Mineralys Therapeutics, Inc. ($MLYS)

All right. Let's kick off our next session. It is my pleasure to be -- to host Mineralys Therapeutics. Here with me, Jon Congleton and Adam Levy, CEO and CFO of the company. Gentlemen, welcome. Always a pleasure to be hosting you guys for these events. I appreciate the -- looking good this year.

With...

We looking good this year compared to the first time we hope that we're -- that there was a [indiscernible]

we were talking about that earlier.

So before we -- I have a lot of questions to ask, but before we go to that, I'll turn it to you for opening remarks.

Yes. No. We're very excited about 2026 and the opportunity in front of us. As we noted, the NDA for Lorundrostat was submitted late last year. The PDUFA date was declared in March of this year that PDUFA is interactions with the FDA standard course, we continue to feel very positive about the opportunity, the approval we're using this year to continue to prepare for a successful launch of Lorundrostat, have built out our market access team, our medical affairs team, we've optimized and obviously, look forward to bringing Lorundrostat to, frankly, the 20 million patients in the United States that could benefit from it significantly in lowering their BP and their cardiovascular risk.

Fantastic. So recently, you guys announced a deal with Tanabe, where you guys ended up buying the IP rights to Lorundrostat and also all the royalty obligations. It would be great if you can go over the terms and the commercial milestone implications related to this deal.

Absolutely. So we had the opportunity to buy back the royalties from Tanabe for $200 million upfront and $100 million in future potential commercial milestones. The future milestones are based on certain thresholds, and we believe that they will be totally paid for by the savings in the royalty.

I see. Okay. And then you guys mentioned that this transaction is accretive to investors. But then I think a lot of investors took it the other way and given how the stock reacted when it came out. Like maybe just walk us through like how this transaction came about? And why do you believe it's accretive to investors?

The feedback we've gotten from investors has been very positive on the transaction. So -- the -- it was really opportunistic. It came up as Bain Capital had acquired Tanabe, and they were looking to monetize assets that they viewed as noncore. They saw this potential future stream of cash flows as noncore to them, and they look to sell it, and we were in the right place at the right time and had the opportunity to buy it at a value that was attractive to us. When we look at the return on investment, we believe that it's quite attractive. And with the cash flows that would come in versus the $200 million upfront, it looked like a great investment for us.

Right. I see. Okay. And what was your assumption given the deal size of that $300 million that went into the modeling of how you guys came up with that price?

So we looked at our base case model, high case, low case, did some analysis and looked at not only what the returns were, but also what we thought would be reasonable for us given that we're cash flow negative. And we also have other investments that we want to make in R&D. And it was really driven more by the market opportunity than us modeling it. We offered something that we thought was attractive and it worked for them. So we made a deal.

I see. Okay. Got it. So some investors saw what you guys did with this deal and then you guys end up raising $150 million to equity and another $500 million debt facility, which is the first time that you took on such large debt. So they saw that you guys are giving up on BD. Is that a fair statement?

So it's really unrelated to business development. We have been thinking about how we capitalize the company for quite some time. We've thought about the range of options to fund, whether we would do additional equity, debt, maybe convertible notes, sell a royalty. And this really matched how we look at our cash flows going forward. So even though it's $500 million committed, we only brought in $100 million upfront. We have additional tranches. The next tranche is available at FDA approval and then beyond that will be $150 million additional. And then there's another $250 million available to us at certain commercial thresholds that's really at our discretion. We can pull it if we want, but we're not required. So this was a good way to put us in a position where we're funded but reduce the cost of capital versus equity.

I see.

And I think -- I mean, if I can add, if you're a fundamental believer in the value of Lorundrostat, which we are, getting uncapped royalties back at what we thought was a fair deal makes a ton of sense for us, and it is not incongruent with the BD strategy because it's fundamentally the value of Lorundrostat. And so to me, there was a congruence to it that fit the strategy that we proclaimed forever with Lorundrostat. -- building value on our own and enabling them being open to partnering.

Right. What was this royalty buyback inspired by some of the partnership discussions that you guys have? I mean, is this to help -- I can expedite that those efforts?

