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

I'm Paul Choi, and I cover SMID-cap biotechnology here at the firm. It's my pleasure to welcome Esperion Therapeutics to this session. Joining us on stage is CEO, Sheldon Koenig. So maybe what we'll do Sheldon, for people in the audience who may be unfamiliar with Esperion, can you maybe just provide a brief overview of the company, sort of your key core competencies and sort of the key markets you target? Maybe just provide an overview of the company to start?

Yes. Great. Thanks, Paul. And I just want to thank you and Goldman Sachs for having Esperion here at the conference. It's definitely great to be here. I just want to put a plug in. We were actually just voted a great place to work. So we're really proud of that. We posted it on LinkedIn yesterday, more information there to see that. So Esperion was the company, was founded in 2008 by Dr. Roger Newton. And to fast forward, he developed a drug called bempedoic acid, which is a novel mechanism, first-in-class product that lowers LDL cholesterol. And the fast forward, these drugs were approved back in March of 2020, which is right in the middle of COVID. So it wasn't the best time to launch a drug. And we came up with a strategy, and we really want to focus on the CLEAR Outcome study, getting to our label, et cetera, and that's what we did. So in April of 2023, we presented the CLEAR Outcome study, which was a 14,000 patient outcome study. And it was a very diverse study. 49% of the study participants were women, 18% Latin American. And 70% of folks studied were secondary prevention, 30% primary prevention. We'll get into that a bit later. And many of the patients also were sick, diabetic or prediabetic. That study was presented, as I said by Dr. Steve Nissen. It was an overall success. We talked about then really focusing on getting our labels, which we did back in April of this year. And we've been off to the races with this product, calling on both primary care physicians and cardiologists. And I know later, I think we're going to maybe talk about our pipeline, which is also very interesting, more to come on that.

Okay. Great. Yes. For those of us who have been following the space for a while, maybe in its own way, this company is now Esperion 2.0 or 3.0, depending on how you count it in current terms of its long history of developing cholesterol drugs, including a small one called Lipitor, if I recall correctly.

That is correct. Roger Newton was a co-developer with Lipitor. And I think our vision says it best. We're in the business of providing life-saving drugs not only for now, but in the future and not only for cholesterol, but in the future other areas.

Okay. Great. So maybe Sheldon, touching on what you just mentioned there, your recent label expansion, it's clearly significantly addressed the -- increased the addressable patient population. And so can you maybe just remind us what is the scope of your new label? How does it differ from your prior label, at least here in the U.S. and then in Europe as well?

Yes. So our old label is very restrictive. The TAM that we were able to address was only 10 million patients. And that was for a couple of reasons. One, a patient had to show document ASCVD, which is atherosclerotic cardiovascular disease. A patient had to be treated on the maximum tolerated dose of a statin. So it was very restrictive, and we didn't have outcomes yet. So payers were really holding us back from really being prescribed. And it was as simple as that. The new label now includes not only secondary prevention, but also primary prevention. And the beauty of that also is we no longer need to show that you have to have a maximum tolerated dose of a statin. We're able to show that we reduce events. We were able to reduce nonfatal MI by 27%. We're able to reduce cardiovascular procedures, such as stent, et cetera, by almost 20%. And we're the only non-statin that can claim that we are indicated for both primary and secondary prevention, and that's a significant differentiator from not only drugs like ezetimibe, but also PCSK9. So that label now has opened up the TAM. Remember, I said it earlier, it was 10 million, 70 million patients. And again, just to be reminded, as you know, Paul, cardiovascular disease is the #1 killer in the United States and the world. So this product can make a significant contribution in reducing death, et cetera, would be -- if people are taking their drugs and lowering their LDL.

Right. Yes. So yes, the risk reduction label obviously has opened up a much larger market for you guys.

Yes.

I want to actually touch on something you mentioned here, which is just sort of payer pushback in terms of the scope of the old label versus the current label. I want to ask, can you maybe comment a little bit on what you've seen in terms of payer behavior with regard to policy changes to accommodate this expanded label? And just have the barriers in terms of the physician experience and prescribing and sort of back-office challenges to get reimbursement or approval or sign off from the payers change?

