Yahoo Finance LENZ Therapeutics, Inc. (NASDAQ:LENZ) Q1 2024 Earnings Call Transcript
LENZ Therapeutics, Inc. (NASDAQ:LENZ) Q1 2024 Earnings Call Transcript May 11, 2024
LENZ Therapeutics, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to LENZ Therapeutics First Quarter 2024 Financial Results and Business Update. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Dan Chevallard. Please go ahead, sir.
Dan Chevallard: Thank you. Good afternoon, everyone. And thank you for joining us today to discuss LENZ’s first quarter 2024 financial results and business updates. My name is Dan Chevallard, Chief Financial Officer of LENZ Therapeutics. We are joined today by Eef Schimmelpennink, our President and Chief Executive Officer, who will provide our business update; as well as Dr. Marc Odrich, Chief Medical Officer; and Shawn Olsson, Chief Commercial Officer, both of whom will join us for Q&A. Before we begin, I would like to remind you that this call will contain forward-looking statements regarding LENZ’s future expectations, plans, prospects, corporate strategy, cash runway projections and performance, which constitute forward-looking statements.
Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our filings with the SEC. In addition, any forward-looking statements represent only our views as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. With that, I will now turn the call over to Eef.
Eef Schimmelpennink: Thank you, Dan, and thank you, everyone, for joining us today. Let me start by saying that the first quarter of 2024 and the weeks following have been transformative for LENZ. In March, we completed our merger with Graphite Bio and a concurrent $53.5 million pipe financing. And as a result, we became a public company trading on NASDAQ under the ticker LENZ. These transactions led us to be well capitalized with around $213 million of cash and cash equivalents at the end of the quarter on our balance sheet. Importantly, we anticipate this cash balance to be sufficient to fund our operations to post-launch positive operating cash flow. I want to acknowledge the hard work that went into this and thank the teams at both LENZ and Graphite, as well as advisors on both sides that got us to this strong position.
Only a few weeks after our public debut, we announced our positive CLARITY Phase 3 data and selected LNZ100, a single agent aceclidine product, as our commercial candidate to treat presbyopia. As a reminder, presbyopia is the inevitable loss of near vision that impacts the daily lives of nearly all people over the age of 45. As the crystalline lens in our eyes hardens with age, the eye is less able to accommodate and focus the incoming light for near vision on the retina, resulting in blurry near vision. Although the progression of presbyopia is gradual, presbyopes often experience an abrupt change in their daily life as the symptoms become more pronounced starting in their mid-40s, when reading glasses or other corrective aids are suddenly necessary to read text or conduct close-up work.
To address the daily challenges faced by presbyopes, we are developing a once-daily pharmacological eyedrop that has been shown to be capable of improving near vision throughout the full workday without the need for reading glasses. Before I give a brief summary of the positive CLARITY topline data, I want to highlight that throughout the development of LNZ100, our objective has always been to commercialize a product that we believe will most effectively meet the needs of the widest range of presbyopes and best create loyalty and value based on an all-eyes, all-day brand mission. That means that we’re not only aiming for high efficacy with a rapid onset and long duration, but also that the product candidate has to deliver that consistently across the majority of the presbyopic population.
This is why we made sure that the close to 1,100 participants in our CLARITY studies represented the majority of the 128 million presbyopes in the U.S. alone. We included participants age 45 to 75 with a mean age of 55. We also made sure to include people that had a wide range of refractive errors. Think of this as including people that need to wear contact lenses or glasses to correct their distance vision, but also people that have never had to wear any distance vision or correction in their life. We made sure to also include people that had previously undergone LASIK or cataract surgery. And importantly, we included participants with a wide range of presbyopia to make sure that we have a product that can appeal to mild, moderate and severe presbyopes.
By doing so, we feel confident that the results that we generated truly reflect the potential benefits that LNZ100 can bring to the vast majority of the close to 2 billion presbyopes globally. On that note, let’s talk about the key outcomes of the CLARITY Phase 3 study in which LNZ100, a single agent aceclidine product candidate continued to show strong performance and best-in-class potential. Consistent with previous trials, and for the moment focusing on the results for the CLARITY 2 trial, as this is the direct vehicle-controlled trial, LNZ100 showed a rapid onset with 71% of participants achieving three-lines or more of near vision improvement without losing one-line or more of distance vision at 30 minutes on the very first day of use of the product.
At the primary endpoint of three hours, we also observed a three-line or more responder rate of 71%. LNZ100 also maintains high levels of near vision improvement with 40% of participants achieving three-lines or more of near vision improvement at 10 hours, the last time point measured in our efficacy trials. All results were highly statistically significant with p-values at each time point of less than 0.0001. We also saw a very impressive near universal response to LNZ100. With 95% of participants achieving at least two-lines of near vision improvement. This is an important measure because it is seen as clinically meaningful and significant for most presbyopes. Notably, 69% of the participants still reported this improvement at the end of the day, 10 hours after dosing.
In both efficacy trials, CLARITY 1 and 2, the participants used their assigned treatment agent every day for 42 days. We saw similarly high response rates for LNZ100 across both trials at the various days we brought participants in for measurements. In terms of safety, LNZ100 was seen to be well tolerated with no treatment related series adverse events observed in the over 30,000 treatment days across all three CLARITY trials. Of all reported non-serious adverse events, 95% were classified as mild, believed to be transient and consistent with those observed in previous trials. Commercial potential was further confirmed by participant surveys with 90% of participants noticing an improvement in near vision and 75% of them indicating that they would continue to use LNZ100 after the study.
