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

Good day, and welcome to the LX9211 Program Update Conference Call. [Operator Instructions] Please note this event is being recorded. At this time, I'd like to turn the conference over to Carrie Siragusa. Please go ahead.

Thank you, Allison. Good morning, and welcome to the Lexicon Pharmaceuticals' LX9211 Program Update 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, we issued a press release announcing the planned advancement of LX9211 into late-stage development. 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 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, clinical development, regulatory status and therapeutic and commercial potential of LX9211. These statements may also include characterizations of our plans for the commercial launch of INPEFA in heart failure as well as the regulatory status and market opportunity for INPEFA and our other drug 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 discussions with the FDA and other regulatory authorities regarding our drug programs, 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 would now like to turn the call over to Lonnel Coats.

Thank you, Carrie. Good morning, everyone, and thank you for joining us on today's call. We're very pleased to update you on Lexicon's planned advancement of LX9211 into late-stage development in diabetic peripheral neuropathic pain. The late-stage LX9211 development plan we share today reflects clear FDA feedback we recently received. The plan derisked our planned Phase III studies and it increases confidence in obtaining positive clinical outcomes as early as possible. With that in mind, I'll turn the call over to Jeff to provide a perspective on the large neuropathic pain market and the need for new potential innovative treatments like LX9211.

Thank you, Lonnel. First, we'd like to provide you with some perspective on the prevalence of peripheral neuropathy and diabetes. Up to 30% of type 1 diabetes patients experience peripheral neuropathy and for type 2 diabetes patients, that prevalence increases up to 50% after 10 years of diabetes. Up to 30% of all diabetic peripheral neuropathy patients experience diabetic peripheral neuropathic pain or DPNP. There are approximately 5 million DPNP patients in the U.S. alone, a number that continues to grow. Diabetic neuropathy can have significant impact on these patients, including challenges like loss of balance, loss of daily function, pain, depression, lack of sleep and others. Current pharmacological treatment options for DPNP are limited. Health care professionals treating DPNP must navigate a complex combination of therapies and other options as shown on this slide. Regular review and adjustment of the therapeutic approach in each patient is essential. In addition, the 2 non-opioid FDA-approved treatments currently on the market were approved nearly 2 decades ago with limited innovation since that time and with a limited pipeline of DPNP treatments currently in development, there is a significant unmet need for DPNP patients and the physicians who are treating them. Now turning to our development candidate, LX9211. LX9211 is a potent, highly selective small molecule inhibitor of a novel target adapter-associated kinase 1, or AAK1. In a number of relevant animal models of neuropathic pain, LX9211 demonstrated consistent significant reductions in pain scores even when compared to positive controls such as gabapentin. LX9211 achieves high levels of drug in the CNS. And importantly, the mechanism of action of LX9211 is independent of the opioid pathway. In Phase I studies, LX9211 was shown to be well tolerated with the pharmacokinetic profile supportive of once-daily dosing. LX9211 has been granted fast track designation by the FDA for diabetic peripheral neuropathic pain. We've completed 2 Phase II proof-of-concept studies of LX9211 that support AAK1 inhibition as a potential new mechanism of action in neuropathic pain including a Phase II proof-of-concept study that met its primary endpoint for diabetic peripheral neuropathic pain. We believe that LX9211 has the potential to overcome many of the shortcomings of current therapies and could become a welcome new innovation for those suffering from diabetic peripheral neuropathic pain on a daily basis. As I mentioned, this is a large and growing market with a high unmet need with more than 20 million Americans experiencing neuropathic pain and approximately 5 million DPN patients in the U.S. in 2022. Today, we are sharing with you our plans to rapidly advance LX9211 into late-stage development and a clinical program directed towards regulatory approval in diabetic peripheral neuropathic pain. DPNP represents the largest market opportunity within neuropathic pain overall. And since our last quarterly call, we have received feedback from FDA that aligns with our proposed development plan in DPNP, including using average daily pain score or ADPS, as the primary endpoint of future studies and targeting a DPNP patient population, similar to those enrolled in our Phase II proof-of-concept study. It is important to note that we are moving forward with a complete DPNP clinical program designed to optimize opportunities for success, time and efficiency and satisfying regulatory requirements for approval. We expect our Phase IIb study of LX9211 to enable a more efficient Phase III study execution and derisk investment while maintaining overall development program cost and time lines. Our first late-stage study will be a Phase II dose optimization study with an 8-week treatment duration that will also include an extension designed to satisfy ICH guideline long-term exposure requirements that we plan to run in parallel with next phase -- Phase III studies. These Phase III studies are expected to have a 12-week treatment duration. We expect the startup of our Phase IIb study will begin swiftly in the third quarter of this year with expected initiation of dosing in the fourth quarter. I will now like to turn the call over to Craig to provide further details about these late-stage clinical development programs for LX9211.

