Conference Transcript - LXEO 2026-09-15

Brian Scorny, Analyst — Baird

Well, good morning, everyone. I'm Brian Scorny. I'm one of Baird's senior biotech analysts. I'm really thrilled to have a fireside chat with management of Lexio Therapeutics. This is a company that I've been following for a couple of years now. Very exciting stories in a number of indications led by Friedrich's Ataxia, but also an earlier stage PKP2 program that's shown some very interesting data, and we're expecting more definitive data later this year. So maybe just to start, Nolan, if you could give us a brief introduction to the company, how it started, and what areas you're currently focused on.

R. Nolan Townsend, CEO

Yeah, so Lexio is a genetic medicine company primarily focused on two diseases. One is Prydrich's ataxia. The second is arrhythmogenic cardiomyopathy, and specifically the PKP2 mutation. The company was a spin-out originally from the genetic medicine lab at Weill Cornell University here in New York. We acquired another gene therapy company in 2021 that was focused on genetic cardiovascular disease, and those two components of the pipeline have come together to the company that you know today. Our most advanced program, as I mentioned, is treating Friedrich's ataxia. We're focused primarily on the cardiovascular component of the disease, which is the cause of death for up to 70% of Friedrich's ataxia patients. We're also seeing a clinically meaningful improvement in the neurologic component of the disease. We evaluate this through the MFAR scale, which is the endpoint used to approve the current commercially available treatment. We're seeing about a 2.5 to 3-point improvement on the MFAR scale, and this effect size appears to be deepening over time. We have patients out to 24 months of treatment follow-up that are seeing persistent benefit. So on the cardiac side, we are reversing the hallmark of the disease, which is cardiac hypertrophy. And we're achieving the effect size on MFARs, or the neurologic scale that I mentioned. So we believe the two together would be a step change in the standard of care for the treatment of Phrygix ataxia. This is a program that's now in a registrational study. We're working towards a top-line readout in the second half of next year. So we're excited about this as our most advanced program. The next program, as you mentioned, is treating arrhythmogenic cardiomyopathy. I think this is a very interesting indication. I'd say, frankly, it's under the radar today. This is a 60,000-patient rare disease in the U.S., so it's, for example, more than twice the size of Duchenne's muscular dystrophy, making it one of, if not the largest commercial opportunity in systemically administered gene therapy today. We have a completed, we have a phase one study that's completed enrollment. As you mentioned, we'll have a readout of this study towards the end of the year. This will focus on our high dose, where we'll have most, if not all, of the patients at 12 months of treatment follow-up. We'll also have a regulatory update in the same time period, which will give a lens into the path forward into the next study, which we hope to be an approval study. And so that one's, you know, moving rapidly as well. So I think, you know, obviously PKP-2 is the nearest term clinical data readout regulatory update that we have. But FA is very important to our strategy, and we'll have the top-line readout in 2027.

Brian Scorny, Analyst — Baird

Great. So maybe starting on FA and just kind of thinking about the Sunrise FA pivotal, kind of walk through us what you've seen in in clinical studies so far and how you think that's going to be predictive in terms of endpoints what's the what is the endpoint for for sunrise fa and you know what sort of regulatory discussions have you had yeah so so the the hallmark of this disease is hypertrophy or thickening of the heart wall we measured that via a cardiac MRI endpoint called left ventricular mass index.

R. Nolan Townsend, CEO

We achieved a left ventricular mass index reduction of 28% in our phase one study at the six-month time point. The effect size that we need to achieve in our registrational study at the same time point is 15%. I would even say that 28% we achieved in the phase one is understated because we had one patient for which we utilized their three-month value instead of six-month, because at their clinical site, there was a hurricane, so they weren't eligible or able to go for their six-month visit. But if you look at nine months, that patient had achieved a 30% reduction. So the point I'm making is a 28%, you know, very, clears the 15% threshold very credibly, but it's also probably understated relative to what the true effect size would have been in six months. So that's the, you know, primary endpoint, the endpoint on which the study has been powered. We have secondary endpoints in the trial of troponin, for which we saw about a 60% reduction in troponin in the phase one. We have MFARs, which is the neurologic scale. I mentioned the effect size earlier. And then we have the Kansas City Cardiomyopathy Questionnaire, which is another cardiac functional scale. So I think all are important endpoints for the disease. The effect size that we've achieved on LVMI, we think makes the primary endpoint a slam dunk for us in terms of achieving that. And the other aspect is we have an ongoing natural history study, Clarity FA, which serves as, in a way, a feeder into the treatment study. We have a picture of the patient baselines in Clarity FA, so we know that the overall disease burden in terms of LVMI that's likely to end up into the treatment study is one that would allow us to credibly achieve the end point as well. So I think from a lot of different vantage points, we have a high degree of confidence in our ability to deliver against the 15% improvement and see some very clinically meaningful improvements in some of the secondary endpoints as well.

