Lexicon Pharmaceuticals - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered a cleaner, R&D‑focused P&L with total revenues of $1.26M and net loss of $25.3M ($0.07 EPS), showing materially lower OpEx post late‑2024 repositioning.
• Results modestly beat Wall Street consensus: revenue $1.26M vs $1.18M estimate; EPS −$0.07 vs −$0.10 estimate; EBITDA −$25.5M vs −$32.9M estimate; beats driven by lower SG&A and disciplined R&D pacing while maintaining INPEFA availability without promotion.*
• Strategic catalysts advanced: exclusive LX9851 license with Novo Nordisk (up to $1.0B milestones; $45M received, recorded as deferred revenue), Phase 2b PROGRESS confirmed 10 mg pilavapadin for Phase 3, and global SONATA‑HCM site activations tracking for full operational status by Q3.
• 2025 guidance maintained: total OpEx $135–$145M (R&D $100–$105M; SG&A $35–$40M); CFO expects stable U.S. INPEFA revenues and lower interest expense after April debt paydown, supporting runway for pilavapadin Phase 3 readiness and SONATA execution.

What Went Well and What Went Wrong

What Went Well

• Pilavapadin dose selection de‑risked: “across RELIEF and PROGRESS, we’ve now demonstrated… the 10‑milligram dose shows early and sustained separation versus placebo,” with “placebo‑like completion rates” after removing the loading dose, enabling Phase 3 planning.
• Capital and BD execution: LX9851 exclusive license with Novo Nordisk strengthens finances (up to $75M upfront/near‑term; $45M received) and validates mechanism; IND‑enabling studies “are going splendidly… all on track for finishing this year”.
• HCM trial momentum: SONATA‑HCM enrolling “at full speed” across U.S./EU/LATAM; sites expected fully operational by Q3; pragmatic design (KCCQ primary) aims for broad label across obstructive and non‑obstructive segments.

What Went Wrong

• Revenue base remains small post INPEFA de‑promotion: Q1 total revenue $1.26M, down sharply from Q4’s $26.6M that included Viatris $25M licensing; underscores reliance on pipeline progress and partnerships for near‑term catalysts.
• Profitability far from inflection: Q1 loss from operations −$25.7M; net loss −$25.3M; operating and net margins deeply negative due to R&D investment and minimal product revenue.
• Zynquista regulatory setback lingered (CRL in Dec‑2024), with management noting ongoing “end of review” process but no active investment—investors should not expect near‑term revenue from this indication.

Transcript

Operator (participant)

Welcome to the Lexicon Pharmaceuticals first quarter 2025 financial results conference call. At this time, all participants are on a snuggly 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 13th, 2025. I will now turn the call over to Lisa DeFrancesco, SVP, Investor Relations and Corporate Communications for Lexicon. Please go ahead, Lisa.

Lisa DeFrancesco (SVP of Investor Relations and Corporate Communications)

Thank you, Shannon. 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 join us for Q&A. Earlier this afternoon, Lexicon issued a press release announcing our financial results for the first quarter of 2025, which is available on our website at www.lexpharma.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 include characterizations and projections related 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.

Mike Exton (CEO and Director)

Yeah, 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-encretin 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 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 II-B 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 evidence of effect to take forward in phase III studies. Once we have the full data package later in Q2, we look forward to engaging the FDA on the phase III design using 10 mg of pilavapadin. Finally, we completely revised our cost structure to reflect our pivot to an R&D-focused company by reducing our operating costs and utilizing the upfront payment from the Novo Nordisk agreement to reduce our debt, while ensuring we have the cash runway to meet our objectives and support continued development of our R&D programs. All in all, we ended the first quarter in a very strong position.

We have a clear path forward for pilavapadin and DPNP, having cleared the hurdle of identifying the appropriate dose for phase III. We improved our balance sheet and are on a strong financial footing for the milestones ahead. I'd like to dive a little bit deeper now into our DPNP program and primarily reiterate two key points here. First, and importantly, across both the RELIEF and PROGRESS studies, we've now demonstrated three times that a 10 mg dose shows early and sustained separation versus placebo. Second, while absence of a day-one loading dose improved the tolerability of all pilavapadin arms in PROGRESS, that 10 mg dosing schedule was particularly well tolerated, showing placebo-like completion rates.

