Lexicon Pharmaceuticals, Inc. (LXRX) Earnings Call Transcript & Summary

Good day, and welcome to Lexicon's INPEFA Approval Announcement Conference Call. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the conference over to Carrie Siragusa. Please go ahead.

Thank you, Allison. Good morning, and welcome to the Lexicon Pharmaceutical's INPEFA Approval Announcement Conference call. Joining me today are Lonnel Coats, Lexicon's Chief Executive Officer; Jeff Wade, Lexicon's President and Chief Financial Officer; and Dr. Craig Granowitz, Lexicon's Senior Vice President and Chief Medical Officer. On Friday afternoon, we issued a press release announcing the FDA approval of our NDA for sotagliflozin and heart failure now being launched under the brand name INPEFA. This press release is available on our website at www.lexpharma.com. A webcast of this call, along with the slide presentation is also available on our website. During this call, we will review the information provided in the release, provide an update on our launch plans and then use the remainder of our time to answer your questions. Before we begin, let me remind you that we will be making forward-looking statements, including statements relating to the safety, efficacy, regulatory status and therapeutic and commercial potential of INPEFA, LX9211 and other drug candidates. These statements may include characterizations of our plans for the commercial launch of INPEFA in heart failure as well as results of clinical trials of INPEFA, LX9211 and our other drug candidates, and the regulatory status and market opportunity for those programs. This call may also contain forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, strategic alliances, and intellectual property as well as other matters that are not historical facts or information. Various risks may cause our actual results to differ materially from those expressed or implied in such forward-looking statements. These risks include uncertainties related to our commercial launch of INPEFA, our regulatory discussions with the FDA regarding INPEFA, LX9211 and our other drug candidates, the timing and results of clinical trials and preclinical studies of our drug candidates, our dependence upon strategic alliances and other third-party relationships; our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial funding to conduct our planned research, development, and commercialization activities. I will now turn the call over to Lonnel Coats.

Thank you, Carrie. Good morning, everyone, and thank you for joining us on the call. On behalf of all the extraordinary men and women at Lexicon, it's with great pride, I announced the FDA approval of INPEFA for the treatment of heart failure. As described in our press release from Friday afternoon, INPEFA was granted a broad label across the full range of left ventricular ejection fraction, which includes HFpEF and HFrEF and for patients with or without diabetes. This moment represents a tremendous accomplishment for Lexicon. INPEFA will be the second innovation to make it to market from Lexicon's Genome5000 discovery program. We know how rare it is to internally advance an innovation all the way from discovery to market. INPEFA's approval represents another major milestone on the path to fulfilling our mission of pioneering medicines that transform patients' lives. As we have shared on our previous calls, we have invested significantly over the last 12 months in preparations for the commercial launch of INPEFA and expect to launch in the U.S. by the end of June 2023. We will share with you today additional insights on our go-to-market plans and further updates on our progress to date. We have every reason to be bullish about the opportunity for INPEFA in the heart failure market. We will be launching with the tailwinds provided by treatment guidelines recently adopted by major cardiovascular societies supporting the use of SGLT inhibitors as a frontline treatment for heart failure. The heart failure market is seeing a rapidly expanding use of approved SGLT inhibitors. Use of the two SGLT inhibitors previously approved for heart failure have more than doubled in that market since the beginning of 2022 and the heart failure branded market itself has grown by almost 40% from 2021 to 2022. Health care professionals can and will have expanded choice when determine appropriate heart failure treatment options. And INPEFA's broad label means that we have the ability to compete across the entire spectrum of heart failure patients. However, our primary focus would be on the sweet spot of care, which for us is the transition of care patients. We believe that patients who are stabilized following hospitalization for heart failure are perfect candidates to be considered for INPEFA before leaving a hospital or soon thereafter. The clinical data from our SOLOIST study is compelling and clearly laid out in our label with specific instructions on how to dose a decompensated patient once stabilized. INPEFA will be 1 of 3 SGLT inhibitors approved for heart failure but 1 of 1 with clinical data from this unique patient population in its label. The opportunity in this space is significant. Based on our internal data as of early 2023, the penetration of approved SGLTs in the overall heart failure market is less than 10%. And in 2022, only about 1 in 10 heart failure patients received an SGLT inhibitor in the hospital, the most critical point of needed engagement. Our President, Jeff Wade, will show later the population of heart failure patients is also projected to continue to grow by nearly 20% by 2030. And combining all of these data points, you can clearly see that a tremendous growth opportunity remains. I fully acknowledge launching in this market would take time to gain traction, especially given we are launching off the managed care bid cycle of the year. Therefore, I want to focus your attention on the key leading indicators that we will be monitoring as we track progress in the coming months. Through our discussions today, we will walk through each of these leading indicators and our goals for launch, including the status of payer negotiations and access to covered lives, wholesaler ordering patterns and inventory status. And finally, prescription trends over time. The remainder of 2023 will be about access, access, access, and laying the necessary groundwork for future accelerated growth, a process in which we have already been fully engaged in earnest. I would now like to turn the call over to Craig to talk about the clinical sweet spot for INPEFA and supporting clinical data.

