Earnings Call Transcript - ESPR Q3 2022

Tiffany Aldrich, Corporate Communications Team

Good morning and welcome to Esperion's Third Quarter 2022 Financial Results and Company Update Conference Call. I'm Tiffany Aldrich and I'm part of the Corporate Communications team here at Esperion. I want to remind callers that the information discussed on the call today is covered under the safe harbor provision of the Private Securities Litigation Reform Act. I caution listeners that management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in today's press release and our SEC filings. The content of this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, November 1, 2022. We undertake no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call and webcast. As a reminder, this conference call and webcast are being recorded and archived. We issued a press release this morning detailing the content of today's call. A copy can be found at www.esperion.com within the Investors and Media section. We will begin with prepared comments and then open the call for your questions. Following today’s call, the team will be available for follow-up questions. Please e-mail the corporate team at esperion.com to schedule a time to speak with the team. With us today are Sheldon Koenig, President; Dr. JoAnne Foody, Chief Medical Officer; Eric Warren, Chief Commercial Officer; BJ Swartz, Chief Strategy Officer; and Ben Halladay from our Finance department. I’ll now turn the call over to Sheldon for some prepared remarks.

Sheldon Koenig, President

Thank you, Tiffany, and good morning, everyone. Thank you for joining us today to review our recent progress in the third quarter of 2022 and reaffirm our goals for the remainder of the year. This is an exciting time for Esperion as we focus on CLEAR Outcomes. The entire organization is working diligently on executing quality site closeout and ensuring accurate data collection. In October 2022, we completed the last patient, last visit in the study, which is another important milestone and we are on track to report a brief top-line announcement in January 2023. We are targeting to present comprehensive results with Dr. Steve Nissen, the lead investigator of CLEAR Outcomes, at the American College of Cardiology's 72nd Annual Scientific Sessions in March 2023. While we await the results of CLEAR Outcomes, we have delivered on our promise to drive consistent growth while maintaining organizational efficiencies. U.S. net product revenue grew 28% year-over-year to $14 million in Q3 2022, while selling, general and administrative expenses were lower by 36% year-over-year. Additionally, we have reduced spend by $74 million in operating cash thus far in 2022 compared to the same period in 2021. Esperion continues to operate with a limited commercial footprint following last year's new organization as we anticipate our commercial spend having a greater impact after the full data readout. This quarter, we are also pleased to announce that bempedoic acid was recommended as an important oral non-statin therapy for LDL-cholesterol lowering by the American College of Cardiology. This ACC recommendation reflects an important management strategy for individuals with ASCVD and underscores the value of using NEXLETOL and NEXLIZET to achieve LDL cholesterol goals in high-risk patients. The CLEAR Path 1 Pediatric Clinical Trial began activating sites in August 2022. CLEAR Path 1 is a Phase II clinical trial investigating bempedoic acid in patients 6 to 17 years of age with heterozygous familial hypercholesterolemia. Our partner, Daiichi Sankyo, continues to report strong NILEMDO and NUSTENDI growth in their European territory and have treated over 64,400 patients in August. Daiichi Sankyo also presented new data at the European Society of Cardiology Congress in August from its multinational prospective observational study, SANTORINI, demonstrating a persistent need among the eligible patient population to attain guideline-recommended LDL-cholesterol levels. Simulation study results further indicate that the addition of bempedoic acid on top of ezetimibe could result in significantly more patients achieving recommended LDL cholesterol goals, potentially reducing their risk of cardiovascular events. Finally, we are pleased to invite you to our upcoming R&D Day on November 9, 2022. We have two world-renowned scientific experts joining us for the event, Dr. Peter Libby and Dr. Michael Gibson. We're excited to hear their insights on CLEAR Outcomes and our pipeline. The upcoming CLEAR Outcomes readout represents the beginning of a significant inflection point in our growth trajectory. A successful study has the potential to expand our current labeled indication, making bempedoic acid the only oral LDL-lowering therapy since statins to be indicated for cardiovascular risk reduction. Importantly, a positive outcome study has the potential to transform cardiovascular disease management for millions of patients around the world who are struggling to meet their LDL cholesterol goal. Earlier today, we issued a press release containing our financial results