So the royalty buyback was opportunistic. It was something that Bain and Tanabe put up for sale, and we had the opportunity to acquire. That said, whether we're alone or with a partner or if someday a company wanted to acquire us, it builds value in any case by consolidating those cash flows and increasing the profitability of the business.

Right. Yes. No, that makes a lot of sense. So now the -- we're waiting for the PDUFA date. When do you expect to hear from the FDA regarding that the proposed label? And when does that negotiating process typically start?

Notably towards the back half of the year, probably in Q4, typically a couple of months before the PDUFA date is when we'll begin negotiating the label and we'll begin to talk about any kind of post-marketing commitments. I think looking at the baxdrostat data label, we feel very confident in some of the common things will be there, but also some of the differentiating points. But all of that will be part of Q4 activities.

Q4. Okay. Got it. And then you guys recently presented data from Launch-HTN at the ESH conference and where you compare patients with CKD and those without CKD among a pool 800 patients treated with that 50 mg dose. What are some of the key highlights in that study? And why is it important from a commercial perspective or from a future development perspective?

Yes. The -- this was data presented by Liffert Vogt, who is one of our PIs in Launch-HTN, it's post-hoc analysis, so in fairness to that. But he wanted to look at the difference in response within Launch-HTN for subjects that had CKD and those that did not. And so using, I think it's KDIGO-related criteria, specifically around albuminuria, which was not part of the inclusion criteria, but we had over 1,000 subjects. So we -- I think we had between 80 and 90 subjects that met that definition of CKD. And so looking at response to Lorundrostat on blood pressure reduction, there was no change whether the patients had CKD or not. So a nice effective reduction in BP, looked at safety. There was no incidence of hyperkalemia in the non-CKD population. I think just 2% in those that were defined as CKD by albuminuria. And then obviously, the ones that had albuminuria at baseline over the 12-week period saw a 55% reduction in albuminuria. Now UACR is a really nice surrogate for a drug that may provide renal protection. So if you see a reduction in UACR, that's conferring a level of protection in the kidney. That's very congruent to the Explore CKD data that we released last June. In that study, we showed over just a 4-week period of time, safe reduction in BP and about a 31% absolute reduction in UACR, so very congruent to that. Why that's important is as we go out and talk to physicians that are treating uncontrolled and resistant hypertension and ask the question, what attributes matter to you? Lowering blood pressure is always #1, doing so safely is always #2. But having a benefit on proteinuria is always a top 5 attribute that if they can make their ideal antihypertensive, it would have an effect on proteinuria. So we've now seen in two separate data sets that you can safely reduce blood pressure and provide a benefit on the kidney. That becomes relevant because if you think about third and fourth-line patients, these are patients that are not just uncontrolled or resistant hypertension patients in isolation. They have other comorbidities. -- that are related to that decade, decades of uncontrolled BP. And so being able to confer that benefit beyond just blood pressure reduction of the patient and the offering that Lorundrostat can provide for that.

Yes, you're right. I think the UACR, you guys saw a 55% reduction at the 12 weeks. I mean what's the implication of this? Like how do you use to leverage this from a commercial setting to help drive uptake? And what does it mean for you to think about CKD as a future indication or future development opportunity?

I think to the latter part, it derisks a CKD program if we were to choose to go there. But I think it's also fair to say that coming at the CKD market from the avenue of hypertension, we're going to be able to provide value to patients at launch with a hypertension label. We're not -- even though this is really nice data, it doesn't mean we're going to have an indication for the treatment of CKD per se. But again, there's such overlap. I think 2/3 to 3/4 of all CKD patients have uncontrolled or resistant hypertension and 1/4 of hypertension patients have CKD. So these are not independent disease states. These are overlapping. If you talk to any nephrologist who's treating the CKD patient who has uncontrolled resistant hypertension, they will say the #1 goal is to get blood pressure under control because that will confer a benefit and provide kidney protection. And so this data with the label for hypertension, I think, will enable us to go and speak to those physicians who are dealing with uncontrolled and resistant hypertension in a population with CKD, use Lorundrostat for the control of blood pressure, but be able to do so with confidence that they can do it safely and that they are likely to see a benefit on proteinuria. So it actually enables an opportunity to have physicians use Lorundrostat in that setting and do so on the background of an SGLT2. And we know that there are programs under development with ASI and SGLT2 in CKD. We're certainly going to be able to compete within that space for those that are uncontrolled and resistant hypertension.

