Welcome to the Lexicon Pharmaceuticals Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, August 6, 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, Josh. Good morning, and welcome to our second quarter 2025 conference call. Joining me today are Dr. Mike Exton, Lexicon's Chief Executive Officer and Director; Dr. Craig Granowitz, Senior Vice President and Chief Medical Officer; and Scott Coiante, Senior Vice President and Chief Financial Officer. This morning, Lexicon issued a press release announcing our financial results for the second quarter of 2025, which is available on our website at www.lexpharma.com and through our SEC filings. 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 press 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 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 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?

Yes. Thank you, Lisa, and good day, everyone. Thanks for joining. We're really excited to give you updates on the quarter and all of the great work going on at Lexicon. When we entered 2025, if you recall, we're still in the early days of our strategic pivot to being an R&D-focused company. And now in the second half of the year, I can say that this transformation has truly taken shape. We've made great strides against our objectives for the year across the board. We're now in a very strong position to advance our innovative portfolio of potential medicines. And I'm pleased to report that all of our lead R&D programs continue to be on track. We've made important progress against each of them in the second quarter, which I'd like to highlight briefly. Pilavapadin, we've completed the secondary analysis of our Phase IIb progress results following the announcement of top line data in the first quarter. We're now in the process of analyzing the totality of Phase II data, which supports the broad potential for this novel mechanism while reengaging in discussions with potential partners with this additional data in hand. Secondly, LX9851, our first-in-class candidate for the treatment of obesity, is on track to complete IND-enabling studies in 2025. So we look forward to continued collaboration with our licensee, Novo Nordisk. For sotagliflozin, we've really hit the accelerator on our Phase III SONATA study in hypertrophic cardiomyopathy or HCM, which is the only Phase III HCM program enrolling currently, evaluating sota in both obstructive and nonobstructive subtypes of HCM. We've made excellent progress on site initiations globally, and Craig will elaborate on this shortly. Lastly, but importantly, we're also working closely with our licensee, Viatris, on expanding the reach of sotagliflozin in territories outside of the U.S. and EU, and we're making great progress on that front as well. So in summary, the team is hard at work, and it was an incredibly productive quarter for us that I'm very proud of. Now before I turn the call over to Craig to talk in detail about the great progress in the pipeline, I want to take a moment to acknowledge a milestone. July marked 1 year since I joined as CEO of Lexicon. And as I reflect on all the changes that we've seen in that 12 months, I'm truly proud of the dedication and adaptability of this team. We successfully advanced multiple programs to late-stage development and beyond, and we look forward to reporting even more progress to come. And on that note, I'd like Craig to give a more detailed update on our pipeline programs. So over to you, Craig.

Thanks, Mike. I'll start by discussing pilavapadin. First quarter, we announced top line results of our Phase IIb progress study of pilavapadin in DPNP. DPNP is a chronic and progressive pain disorder that impacts approximately 30% of people with type 1 diabetes and up to 50% of those with type 2 diabetes. These patients experience burning pain, loss of sensation and other side effects that can severely impact their quality of life. Importantly, in both our Phase IIb PROGRESS study and our Phase IIa RELIEF study, pilavapadin 10 milligrams delivered consistent clinically meaningful reductions in these painful symptoms. Based on these data, we have concluded the 10-milligram dosage strength warrants further evaluation and is the appropriate dose to take forward into late-stage development. We recently convened a scientific advisory board with expertise across clinical development, regulatory and neuropathic pain to review the full body of evidence for pilavapadin in DPNP. This esteemed group provided encouraging feedback and validated our key findings from the top line data readouts, including the following: first, the advisory board confirmed that pilavapadin demonstrates clinically meaningful efficacy. Second, they confirm the 10-milligram dose is the appropriate dose for future registrational studies. This gives us clarity on our path forward and validates the dose-finding work we've done to date. Third, the board reaffirmed the safety and tolerability profile of the 10-milligram supports advancement into late-stage development. And finally, they provided validation and valuable input into Phase III study design, including suggestions to potentially lower the placebo response rate, which we believe could reduce potential study variability. The panel support gives us tremendous confidence as we prepare for our next steps and engage with potential partners for pilavapadin. It reinforces our belief that we have a potentially transformative therapy for the millions of patients living with this debilitating…