for the third quarter, which is available on our investor website. U.S. product revenue for the third quarter ended September 30, 2022, was $14 million, up 28% year-over-year, and $40.9 million for the nine months ended September 30, 2022, up 47% year-over-year. Retail prescription equivalents for the third quarter were in line with our expectations, growing 2.4% quarter-over-quarter. Royalty revenue for the third quarter ended September 30, 2022, was $1.6 million, up 33% year-over-year, and $4.2 million for the nine months ended September 30, 2022, up 50% year-over-year. We expect our partner to continue launching NILEMDO and NUSTENDI to new markets in the next year. Combined royalty and partner revenue was $5 million for the third quarter ended September 30, 2022, an increase of 43% year-over-year, and $15.8 million for the nine months ended September 30, 2022, a decrease of 55% year-over-year. The decrease for the nine months ended September 30, 2022, is due to a one-time milestone payment from our collaboration partners in the second quarter of 2021. Finally, total revenue for the third quarter ended September 30, 2022, was $19 million, an increase of 32% year-over-year, and $56.7 million for the nine months ended September 30, 2022, a decrease of 10% year-over-year. The decrease from the nine months ended September 30, 2022, was due to the aforementioned one-time milestone payment. Turning to expenses; R&D expenses for the third quarter ended September 30, 2022, were $29.1 million, an increase of 15% year-over-year, and $85.9 million for the nine months ended September 30, 2022, an increase of 10% year-over-year. The increase is primarily related to an increase in CVOT costs as we achieved 100% MACE accumulations and continued close-out activities. SG&A expenses were $25 million for the third quarter ended September 30, 2022, a decrease of 36% year-over-year, and $84.9 million for the nine months ended September 30, 2022, a decrease of 42% year-over-year. These decreases reflect savings from the transformation for long-term success plan implemented in Q4 of 2021. As of September 30, 2022, cash, cash equivalents, restricted cash, and investment securities available for sale totaled $239.3 million compared with $309.3 million on December 31, 2021. We currently anticipate that our cash runway extends beyond the anticipated completion and readout of CLEAR Outcomes. Our operating expense guidance for the full year 2022 remains unchanged. We continue to anticipate full year 2022 R&D expenses to be between $100 million to $110 million and SG&A expenses to be between $120 million to $130 million. These estimates are inclusive of approximately $25 million of non-cash stock-based compensation expense expected to be incurred during this year. To close, as a new organization, we are committed to helping providers and patients reach their goals, not only today with our approved products but in the future with CLEAR Outcomes and additional pipeline programs. We look forward to updating you on our progress as we near a critical milestone in our journey and continue to help address the leading cause of death worldwide. You will see the longer-term vision for our pipeline on R&D Day on November 9, and we will be making a presentation at Jefferies in London on November 16. Thank you all for joining today and for your continued support and interest in Esperion. Operator, we are now ready for Q&A.

Operator, Operator

Our first question comes from Mike Yee from Jefferies.

Mike Yee, Analyst

Congratulations on the progress and the updates. We have two questions. You clarified the timing for the early January release and provided a brief statement regarding the results of the cardiovascular Outcomes study. Can you confirm if you would characterize the results in any way to clarify their clinical significance, or will you only state that the results are positive and leave it at that until March? I ask because there are varying levels of positive data that can influence how the results are interpreted. That’s the first question. The second question pertains to the milestones and cash position, assuming you will not raise cash until after the presentation. Were there any warrants issued in the quarter? Additionally, could you discuss other opportunities throughout 2023?

Sheldon Koenig, President

Sure, I'll start with the first part of your question and then hand it over to Ben Halladay for the financing aspect. Regarding the top line, we're still evaluating what modifications we might implement. We won't comment specifically on a hazard ratio or any statistical significance measures. As a reminder, we're preparing for our presentation at ACC, and we want to avoid breaking our embargo. We're also aiming for a simultaneous publication in a leading journal. This is why we're providing some information but not all the details. We are considering terms like clinically meaningful, and once we have the data, we will implement those strategies for the top line. Ben, would you like to address the question about financing related to warrants and other financial activities?