Together with the broad inclusion criteria we mentioned earlier, we believe this positions LNZ100 well for the estimated over $3 billion potential market opportunity. We recently received the full data sets of the three CLARITY trials and are currently analyzing them for additional insights. While that work is still ongoing, I can share that some of the early new data that is coming out is exciting and continues to show nearly universal high efficacy of LNZ100. For example, looking at pooled data across both of our efficacy trials, CLARITY 1 and 2, we see that not only did 97% of participants achieve at least a three-line improvement at some points, but an impressive 84% improved their near vision by at least four or more lines. We believe that these results indicate that the vast majority of people that, if approved, sample the product, would notice a rapid and meaningful improvement in their near vision.
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This is something that will play a key role in our future commercialization strategy and could serve as a very strong differentiator from the VOD launch. As mentioned, we are conducting analysis of the full data set for Phase 3 results beyond the already shared topline results. We’re excited to announce that we’re planning a Phase 3 Capstone KOL event on June 18, 2024, in New York City. With this event, we will share additional data, and importantly, we will have distinguished and respected KOLs and lead investigators from our study share their views on our data, expectations for the clinical practice and market, and firsthand experiences with LNZ100. We look forward to providing additional information on this event in the weeks ahead. Turning to our upcoming NDA submission, I am pleased to share that the CLARITY Phase 3 study was designed in close alignment with the FDA, and the positive topline data generated concludes the clinical development program for LNZ100.
The team is now fully focused on the execution of the filing and we are well on track to submit our NDA for LNZ100 to the FDA in mid-2024. In parallel to working towards our NDA submission, our commercial launch preparedness is also well underway. In February 2024, LENZ’s launched its unbranded Eye Am campaign to educate and excite eye care professionals about future presbyopia solutions. Over 40 key opinion leaders are involved in the campaign and are featured at EyeAmSelective.com, that is E-Y-E-M-Selected.com, where eye care professionals can learn about ideal pupil size, eye risk muscle selectivity and expected early adopters of presbyopia eye drops. Continuing on that momentum and to support the projected launch following potential FDA approval, LENZ is actively building out its U.S. commercial capabilities, highlighted by completion of third-party logistics contracting in the first quarter of 2024 and the addition of key commercial expertise in direct-to-consumer and influencer marketing, all in preparation for a potential launch of LNG100 as early as the second half of 2025.
In summary, we are very pleased with the progress the team has made on all fronts. The recent period has been and promises to continue to be, a very exciting time at LENZ. With that, I’ll hand it over to Dan, our CFO, for an update on our financial results.
Dan Chevallard: Thank you, Eef. As Eef mentioned, we are pleased with the successful close of the merger transaction and concurrent pipe, having ended Q1 with approximately $213.3 million in cash, cash equivalents and marketable securities, inclusive of the over $117 million acquired in the recent merger and the $53.5 million in proceeds from the concurrent private placement. Importantly, we announced today that this is anticipated to fund the company’s cash runway through to post-launch positive cash flow from operations. We believe this puts us in a strong position to focus on execution. Our operating results and resulting cash burn for the first quarter were substantially in line with our plan. As is common around transactions such as what we just completed, there have been, and will be into the second quarter, certain non-recurring or one-time transaction costs.
Those aside, our total operating expenses, inclusive of both research and development and sales general and administrative expenses, for Q1 2024 were approximately $16.1 million, compared to $12.6 million for the same period in 2023. Overall, this increase was substantially a result of additional operating costs incurred in our preparations for being a publicly traded company and early commercial planning. More specifically, our research and development expenses for Q1 2024 were $10.5 million, which was materially consistent with research and development expenses of $10.3 million for the same period in 2023. Substantially, all research and development expenses incurred for these comparative periods related to the clinical development and manufacturing were required to support our Phase 2 INSIGHT and Phase 3 CLARITY clinical trials.
Selling, general and administrative expenses for Q1 2024 increased to $5.6 million, compared to $2.3 million for the same period in 2023. This increase was primarily driven by costs associated with preparations to be a publicly traded company, in addition to an increase in pre-launch commercial expenses. As well, expenses in Q1 2024 included a non-recurring, non-cash, stock-based compensation charge associated with the merger. Finally, our net loss per share, both basic and diluted, was $3.53 per share in the first quarter 2024 on a net loss of $16.6 million, compared to a net loss per share of $6.50 per share in the first quarter 2023 on a net loss of $12.7 million. Please note that this loss per share figures considered only the weighted average common stock outstanding for the respective periods.
And thus, most notably for Q1 2024, do not fully weight any of; one, the convertible preferred and convertible common stock from pre-merger private lens that converted into common stock upon the merger close, totaling 11.3 million shares; two, the shares acquired from legacy Graphite shareholders as of the merger date, totaling 8.3 million shares; or three, shares of common stock issued in the 2024 concurrent private placement totaling 3.6 million shares. More simply stated, we ended Q1 2024 with approximately 25.5 million shares of common stock outstanding, most of which were not fully weighted in our Q1 2024 net loss per share previously noted. Now, as we advance from here, our allocation of capital will begin to change over the balance of the year and we would like to take a moment to highlight the following three key items on this point.
First, research and development and clinical development spend will decrease over 2024 due to the wind down of our positive Phase 3 CLARITY studies, while prioritizing the financial support necessary to enable a successful mid-2024 NDA submission. Second, we plan to allocate more emphasis and more capital toward the ramp up of our commercial infrastructure and pre-launch activities over the balance of the year. And third, eliminating for the non-recurring nature of our transaction-related costs, we will aim to maintain discipline in managing our general and administrative costs associated with being a newly publicly traded company. We look forward to executing on what is a clear path forward for the company towards NDA submission in mid-2024 and the potential approval and commercial launch of LNZ100 in the second half of 2025.
With that, I’ll turn the call back over to Eef.
Eef Schimmelpennink: Thanks, Dan. Operator, we’re now happy to take questions.
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