Thank you, Lonnel. As a reminder, INPEFA was studied in 2 pivotal studies in an aggregate of nearly 12,000 patients, SOLOIST and SCORED with unique and high-risk patient population. Next, we wanted to illustrate for you the typical journey and highlight the sweet spot for the hospitalized heart failure patient. As you can see on the slide, this group of patients, while clinically stabilized remains at extraordinarily high risk for future heart failure events. A majority of these patients will return to the hospital within 1 year after hospital discharge. This is where our SOLOIST Worsening Heart Failure trial was unique by enrolling approximately 1,200 patients who have been hospitalized for heart failure, and we're transitioning out of the hospital. Double-blind randomized treatment began either in the hospital or within 3 days following discharge. They were approximately 50% of patients in each of these categories. On the next slide, you will see as a reminder that the primary endpoint for this trial was achieved with a statistically significant and clinically meaningful reduction of 33% in the composite of total cardiovascular death, hospitalization for heart failure, and urgent heart failure visits with the NNT or number needed to treat of only 4 patients for 1 year to avoid an event, a finding which is unsurpassed across all SGLT inhibitors. Presented here are the results of the post hoc analysis looking at cardiovascular death and heart failure-related events for 30 and 90 days post discharge. You can see the INPEFA arm in the blue collar begins to separate from the placebo arm in green early on and showed that treatment with INPEFA resulted in a significant relative risk reduction versus placebo of approximately 50% in the composite of cardiovascular death and readmission for heart failure at both 30 and 90 days following hospital discharge. These findings are unique and underscore the benefits of early initiation of evidence-based heart failure therapy. We also wanted to highlight key data presented just recently at the American College of Cardiology's 72nd annual scientific session held in March 2023 on the time to clinical benefit of INPEFA, which was also published in the Journal of the American College of Cardiology shortly thereafter. The authors of this post hoc study concluded that treatment with INPEFA led to a statistically significant reduction in the risk for the primary outcome of cardiovascular death, hospitalization for heart failure, and unscheduled emergency heart failure visits on day 27, post randomization. These results were consistent across the left ventricular ejection fraction range. We believe that these data support and further extend the 30-day reduction in readmission results presented at the 2022 AHA meeting supporting the conclusion that treatment with INPEFA results in an early and significant reduction of heart failure events and cardiovascular death in the high-cost, high-risk recently hospitalized patients with worsening heart failure. In addition to these important clinical results, a new analysis recently presented at the International Society for Pharmacoeconomics and Outcomes Research annual meeting in Boston, Massachusetts on May 9, found that INPEFA is cost-effective treatment, a commonly accepted willingness to pay thresholds in patients with diabetes and worsening heart failure. This analysis was led by the MedStar Health Research Institute in Washington, D.C. and was conducted from a U.S. health care sector perspective in accordance with the consolidated health economic evaluation reporting standards. The analysis was based on 9-month median follow-up from the 1,222 patients enrolled in the Phase III SOLOIST Worsening Heart Failure trial and designed to extrapolate costs, life expectancy, and quality adjusted life expectancy to estimate INPEFA's cost effectiveness. We expect these results demonstrating cost effectiveness, along with the robust clinical results to be a key part of our discussions with both health care practitioners and payers. Finally, and importantly, as Lonnel has already communicated, the growth in the heart failure market is being bolstered by new treatment guidelines recently issued by major cardiology societies in the United States and Europe, recommending the use of SGLT inhibitors as a pillar of care for treating heart failure. In addition, the ACC recently issued a new document in the April 2023 edition of JACC entitled 2023 ACC Expert Consensus Decision Pathway on Management of Heart Failure with Preserved Ejection Fraction. The consensus recommended that SGLT inhibitors should be initiated in all individuals with HFpEF lacking contraindications. Considered together with the previous consensus guidelines, the SGLT inhibitor class is the only medical therapy recommended in all heart failure patients regardless of injection fraction. As a reminder, INPEFA is now 1 of only 3 SGLT inhibitors indicated for the treatment of heart failure, and the SOLOIST population was unique in its study of recently hospitalized patients and resulted in significantly lower total number of deaths from cardiovascular causes, hospitalizations and urgent visits for heart failure than placebo, regardless of left ventricular ejection fraction. I will now turn the call over to Jeff to share further about our commercial plans and execution.