Benjamin Halladay, Finance Department

Yes. Thanks for the question. So let me start by saying we are very happy with our current cash and funding position. We ended the quarter very strong from a cash standpoint. As far as warrants, we have not had any of those exercised at this time, but we are actively keeping an eye out for those. That would be a pretty significant tailwind for us. Just as a reminder, it's $309 million that would come into the company. As far as looking to 2023, outcomes and publication is a major catalyst for this company. And so, obviously, that’s going to put us in a very good position to assess what our options are. With the milestones, we’ll know what those are when those are coming in and I think that will just kind of open up what we can possibly do from any fundraising in 2023, and we'll look to do basically what makes the most sense for us then.

Operator, Operator

Our next question is from the line of Serge Belanger with Needham & Company.

Serge Belanger, Analyst

Just one question from us. You’ve previously talked about some pretty significant milestones associated with the CLEAR Outcomes draw. Can you just talk about what triggers these milestones you need to reach a certain hazard ratio or risk reduction? Or is it just inclusion of a label expansion?

Sheldon Koenig, President

Yes. So as it relates to the milestone, just as a reminder, it's a milestone with Daiichi Sankyo, up to $300 million. We have a separate milestone payment of up to $150 million with Otsuka. But in order to actually achieve that milestone as it relates to Daiichi Sankyo is to include the CLEAR Outcomes data in the label of the European label. And that's where we are. Again, it’s based upon the, yes, the study results. The study, again, as a reminder, is powered for 15% residual risk reduction. It’s 90% powered for that. And – but it’s essentially the data from the CLEAR Outcomes study being included into the label. And JoAnne, do you have any further comments as it relates to that?

JoAnne Foody, Chief Medical Officer

Sheldon, one just to clarify, that's the European, the EMA label but no other comments and thank you for the question.

Operator, Operator

Our next question comes from the line of Jessica Fye with JPMorgan.

Unidentified Analyst, Analyst

This is Nason for Jessica Fye. Congratulations on the progress. One question from me ahead of the CLEAR Outcomes data. What is your market research telling you in terms of what level of residual risk reduction the physicians are actually looking for? I know your base case is a 15% risk reduction. But what is a home run scenario? And what kind of uptake can we anticipate from that?

Sheldon Koenig, President

Before I turn it over to our Chief Commercial Officer, Eric Warren, who’s done a lot of work on this, just one thing I do want to say is that we believe achieving a 15% residual risk reduction, of which the study is powered for, will be a significant achievement for the organization. But Eric can talk about the other thresholds that we also tested. Eric?

Eric Warren, Chief Commercial Officer

Thank you, Sheldon, and thanks for the question. So just to keep it simple, 15% was deemed highly significant from our clinicians and our market research. So 15%, very meaningful and has significant impact from a market share perspective as well as a market access perspective in terms of quantity and quality of access. Now anything greater than 15% would create incremental value. But I just want to be very clear that at the base level of outcome, 15%, we have incredibly significant value.

Operator, Operator

Our next question comes from the line of Tom Shrader with BTIG.

Tom Shrader, Analyst

Clinicaltrials.gov is incredibly sparse on details on this trial. There are no secondaries listed. Is that accurate? Does that limit your ability to get other aspects into the label? And what I’m particularly interested in is how much type 2 diabetes progression data are you collecting? And do you think you can get that in the label? And then finally, with no statin in the control arm, do you think the best case for diabetic progression is equal to the control arm?