Collectively, in our view, these data de-risk our advancement into phase III with a 10 mg dose and give us great confidence in the potential of pilavapadin to be the first novel oral non-opioid DPNP medication in more than two decades. I can't emphasize enough the opportunity for innovation in this market. As I talk with patients, caregivers, and payers, it's absolutely clear that there's a tremendous need for new non-opioid treatment options for neuropathic pain. DPNP is a relatively common complication of diabetes, impacting one in every four people with diabetes. Today, there are approximately 9 million people in the US with DPNP, and that number is expected to grow to 13 million by 2035. This is a chronic and progressive pain disorder that severely impairs people's quality of life.

Not only is it painful, but it's unrelenting and burdensome to patients and can lead to other complications like a loss of sensation, falls, fractures, even limb amputation. The message from all stakeholders is loud and clear. The community needs new and better medications to manage DPNP. For 70% of people with DPNP, currently available treatment options do not provide adequate relief. 60% have tried multiple therapies, either by switching or by adding on to their treatment regimen. People with DPNP often feel like they're stuck in a cycle of trial and failure with different treatments. The need for new non-opioid treatments for pain is also underscored by recent proposed legislation, such as the Alternatives to PAIN Act, that is being proposed, supporting greater access to non-opioid therapies.

We're committed to advancing our pilavapadin development program as quickly as possible, with the aim of providing a novel oral treatment that can improve the lives of people with DPNP. We look forward to providing further updates as the year progresses, including full data from the PROGRESS study at an upcoming medical meeting. We're targeting a phase III study initiation for pilavapadin and DPNP later this year, following our end-of-phase II review meeting with the FDA. Moving on now to sotagliflozin. We remain on track with enrollment in our global pivotal SONATA-HCM study of sotagliflozin in hypertrophic cardiomyopathy, or HCM. HCM represents an area of significant opportunity and need, where we feel SOTA has the potential to offer a differentiated treatment option.

Now, in the U.S., there are just over a million people with HCM, and of those, approximately a third have non-obstructive HCM, which the heart muscle is thickened but does not block flow, whereas 2/3 are diagnosed with obstructive HCM, in which the thickening of the heart muscle wall blocks or reduces blood flow from the heart. An important characteristic of HCM that may not be fully appreciated is that as a chronic progressive disease, HCM can deteriorate over time, leading to other complications, including heart failure. Indeed, 43% of people with HCM also have progressive heart failure. Now, we have great confidence in sotagliflozin as an option for HCM. As you are all aware, there have been a number of innovations that target the sarcomere being developed for this disease, one of which is approved for the treatment of obstructive HCM.

Nevertheless, despite significant investment and increasing awareness in HCM, these novel agents have only penetrated about 1% of the market. We believe the potential approval of sotagliflozin would significantly expand the population treated with novel agents. Our confidence derives from a number of sotagliflozin's features. First of all, besides its approval in the US for heart failure, there are important data that give us confidence that sotagliflozin will be effective in both obstructive and non-obstructive HCM. Namely, we have observed significant benefit of sotagliflozin in heart failure and MACE in patients with left ventricular hypertrophy with normal blood pressure. Furthermore, mechanistically, sotagliflozin appears to reduce cardiac work and improve cardiac metabolism. Importantly, we would expect no REMS for sotagliflozin in HCM, consistent with our heart failure label, which would provide access to a broad prescriber base.

Finally, we can have confidence that to date in clinical trials and post-marketing experience, sotagliflozin has not been associated with an increased risk of atrial fibrillation. Therefore, we expect sotagliflozin has the potential to become a disruptor in this space and become widely used in the market across the spectrum of disease. The next slide provides an overview of our global phase III SONATA study of sotagliflozin in HCM. SONATA is enrolling at full speed, with EU and LATAM sites either already online or imminent. We expect that all of the phase III sites will be up and running by the third quarter of this year, so we're pleased with that progress. SONATA is the only ongoing study evaluating a treatment in both obstructive and non-obstructive HCM. We feel that there's potential for this study to support an sNDA with a broad label.