I see. Okay. Got it. So let's go into the hypertension market [Audio Gap] ask you guys, how do you think payers will manage lower line setting -- so -- and I think maybe in the past when I asked you this question that you felt like the third line is pretty fair game and then you could have access to it. But in the last call, you guys mentioned that the fourth line is the optimal entry point. And then that's where you would go and build, I guess, benefit and establish benefit there before you would move into the third-line setting at some point. So when people hear that, it sounded like there may not be an opportunity to third line because who knows how long that takes for you to establish the benefit. Is there a path to that third line? And what does that look like?

Yes. So as we do market research with physicians, there's high demand in third and fourth line. And as we do research with payers, the access entry point is probably a little bit quicker for fourth line. It doesn't mean that third line is not something that's available. It's a little bit dependent upon plan and upon payer. I think the point I was trying to make is the fourth line, if I combine access and demand, that's the easy entry point. It doesn't mean that third line won't be used. It doesn't mean that physicians won't be prescribing it. It just means the access aperture is going to be a bit broader for the fourth line. But again, the demand is clearly there. We anticipate third line use. But the fourth line, just based on our current research with both payers and physicians, I think, is where it's really going to take off. And then with that success, build into the third line very quickly, that demand will progressively open up the aperture from an access standpoint.

I see. And what does that time line look like? I mean, is it years? Is it...

No, I think it begins at launch. And again, I hate to use this aperture, but it progressively opens up with that demand. And some of it is based on book of business, commercial, is at Medicare. Some of that is plan specific. But I think both markets that uncontrolled and resistant are going to be in play immediately. I just think that fourth line, there's a bit of a broader open lens.

I see. Okay. Okay. Got it. So basically, optimal from a point that it's easier to access those patients immediately and then -- but it doesn't mean that there's not going to be a third line.

I think you're going to see the drug used in both lines of therapy. I just think the access barrier is going to be a lot lower.

I see. Okay. Okay. Got it. So in that fourth line optimal entry point, what would the step edits look like? Will that include like an MRA or such as that as part of the process. What do the patients have to do to get on [indiscernible]?

Yes. I think there is a growing appreciation. It's already there in the medical community. I think it's growing within the formulary and those are manned by physicians and PharmDs that aldosterone is the emerging target that's not addressed properly right now. That Spironolactone is the only one that's there. And so for the 5 years that I've been involved in Mineralys, the natural question that you just asked is what about MRA, what about Spironolactone step-through? And progressively, the feedback has been, we're not going to make a step through an MRA. A, the use in hypertension is exceptionally low; b, these formulary decision-makers understand the difficulty that patients have in staying on that drug, having a successful outcome with that.

And the titration, do...

Well, I think it's titration -- I think it's not just off-target effects like [indiscernible], but it's also to push dose to get more efficacy, you push the rates of hyperkalemia. And so it's just -- for a lot of reasons, it's just not used. I think what has progressed as our pivotal data read out and as we now have market access team members out in front of the field is that it will be -- for that fourth-line setting, it will be a step through 3 drugs. It will be a look back in their EMR, step through 3 drugs, but kind of indiscriminate what those drugs are. There will just need to be evidence that a patient has a history in the last 6 to 9 to 12 months of being on 3 drugs or more, failing to get to goal, and that is, in essence, the check the box for the step edit. There's likely to also be a PA to label for I think the vast majority of that will be an electronic PA. So that's -- I think both of those are going to be fairly low hurdles because if we think about the volume of patients, roughly 10 million patients that are going to have within their existing EMR that experience base. It's a quick look back, check, step edit and access to lorundrostat. And I think -- I don't know if this is on your mind, but I think where we've seen baxdrostat price, based on the research we've done, I think that's a reasonable price point that they've identified that fits within that utilization management based on the research that we've done.

Yes. Yes. No, I have some questions on that, too. So how long would that process when you go do a step edit before they can get on lorundrostat?

No, I think it's going to be variable by plan. Yes. I don't know if I'd want to hazard a guess it may be a 30-, 60-day period, but it's going to be variable by the plan.