Thank you, Craig, and good morning, everyone. For the second quarter of 2025, we reported $28.9 million in revenue compared to $1.6 million for the second quarter of 2024. Q2 2025 revenue consisted primarily of $27.5 million of licensing revenue recognized from the Novo Nordisk agreement. As a reminder, we received the upfront payment of $45 million from Novo in April, which was initially recorded as deferred revenue and is being recognized as revenue throughout the remainder of 2025 as the IND-enabling work is completed. Total revenues for the quarter also include net product revenue of $1.3 million from sales of INPEFA. Research and development expenses for the second quarter of 2025 decreased to $15.7 million from $17.6 million in 2Q 2024, primarily reflecting lower external research expense on our PROGRESS clinical trial study, partially offset by increased investment in our SONATA Phase III clinical study in HCM. Selling, general and administrative expenses for the second quarter of 2025 decreased to $9.4 million compared to $39.2 million in 2024. The decrease reflects lower costs as a result of our strategic repositioning announced in late 2024 and the significantly reduced marketing efforts in 2025 for INPEFA. Net income for the second quarter of 2025 was $3.3 million or $0.01 per share as compared to a net loss of $53.4 million or $0.17 per share in the corresponding period in 2024. The net income for the quarter was primarily a result of the revenue recognized from the Novo Nordisk licensing agreement in Q2. We expect to recognize the remaining $17.5 million of licensing revenue from the Novo agreement in the second half of this year as the IND-enabling work is completed. We ended the second quarter with $168 million in cash, short-term investments and restricted cash as compared to $238 million as…

Yes. Thanks, Scott and Craig. Now as you... [Technical Difficulty]

Please stand by, your conference will resume momentarily.

Apologies for that brief interruption, when I'm getting to the punchline here. But look, let me go back and say that we've got lots of exciting updates in the second half of 2025. And clearly, as we've outlined, partnering is an essential part of how we plan to advance all of our assets. And on this slide, it really highlights the partnership strategy and action. Firstly, Viatris is making great progress and has recently received its first approval of sotagliflozin in the United Arab Emirates, which was a really short turnaround time and has also filed for regulatory approval in Saudi Arabia and is expecting to file for regulatory approval in Canada, Australia and New Zealand, Mexico and a number of Southeast Asian countries before the end of this year. We aim to maximize the potential of LX9851 with our licensee, Novo Nordisk, a global expert in obesity and related conditions and partnership discussions are ongoing for pilavapadin, where we hope to collaborate with a high-quality partner to unlock the pipeline and appeal potential of this asset globally and across multiple indications. This flexible partnership strategy is intended to allow us to follow the science broadly, but really remain focused internally on our core cardiometabolic expertise. And so as you can see on this slide, we're exceptionally well positioned with a number of pipeline opportunities from our late-stage assets to our newest opportunities and whether organically or with a partner, we expect these programs to continue to add value and bring new innovation to patients over the longer term. Now as we look further into 2025, we're excited about where Lexicon stands at this moment. Starting with pilavapadin, we're expecting full progress data to be presented in Q3. Also planning our end of Phase II meeting with timing to be…

[Operator Instructions] Our first question comes from Yasmeen Rahimi with Piper Sandler.

This is Liam on for Yasmeen Rahimi. Great presentation this morning. We just were really impressed by the SOTA-CROSS trial that's upcoming with potential data in late 2026. So we're just wondering maybe if you can kind of walk us through, given the small sample size of the study, what are the doses being assessed and how much the inclusion/exclusion criteria resemble SONATA and kind of like in that vein, whether you expect to see like a static separation on the efficacy endpoint and also why an HCM was selected rather than an OHCM patient population?

Yes. Thank you, Liam, for the question. We're really excited about working with Dr. Day on this NIH-supported mechanistic trial. And I think the idea behind the NIH's interest in this was to continue to look at therapeutic options outside the CMIs that would be much more widely applicable and more readily implementable across the United States for this large unmet medical need. Nonobstructive HCM, I think, was also the target for the NIH grant because there are options available for obstructive. There are surgical options and now medical options, but there are no treatment options that have been approved for nonobstructive. Relative small size of the study belies its significant power to accomplish its goals. By having a crossover design, you use the patient as their own control in the study. And the study has a number of important -- both imaging and physiologic outcomes. The inclusion criteria is very similar to that in the SONATA-HCM trial, which is a very broad cross-section of patients without diabetes who have a nonobstructive HCM. The only difference is that in SOTA-CROSS, there's not an allowance for patients on a CMI, but in SONATA-HCM, there actually is. So SONATA-HCM is even more broadly applicable. We believe that if you look at all of the data together in its totality and what we've tried to do really as we think about life cycle management strategically is to look at the totality of the benefit of sotagliflozin, both mechanistically, imaging and clinically across the range of heart failure, MACE and HCM using different trials to look at different aspects. And one of the reasons we presented all 3 of SONATA-HCM, SOTA-CROSS and the SOTA-P-CARDIA study is that they are looking at different aspects of the physiology and clinical findings of patients with HFpEF and HCM.

