not have an injectable product. But you can see, as I kind of walk through that, we have a very detailed, what we call, buying process or patient journey, but you're looking at sometimes 4 to 6 months for a new patient to get to an area where they can be controlled. And with new products like NEXLETOL and NEXLIZET, we also need to change behaviors because sometimes there's this fire-and-forget mentality, that if I use rosuvastatin and maybe I do add ezetimibe or maybe I don't, I'm doing enough. So just one more aspect there. We really explored emotional benefits to say, how does the physician really want to feel when they use a drug like NEXLIZET and NEXLETOL. So we're incorporating that into our selling message as well, to break that, change that behavior because that's what marketing is. Current behavior to desired behavior, use NEXLIZET and NEXLETOL in this space.

Great. And you've talked about your expectations for demand growth shifting in the second half. I guess, what drives your confidence in this? And what does your team need to do to help facilitate that shift in demand growth?

Yes. I think the big thing is to continue doing what we're doing today and then having the opportunity. Well, first, let me say, my confidence is the team that we have in Esperion. It's the entire company. We actually just had, as a side note, a motivational speaker last night that talked about teamwork and culture. And it was a great way actually to kind of end the evening. And I think we need to work as 1 team to carry out our strategy. We've already broken down the silos. We've got 2 products, as I mentioned, our breakthrough products. We have this large outcome study that we don't talk enough about. But if you ask me to rank what would be the #1 opportunity, it's the fact that we can have our territory managers go to a physician's office and the office is open. And have the ability to have that discussion, to have live programs, to really get out there and create the awareness that we need. We didn't have that opportunity last year. Our reps tried as hard as they could. I think, and we are one of the only companies that had actually territory managers out in the field and folks are doing their best, driving to offices and finding that most of them were closed. So then they'd sit in the parking lot and try to call the office and talk to them. So now folks are invigorated that they have this opportunity. And so it's going to be about teamwork, communication, and really sticking to our strategy and our one strategy and driving the business.

Great. Maybe moving to a few questions on partnerships and financials like. Recently, Esperion announced expanding the partnership with Daiichi Sankyo, 2 additional territories. Can you walk us through that partnership and the expanded agreement?

Yes. Definitely. Thanks, Jeff. So Daiichi Sankyo is a great partner for us. I actually just got off of one of our joint commercial teams with them. We meet with them every week. So the program is -- essentially allows us to expand in the ASCA region. The ASCA region consists of markets such as Korea, Taiwan, Brazil, Vietnam, et cetera. It also allows for option to move into a significant markets in the Middle East as well. The terms of the deal was a $30 million payment and also $175 million in sales milestones. We're excited to continue this partnership with them. We have -- when we work together, we work, as I was just speaking to them as -- I'll give you an example. We've been having discussions around what we do from a life cycle management perspective. We seem there's like 1 company, 1 team doing this. So we're really happy in the deal that we signed with them and looking forward to continue working with them in the future.

Great. And that same day you announced a $50 million funding from Oberland Capital. Can you remind us of the terms and how the repayment works?

Yes. Yes. So again, Oberland, who I also view as a partner of ours, that was the final tranche of payment that we pulled down, the $50 million. There is no change in the original contract. The terms of it are essentially about 2.25x the Oberland Capital that they have given to us. And it was very fortunate for us that we were able to be able to announce that on the same day, and we continue to work with Oberland as a partner and move forward as we make these products a success together.

And so now with almost $300 million at the end of Q1, how far does that get you?

Yes. So we feel we're well positioned. I'll talk about our balance sheet. We have $300 million on a pro forma basis. We have $1.2 billion in the future as it relates to milestones. I think the best way to summarize the answer to this question though, Jeff, is the fact that, as I mentioned, we're on a mission here. We're on a mission for these products. We're on a mission to finish our CVOT study. We're going to do everything and anything possible as it relates to ensuring resourcing ourselves to achieve all of those goals.

Okay. Great. So I guess coming back to where we started at the beginning of the session, now that you're the CEO, what adjustments do you think need to be made? Or are there any further changes that are needed to the sales strategy?

Yes. So again, day 3.5, as we mentioned earlier, we've made a lot of changes that we're already seeing success from these changes. The sales strategy, as I mentioned, was just rolled out. The Medicare strategy was a significant win. We're in the process now. By the way, I failed to mention, we have 60% Medicare coverage. That's a big jump from 37% to 60%. And that's because, again, Humana being the largest provider of Medicare. We're negotiating with some of the other ones as we speak right now. So we need to continue that. And I think moving forward, it's more about just being as transparent as possible of how we're going to essentially execute now. This is about execution. And driving demand and growing new Rx' and TRx'. That's what we're focusing on as we plan for the CVOT readout.

Okay. And then over the weekend, you guys actually had a poster presented at ACC on analysis to assess the potential of bempedoic acid to reduce CV event risk. Can you just walk us through the key takeaways from that analysis?

Yes. This was exciting. Of course, this is a simulation model. And I always have to say this. I was trained very well. We obviously don't know anything about the CLEAR Outcomes study. We'll be waiting, as everyone else will be. But I do think CLEAR Outcomes study will be a landmark study that will be a late-breaker at some meeting when we see the readout. So in ACC on May 15, we did present a simulation model. This is what's called using SMART, which is Second Manifestations of ARTerial disease. It was also combined with a pooling of our Phase III data of the CTT analysis, which is the Cholesterol Clinical Trialist data that's been out there. And essentially, what the study showed is it showed absolute reductions. This was not something that looked at residual risk reductions where you see outcome studies themselves report, but absolute. And it showed absolute risk reductions and a positive effect on reducing 10-year morbidity and mortality. On statin intolerant patients, it showed a 6% absolute risk reduction. And on all other patients, it showed a 3.3% absolute risk reduction. Again, these are significant. And again, I'll remind you, this is a simulation study. But it really points to, again, the value that a drug like bempedoic acid has because its unique mechanism of action. There's other areas that are being explored, not mentioned in this paper, but in our outcome study, even as it relates to reduction of glucose, reduction of inflammation, et cetera. So what else is happening here besides LDL lowering. But getting back to the ACC abstract, it's another point of information that adds to the wealth of information that has already been established with our Phase III clinical trials. And also looking forward to our CVOT trial once that reads out.

Great. So maybe one last question. In the past, the team has indicated that the main areas of focus are on the launch and the outcomes trial. What are your thoughts on the pipeline, both the oral PCSK9 and the potential to expand the pipeline further?

Yes. So I think it was -- right when I was joining, we brought in the oral PCSK9. And at the time, I didn't realize it, but what I found out later, once I knew about this, it was an asset that came from a company I had worked out before, Portola. So I had some experience with this oral PCSK9. This is something that we probably do need to spend more time and put more attention to exactly what we're doing with it. There's no question there is a strategic fit. We know that with injectable PCSK9s, there's a reluctance to use them, et cetera. And folks would always rather take a small molecule than doing an injection. This product is years off. But from a life cycle management perspective, we'd be remiss, if we want to address lipids and we want to address LDL-cholesterol that we weren't looking at something like this. So right now, we're in the process of really thinking about what would be the development plan for this product, and we'll continue to update all stakeholders on this as we move forward over the next few quarters.

Great. Well, looks like we'll have to leave it there. Thank you so much for your time, Sheldon.

Thank you, Jeff. We really appreciate it on behalf of Esperion Therapeutics. This was great. And thank you so much. Look forward to speaking to you again.

Thanks again. Have a great day.

You too. Take care. Bye.

Take care. Bye.