Lexicon Pharmaceuticals' (LXRX) Management Presents at 2014 Bank of America Merrill Lynch Healthcare Conference (Transcript)

Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)

2014 Bank of America Merrill Lynch Healthcare Conference Call

May 13, 2014 04:00 PM ET

Executives

Brian Zambrowicz - Chief Scientific Officer

Jeff Wade - Chief Financial Officer

Analysts

Colin Bristow - Bank of America Merrill Lynch

[Call starts abruptly]

Bank of America Health Care Conference. My name is Colin Bristow and I cover the U.S. Major Pharmaceutical names, and Lexicon Pharmaceuticals. It's my pleasure to introduce, Brian Zambrowicz, the Chief Scientific Officer at Lexicon. Thanks.

Brian Zambrowicz

Alright. Thanks for the opportunity to present today. I will be making forward-looking statements, so I point you to our filings with the Securities and Exchange Commission for a more thorough listing of our risk factors.

I will be spending time today discussing our two late stage program. Starting with LX4211 for type 1 and 2 diabetes. LX4211 is unique and being a dual inhibitor of two glucose transporters. SGLT2 in the kidney, where inhibition of SGLT2 results in release of glucose in the urine. And more accordingly the SGLT1 affect, SGLT1 is the primary transporter for uptake of glucose from a gastrointestinal tract after a meal and inhibiting then SGLT1 and the GI results and a reduction in blood glucose levels after a meal and then also triggers the release of GLT1 and PYY, beneficial peptides.

Of course the SGLT inhibitor space is a crowded space. So there is many selective SGLT2 inhibitors approved during the clinic and the column just indicates whether SGLT1 or 2 is inhibited by these agents. We're unique and being a first and fast dual inhibitor. The other compound dual inhibitor here is the Novartis compound and the news here is that although they indicated they were moving into Phase 2 and filed at clinicaltrial.gov, they recently withdrew prior to enrollment that study. I think that indicates what we've been saying all along, it's a very challenging when you have two targets to hit them properly without hitting one or the other too harder or not hard enough. And again I think we're in a unique position and it will be difficult to follow-on with a compound like LX4211.

So I want to just focused on our too much recent studies that really emphasize some of the differentiation we have with 4211 due to its SGLT1 inhibition. And the first of those is data from patients with renal impairment, about 40% of type 2 diabetics will ultimately suffer from kidney failure and many of the current medications are [currently] indicated for the renal impaired patients.

Our rationale here is that within SGLT2 inhibitor, if you inhibit SGLT alone, you will lose your ability, the benefit the patient as a lose their kidney function. However, because we also inhibit SGLT1, we expect it to be able to maintain benefit even in patients with very low kidney function. And it's a great opportunity to differentiate in the substantial patient population since the SGLT2 inhibitors have little to no effect in this population.

So with that, we did run a small, we renal impairment study, we did it in the 30 patients with moderate to severe renal impairment, these patients range from 59, GFR 59 down even below 45. And we tried to balance the 30 patients to have half above a GFR40 and half below GFR40. So we could really address how those patients at the lower end below 45 looked relative to those at the upper end of renal impaired.

Our primary endpoint was the effect we had on postprandial glucose and that relates to as I said, the importance of SGLT1 on reducing postprandial glucose. We’re also very interested in safety and tolerability and a number of other measures which I won’t discuss today.

Then the adults, they were dosed once a day with two by 200 milligrams or 400 milligrams once daily of LX4211. And what we’re looking at here is in the [maroon] is showing before dosing began and then the blue is after seven days of once daily dosing. On the right with placebo where obviously after seven days there is no benefit as far as any change in postprandial glucose levels. But on the left, this is the entire population of the renal impaired. And you can see that after seven days of once daily dosing, there was a very nice improvement and statistically significant improvement in postprandial glucose.

Of course, as I mentioned, we’re particularly interested in the subset of patients with the GFR below 45 and we’re really interested in seeing if we would lose our effect as we move down to the low end of GFR and that was not the case. So, if you see here again, you see on the right that placebo really had no benefit as far as effect on postprandial glucose, but there was no diminution of effect on the left with the effect on postprandial glucose in the those with the GFR less than 45, again relative to those patients I just showed you, the whole range, both below and above 45. So those are very encouraging, demonstrating that this SGLT1 effect is meaningful and allowing us to provide benefit for patients with low kidney function.

