Lexeo Therapeutics, Inc. (LXEO) Earnings Call Transcript & Summary

Good morning, and welcome to Lexeo Therapeutics webcast presentation. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference call over to Ashley Kaplowitz, Head of Capital Markets at Lexeo Therapeutics. Ashley, please go ahead.

Thank you, and good morning. Earlier today, we issued a press release announcing the signing of an agreement to acquire Mantle Therapeutics and 3 new research collaborations focused on CNS-targeted gene therapy strategies in Friedreich's ataxia or FA. A copy of the press release and slides to today's call can be found on our website at lexiotx.com. Joining us on today's call are Nolan Townsend, Chief Executive Officer; Nani Bala, Chief Medical Officer; and Louis Tamayo, Chief Financial Officer. Before I begin, I would like to remind you that this call will contain forward-looking statements regarding Lexio's future expectations, plans and prospects, which constitute forward-looking statements for the purpose of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our filings with the SEC. With that, I would like to turn the call over to our CEO, Nolan.

Thanks, Ashley, and thank you all for joining us this morning. Today, we are excited to announce that we have entered into an agreement to acquire Mantle Therapeutics alongside several new research collaborations, significantly expanding our presence in FA. Over the past several years, we have established a strong foundation in FA cardiomyopathy through the development of LX2006. Our initial area of focus was cardiomyopathy because it remains the leading cause of mortality in FA, and we believe that addressing that burden represented the greatest opportunity to improve outcomes for patients. Today, we are building on that foundation by adding complementary therapeutic modalities and CNS-targeted gene therapy strategies, advancing our objective of building a best-in-class platform that comprehensively addresses both the cardiac and neurologic manifestations of FA. As the field has evolved, it has become increasingly clear that patients and families value a comprehensive approach that addresses both the cardiac and neurologic aspects of disease burden. As we walk through today's announcement, you will see how this strategy will meaningfully expand our FA platform without changing our near-term priorities. LX2006 remains the backbone of our FA disease area strategy, and we believe it has the potential to become the best-in-class therapeutic for treating FA cardiomyopathy. SUNRISE FA 2 remains our highest operational and capital allocation priority. These new assets and collaborations are designed to complement that foundation and maximize our overall benefit in the neurologic pathology of FA. In addition to gene therapy, we will soon have small molecule, protein replacement and RNA-based strategies, providing multiple differentiated approaches to increase or replace frataxin in the brain and address the neurologic burden of FA. This broader toolkit will allow us to pursue multiple biologic thesis for successfully treating the components of FA mediated by the central nervous system while leveraging the infrastructure and expertise we have already built around LX2006 to extend our leadership in FA and create additional long-term value. Importantly, achieving a compelling return on investment for this acquisition does not depend on advancing every program. Upon closing, we intend to evaluate the acquired programs against predefined scientific, clinical, strategic and financial criteria and prioritize investment in the opportunities demonstrating the strongest potential for clinical patient impact, regulatory success and shareholder value creation. Our cash runway guidance into 2028, which remains unchanged, includes plans to advance one acquired program into clinical development. We expect to provide a program prioritization update in early 2027 and submit an IND for our next FA development candidate in 2027. FA is a progressive multisystem disease with substantial unmet need. Cardiac complications remain the leading cause of mortality and is the reason LX2006 continues to be such an important potential therapy for patients and providers. At the same time, neurologic manifestations affect patients throughout the course of the disease and contribute significantly to long-term disability and reduced quality of life. We are already observing a statistically significant improvement in the neurologic component of FA with LX2006, and we believe this benefit could be further expanded with therapeutics specifically designed to target the brain, a key organ to address in order to maximize patient benefit and achieve a best-in-class treatment for patients with FA. Let me spend a moment on the transaction itself. Lexia will acquire Mantle Therapeutics for $8.3 million in upfront consideration, gaining access to a differentiated FA portfolio that includes a clinical stage asset with early functional and biologic signals. The agreement also includes up to $13 million in success-based clinical and regulatory milestone payments, bringing the total potential consideration to $21.3 million. This transaction is complemented by 3 new research collaborations with Weill Cornell Medicine, Vivet Therapeutics and Apertura Gene Therapy. These collaborations are designed to evaluate cerebellum targeted sequential dosing of frataxin gene therapy, alternative CNS delivery and strategies that may support repeat dosing of LX2006. With that, I will turn it over to Nani Bhalla to walk through the mantle programs and research collaborations in greater detail.