Thank you, Jeff. As Jeff has already mentioned, we have designed a late-stage program that begins in Q3 of this year with a Phase IIb dose optimization study and follows through 2 planned Phase III studies to an NDA filing. In addition, our strategy of employing a Phase IIb study with an open-label extension running in parallel with the start of Phase III is designed to enable satisfaction of regulatory requirements for filing within the same approximate time frame as a direct Phase III development program. Next, we'd like to preview for you our plans for the Phase IIb dose optimization study. The study with design will include a randomized patient population similar to our previous Phase II proof-of-concept study in DPNP, including patients with type 1 or type 2 diabetes. Patients will be 18 years of age or older with a history of DPNP of greater than 6 months. Pain scores will be considered moderate to severe, and patients will be stratified for DPNP medication use. Patients will also be allowed on a single preexisting stable dose DPNP medication that is maintained throughout the double-blind treatment period. As mentioned previously, the double-blind treatment period will run for a period of 8 weeks and will include 4 treatment arms, including a 10-milligram dose, a 20-milligram dose and a 20-milligram dose for 7 days followed by 10 milligrams thereafter as well as a placebo arm. The open-label treatment period is expected to run for 44 weeks with a safety follow-up period of 4 weeks. Startup for this study scheduled for the next quarter of 2023, we expect the readout of top line data in the first quarter of 2025. I'd now like to pause and ask the operator to open the line to take your questions.

[Operator Instructions] Our first question today will come from Yigal Nochomovitz of Citi.

This is Carly on for Yigal. First, just curious in your interactions with the FDA, if they commented at all on the magnitude of improvement in average daily pain score that they would consider clinically meaningful? And I guess, also, when you look at the labels for gabapentin and pregabalin they also look at sort of responder analysis. So just curious, from a regulatory perspective, how important those might be going forward?

Great question, Carly. Let me turn it over to Craig.

Thank you, Carly. Yes, we've spent a lot of time talking to the FDA and KOLs about this study in this program. And the feedback we've gotten from everyone in today's world, with this study design, the outcomes achieved in the Phase II positive proof-of-concept study are both regulatorily satisfactory and clinically meaningful. I think from the medical community standpoint, the fact that this drug has been presented at close to 10 different major medical meetings, including a podium presentation at the ADA meeting on Friday night, as we've already referenced in our press release, I think, speaks to the importance and the excitement about this data and the unmet medical need. It was reaffirm me to get formal feedback from the FDA also acknowledging that the reduction in ADPS scores are considered regulatory satisfactory. Just as a point of historical reference, the studies that were achieved approval 20-plus years ago. In general, the patients were taking off all underlying medications is very different than this trial design where not only were patients allowed to continue on their underlying medication, but there is a run-in period that, as we've already previously communicated the placebo group has a net drop in ADPS in the run-in period before the formal start of the trial. So I think taking that into consideration both from the regulatory and the KOLs, they believe this data is a regulatory approvable based on the results already achieved in the positive Phase II and that the medical community sees these as important -- this drug is an important potential new innovation in the treatment of DPNP.

Yes, I would agree with everything that Craig said is that the results we have in hand and the proof-of-concept were good enough for us to move forward. Remember, the reason for us doing this is not just to have the efficacy, but we also want to have the ability to reduce what we saw was some tolerability issues, and that's why the design is to where it is. So we have the efficacy piece. The other piece of your question is when you get into Phase III, responder analysis will be part of that plan.

Okay. Great. That's very helpful. And then just in terms of the dosing. Can you elaborate a little bit more on the rationale for doing away with the high loading dose? I think you mentioned some tolerability issues in the prior study, but just curious why you don't think you might need the high loading dose for going forward.

Craig, I'm going to turn that back to you.