Thank you, Craig. Heart failure is a multibillion-dollar fast-growing market. There are 6.7 million people in the United States living with heart failure, a number that is expected to rise to 8 million by 2030. Heart failure is the leading cause of hospitalization for Americans over 65 with approximately 1.3 million hospitalizations for heart failure annually. One of the major challenges in heart failure treatment is that patients who are hospitalized for heart failure are highly likely to return with approximately 25% of patients being readmitted to the hospital within 30 days of discharge and 65% within a year. Those 1.3 million hospitalizations a year provide an exceptional opportunity for INPEFA given our unique data showing INPEFA's significant impact in addressing this challenge, substantially reducing the risk of cardiovascular death hospitalization for heart failure and urgent heart failure visits for patients transitioning from the hospital to outpatient care after a heart failure event. Turning to the next slide. You can see that hospital readmissions are burdensome not only for patients but also to the health care system. Annual costs from heart failure are expected to increase to nearly $70 billion by 2030, with 80% of those costs due to hospitalizations. There is not only a substantial unmet need for better treatment options for patients. But as these data make clear, there is also a strong incentive for providers, hospitals, and payers to identify new approaches to reduce hospital readmissions. We also know that it is important to prioritize when patients are started on therapy in order to increase the likelihood that they remain on therapy following a hospitalization. As you can see from the data shown on this slide from the Journal of the American College of Cardiology, starting patients on therapy at the time of hospital discharge results in significantly higher percentage of patients receiving appropriate treatment at 60 to 90 days and a 12 months follow-up. As we have previously reported, commercial launch preparations for INPEFA have been underway for well over a year and have progressed meaningfully throughout 2023. We have invested significantly in the infrastructure to support the commercial launch of INPEFA in heart failure in the U.S. with the required resources currently in place. We will now take a few minutes to provide you with updates on a few key areas of our launch and execution plans. Beginning with our go-to-market approach. Our focus at launch will be to generate demand with targeted initiatives aimed at heart failure experts and high-volume treaters. Across our teams, we will be focused on establishing INPEFA as the standard of care for heart failure patients who are hospitalized in transitioning to outpatient care. This will include driving urgency and the need to initiate heart failure guideline-directed medical therapy, both in and out of the hospital, leveraging updated treatment guidelines and accelerating the adoption of INPEFA on to IDN and hospital formularies, focusing on high admission rate hospitals and INPEFA's unique value proposition. Finally, our field sales force will be focused on pulling through early hospital and payer formulary access and driving early adoption. Next, on our field sales structure, we will be launching with approximately 150 cardiovascular sales specialists. We have already onboarded the significant majority of this team whose members are already well progressed in their training, and we expect our full team to be in the field engaging with HCPs in the second half of June. We have taken great care to bring on board experienced pharmaceutical sales team members with expertise in both cardiovascular and hospital sales. Our field teams will be focused on both high-volume treaters and the top heart failure institutions. The team is sized to cover a total of approximately 22,000 targeted health care professionals with a primary focus on a subset of about 8,000 health care professionals who are responsible for the greatest proportion of heart failure treatment decisions. Selection of these health care professionals for the field team was based on the volume of rated heart failure prescriptions and for institutions, the number of heart failure discharges. While the teams have been onboarding the past several months, one of their major initiatives has been making appointments to occur following FDA approval with targeted health care providers. To date, they have booked well over 5,000 appointments