Thank you, Nolan, and good morning, everyone. As you can see on Slide 7, the Mantle portfolio includes 4 programs, which I will highlight in more detail on the next 2 slides. Starting with LX3010, -- this is a clinical stage oral combination therapy designed to increase frataxin expression while addressing mitochondrial function and oxidative stress through complementary mechanisms, including HDAC inhibition and Nrf2. What we find particularly interesting is that the early data include both a functional signal and direct evidence of increased frataxin protein. Early clinical data include an approximately 6-point improvement in mFARS scores at 16 weeks and a mean ninefold increase in frataxin protein levels from baseline in muscle biopsies across 11 Friedreich's ataxia patients. We plan to further evaluate the durability and reproducibility of these findings, but we believe the data generated to date support continued evaluation of the program. LX3030 is a preclinical stage oral tissue penetrant small molecule designed to increase production of endogenous frataxin in the central nervous system. It is a third-generation benzamide HDAC inhibitor that builds on published clinical work demonstrating that oral benzamide HDACs can increase frataxin in patients with Friedreich's ataxia through epigenetic modulation and acetylation of chromatin. Preclinical studies have demonstrated robust increases in frataxin supporting continued evaluation of LX3030 as a differentiated oral therapy. As we think about the unmet need in Friedreich's ataxia, neurological manifestations remain a major challenge. An oral therapy designed to reach the CNS and meaningfully increase frataxin could represent an important opportunity, particularly if it improves upon earlier approaches in this class. While still preclinical, we believe LX3030 has the potential to be a highly differentiated asset within the FA landscape. What excites us about LX3050 is the opportunity to test a fundamentally different biological thesis of directly replacing deficient frataxin. LX3050 is a preclinical stage recombinant human frataxin fused to a proprietary anti-TFR1 FA. It is intended to directly replace deficient frataxin and uses a TFR1 targeting brain shuttle designed to cross the blood-brain barrier and increase delivery of frataxin to the brain. In vitro studies have demonstrated dose-responsive improvements in measures of mitochondrial function, providing early support for the program's proposed mechanism. We believe that diversification of mechanism is important in a disease as complex as FA, and this program uses a potentially differentiated protein replacement strategy designed to reach disease-relevant tissues, including the CNS. Finally, LX3070 is a discovery stage ASO FA conjugate program designed to stabilize frataxin messenger RNA and thereby increase translation of endogenous frataxin protein. The program combines an RNA targeted mechanism with a proprietary anti-TFR1 FA intended to support delivery to disease-relevant tissues. In vitro studies have demonstrated dose responsive increases in frataxin. What we found particularly attractive here is the combination of a novel mechanism and a delivery strategy intended to reach the central nervous system. Together, the 4 programs will give us distinct approaches to either increase endogenous frataxin production or directly replacing the deficient protein. As these programs progress, Lexeo will have the opportunity to identify a differentiated lead neurologic program with the potential to deliver meaningful clinical benefit. We have also established 3 new collaborations to evaluate cerebellar targeted sequential dosing of frataxin gene therapy. Each collaboration is designed to complement systemically administered LX2006. Starting with Wale Cornell Medicine, we are particularly excited as this collaboration builds on encouraging large animal data that were previously presented at ASGCT earlier this year. In those studies, animals received systemic intravenous LX2006, followed by a second intracisternal administration into the CSF and directly to the cerebellum 8 weeks later. Despite preexisting immunity to the vector, potentially therapeutic levels of vector genomes were detected in the cerebellum through both approaches. We believe these findings provide early support for the feasibility of sequential dosing strategies and reinforce the opportunity to explore broader neurological applications of LX2006 in the future. With Apertura, we are excited to gain access to novel blood-brain barrier crossing capsids. One of the key challenges in neurological disease is achieving effective CNS delivery while maintaining a practical patient experience. This partnership gives us access to technology that may enable an intravenous route of administration to target the CNS, enabling a less invasive approach following initial systemic administration of LX2006. And with Vivet, we are evaluating technology that may help address one of the fundamental challenges associated with repeat administration. If successful, novel immune modulation strategies could play an important role in enabling future sequential dosing approaches and expanding long-term flexibility for gene therapy. Importantly, these collaborations provide opportunities to explore broader neurological applications, alternative delivery approaches and future sequential dosing strategies, all while maintaining our focus on successful execution of SUNRISE FA 2. I will now turn it back over to Nolan.

