Lexicon: If You Fall n Times, Then Get Up for the (n+1)th Time

Not all drugs can smoothly enter the market, and if the FDA raises a “NO” flag, a company’s fate can take a heavy blow. In this regard, Lexicon Pharmaceuticals has something to say.

Founded nearly 30 years ago, Lexicon has only one commercialized product, Inpefa (sotagliflozin), which was approved last year. The company has repeatedly tried to gain approval for treating Type 1 Diabetes (T1D), but has faced repeated setbacks with the FDA.

In early November, the FDA advisory committee again showed a negative stance in its vote on the product’s use for T1D treatment.

Steve Edelman, a medical professor at the University of California, San Diego, founder and director of "Taking Control of Your Diabetes," supports the product because “patient demand is high, and only 20% of T1D patients reliably maintain adequate blood sugar control with insulin.”

It is estimated that the potential market for T1D patients could reach $400 million. Other estimates suggest sotagliflozin sales could reach $1 billion.

If the committee's stance was somewhat “ambiguous” in earlier votes (with a tie of 8-8), the recent result of 11-3 makes Lexicon’s path to the T1D finish line even more challenging.

Three Setbacks

Sotagliflozin is a dual inhibitor that targets two sodium-glucose co-transporter proteins, SGLT1 and SGLT2, responsible for glucose regulation, by inhibiting glucose reabsorption in the kidneys and intestines, helping diabetes patients better control their blood sugar.

In June this year, Lexicon submitted a new indication application for sotagliflozin as an adjunctive treatment for insulin therapy, aimed at controlling blood sugar in T1D and chronic kidney disease (CKD) patients.

In early November, the FDA advisory committee voted 11-3 against sotagliflozin's use for T1D patients with CKD, believing that its benefits did not outweigh the risks.

Lexicon’s CEO and board member Mike Exton expressed disappointment in the committee's vote, “but we have received broad attention and discussion, and support for making sotagliflozin available to the right T1D and CKD patients, which is encouraging.”

Although the FDA has yet to provide a final review result (PDUFA date is December 20, 2024), it has already twice rejected sotagliflozin's new indication application.

In March 2019, Lexicon submitted sotagliflozin's marketing application for T1D, but the FDA rejected it, citing a possible increased risk of diabetic ketoacidosis (DKA). In July of the same year, Sanofi announced the termination of its partnership with Lexicon for sotagliflozin and paid a $260 million “divorce fee.” The two companies had entered into a licensing agreement in 2015, granting Sanofi global exclusive rights to sotagliflozin outside of Japan, which included a $300 million upfront payment and up to $1.4 billion in future milestone payments.

Lexicon appealed the FDA’s decision, but in 2020, the FDA again rejected it on the grounds of safety concerns.

On a slightly brighter note, while sotagliflozin’s T1D indication was stuck at the FDA, it was launched in Europe under the brand name Zynquista.

In April 2019, sotagliflozin was approved by the EMA as an adjunctive treatment for insulin therapy in adult T1D patients with a body mass index (BMI) ≥27 kg/m2 who could not achieve adequate blood sugar control despite insulin therapy. Zynquista became the first oral dual SGLT1/SGLT2 inhibitor for diabetes.

However, sotagliflozin’s European journey was also bumpy. In 2022, Guidehouse Germany, which held the EU marketing rights for Zynquista, withdrew the marketing authorization for commercial reasons, and the drug was withdrawn from the EU market.

It is not that Lexicon is unlucky, but rather that the FDA has concerns regarding the use of SGLT1/2 inhibitors for treating T1D. To date, no SGLT1/2 inhibitor has been approved by the FDA for T1D treatment.

Similarly, Farxiga, an SGLT2 inhibitor for T1D approved by AstraZeneca, was rejected by the FDA for the relevant indication in July 2019.

In March 2020, Eli Lilly announced receiving a complete response letter from the FDA rejecting its supplemental application for the SGLT2 inhibitor Jardiance for T1D treatment. Jardiance, developed by Eli Lilly and Boehringer Ingelheim, was approved by the FDA in August 2014 for the treatment of Type 2 diabetes in adult patients.

The Underperforming "Only" Product

Founded in 1995 as Lexicon Genetics, Lexicon went public on the NASDAQ in 2000.

“Early fame” often comes with turning points.