Our next question comes from Andrew Tsai with Jefferies.

A couple of questions on pain. Recently, RFK Jr. mentioned how he wanted to promote the development of non-opioid pain drugs like Vertex's JOURNAVX. And so is there something you guys can do to take advantage of this new development? And could it, for instance, make sense to apply to the Commissioner's National Priority Voucher Program?

Yes. Thanks, Andrew. In fact, my team has been very actively engaged from a legislative perspective, particularly with the Alternatives to PAIN Act, which is the act that's supporting the use of non-opioid medications in chronic pain. And we've been really supporting the utility and the passing of that particular act. And we're seeing bipartisan support for this very important facet of the management of pain. In addition to that, like we have done with type 1 diabetes, it's also a patient advocacy groups that are very compelled to get new treatments. And really, all of those things are just a factor for, I think, what is really a zeitgeist in the realization that particularly for chronic pain actually, even though there are new alternatives for acute pain, the real issue for non-opioid alternatives is -- lies within the realm of chronic use over many years where the addictive potential is clearly much more significant. And so we're very encouraged by the bipartisan enthusiasm in this area, and we think that as we progress pilavapadin into Phase III and then beyond, that this not only gives great support for continuing to develop pilavapadin, but importantly, once it achieves commercial reality, clearly, it provides a pathway for great access and ease of patients getting on to this non-opioid medication.

Right. And it sounds like you will have the FDA meeting by year-end now. And so in theory, in that meeting, to you guys, what would be the realistic "worst-case scenario" that can arise from that meeting?

Yes. Thank you, Andrew. It's Craig. I can answer your question. I mean, it actually is validating hearing other companies talk about what their pain program Phase III approaches in DPNP are. And as you recall, we have already met with the FDA on this program. And I think their feedback is going to be very similar to what we've already heard from them, and I think what other companies have also acknowledged is that you're going to need 2 parallel studies in the lead indication for neuropathic pain, and it is highly unlikely that with a single indication or a single study in 2 indications that you could get a broad neuropathic pain indication. That was always our expectation that was affirmed by the FDA, that was affirmed in our ad board, and I think it's been affirmed by other companies that are out there. So when you think about the timing of our program and the magnitude of our program, I think it remains pretty much unchanged to what it was. It would be 2 parallel trials in DPNP, potentially with different geographies or slightly different designs, but primarily the same primary endpoint of neuro pain score at week 12. And I think based on all the data we've seen across the totality of our program, we think that the size of those studies to appropriately power them is very similar to what we've already been communicating to you of 2-arm studies of roughly 600 patients each with a single active arm and a placebo control arm.

Our next question comes from Caroline DePaul with Citi.

This is Caroline on for Yigal Nochomovitz. So we'd like to know what is Novo's plan for the Phase I in obesity? Are there plans to combine with GLP-1?

Yes. I think in our discussions with Novo, and I really want to thank our entire team for really having a great collaboration with Novo. I think as you've heard in the marketplace, and I think you've seen from both Lilly and Novo and other companies that the market is going to be moving towards oral options and combination options. And I think the data that we've already demonstrated and presented on the use of 9851 as an oral once-daily agent or the expectation of that, both with semaglutide and other agents that are being studied in development for weight loss and the potential for triple combinations. And I think you've seen other companies talking about moving both to oral and triple combinations. I think 9851 is really rightly positioned to be a part of that set of development programs.

If I could just provide one comment over the top of that. We've been really blessed with both of our partners with our licensees with Viatris and Novo Nordisk, the enthusiasm and capabilities that they bring to bear for both of these assets are really stellar. And although obviously, Novo is undergoing some changes at the moment, our engagement and interaction and their enthusiasm and drive for this asset is unbridled, so to speak. It's really incredible to see the team in action. And we expect that Novo will attack the Phase I program with vigor shortly after the IND.

