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

Good morning. Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analysts. 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 Esperion with CEO, Sheldon Koenig. Welcome, Sheldon.

Hey, Jeff. Thank you. Great to be here.

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

Yes, absolutely. First of all, on behalf of Esperion and our team, want to thank Morgan Stanley for the opportunity here to talk to our story. Esperion is a company that is a midsized biotech company. We specialize in cardiovascular medicine. We have 2 products that we're currently commercializing. We're going to have an interesting R&D Day on November 9. We have a very interesting pipeline as well. So -- and I think one of the big highlights for us is we have a very large outcome study that's going to report out probably in the next 4 months or so. So we're -- first quarter in 2023. So a really exciting time for all of us.

Maybe taking a step back over the last year, since you joined the company, Esperion adjusted the sales strategy. What kind of impact have you seen from those adjustments? And maybe if you can talk a little bit about how things have been over the last year and...

Yes. No, that's great. So I've been with the company -- it will actually be 2 years in December. I took over as CEO back in May of 2021, and we took a few months to really think about what does this organization need to look like. And so what we did is in October of 2021, we actually rightsized the organization. We reduced our burn rate by almost $30 million per quarter, saving us $120 million. We rightsized the organization. Unfortunately, we had to remove about 40% of the folks within our organization to really find the right balance of personal promotion, digital promotion but also how do we actually dedicate our resources to the CLEAR Outcomes study and preserve our cash in order to get to the results and then a bit beyond. We also did a significant capital raise back in December of last year, and that gave us that runway. And so since then, we've noticed that we've been a very good job -- very -- doing a very good job of managing our cash. We've been growing continuously quarter-over-quarter, which is something we said that we would do. And what we've always said and been consistent on is that the CLEAR Outcomes study will be really the true inflection point for the company and for sales. And that's, I think, what makes us feel good, is that we have enough capital now to get there and beyond. And again, really excited about what that -- what those study results are going to say for the organization. And I think the last thing I would say is just really creating a credible culture. I've said this in the past, where I think folks were waiting for what mistake is Esperion going to make next. And I can say that we are running like a machine. We've got a great culture, and again, feel good about where we are right now.

Great. Your launch has coincided with the pandemic. And I guess, kind of in relation to the last question, what kind of changes have you seen in patient behavior over the course of '22? And are there signs of things that are returning to more pre-COVID behavior?

Yes. Well, I think one example is just this, what we're doing here today. I don't see a lot of people nor anyone right now in the audience wearing masks. Even going back to, I guess, June in the conference, we were at there with still masks. We just came from ESC, European Society of Cardiologists, which is now one of the world's largest meetings, and nobody was wearing mask. And I guess that's somewhat more of a predictor, I think, of getting back to some normalcy. So we've heard physicians say that patients are coming back. We're seeing that. We have a partnership with Labcorp right now that's helping us from a reimbursement perspective. And they've actually provided us with some data that shows that individuals are coming back and getting more lipid panels done, et cetera. I myself just had mine done, and I asked them end of one. This was in Virginia. I said, are you seeing more people coming back for lipid panels? And they said, this is all we see. So I think we're getting back to this normal state. I think the landscape, the going-to-market landscape and how pharmaceutical companies go to market and sell and market, that's always going to be changed. But patients returning is starting. The last thing I'll say to that is there's been several articles that have been written that because patients have ignored their essentially chronic care diseases, there's going to be this tsunami effect of patients now coming and really dealing with. Unfortunately, that they ignored this, I hate to say bad times, but it's more important now to address these patients than it ever has been before because the focus has been on COVID.

And so what are your expectations to the outcomes data next year? Like are there seasonal trends or other factors that we should keep in mind for the rest of this year, for instance?

Yes. No. There's really no seasonal trends in LDL medicine -- LDL lowering, I should say. No seasonal trends I'm aware of as far as patients, God forbid having strokes, heart attacks. You see seasonal trends for drugs such for heart failure, especially during the holidays when people are eating turkey or large sodium-containing food. But right now, as far as the trends for us, it's steady as it goes. We know right now there's 18 million patients in the United States who are not at the appropriate LDL threshold that could benefit from therapy. And we also know that cardiovascular disease is still the #1 killer in the United States. And we believe we have 2 effective medications to address that.

And so then at this point, where do you see the further opportunity coming from? Is it physician awareness, patient awareness, getting more patients to see their cardiologist or something else?