with health care providers or within institutions that will begin in June. We plan to share with you additional details on these types of interactions in future updates on the progress of our launch. Turning to Access. Our pricing and access approach has been built on leveraging and informing payers of INPEFA's strong value proposition in our targeted patient population. Our wholesale acquisition cost will be set in line with other braved heart failure treatment options on the market today. We are pursuing broad formulary access across Medicare, commercial, government, and institutional accounts to enable adoption and accelerate the use of INPEFA. Our market access field teams are focused on both national and regional Commercial and Medicare payers as well as institutional accounts. As you can see on this slide, we have a team focused on the largest payers in the U.S. and a dedicated team also focused on generating access in integrated delivery networks, or IDNs. IDNs are comprised to the network of acute care hospitals, outpatient ancillary facilities and providers working together to deliver coordinated quality care across the inpatient/outpatient continuum in specific geographies and populations. We believe that there is a strong clinical and economic value proposition we will be bringing to these systems. Specifically, we believe that INPEFA's unique data and transition of care heart failure patients provides a compelling rationale for benefits to both patient and IDN of starting therapy in the hospital or upon discharge, making IDNs a key target for driving adoption and growth of INPEFA. We have prioritized for the focus of our IDN efforts, 60 high-leverage IDN systems out of the approximately 400 such systems in the United States, selected based on their respective heart failure patient populations, decision-making processes, and readmission rates. We have focused our payer access efforts by prioritizing accounts based on the number of heart failure lives and we have tailored those efforts by deploying unique engagement strategies for the messages we think will resonate most with each class of payer. For example, for Medicare Access, we have focused efforts on sharing INPEFA's unique value proposition and planning for off-cycle bid submissions to accelerate access to those patients with Medicare coverage. As a result, while our approval falls off-cycle in the typical Medicare submission process, we have already begun submitted -- submitting bids for Medicare coverage beginning in January 2024 or before and expect to continue such submissions over the next several months. Medicare will be an important opportunity given that, as I mentioned earlier, heart failure is the leading cause of hospitalizations for Americans over 65. We have also begun submitting bids for commercial coverage, which we see as offering earlier opportunities for access for INPEFA after launch, given the processes for formulary decisions. For both commercial and Medicare, 100% of our targeted national accounts and the majority of the targeted regional accounts have already received preapproval information exchange presentations from our field medical teams. Based on all these early access efforts, we expect to have made submissions for access encompassing nearly 19 million Medicare lives and 91 million commercial lives by the end of this week with more bids continuing over the next 6 to 12 months. Supporting our IDN access strategy, we are focusing on contracts with the 5 largest group purchasing organizations to facilitate hospital purchases of INPEFA. Among IDNs, we have appropriately engaged with close to 3/4 of the targeted 60 institutions to drive awareness of the unique value proposition of INPEFA. We plan to share updates on our ongoing bid submissions across channels and access to covered lives in our upcoming corporate updates. Lastly, regarding the timing of product to market, all the distribution and trade networks are poised for launch. Serialized and pre-labeled product is already at our third-party logistics vendor, with only printing of the final FDA-approved package inserts to be completed before release. We expect that product will be ready for order from wholesalers and downstream retailers in a matter of weeks and no later than the end of June. We plan to share additional information on wholesaler ordering patterns and inventory levels in our upcoming update calls. I would now like to pause and ask the operator to open up the call to take your questions.

