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Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)

32nd Annual J.P. Morgan Healthcare Conference

January 15, 2014 12:30 PM ET

Executives

Arthur T. Sands - President and CEO

Analysts

Matt Lowe - J.P. Morgan

Matt Lowe - J.P. Morgan

Hello, welcome everybody. I’m Matt Lowe of the J.P. Morgan biotech team. Our next company to present is Lexicon Pharmaceuticals. There will be a breakout down the corridor in the Sussex Room afterwards. If I could just please ask everybody to put their cell phones on silent. I will hand over to the CEO, Arthur Sands. Thank you.

Arthur T. Sands

Thank you very much. I’d like to thank the entire J.P. Morgan team for another excellent conference. I’ll be making certain forward-looking statements during this presentation and I refer you to our risk factors filed with the SEC.

I’m going to be focusing my talk today on our two most advanced programs, LX4211 for diabetes and then telotristat etiprate for carcinoid syndrome. And in terms of LX4211, I would like to be highlighting some of our recent data in renally impaired patients with type 2 diabetes and then an ongoing I think very exciting study in type 1 diabetes all because -- what’s critical here from a business and science and medical standpoint is to demonstrate differentiation such that this product really can offer something I think quite new and important for patients and that’s of course critical from any product development and commercialization perspective as well.

At the root of that differentiation is the fact that this is the first dual inhibitor of both SGLT1 and SGLT2. These are two critical transporters of glucose. SGLT1 in the GI tract is pictured here on the right. It’s a primary source of the body’s absorption of glucose after a meal. And it is complimented by the functions of SGLT2 in the kidney, which is the key transporter that reabsorbs glucose from the urine as the blood is filtered, so it rescues glucose back from the urine, so it’s not spilled out. So both these transporters think of them in terms of pumping the blood stream full of glucose as much as possible pretty much all the time.

Now most work today in the large pharmaceutical industry is focused on SGLT2 inhibitors. For a number of reasons these were discovered human genetics studies earlier and -- but we had knocked out both genes in our gene -- large-scale gene knockout program. So we had mouse genetics to inform us about SGLT1 and its important role.

As we developed the medicinal chemistry program around these important transporters, we had molecules over selective for SGLT2 and then we had LX4211, which is a dual inhibitor. And LX4211 always look better in all the pharmacology studies we did and so we selected that and we’re now Phase 3 ready with this program for type 2 diabetes.

You can see that the field has developed. There are number of competing molecules, but mostly all in SGLT2, although a recent entrant from Novartis that is another dual inhibitor. So the strategy for our late-stage development and commercialization program is to demonstrate all the trials are designed to demonstrate this differentiation and what the benefits then are for patients because of it.

So we believe this unique, this dual inhibition will work of course alone as a single agent, but also in combination especially with DPP-4 inhibitors and we’ve done studies there that show we believe a very unique synergy between the SGLT1 portion of mechanism and DPP-4 inhibition through the GLP-1 mechanism. Diabetes with renal impairment we think will benefit and I will focus on that study and then I mentioned already type 1 diabetes.

And then of course importantly in type 2 diabetes it’s important to be able to demonstrate a cardiovascular benefit as the regulatory requirements are still in place to requiring cardiovascular studies and we may have unique positioning there as well.

Just for context I will go quickly through this Phase 2b data because -- of course many of you’re probably familiar with it. But we had a very substantial drop in this 12-week study of 300 patients with type 2 diabetes, drop in hemoglobin A1c as pictured here, nice dose dependent reduction resulting in .95% reduction. And it is -- really compares extremely favorably with the SGLT2 inhibitors which cover around .7 in similar studies.

Now to demonstrate the first point of differentiation, we’re looking at the urinary glucose excretion. So when the SGLT2 portion of this mechanism results in glucose being spilled into the urine and that’s pictured here, we measured this through that study. And what’s important is that from the 200 milligram dose to 400 there is really no increase in urinary glucose excretion. So however if you recall by this efficacy slide, from the 200 in blue to the 400 dose in black, we do see a substantial increase in efficacy, so that we know we attribute to SGLT1 mechanism because it can’t be SGLT2 because here you see SGLT2 is pretty much maxed out, we’re not seeing a difference on the urinary glucose. So this was one of our first elements of clinically important information that this dual inhibition makes a huge difference.

In addition, there is substantial reduction in systolic blood pressure. This is not all patients in the study. And then if you look at this information from a different perspective on blood pressure, here we’re looking at those patients on the X axis that came in with high blood pressure it is -- every triangles is a patient in the study. And those that came in with pretty much normal blood pressure and you can see the ones that have the reduction the most -- the greatest reduction in blood pressure were the ones who needed to have that reduction. They were hypertensive and that’s quite important of course placebo group no change because we don’t want to lower blood pressure globally, we don’t want to see hypertension and we have not. But for those with high blood pressure we had a 40 millimeter decrease in blood pressure and that’s really comparable to essentially some of the best anti-hypertensive medicines as well.

