Welcome to the Lexicon Pharmaceuticals First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a brief question-and-answer session. As a reminder, this call is being recorded today, May 13, 2025. I will now turn the call over to Lisa DeFrancesco, SVP, Investor Relations and Corporate Communications for Lexicon. Please go ahead, Lisa.

Thank you, Sanan. Good afternoon and welcome to the Lexicon Pharmaceuticals first quarter 2025 financial results conference Call. Joining me today are Dr. Mike Exton, Lexicon's Chief Executive Officer and Director; and Scott Coiante, Senior Vice President and Chief Financial Officer; Dr. Craig Granowitz, Senior Vice President and Chief Medical Officer, will also join us for Q&A. Earlier this afternoon, Lexicon issued a press release announcing our financial results for the first quarter of 2025, which are available on our website at www.lexiconpharma.com and through our SEC filing. A webcast of this call, along with a slide presentation, is also available on our website. During this call, we will review the information provided in the release, provide a corporate update, 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 related to the safety, efficacy, clinical development, regulatory status, and therapeutic and commercial potential of pilavapadin, LX9851, sotagliflozin and our other drug programs, as well as our business generally. These statements may also include characterizations and projections, relating to the clinical development, regulatory status, and market opportunity for our drug programs, and the commercial performance of INPEFA for heart failure. This call may also contain forward-looking statements, related 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 in such forward-looking statements, and we refer you to our most recent Annual Report on Form 10-K and other SEC filings, for detailed information describing such risks. I would now like to turn the call over to Mike Exton. Mike?

Hey, good day, everyone. Thanks for joining us. As those of you following Lexicon know, the first quarter of 2025 was a busy and productive one for us. Starting with our most recent announcement, at the end of March, we announced an exclusive license agreement with Novo Nordisk for LX9851, our first-in-class oral non-incretin candidate for obesity and other metabolic conditions. Now, this agreement grants Novo an exclusive worldwide license to develop, manufacture, and commercialize 9851 in all indications. Under the terms, Lexicon was eligible to receive upfront and near-term milestone payments of up to $75 million, of which $45 million was received in April. And up to $1 billion in aggregate upfront and development, regulatory and sales milestone payments, as well as tiered royalties on future net sales of 9851. Lexicon will be responsible for completing agreed-upon investigational new drug application enabling activities for 9851, and providing clinical supply to Novo Nordisk at an agreed-upon transfer price for a limited time period, while Novo will be responsible for filing the IND and conducting all further development, manufacturing, and commercialization of LX9851. Now, we couldn't be more pleased with this collaboration. Novo Nordisk's experience and global capabilities in obesity make them an ideal partner to maximize the value of LX9851. This truly is a validation of the science and the potential of this novel asset. We're gratified that we have continued to make great progress in our partnering strategy to find the highest quality partners that augment our capabilities and realize the full value of our assets. Now, the other major development in the first quarter was the top-line readout of our progress Phase 2B study of pilavapadin, which is our oral non-opioid drug candidate for DPNP. We're pleased to have identified a well-tolerated dose that has repeatedly shown clear…

Thank you, Mike. For the first quarter of 2025, [inaudible] sales of INPEFA compared to $1.1 million for the first quarter of 2024. Research and development expenses for the first quarter of 2025 increased to $15.3 million from $14.4 million for the same period in 2024, and primarily reflect expenses associated with our late-stage development programs, including the SONATA Phase 3 study for HCM and our Progress Phase IIb study of pilavapadin in DPNP. Selling, general and administrative expenses for the first quarter of 2025 decreased to $11.6 million compared to $32.1 million for the first quarter of 2024, primarily due to the efforts of our strategic repositioning in late 2024 and the reduced marketing efforts for INPEFA. Net loss for the first quarter of 2025 was $25.3 million, or $0.07 per share, as compared to a net loss of $48.4 million, or $0.20 per share, for the same period in 2024. We ended the first quarter with $194.8 million in cash and short-term investments, as compared to $238 million of cash and short-term investments as of December 31, 2024. I'd like to take a minute to note a few items. The first quarter is typically the quarter with the greatest use of cash, and included in the cash used for Q1 2025 was approximately $7.5 million in severance payments related to our restructuring, which were accrued in Q4 2024. We expect the use of cash to be less in the subsequent quarters of this year. Revenue associated with the $45 million upfront payment from Novo has been deferred and will be recognized over the estimated completion period of our obligations under the Exclusive Licensing Agreement. We anticipate stable U.S. INPEFA revenues this year despite limited promotional activity, and we are also reiterating our previously provided operating expense guidance and expect total operating expenses to be between $135 million and $145 million for 2025, with R&D expected between $100 million and $105 million, and SG&A expected between $35 million and $40 million. We also expect lower interest expense for the remainder of the year as a result of our partial debt repayment in April. We are confident that we are capitalized to meet our objectives to support our Phase 3 readiness for DPNP, our ongoing Phase 3 trial in HCM, and all IND-enabling activities related to 9851. I'd now like to turn it back to Mike for closing remarks.