Once the SONATA study is complete and we have that data in hand, we will also have an opportunity to revisit the totality of the sotagliflozin potential opportunity across indications in the U.S., where we continue to build differentiating evidence that the mechanism of dual inhibition of SGLT1 and 2 does have different outcomes in MACE events, including MI and stroke, as most recently published in The Lancet. Now, touching briefly on business development. As I mentioned at the top of our call, we're very pleased with our recently announced collaboration with Novo Nordisk for LX9851, which both strengthens our financial position and provides LX9851 the best possible chance of success by benefiting from the expertise, resources, and capability of Novo Nordisk, an established leader in the obesity market.

As the obesity treatment landscape continues to grow and evolve, we expect to see an opportunity for next-gen treatments to build on the success of the earlier incretin-based therapies. Based on 9851's unique mechanism, oral administration, preclinical findings to date, and possibility for both monotherapy and combination applications, we feel LX9851 has the opportunity to occupy a unique space in the treatment landscape for obesity and metabolic conditions. We look forward to working with Novo to maximize the potential of this innovative medicine. Zooming out to look at business development more broadly, our innovative and flexible partnership approach is unlocking long-term value for Lexicon. Boehringer Ingelheim has been a committed and collaborative partner for sotagliflozin outside of the U.S. and Europe and is extending the geographical reach for sotagliflozin across cardiometabolic and other indications.

This agreement included a $25 million upfront payment and potential milestone payments of up to almost $200 million. This collaboration leverages Bristol's global scales and capabilities, allowing us to reach more patients worldwide. Boehringer Ingelheim recently announced it's been preparing regulatory approval applications for sotagliflozin in a number of ex-U.S. markets. Filings in the UAE and Saudi Arabia have been submitted, and the filing in Canada is expected to be submitted shortly. As you can see, we've been working closely with Bristol and making significant progress together. Now, as I just noted, our partnership with Novo has the potential to generate significant value for LX9851 in obesity and for Lexicon as a partner.

As we look to our future partnerships, we're heavily focused on pilavapadin, where our aim is to unlock value globally across multiple indications with a partner that has complementary capabilities, therapeutic area expertise, and a global commercial footprint to help fully realize pilavapadin's pipeline and appeal potential. With our significant clinical expertise in the space, we have flexibility in the types of partners that would be a great fit for this asset, and we've been having a significant amount of interest and dialogue with these potential partners. With that, I'd like to now turn it over to Scott to walk you through our financial results for the quarter ended March 31, 2025.

Scott Coiante (Senior VP and CFO)

Thank you, Mike. For the first quarter of 2025, from 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 III study for HCM and our progress phase II-B study of pilavapadin and 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 31st, 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 Nordisk has been deferred and will be recognized over the estimated completion period of our obligations under the exclusive license agreement. We anticipate stable U.S. INPEFA revenues this year despite limited promotional activity.

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 III readiness for DPNP, our ongoing phase III trial in HCM, and all IND enabling activities related to 9851. I'd now like to turn it back to Mike for closing remarks.

Mike Exton (CEO and Director)

Yeah, thanks a lot, Scott.

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-in-appealed 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. 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. 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 and DPNP, we anticipate sharing full progress data in Q3 along with an end-of-phase II 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 III study sites expected to be operational by Q3. Beatrice continues to advance regulatory submissions for sotagliflozin in heart failure outside of the U.S. and Europe, with the UAE and Saudi Arabia complete, and Canada anticipated shortly. As we discussed last quarter, we see opportunities to differentiate SOTA as a mechanism and believe that the recent MACE data potentially supports expanding the use of this medicine into adjacent indications. We plan to engage in a regulatory process regarding this data later this year.

Finally, regarding Zynquista for type 1 diabetes with CKD, while we're not currently actively investing in this program, it's important that we continue to move forward with the end-of-review process in support of the significant number of patients that continue to actively and strongly advocate for approval of this drug, underscoring the need in T1D. To that end, we held an end-of-review meeting with the FDA in Q2, and we expect to continue discussions with the FDA. We remain enthusiastic as we look to the potential updates in the remainder of this year, and we look forward to keeping you all informed of progress across all of these programs in the coming months. With that, Craig, you can join us, and we'll have time to take everyone's questions. Over to you, Operator.

Operator (participant)

Thank you.

To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Andrew Tsai of Jefferies. Your line is now open.

Andrew Tsai (Senior VP)

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 pivotal phase III 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?