Yes. I'll talk about this in both ways. One, the payer perspective and also from a physician perspective, past and then into the future. So again, prior to the label, the biggest pushback was, again, you do not have outcomes, it was simple as that. And because you do not have outcomes, you have to get a patient through maybe 2 statins and then after 2 statins, maybe ezetimibe, you have to supply a lot of documentation, et cetera, to get these patients approved. And physicians don't have the time to do that nor primary care or cardiologists. They just don't have the time. We knew and we knew right after ACC that payers were willing to listen and hear about our new label. So we went right after ACC. In December, the FDA actually made a change for our label where you never needed the maximum tolerated dose of statin anymore, which was great. And that's because we did have outcomes even though we didn't have the label. That allowed us to go back to payers again and preview to them what was coming in late March or late April. I'm just going to say I'm really proud of our market access team. We have had over 10 wins since June 1, where not only is it easier to get NEXLIZET and that's really a new campaign for us. It's easier to get NEXLIZET. There are some plans where there's not even a prior authorization. You just need electronic look back to see if this patient was even on the statin. So payers now with the outcomes data have been very open arms. And I think another contributing factor to that was we had an ICER opinion a few months ago that showed that from a pricing perspective, we are economically priced along with the outcomes that we provided. So I'm really proud of the team, and we have 2 key messages after a statin, we're next. And now it's easy to get us.

Okay. Great. And then just you were talking a little bit about the payer wins, but then the physician experience. You said now they can just submit a look-back record, in some cases, yes, depending on the plan. And I guess, the question is for the back office or the physician's admin system. Just what does that translate to in terms of requiring sales force touches and so forth?

Yes. So we have 150 salespeople strong. We actually just added 5 key account managers. We also have 6 reimbursement specialists. So for some offices where they are finding they have some difficulty, we can target those people to that office, and that's going well. Again, these new payer wins have really opened the doors for us, and we're already seeing the momentum since June 1, and that's going to carry significant momentum into the third quarter as well. Happy about that. We also have another bridge. We have what we call ASPN, which is a specialty pharmacy, that allows physicians if they're having trouble with the PA to work through ASPN and what ASPN is able to do is do the prior authorization for them. If, for some reason, they're running into some issues, they're actually able to supply the patient with a free bottle or a month worth of product until that prescription gets prior authorized. I can tell you, we just had, yet we filed this weekly, we had another tremendous week with ASPN. Those prescriptions by the way, aren't necessarily covered in IQVIA until you move over to paid. So it's been, like I said, a lot easier for physicians to get the drug with what we have established with payers now and the bridge that we've supplied in case they are having trouble.

Okay. Great. Maybe one last question on the sales force piece and ASPN is, you recently got your label change. And so I think maybe physicians who have been aware of the drug for a few years since your approval and launch in 2020, may not be fully aware sort of the scope and changes to the label. And so just kind of where are you in terms of your sales force touches in educating the prescriber base? Does it require maybe a few more medical conferences, whether it's AHA, whatever the case may be coming up here in the fall to just sort of increase awareness in the physician community of what the new product label looks like.

Yes. I think the meetings that we have coming in the future, ESC, that will be the end of August. Again, I think it's important to know, it's not just a Esperion that's in on this, right? There's a very large company, Daiichi Sankyo, that has about 25,000 employees, Otsuka in Japan that has about 7,000 employees. And we meet regularly. I was just on the phone with our Business Director in Germany. So there's a lot of collaboration of how do we get the message out wholly. At ESC, for instance, there's not only U.S. physicians, but European physicians, et cetera, AHA, the same. So that is one aspect. The other aspect is the consumer initiative that we have, which drives consumers into the office. It's played very well. It's called the lipid Lurker. I just had them lurking on my Instagram and Facebook. And if you're a target audience, you will see that as well. And then we have our representatives as I've mentioned. And we have programs, we have webcast with key opinion leaders that are transmitted throughout the country, et cetera. And it takes maybe sometimes 5 or 6 visits for representatives to get out there. But what's really been interesting, remember, I talked about we have an indication in primary prevention, we're seeing a lot more use in primary care physicians, which speaks to us that they're also using it for primary prevention. So we're really making some inroads there already. We can see that. And I feel really good about that.

