Hello, everyone, and welcome to the fourth annual BioConnect Investor Conference. My name is Lander. I'm a VP of Equity Research at H.C. Wainwright, and here with me are Mike Exton, CEO, and Craig Granowitz, CMO of Lexicon Pharmaceuticals. Thank you for joining us.
Good day.
Good day, Lander. How's it going?
All good. All good. Thanks for joining us. Before we start, from a disclosure standpoint, we currently cover Lexicon with a buy rating. Maybe, Mike, for those who may not be familiar with Lexicon, can you please provide a brief overview of the company and a summary of the ongoing programs?
Yeah, absolutely. Thanks so much again for the invitation, Lander.
Sure.
It's a pleasure to be here. Lexicon is a cardiometabolic company looking at cardiometabolic disease and associated disorders. We're a late-stage and early-stage company, so fully integrated. We have a number of programs both commercially late-stage and early-stage development. Specifically, we have an asset called sotagliflozin, which is the only dual SGLT1 and SGLT2 inhibitor that's currently marketed as INPEFA for heart failure. But we have two indications, late-stage indications, for which sotagliflozin has the potential to be the first and only SGLT inhibitor approved in those indications. The first is in Type 1 Diabetes. As you know, to treat euglycemia, hyperglycemia in Type 1 Diabetes, the only drug approved is insulin.
Sotagliflozin has the potential to be the first and only adjunct to insulin for glycemic control in type 1 diabetic patients. We're resubmitting the file for that by mid-year with a potential approval in 2026. Secondarily, we currently have an ongoing phase III trial in hypertrophic cardiomyopathy, which has been an area of intense interest over the last 12- 18 months. This trial, SONATA, is a large ongoing trial in both obstructive and non-obstructive disease. We're going to complete enrollment of that by mid-year, which is, you know, soon, and a 26-week study with data in Q1 of 2027. Following the cardiometabolic line, we also have a drug called LX9851 for obesity.
This is against a target called ACSL5, which is completely novel and non-incretin mechanism that we licensed to Novo Nordisk last April preclinically. Novo now filed the IND at the start of this year and recently moved into the clinic in phase I. We received two $10-million milestones in accordance with that, they're really pushing that forward at a rate of knots. Like all of our medicines, it's an oral once-a-day medicine which augurs well for complementarity with their oral Wegovy.
Finally, in terms of associate cardiometabolic disorders, we have another novel drug against AAK1 in diabetic peripheral neuropathy, where we completed the phase II program last year, had the end-of-phase II meeting with the FDA, and got the all clear to move into phase III with a 10-mg dose, single 10-mg arm versus placebo, with no addiction potential and no need to run these types of addiction potential studies, which is a really huge area of unmet need because in neuropathic pain, there's been nothing developed for 20-odd years, and oral opioids are still continually used. Across the board, we have a number of near-term milestones between now and the Q1 of 2027. Really looking forward to executing on that.
Awesome. Thank you for that. Let me start with sotagliflozin in HCM. Maybe Craig, how do you think that the recent data demonstrating cardiac structure and functional improvements in HFpEF patients support favorable efficacy in HCM, particularly non-obstructive HCM?
Yeah. Thank you, Lander. That the data that you're referring to, a study called SOTA-P-CARDIA.
Yeah
was a placebo-controlled double-blind trial in patients with non-diabetes HFpEF, with an ejection fraction above 60%. It was a pure non-diabetic HFpEF population. Many in the field look at HFpEF as a read-through in hypertrophic cardiomyopathy. When you think about the entire sotagliflozin program, we also have a 14,000-patient 2-study FDA-approved product in both recent worsening heart failure and chronic heart failure that included both HFrEF and HFpEF patients. It's in that context and demonstrating in that program significant benefit in chronic heart failure, recent and worsening heart failure with a read-through on reduction in stroke and MI that we believe is unique for the dual mechanism of sotagliflozin being a dual inhibitor of SGLT1 and SGLT2.
The results that we saw in the SOTA-P-CARDIA study, we believe, reinforce our confidence in the read-through to HFpEF because we saw, unlike what you see with SGLT2 inhibitors in a pure HFpEF group, we saw significant improvements in function, in feeling, as well as in a number of cardiac endpoints, left ventricular wall thickness, myocardial enzyme, six-minute walk test, KCCQ, and most recently that we reported at the ACC meeting, reductions in epicardial fat. It certainly is thought now, and increasingly so, that HFpEF and HFrEF are two very different diseases, and HFpEF is probably driven by something called adipokines, which are negative inotropic cytokines that are produced by fat cells, particularly visceral fat, and epicardial fat is a great example of visceral fat and sits obviously right on top of the myocardium.
Awesome. Thank you for that. Can you elaborate maybe on how sotagliflozin safety profile may bypass or somehow at least reduce potential REMS requirements compared to approved Cardiac Myosin Inhibitors?
Thank you, Lander, for that question. You know, the good news is with Sota, we have a long-established, well-known safety profile in disease, and there is no need for REMS. There is no issue for left ventricular failure or having to have echoes for that. In fact, Sota is a drug that prevents heart failure and cardiac death, not causes heart failure and symptomatic heart failure.