I think it's a mix of both. I think for us, from a prescribing perspective, it's definitely physician awareness. We believe when the CLEAR Outcomes study reports out, that's going to be a large, for better word, bolus of information. Steve Nissen, who I think you're familiar with from the Cleveland Clinic, he's our primary investigator. He's done many studies. He himself is very good at advocating what it means to have a clinical study and outcomes study. Once we report our data out, which will happen sometime again late first quarter, and you can kind of think about the meeting that a lot of cardiologists go to, that's going to be a real opportunity for us to get the word out. And we're planning a very large splash in order to make -- to get the word out. Of course, right now, we're blinded. We don't know what the data shows. We're anxiously waiting for the top line, which we think will come out very early in the first quarter.

And so the outcomes study continues to be a big focus. Can you just walk us through the study design and why you think it's differentiated?

Absolutely. So the study design is 14,000 patients, and these are all statin-intolerant patients. So these are patients that actually signed an affidavit that they would not be on the statin. So there's never been a study like this, nor has the FDA ever approved a study like this to occur. What's also interesting is our entry criteria for patients. Patients entered with an LDL level of 139 milligram per deciliter. That's very different if you look at PCSK9, which is, on average, 92; and very different than IMPROVE-IT, which was a 62 milligram per deciliter. We're testing a very different hypothesis. What's also interesting for us is our medium duration of our follow-up is about 4 years, whereas if you look across the 2 PCSK9 studies, it's 2.4 years. This study is powered to show a 15% residual risk reduction. And it's important to note it's powered on LDL lowering alone. Why do I say that? There's some significant attributes with bempedoic acid which may play into furthering the benefit of this drug. We'll have to see. But one is an hsCRP reduction. So this is a measurement of inflammation. And we also know that we reduce glucose. Now if you look across drugs like PCSK9, acetamide, even statins, they don't reduce glucose. If anything, statins increase it. Statins do have a bit of an effect on hsCRP. We also know that in Phase III studies, we reduced blood pressure, and we also had some weight loss. So I don't like to use the word pleiotropic, but I can't think of another word to use, and it will be interesting to see what these effects have as well as they play into the results of the study. But it's highly differentiated. And there hasn't been a study like this done in over 20 years. So I think that the community is really going to welcome what the study is going to show and how we'll advance and hopefully change practice.

And so can you frame what we should expect to see with the top line data? Will it be more than, say, p-value?

I will say it won't be the p-value. It will be simply something as simple as the study either met or did not meet its primary end point data to be presented at a large conference later in the quarter. But it will be -- really, the minimum of just saying that we met or did not meet the clinical end point, and the reason for that, by the way, is this study is so important not only to the organization of Esperion but also the practicing physician community. And it needs to be presented at a large meeting with a lot of cardiologists, lipidologists, et cetera. So we don't want to break the embargo. And many of us here, Dr. JoAnne Foody, who's our Chief Medical Officer, is here. She's sitting in front of me, for those who can't see, we both have launched many different outcomes studies, so we know the importance of what it means to make sure that you don't break the embargo.

And so then can you just clarify that a little bit? So you mentioned that the initial top line, no p-value, just whether it met or did not meet.

Correct.

And then you will present it at a medical meeting.

That's right.

So then, I guess, in the interim, I guess, can you clarify like how people are supposed to interpret the clinical meaningfulness of that?

Right. Well, I think the fact that if we state something as though we met our clinical end point, then -- which is a MACE-4 end point, I think individuals can feel pretty confident that, okay, this study has showed something. I also think that from a clinical perspective, maybe not from an investor perspective, but from a clinical perspective, physicians both at the academic level and also the prescribing level, they understand why that is and that you really need that full set of data to really make a determination of what does the study mean. And not only do you need that full set of data that's presented, but it's also nice to have a simultaneous publication which is also something that we are really hoping to do. So at the same time we present, also publish this information. That's very important. And the reason for that is because there's much more analysis in that publication and that's something that was also lacking from PCSK9 perspective as well when they -- I specifically was familiar with ODYSSEY when we reported the ODYSSEY data. So I'm sure there'll be a lot of questions, but the separation between the top line of data presentation won't be that long either. So...

Okay. Great. So then clearly, as you mentioned, it's 90% power to detect a hazard ratio of 0.85. Like what kind of hazard ratio and risk reduction do you need to show to be clinically meaningful?