Okay. Great. This is somewhat backward looking, but for last year, part of the challenge of thinking about the Esperion investment case was your -- was the ongoing litigation at the time with your partner, DSE. Now that's behind you through amicable resolution. Can you maybe just remind us on what are the amended terms of your agreement with them?

Yes. So look, last year was a stressful year. We went through about 10.5 months of litigation. We were able to resolve that and announced that in January of this year. So in a sense, what we received is $125 million in cash from Daiichi Sankyo. We received $100 million at the end of January. We are receiving another $25 million in the next weeks based upon their approval in Europe. The other thing that we did is we gave them the right to develop triple combination which, keep in mind, once that's developed and marketed, we also get royalties from that triple combination. That's pretty significant, ranging between 15% and 20%. The other thing that we're doing is a tech transfer, and that's going along very smoothly. That's where they will actually produce both NEXLIZET and NEXLETOL. NILEMDO and NUSTENDI as is referred to in Europe. So when you do a net present value analysis, remember, the lawsuit was around a $300 million milestone. We actually can demonstrate that the result is above $300 million value and again, it allows the teams now to work collaboratively. It's in the past. And I'm not a big hockey fan, but I know we're in Miami and the Florida Panthers are playing and there are 2 of them here. We've been back-skating a lot, okay? But we're not back-skating anymore. Like we are on the offense now. Those distractions are gone. We have the outcomes, we have the label, that's resolved, and we have the capital to keep moving forward.

Great. Maybe a question on the triple combo development. Will you run that? Or will DSE run that? And then just sort of in terms of broad clinical development requirements, can you just do a bridging study? Or does a full on -- given the ingredients are kind of relatively well known. Can you just do a sort of bridging study? Or just sort of what's required there to...

So Daiichi Sankyo is -- I mean, they are hot on this. They love this. This is something they've always wanted. I think they're going to do it with 2 statins, both rosuvastatin and atorvastatin, that remains to be seen. But it's a simple bioequivalent study. And then there's stability for 6 months. So it's a pretty quick program where if you were to do a program like that in the United States, it would have to be a complete clinical study. They're paying for everything. They're doing everything. So nothing out of our pockets to do that.

Okay. Great. You touched on this briefly, but with the approval in Europe, triggering this pending $25 million milestone from your partner DSC, maybe can you speak broadly about your capital needs and just sort of the strategy and sort of funding either commercial operations and or clinical development? And sort of what's the philosophy on addressing potential future capital needs at this point?

Yes. So we're in a great position with cash right now. We finished the quarter with about $226 million. As I mentioned, we're receiving another $25 million in a few weeks before July 1. We're in a great position from a capital perspective. What we're focusing on right now is really addressing our debt, and we hope to have a solution for that before the end of the year. This is something I think we can do without any further dilution, et cetera. We're really close to being breakeven and cash positive. So you never say never, but right now, we're in a really good place from a capital perspective and don't see as it stands right now, any immediate need, et cetera, to go to the capital market. So we're able to fund our business in the way that we need to. And again, keep in mind, a lot of our expenses last year, the year before, going back to 2019, if you will, was all the fund a $600 million CLEAR Outcome study that's done. So that allows us to be smart about our spending and only spend where we see really good return on investment.

Okay. Great. So you obviously identified a major operational expense in terms of at least backwards looking, running outcomes trial. Obviously, it's not a trivial endeavor, and it's a substantial investment. Your R&D as a percentage of your sales on the forward theoretically should go down meaningfully and start to generate significant leverage as you kind of analyze in the new expanded indication. So I guess as you think about maybe just in broad strokes, the sort of the cost structure you don't have huge outcomes trials to run near term, but you are developing other earlier to mid-stage assets. So what is the sort of shape, I guess, broadly of the P&L look like in your mind as you and the management team and the Board sort of think about the intermediate to longer-term outlook?

Well, I think the good news is we are where we need to be. So there's no need to further expand the business. We're fully staffed at 150 representatives, as I mentioned, the 5 key account managers. So our commercial budget is going to be where it is. So we don't see any type of significant ramping versus where we are today. We're at the right size where we need to be to make these products successful, we're showing it. We're already showing it. And part of it is just from a perspective of really being smart about x amount personal promotion, x amount digital promotion, et cetera. So and again, from a payer perspective, these wins that we've gotten we were able to get without giving really any concessions because the contracts from the past had been aggressive. So from a gross to net perspective, we feel good about that as well. We don't see any variability going beyond where we already are. So again, we're in good shape. I don't see any need to do -- and if we do talk about pipeline later, we even have money set aside to get us to where we need to get until we're at profitability. So from a spending perspective, we're in great shape.