Brian Scorny, Analyst — Baird

And you're running a concurrent untreated control arm, right? So this is a six-month endpoint looking at that versus an untreated control. Are you actually randomizing too? Is it randomized? Yeah.

R. Nolan Townsend, CEO

So the control arm, there's no placebo, there's no sham procedure. There is a random allocation of patients into the untreated control or into the treatment arm. This was designed to ensure that there was balance in the patient phenotypes across the treatment arm and the untreated control. We want to ensure roughly similar levels of disease burden across those two arms of the study to ensure that we have, we're comparing the apples to apples in terms of the patient populations. And then what's your expectation for lvmi change for placebo i think i get not yes in the concurrent control yes so so the i think one of the challenges is that cardiac mri untreated patient data is is not been published there's i think a single study looking at this to design this trial we looked at three different natural history data sets all evaluating cardiac mri one from cornell one from CHOP and one from the FACOMS database, so the three different independent sources of cardiac MRI data, and all showed a very negligible change over a six-month time period in left ventricular mass very, very consistently. So I think we're looking at a control arm that's unlikely to have any meaningful change, and we're talking in the, you know, probably 1% range, if not negligible, in that time period, based on several different natural history data sets that we've reviewed. You know, unfortunately, these are not yet published, so we can't, you know, point, you know, the Wall Street community to these studies, but they were certainly used behind our assumptions in terms of the powering of the study and the effect size we need to achieve in order to have a successful outcome.

Brian Scorny, Analyst — Baird

Great. And there seems to have been a focus away from for tax on expression on the regulatory side with this program. Can you talk a little bit about the, you know, why the agencies seem to want to deprioritize for tax on expression a bit? and, you know, how you kind of think about frataxone expression as a measurement for FA cardiomyopathy.

R. Nolan Townsend, CEO

Yeah, I think, you know, frataxone expression and tissue expression in general, I think was very commonplace in study designs in the prior leadership of CBER, the Peter Marks and Nicole Verdun era. And I think what it did is establish a plausible mechanism for improvement in the disease. Its direct link to the, you know, kind of a clinical measure as a surrogate was a little bit less clear. So I think that this group at CBER values tissue expression a lot less. I think we all understood that LVMI was the key surrogate endpoint for this trial. We also, as we began to talk to cardiologists about what they would find compelling out of a data set, it was very clear that cardiologists would respond very favorably to meaningful effect size and improvement of LVMI, but the relevance of a certain level of frataxin expression for patients was a little bit less clear in how this would change their course of treatment for FA patients. So I think because of the, let's say, lessened interest in frataxin expression amongst the FDA, the fact that it wasn't necessarily an endpoint that was highly valuable for cardiologists, in our view, this has dramatically reduced study complexity by not requiring a cardiac biopsy in this trial. And therefore, we opted to not to have it in the trial. And I think it just reflects some confidence in the key surrogate endpoint, which is left ventricular mass, the effect size we've achieved there, and its relevance and its link to mortality in this specific disease.

Brian Scorny, Analyst — Baird

Great. And you mentioned sort of the effects that you had seen on MFARS. And I'm I guess just wondering, aside from like the initial six month data that you're planning to submit for Pivotal, you've talked about MFARs as potentially a confirmatory endpoint. I guess, how do you think about that in the context of this study size? Do you need a bigger study to power for MFARs at a longer time point, you know, maybe opposed to LVMI? It does seem like in the natural history, there's more variability and sometimes improvement in MFARs. Yeah.

