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

Well, good afternoon, everyone, and thanks so much for joining us for our second day of the BofA Health Care Conference. My name is Cameron Bozdog, and I'm a part of Jason Zemansky's SMID cap biotech team here. I have the pleasure of introducing Ben Halladay, Esperion's Chief Financial Officer; and Eric Warren, Chief Commercial Officer. Thanks so much for being here with us today.

Great. Thanks for having us.

Thank you.

Perfect. Well, it's definitely been a busy start of the year for Esperion with much to discuss, so let's just jump right in. In early January, you resolved your contract litigation with Daiichi. Appreciating there were some questions at the time, but can you discuss how the deal maybe positions you well for success moving forward?

Yes. I can say it not only positions us well, but I would say also positions our partner well. This is a very mutually beneficial settlement agreement, and we're very excited for what it brings for the partnership. I would say there are 3 pillars to this. The easiest one is to understand is the cash, which was $125 million payment, $100 million of which we've already received and $25 million, which will come at the decision on the European label, which frankly could happen in any second now. The other 2 pillars are: one, they will develop a triple combination therapy at their own -- through their own activities, which is a tremendous commercial opportunity in Europe. Gives them a patent exclusivity extension at the end of their life and really opens up a lot of opportunity for different marketing opportunities for them. At the same time, we also have a tech transfer where they will take over the manufacturing of the tablets for the European and ASCA region, which is their smaller Asian markets. And that one is actually very exciting. We currently manufacture all the tablets and sell to them at a loss, which is not necessarily something we want to be in the business of. Them taking it on frees up some working capital constraints as well as really opens up a gross margin opportunity. And that's going to take a little bit of time to unwind, but we expect sort of mid-2025 to start seeing some of those effects.

Yes. Perfect. I think a great segue into my next question. If you can maybe focus specifically on how impactful the manufacturing update is, what does it do to your expense outlook? And when do you start seeing these improvements?

Yes. Tech transfers take a while. It's about an 18-month process to get through the whole thing. And I think we'll start seeing some of the benefits earlier on. But it will really start hitting in 2025. When I mentioned those negative margins, that tablet sales will be off our books. It's about a negative 30% margin. And I think overall, you'll see an improvement there. But at the same time, to produce bempedoic acid and get it to a tablet form, it's about a 12- to 14-month process. So in order to sell them tablets a year from now, we're starting to spend money on that inventory now. So ultimately, floating them a 12- to 14-month working capital, which we again sell at a loss. So you'll start to see that unwind, I think, towards the end of this year. But you'll really start seeing the gross margin sales benefit coming in next year.

Got you. And then looking at the triple combo, can you talk about why this is a longer-term driver?

Yes. So they're very excited about the triple combination. They see a lot of doctors getting excited about this. We're excited about this because there is an opportunity for a significant exclusivity extension at the end, so they're about the same with U.S., 2031. This could potentially take them to 2040 before loss of exclusivity. And they see a lot of their doctors moving towards this from both the single and the combination product once it's launched. Again, similar time frame. It will take about 2 years to run sort of a bioequivalent study, with a filing shortly after and on the market relatively quick here.

Perfect. And then any potential you could bring this to other markets, including the U.S.?

So we looked at it for the U.S. Significantly more expensive. We would have to do an additional Phase III trial to do it in the U.S. And at the same time, you don't have that patent exclusivity benefit at the tail end. So when we looked at it, the math just didn't make sense, and we scrapped the project. Daiichi Sankyo is also doing it in their ASCA region, which they also cover. But I would say that's -- it's probably where we're limited to at this point. We likely will not do it in the U.S.

Great. Got it. And then certainly, there's been a steady stream of updates from your partners' efforts to expand commercially in the EU. Can you kind of give us a sense of how BA fits into DSE's portfolio? And where does this franchise fit into their overall strategy?

Yes. So we've had a lot of dialogue with them since the settlement and going through the triple combination and the tech transfer. And one of the things we learned is it's now considered a global product for Daiichi Sankyo, which really increases it on the priority list. And they talk about it on their earnings calls. They see this as significant driver of growth, both in the EU and in the ASCA region. And they have a lot of resources dedicated to this. They're very excited about it.

Got you. Makes total sense. And then turning to the other major development. You've received approval late March to expand the label of your BA portfolio to include the CLEAR data. And maybe for those of us who -- or for those who aren't as close to the story, what exactly does your new label include? And what are the implications from a commercial perspective?

Sure. Yes. So thanks for the question. So cardiovascular risk reduction is part of this new label now. So in the past, before this label, our promotion was limited to the ASCVD population, which was core in the label. So those patients had to be ASCVD and they had to be on maximally tolerated statins. And they didn't need to be at their LDL-C goal, obviously. With the changes that we had as a result of CLEAR Outcomes, we have now Outcomes data in that ASCVD population. But we've also pulled in the primary prevention patient, and we are the only LDL-C-lowering non-statin that has proven cardiovascular risk benefit in primary and secondary prevention patients. And that is huge. It's always good to have something that others don't have. And that really solidifies that position that we have as being next after statin.

And to ask this question in a different way, like prior to this label expansion, what was the biggest impediment to uptake?

Two things. So number one, we were limited to that ASCVD patient on max tolerated statin and not at goal. So that created just -- there was a desire to prescribe for other patients, namely the statin-intolerant patient and the primary prevention patient. But the label didn't support that and the payer's defined utilization management criteria are basically the road map for how a physician can prescribe, and those aligned with that label. So you had the desire to use it in other populations, but the label that didn't support that as well as payers, making it very difficult to try to go outside of the label.