Craig Granowitz (Senior VP and Chief Medical Officer)

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 mg 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 the 10 mg dose arm.

Also, as a reminder, the reduction of pain score from patient baseline is approaching one and a half to two-point drop from baseline, which is what the patients would experience. With all of that and a drug that we feel confident that's once daily, has placebo-like completion rates, no identified yet drug-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 II meeting.

Andrew Tsai (Senior VP)

Right. Assuming the end-of-phase II does go well and you start the phase IIIs and let's just say Q4, when would the pain data sets be?

As those phase IIIs are studying, what other peripheral studies do you think you need to accomplish or finish to ensure you can file an NDA right after the phase III data? Thank you.

Craig Granowitz (Senior VP and Chief Medical Officer)

Yeah, 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.

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 are ready to go right into phase III and pre-commercial scale manufacturing with a process that is robust, and I do not think will be cost-prohibitive in that regard. I think there is always more things to do. I am 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.

Andrew Tsai (Senior VP)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Roanna Ruiz with Leerink Partners. Your line is now open.

Roanna Ruiz (Senior Research Analyst)

Hey, afternoon, everyone. A couple from me. I will 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? I was also curious, how closely involved is Novo with your work and development here for this asset at this stage?

Mike Exton (CEO and Director)

Yeah. 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. They're very collaborative and engaged as we go through this process and are very pleased with the progress so far. As we have outlined, we expect that that will all conclude this year, and then the information will be over to Novo to submit the IND.

Roanna Ruiz (Senior Research Analyst)

Got it.

Thanks. And one more follow-up from me. I noticed we've had a couple of 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?

Mike Exton (CEO and Director)

Yeah. 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. I think 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 collected both preclinically and in clinical and preclinical studies that give us confidence in the efficacy of sotagliflozin in non-obstructive HCM. We're actually powered to see an effect in both non-obstructive and obstructive as it is. We do not 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. Craig, do you have any thoughts?

Craig Granowitz (Senior VP and Chief Medical Officer)

Yeah. No, well said, Mike. Roanna, I think the other important development really is the opportunity now to rapidly enroll the trial. As BMS mentioned, there is no further work that they're doing on ODYSSEY. The long-term extension trial is, my understanding, not taking place. As Cytokinetics mentioned, they have now fully enrolled in ACACIA.

There are no other large trials that are running currently right now actively enrolling patients.

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.

Roanna Ruiz (Senior Research Analyst)

Got it. Thanks again.

Operator (participant)

Thank you. Our next question comes from the line of Yasmeen Rahimi with Piper Sandler. Your line is now open.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

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 end-of-phase II meetings and in preparation for phase III, do you think getting the minutes and the sign-off on the phase IIIs, 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, Mike.

Mike Exton (CEO and Director)

Thanks, yes. 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'll continue to have those discussions with the strategics, and that will be the sort of natural course of the engagement going forward. No, we do not see at this stage the FDA end-of-phase II meeting being a gating factor.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

Thank you. 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 are 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? I have a third last question.

Craig Granowitz (Senior VP and Chief Medical Officer)

Yes, yes. It is Craig Granowitz. Thanks for your question.

What we intend to show later on in the year will be additional detail on the secondary analyses, which 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 mg 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. 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.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

Thank you. 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 peripherally, has been just saying non-obstructive is a very distinct population, different from obstructive. 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. 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, that would be helpful. I'll jump back in the queue.

Craig Granowitz (Senior VP and Chief Medical Officer)

Yeah. Thanks. Again, yes, great, great question. The major criteria we have for the trial is symptomatic disease. I think that is really reflective of the diastolic dysfunction and that is a sine qua non of HCM.

It is funny, I think we've had this conversation at 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. 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.

As a reminder, one of the reasons why we tried to highlight the MACE data that was recently published in The Lancet is that patients with HCM remain at significantly elevated risk of MI and stroke. I think having that additional benefit in a group of heart failure patients is all continued to be supportive, particularly in the non-obstructive group. Yeah. It is important for us, yeah, 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, does not have an indicated the CMIs have not shown robust efficacy there. It is all aligning with our approach of broad potential application for a broad prescriber base and broad applicability across the patient population as well.

We actually have a lot of data now that gives us great confidence in non-obstructive HCM. The SONATA trial was built to capitalize on both opportunities.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

Thank you so much.