We saw the same thing when we looked at fasting plasma glucose for the total population what we saw the 20 mgs per deciliter dropped by day seven in fasting plasma glucose. But if you look at the two ranges of patients those from 45 to 59, it was 17 mgs per deciliter and those below 45 it was 27 mgs per deciliter. Again those on the low end showed no diminution of effect relative to those on the higher end of GFR.

And importantly, if you look at our effect in this study on SGLT2 by looking at our effect on urinary glucose excretion, we see on the top is that the overall population of renal impaired was releasing 33.6 grams of glucose into the urine over 24 hours but then if you break that out, you see that above 45, they were releasing 42 grams over 24 hours into the urine where as we are seeing the expected drop in SGLT2 effect as kidney function was lost because below 45 GFR we saws only 21 grams being released over 24 hours. This clearly indicates that something is going on with LX4211 beyond just its effects on the kidney to provide the benefit that I showed you in those patients with low GFR.

So we were very encouraged by this study we were able to improve glycemic control in type 2 diabetics with renal impairment. We saw very robust effect on postprandial glucose particularly apparent in those with low GFR below 45. And these benefits were clearly obtained while losing much of the SGLT2 benefit at the low GFR. The safety looked very favorable and supports this dose for which was 400 milligrams once daily for Phase 3 studies in this patient populations and provides us another opportunity to differentiate LX4211 from selective SGLT2 inhibitors.

Most recently we were very excited about our proof-of-concept data in type 1 diabetes. So I give you some guidance here from the FDA what they are looking for add-on therapies to insulin and type 1 diabetes. What they describe for meaningful outcome is they want to see a reduction in insulin or simplification of the insulin dosing regimen, while maintaining or improving glycemic control. And furthering that, they indicate that reduction of insulin need is not sufficient evidence of efficacy, but they also want to see independent reduction or at least no increase in hemoglobin A1c.

So we initially had done a pioneer our portion of this study which was open label in three subjects since it was our first time testing LX4211 in type 1 diabetic for safety reasons, we wanted to do it open label and we wanted to track that very closely. But once we have that information and showed good safety in those first three subjects and had a better feel for using our agent in type 1 in combination with insulin, we moved it into an expansion phase of 33 subjects that was a double-blind placebo-controlled study carried out at seven sites in the U.S. And we used 400 milligram once daily dose, the same dose that I showed you we used in the study in renal impairment and it was the dose that in type 2 diabetes on our Phase 2b dose ranging study, gave the greatest efficacy.

Treatment was once a day for 28 days. And these were adult type 1 diabetics, 18 to 55 years old. And I do want to point out that we required a hemoglobin A1c value between 7 and 9. This is important, it's a high-end of that range is relatively low compared to lot of type 2 diabetes studies. And the importance of that is the lower baseline A1c come -- the less A1c effect you can expect to have after treatment.

The primary goal of the study was we need to establish safety and mechanistic proof-of-concept for LX4211 in combination with insulin. And our primary endpoint was to look at the effect of LX4211 treatment on mealtime insulin for bolus insulin requirements. So we had multiple secondary objectives, I'll show you a few of them, but we were really interested, because the FDA said it’s not enough just to improve the insulin regimen, we want to see that hemoglobin A1c is at worst unchain, but preferably reduce, so we set multiple parameters of glycemic control.

A little bit on the baseline characteristics. In this table, the PL column is the placebo arm and LX is LX4211 arm. No arms were real down, so I point a few out of the measures. For instance, if you look at the BMI 26.2 in the placebo arm, 27.1 in the LX4211 arm, pretty well matched and also indicates that these are overweight individuals, something that’s being seen more and more in type 1 diabetes and where the weight loss benefits of LX4211 could be particularly important.