Yes, thanks a lot, Scott. So, in summary, with the significant amount of progress we've made so far this year, we're incredibly well-positioned with a number of pipeline and appeal assets that we can continue to explore ways to leverage and add value for Lexicon with potential for new indications, new partnerships, and late-stage regulatory developments. Our goal is to advance these additional programs on our own or, in the case of pilavapadin, in partnership with a committed collaborator with therapeutic expertise and global scale. And we have demonstrated our ability to find the right high-quality partners for our assets where appropriate. Earlier in the year, we introduced Lead to Succeed. And I think it's important that we continue to discuss this as an important pillar of our strategy as we think about the opportunities that we have in our pipeline. In particular, I feel it's important that we focus on areas where we believe we have the greatest chance of success, where we can be first or only in large markets with significant unmet need, and where we have the internal clinical and medical experience necessary to be successful. We'll continue to apply this lens to our future opportunities as we develop our path forward. Now, importantly, we've got a number of very important and impactful catalysts as we look towards the remainder of this year. For pilavapadin in DPNP, we anticipate sharing full-progress data in Q3, along with an end of Phase 2 meeting. We're also preparing to present data at upcoming medical meetings, and partnership discussions are ongoing. For LX9851 in obesity and weight management, we'll collaborate with Novo Nordisk on IND-enabling activities, and Novo will be responsible for the IND submission. For sotagliflozin in HCM, we're actively enrolling our SONATA HCM study with all Phase 3…

[Operator Instructions] Our first question comes from the line of Andrew Tsai of Jefferies.

Hi. Thanks for the updates. Appreciate you taking my questions. First is on the pain program. I know the base case is going to be running two clinical Phase 3 studies. Can you talk about the intended trial designs, whether they're identical, and could it actually make sense to do three studies instead with the third one serving as a backup?

Andrew, it's Craig Granowitz. Thank you for your question. Our plan is still, as we've previously communicated, to run two parallel trials with very similar design. One would most likely be U.S. only, and the other would be a worldwide trial, including U.S. and non-U.S. sites. There's been nothing since our last update that would change our plans in that regard. As a reminder, the sites would be roughly about 300 or 350 patients per arm, two-arm trials of a 10-milligram dose flat from the outset versus placebo, and run in parallel in patients with moderate to severe pain with a subset of that group stratified for an underlying DPNP medication. With respect to the third trial, we don't believe, as Mike mentioned during the prepared remarks, we believe that we have a robust clinical signal in these trials that is observable and reproducible and rapidly separating from placebo, in each case with a 10-milligram dose arm. And also, as a reminder, the reduction of pain score from patient baseline is approaching 1.5 to 2 point drop from baseline, which is what the patient would experience. So with all of that and a drug that we feel confident that's once daily, has placebo-like completion rates, no identified yet drug interactions or other safety concerns of significance, we feel quite confident in this program. Depending upon what we hear from the FDA, that would obviously be subject to change, but that is certainly our intention going into the end of Phase 2 meeting.

Right. And assuming the end of Phase 2 does go well and you start the Phase 3 and, let's just say, Q4, when would the pain data sets be? And then as those Phase 3s are studying, what other peripheral studies do you think you need to accomplish or finish to ensure you can follow an NDA right after the Phase 3 data? Thank you.

Yes, great questions, Andrew. I think as all drugs that are centrally acting in this category, we need to look at addiction liability. We believe and hope that those would be animal model studies only because we have no indication. We've seen no rebound or other unusual liking behavior with the use of pilavapadin. That would be a critical study. There are some additional metabolism studies that we're looking at as a reminder this drug is renally cleared, and we're looking to validate the clearance and the level of renal impairment that we can include in the trials. Those studies, we think, will be important. And then, obviously, there are long-term CARC studies and a few other preclinical trials. We feel quite confident that we have a robust manufacturing process that we're ready to go right into Phase 3 and precommercial scale manufacturing with a process that is robust. And I don't think we'll be cost-prohibitive in that regard. So I think, there's always more things to do. I'm sure that FDA might have some suggestions for us in addition, but based on our interactions with the FDA, we believe that those are going to be the major components of things we need to look at.