Thank you, Lonnel. Carly, great question, and this is one that we really spent a lot of time working with our KOLs, our internal discussions and then also some of our key questions we had for the FDA. As I think we've shared previously, most of the tolerability issues, and again, I want to stress that these are tolerability issues, not serious adverse events, and the major tolerability issue was mild to moderate dizziness they all occurred in the first couple of weeks. If you look out beyond 2 weeks, there were essentially no differences in dropouts between the treatment group and the placebo group in DPNP. So in that regard, we had a good clinical rationale for why we thought that tolerability issue was really focused upfront and not the efficacy because the maintenance of the curves on an efficacy standpoint continued throughout the duration of the study, which is not what you will always see with other DPNP treatment trials where, over time, the efficacy returns towards placebo. We've done extensive PK and modeling work to validate those results that made us feel very comfortable with this trial design and the importance of including that 20-milligram dose arm as well because based on exposure, we did see that those patients that had more drug treatment exposure in their blood tended to have better efficacy.

I think just to add on to this, Carly, is that we saw -- in the study, we saw efficacy that started right off the back. So the results separated from placebo in the first week and the reason that we did the loading dose in the first place was because we didn't know how long it would take for the drug to start to show an effect. And we wanted to get the steady-state PK on the very first day. And it's apparent from the results that, that's not really necessary that may likely be contributing to tolerability. But that, as with a lot of other medications in this space, that having basically getting to that steady state over a relatively short period of time, but not on day 1 is going to provide us with the efficacy that we want to see, but also with better tolerability.

Our next question today will come from Yasmeen Rahimi of Piper Sandler.

Congrats on a great update. A number of questions for you. Maybe the first place is, could you maybe comment on what are some of the key secondary endpoints that you're powering for if there are any statistical hierarchy? Any color in terms of powering assumptions to the extent you can comment on, on the primary? And then lastly, as you're thinking about the Phase III patient population, like could we assume that the inclusion/exclusion criteria are going to be almost identical to what we have already seen in the Phase IIb program? So I just want to understand like what elements will you keep the same? What are some of the modifications you're making? And if you're making modification? What are those? And why are they being implemented? And I also would love to, once we address that, maybe squeeze in a question on sotagliflozin, given the strong presentation that was at EASL and ADA. But maybe we'll start on LX9211.

Great question, Yasmeen. I think Craig, why don't you take that? But I think also, generally speaking, you're going to see the fullness of how do we best take a dose into Phase III from Phase IIb to allow us to stay on time and on track. And the population is going to be very similar to what we have already proven to show that the drug has effect. So I'll give you that as I'll start, and then I'll let you, Craig, to take it from there.

Thank you, Yasmeen, for the great questions. And again, just as a reaffirmation, the primary endpoint is the ADPS score at week 8 at the end of the study. So that's how the study is powered identically to how we did the positive proof-of-concept study in DPNP. The secondary endpoints, I think were really informed based on the feedback we've gotten from both the agency as well as what we learned in the positive proof-of-concept study. So we are certainly going to be looking at some of the qualitative aspects of pain because we believe these are extremely important clinically to patients have not really been effectively labeled as such with the other agents. And remains an area where we can really be differentiated in the market over the long run. So we're really looking at the burning pain. We're looking at sleep interference similar to what we looked at in the positive proof-of-concept study. We're looking at the PGIC. And we're looking at the total neuropathic pain symptom inventory, NPSI, which I think we've discussed with you previously. So we have a host of secondary endpoints that get at the quality of the pain and really trying to identify how we can potentially bring some of those very important clinical markers for patients into the Phase III program with the goal of getting unique and differentiated labeling based on the profile of this agent. With the powering assumptions, we feel very confident going in based on the large positive proof-of-concept, and we're looking at a similar reduction in ADPS of the treatment arms compared to the baseline and one of the reasons why we have 3 active arms, as you can now also model those arms in a number of different ways that increase the confidence not only in the activity of the drug, but in the final dose selection of the 10 versus the 20 for 5 days, followed by 10 versus 20 flat. So we've taken all of that into consideration, having learned a lot from the positive proof-of-concept. When you're asking about the inclusion/exclusion criteria for the Phase III study. We believe that the inclusion/exclusion criteria in this study is really broad and in fact, one of the elements that we've gotten a lot of positive feedback on is the breadth of the study. As a reminder, we had a very broad geographic representation, gender representation, a large contingent of African Americans in this population, nearly 20% of the Phase II proof-of-concept was African-American much higher than you see in other trials. I think the only area that we continue to look at is, can we potentially lower that pain score a bit from the very -- what is considered high moderate to a lower rate. But otherwise, we think we have a very broad and inclusive group already included, particularly the use of underlying DPNP medications and the ability of patients to continue on those medications at a stable dose.

