Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) Q1 2021 Earnings Conference Call May 6, 2021 6:00 AM ET
Chas Schultz - Executive Director of Corporate Communications & Patient Advocacy
Lonnel Coats - President and Chief Executive Officer and Director
Jeff Wade - Executive Vice President, Corporate and Administrative Affairs and Chief Financial Officer
Conference Call Participants
Jessica Fye - JPMorgan
Joseph Stringer - Needham & Company
Good morning, good afternoon and good evening. My name is Donna and I will be your conference operator today. At this time I would like to welcome everyone to Lexicon Pharmaceuticals Incorporated First Quarter's 2021 Earnings Call. [Operator Instructions]
I would now like to hand the conference over to your first speaker for today, Chas Schultz, Executive Director of Corporate Communications and Investor Relations. Thank you. Please go ahead, sir.
Thank you, Donna. Good afternoon and welcome to the Lexicon Pharmaceuticals first quarter 2021 financial results conference call. Joining me today are Lonnel Coats, Lexicon President and Chief Executive Officer and Jeff Wade, Lexicons Executive Vice President of Corporate and Administrative Affairs and Chief Financial Officer.
Earlier today lexicon issued a press release announcing our financial results for the first quarter of 2021, which is available on our website at lexpharma.com and through our SEC filings. A webcast for this call along with a slide presentation is available on our website. During this call, we will review the information provided in the release, provide an update on our clinical programs, and then use the remainder of our time to answer your questions.
Before we begin, let me remind you that we will be making forward looking statements including statements relating to the safety efficacy and the therapeutic and commercial potential of LX9211, sotagliflozin and other drug candidates. These statements may include characterizations of the expected timing and results of clinical trials of LX9211 LX, sotagliflozin and our other drug candidates and the regulatory status and market opportunity for those programs.
This call may also contain forward looking statements relating to our growth and future operating results, discovery and development of our drug candidates, strategic alliances and intellectual property, as well as other matters that are not historical facts or information. Various risks may cause our actual results to differ materially from those expressed or implied and such forward looking statements. These risks include uncertainties related to the timing and the results of clinical trials and preclinical studies of LX9211, sotagliflozin and our other drug candidates, our dependence upon strategic alliances and third-party relationships, our ability to obtain patent protection for our discoveries, limitations imposed by patents or owned or controlled by third parties, and the requirements of substantial funding to conduct our research and development activities. For a list and a description of the risks and uncertainties that we face, we see the reports we have filed with the Securities and Exchange Commission.
I would now like to turn the call over to Lonnel Coats.
Thank you, Chas. Good afternoon, everyone. And thank you for joining us on the call. We of course welcome the opportunity to provide you an update on the first quarter 2021 and the remainder of the year.
Patient enrollment is ongoing in our two Phase 2 clinical studies of LX9211, and neuropathic pain. We continue to navigate the challenges associated with patient enrollment, given the current environment with the pandemic. To help mitigate those challenges, we have increased the number of clinical sites in our RELIEF-DPN-1 study, we're keeping a close eye on enrollment and we're continuing to adjust the challenges as they arise to ensure we stay on target.
Late last year, our SOLOIST and SCORED Phase 3 outcome studies of sotagliflozin in heart failure both achieved their primary endpoints. Based on the strong results from these studies and our subsequent discussions with the FDA, we made the decision to move forward expeditiously with a new drug application for an indication to reduce the risk of cardiovascular death, hospitalization for heart failure and urgent visits for heart failure in adult patients with type two diabetes with either worsening heart failure or additional risk factors for heart failure.
On the next slide, there are a number of events to look forward to during the remainder of 2021. As mentioned, we are working hard to reach our goal to have both of our proof-of-concept studies for LX9211 readout by the end of the year. We're very enthused by what we've seen from LX9211 in our preclinical and Phase 1 studies and are looking forward to obtaining these Phase 2 results. We plan to share more about the data from these earlier LX9211 studies in upcoming publications.
We're moving forward with an NDA filing for sotagliflozin in heart failure and expect to submit the NDA during the second half of the year. We're also looking to establish a strategic alliance for sotagliflozin in heart failure, and those business development discussions are ongoing in parallel with our NDA preparations.
Lastly, I should note that there are more analysis ongoing from the SOLOIST and SCORED studies, which we expect to result in additional publications throughout the year.
There will be a presentation on sotagliflozin at the upcoming American College of Cardiology on May 16, entitled sotagliflozin reduces total hospitalizations and increases days alive and out of hospital in a SOLOIST's [ph] worsening heart failure trial. Stay tuned, and I hope you get a chance to chime in to that meeting.