Our next question comes from the line of Roanna Ruiz with Leerink Partners.

Hey, afternoon, everyone. So a couple for me. I'll start with 9851. How are the IND-enabling studies progressing, and could you talk a bit about any remaining gating factors for the stage of development and eventually entering the clinic? And I was also curious, how closely involved is Novo with your work and development here for this asset at the stage?

Yes. Thanks for the question, Roanna. Actually, the IND-enabling studies are going splendidly. They're all on track for finishing this year, and the relationship with Novo is very strong. They're very engaged in the data, and we're actually giving them direct line to the outputs of that data, so they're very collaborative and engaged as we go through this process and are very pleased with the progress so far. And so as we have outlined, we expect that will all conclude this year, and then the information will be over to Novo to submit the IND.

Got it, thanks. And one more follow-up from me. I noticed we've had a couple updates in the HCM space from other companies, including the failed ODYSSEY trial for mavacamten and non-obstructive HCM. I was curious if that updates or refines some of your thinking around SOTA's potential going after non-obstructive HCM. Would you actually consider upsizing the SONATA trial or making any modifications based on what you're seeing in the field?

Yes, look, it's really been an amazing quarter for HCM. There's been a lot of information, a lot of updates, and a lot of interest. And I think what a number of the outputs that we've seen from ODYSSEY and others just reinforces our belief in SOTA. As we outlined in the prepared remarks, there's a number of pieces of evidence that we've collected both preclinically and in clinical and preclinical studies that give us confidence in the efficacy of sotagliflozin in non-obstructive HCM. And we're actually powered to see an effect in both non-obstructive and obstructive as it is. So we don't think that it's necessary to increase to any degree the sample sizes that we see in SONATA and are confidently moving forward with that. So, Craig, do you have any thoughts?

Yes, well said, Mike. Roanna, I think the other important development really is the opportunity now to rapidly enroll the trial. So as BMS mentioned, there is no further work that they're doing on ODYSSEY. So the long-term extension trial is, my understanding, not taking place. And as Cytokinetics mentioned, they have now fully enrolled in ACACIA. So there are no other large trials that are running currently right now actively enrolling patients. And I think between the ease of our protocol for sites to complete, and as a reminder, we allow the use of CMIs or not CMIs, we have an ejection fraction down to 50%. We include both obstructive and non-obstructive patients. The burden on the sites is relatively limited in terms of the number of echoes, which is a rate-limiting step, I think, for some other companies just in terms of the capacity to do all those echoes. The lack of the need for doing the peak VO2 measurements or other difficult-to-execute physiologic tests, the feedback we've had from really all sites, whether we've talked to sites in Europe, the U.S., or Latin America, is that this is a trial that people are excited to participate in, both patients and the study sites themselves.

Our next question comes from the line of Yasmeen Rahimi with Piper Sandler.

Good afternoon, team. Thank you so much for all the updates. I guess the first question is, after, obviously, as you guys have been engaging with the agency on pilavapadin and the Phase 2 meetings and in preparation for Phase 3, do you think getting the minutes in the sign-off on the Phase 3s, is that a gating factor for the strategic discussions you're having in parallel? Or is it just, both are kind of concurrently ongoing, one is not necessary for the other to occur? That's maybe the first one.

Thanks, Yas. It doesn't seem to be a gating factor at the moment. That's not the conversations that we're having. As we sort of await the full data set and all of the full analyses, we will continue to have those discussions with the strategics, and that will be the sort of natural course of the engagement going forward. So, no, we don't see at this stage the FDA end of Phase 2 meeting being a gating factor.

Thank you. And maybe the second question is, obviously, top line data was very helpful and thoughtful, but I think you guys have said we will, and I think even in the press release today, you're planning to share more data in medical meetings. Could you help us understand the type of data that we could, see? What are some of the key additional analyses that you hope to present and maybe the significance of it? And then I have a third, last question.