JoAnne Foody, Chief Medical Officer

So Tom, thank you so much for the question. And to your point, clinicaltrials.gov just gives really a very basic overview of the trial. That being said, we have plenty of other secondary endpoints, importantly, to your point, for both glycemic control in diabetics as well as progression to new-onset diabetes. And not having it in clinicaltrials.gov does not, in any way, preclude a regulatory conversation for that. It is our hope and we anticipate that important glucose information, whether it be glycemic control or progression to new-onset diabetes would be included in the label, obviously pending results. And we believe that, that’s a significant differentiator for the large proportion of patients with either diabetes or prediabetes. In CLEAR Outcomes that constitutes 70% in total of our population. Now with respect to the second component of, on a statin, not on a statin, remember that CLEAR Outcomes focuses on patients not able to tolerate statins but also includes 20% of patients not able to maximize their statin. So we will have a significant number of individuals who are on a background statin as well as diabetic based on – or prediabetic based on the numbers. So we think we’ll have important clinical information for prediabetics, diabetics with or without statin, and include that information in the label.

Operator, Operator

Our next question comes from the line of Jeff Hung with Morgan Stanley.

Mike Riad, Analyst

This is Mike Riad on for Jeff Hung. Two questions. First, could you talk about your current thinking and expectations on the cadence for increased adoption of NEXLETOL and NEXLIZET sales? Do you expect like a fairly quick inflection in sales following the full data presentation or do you think it would be more gradual and take longer? And our second question is, what are you hoping to see during the CLEAR Path 1 Pediatric Clinical Trial? And how could that data be implemented in the label?

Sheldon Koenig, President

Sure. So Eric, if you could take the first part regarding sales and then JoAnne, if you could speak to the pediatric trial.

Eric Warren, Chief Commercial Officer

Great. Thanks, Mike, for your question. So the answer is pretty straightforward, again. So growth will start with the release of the data. So we will see the increased growth. As you know now, we’ve been committed to delivering consistent growth and we’ve been doing that while conserving dollars for a post-CLEAR environment. So CLEAR data has come out, we increased the level of growth that we’re capable of delivering. And then when we have the label, which will happen in the first half of 2024, we expect to achieve even further or accelerated levels of growth.

JoAnne Foody, Chief Medical Officer

So thank you, Jeff, or Mike, I guess, for the question. And with respect to CLEAR Path 1, this is a pediatric trial focused on individuals or children with familial hypercholesterolemia. And this is really, as we know, a genetically modified disease that runs in family. So our hope is that we can provide another oral option for the children that ultimately are at very high risk over their lifetime for cardiovascular disease. With respect to a label, we would assume a pediatric indication and the potential to also increase our patent life with the study. But the real key is that this is a group of individuals with very high unmet need. And there are no other oral options for these individuals, and we hope to add to the armamentarium for children.

Sheldon Koenig, President

And Mike, I just wanted to add one more thing as it relates to growth. Since we actually did our plan of savings and transformation last October, one thing we committed to was, of course, not only preserving our burn rate but also demonstrating continuous growth throughout the year, the year defined as 2022. And as Eric has mentioned and as we have mentioned in our prepared remarks, this is with a very small footprint. So we've been very pleased with the fact that we've been able to deliver on what we said that we would deliver on, and we'll continue that. And the second part of that is the fact that we've also always stated that CLEAR Outcomes and getting the label will be a significant inflection point for the organization. So thank you again for your question.

Operator, Operator

And our next question comes from the line of Joseph Thome with Cowen.

Joseph Thome, Analyst

Maybe the first one, I know the study was fully enrolled ahead of any impacts from COVID but maybe what additional information have you been able to glean during the conduct of the trial to make sure that COVID didn't have a substantial impact in either the overall trial conduct or the interpretation of the results? That would be helpful. And then maybe just to follow up a little bit on Mike’s first question, you did mention potentially indicating clinical meaningfulness in the top line release. Is your interpretation of clinical meaningfulness, that 15% residual risk reduction? Or is there potentially another interpretation?

Sheldon Koenig, President

JoAnne, do you want to speak to the COVID?

JoAnne Foody, Chief Medical Officer

Absolutely. Joe, thank you for the question. So as a large randomized global trial of over 14,000 patients, we would expect that the randomization would handle any confounding addressed by COVID. We are certainly blinded with respect to any of the events. But in fact, the events continue to track across the study population consistent with what we had predicted prior to COVID, suggesting that we don't have any particularly different accumulation of events or, secondarily, any difference in the proportion of events. So again, we’ve been tracking this very closely as have the regulators, and we’ve been in conversations with them, and we don’t see anything significant with respect to COVID that would be out of proportion or a concern.