Yes. I see. Okay. Another key point that I think we discussed before was that the ongoing PBM reforms where the rebates are now being completely passed through to the plan. So it used to be that the PBMs have some financial incentives to use branded medications like lorundrostat or ASI, maybe even ahead of some of these generics or parity to generics because they can have some of the rebates, they can keep some of the rebates. But now that's been passed through and kind of shift some of the incentives away from that. How do you think -- just given that dynamic, how does it affect when you think about getting it on the formulary, thinking about competing with these generics with these payers?

Yes. I think the old model, there were 2 incentives for PBMs. And one was the retention, their portion of the rebate that they retain. But there was -- in fairness to PBMs, there was another incentive, and that was trying to identify good clinical value to their customers ultimately. And so creating access to novel innovations that could help their constituent customers, populations address whatever medical need, in this case, getting their blood pressure under control. So that's always an element of the PBMs within this context. So it's not just give us the rebates, but it is providing good service and good value from a clinical standpoint to their constituents. I think if we look at the model now, that clinical value piece still sits there as a supposition that if there is true innovation and given the fact that half the patients in the United States cannot get to goal that are treated, that becomes part of that clinical value prop. Now what has shifted is the rebate transparency has pushed that through, but what has emerged for that are the service-based fees as a percentage. So whether it's an admin fee, a data fee, there are new fees that have emerged that are a bit more transparent, but it's kind of from one hand into another hand. So there are several elements from a PBM standpoint that they'll drive value from having a branded asset introduced into a market that's purely generic right now.

I see. And then when we look at PBMs, they often use these preferred and exclusive contracting tactics especially when multiple players come into the market with similar drugs. It just happened, we saw that with the PCSK9, obesity now and also many others. Are you expecting this to be the case for ASIs as you launch lorundrostat with baxdrodstat already out there? And then how are you preparing for this scenario?

Yes. I think we put our market access team in place in Q1 of this year. So we're doing what's called PIE pre-approval information exchange so that these payers are aware of our timing, our clinical value proposition, the unmet need and how we're thinking about positioning lorundrostat, which is in that third line or later setting. To your point, I think payers like to have, from their standpoint, multisource of new innovations like this. So having 2 is kind of an ideal setting for them. I don't know that they necessarily drive and force for a preferred. I think it's more of from a sponsor standpoint, do we want to move to a preferred setting if we want to do that, then there's going to be a cost related to that. Our going-in position is really going to be more about how do we ensure fair access, parity access, we'd be fine with. We're somewhat interpreting as we make some assumptions about our launch plan that AstraZeneca may come in with a parity kind of position as well as opposed to anybody who wants to move to a one of one, then you're going to have to buy into that preferred state and offer more rebate. So I think it's -- from our standpoint, it's more about let's create profitable access, let's look for parity and then let's create opportunity for physicians and patients to choose.

But going back to my previous question about the PBM reform, do you see because of that instead of shifting away from these PBMs, do you also see that there's a shift in terms of how they're managing it and maybe less use of these preferred exclusive type of contract?

No, I think there's still the opportunity through other rebate structures to create preference if one chose to do that. But again, that becomes -- there's a potential slippery slope with that as far as risking your margin in doing that. And I think our goal, again, is how do we create equitable fair access for when physicians and patients choose lorundrostat and keep it in the parity position. So it is a choice of the physician as opposed to a forced choice from the payer.

I see. Okay. And you guys -- so you mentioned, I think, last time that the sales force usually, you would hire them typically around 90 days before launch. And obviously, you can't just post the position at 90 days before launch because you have to -- there's a whole process of hiring them, making the offer, negotiate background checks, notice periods and stuff like that. How many sales do you foresee needing for that initial launch? And then how soon do you have to really like get the ball rolling on that?