Okay. Correct. Actually I want to talk maybe a little bit about the pipeline now, if we can. And I think the focus has been sharpened recently by the growing sort of a return in investor interest in the cardiorenal space, broadly speaking. And you have some early-stage programs that you've talked about, but don't necessarily get a lot of your time. So can you maybe remind us sort of what's next in the pipeline after bempedoic acid here?

Yes. So we have a second-generation ATP citrate lyase. It's very different than what we have focused bempedoic acid on. This is something that moves beyond LDL. We are actually going to have an R&D day sometime in the fourth quarter. We haven't announced when it's going to be, but there'll be a lot more detail there. And what I mean by that is this is where we could be going. This is how it could displace competition that exists now and even competition in the future. It's very focused on kidney, heart and liver. And we've actually seen some signals from an oncology perspective as well. But we're really looking at a specialty focus with kidney and liver. So more to come there. We're really excited about it. And I think I've said this before, Paul, is that it's hard to find small, midsized companies that are not only commercializing assets, but also have assets in the pipeline. We tried to talk about it back in, I think it was 2021, and that was probably a mistake because everyone was just wondering, well, what's going on, it became the CLEAR Outcome study. So now with that behind us, we can really focus on R&D Day that will show assets that we think will have significant contributions to treating that cardiometabolic area. So stay tuned. We're excited about it.

Great. One maybe another pipeline-related question is on oral PCSK9. That's something you mentioned in the past, but having given like a huge clinical updates recently and just kind of, I think, with the Merck's MK-0616 program, it's still on people's radar and just sort of thoughts on that versus your second-generation ATP lyase program, just how do you rank order that? Sort of what is the commitment in terms of capital and thinking about advancing that program?

Sure. Right now, I think the capital for our program and our pipeline is really to get to a point of doing IND, and we'll probably talk about more of that at our R&D Day. The Merck's 616 program, first of all, I just want to remind everyone, we had an agreement with Serometrix. We were in development of an oral PCSK9. We gave the rights back to Serometrix. I think the question for us was do you really need an oral [Technical Difficulty] bempedoic acid, et cetera. The 616 program, we'll be following that program. I think there's a lot of things to be said about that program from a fasting perspective, dosing, et cetera. So we'll see what happens there. But again, the adjunct market, it's not PCSK9, it's ezetimibe. That's where the real opportunity is. More than 60% of the use in the adjunct market is ezetimibe. And that's really what we're focusing on. Our physicians to just get away from the pipeline for a second, physicians who are currently writing statins and ezetimibe you could actually switch to a drug like NEXLIZET. But the pipeline will be separate, then it's not going to be about LDL lowering.

Okay. Great. I want to talk a little bit about life cycle management and IP, which is most recently the USPTO issued you guys a patent term extension through -- if I've got this right through December 2030. Can you maybe just remind us what's included in your patent term extension and maybe in broader strokes, how are you thinking about the IP strategy longer term beyond 2030?

Sure. Yes. We just announced that a few weeks ago, it's material of matter that gets us to that 2030 time frame. And then from a pediatric perspective, we actually have patent protection to 2031. We actually think we can increase our patent protection all the way to 2040. And what will allow us to do that is we're developing the strategy. I should say we do have a strategy. We recently -- you may have seen, have gone through some ANDA litigation. And we believe that during that litigation, is going to be an opportunity for us to actually expand our patent life into the 2040 time period. So that's something we have been preparing for. We were expecting and looking forward to executing on that and extending even beyond 2031.

Okay. And then with regard to Europe, maybe just remind us where the IP -- you're talking about U.S. litigation and so with your partner, DSE, what is the IP framework in Europe and other U.S. markets?

Yes. So for Europe, it's actually very straightforward and also the markets beyond that, the AsCA, Asia regions, et cetera. So for Europe, they actually have patent protection through 2031. And the development of the triple combination is going to give them an additional 10-year patent protection. So that will get them to 2041, this we've already covered, it's a pretty easy quick development.