If I don't-
Yeah
don't mind, I'll add on to that. Of course, recently, CMIs have been demonstrated through ACACIA-HCM to have some level of efficacy in non-obstructive HCM, which was a breakthrough for the field, quite frankly, because until then, nothing had been demonstrated positively. It's important to note that that benefit risk is a very different profile to what you would see with sotagliflozin should it be positive because I think they showed a three-point difference in KCCQ. Of course, you get the downside of the potential of falling into heart failure, the REMS program, et cetera.
Really, as we march forward with Sonata, we see the potential for sotagliflozin in HCM as being an incredible opportunity, not only because of the ease of use, a once-daily oral medicine, because of the potential efficacy that we'll see when Sonata reads out, but of course, because of the applicability and appropriateness and ease of use without a REMS and worrying about what the potential safety concerns are going to be. Overall, we feel very strongly that Sota is well-positioned in both obstructive and non-obstructive, but particularly in non-obstructive disease.
Perfect. Thank you. Moving into Type 1D. As you said, you expect an NDA resubmission in 2026 based on the Steno 1 investigator-initiated study in Denmark. My question would be, does the FDA require full study completion or a predefined patient exposure threshold that may trigger the filing potentially?
Yeah, another great question, Lander, and I think this is a point that bears clarification. The primary endpoint of the STENO-2 trial is a reduction in stroke and MI in two different treatment regimens, one that includes either sotagliflozin or semaglutide or fenofibrate compared to a regimen of just optimized lipids and blood sugar management. What we were able to work with both the Steno-2 group and the FDA is this a very large sample size. There's a 1,000 patients in each of those two groups, of which a significant percentage of those patients will be on sotagliflozin. What the FDA asked for in the CRL letter was not another study to demonstrate efficacy. We demonstrated efficacy. They are confident we demonstrated efficacy. What they wanted to see was a prospective group of patients treated with sotagliflozin to measure just diabetic ketoacidosis.
We worked very closely with Steno-2 and the FDA to define the criteria for what is the definition of diabetic ketoacidosis, how do you identify it, and how do you manage it if and when it occurs. All of that was aligned with the FDA. The value of Steno-2 for Lexicon is it's going to be a large number in the many hundreds of patients treated with Sota for a long period of time. To run a trial with diabetic ketoacidosis as the primary endpoint would not have been ethical and would not have been possible, because how do you run that trial from a patient standpoint that would be of any benefit to the patient?
We're using a group, a trial with a large group of patients with an endpoint that requires a large sample size, reduction in stroke, MI, and cardiovascular death, but we're using the patient exposure and clinical trial experience to answer in a prospective group of patients, a large number of patients treated for a long period of time, what is the rate of diabetic ketoacidosis in that group?
Awesome. Yeah.
It's worth keeping in mind the interesting thing about this particular study, apart from the fact that Sota is being used and it's a large prospective study, which is what the FDA has always wanted from Sota, is that it's an open label study. In fact, not only do we see the patient recruitment in real time, so answering what is the level of patient exposure on Sota, but we also see the cases of DKA in Sota across standard of care and other treatment arms. We haven't talked about what the actual data looks like, even though we get that on a monthly basis. What we have said is that the rates of DKA are consistent with what we believe is the appropriate risk-benefit profile of Sota in Type 1 Diabetes.
Really, as we sort of march towards the enrollment and exposure figure, which is imminent, we will be able to resubmit with that and look forward to a potential approval in 2026.
I'm just curious, how are you thinking about extrapolating DKA rates from Steno 1 in Denmark and translate them into the real world in the U.S.? Because maybe the monitoring protocols might be different between the countries.
Yeah. They're actually not different.
Okay.
It's that there are international guidelines for management of DKA that are used uniformly around the world to identify DKA, what is the definition of DKA, how do you monitor and coach patients to stop or other acronyms that are similar to that in terms of the steps that you take if patients are having both changes in how they feel
Then elevated ketones when measuring their blood ketones. There's a regimen of which there are multiple international consensus statements on, and largely these are used around the world. They're used in the U.S. routinely. They're incorporated in several other trials that are running, one called SUGARNSALT on preventing CKD progression. Another trial called SOPHIST, which is looking at preventative heart failure progression. Both of those are blinded trials that are using sotagliflozin, and they all use the same criteria. Those are the same criteria that we had already previously discussed with the FDA that we would provide as educational materials, if and when sotagliflozin is approved as INPEFA to manage blood sugar in patients with Type 1 Diabetes.
Awesome. Across HCM and T1D, what do you see as the biggest clinical or regulatory inflection point that could change the trajectory for sotagliflozin?