Sheldon Koenig, President

Thanks, JoAnne. And Joe, regarding the second or yes, it was your second question, wasn't sure if it was the first or the second, of the top line, if you were to use words such as clinically meaningful, what does that necessarily mean? And I think to us, it's the fact that if it's clinically meaningful, then there's obviously statistical significance. So I think that's one way to think about it.

Joseph Thome, Analyst

Okay, perfect. And then maybe just one more quick one because I know the drug does also lowers c-reactive protein. Is there any way based on the literature to sort of uncouple the CV benefits specifically due to c-reactive protein lowering versus LDL reduction? Or how should people best think about that?

JoAnne Foody, Chief Medical Officer

So Joe, thank you again for the question. We believe the anti-inflammatory effects of bempedoic acid are clinically relevant and meaningful. I think the best way to think about this is to look to a study like the CANTOS trial using canakinumab, which had only an anti-inflammatory effect and was able to significantly reduce cardiovascular events. We also know that statins reduce c-reactive protein. And so some of their event reduction is because of that. But importantly, we also know that PCSK9 inhibitors and ezetimibe do not have significant effects on CRP. So perhaps this is why PCSK9 has underperformed relative to their LDL reduction. So, I think those are all ways to think about it. I also encourage you to take a listen to our Research and Development Day on November 9, Peter Libby, really one of the world’s experts in the linkage between inflammation and cardiovascular disease and beyond, will be speaking with respect to inflammation and its potential across multiple disease states. And I think you’ll find that helpful.

Operator, Operator

And our next question comes from the line of Jason Butler with JMP Securities.

Jason Butler, Analyst

You broke out the number of hard ischemic events in the presentation and that’s helpful. Can you just maybe comment on whether the rate of those individual events was in line with your expectations from the study design? And then how well powered you are to hit statistical significance on any of the components on a stand-alone basis, most specifically cardiovascular death?

JoAnne Foody, Chief Medical Officer

So thank you so much for the question. As you mentioned, we've accumulated for MACE-4 over our 1,620 anticipated events, thereby allowing us to have 90% power for a 15% risk reduction. With respect to components of the composite and the numbers, we do not have them specifically. However, I can tell you that if we look at our MACE-3, which is predominantly the harder events because it doesn't include coronary revascularization, we are nearly at 140% of those events with a very significant power around all of those, and that is stroke, MI, and death. I can't give you specifically with respect to death, although I know that that's your question. But I think you should have confidence in the fact that our MACE-3 is well above the prespecified number, giving us much greater power on those harder events.

Jason Butler, Analyst

Okay, great. That's helpful. And then just on the commercial side, can you speak at least broadly to the steps or how you gate the commercial build-out after the top line and the full data and ultimately label expansion?

Eric Warren, Chief Commercial Officer

Yes, Jason, it’s Eric. Thanks for the question. So at this current point, our sales force is relatively modest, less than 80 individuals. We’ve been working very closely with ZS Associates now to come up with a staging plan that optimizes the impact of those individuals but helps from a runway preservation perspective as well. So rest assured, we have a robust plan in the work that will create expansion. But at this point, I’m not going to provide the specifics of that.

Operator, Operator

Next question comes from the line of Judah Frommer with Credit Suisse.

Judah Frommer, Analyst

Just kind of following up on the last and maybe asking it a little differently. Regarding the marketing message after a potential positive CLEAR Outcomes trial, how would that be different versus the initial launch of bempedoic acid which obviously happened during a difficult time? Would you focus largely on the CLEAR Outcomes benefits? Or would there also be a message that’s similar to what the drug was launched with a couple of years ago?