And then were you surprised at all by the label? Certainly, FDA had loosened some restrictions last December. But is there anything that you weren't expecting or maybe you were less sure about?

I'll start off. I think we had always hoped to get this in both products, but it was never a given. We're very excited and very pleased to see that this was both in NEXLETOL and NEXLIZET and will easily benefit both products. Eric, anything else?

Yes. I mean, I'll just say the label is fantastic, right? So CLEAR Outcomes had a unique design in that it had 30% primary prevention, 70% secondary prevention. So by having both of those study populations within the label, obviously, creates the opportunity for us to promote that. So yes, and we have the ability now to be used regardless of a patient's ability to tolerate statins. So whether they can tolerate no statin, some statin or full statin, this label gives us the ability to go in any of those directions.

Perfect. And then maybe just what's been the initial feedback from prescribers?

It's been great. I mean so we're seeing physicians that we haven't been able to see for 2 years. In some cases, they're calling our representatives asking for time to discuss. I would say the most -- in addition to the quality of the Outcomes data across both populations, there's even more desire from our primary prevention population. And that is because they haven't had an agent besides statins that were -- was capable of providing that cardiovascular risk benefit. So it's been really overwhelmingly positive from an HCP perspective.

Perfect. And then maybe before we turn to commercial dynamics, where do you see the value proposition of BA in the current treatment paradigm? Who is a perfect candidate for NEXLIZET and NEXLETOL? And especially when there are other options like statins and PCSK9s available?

Yes. So I'll keep it to that simple statement as we're next after statins. So statins are definitely a key therapy, right? So everyone deserves a chance to try a statin. But unfortunately, about 10% of patients can't take statins at all. Another 20% can only take some or low doses of statins. So after a statin has been tried, we should be next for a patient that requires additional LDL-C lowering. And that puts us in, I think, a pretty wonderfully differentiated position. So right now, ezetimibe is the typical go-to agent after statin. PCSK9s are used more for the secondary prevention patient. As you know, they're an injectable therapy. So the ability to go next after statin, potentially displace ezetimibe or mitigate the use of ezetimibe with an Outcomes proven agent, is really a great opportunity.

And you've [ started ] the new label has expanded the addressable population to around 70 million patients. Who are you specifically targeting over the near to midterm? And fundamentally appreciating many are eligible, what specific segments maybe represent the greatest near-term return on investment?

Yes. So that 70 million represents 10 million ASCVD patients, roughly 20 million primary prevention and statin-intolerant patients, and then the 40 million come from patients that haven't tried statins yet. So our focus is on that 30 million population initially. So obviously, the ASCVD population we've been playing in. Now we have Outcomes data to really kind of either equal the playing field or put us slightly ahead. And in that primary prevention population, again, that's a core element for us given this differentiated label that we have. Layer in those that cannot take statins or cannot tolerate more than limited doses, it puts us in a wonderful position with a sizable population. So 30 million is our current focus. That other 40 million will come into the funnel as clinicians start seeing the benefit. If patients start seeing the benefit, they start taking. Those that are on the sidelines now, because they're afraid of statin and haven't tried it, will enter the treatment paradigm.

And maybe if you could elaborate a little bit more on specifically what you need to see to maybe get into that additional 40 million patients.

It's just as we gain additional momentum in the primary prevention population. So there hasn't really been a proven agent, again, that works in this statin-intolerant population. We know it's a real population. I think there's often confusion because some people think it's only those that can tolerate none, but there are so many patients that can only tolerate some statins and are afraid to push it. So as clinicians start talking, as patients start talking, that's going to generate a lot of momentum.

Perfect. And there's been some debate both amongst investors as well as in the literature regarding the issue of what truly is like statin intolerance. Based on your market research, how many patients are incapable of achieving therapeutic levels of statins?

Yes. It's up to 30% of patients. So again, 10%-ish are these cannot take any statins, and roughly 20% are capable of taking the lower dose of statin. But when they go to the higher doses, they experience the myalgias. So roughly 30% of patients aren't able to maximize their dose of statins.

And I guess when you think about the nocebo effect, how does that kind of impact that 30%? Or does that impact your expectations there at all?

I mean I think that 30% is real. If anything, there's more patients. I mean I don't -- I mean every time I talk to somebody, they or their family or friends have had a negative experience from a titration perspective with statins.

Anecdotally, I'd say half the investors we spoke to at this conference said they're on a statin and feel muscle pain now.

Yes. Totally makes sense. I guess can you talk about the puts and takes of going after primary versus secondary prevention, when you think about the market approach there?

Yes. I mean they're both really important populations, right? I mean secondary prevention patients, they've already had an event. So they're in tune to their cardiovascular health, and they want to do more for their themselves. Obviously, the clinicians want to do more for their patients. But equally, if not more important, is the concept of preventing an event from happening. And again, it's been an underserved population where after statins, you've been able to lower their LDL, but you haven't had an agent that's been proven to reduce their cardiovascular risk. So there's kind of pushes and pulls of both. But that primary prevention represents a very distinguished and differentiated population.

And when you think about the, I guess, the more practical considerations of primary prevention, there's a broader group of prescribers beyond cardiologists. There's PCPs, hospitalists, internists, et cetera, [ necessitating ] broader outreach. How does this factor into your commercial strategy?

Yes. Yes. We've done really good segmentation. So we know which physicians are more likely to respond and have these primary prevention patients who are more likely to take action with NEXLIZET or NEXLETOL. So that's factored into our ultimate deployment strategy. So right now, from a personal promotion perspective, we're focused on about 20,000 HCPs that are the ones, again, most likely to respond to our differentiated products. Of which, 10,000 are primary care, 10,000 are specialists.