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

Welcome to Citi's Biopharma Back-to-school Summit for 2026. We're very pleased to be introducing our next company, Lexicon Pharmaceuticals. We have Mike Exton, CEO. Welcome. Craig Granowitz, CMO, and Scott Coiante, the CFO. Welcome, all of you. Thank you so much. I'm Yigal Nochomovitz, cover the company for a long time. Well, since before COVID, I think.

Anyway, -- so maybe, Mike, do you want to just start us off with the quick kind of overview of where things are with sotagliflozin. And of course, you have a very important Phase III readout coming up in a critical area of cardiology. So why don't you start there?

Yes. No. Great. Thanks, Yigal. And perhaps before diving into SOTA, I can give you a little bit of where we're at as a company over the last couple of years. Really, we focused on driving our R&D programs on establishing financial flexibility and completing a number of partnerships that have gotten us to, I think, a really good state, particularly with SOTA, but across the board. And now we're on the precipice of a very important data readout in HCM, hypertrophic cardiomyopathy with SOTA. We expect data in Q1 of next year. And really, that is the North Star for the company. And as we sort of execute that -- all of the data into the trial, in parallel to that, we start to think around what the commercial opportunity is for us in this pretty important space. And we recently just promoted Rachel Martens in our company to Chief Commercial Officer. Rachel has been leading our BD&L and partnership strategy and was the driver behind our partnership with Novo Nordisk. And really pleased to have her in that position. She ran the insulin businesses for Sanofi and has worked in biotech. And we're going to form a very small but very mighty commercial team with -- we now have a Head of Marketing and on the precipice of bringing in a market access person who are really going to do all the prelaunch preparation in HCM because that is our #1 commercial opportunity. Beyond that, of course, we're very soon to resubmit sotagliflozin for T1D. In addition to that, we have pilavapadin, which is a Phase III ready program in DPNP and of course, our program with Novo Nordisk, which is in Phase I, LX9851 for obesity. So a lot of things over the next 6 months where if you think at the end of Q1 of next year, we could be in a situation where we have data from SONATA in HCM, a potential launch in T1D have started a Phase III program in DPNP and Novo starting the Phase II program in weight management for LX9851. So really important time for the company. Lots of things happening, but with a clear focus for us in HCM.

Okay. So let's start with SONATA-HCM as the study is called. Now the primary endpoint is something called this KCCQ measurement. Maybe, Craig, you could just review exactly what that is so people understand. And you're looking for what I understand is like a 4- to 5-point improvement there. But you've also over-enrolled -- you've exceeded your target. So kind of just frame like how should we think about having an over-enrolled in terms of probabilities of success? And overall, even without the overenrollment, how do you think about hitting on that target?

Yes. Thank you, Yigal. Important questions you're asking. The primary endpoint that has been identified by health authorities is improvement in feeling and function. Since we have a long history with the molecules, sotagliflozin and heart failure and not only have improvement in symptoms in heart failure, but also improvement in cardiac mortality and reduction in heart failure events. And outside the U.S., our partner has gotten approval also for use to reduce stroke and MI with the agent. FDA and we agreed and have -- before we started the study that the primary endpoint would be in this KCCQ score. And the secondary endpoint would be in the New York Heart Association score, change in those scores, placebo controlled and adjusted. And that is consistent with HCM. The regulatory hurdle is to improve patient functionality and feeling. There are no long-term outcome studies. The CMIs that have been approved do not have long-term outcomes associated with that agent. In part, they needed a dual endpoint because these are unproven agents that have never been on the market. And I think there was a concern that KCCQ score alone would not be enough, and that's why they have a co-primary endpoint, particularly outside the U.S. for a physical function benefit of peak VO2. In our trial design, and I hope as we go to market, we've really tried to take a very broad and pragmatic approach and really thinking about being first and only in mechanism and complementary in use no matter what the agent. And the trial design really takes those criteria into account. We have the broadest range of ejection fraction included. We have the broadest range of baseline medications, including CMIs in the trial and not requiring all of the physical testing like peak VO2 or exercise testing, it also allowed more centers to enroll more patients more rapidly. So that was the philosophy behind the trial. And I think the result of that is we enrolled the trial quickly at relatively modest cost compared to some of these other trials. And as you've already pointed out, we actually overenrolled the study.