Yes, Yas, it's Craig Grenowitz. So thanks for your question. What we intend to show later on in the year will be additional detail on the secondary analyses, what would be the qualitative aspects related to the quality and types of pain and functionality, which were a series of secondary endpoints. I also think we might be able to place into better context the 20-milligram dose arm with exposure and some other pharmacokinetic and other data to place that in additional context of why that arm performed the way that it performed. So I think this data will be very helpful for both the medical community and the investor community to provide additional context of our confidence in the trial and the results that we've seen.

Thank you. And then a last question on the SONATA study, sort of consistent with Roanna's question that she asked around non-obstructive study of recently ODYSSEY failing. I think it was clear that the commentary, at least perfectly, has been just saying non-obstructive is a very distinct population different from obstructive. So I think it has raised sort of the bar for a lot of investors of thinking about how do companies create a homogeneous population? Obviously, we haven't seen the data, but could you maybe talk about, as you guys designed SONATA in terms of inclusion-exclusion, what was built in to create maybe a more homogeneous population within the non-obstructive specifically to the extent you can comment on? That would be helpful. And I'll jump back in the queue.

Yes, thanks again, Yas. Great, great question. The major criteria we have for the trial is symptomatic disease. And I think that is really reflective of the diastolic dysfunction that is sine qua non of HCM. And it's funny, I think we've had this conversation in other calls previously about people feeling more confident, at least in the investor community, of the activity of sotagliflozin in the non-obstructive group as opposed to the obstructive. We believe that non-obstructive is really a great surrogate and is a subset of HFpEF. And we feel very confident in our HFpEF results in that the high degree of efficacy that we see both in heart failure reduction and MACE reduction in those with HFpEF. I think that on top of the data that we've demonstrated in terms of that left ventricular hypertrophy group with normal blood pressure, which is a real surrogate for HCM. And again, that 50% reduction in both MACE and heart failure is really encouraging to us. And as a reminder, one of the reasons why we've tried to highlight the MACE data that was recently published in the Lancet is that patients with HCM remain at significant elevated risk of MI and stroke. So I think having that additional benefit in a group of heart failure patients is all continue to be supportive, particularly in the non-obstructive group. And it's important for us, Yas, as we think across the breadth of the HCM market that the non-obstructive HCM, as we know, it's about a third of all HCM patients, which at the moment, as you know, doesn't have an indicated or the CMIs haven't shown robust efficacy there. And so it's all aligning with our approach of a broad potential application for a broad prescriber base and broad applicability across the patient population as well. So we actually have a lot of data now that gives us great confidence in non-obstructive HCM. And the SONATA trial was built to capitalize on both opportunities.

Our next question comes from the line of Yigal Nochomovitz with Citigroup.

Hi, guys. Thank you for taking the question. A few more on the design of SONATA. I think you mentioned, Craig, that it's powered for both obstructive and non-obstructive. I'm just curious. Are those co-primary endpoints? What is the exact detail around how that measurement is structured in the protocol? And then with regard to the relative proportions of obstructive and non-obstructive, you just mentioned it was a third, two-thirds. How is that playing out in terms of the enrollment? Is it balanced? Is it adhering to those ratios? Are you trying to go for more of a 50-50? Thank you.

Yes, great question, Yigal. Similar to what we did in the SCORD trial and SOLUIS trial, the study is powered for the overall endpoint. And that in the case of the preserved ejection fraction, reduced ejection fraction, it really is the issue of consistency across results. So FDA has not asked for, in a sense, two independently powered arms. And if I gave that a misimpression in one of my answers, I apologize for any misunderstanding on that. So the study is powered on the base of 500 patients with a difference in KCCQ compared to placebo. And really, what FDA would be looking for, similar to what we showed in SCORD and SOLUIS, is that there would be consistency but not necessarily formally powered for each one of the two subgroups. So I think that really is the critical design element. The trial is designed as a stratified with a one-to-one enrollment of obstructive and non-obstructive. And right now, we don't really have enough patients in the study for me to say whether we're going to have more or less difficulty enrolling one or other of those two groups. And as Mike had mentioned, a vast majority of the patients right now are not being treated. And again, we're looking for just patients with symptomatic disease, whether or not they're on a CMI. So we think that there are certainly adequate patient number. And again, the study includes patients with an ejection fraction down to 50%, which is one that the currently approved agent is not indicated to treat. So we think we have a number of opportunities to enroll patients, especially with no competing trials right now and the drug really not being available outside the United States.