Yeah, there's a couple. I mean, clearly, for T1D, an approval is the outcome that we're seeking here. The company has a history that they've invested in. You know, kudos, it's before my time, kudos to the company for sticking with it, quite frankly, because other companies may have given up. Really the patient need and the association with the patient groups has been incredibly strong. They, as you know, at the AdCom that we had in 2024, were incredibly supportive behind approval for sotagliflozin. You know, I think that will vindicate the company's position all along that the benefit risk of sotagliflozin is worthwhile in this really needy patient population. That's an important one. Then clearly HCM is an area that's generated a lot of interest.
I think, there's a huge amount of unmet need. There's starting to be some medicines that are being used somewhat in a limited capacity because of the REMS and the things that are required to be associated with initiation of those medicines. But there's a massive opportunity there. Having the top line readout in Q1 of 2027, which, you know, is coming at us really fast, I think will be an incredibly important inflection for us and the company.
Great. Before we move beyond sotagliflozin, how should we think about the current financial position in relation to key upcoming catalysts? How does the Novo Nordisk collaboration and the recent loan facility factor into the future capital strategy?
Well, that's probably a good segue into LX9851. Look, we raised capital at the end of January, start of February, really to ensure that we saw ourselves through these significant inflection points, T1D approval, top line data in HCM. You know, we have $197 million, there or thereabouts, Scott, right, in cash, a little more. There or thereabouts, which gets us well through HCM readout and well into 2027, which is important. On the back of that, importantly, we were able to refinance our debt facility, which is $45 million or thereabouts, and in fact, have an arrangement with Hercules. If we desire it, we have access of non-dilutive capital up to $100 million.
It gives us a lot of flexibility in our financial position, but importantly allows us to really focus on execution, and that's really what the team have been doing of late now. In addition to that, we received two $10 million milestones from Novo for LX9851. First, upon filing of the IND earlier this year, and more recently for the initiation of the single ascending dose. Our study will receive, potentially, we should expect another $10 million when we go to multiple dosing later this year. Really, as we move into 2027 with the potential of moving into phase II is when we start to get serious here with the Novo collaboration. Might I say that collaboration is spectacular.
I don't know if you happened to catch their earnings for Q1, but Lexicon featured on page four of their of their presentation. They are full behind this mechanism, which is the 1 and only drug for this particular mechanism. Again, it's a once a day oral medicine and fits fully with their ambition of being the premier obesity company in general, but certainly the premier company for oral medicines and obesity. With that, we see the relationship continuing to be very successful for us.
Awesome. Thank you for clarifying that. Changing gears into pilavapadin now. Last year, you announced top line results from the phase II-B PROGRESS clinical trial, during the end of the phase II meeting, the FDA raised no objections for a phase III. My question would be, are you considering a full hands-on partner, or are you open to a co-development deal? Is there a timeline that investors should be paying attention to in terms of pilavapadin?
Look, that's really important. We initially last year, as we sort of went through the phase II program and looked at the data, were very focused on getting a partner that could provide, you know, reasonable but non-dilutive capital because we were thinking we would use that for HCM, for T1D, et cetera. Clearly, with the capital raise, we've allowed ourselves a lot more flexibility and a bit more time to really consider what is the best potential return for the company and shareholders, et cetera. You know, there's been a number of things happen in the environment. AbbVie recently did their deal with the Chinese company early stage. Clearly Lilly is involved in this area.
You know, this field among strategics is going to evolve over the next year or two. There is the possibility that we continue to look for ways to fund the program outside of the $197 million. Let me be very clear about that. Look at ways that we can fund that to create the maximum value for Lexicon and the potential partner.
Makes sense. Maybe as a side note, based on your recent presentations at the AAN meeting, can you talk about pilavapadin's opportunities for additional indications besides DPNP?
AAK1 is a fundamental mechanism in a number of important biological processes in the cell, particularly how different vesicles transmit throughout the cell, and I think have been validated in a number of animal models and preclinical experiments. We presented one of those for the first time. We presented our spasticity data in two different animal models, mirroring models of spasticity that involve damage, either damage to or complete severing of peripheral nerves, and it demonstrated reduction in spasticity associated with that, which is a major issue in MS as well as in trauma and spinal crush injury in humans.
Perfect. Finally, Mike, to wrap up, what are you most excited about as we approach the second half of the year?
Oh, wow. Many things. Many things. Look, just painting the picture, not just the second half of this year, but you think at the end of Q1 of 2027, which is not that far away, 9 months or so, you know, potentially we've read out top line for Sonata and had positive data in HCM. That will be transformational for the company. We've launched in Type 1 Diabetes. That will be transformational for the company. Novo has moved into phase II trials for 9851 with the potential for significant passive income from that partnership. Viatris will continue to gain approvals, and we'll be seeing sales royalty come in. Actually, we'll start seeing that this year, that will really accelerate next year as some of these major markets like Canada and Australia come on board.
Next year, Q1, the company's gonna be in an incredible position, which is really, you know, it's a cliché, but I think it's gonna be transformational as we look to be, you know, a potentially a profitable long-term commercial organization that continues to support the pipeline.
Awesome. Well, thanks again, Mike and Craig Granowitz. Very helpful context today.
Thanks so much again for the invitation.
Yeah. Thank you.
Really appreciate it. Thank you.