So this mechanism conveys many metabolic benefits. I focus on the glucose transporters, but they’re also the S is sodium glucose transporter, so sodium is also being reduced we believe by this inhibition of the transporters.

So let me show you then the recent studies and results, highlights in renal impairment. Up to 40% of patients with type 2 diabetes suffer from kidney failure, so this is a very major segment and the progression of the disease includes this -- unfortunately this outcome from many patients. Many of the current drugs are contraindicated when the kidney is compromised and we believe that with SGLT1 functioning we can have unique benefit there. This will also position LX4211 in Phase 3 development. This is a necessary study in Phase 2 to establish safety in these patients who are quite [ph] ill.

So we looked at 30 patients in the placebo controlled study over seven days of dosing. 50% had very low GFR rates, which is the measure of their -- severity of their kidney function. So we are able to include both moderate and severe renal impairment patients.

Primary outcome is pictured here. This is a reduction in postprandial glucose. In blue the treated group, you can see quite an effect and this is baseline in light green and then on treatment after seven days of treatment, a very nice reduction versus really no change in placebo. This postprandial reduction is very informative and thus again we think indicate primarily the SGLT1 effect by blocking that glucose absorption in the GI tract. This -- if you got to look at the severe patients it's less than 45, this effect is still there. So this is very nice finding, very important. We’re not loosing our effect as kidney function decreases because SGLT1 is in the GI tract.

Very nice reductions compared to placebo and fasting plasma glucose 20 points, 17 points in the higher GFR group and then a low GFR group you see our effects are sustained. And then it's collaborated by our increase in GLP-1. This is total GLP-1 rising after seven days of treatment substantially, and this is active GLP-1. So this is part of the SGLT1 mechanism. I won't go into the details of how this is occurring, but it adds to the overall beneficial effects.

Interestingly on urinary glucose excretion in those with kidney impairment that’s decreased because the kidneys are not functioning as well SGLT2 can’t benefit them as well by inhibiting it. And if you look at those with a little bit higher GFR there are 42 grams, and then the low GFR group you can see that decrease in excretion of glucose. So this is why the SGLT2 selective compounds have had trouble because obviously you need a functioning kidney to really benefit these patients. So -- but in this slide, we see that decrease in SGLT2 inhibition function, but SGLT1 is providing substantial benefit. It was safe and well tolerated in this small study, which we think enables our Phase 3 program to include then patients with moderate to severe renal impairment, and we’re in the process of planning those studies.

So let’s move on now to I think what is I believe personally one of the most potentially very exciting applications in type 1 diabetes. There has not been a small molecule approved for type 1 diabetes. And the mainstay of therapy is of course insulin. As many as three million Americans have type 1 diabetes. Over half of them are diagnosed as children below the age of 18. But 5% to 20% of patients diagnosed with type 2 diabetes may actually be adults with type 1 diabetes. And the natural history of the disease is pictured here. There is autoimmune destruction of the beta cells. And the beta cell mass is sustained for a while as this disease begins, but then it erodes. And as it erodes that’s when glucose and tolerance occurs. And one of the key therapies of course is insulin, but the goal is not only to use insulin to get the energy into the cells of these patients so they can function, but it is to -- you also need to improve glycemic control overall, lower the blood glucose because glucose itself at high levels is toxic.

So we think this drug can work in combination with insulin. There is a real need to treat these patients more effectively. The majority of type 1 diabetes patients are way above their hemoglobin A1c goals as a fear of over treatment with insulin and fear of hypoglycemia which has a very -- because insulin has a very narrow therapeutic window and we do think adding this on to insulin can help prevent weight gain, insulin promotes weight gain. It can promote weight loss. We think it will reduce rates of hypoglycemia and improve the time a new glycemic range for these patients. Insulin add on therapy can also have benefits through SGLT2 inhibition, lowering mealtime insulin dose and many other aspects and in addition the potential to protect the beta cells that are remaining.

I want to tell you very quickly about this ongoing proof-of-concept study. We had three patients that where in a pioneer group open-label because this is the first time we co-administered insulin with our drug and we’re now in a placebo controlled portion of the study with 30 patients and we’re accessing many objectives a little bit on the design. We take all the baseline readings and a continuous glucose monitoring before treatment begins. We have to have a two day inpatient period to bring our drug onboard with insulin and back off insulin that’s necessary and this was of course first time. This was highly engineered and I think a very well done process by our investigators. And then the patient can go outpatient with the drug for 28 days and then come back in and we have to then stop LX4211 and bring insulin back onboard. So this is a fairly intense trial and design and I think it went very well.