If you look at MBI CS2 that's whether they’re on multiple data injections versus insulin pumps. And the ratio was very similar in the two arms. The mean total daily insulin used some unit per kilogram 0.6 for both arms, the bolus to total 0.44 and placebo 0.43 in LX arm and the hemoglobin A1c exactly down 7.9 in each arm. These patients did come in with normal blood pressure range.

So our primary endpoint, we hit it. We saw 30% -- 32% reduction in meal time insulin requirements relative to a 6.4% reduction in the placebo arm. This was a significant reduction for 4211 relative to baseline and highly significant reduction relative to placebo.

What was very intriguing though is when we look at the hemoglobin A1c effect, and I want to emphasize again that this was a four week study and typically 12 week to 24 week studies are run to look at hemoglobin A1c effects, because it’s dependence on the half-life and turnover of red blood cells and 12 to 24 weeks are typically required to see a more full effect on hemoglobin A1c. And we saw a 0.55% reduction in hemoglobin A1c with LX4211 relative to minus 0.06% for placebo; highly significant reduction for 4211 relative to baseline and relative to placebo.

We also just continued its glucose monitoring during the study. And so, we show that as pie charts that add up to a 100% of their time obviously but red is the time spent in hypoglycemia, less than 70 mgs per deciliter blood glucose, green is where you want them to be and a more euglycemic range between 70 and 80 mgs per deciliter and yellow is hyperglycemic range of over 180.

With the placebo arm, you can see that there was really not much change in the green from 55.9% to 54% but there was an increase, 35.6% to 40.2% of the time spent in yellow to hypoglycemic range and perhaps the small reduction in hypoglycemic range, red.

What you see with the LX4211 treatment is quite different. There was a significant increase in the time spent in the euglycemic green range from 56.4% to 68.2%, highly significant increase relative to baseline and relative to placebo. We also saw a significant reduction in the time spent in the hyperglycemic range above 180 in yellow, going from 35.7% to 25%, again highly significant relative to the baseline and relative to placebo. And no increase in time spent in hypoglycemia, the red; if anything, a decrease.

This is very encouraging because between the hemoglobin A1c data I just showed and this continuous glucose monitoring data, I think it confirms that we were able to improve glycemic control in these patients while improving their insulin regimens and not increasing the risk of hypoglycemia, very much falling in line with the FDA guidance of what they’re looking for head-on therapy in type 1 diabetes.

And we also saw a significant reduction in body weight at four weeks with the 1.72 kilogram reduction in body weight with LX4211 relative to 0.5 kilogram increase in body weight in the placebo arm again highly sophistically significant for 4211 relative to baseline and relative to placebo.

So, in summary very encouraging data, we met our primary endpoint of reduction in both insulin and importantly we improved glycemic control, dropping A1c by 0.55% in only four weeks with less hyperglycemia, more time spent in euglycemic range, no increase in hypoglycemia and importantly all the measures of glycemic variability will reduce. So when you measured the highest -- the hyperglycemic and hypoglycemic events, they were reduced by every measure that we used and also decreased body weight and as well tolerated and were committed to progressing LX4211 into Phase 3 and type 1 diabetes and our planning is ongoing.

So it’s just confirming our strategy and the unique differentiation again due to this dual mechanism of action and hitting SGLT1. It does give us an opportunity in the general type 2 population for improved efficacy as well as safety but importantly, it gives us renal impairment sub population, the type 1 diabetics. We also have a unique synergy and elevating active GLT1 levels after a meal in combination with DPP-4 inhibitors which we have also shown in the clinical study and type 2 diabetics. And our strong blood pressure luring effects give us the real opportunity to demonstrate cardiovascular benefit with the agent.

Briefly, I will tell you about our Phase 3 program of telotristat etiprate for carcinoid syndrome, very different indication; it’s an orphan fast track identification for the FDA orphan indication designated by the EMA. This is a very directed therapy. Carcinoid syndrome is caused by tumors that originate typically in the small bowel and they contain cells that produce very large amounts of serotonin. And when these tumors metastasize to the liver, they dump the serotonin, it can bypass first path metabolism and act on the GI to cause severe diarrhea, it also causes flushing and other symptoms. This is clearly -- the effects are driven by serotonin and our compound telotristat etiprate is the pill and it is a small molecule inhibitor of the rate limiting enzyme and serotonin synthesis. But it doesn’t cross the blood brain barrier, so it can reduce serotonin production by the tumor without affecting central serotonin level.