Yes. The actual number, we haven't disclosed yet. And that's predominantly just for a level of competitive insulation. We're just not willing to signal yet to AstraZeneca, who's in the market right now, how we plan on doing our go-to-market model and our sales force size. As I noted, we put our market access team in place in Q1. We've optimized our size of our MSL medical science liaison team in Q2 of this year. We're beginning to put our sales leadership team structure in place right now. And as you know, there's head of sales, the next level and next level of management in sales territories. We're confident in the timing that we have, the positions that we put in place right now, the physicians we're recruiting for that all of that enables 90 days prior to that PDUFA that we could have the vast majority of our targeted sales force in place in that time frame. And then that gives us time for those reps to get acclimated to their geography, meet their customers, do all the proper training, begin to do some of the disease awareness communication that's allowed pre-approval up to and including compliant communication with the goal ultimately being upon PDUFA that we can quickly pivot to full commercial launch.

Right. Okay. And then Baxfendy recently approved on May 18 for the list price of $900 per month. So this was higher than what we were expecting. I think some of the market were expecting. What is your impression for that price given sort of like the sensitivity around drug pricing at this point? And then how do you -- like have you tested that price range? And how do payers would react to that price?

Yes. I think that, that price fits within the research we've done, the one-on-one dialogues our team is having right now, it's not a specialty tier, which was one of the key points that if the net price for an ASI would have fallen in the specialty tier, then that would have greatly restricted access. This is a non-specialty tier price point just at WACC, let alone what the net would be. And so I think with the positioning of the drug later in treatment, not first line, not even second line, but third line or later with the step edits that I identified earlier, I think that price point, coupled with what will eventually be the rebate percentages fits well within the research that we've seen. Now, will that be the exact price that we land on? That's part of what we'll continue to analyze through the course of the next 6, 7 months. But I think it was a reasonable price. And I don't think it narrows that 20 million third and fourth-line patients that we've talked about in the past. I think that fits within that population based on the research we've done.

And how have you been hearing how payers are looking at Baxfendy at this point?

It's early days.

Like in your PIE discussion, does it get brought up?

It's very, very early days. Obviously, the price point just got communicated in the last couple of weeks. But I don't know that there's been any surprises. I don't know that there's been any shock around the price point. I don't know that we have seen a great deal to date on the contracting strategy that will be something that will unfold over the next couple of months.

Right. Okay. Got it. So basically still aligns to your -- what you said earlier about the fourth line being the optimal entry for them also at that price point?

I think the payers view this transformative class, and I think that's a fair statement to say. I think they've been impressed with the clinical value proposition. And I think they're viewing both lorundrostat and baxdrostat similarly as it relates to access to fourth line and in some cases, with some payers third line as well.

Okay. Got it. So I want to shift gears to some of the partnership questions and then later on the Baxfendy label. So from a partnership perspective, you guys have been talking about exploring potential partnerships for some time now. Now with the December PDUFA date fast approaching, and there are some key uncertainties and risk. I mean, are there any key uncertainties and risks that are sort of holding things back? I mean I was just kind of looking at the macro environment and how -- potentially how payers are managing this class, maybe you want to see clarity on that. Like from that partnership point for your ongoing discussion with partnerships, are there things that are holding back, do you think?

No. We've shared that we're always open to having dialogues about increasing the value of lorundrostat by definition, Mineralys through partnering, open to the point of acquisition if it made sense. But fundamentally, we've been driving to ensure that we have a successful launch in the United States. I think there -- what I can share within those dialogues with partners, there's an appreciation of the value proposition of lorundrostat, the appreciation for the value of the ASIs as a class and an appreciation for the market size. I don't know that any of the macro elements I would characterize as limiting. I think it boils down to the value proposition at large. And I think like I said, there's a true appreciation for that.

Right. I see. And throughout this year of discussion with strategic do you see -- like how would you characterize sort of that interest level throughout this period of time? Is there -- is it similar since you guys started? Is it becoming -- there's higher interest now or lower interest now?

I think return of large pharma to cardiorenal metabolic. I mean -- so I was the first hire when Mineralys was put together through the licensing of lorundrostat. This was late 2020, early '21. Maybe a handful of pharma were really focused on cardiorenal metabolic. I think today -- and I think part of it is due to the success that Novo and Lilly have generated with the GLP-1s in the anti-obesity space. I think today, the vast majority of pharma have returned to this space and appreciated not only the market opportunity, but the unmet need. You and I have talked in the past. I mean you go -- just go to global -- The Lancet's global burden of disease study, 3 of the top 8 drivers of loss of life or loss of quality of life are kidney disease, stroke and heart disease. And what underpins those 2 are cardiovascular like blood pressure and metabolic like diabetes or obesity underpinning that. So I think there's clearly a return of interest to this space and an appreciation for the significant value opportunity.