R. Nolan Townsend, CEO

So I'd say, one, I think we have the accelerated approval path in line with what we just discussed. I think the confirmatory evidence strategy is something we still need to finalize with the FDA. We did not want to take the time to finalize a confirmatory strategy in the past conversations. There's clearly a possibility to use this same study, but at longer time points, evaluating some clinical endpoints like MFARs or maybe others in the future. that conversation is still still pending with you know with the FDA so I don't I don't have an answer directly about that but what I can say is that the patients in the untreated arm will cross over to you know the treatment so we'll have 26 patients in total that have been treated and so we need to evaluate that both the length of time we we'd like to review the endpoint but also the number of patients that are required the variability it's factors like this will go into the overall conversation. And I think we'll have an update on this in the coming period of time.

Brian Scorny, Analyst — Baird

Will all the patients on the concurrent uncontrolled arm have the option to switch to treatment at six months? That's correct. And would that be part of the data package, too? Any changes in LPMI there? It should be. Okay, great. So with the timeline currently setting up, potentially first half 28, where are you on CMC and what sort of like a commercial build out look like?

R. Nolan Townsend, CEO

Yeah. So I think CMC, we're in a very good position. We were accepted into the FDA CDRP pilot, which is a pilot designed to have more so fit for purpose CMC requirements for diseases of this profile. So for example, traditionally you would need three PPQ batches to support a BLA and this disease four or five batches may supply the entire FA market. So obviously that's not a fit-for-purpose PPQ requirement for this type of disease and this type of modality. So we're working with the FDA on much more fit-for-purpose PPQ requirements, which may be one or two batches that are required. And I think this puts us in a good position for being able to achieve our BLA timelines and the timeframe that we've guided to. We're in the commercial process with the vector that's being administered to the patients in this trial, so there are no further modifications to the process that will be required. So simply executing the appropriate process validation steps in PPQ to get to that point. From a commercial build-up perspective, things are moving well. We've begun to hire some of the first commercial hires into the company. We're focused quite a bit at current on market access and ensuring we have the appropriate backdrop for access both in the U.S. and then early work that we're considering for Europe as well. So the commercial build-out is going well.

Brian Scorny, Analyst — Baird

And then just in terms of thinking about sort of bifurcating before you have any potential confirmatory data, including MFARs, the split of like FA cardiomyopathy versus the potential for one day broader FA. And, I mean, how clear is, like, the cardiomyopathy as a subgroup population? Is there wiggle room? Like, you know, what is the true addressable initial target?

R. Nolan Townsend, CEO

Yeah, so I think this first comes down to what is the definition of Friedrich's ataxia cardiomyopathy, right? And that, I think, is something we're working a lot on with a lot of the thought leaders in the space to actually define what is the nature of the disease. In our view, the trigger point for being able to say that the disease is beginning to develop is the instance of increasing in troponin. And troponin is a blood-based biomarker that evaluates cardiac cell death. It's so sensitive that cardiologists use it to predict heart attacks. But in this case, it appears that elevations in troponin will come ahead of increases in lateral wall thickness. They'll come ahead of increases in left ventricular mass. So it may be that the introduction or the elevation in troponin is when you can definitively say that a patient is beginning to have the onset of FA cardiomyopathy. And when you look at the disease in that way, while 40% of the adult FA population has abnormal LVMI or greater than two standard deviations, a much greater percentage of the adult population is likely to have elevations in troponin. And you can look at that on one end as 70% of patients the cause of death is cardiac disease. So at some point in the disease course, 70% of the patients are likely to have elevated troponin. So if we think about access and reimbursement, for example, with that lens, patients, when they come for their annual visits, part of that visit should include a blood test that will look for elevations in troponin. If you see this elevation in troponin, that would likely be the trigger for underwriting the introduction of a therapy for F.A. cardiomyopathy, i.e. the therapy we're talking about today. So I think from an access strategy perspective, really validating that as the treatment protocol around FA cardiomyopathy and gaining alignment, that that is the picture of the disease that should yield prescribing a therapy is what we're working towards. Obviously, I think in general for rare disease, physicians are hesitant to design a treatment protocol when there is no treatment available. Here, as we get to a place where there becomes a treatment more so available, I think the broader treatment approach, treatment protocol, diagnostic protocols, and so on will come into the frame. And this will be what sits behind our access and reimbursement strategy.