Okay, got it. Thank you. And then on the choice of the endpoint specifically, KCCQ, CSS, I'm just wondering, you mentioned peak VO2 is cumbersome and complicated endpoint. Was that the reason you picked KCCQ? Or was it also because since you're doing HCM and non-obstructive, that it's just the easier endpoint to deal with given the broader population as opposed to what we saw this morning with Maple-HCM where they did peak VO2, but that was only obstructive?

Yes, no, great question as always, Yigal. The advantage with SOTA is we have outcomes. So we have heart failure outcomes in 12,000 patients and we have an FDA approval for outcomes and we've demonstrated reductions in MACE as well as heart failure events. I think one of the issues with the newer class of agents is they don't have the experience to have anything with outcome. So what they're really looking for is a surrogate for outcome besides functionality is that they're looking for some sort of metabolic parameter. And I think that is going to be really one of the long-term questions is, are they modifying the disease in any way? We know we modify the disease. We prevent heart failure events and cardiovascular deaths and we reduce stroke and MI in overlapping in similar groups of patients. So from that standpoint, the FDA didn't ask for any additional endpoints and we really wanted to run a pragmatic study. We wanted to have it as open and inclusive as possible to give us the broadest possible label, just like what we did with SCORD and SOLUIS is we have a very broad label that provides the maximum opportunity for labeling and for patient inclusion in the criteria. And we took that same mindset and approach to how we structured SONATA with a lot of input from the medical community and agreement from the FDA. And just to pile on top of that, really coming from a patient's perspective, a patient with HCM, not too dissimilar from a patient with heart failure, quite frankly, the primary issue or the primary want, the primary need that they have is the symptomatic benefit. The primary thing that a patient with HCM wants to be able to do is to have the energy to walk outside, walk to the letterbox, to feel better. And that's frankly what the CMIs do as well. Yes, they're indicated for symptomatic and functional benefits, but the primary reason to believe is that they make the patient feel better, at least in obstructive HCM. And so you combine the pragmatism of the trial with developing something for what patients actually need and, in fact, we've seen the benefit in KCCQ already in diastolic dysfunction. It not only gives us confidence in the outcome that we're going to produce, but confidence in that should the trial be positive, it's something that patients really, really want.

Yes, I mean, just to make it really pragmatic, Yigal, I mean, having the primary as KCCQ and the secondary as New York Heart, at the end of the day, as Mike said, people want functionality. I think it's very hard to explain to a patient, you can achieve 15 meters more in a six-minute walk test. I think that's pretty hard to try to wrap your head around as a patient and a provider, but to say, it's very likely that you'll be able to do your activities of daily living with an improvement. For patients, again, we're focused on symptomatic patients. That, I think, is meaningful, and that's really why the CMIs have been approved, is for symptom benefit.

Our final question comes from the line of Joe Pantginis with H.C. Wainwright.

This is Lander on for Joe. Thanks for taking our questions. So, just to follow up with the pain program and regarding additional progress data anticipated soon, do you expect pilavapadin to have a differential effect in the stratification analysis based on background therapy? And if so, would these observations change the design of the upcoming registration and Phase 3 studies? Thank you.

I think what we can say, and I think we've already communicated, is we see a benefit whether or not the patient is on an underlying DPNP medication. Again, the sample sizes, and I think we've had some of these conversations, so I apologize if I'm being redundant, but there were only 30% or 50% of 100 patients in each one of the trials. So, I wouldn't want to over-interpret the data of whether it's better with or without an underlying DPNP medication. And as a reminder, about 90% of the patients were on gabapentin. So that is the most widely used agent. I think what we've already published on and we presented previously on progress as well as relief is that we're seeing a benefit regardless of whether they're on an underlying DPNP medication, which is not surprising because they have different mechanisms of action, and it's not surprising you will get added a benefit whether or not they're on a DPNP medication.

Thank you. I would now like to turn the call back over to Mike Exton for closing remarks.

Thanks very much, and thanks for the questions, guys. Always very engaging. So, that wraps up our Q1 earnings call. It's been a busy and productive quarter for us and a lot more to do in quarter two and throughout the year. We've got a lot of important catalysts coming up for the rest of the year, and look forward to updating you as the year progresses. So, thanks very much for your time, and we'll speak to you soon.

This concludes today's conference call. Thank you for your participation. You may now disconnect.