And yes, I would just want to add, one of the things when we were doing market research, and this is informed by the proof-of-concept study result is that something that physicians feel is a very significant need is an agent that can be used on top of underlying existing therapies and add benefit. So not only that it can be used on its own, but it can be used in combination with other therapies. And because the results that we saw were consistent both with and without underlying therapies, that offers an opportunity for us that has just not been met by anybody in the marketplace. And the design of these studies is lined up with that objective to be able to be used kind of on its own and the rotation among various diabetic peripheral neuropathic pain therapies, which is the way that people treat it now. But also in combination for someone who's on an underlying therapy may be providing some benefit but not adequate benefits to be able to add another mechanism that will allow them to get better relief.

And maybe on the conferences. We noted that at EASL and ADA, there was a significant support of combination approaches the SGLT2 class with the GLP-1. We also saw a tremendous interest in data set in NASH as well. Would love to hear sort of some of the key takeaways and as you guys observed from the EASL conference as well as from the American Diabetes Meeting. And then I'll jump back into the queue.

Craig, this is your moment. So, it's back to you, sir.

Okay. Thanks, Lonnel. Yes, I think that what it really establishes is that the SGLT class is a foundation for all cardiometabolic disorders, particularly when it relates to heart failure and a number of uses related to heart failure and renal dysfunction. So everybody wants to partner with an SGLT inhibitor because they are so important in this large cardiometabolic space. And whether you're thinking about improved weight control or glucose control with GLP-1, whether you think about renal function with ASIs or MRAs, when you think about reducing heart failure, again, SGLTs make everybody work better. So I think that, that is a growing awareness and guys like Eugene Braunwald have said SGLTs are the most important medical innovation in cardiology in this century. So I think there's been a lot of innovation but I think the SGLT class, and I think that's been identified as now this is the only class of agent that has been recognized across the entire range of heart failure as all patients should be on an SGLT inhibitor with heart failure unless there is a contraindication. And we feel really good about our INPEFA data that not only do we have unprecedented data or noncomparable data when it relates to the at-risk group of patients with heart failure but also that recent and worsening heart failure group were the only ones that are specifically labeled and have been studied by the FDA for safety and efficacy in that highest risk, most fragile patient group, and we've been able to demonstrate the outstanding efficacy results and similar tolerability in the more stable at risk for heart failure patients that the SGLT2 inhibitors have studied in for which they are labeled.

I'll just add one other thing is that, it does highlight to Craig's point, the all the medical benefits of SGLTs, but it also increases the opportunity -- the partnering opportunities for compound like INPEFA across the board with some of these other mechanisms. And so we look forward to advancing our work in the marketplace. But ultimately, from a business perspective, this is definitely something, I think, will continue to be an important part of our overall strategy.

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

Good job on the progress. So first question is on the Phase IIb. What did the FDA say about the Phase IIb potentially being a pivotal study or would you still need 2 positive Phase IIIs at the end of the day? Secondly, what peripheral studies did the FDA ask you or recommend you to run? Remind us, for instance, if you need to do human abuse liability studies or is this Phase II and 2 Phase IIIs all you need to file the NDA? And then third, what strategies are you implementing to help mitigate a high placebo effect potentially?

Andrew, all great questions. Craig, I'll turn it over to you.