Okay. Great. You touched a little bit on prescriber behavior in the adjunct market. As you sort of think about the competitive landscape and development for the adjunct market, at least I know you're focusing on in terms of your pipeline on sort of beyond lipid lowering and so forth. But maybe as you think about the competitive landscape, at least on the cardiology side, what is -- what are you monitoring the most as potential challenges to NEXLETOL, NEXLIZET here in the U.S. over the near to intermediate term?

Sure. I think definitely, we're watching the development of the oral PCSK9. Obviously, we're watching the development of the CETP inhibitor. I'll start with that one first. I mean, it's definitely an interesting program. I think the thing about...

You're referencing the New Amsterdam.

NewAmsterdam. I think with CETP, we've seen 5 -- I worked on one anacetrapib, none of them have made it. Most of them, if not all of them, show great efficacy. I think the question is really around safety. What happens with adipose tissue, et cetera. The MOA of CETP has never really been fully understood and explained. So it's not only efficacy, but safety. And then the other question is how does efficacy translate into outcomes. So a lot of more hurdles to go. The 616 program, the AstraZeneca program, again, these are early programs. I think Merck is advanced past them. They're also going up to an outcome study, the latest timing here on their outcome study is by the end of 2030, they would have outcomes. So I'll bring it back to us selfishly. We have outcomes today. And physicians and payers don't care about the products of the future. They care about -- payers care about the products available today and the price they can get it at. Physicians care about the products that they can get today to treat patients. And that's what we're focused on. And if you're successful, just like ezetimibe was, if you build enough market share and leverage, it's harder for new products also to come in. So there's a lot of challenges. But of course, we'll follow their development program. And look, there's a need out there. There's 70 million patients out there who need more LDL cholesterol lowering, and we're doing it right now.

Okay. Maybe in terms of current competitors, what do your sales force hear -- what does your sales force hear from physicians in terms of sort of the injectable landscape, whether it's siRNAs Leqvio. Is that even registering on physicians' radar at all? Whether it's given lack of outcomes data, challenges from a buy-and-bill model, making it difficult for them to hold drug on the shelf and not necessarily get paid for that versus a pill that's readily available. And just how does that -- what do your sales force -- what does your sales force hear...

Yes, yes. And we have medias routinely to hear it was coming back. We're not hearing any pushback to our drug versus injectable PCSK9, whether it be Repatha or inclisiran. And most physicians we talk to, they don't really know what inclisiran is, and they're not using it. At the end of the day, what we are hearing, especially with primary care physicians because it's always hard for them to get injectables. Even if they have the ability to get one, they give a patient a choice you can take this pill or you can take this injectable, they're picking the pill 9 out 10 times. And especially now with our coverage, it's easier to get. The one thing I thought to mention is we talked about secondary prevention. In primary prevention, we showed a MACE-3, which was fatal, nonfatal MI and cardiovascular death, almost a 40%, 4-0 reduction in primary prevention. That has really resonated with primary care physicians. And they know, cardiologist too, but definitely primary care physicians, and they know that injectables do not have that data. So for them, it's like, wow, ezetimibe didn't have that data, injectable PCSK9, this is amazing. And that's what we've heard.

Okay. I want to drill on that a little bit more in just terms of where your prescription volume growth and changes are going. We can't get a full picture, as you mentioned, because some of the volume is coming through your ASPN. But just, I guess, where as you can best tell, is the growth coming from? Is it primary or is it just new secondary patients who are not having this insurance barrier anymore that you had in the past? Just sort of curious if you have that level of granularity to at this point.

We're getting close to that. Our initial belief is it's coming from primary prevention. We're seeing more and more acceptance of primary prevention. And we're using the gauge of kind of the discussion you and I just had, feedback from the field and seeing that more primary care physicians are using this drug. If you go back historically, you look at ezetimibe and you look at prescribing it was 40% cardio -- and that's a brand I ran for a while, 40% cardiologists were writing it, 60% primary care physicians were writing it. Again, it's easier for primary care physicians to prescribe a NEXLIZET or a NEXLETOL versus an oral PCSK9. Now you give them the power of they can do it for not only secondary injectable -- I mean injectable, yes. Sorry. Now you give them the power to do it for either secondary or primary prevention. And the one thing I'll go back 2 years ago, we did some behavioral research and what we found with physicians, especially primary care physicians is they felt that there's nothing we can do more. All we have is a statin and ezetimibe, and I really can't get an injectable, there's nothing I can do more. We're playing off of that behavior of doctor, now there is more that you can do. And that's also resonating.