Maybe if I just add on to that, Yigal, because you mentioned a 4- or 5-point delta versus placebo. And the study was certainly powered for that and having an overenrollment improves that powering, obviously. But what our expectation for success is, has really been set by the marketplace. So a delta placebo adjusted of 3 points that's statistically significant. We think given the benefit risk profile of SOTA would be a home run for us commercially. And anything above and beyond that is obviously upside for us. So we think we have a great chance of this being a very important part of the armamentarium in HCM.

Okay. So let's just dig a little deeper in terms of the components. So you're obviously enrolling the obstructive and the nonobstructive groups. So -- now the argument you've made many times is the mechanism is general to the cardiac energetics as opposed to being sort of a mechanical MOA where you may see a benefit more in one subset versus the other. So without directly answering the question, maybe go into a little more detail there as to how to think about the nonobstructive versus the obstructive. And then also just when you present the data, how are we going to see it? Are we going to see the groups? Are we going to see everything together? Just frame that part of it for us.

Yigal, you're doing such a good job answering the question. I just want you to continue. But the trial is designed for the combined group together to be analyzed as one. So all of the 500-plus patients as one primary group. As we've mentioned, the trial is stratified based on baseline obstructive or nonobstructive. But as you've already pointed out so elegantly, the mechanism really is going to be independent of the underlying mechanism. I think there's an expectation in the field, which may or may not be borne out, that the obstructive group is less heterogeneous than the nonobstructive group. The nonobstructive group seems to probably be an amalgamation of different diseases. Certainly, the sarcomeric mutations is going to be a more severe and a relatively more pure form of the disease. It might be more prevalent having these identified underlying genetic mutations primarily in the energy molecules, the energy proteins of the muscle cell, but not uniquely dependent on them. And I think particularly in the nonobstructive group, perhaps one of the reasons why the CMIs have not been as effective on a relative basis is that the disease itself is more heterogeneous. And one of the advantages, we believe, with SOTA is its breadth of mechanism. So you're not only getting a number of benefits on the cardiac cell itself with the SGLT1 and as you've already pointed out, you're looking at calcium flux, sodium flux, inflammatory markers, energetics. There's a broad range of activities that have been demonstrated for SOTA and only SOTA because there's only SGLT1 receptors on the heart, not SGLT2 receptors. But you're also getting all of the benefits of SGLT2 inhibition on improving the cardiorenal function, which remember, we're enrolling only patients with symptomatic disease. So they all have elements of congestion and SGLT2 inhibitors are very good at reducing congestion. So as I said before, I think the idea is to be first and only in mechanism and complementary in use that we believe that if the profile that Mike laid out bears out that we would be very high in the use categorization of agents, but at the same time, it's not going to be necessarily exclusive because we have enrolled patients on a CMI in the trial.

Can you speak to the relative split on the populations? Or you can't get into that yet in terms of the percent that are HCM versus non-HCM and the percent that are on CMIs or just based on the general guidelines and knowing the marketplace, what would be expected there?

Well, again, we designed the trial pragmatically. And I think with very strong encouragement from our steering committee, we did not cap at a hard number one or the other. I think we enrolled more nonobstructive patients than obstructive. We've been public on that. We have not provided numbers because we haven't finished cleaning all the baseline demographics yet. And we will be presenting that data at an upcoming medical meeting probably in the early part of 2027. But I think we went where the need is. So I think where the centers are right now is there's a greater need and more patients available for clinical trials with nonobstructive disease. So again, we try to model what would be what most people see more closely in clinical practice than having a very rigid clinical trial.