I will show you two pieces of data from our proven concept studies in carcinoid syndrome on the Phase 2. This was [renal] open label study of 15 patients. And this is the primary endpoint efficacy endpoint for our Phase 3 program as well. So our affect on bowel movement frequency, these are patients just to be clear that are coming in, they are being treated with octreotide, somatostatin analog, but they are having breakthrough symptoms that are not adequately controlled, so they have to have four to ten bowel movements per day. And you can see on average that’s about six bowel movements per day coming into this study, but within the first two weeks of treatment there was a significant reduction in bowel movement frequency, continued to grow by week 12 there was a 43.5% decrease in bowel movement frequency. That’s average going from about six to a little over three bowel movements per day.

But if you look at individual patients the same measure, the percent reduction on the Y-axis here, the vast majority of patients have at least the 30% reduction in bowel movement frequency with many patients giving much more profound benefit than that.

So a little bit on the market. It is an [orphan] indication, there is about 13.7 about 14,000 patients with carcinoid syndrome in the U.S. the vast majority are treated with octreotide, about 98%, but at any given time about half are not adequately controlled than have these breakthrough symptoms, this is the population that we wish to treat with them, with telotristat. And again we are going on top, just like in our clinical studies both the Phase 2 data shown you and Phase 3 we will be going in on top of somatostatin analog therapy.

It is a snap shot if you look overtime, it’s actually 79% of patients who will eventually be not adequately controlled on somatostatin therapy. And if you look at overtime by 36 months 71% of patients won’t be adequately controlled. And there are no current treatment options once these patients are not adequately controlled, the only options are higher than labeled doses of the somatostatin analog, which cause significant side effects or increased frequency of rescue immediate release octreotide injections.

So, we are currently in Phase 3, it's 105 subject study, double blind placebo controlled efficacy endpoint, as agreed upon with the FDA is 12 weeks, so I'll emphasize. I showed you proof-of-concept data at 12 weeks in the same patient population, not adequately controlled on somatostatin analog therapy with the same doses of telotristat etiprate that we'll be using in Phase 3. Primary objective is the same primary endpoint as in that proof-of-concept study our effect on bowel movements and frequency with multiple secondary end points including 5-HIAA levels, which is a breakdown product for serotonin flushing and abdominal pain.

So, just to summarize telotristat etiprate is currently in Phase 3. The pivotal study is enrolling well, our goal is to complete enrollment by year end and file hopefully next year.

We have a companion study, we've initiated TELECAST, it's mainly to up our safety data base for our IND and commercial preparations are underway. And LX4211 is Phase 3 ready in type 2 diabetes. Phase 3 planning is also underway for type 1 diabetes with the meeting with the FDA requested and pending.

Our cash and investments as of the end of the first quarter was $98 million and our goal remains to commercialize products both independently and collaboration with partners obviously type 2 will remain interested in partnering that program, but carcinoid syndrome provides a unique opportunity for commercialization on our own.

And with that, I can take any questions.

Question-and-Answer Session

Operator

(Inaudible).

Unidentified Analyst

Hi, I'm sure I’m the first person to ask this. Can we talk your partnership discussions and how that's progressing?

Brian Zambrowicz

Sure. Maybe Jeff you can answer this yourself and answer that question.

Jeff Wade

Sure. I'm Jeff Wade, the company's Chief Financial Officer and Lead the Corporate Development Group. So we've been having a discussion about type 2 diabetes partnership profile. And in that indication there is the seismic development program potential commercial footprint required that something that we feel like we needed the partnership to foresee them.

Interestingly, I don't think that’s really the case with type 1 diabetes. I can say that we are pretty far down the path with our partnership discussions, but we’re at the stage at this point where I cannot put a whole lot of additional comment.