[Operator Instructions] Our first question today will come from Yasmeen Rahimi of Piper Sandler.

Really big congrats on an incredible win and what a broad label really probably the best label across all the SGLT2 class. So -- what a wonderful job you guys have done. A few questions. Maybe the first one for you, Jeff, is like what is the capital needed in order for the commercial plan to be fully executed? If you could provide some color around that, that could be helpful. Second, maybe just -- I know that a lot of our clients listening understand the opportunity of patients that are hospitalized, but I guess what you could maybe highlight is like what is the speed by which scripts could be filled in a hospital setting versus maybe a traditional going in into the doctor's office and calling on to those cardiologists, just sort of your -- like there's a way to quantify that, the speed and the efficiency being in a hospitalized channel versus in the doctors' offices? And then third is just like I know you pointed out that the pricing is going to be consistent with other. But given the broad label, is there an opportunity, like is it really exactly in line? Or is it a little lower? Is it a little higher? Just some other commentary beyond pricing would be really helpful. And then we'll jump back into the queue.

Okay. I'm going to do my best to address each one of those and try to remember the questions in order. So if I need a reminder, I may ask you about that. So in terms of capital, so we had roughly $106 million at the end of this past quarter. We have an arrangement with Oxford, where we have the ability to draw down up to $100 million in additional funding and we have the entitlement to draw down up to $75 million based on this approval. And so that provides us with substantial flexibility and the ability to launch this drug well. The second question as it relates to timing. So there's kind of 2 parts of this question. One is, it will take some time to get on hospital formularies. So there is going to be some -- and we've already begun engaging to do the groundwork for that, but it will take some time to get on hospital formularies to enable in-hospital starts. And so at the outset, the opportunity is really more on -- upon discharge. And so that will be -- as over time, that will change as we get on hospital formularies to where we can get more and more in hospital starts. So that's an important element to consider as we go here. We think we have a really strong value proposition to get on the hospital formularies because we're bringing value not only to the patient but also to the hospital, to the institution and that messaging and the data that we have has really been resonating. But it will take some time to get on those hospitals post approval -- this hospital formularies post approval. And -- so I address 2 of the 3 questions -- oh pricing. So pricing -- so we just talked about WAC pricing, wholesale acquisition cost pricing. We are pricing pretty much all of the heart failure drugs, bringing heart failure drugs in the market are priced within a common range in terms of wholesale acquisition costs. What differs really is that the patient population that you're addressing and the value proposition that you bring. And that's really manifested in net pricing. We believe that we have a really strong value proposition. We're bringing value to the patients and also to payers and to hospital systems as well. So we believe that there may be a difference not so much of a difference in the wholesale acquisition cost, but we have a strong value proposition as it relates to what that net price will be in -- where that will end up landing. So hopefully, that addresses your question?

Yes, and I would add just a couple of things what Jeff said, and they go hand in hand is that the pricing has -- so the IDN's is to Jeff's point, it's going to take some time to get up to those hospital formularies. That's part of the long-term value proposition we will create for maximizing the opportunity with this asset. The near terms is that we have these commercial plans, both regional and nationally, and we have to be competitive, ensuring that we're able to get early access. So we have the price in a way which allows us to get that access early and start getting early use while we work on the IDNs and get on site with the Medicare plan. So while we have a great value proposition, we also have to be very, very sensitive to our ability to be able to get early access into those commercial plans to start getting lift on the product sooner than later.

Our next question today will come from Andrew Tsai of Jefferies.