These are the three pioneer patients and what you’re looking at the bar graphs are the reductions in insulin requirements that they experienced. For their bolus insulin at breakfast, lunch and dinner you can see a quite substantial reduction and then even the total daily basal dose being reduced. So we’re looking at reductions from 30% to 80% on some of the bolus doses that are required. And of course this is the first three pioneer patients’ open-label, so we’re eagerly waiting the placebo controlled double-blinded study results at the end of March.

The Hemoglobin A1c was either maintained over this 28 day period or reduced. So -- and it look like by the continuous glucose monitoring there was a reduction in the present time spent in hypoglycemic range. So we’re encouraged by the glycemic control parameters today at so far. And the three patients also did have weight loss, percentages of weight loss similar to what we’ve actually seen in type 2 diabetes. And so we were able to go forward as I said into the placebo control portion. We should have results at the end of this quarter.

So in summary for LX4211, the dual mechanical offers we think substantial potential benefits for patients and a significant differentiation. The strong postprandial glucose reductions are key and the GLP-1 mechanism of action through an oral molecule is really quite important. And the goal being the reduction in hemoglobin A1c and because of the dual mechanism we can -- we think our drug results and less excretion of glucose in the urine which ultimately means less work essentially for the kidney. So the unique benefits for type 1 remain to be proven. We’re encouraged and we hope to see that move forward in that indication.

Just a quick update then to windup here on telotristat etiprate which is our Phase 3 program in carcinoid syndrome. This is of course a very different indication, quite different than diabetes where there are tens of millions of Americans affected. Here this is an orphan indication. There’s approximately 13,000 patients bio-market research and other studies with carcinoid syndrome in the United States. And this is the functioning carcinoid tumors, these are tumors that secrete serotonin, they’re neuroendocrine tumors. And the serotonin that’s secreted creates GI disturbances, extreme diarrhea, flushing vascular instability, got this flushing abdominal pain and ultimately the high serotonin damages the heart valve. So our drug telotristat etiprate is an inhibitor of the enzyme that produces serotonin that’s out of control in these tumors and so we can reduce serotonin levels and then reduce and treat carcinoid syndrome and that’s the goal. It has fast track status as well as orphan status in the United States and orphan status in Europe as well.

So a quick update on this ongoing Phase 3. It is a small study for this orphan indication. 105 patient’s for the registrational study. It is a 12 week treatment period because we’re looking at reducing carcinoid syndrome. We do not have to show changes in tumor burden, therefore we can have a more discrete treatment period. The objectives are then to see many of these parameters of carcinoid syndrome be reduced, primary endpoint being the bowl movement reduction because diarrhea being one of the primary issues with the disease.

But we’re also looking at 5-HIAA the biomarker of serotonin, so we have a nice biomarker to continue monitoring the efficacy of this drug throughout the trial. So that enrollment is going well. We are encouraged to introduce a companion study into the Phase 3 program, because there are some patients that did not -- if they don’t qualify to get into the TELESTAR study which is the main study. Several patients wanted to get in. Their bowel movement frequency was below 4, which was a threshold to be enrolled, and yet they still have other symptoms of carcinoid syndrome including high 5-HIAA and others and so we created TELECAST to create a way for patients to participate in the Phase 3 trial. It's designed very similarly except for the enrollment criteria change.

So to summarize then, we have made I think very significant progress in 2013 advancing our late stage pipeline. We’ve focused the Company’s efforts on our Phase 3 program and [ph] launches with telotristat etiprate as I just summarized, and then also 4211 for diabetes, which has grown to -- in terms of great importance for the Company and also on its application for patients in both type 2 and type 1 diabetes. We have completed all the studies required to move into Phase 3 and its quite compendium of studies including the QTc study, showing with the renal study and many others that were required. And we anticipate progression of the program into Phase 3 in type 2 diabetes with the corporate partner.

With respect to type 1 diabetes I do believe this is an area that Lexicon itself to play greater role in and we hope that it is going to be able to do that based on the results, seeing the results from the next study. And we’re already though planning the Phase 3 program and we look forward to getting some regulatory input from the FDA and how to properly develop this molecule in type 1 diabetes.

We have taken steps to focus our financial resources recently and that I think it’s very important to narrow Lexicon’s expenditures and strength -- position us in a stronger position -- we're in a strong cash position and again the focus going forward will be in diabetes and carcinoid syndrome.

You can see that the cash balance is substantial, so that we’re in a very good position. And at this stage I’d just like to say since its very recent that I’d like to thank, this involves of course a workforce reduction, but I’d like to take the opportunity to thank all the terrific research scientists that have worked so hard on these programs all these years and make them a reality. I do believe that their hard work will translate to break through therapies for patients. I will stop there and we have a breakout room. Thank you.

Question-and-Answer Session

[No formal Q&A for this event]

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