Our next question comes from Joe Pantginis with H.C. Wainwright.

A couple, if you don't mind. First is a housekeeping question. With regard to the OpEx guidance, does this include or not include stock-based compensation?

It does include stock-based compensation.

Great. And then a couple of comments here that have been coming up about the end of Phase II meeting for pilavapadin. Just curious how you feel that, that's still on track, but more specifically, do you feel this is the ultimate rate-limiting step for your partnering plans?

I don't think it's a rate-limiting step, Joe. I think what has been our approach here is have the initial round of discussions with partners with the top line, helping them understand and now 2 important things have happened. We have, a, completed the secondary analyses from progress or 3 important things, I would say, completed the secondary analysis. We're bringing the totality of the Phase II program data to bear so that we understand the totality of evidence. And most importantly or perhaps most importantly, we've convened the scientific advisory board. And we won't sort of go into who the people were, the members of that advisory board, but I can assure you, these are the top, top people that have been involved in this space from a regulatory development and mechanistic perspective for some time. And having their endorsement of as we theorized all along straight from the top line of 10 milligrams being the appropriate dose to move forward into Phase III really gives us confidence not only internally, but to reengage in those discussions and start to progress the discussions to a more concrete basis over the coming months. I think how we approach the end of Phase II meeting will be sort of dependent on now the engagement from partners around whether they want to be a part of that, whether they want to sort of see the outcome and move forward. But we're progressing that at speed.

Totally fair. And then just quickly on HCM. I don't know if Craig would want to give any color on this. I think it's been a pretty impressive ramp on the number of sites that you have. So just curious, as you're looking to really ramp up enrollment as well, are there any comments from the field with regard to views towards CMI or CMI competition for patients or what have you, even though you know you have a different profile of where sota might fit?

Yes. Great question, Joe. I'll answer that sort of in 2 very different ways. The first is we have this open window of enrollment. There are no active ongoing registrational trials now in HCM. And the fact that ODYSSEY ended in a sense without a long-term extension, there's a fair runoff period in that trial from what we understand, but those patients are also available with no treatment options. So we really have a nice golden opportunity here from an enrollment standpoint as we have a lot of sites with available patients that are symptomatic, both obstructive and nonobstructive whether they're on a CMI or not, that can be included in the trial. So in that regard, I think that's been a real upside. The interesting aspect actually, when you think about enrollment, and I think this is what you're seeing already with some of the companies that are marketing products in obstructive HCM is there seems to be a speed limit in the capacity of the field to start new patients on CMIs because of the echoes. And while we do not require multiple echoes during treatment, unlike the CMI studies or CMIs themselves, we do require a baseline echo. So scheduling echo is an issue for enrollment, at least in the U.S. So it is interesting to see that flow through from the commercial market. In the U.S., I would say the very early enrollment, and again, we're just looking at blinded data, but we know whether the patients are obstructive or nonobstructive, there are more nonobstructive patients being enrolled currently in the U.S. than obstructive, which is to be expected because one of the CMIs is already approved and on the market in the U.S. So there are no options available at all for the nonobstructive. So in the U.S., we're seeing more nonobstructive than obstructives, but we think that's going to rapidly shift ex U.S. because the CMIs are largely not available outside the U.S.

And Joe, what I hear over the last sort of 3 to 6 months speaking with KOLs, there's a couple of things. One, they're becoming more and more aware of sota in HCM. I think that's twofold. One, we're progressing SONATA and that enrollment is going nicely. And two, there's obviously been noise in the marketplace, particularly around nonobstructive and conjecture around will aficamten be successful, but they see because of some of the other evidence that we have with SONATA that this could be a real option for nonobstructive. So they're enthused about the possibility of that. And then more broadly, sort of having worked in this space with Entresto and understanding that general cardiology practices across the country have HCM patients, have HFpEF patients and the potential to have one medicine that can potentially treat both very significantly without sort of fear nor favor and is really compelling beyond the academic sites into the general cardiology practices where, as you know, actually the vast majority of HCM patients are being treated.

[Operator Instructions] Our next question comes from Mazahir Alimohamed with Leerink Partners.