And to the second part of your question around CMIs, we haven't said the exact number, and we don't know the exact number yet, but it's relatively small, but significant enough that you can take some data and some questions and some understanding from that. So we've got a cohort and really, this will be the only trial that has a cohort of patients on both a CMI and SOTA. So it's going to be really fascinating data to see how the 2 work in tandem. But the other take-home from that very point is that patients on a CMI still have the propensity to be symptomatic, which sort of underscores this original point you made, Yigal, that the underlying disease truly becomes the energetics of the disease and diastolic dysfunction. And despite improving the obstruction, these patients still remain symptomatic. So there's something much more at play here than just the obstruction. And so we'll see that from this data.

Yes. I mean I think to Mike's point, some of the artificialness of how people think about the disease is a reflection of the trial designs that were done. And if you think about obstruction, it's a continuum. And I think there's this belief just -- and again, it's totally understandable that by running obstructive trials and nonobstructive trials that's like these 2 different things. When you think about a patient, a lot of the issue around obstruction or nonobstruction is how much effort did the person do with their Valsalva. I mean there's a lot of very qualitative factors. We faced a similar issue when we studied HFrEF and HFpEF together in a population. So by being able to study the entire continuum in this case of outflow tract obstruction and looking at results across the continuum as opposed to this artificial line, I think it's going to be far more informative to the medical and the investor audience about the effectiveness of sotagliflozin in this indication.

Plus you also -- I just thought about it, plus you also get -- I know it's -- I don't think it's stratified by CMI use, right?

No.

But nonetheless, you're going to get some data on CMI plus SOTA versus CMI plus placebo that you can put interestingly and analyze. Even though that's not stratified, it's not -- that's not the main thrust of the study, but that's -- there's some very interesting data there potentially.

Yes. And so to that point, presumably, every patient that was on a CMI when they were placed on the CMI because they just need to be on a stable dose. So that means they've been on the CMI 6 months because that was the entry criteria. So they were all on [indiscernible] because [indiscernible] wasn't commercially available in that time frame. We didn't stratify or hold them accountable to a certain baseline outflow tract obstruction. So I can tell you there's going to be continuum of outflow tract obstructions, some of which would be considered classically obstructive and some would be at the baseline nonobstructive. So to Mike's point, there is not a great correlation between obstruction and symptoms, and we have all of those flavors in the trial.

Yes. It's always dangerous when you try to take -- create 2 categorical variables out of what's a continuous variable.

We'd love to do it, but you're right, it is fraught with danger and misinterpretation.

Yes. Okay. By the way, so we should talk to you about some of the secondary endpoints, please. What are the ones that are most important in the study?

Well, I think the ones -- and you saw some of that data presented at ESC from the Afi study from ACACIA. But there's really beyond the New York Heart, which is basically the provider assessment of patient functionality. So sort of the mirror image, the patient with KCCQ is rating themselves. New York Heart is the health care provider sort of making an external assessment of the patients. But in general, they're very highly correlated over time. There's really a lot of parameters. I would put them in the function and feeling. So those are the primary and secondary endpoint. And then there's a lot of secondary endpoints, the enzymes and then really looking at a lot of the echo parameters. And I think the echo parameters are really important. And I think to me, one of the key takeaways from ESC is that a lot of the benefits, I would say, and the speaker on the podium said, these benefits are modest and reversible. And so that to me is an important element, not just looking at the enzymes because I think the enzymes are not very reflective, at least with CMIs on benefit because the biggest benefit is on cardiac enzymes, but there's no correlation of that to anything. I think looking at things like left atrial volume is going to be really important because that's a real reflection of left ventricular function. The left -- the less functional the left ventricle is, the more you generally get a large left atrium. We're going to look at left wall thickness. We're going to look at the speed of the contraction. So there's a lot of echo parameters that are going to be looked at as either secondary or exploratory endpoints.

Okay. And I imagine if you hit presumably on the first -- on the primary endpoint that you would expect to see the secondary endpoints track accordingly if the patients are reflecting a better feeling, better quality of life, right?