Yes. So right now, again, we -- to your point, we have a residual risk reduction of 15%. That's what the study is powered for. And we believe that will show anywhere between 25% LDL lowering or greater. I think that there's a lot of folks out there right now doing their own calculations. We get calls and e-mails all the time of what you think about this, how does this look? And we've been very consistent to say we absolutely get it. We just need the patience of getting to database lock, scrubbing the data and then reporting the data out. I think all of us, the feedback that we've received from experts, et cetera. Kaus Ray presented some work about 1.5 years ago. He did a simulation with a SMART analysis. He showed a hazard ratio of 0.8. But again, that is a simulation. And I think he said it best, as anyone does when they do a simulation. That is we'll have to wait to a clinical trial show. But we know that NEXLIZET, not that the study is on NEXLIZET, NEXLIZET lowers LDL by 28%. And NEXLETOL is anywhere between 21% to 25%. And the reason why the study is focusing on NEXLETOL only is really to, again, really test the true merits of this mechanism of action. We are pretty confident that whatever the study shows, we'll also be able to get into the label for NEXLIZET.

And some physicians and investors argue that NEXLETOL and NEXLIZET are not well positioned in that patients who need more LDL lowering might as well go on to take PCSK9s. How do you think the CLEAR Outcomes data might change that perception?

Yes. So a couple of things. First of all, physicians and patients that we've done market research want a small oral molecule. They really don't want to use an injectable. And trust me, I marketed an injectable PCSK9 for 3 years, and some of the headwinds they face now are still the headwinds that they have now. So that's number one. I think, again, just as the way we talked about the design of the study and what that study will show, I think it's going to leave a lot of questions of -- or be very compelling to say, okay, this drug not only has outcomes which is one of the headwinds that we face, but it also may be easier for physicians to get. Because one of our greatest headwinds is the prior authorization. And the reason for that is our current label is for ASCVD, patients on maximum tolerated dose of a statin. And if you're statin intolerant, it's not even in our label. The CLEAR Outcomes study is going to reduce those barriers, and it's going to allow for an easier burden of evidence for a physician to write this drug. The beauty about NEXLETOL or NEXLIZET, it's a partner to all drugs. You can use it with a statin. You can use it with PCSK9 right now today. And eventually, with our label, if you have patients that are statin intolerant, you can use it alone as well. And of course, we would have residual risk reduction. It's interesting. The label I just pointed out to you is really the label that exists in Germany without the outcomes. And in Germany, bempedoic acid -- the use of bempedoic acid in 2 years has surpassed the cumulative use of all PCSK9s since they were launched 8 years ago. So it's another testament of exactly what could come for us here in the United States with these drugs.

Great. And can you just walk us through the steps of what happens once you have the outcomes data in terms of filing an sNDA and what would you be looking for in the updated label?

Yes. So once we have the data, we'll, of course, we'll file the data. And we're doing the regulatory work not only in the U.S. but also for Europe. In case we don't get to it, we have significant milestones as it relates to Europe and this data being in the label. But as soon as we have the top line, just to give you some other color, we're going to be going to meet with payers to really talk about what I just mentioned for the prior authorizations, what can we do to lessen the prior authorizations knowing that this data is coming. And we know that the way the label will change is we hope to see ASCVD, which most physicians don't even know what that means, go away. We hope to see that the maximum tolerated dose of a statin that, that would go away, you wouldn't need that. And we also are hoping to see the inclusion of the fact that for patients who are statin intolerant, which is believed that 15% to 20% of patients out there are statin intolerant, that, that will also go away. And of course, we'll have outcomes as it relates to residual risk reduction. I go as far as to say, again, we're powered for a hazard ratio of 0.85. If it's better than that, I would ask the question of why would you reach for a PCSK9 unless you really had a patient who was maybe FH and really not getting to goal. So we think we have a game-changing label post a game-changing study.

And you mentioned that you view the outcomes data as kind of the beginning of an inflection point. Maybe if you can talk a little more specifically about the cadence of when that inflection point actually begins. Because you mentioned how the top line is not -- is going to purely say yes or no. And then you're going to have more full data presented at a meeting. But then subsequent, you'll have the sNDA filed somewhere along that line, but then also the updated label. So maybe you can just talk about how we should be thinking about or how you're expecting that to play out in terms of an inflection point?