Operator (participant)

Thank you. Our next question comes from the line of Yigal Nochomovitz with Citigroup. Yugal, please go ahead.

Yigal Nochomovitz (Director)

Hi, guys. Thank you for taking the question. A few more on the design of SONATA. I think you'd 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, or are you trying to go for more of a 50/50? Thank you.

Craig Granowitz (Senior VP and Chief Medical Officer)

Yeah. Great questions, Yugal. Similar to what we did in the SCORED trial and SOLOIST trial, the study is powered for the overall endpoint. In the case of the preserved ejection fraction and reduced ejection fraction, it really is the issue of consistency across results. FDA has not asked for, in a sense, two independently powered arms. If I gave that a misimpression in one of my answers, I apologize for any misunderstanding on that. The study is powered on the basis of 500 patients with a difference in KCCQ compared to placebo.

What FDA would be looking for, similar to what we showed in SCORED and SOLOIST, is that there would be consistency, but not necessarily formally powered for each one of the two subgroups. 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. Right now, we do not really have enough patients in the study for me to say whether we are going to have more or less difficulty enrolling one or other of those two groups. As Mike had mentioned, a vast majority of the patients right now are not being treated. Again, we are looking for just patients with symptomatic disease, whether or not they are on a CMI. We think that there is certainly an adequate patient number.

The study includes patients with an ejection fraction down to 50%, which is one that the currently approved agent is not indicated to treat. 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 U.S..

Yigal Nochomovitz (Director)

Okay. Got it. Thank you. On the choice of the endpoint specifically, KCCQ CSS, I'm just wondering, you mentioned peak VO2 has got this 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?

Craig Granowitz (Senior VP and Chief Medical Officer)

Yeah. No, great question as always, Yigal.

The advantage with SOTA is we have outcomes. We have heart failure outcomes in 12,000 patients. We have an FDA approval for outcomes. We have demonstrated reductions in MACE as well as heart failure events. I think one of the issues with the newer class of agents is they do not have the experience to have anything with outcome. What they are really looking for as a surrogate for outcome besides functionality is some sort of metabolic parameter. I think that is going to be really one of the long-term questions: are they modifying the disease in any way? We know we modify the disease. We prevent heart failure events and cardiovascular death. We reduce stroke and MI in overlapping and similar groups of patients. From that standpoint, the FDA did not ask for any additional endpoints.

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 SCORED and SOLOIST, we have a very broad label that provides the maximum opportunity for labeling and for patient inclusion in the criteria. 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.

Mike Exton (CEO and Director)

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 for 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. That is, frankly, what the CMIs do as well. Yes, they are indicated for symptomatic and functional benefit. The primary reason to believe is that they make the patients feel better, at least in obstructive HCM. You combine the pragmatism of the trial with developing something for what patients actually need. In fact, we have seen the benefit in KCCQ already in diastolic dysfunction. It not only gives us confidence in the outcome that we are going to produce, but confidence in that should the trial be positive, it is something that patients really, really want.

Craig Granowitz (Senior VP and Chief Medical Officer)

Yeah.

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. 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. That's really why the CMIs have been approved, is for symptom benefit.

Yigal Nochomovitz (Director)

Got it. Thank you very much.

Operator (participant)

Thank you. Our final question comes from the line of Joe Pantginis with H.C. Wainwright. Your line is now open.

Lander Egaña-Gorroño (Senior Biotech Equity Research Associate)

Hello, everyone.

This is Lander on for Joe. Thanks for taking our questions. 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? If so, would these observations change the design of the upcoming registration or phase III studies? Thank you.

Craig Granowitz (Senior VP and Chief Medical Officer)

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. I wouldn't want to overinterpret the data of whether it's better with or without an underlying DPNP medication.

As a reminder, about 90% of the patients were on gabapentin. 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. It is not surprising you will get additive benefit whether or not they're on a DPNP medication.

Lander Egaña-Gorroño (Senior Biotech Equity Research Associate)

Perfect. Thanks a lot.

Operator (participant)

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

Mike Exton (CEO and Director)

Thank you all. Thanks very much. Thanks for the questions, guys. Always very engaging. 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. We look forward to updating you as the year progresses. Thanks very much for your time. We'll speak to you soon.

Operator (participant)

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