Thank you, Nani. What these programs and collaborations provide is the potential to expand Lexeo's opportunity beyond FA cardiomyopathy and address a broader portion of the FA population over time. Today, LX2006 is focused on patients with Friedreich's ataxia cardiomyopathy with the potential to expand the opportunity to additional FA patients based on future mFARS data from our ongoing studies. The complementary modalities and CNS-targeted gene therapy strategies we have discussed today may further broaden our reach, including the patients with predominantly neurological disease and those across different stages of cardiac involvement. Slide 12 shows how we intend to pursue the broader opportunity. We believe the clinical and biological rationale for LX2006 as a treatment for FA cardiomyopathy is strong, positioning it to serve as the backbone of a broader FA treatment platform. Each of the mantle programs has the potential to complement LX2006, whether as a stand-alone sequential or combination therapy. While targeting the heart is central to addressing mortality in FA, safely and effectively transducing the brain has historically been a significant challenge for the field. The Mantle programs and research collaborations will provide multiple approaches to addressing that challenge, including strategies that increase or replace frataxin and extend the potential of gene therapy into the CNS. To conclude, today's announcement significantly advances our long-term vision for Friedreich's ataxia. LX2006 remains our highest priority development program and SUNRIZE-FA2 remains our top operational and capital allocation priority. We are particularly encouraged by the continued momentum in Clarity FA, our natural history study, with 22 participants enrolled or imminently enrolling in the study to date. This provides an important pool of potential participants who may transition into SUNRISE-FA2 pending eligibility. In parallel, we continue to work on clinical site activation for SUNRISE-FA2 to support continued enrollment. The transactions announced today will strengthen our leadership position in FA and establish a differentiated platform with meaningful potential for patients and long-term shareholder value. I will now turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Roanna Ruiz with Leerink Partners.

A couple from me. One big picture question. Can you talk a bit more about your strategy to prioritize the multiple acquired programs and strategic collaborations? What might be the go/no-go decision process that might happen before you file an IND, et cetera?

Sure. So thank you for the question. So I think we intend to and have been prioritizing the programs against predefined patient impact, regulatory probability of success and overall return profile characteristics. And what I mean by return profile is the cost of development to get to meaningful milestones and progress the program through the clinic. I think each program has its advantages. I think there's some very interesting therapeutic approaches here, and we intend to evaluate all of the existing data and add some additional studies to what exists today out of the Mantle portfolio to make a fully informed decision about which is the program we intend to progress most rapidly. But I think what's interesting here is this portfolio allows us to evaluate multiple biologic thesis around treating FA in the brain. And obviously, we can do this in the context of other programs outside of our walls that are progressing alongside and the regulatory developments that occur around those programs as well. So I think we're both looking at the internal data and internal data we intend to create, but also looking at the regulatory landscape as it evolves in FA around us as well.

That makes sense. And could you elaborate a bit more on some of the early data and discovery work that got you excited about the Mantle programs above others that you might have looked at? And any other nuances or information that you think we should know about these programs?

Well, so first off, I think that what's exciting about this and certainly including the research collaborations is that every one of these approaches is fundamentally complementary to LX206. LX2006 remains the top development priority. As was mentioned, we have 22 patients in Clarity FA. So we're progressing well towards fully enrolling these studies, getting to the pivotal study readout, moving this program into a BLA. So we are thinking about life cycle here. And obviously, we believe we have the best-in-class cardiovascular therapy for achieving a 2- to 3-point improvement in the mFARS scale. And the question is, can we do more for patients by adding an additional therapy on top of that in the future. So first off, I'd say all are complementary. I think for the HDAC program, what was interesting for us is obviously the muscle biopsies, increases in frataxin there. We've not seen that across programs that are out there today. So I think that's what was interesting for us. But what's interesting as well is that, that strategy could also be benefited by a second-generation or third-generation HDAC program as well. Obviously, a protein therapy that has a brain shuttle that can maximize the biodistribution into the brain is also interesting. So I think we have a lot of interesting candidates here, and we intend to evaluate all of the data to make a decision about what's the best program to take forward as we advance LX2006 into its pivotal study data in the second half of the year.

Our next question comes from Kristen Kluska with Cantor Fitzgerald.