Thanks, Andrew. On related, the Phase IIb, we feel very strongly that in this category, like most things in CNS that you're going to need to run at least 2 pivotal studies. And that's why we've designed the trial with those 2 pivotal studies. We also believe though that as Jeff and Lonnel mentioned, by having that long-term follow-up period in the Phase IIb, we're going to be able to concurrently accumulate the exposure, both in terms of numbers of patients and duration of patients that are required for ICH guidelines for exposure. So even if we were to start the Phase III program earlier, we wouldn't be able to file any earlier because we would not have had the necessary exposure data. So in a sense, we are already using the Phase IIb study as very important supportive information for the filing. I think it is very likely that with positive study results, there will be a request from the FDA to combine the overall studies in some way or not, but we are not counting on that, that's why we are planning on running those 2 separate independent Phase III programs. The peripheral studies, I think we've tried to be disclose on what we've discussed previously with you. We did get feedback from the FDA on what I would call the peripheral or as you rightly called it, Andrew, the peripheral studies like abuse liability and others. We've had good, robust discussion with FDA on that, and we continue to dialogue with them, which what is the optimal trial to do in that regard both the animal studies and the human studies, but we don't believe that any of these are significant roadblocks or show-stoppers. I mean, our program and as you've -- as we've already previously discussed, this is a non-opioid mechanism, and I think that can only work to our favor. I think there's another panel of nonclinical studies like the CARC studies and other long-term trials that we're also planning and running and some of these, as you know, take significant amounts of time. But all of this program is intended to be complete to allow us to file for NDA approval without delays. The third in the issue of mitigating the high placebo rate. I think by having the moderate pain score and the run-in, one of the elements that we've been complemented on particularly in the medical community is the fact that we have very consistent results, which is a reflection of not having this high degree of variability in either the pain score of the patients who are being treated or in many of the placebo effects that the devil other trials.

Our next question today will come from Joseph Stringer of Needham & Co.

Two from us. Just wondering if you could comment on the partnership options and the discussion around the pain program. Or are they still on the table? Or are you planning to do this program on partner to move it forward on partnered? And are discussions still ongoing? And could they open up after potentially the Phase IIb readout? And then secondly, can you talk about the pain program impact to cash burn and current cash runway?

So Joey, just a couple of things. So first of all, we've been continuing to have dialogue with potential partners. This design actually is informed by some of those discussions. And we are continuing that dialogue. We have -- we've previously said, and this has always been our strategy is that we're going to pursue. We're going to keep pushing forward in diabetic peripheral neuropathic pain, as we go through those partnership discussions. What partnership really allows us to do is to address a broader neuropathic pain program that goes beyond just diabetic peripheral neuropathic pain. But we're continuing to have that discussion, and we'll continue to move this program forward in the interim. We do think that there's an opportunity by us continuing to develop that we are going to continue to increase the value of this program. Programs do not gain value by pausing in development. And by moving this forward in development in an area where we have strong proof-of-concept data and a clear path forward in what is the largest market within neuropathic pain, we think that, that's going to be a driver of interest. In terms of the program itself, this study is something that we've had baked into our forecast for a long time. And so this is going to be something that is funded within the current cash runway. We're expecting that to take us out roughly 2 years and that's without any partnership. So we -- and which we think is very imminently possible within that 2-year period. So we're pleased to be moving this forward. We think it's going to be an opportunity to create a lot of value. And we also think that by moving it forward, we're going to be creating not only value in the program, but also a potential partnership value.

Joey, I would say one of the key reasons for raising capital recently was to ensure that we take this program into Phase III. It is a very critical program, I think, for the long term, value creation for the company. My view of it is that holding on to a longer only will create greater value. Now that we've had the FDA feedback is consistent with what we believe, to Jeff's point, we've actually learned quite a bit in partnership discussions on what's the best way forward with development of this program. And I think all that encourages us to keep this program a little bit longer in our hands, further develop it and increase opportunity. So to Jeff's point, in our capital raise, it gives us that opportunity to do so.

This will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Lonnel Coats for any closing remarks.

Well, thank you, everyone, for joining us on today's call. We're very proud of our announcement in advancing LX9211 into late-stage development and the clinical program directed towards regulatory approval and diabetic peripheral neuropathic pain. This is a very large market opportunity within neuropathic pain, and our development plan aligns with recently obtained FDA feedback and is designed to optimize opportunities for success, time and efficiency and satisfying regulatory requirements for approval. Finally, we expect our Phase IIb starting to begin in Q3 of this year and enable a more efficient Phase III study execution and derisk investment while maintaining overall development program costs and time lines. We look forward to continuing to update you on our progress in the coming months on LX9211's advancement into late-stage development and remain excited about the opportunity to bring forward this potential innovation for diabetic peripheral neuropathic pain patients. With that, also, thank you for joining us this morning.

Conference has now concluded. We thank you for attending today's presentation. You may now disconnect.