This is [indiscernible] on for Roanna. Just 2 from us. But I guess the first one is, given Vertex's recent announcement about their VX-993 and its inability to meet its primary endpoint in the Phase II, how does that, I guess, impact your confidence in the overall pain market and the ability to conduct a careful Phase III trial? And then I guess the second one, Craig, just a follow-up to what you just said. So I noticed that you mentioned that there's going to be an echo for every patient when they start the trial. Is that something that you would expect if approved as well? And to the market, would it be something that you would expect commercially that they would have an echo before being started on drug?

Yes. Great couple of questions, and please pass on our best regards to Roanna. I hope it's all going well with above. Let me take a first go with the pain question and Vertex. And obviously, we followed their earnings yesterday. I think, in fact, that gives us even greater confidence in our own program. Why is that? We've now shown 3 times in -- across Phase II programs in neuropathic pain that we can separate from placebo with the 10-milligram dose. We, I think, have always been a little bit skeptical of Nav 1.8, particularly in neuropathic pain. I think the evidence in acute pain despite 993's results yesterday in post bunionectomy not reading out positively. So it allows us confidence in our program and having a novel mechanism of action compared to the number of companies that are now pursuing Navs, which really, the evidence is mixed, one would have to say apart from acute. But certainly, in neuropathic pain, the evidence is mixed at best. And actually, it's probably pretty much not great, so to speak. And it's one of those instances where being on a novel MOA with proven efficacy, really, we think, is something that we appreciate and gives us confidence moving forward. And importantly, our partners will appreciate as we sort of go back and have this next round of discussions. So Craig, any other thoughts on that?

Yes, Mike, I think that was well said. I think just scientifically, there are a couple of important points. And again, I don't want to draw undue attention to another company's communications, but they did demonstrate or they communicated that with 993, they did get more exposure with more dose, and they had no additional efficacy. So I think that the question is there is certainly a healing on the effect of Nav 1.7 to mitigate pain. I think that's also reflective of the fact that they're looking at developing combinations of Nav 1.7 and 1.8, which presupposes that they're looking for more efficacy. So I think that's an important point. And as Mike said, in neuropathic pain, the Navs have not demonstrated separation from placebo. They've demonstrated similar drops in pain score compared to pregabalin. But as we know, pregabalin doesn't always separate from placebo in the pregabalin registration trials, and that's the whole issue around placebo effect. So I think those are just a couple of additional comments. And I think it also reaffirms from a regulatory standpoint that you're going to need to do 2 separate trials in a pain indication to seek approval. And so again, I think those are some important findings that we had from what we heard the other day. Switching gears on the echo. I don't think that's going to be a major impediment. All these patients are going to be getting an echo regardless. I think a lot of the issues in HCM, frankly, are related to the echoes because of the fact that CMIs reduce ejection fraction. So I think we don't have that issue, right? We're a drug that treats heart failure, whether you have low ejection fraction heart failure or normal ejection fraction heart failure. I think part of what's going on in the HCM field has been modified by the level of the agents and the fact that the current agents that have either been approved or under study actually have a negative ionotropic effect on the heart by their very design. And because of that, getting an echo and following ejection fraction closely is a very important safety signal, which is the basis of the REMS that exist. So I think FDA will probably label our drug the way that we studied it, that there'll be an echo, but I think that the requirement or the necessity of the echo from a patient suitability standpoint might be less with sota, even though following the echo and following ejection fraction in patients with symptomatic heart failure is sort of standard of care today anyways, at least in the United States.

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

Yes. Well, thanks very much for joining, everyone, and thanks for the questions, folks. I really appreciate those. So I've done a number of these quarterly earnings calls since I've been here. And the last couple, we've had some major announcements with data readouts with a refocus on strategy and all of those have been very important announcements. But I think so far in my short tenure here, this is probably the quarter that I'm most proud of, mostly because of 2 things. One, that the team has really driven all programs in parallel to the point of their next stage of catalyst, to their next sort of inflection point, to their next natural development. And importantly, we've done so in a way where we have really focused our resources and are allocating capital in a way that's really focused on adding value for us and all stakeholders. So both of those things have resulted in a quarter where the pipeline has advanced dramatically, and we've done so revising the outlook for expenses for the year, mostly because of 9851, but some of it due just to looking at all of our expenses and making sure we're spending wisely. So I couldn't be prouder of the team. Looking forward to Q3 as we go through a number of important developments over the next 3 months and updating you all then. So thanks very much.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.