Unidentified Analyst

With regards to the type 1 opportunity, could you just give us some -- what your expectations for the discussions with the FDA which was around specifically a CD study? And what did you come -- in your believe and assuming that the FDA did require a CD study it’s not that you’re saying you will be able to fund yourself?

Brian Zambrowicz

Well, our feeling is that the FDA will likely not refer a cardiovascular outcome study. But again, we will be having a meeting that should clear that up in the near future. But we've had some informal feedback that's indicated that they prefer to see safety data in the same patient population that's the population not to be treated.

I would have interpreted that I mean they want safety in type 1 for type 1 diabetics and it’s not really realistic to run a cardiovascular outcome study in type 1. Again, we’ll clear that up as we move forward in the very near future, but I don’t anticipate it will be required.

Unidentified Analyst

And on your 4Q call you mentioned that you just completed the QT study with positive results; really that must for the suite and the data package for potential partners. And can you just -- had been a gating factor to discussions previously?

Brian Zambrowicz

I think that it’s safe to say given the space is crowded there is agents on the market that differentiation with selective SGLT2 inhibitors. It’s always been extremely important than just in the past six to eight months I think we’ve had multiple thesis of data that have been very important for that differentiation that’s included the renal data that I showed that type 1 data.

But also there an important need when making this kind of investment to derisk a program as much as possible and I think the QT study was important to check off because it’s difficult to do such an important deal in diabetes and if you were then to have the program failed fairly rapidly in the short QT study that wouldn’t look it. So I think there are some doctors that have to be checked off and then additional differentiation data was also important in that timeframe.

Unidentified Analyst

Presumably the type 1, type 2 opportunities are both on the table for potential partnering discussions despite your ability to potentially move into Phase 3 in type 1 yourself?

Jeff Wade

So our expectation is that we would develop this -- in the partnership we would be developing it as an integrated program. And we have said that we continued to express that in any partnership we would want to have a bigger role in the type 1 development and commercialization of the product. But it is something that would be developed as we unified the product.

Unidentified Analyst

Can you just walk us through what are the key updates and read outs we’ll get from you between now and year-end?

Brian Zambrowicz

Sure. I think what everyone was looking for the type 1 data it’s now in for diabetes I think now they are looking for partnership I think that’s a next inflection point in the diabetes program. We’ll also have feedback from the FDA on what the type 1 plan might have to look like. I don’t foresee any other news in the type 1 phase. We have no ongoing studies anymore. And then I think the other important inflection point is reporting that we have completed enrollment of the Phase 3 study in carcinoid syndrome.

Colin Bristow - Bank of America Merrill Lynch

Great, can we have another question?

Unidentified Analyst

Can you just talk briefly about the market opportunity in carcinoid syndrome?

Brian Zambrowicz

I will let Jeff discuss that.

Jeff Wade

Sure. So this is a disease that is managed currently with Somatostatin Analog Therapy; in the U.S. it’s –. And that as Brian indicated that will in some patients doesn’t control the symptoms, but in other patients it will for some period of time, but won’t continue to. So what we are doing here is layering this on top of Somatostatin Analog Therapy.

So Somatostatin Analog Therapy even when it ceases to control carcinoid syndrome will continued to be given for a variety of reasons including the patients would be worse if that was discontinued and we are layering on top of that. So we are meeting a need that will be -- but it’s basically half of the patient population has this need where they are not being adequately controlled with Somatostatin Analog Therapy and we’re sort of enabling them to regain control of carcinoid syndrome.

So we believe that to be a pretty significant market opportunity. The pricing of Somatostatin Analog Therapy is relatively expensive. And at the high dose, which many patients go to is around $4,000 a month, hope for acquisition cost and so it’s expensive.

And one of the ways that people respond now to Somatostatin Analog Therapy season is at control, so increased the label dose are reduce frequency to less than four weeks recommended dose, so there is [submitted] cost associated with that as well. So we think that this is a substantial market opportunity for Lexicon. It is a patient population that is treated largely in centers of excellence concentrated prescriber base and something that we think that we can address relatively additionally.

Colin Bristow - Bank of America Merrill Lynch

Great. And at this point thanks to Brian and Jeff and thanks everyone. Thanks.

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