Brian Scorny, Analyst — Baird

Great. Maybe moving on to 2020 for a little bit, we kind of touched on PKP2 and this indication being a very large orphan disease. But maybe you could kind of like walk through, you know, the underlying genetics here and, you know, what your vectors are actually seeking to replace to start and then.

R. Nolan Townsend, CEO

Yeah. So the this is a disease of desmosomal dysfunction. So it's a cell cell junction in the heart. The PKP2 protein is important to ensuring desmosomal integrity. With the absence of this protein, the desmosome, let's say, disintegrates and the cells in a way become islands. and the fact that they're separated is what causes the electrical conduction disorder or the arrhythmias. In between the cells, you begin to see patients with fiber fatty deposits, and in the animal models, as you reintroduce placophyllin-2, this restores the desmosomal function, so the cell-cell junction. This restores cardiac function and sort of restores structure, But importantly, it also reduces the cause of the disease, which is the arrhythmias. So that's the disease. In general, the most common way the disease is diagnosed is through a major arrhythmia event, whether it's a sustained or non-sustained ventricular tachycardia. In some cases, it's a sudden-death arrhythmia event. And then the family of a patient who has experienced such an event will go and be genetically tested. They'll find that they all have the same mutation, and that's typically how the disease is most commonly diagnosed. Here we're restoring the Placifilin-2 protein through a AVRH10-mediated vector, so the same one we're using for FA. We've seen at these doses we're getting between three and five vector copies per cell, so we think we're delivering enough of the therapeutic protein to achieve correction in the disease. And as you mentioned, we have some early data showing, you know, directional improvements in some of the important endpoints. We'll have patients at much longer, you know, time points in the data readout later in the year. And we'll have more of them at the higher dose as well coming in the next few months.

Brian Scorny, Analyst — Baird

So maybe we could go into a little bit of the details of the study data that you've shown so far. just in terms of PKP2 expression, any correlation that you're seeing there between more of the cardiac biomarker endpoints like NSVTs or PVCs? And as we look at the data set later this year, what are sort of the key things to look for to give confidence to move forward in a pivotal?

R. Nolan Townsend, CEO

Yeah. So one, starting with the biopsies, we saw a dose response between our low dose and our high dose in vector copy, mRNA, and in PKP2 protein expressions. So we saw a clear dose response there. We then, you know, looking at the clinical endpoints or the surrogates, we saw a reduction of 14% of premature ventricular contractions. We saw a low 20% reduction in non-sustained ventricular tachycardia. We saw one patient who started with a low ejection fraction. I believe it was 31%. They saw about a 30% improvement in ejection fraction. And this, I'm primarily describing our high dose where the majority of patients were at the earliest time point where we could evaluate efficacy. They were at six months. The two patients that were at nine months of treatment follow-up within that high dose had about a 65% reduction in non-sustained ventricular tachycardia, which we think is the more clinically meaningful endpoint. You know, if I look at the two, I think PVCs are more likely to be an endpoint that's impacted by outside factors other than the disease and the treatment. If you have a lot of coffee one day, you could have elevation in PVCs. So we think NSVT is a cleaner endpoint to evaluate in a future clinical trial. It's closer to the disease. It's less likely to be influenced by outside factors, and therefore I think makes it a more credible endpoint to study in a future trial. with nsvt we look at for example the antiarrhythmics they were approved on a roughly 20 percent reduction in non-sustained ventricular tachycardia so i could say that that kind of low to mid 20 percent is the clinically meaningful threshold for for nsvt improvement however as we've discussed with with our fa program you know we'd like to very comfortably clear that low 20 percent uh threshold in this disease as well so you know call it another 10 to 15 percent above that low 20s threshold so put that at about a 35 or so up to up to 40 percent improvement in svt we we would view to be you know clinically meaningful and and sort of the bar for being able to move forward into a next study uh in this disease so um i think that that if you look at that from a product profile perspective, call it a mid-30s reduction in SVT, some evidence towards structural improvement and improvement in ejection fraction, the safety profile that we have around this. We have no direct treatment-related SAEs in this program to date. I think that's a very favorable risk-benefit for patients. It clearly is a greater effect size with the superior safety profile to antiarrhythmics. And obviously then with the structural changes and the prevention of patients moving into the later stages of the disease could prevent patients from requiring transplants later. So in totality, we think that's a compelling picture for a future therapy.