Eric Warren, Chief Commercial Officer

Thanks, Judah. It's Eric. I can start and then JoAnne can add to this. When the products were initially launched, there wasn't much detail provided. The labeling is somewhat restrictive, as it relates to ASCVD patients on maximally tolerated statin therapy and indicates an LDL-C benefit but clearly states there is no outcomes benefit or impact on morbidity and mortality. With the CLEAR Outcomes study, we can enhance our messaging significantly, as integrating the outcomes message into our discussions will add considerable value, as indicated by our market research. We also expect to eliminate the limitation related to maximally tolerated statins, which is a significant constraint for us. Improved clinical messaging and the removal of these limitations will also positively influence payers’ willingness to not only increase the percentage of coverage, which is currently positive, but also enhance the quality of that coverage. This will help align their utilization management with the improved labeling we anticipate. Hopefully, that's clear. JoAnne, if you have anything to add, that would be great.

JoAnne Foody, Chief Medical Officer

Yes. As we consider this, CLEAR Outcomes combined with our life-cycle management research leads us to a straightforward label. We aim for a label targeting individuals at risk, focusing on lowering LDL cholesterol to reduce events. As Eric mentioned, this approach allows us to be more expansive and positions the drug as an early oral therapy that clinicians can utilize to lower LDL cholesterol and reduce events. It's important to note that this aligns well with the existing ex-U.S. label that excludes maximally tolerated statins. For instance, in Germany, that type of label has already led to a significant increase in PCSK9 utilization. Therefore, this label is clinically relevant, easier to market, and should provide substantial benefits for both providers and patients.

Judah Frommer, Analyst

That’s helpful. And then just a quick question on the potential Daiichi milestone. The language is up to $300 million. Is there anything you can share with us regarding how you get to the full $300 million aside from inclusion in the European label?

Sheldon Koenig, President

Yes. Judah, we've never disclosed how to get to the additional $100 million that's related to specific aspects of the study. That we haven't made public as of yet.

Operator, Operator

Our last question comes from the line of Paul Choi with Goldman Sachs.

Paul Choi, Analyst

My first is on just what your market research suggests or indicates as to what uptake might look like among clinicians if the primary endpoint is primarily driven by lower rates of cardiovascular revascularization versus sort of the hard MACE endpoints. And then my second question is with regard to the pediatric heterozygous familial hypercholesterolemia trial, can you maybe just give us some guidepost as to what your regulatory feedback has been like and just sort of what rough time lines might be for completion of that study in that population in order to get the pediatric exclusivity for additional 6 months of patent life?

Sheldon Koenig, President

Eric, before you go. Thanks, Paul, for the question. One of the things I think we really struggled with, and it kind of goes to the last question, was overall awareness of these brands. And more and more we're starting to see, and even in our prepared remarks, we've talked about the fact of the inclusion of NEXLETOL and NEXLIZET, the bempedoic acid franchise in guidelines, and we're seeing more and more opinion leaders, scientific leaders throughout the United States and, obviously, throughout the world, also speak about these products and where they fit. And I think that's a good segue of what Eric has been seeing in his market research that he conducted and potential uptake once we have the CLEAR Outcomes. Eric?

Eric Warren, Chief Commercial Officer

Yes. Thanks, Sheldon, and thanks, Paul. And yes, so Paul, with regards to the primary endpoint, so MACE-4 is what we’ve evaluated that 15% base level of impact, if you will, is what we’ve anchored our research around. We’ve provided kind of incremental profiles, if you will, to assess changes in value. But I’ll just say that, again, with a MACE-4 benefit equivalent to a 15% relative risk reduction, we see very significant multiple-fold improvements in market share or penetration, and we also have that significant payer benefit. And we’ve tested that not only in quantitative and qualitative research, but we’ve also tested that with a payer advisory committee.

JoAnne Foody, Chief Medical Officer

Yes, absolutely. So thank you for the question. As was mentioned, we've started our first patient in the study. As you all understand from our CVOT, these trials can take time, although this one won't take that long. We're anticipating a 2026 presumably opportunity to file. With respect to conversations with the regulators, they have been quite pleased with the study design, with the targeting and the opportunity for us for a label update as well as potential pediatric exclusivity.

Paul Choi, Analyst

Great. Thank you very much.

Operator, Operator

Thank you. And ladies and gentlemen, with that, we conclude our Q&A and conference call. Thank you for participating, and you may now disconnect. Good day.