This is Ayan on the line for Kristen. Congratulations on the announcement here. I guess first, what are some of the best ways to truly understand the potential of the neurological benefit from these CNS-directed programs? Just anything beyond [indiscernible] given that you've already seen some benefit here from LX206?

So I think the question was how to best understand the potential of the pipeline. I think that, one, from our perspective, from a commercial standpoint, obviously, LX2006 as we're working towards the best-in-class treatment for FA cardiomyopathy. There's a meaningful percentage of the FA population that has existing cardiomyopathy, whether it's via cardiac hypertrophy or earlier components of the disease, such as elevated troponin and wall thickness. So there's certainly commercial market opportunity associated with that. But I think what LX2006 is probably not addressing as well as patients that do not yet have cardiovascular involvement in the disease. And I think that this is where the pipeline we're adding could have a meaningful benefit for patients, those that have primarily or only the neurologic component of the disease at current. So I think in terms of potential, one could look at the other side of the disease, patients that are only challenged with the neurologic symptoms and think about the commercial market potential associated with treating the brain. I also think the addition of a therapy to patients that were previously treated with LX2006 really strengthens even the profile of LX2006 commercially that patients don't need to choose between a cardiac therapy and something else that as we have treatment arms in our future trials that include previously treated patients with LX2006, we can demonstrate the maximal effect size in the components of the disease that are mediated by the brain. So I think it both strengthens the LX2006 commercial opportunity, but also expands to patients that do not yet have cardiac involvement in the disease as well.

Great. Makes a lot of sense. And I guess sort of touched on my second question, which was on how you envision the IV infusion and the CNS directed therapy ultimately being given together. And from the answer, it sounds like there's some rationale here for sequencing these treatments.

Yes, absolutely. If you're talking about gene therapy for the brain, we had a poster at ASCCT demonstrating the potential of sequential dosing. So nonhuman primates that were previously treated with LX2006 systemically were subsequently treated with an intracystnally administered gene therapy to the brain. We demonstrated that, that gene therapy reached its target in terms of transducing the cerebellum. So it showed what's possible for sequentially dosed gene therapy. And I think the gene therapy research collaborations really expand on that proof-of-concept work. So whether you look at non-gene therapy approaches that come through the Mantle portfolio or the potential gene therapy -- the gene therapy research collaborations and the potential there, both are designed to being complementary to what we view to be the backbone of FA treatment for cardiomyopathy being LX2006.

Our next question comes from Tessa Romero with JPMorgan.

This is Caroline Pocher on for Tessa Romero with JPMorgan. Just a few from us. So acknowledging that your cash runway includes plans to advance one acquired program into clinical development, how do you see each of these opportunities from Mantle's portfolio stacking up in your view in terms of relative risk? And which asset do you think has the largest potential reward?

Well, I'd say, early for us to draw a formal conclusion on that. We guided to provide a pipeline prioritization update in early 2027, and that's where we'd intend to sort of communicate which of the programs we intend to take forward most rapidly. I would say each has their own advantages -- all of them are complementary to LX2006. So we'll communicate in early '27, which one we've prioritized and sort of the rationale behind that prioritization. But we're certainly considering which program is positioned to move forward into the clinic the fastest, which program can demonstrate clinical proof of concept fastest, but also looking at the regulatory landscape and the types of approaches one can utilize to consider an accelerated approval for certain of these assets behind LX2006 is certainly some of the considerations here. So that's something we will be able to guide to early next year.

Okay. Great. And if I could just squeeze one last one in here. Of the 22 participants that you noted are enrolled or imminently enrolled in Clarity FA, how many do you think will be eligible to feed into SUNRISE FA?

That's a number we don't yet have and that many are undergoing neutralizing antibody screens. But I think we'll give an enrollment update at a major milestone when it comes to SUNRISE FA. But we are very encouraged by the number of patients that we have in Clarity. Obviously, all of the patients in Clarity aside from neutralizing antibodies meet the inclusion criteria of SUNRISE-FA2. So it demonstrates that we are able to rapidly find patients that represent the phenotype that we would enroll in Clarity FA. So things are moving well there, and we're excited to see this number of patients that are in the Clarity side of the study.

Our next question comes from Leland Gershell with...

It looks like some interesting opportunities for Lexeo here. Nolan, just wondering with 2 of the more advanced Mantle programs focused on HDAC, just wondering if you could share with us what we know about kind of HDAC inhibition and its potential in SA and what the consistency and breadth of maybe HDAC inhibition across various patients with FA might be?