Okay. Great. With the volume trajectory going up into the right with your label expansion here, I want to maybe just touch briefly on the subject of gross to nets in the category and just kind of where you see maybe that evolving over time, probably I think in the earlier days of the launch, that was a bit of a headwind just given some of the payer barriers that were in place. These are now largely gone. And is this something that you think the Street is appreciating that this is probably something that's going to improve? Or is this just sort of now that you're established as a product with the payers, it's just sort of sort of par for the course. Maybe what are your thoughts on that?

I think it's 2 answers. It's par for the course, but it's already improved. Some of our largest GTN headwinds were DSA funds going through some of these large distributors like McKesson, Cardinal, et cetera. We've showed significant volume progress and those DSA fees have lowered. So it's kind of a paradox if you show more volume, then the DSA fees come down, and we are able to show that in January. So that really gave us some favorability from a gross to net perspective, and we feel good about that. We've come a long way in managing what were the original gross-to-net program, so really bringing our gross-to-net issue to bringing gross to net stable and I would say, comparable because we don't say what gross-to-net comparable to other pharmaceutical companies and what they're probably paying just from a gross-to-net perspective. So I don't see any significant changes where gross-to-net is going to increase. If anything, maybe it could come down a little bit, but I feel really good about where we're at now. And it's become really artwork with us.

Okay. Great. As we think about the longer-term trajectory of the company and growing your NEXLETOL, NEXLIZET franchise here. You've often spoken about blockbuster potential, but the commercial trajectory this year, at least, is still relatively smaller. And just sort of, I guess, what is needed, I guess, to see that major inflection to get to that next sort of next level tier of sales performance and making a large cardiovascular franchise.

I think part of it goes back to the question you asked earlier, and that is getting the message out there. We've been very good at doing that. We do not give guidance. We said we're comfortable where consensus this year between $150 million and $170 million. That's pretty significant growth from where we ended last year at $61 million. So I think as time marches on, and it takes a while, the cholesterol market is a large market. It takes months to kind of see that growth. We've always said we would show continuous growth. We always said it wasn't a hockey stick, it would be steady and growing. So this year, we'll finish hopefully, in that range, I believe, we will. And then in the next year, I think even more significant growth. So we're on the right path to make these and committed to blockbuster potential. I think people really are interested and love the science that's behind this drug. And we saw that ACC, even when other companies came up to us and said, "Oh, wow, [Technical Difficulty] your labels are amazing." When we were recently at Bio, companies asking us about the science, et cetera. So physicians feel the same way about this drug and what it can do and just the science behind it.

Okay. we're coming up on time here. So last question, Sheldon, is sort of as you think about the multiyear strategy, you have this commercial base. You have a nice partnership in the ex-U.S. markets. You said you will start to turn the card a little bit over on your earlier-stage pipeline. But as you think about the investment case over maybe a little bit of a longer-term time line -- excuse me, where do you see the shape of the company? And sort of what is the I guess, the value proposition that investors may or may not be getting at the moment as to where, let's say, Esperion could be in a few years?

Yes. I think we're finally past , as I mentioned earlier, all the distractions that we've seen before. And the one thing we've always stuck to is that everything that we said that we were going to do, we've done and we've accomplished, we're going to keep doing that. We're going to grow these products to a blockbuster potential, that's going to allow us to high tide floats all boats, invest in what is a very exciting pipeline and carry this company into the future of gets back to what I said earlier, really supplying drugs that are life-saving not only today, but in the future in a market that, to your point, has really starting to evolve and getting more attention in the cardiometabolic marketplace. So we've got great products and great products are the key to success in this industry after doing this for 34 years.

Great. Okay. We're coming up on time here. So we'll end it on that note. My thanks to Sheldon and Esperion for joining us. Thank you.

Thank you so much.