On the type one Diabetes front, we continue to believe the sotagliflozin demonstrate a positive benefit risk profile and the largest Phase 3 development program ever conducted and type one diabetes, and that it has the potential to become an important new treatment option as an adjunct to insulin for type one diabetes patients. We requested an opportunity for an administrative hearing with the FDA on whether there are grounds for this previous denial of our NDA for type one diabetes.
In March, the FDA issued a public notice of opportunity for hearing and there was a period for the submission of public comments, which ended earlier this week. We were very encouraged to see that those public comments were overwhelmingly positive in their support for sotagliflozin and in type one diabetes. Last week, we submitted a written response to the FDA position and look forward to maintaining these discussions with the FDA.
I like to pause now and invite Jeff to take us through the financial results for the first quarter and our financial guidance for 2021.
Thank you, Lonnel. To begin, I will discuss key aspects of our first quarter financials. More financial details can be found in the press release that we issued earlier today and also in our 10-Q filed with the SEC.
As indicated in our press release, we had minimal revenues in the first quarter of 2021, primarily due to the absence of product revenues as a result of the sale of XERMELO during the third quarter of 2020.
Research and development expenses decreased to $12.6 million from $55.2 million for the corresponding period in 2020. This was primarily due to decreases in external clinical development costs related to sotagliflozin resulting from the completion of clinical studies.
Selling, general and administrative expenses for the first quarter decreased to $8.3 million from $14.7 million for the same period in 2020, primarily due to lower salaries and benefit costs as a result of reductions in personnel in September 2020 and also lower marketing expenses.
In total, we had a net loss for the first quarter of $21 million, or $0.15 per share, as compared to a net loss of $66.6 million, or $0.63 per share, in the corresponding period of 2020. Our net loss for the core first quarter of 2021 and 2020 included non-cash, stock-based compensation expense of $2.9 million and $4.4 million, respectively.
We ended the first quarter of 2021 with $141.4 million in cash and short-term investments as compared to $152.3 million as of December 31 2020. Our financial guidance for 2021 has not changed from the guidance given on our March 2020 year-end financial results conference call. We continue to expect our 2021 operating expenses to be in the range of $85 million to $100 million, which is a sizable decrease from the $204.4 million in operating expenses that we had in 2020. We expect non-cash expenses to be approximately $11 million of our total operating expenses.
Research and Development expenses are expected to be in the range of $60 million to $70 million. This estimate includes the expected spend for our ongoing two Phase two clinical studies of LX9211, the remaining close out of our sotagliflozin studies, and the expected cost to submit a new drug application for heart failure, as well as investment in preclinical and discovery stage programs.
We expect the GN&A expenses to be in the range of $25 million to $30 million. Overall, we expect that our current cash investments will be sufficient to fund our operations through 2022 and into 2023.
I will now turn the call back to Lonnel.
Thank you, Jeff. We are very much looking forward to our upcoming catalysts. And we're working hard to achieve it for the second half of the year with LX9211 and sotagliflozin and we'll be sharing more as they play out.
I like to at this point turn the call over to the operator for Q&A.
[Operator Instructions] Your first question comes from the line of Jessica Fye from JPMorgan. Your line is now open.
Hey, guys. This is Luke Brennan lawn for Jessica Fye. Thanks for taking our questions today. I guess just to start, you know, the news on the type one front. What's the timeline for sort of response from the FDA on this? And then what are the possible outcomes historically, over here like this? Is there any precedent [ph] for them to go back on their original denial with the NDA?
Luke, great question. Let me first start off with the timeline, we expect the FDA to come back in the next two to three months. However, I do believe they will publish and make public the briefing document that we submitted to them. And I encourage everyone that have an interest, they can take a look at it when it becomes public.
The second thing in terms of the hearing itself and what we requested, this is very, unique and it is very rare. And so in terms of looking for whether the FDA is ever overturned, and so forth, I don't think you're going to see much precedent either way, because this is a very rare moment.
Our objective certainly is to be able to work with the agency to come to a reasonable conclusion as to how we will make sotagliflozin available in the market for patients living with type one diabetes, I think this is one of the processes that we'll use to try to affect that opportunity. So, you know, stay tuned, I think we'll have a lot more opportunity to talk about this as the process plays out.
Okay. And then just one real quick on 9211, I noticed in a press release that the clinical trial sites for the DPN trial was bumped up from 30 to 40. Has there been any struggle to enroll there? And that's what's driving the additional sites are or was, you know, what should we read into that?
No, I think look, you're spot on to me. Like - I think we're no different from many enrollment, it was not meeting our expectations, given that, you know, folks were reluctant to come out. And we have a number of visits that are scheduled in our protocols. And therefore, we felt the only way to change the dynamics of what we were saying was to increase the site.