Brian Scorny, Analyst — Baird

Great. So when we think about the design of a potential pivotal, I mean, And is there anything to kind of lean on? Obviously, you talked about the 20% delta with antiarrhythmics. But in a 60,000-patient orphan disease that's pretty large, gene therapy, most studies have been very, very small. I mean, do you have anything to kind of look at and say, like, this is the sample size that you're going to need? I mean, NSVTs, you could potentially power pretty, you know, if you replicate your data. Like, you only need 20 patients, but I would imagine the FDA for a 60,000 patient population might want more safety.

R. Nolan Townsend, CEO

Yeah, look, we'll be able to give a very clear update on some of this at the time of the regulatory update. I would say the study's probably larger than our Friedrich's ataxia pivotal study. But given some of the possible effect sizes here and we're understanding the variability of the endpoint, we should be able to design a study that will be executable for a company of our size and stage against, again, a 60,000 patient disease. So it's a multibillion-dollar peak sales opportunity. So I think the ratio of likely study size to revenue potential here is likely to be very favorable against the endpoints that we're working towards. But I think that's all we can say right now. I don't know if you want to add anything to that.

Speaker 1

No, I agree with what you said. You know, what I would say, the CMC process that Nolan described earlier is also yielding very favorable cost profiles. So, you know, if we do need to execute a larger study, I think we're uniquely positioned to be able to do that in a cost-effective way.

Brian Scorny, Analyst — Baird

Yeah, which was going to get to my next question. Well, actually, one question down. But the current cash position, what runway that brings you guys to? And, you know, how do you think about kind of like monetizing the two different programs in different ways as partnership on the table? Do you guys want to launch both programs on your own?

Speaker 1

Well, I'll talk maybe to capital allocation first, but cash-wise, our last disclosure, we had $234 million in cash and equivalents. Our capital allocation strategy is very focused on prioritization of the LX2006 pivotal, so getting that through to the BLA filing. Our burn rate has been in the lower $20 million range per quarter, but as that trial gets into full steam, you know, we'll probably accelerate that into kind of the 25 to 30 million per quarter range. So runway will run into 2028 and get us through to the filing of the BLA.

R. Nolan Townsend, CEO

And just from a commercial strategy perspective, so this cardiac pipeline was designed around a single physician population, which is heart failure specialists. They treat FA cardiomyopathy, They treat arrhythmogenic cardiomyopathy. We have two programs in our preclinical pipeline, Desmoplac and cardiomyopathy, TNI3-mediated HCM, all treated by heart failure specialists. There are 4,000 to 5,000 heart failure specialists in the U.S., so clearly it's a – and they're typically concentrated around a few dozen of the major heart failure centers around the U.S., and a lot of them are the biggest heart failure transplant programs out there as well. So 5,000 patients roughly is a population that a company of our size and stage can absolutely build a commercial organization around. We do not need to have a commercial organization that addresses the broader population of cardiologists because they typically would not treat diseases of this profile. So with that context and with the concentration of substrate that we can commercialize into this relatively small physician population, we actually think that's a very attractive commercial organization set up. If you look at the ratio of revenue that we'll have relative to the number of physicians that will be prescribers of these types of treatments. So we actually think it's a very favorable picture from a commercial, let's call it commercial leverage point of view.

Brian Scorny, Analyst — Baird

Great. And maybe just to end things off, if you could just kind of recap the key catalysts for the company over the next 18 months.

R. Nolan Townsend, CEO

Yeah, sure. So this year, we'll have both a clinical data update and a regulatory update for PKB2. The clinical data for PKB2 will be at longer time points, so more mature. From a data perspective, we'll also have additional patients at the high dose that the market's not yet seen. So that's the 2026 remaining catalyst. Next year, we'll have the top-line readout for the Friedrichs Ataxia program in the second half, and we intend to have the BLA filed in early 2028. So those are the key catalysts coming for the company for the programs that are of focus for us over the coming 18 months.

Brian Scorny, Analyst — Baird

Great. Well, it looks like some exciting times, and we'll have a much different conversation this time next year. Absolutely. All right.

R. Nolan Townsend, CEO

Thanks a lot, Brian.

Brian Scorny, Analyst — Baird

Appreciate it.

Speaker 1

Thanks, Frank. Thanks a lot.