I have a high degree of confidence in that, Yigal, because, again, we've got this massive database of heart failure outcome studies. And like in HFpEF, the primary endpoint of the trial we've talked about that SOTA-P-CARDIA was left ventricular wall thickness, and that was the primary endpoint was achieved. And KCCQ score was beneficial in 6-minute walk and a number of other parameters. So I have a high degree of confidence just based on our prior experience in heart failure that you're going to see benefit across a range of these parameters.

Okay. Did you want to say anything else about ACACIA read-through or any other comments there in terms of thinking about your study?

I just think they're complementary mechanisms. And the fact is we're going to have patients on a CMI in our trial. I think that's going to give people comfort around relative safety and tolerability of that in a way, to Mike's point, that you're probably not going to see otherwise because it's in a placebo-controlled large multicenter trial.

Okay. Now you mentioned the promotion to Chief Commercial Officer of one of your BD people. So what have you -- what are you learning or have learned recently in terms of the marketplace that will help you with launching the drug?

Yes. We’ll likely be more elaborate as we get into Q3 earnings to talk about some of the specific research. But I think just listening into some of these conversations with KOLs and payers is clearly in nonobstructive HCM, there's a huge opportunity and the profile of SOTA as presented is in layman's terms, a no-brainer, given the lack of other options, given the relative low bar that's been set for us to be successful there. What has been interesting is that there's still quite a lot of enthusiasm in obstructive HCM as well for various reasons. One, because despite alleviating obstruction, there's still a high degree of symptomology. Of course, dependent on how the drug functions in obstructive HCM the safety and the tolerability of the drug still lends itself either as an add-on to a CMI in those particular cases or even in first-line use because of the ease of use of that particular drug. So it's been very encouraging so far, and we'll present a lot more specific information on that at earnings.

Okay. And just one thing. So the data is 1Q '27, but given you now know you're done with the enrollment, right, do you have -- is there -- can you be a little more granular with the timing in 1Q? Or are you still just going to keep it open to in 1Q? Or do you have a sense as to where in the quarter we might get the data?

That's a good question. Look, I think it's probably still a little bit early. The closing a trial, it actually involves a lot of work. So you've got to get all the data in. You've got to make sure it's clean. Clearly, you do the analysis, et cetera. I think we'll be more confident to give sort of more specific guidance at the start of next year.

Okay. All right. Fair enough. All right. Let's make sure we talk about some other things. We still have to talk about SOTA, but in a different area. So type 1, where we -- I remember being at that AdCom many, many years ago. But so things have progressed a long time -- a long way since then. So tell us what we're waiting for. I know there's this very important natural history study, which is being conducted over in Denmark, I believe. So tell us what the significance of that is the STENO-1, why that's so important. And then just sort of thinking about what the FDA wants to see and the resubmission path.

Yes. Maybe let me start and Craig can dive into some of the details. So the FDA in the history of SOTA with -- in T1D has really asked for a couple of things the whole time. And this time around, we feel very confident, in fact, having very good engagement with the FDA that we can deliver that. And those 2 things are we want a new prospective study, not a retrospective look at the data, cutting it in a different way. And we need to see from that study a certain amount of exposure on SOTA and to see a DKA level that's acceptable. And until now, we've -- as a company, we've never really known what those expectations are. What we have now is we have that prospective study, STENO-1 that you're saying is running in Denmark. We have agreement from the FDA that, that study is sufficient and will gather sufficient exposure, which they've given us the exact number. And in fact, we achieved that exposure at the end of August. So the data is done. Data is done. Now we just are in the throes of preparing it and getting ready to submit. And we have a DKA level that is less than what we saw in the inTandem program. So it's -- all of those 3 aspects have been fulfilled. We're in constant engagement with the FDA to prepare this resubmission. And they are the things that are different this time around. And so we are highly confident that we can finally bring this drug to patients with T1D.

So that sounds like there's some new information there, the fact that you've got -- you've reached that exposure target at the end of August.

Right.

Okay.