The other thing I think is encouraging is as vaccinations have increased dramatically, and people's confidence of going out into the public and engaging again, in these centers, should help us tremendously. So I think, with the number of sites that we've added, along with the environment changing, we have a good chance of staying on schedule as planned.
Okay, thank you very much.
[Operator Instructions] Your next question comes from the line of Joseph Stringer from Needham & Company. Your line is now open.
Hi, everyone. Thanks for taking our questions. Just wanted a couple on partnership discussions here, in terms of for sota [ph] you had two competitor readouts, and heart failure looks like maybe the second half of this year, the [indiscernible] just curious how that is playing into the partnership discussion?
And second, on the pain programs. What are the sort of possible paths forward or outcomes that you know, both trials look promising in terms of readouts, would you prioritize one type of indication over the other or, you know, seek a partnership with one versus the other depending on how the results read out? Thanks.
Yeah, I mean, both - great question. Your first question on partnering. Yes, you're correct. There are near term data readouts that are coming from other STLT's in the category. While we believe our data is unique and we believe our outcome is very unique. But it does play a role in partnership discussion and how fast you can accelerate them. But ultimately, we believe that our data will remain somewhat unique. So I think at this point, from your perspective, we should see some new data from these other competitors sometime in the very near future.
From our perspective, it matters less because I believe that the heart failure market is growing substantially. And I think you've heard me say this before, there's plenty of room for play to competitors. But most important, I think our data at this point will set the standard for what other competitors are going to have to meet relative to once we get to market. So we remain very, very confident where we are, but you are correct that near term data, certainly will have an impact on how we have conversations.
You know, as for the - you know, the outcome for the two neuropathic pain studies, the most important study is the DPN study, is a broader, bigger market, significantly underserved market. And so that's the one that we will prioritize, and most likely upon success we'll find our way quickly until Phase 3 program.
Great, thanks for taking our questions.
Thank you. [Operator Instructions] Your next question comes from the line of [indiscernible] from Citi. Your line is now open.
Hi, this is Carlyon for you Ugal [ph]. Thank you for taking our questions. First questions we had was with regards to the NDA filing for sotagliflozin and heart failure. Can you clarify if there are any additional pieces of feedback you're waiting on from the FDA at this point? And at this stage what aspects of the filing have been completed and what still needs to be completed before you file it in the second half of the year?
No, I think we got the feedback that we needed. And it was very encouraging. And at this point, we are accelerating as fast as we can to get the NDA put together. You know, we've put it into the second half. But for those who know us, we push hard within a second half to get it done.
I think we're very fortunate that, you know, we did file for type one. So the CMC work should be a little bit easier than if we had to start from the beginning. And there was quite a bit of work that we can certainly do around some of the integrated safety assessments.
So I think we're in a very good position, it's a fairly large study. So it will take some time for us to finish the work. But we're in a very good position to get it done as soon as we can in the second half.
Okay, great. And then we just had one follow up on the LX9211trial. Can you talk about the steps you're taking to mitigate risk related to missed [ph] visits, given the pandemic? And just you know, how will any missed visits or missing values be accounted for in the primary endpoint analysis for those studies?
Yeah, we are working through all of those kinds of dynamics, I won't get into a lot of specifics. But I think a couple of things that we realize we had to jack up a little bit. One is that, we had to help the site's do more to try to pull patients in from an advertising point of view. And so we're working hard to do that, and give them the necessary support.
The second one is increasing the number of sites, while we make other sites productive allows us to stay on track. So I mean, those are the two things I would say that we have probably added into the mix to try to mitigate what we saw as risk to our timeline.
I talked about this on last call. I believe in March that we were starting to see some risk around the timeline because of enrollment. And we were going to try to find a way to mitigate that through some work with the sites and trying to figure out how best to do that. We made the determination to increase the sites and make the ones that we had a little bit more efficient.
And it really was around advertising and making sure that people were aware and understood the situation. But I will tell you the probably the best thing that's going to help our industry, as well as this study is, as the environment improves, vaccination improves and people willing to come to the site. I think all the studies will show a benefit as a result.
Okay, that's helpful. Thank you for taking the question.
Thank you. [Operator Instructions] There are no further questions at this time. I'll turn the call over back to you speakers.
Well, thank you everybody for joining us. You know, we're working diligently over these next couple quarters to ensure we're able to deliver on what we see the second half. LX9211, you know, hitting the milestones we want to achieve, as well as advances sotagliflozin to submission. I think I said it in March, the more we did work around sotagliflozin and its uniqueness, we made the decision to advance this to an NDA as quickly as we can. It is impressive indeed. And we think it is a remarkable opportunity. So we look forward to continue to keep you updated as we have more information to share with you. Hope everybody have a safe and wonderful rest of the week.
This concludes today's conference call. You may now disconnect.