I see. Okay. So now with that PDUFA fast approaching and then after a certain time period, there may not be enough time for a partner to come in to kind of properly prepare for lorudrostat's launch or be able to participate in that label discussion. Is there a window that closes for a potential strategic to come in ahead of the PDUFA? Or do you see sort of these ongoing discussions would go past PDUFA?

Yes. I don't -- I appreciate the question. I don't know that I hold that there's a window. I think at any time it could be right for us, it could be right for a partner. That's why -- and I'll pick on the word that you used there properly. I think -- and it goes back to what we did with the proof of concept. I think we properly ran a proof of concept. I think we properly ran a pivotal program that put together a very robust NDA. And last year and into this year, I think we're doing all of the things -- if you were to blind Mineralys and put in any big pharma name, you would see what we're doing to prepare for a successful launch of lorundrostat looks the same, the investments in market access, the investments in medical affairs, the readiness for sales force. And so all of that supports 2 things. One, us generating value with lorundrostat as Mineralys and they go it alone, but two, enables a partnering or potentially even acquisition at any point because any pharma could look and say, you are doing everything that we would do. And legitimately, that may sound bold for a small biotech, but the team is loaded with experienced commercial med affairs, market access, commercial manufacturing staff. So we're ready that to enable successful launch, again, whether it's in our hands or that of a partner.

Okay. Got it. So let's spend the rest of the time on Baxfendy label after we -- it came out, it looks interesting in a way that we did not see the VAX-24 data in there. or at least the efficacy portion. We saw some safety portion, but not the efficacy. What is your impression of that label? And how do you think lorundrostat can differentiate?

I think it did 2 things. It affirmed some assumptions that we had. So the indication was very straightforward and it's broad, right? So inadequately controlled blood pressure on top of background meds. The outcomes claim as anticipated by the guidance was in there, lowering BP lowers risk of stroke and MI. I think the monitoring was actually a little bit more liberal than I thought it would be. It's established a baseline and then periodically check. It did not delineate time, bring back in 2, 4 weeks. And I would presume that those will be pretty common language within an approved lorundrostat label. To your point, the VAX-24 is part of safety, but not part of the efficacy. And the BAX-HTN data as published was represented in that label. And that's where I think there becomes the opportunity for differentiation. Specifically, if launch HTN as the base case is the only clinical data set that gets into our Section 14, then we know the absolute and placebo-adjusted change is greater than what was demonstrated with baxdrostat in that study. But advanced-HTN, we think, is a highly informative, very rigorous study that we are going to make arguments for during those negotiations should be a part of the label because it's very informative for the truly confirmed uncontrolled resistant hypertension. That could become part of a differentiation aspect as well.

And there was also a statement saying that there was no clinical benefit established for eGFR less than 45 although the label does not restrict the use of these patients. Do you believe the payers would have some statement for you guys to study these patients?

Yes. We -- so that could also be a point of differentiation. We did Exlore-CKD down to eGFR 30. We made a part of our label application, will be part of our negotiations, whether that's in Section 14 or acknowledged in special populations down to EGFR 30. That said, our market access dialogue hasn't indicated that the payers are going to be looking at an EGFR cutoff specifically.

I see. Okay. Well, fantastic. We're out of time. I've probably gone through like less than half of the questions I prepared for yet. So we got to do it again sometime. Thank you so much. It's been a pleasure hosting you guys again at the GS conference.

Always a pleasure to be here and appreciate the invitation.

Any final remarks?

No, we're -- look, it's been too long. It's been 20, 25 years since there's been true innovation in this space. I think the ASI is the right medicine at the right time. The medical community is keyed up in looking at aldosterone as an untargeted driver of cardiorenal metabolic. I think they're excited about ASIs. We're very excited about the clinical profile that we've developed over the last 5 years and the commercial opportunity to really help improve the lives of millions of patients that I think will engender significant value for shareholders and Mineralys.

Great. Thanks, guys. Thanks, everyone.