Big congratulations to you as well. A couple of questions on our side. I guess to start, just taking one step back. When we look at the label, in short, can you possibly summarize for us what aspects in the label specifically differentiate sota from the other heart failure drugs out there? Or said another way, what will your sales rep be messaging to doctors about INPEFA why doctors should prescribe it and vouch for INPEFA at their P&T committees over the other SGLT2 inhibitors at the end of the day? Secondly, a lot of -- we understand your priority is getting formulary access. The question then would be, how quickly do you think you can get broad formulary access at your targeted hospitals, for instance, how long did it take to other SGLT2 inhibitors as well as ENTRESTO to get on the formularies? And then third, lastly, is given you have a broad label for heart failure, is there any plans for a DTC type of ad spend in the near term?

Okay. So I'm going to start with the first part in terms of the label. So as Lonnel mentioned, we are going to be 1 of 3 SGLT inhibitors approved for heart failure and it's a broad label in heart failure. We will be 1 of 1 with data in our label from the SOLOIST patient population from patients who are initiated in the hospital at the most important transition of care point. And we will be the only ones to have the efficacy data and the safety data in that patient population in our label. We also have specific instructions, as Lonnel said, that are unique to sotagliflozin because we uniquely studied this in this patient population that address how do you start a patient that's initiated in the hospital as opposed to just purely a chronic care patient. So there are going to be these key elements that are focused on that SOLOIST data and the value associated with that. To answer one of your other questions in terms of timing, we're -- we feel that there's a good opportunity for us to get coverage. Starting this year, but really around the beginning -- at the end of this year, beginning of next year is when we think that we're going to be able to really drive significant increase in coverage. And that's going to be -- that's a key area of focus for us. That's going to be what we're focused the most upon -- most on during the course of this year. Hospital formularies generally take 6 to 9 months, some of them take 1 year. So it will take some time to get to on hospital formulary access in terms of the ability to initiate in the hospital as opposed to upon discharge. But that's something that we've already done a lot of groundwork on, and we'll be accelerating over the balance of this year and through the beginning of next year. And there was one other question that you had that I wanted to address, and I'm trying to remember what it was.

No worries. DTC spend, please?

DTC. So our strategy is really focused on this transition of care patients. It's a decision that's being made while the patients in a hospital with an acute decompensated heart failure event and then is getting ready to transition to outpatient care. We are not really big believers that DTC is really going to drive that strategy, right? That's a decision that's being made in the hospital setting. So that's -- we don't have intention of spending a lot of direct-to-consumer on the light of direct-to-consumer promotion given the strategy that we have for penetrating this market.

Yes. Andrew, I add a couple of things to what Jeff said is that what's different and why the time line for us to get on to formularies and particularly hospitals, a little bit faster than others have is because for the first time, you have these guideline-directed medical suggestions that are coming from all of the cardiovascular societies, where SGLT inhibitors are being moved up in lines of therapy, where the recommendations are -- start with an SGLT as an example. We are actually -- we have those tailwinds going into those institutions. Those who came before is the limited branded products that came before us did not have that. They actually had to try to prove that. And in fact, given that the SGLT has moved in a front line, that's actually ahead of ARNI, including ENTRESTO. So those guidelines are critically important, and it's so awesome that we were part of that even before we got approved because of the data that is now in our label. So I do expect us to make inroads much faster than others have because of those guidelines. And then the second point that Jeff, made I think the better utilization and allocation of our resources would be on that setting as well as on ensuring that we have the ability to gain access with specific audiences that allow us to play off of the hospitalized patient versus going too broad and trying to compete too broad. We're not going to outspend the competitors in the marketplace. But if we focus our resources where we have strength and we have every chance of having significant growth.

Makes sense. I really appreciate it. So just -- it sounds like your focus on during hospitalization, that's your angle. How -- just one more is just how about the readmission rate data that you have is -- are your sales reps able to promote that?

Well, this is the great thing is that the SOLOIST study is in our label. So it is focused on readmissions. We have data on readmissions in our label. We have data on the composite endpoint. We have specific data on hospital readmissions in our label. So we will have the opportunity to share that information with health care providers and with payers as a core value proposition because we do have that -- we did complete that study, and that study is in our label in some detail.

Our next question today is from Joseph Stringer of Needham & Company.