Yes, if you look at analogies for some of the other outcome studies, what you'll see is that you'll start to see an increase in prescribing, not necessarily to the magnitude of once it's actually in the label. So we'll see this continuous growth, and I think we'll see the true magnitude upon once it's in the label. And the reason for that is because that's when your sales representatives, of which we would scale up at that point, can actually go out there and actively promote the label. But with that said, I mentioned we have Steve Nissen, we have a publication plan, we have a media plan. So we plan to be everywhere as it relates to getting this information out in a medical-legal way, also doing continuing medical education at conferences, whether they be regional or national, this is very different than just doing a large meetings. Upon all of us that are on the leadership team here at Esperion, we have significant experience in cardiovascular outcome studies and products, and we've done this before. So it's really about the execution of getting the message out there. So I think we'll see a cadence of growth. And then I think once we have that label, we'll really see more significant growth as well because our promotional folks can be out there talking about it.

Great. And then you mentioned milestones. So maybe you can talk a little bit about that and what we should think about that?

Yes, yes. So from a milestone perspective, once we have the data, once we put that into the label in Europe, we -- from Daiichi Sankyo, we get up to 100 -- up to $300 million milestone payment from Daiichi Sankyo. With Otsuka, we have a very similar deal and that's $150 million. Now Otsuka is just entering their Phase III trial. So that's a little bit after, of course, almost probably a year after Daiichi Sankyo. But up to $300 million milestone payment, plus the royalties that we receive from them now. And they've been growing significantly every quarter as well. So a significant milestone. And it comes later, 10 months later after we submit the label. But one can say that with a positive top line and positive data, we know that, that is something that will be coming to the organization.

Great. You mentioned earlier that you have an R&D Day scheduled for November 9. Maybe you can talk a little bit about that and what the focus will be, what we should expect?

Yes. So we'll be back in New York. We're going to do it virtual, but we hope to have some type of lunch or something afterwards. But we're going to talk about, we'll give an update on the CLEAR Outcomes study just to say where we are with that. And then what we'll also do is talk about oral PCSK9, which we think is a best-in-class product, and just talk to John Kastelein at ESC, who knows a lot about these products, and he's excited about it as well. But we also have a second-generation ATP citrate lyase platform. And this is really interesting. We know that ATP citrate lyase lowers LDL. I've talked about what I can do from an inflammatory perspective and a glucose perspective. We think that we could potentially have activity versus in therapeutic areas such as NASH. There are some signals as it relates to oncology. There is just actually an interesting paper written on glioblastoma that talks about specifically the ATP citrate lyase inhibition there. So -- and we think there might even be some cognitive effect. So it's an interesting platform. And it will be something that will have both company representatives and key opinion leaders speaking to these topics. It's important for us because we've always had this pipeline, but we never really talked about it. And I think it's -- not often you find a company our size that's not only commercializing products but also has an R&D arm. And some folks may think, well, there's an expense to that. But we're being very smart in how we think about that, how we would actually finance that, et cetera. So -- but it should be an interesting day. We're looking forward to it.

Great. Well, you mentioned the next-gen ACL inhibitor. Have you identified a candidate for that next-gen ACL inhibitor? And how is it different than bempedoic acid?

Yes. So currently, right now, we're working more on a scaffolding of what the optimal molecule actually look like. And so I would just kind of leave it at that, and we'll probably talk about that more at the R&D Day.

Okay. Great. And maybe one last one. Once you have the CLEAR Outcomes data, maybe can you talk about the cadence for the clinical updates for the rest of the pipeline? Obviously, you'll have the R&D Day, but maybe if you can describe how we should think about that going forward?

Yes. So I'm a big believer, and I think everyone at the organization is that you have to have a very solid publication plan and you always have to get data that's out there. Something we don't talk about, but what we're doing is we have an interesting study, looking at the use of our drug in HIV patients. We're looking at starting a study in the African-American population, which is a population that I think is undertreated, underserved in clinical studies. So we're looking to do something like that. But just looking at the CLEAR Outcomes study itself, 50% of the population within the study are women, 30% of the population are diabetic. I talked about the inflammatory properties, the glucose properties. There'll be secondary, tertiary publications just as it relates to the CLEAR Outcomes study itself. We continually think about life cycle management, so that will also generate potentially new data. So it's all about making sure we have a plan, which is something that we do. Right now, we have a plethora of information on bempedoic acid that I think there's still a lot that needs to be released, but that -- it will be important continuing to update that data.

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

Great. Thank you, Jeff. And again, thanks to Morgan Stanley for allowing us to be here at the conference. I appreciate it.

Thanks.

Great. Thank you.