Lexicon, after nearly 30 years, only has one commercial product, Inpefa, which was approved by the FDA in May 2023. It is used to reduce the risk of cardiovascular death, hospitalization for heart failure, or emergency treatment in adult patients with heart failure, Type 2 diabetes, chronic kidney disease, and other cardiovascular risk factors. Inpefa was approved under the name Inpefa.

The supporting Phase III clinical trials (SOLOIST-WHF and SCORED) showed that Inpefa significantly reduced the composite risk of hospitalization for heart failure, emergency visits for heart failure, and cardiovascular death by 33% compared to a placebo.

Notably, these two trials only included Type 2 diabetes patients, but the FDA’s approval for sotagliflozin was not limited to diabetes patients. This shows that the FDA fully recognizes the product’s role in heart failure, even as it firmly “disapproves” the product’s use for T1D.

In May this year, Lexicon released new clinical data showing that Inpefa reduces the risk of heart failure-related events in diverse patient populations, including those with heart failure with preserved ejection fraction (HFpEF). Researchers pointed out that Inpefa is particularly effective in reducing the risk of heart failure-related events in HFpEF patients with obesity.

Wall Street analysts forecast that Inpefa's sales will grow by over 1100% in 2024, reaching $46 million. Most analysts expect Inpefa's annual sales will eventually exceed $500 million.

However, Inpefa’s sales are clearly not meeting expectations. According to financial reports, Inpefa’s sales in Q3 2024 were $1.7 million, compared to $1.6 million in Q2 and $1.1 million in Q1.

There may still be some room for growth in the future.

Last month, Lexicon signed a $25 million agreement with generic drug giant Viatris to gain the sales rights for Inpefa outside of the United States and Europe, with Lexicon retaining some patent royalties. According to a Reuters report last year, Lexicon expects $112 million in sales by 2025 and $576 million by 2028.

However, there is a strong competitor to Inpefa—Jardiance, from Boehringer Ingelheim and Eli Lilly, which has been approved to reduce cardiovascular risk in Type 2 diabetes patients, as well as in heart failure and chronic kidney disease, the same indications Lexicon is aiming to develop.

Boehringer Ingelheim has stated that Jardiance has been a huge success, with sales reaching $8 billion in 2023. The drug is widely used and has been included in Medicare's drug price negotiation plan for the top 10 drugs, which will take effect in 2026.

More Opportunities

On its persistent pursuit of the T1D indication, Lexicon has also disclosed new data for sotagliflozin.

A press release shows that a recent study published in the Journal of the American Society of Nephrology (JASN) evaluated the efficacy and safety of sotagliflozin in combination with insulin in T1D and CKD patients.

The study concluded that T1D and CKD patients treated with sotagliflozin and insulin achieved similar reductions in HbA1c compared to T1D patients without CKD, which was the primary endpoint of the trial.

Additionally, the results indicated that sotagliflozin was associated with a lower to neutral risk of severe hypoglycemia and did not significantly increase the risk of diabetic ketoacidosis in a few DKA events.

David Cherney, co-author of the study and a kidney specialist at the University of Toronto Health Network, stated: “Previous studies showed that SGLT inhibitors, including sotagliflozin, reduced blood pressure and proteinuria in T1D patients to a similar extent as in Type 2 diabetes patients. Our current analysis adds important evidence that sotagliflozin could offer benefits for T1D and CKD patients, especially after taking appropriate steps to reduce the risk of diabetic ketoacidosis.”

Beyond T1D, Lexicon is conducting a Phase III trial of sotagliflozin for hypertrophic cardiomyopathy. The company’s candidate for diabetic peripheral neuropathy, LX9211, is expected to disclose Phase IIb topline data in the first quarter of 2025. Lexicon also has a preclinical obesity drug.

In its Q3 financial report, Lexicon also mentioned the ACSL5 inhibitor LX9851 for obesity and weight management, stating that the product is expected to submit an IND by mid-2025.

After conducting a strategic review of its business and pipeline projects, Lexicon has decided to focus its promotion efforts on heart failure indications and regulatory filings for T1D and CKD. As part of its restructuring plan, Lexicon announced earlier this year that it would cut about half of its workforce to save $40 million in costs.

According to the financial report, Lexicon reported $1.8 million in revenue for Q3 2024, an increase from $200,000 in the same period in 2023. As of September 30, 2024, Lexicon had $258.4 million in cash and investments, compared to $170 million on December 31, 2023.