LEXICON PHARMACEUTICALS INC

Previous wording

•We are commercializing INPEFA, an orally-delivered small molecule drug, in the United States to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits in adults with heart failure or type 2 diabetes mellitus, chronic kidney disease, or CKD, and other cardiovascular risk factors.

Current wording

•We are commercializing INPEFA® (sotagliflozin), an orally-delivered small molecule drug, in the United States to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits in adults with heart failure or type 2 diabetes mellitus, chronic kidney disease (CKD), and other cardiovascular risk factors.

Previous wording

We are separately pursuing regulatory approval of sotagliflozin as a treatment for type 1 diabetes. The U.S. Food and Drug Administration, or FDA, issued a complete response letter regarding our New Drug Application, or NDA, for sotagliflozin in type 1 diabetes in March 2019, which we appealed. Following FDA feedback from recent discussions, we are now preparing to resubmit our NDA for patients with type 1 diabetes and CKD. We have reported positive results from three Phase 3 clinical trials of sotagliflozin in type 1 diabetes.

Current wording

We are separately pursuing regulatory approval of sotagliflozin as a treatment for type 1 diabetes. We have a pending New Drug Application, or NDA, for sotagliflozin as an adjunct to insulin therapy for glycemic control in adults with type 1 diabetes and CKD. The NDA is currently under review by the U.S. Food and Drug Administration, or FDA, and has been assigned a Prescription Drug User Fee Act, or PDUFA, goal date of December 20, 2024. We have reported positive results from three Phase 3 clinical trials of sotagliflozin in type 1 diabetes.

Previous wording

We are also developing sotagliflozin as a treatment for hypertrophic cardiomyopathy, or HCM, and are preparing to initiate a Phase 3 clinical trial of sotagliflozin in HCM.

Current wording

We are also developing sotagliflozin as a treatment for hypertrophic cardiomyopathy, or HCM, and have initiated a Phase 3 clinical trial of sotagliflozin in HCM.

Previous wording

Since our inception, we have incurred significant losses and, as of March 31, 2024, we had an accumulated deficit of $1.8 billion. Our losses have resulted principally from costs incurred in research and development, selling, general and administrative costs associated with our operations, and non-cash stock-based compensation expenses associated with stock options and restricted stock units granted to employees and consultants. Research and development expenses consist primarily of salaries and related personnel costs, external research costs related to our nonclinical and clinical efforts, material costs, facility costs, depreciation on property and equipment, and other expenses related to our drug discovery and development programs. Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, sales and marketing, and administrative personnel, professional fees and other corporate expenses, including information technology, facilities costs and general legal activities. We expect to continue to incur significant research and development costs in connection with the continuing research and development of our drug candidates and significant selling, general and administrative expenses in connection with our commercial launch of INPEFA. As a result, we will need to generate significantly higher revenues to achieve profitability.

Current wording

Since our inception, we have incurred significant losses and, as of June 30, 2024, we had an accumulated deficit of $1.9 billion. Our losses have resulted principally from costs incurred in research and development, selling, general and administrative costs associated with our operations, and non-cash stock-based compensation expenses associated with stock options and restricted stock units granted to employees and consultants. Research and development expenses consist primarily of salaries and related personnel costs, external research costs related to our nonclinical and clinical efforts, material costs, facility costs, depreciation on property and equipment, and other expenses related to our drug discovery and development programs. Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, sales and marketing, and administrative personnel, professional fees and other corporate expenses, including information technology, facilities costs and general legal activities. We expect to continue to incur significant research and development costs in connection with the continuing research and development of our drug candidates and significant selling, general and administrative expenses in connection with our commercial launch of INPEFA. As a result, we will need to generate significantly higher revenues to achieve profitability.

Previous wording

Revenues for the three months ended March 31, 2024 were approximately $1.1 million primarily from product revenues recognized from sales of INPEFA following its regulatory approval in May 2023.

Current wording

Revenues were approximately $1.6 million and $0.3 million, respectively, for the three months ended June 30, 2024 and 2023 and $2.8 million and $0.3 million, respectively, for the six months ended June 30, 2024 and 2023 primarily from product revenues recognized from sales of INPEFA following its regulatory approval in May 2023.

Previous wording

Cost of sales during the three months ended March 31, 2024 consist of third-party manufacturing costs and freight associated with sales of INPEFA. Prior to receiving regulatory approval on May 26, 2023, we had completed or begun the manufacturing of certain INPEFA raw materials. These raw materials were either received at “zero-cost” to us in conjunction with a terminated agreement in 2019 or recorded as research and development expense. Based on our expectations for future manufacturing costs, we estimate these amounts totaled approximately $39.0 million. We began capitalizing inventory manufactured subsequent to regulatory approval of INPEFA as the related costs were expected to be recoverable through the commercialization of the product. At March 31, 2024, substantially all of the “zero-cost” INPEFA raw materials remains available to us. The “zero-cost” inventory is expected to be consumed over approximately the next three years, which will result in a lower average per unit cost of materials during that period; however, the time period over which this inventory is consumed will depend on a number of factors, including the amount of future INPEFA sales, use of this inventory in clinical development or other research activities, production lead times, and/or the ability to utilize inventory prior to its expiration date. We estimate our cost of goods sold as a percentage of net product revenue will be less than 10% subsequent to the utilization of all of the remaining “zero-cost” inventory.

Current wording

Cost of sales during the three and six months ended June 30, 2024 consist of third-party manufacturing costs and freight associated with sales of INPEFA. Prior to receiving regulatory approval on May 26, 2023, we had completed or begun the manufacturing of certain INPEFA raw materials. These raw materials were either received at “zero-cost” to us in conjunction with a terminated agreement in 2019 or recorded as research and development expense. Based on our expectations for future manufacturing costs, we estimate these amounts totaled approximately $39.0 million. We began capitalizing inventory manufactured subsequent to regulatory approval of INPEFA as the related costs were expected to be recoverable through the commercialization of the product. At June 30, 2024, substantially all of the “zero-cost” INPEFA raw materials remains available to us. The “zero-cost” inventory is expected to be consumed over approximately the next three years, which will result in a lower average per unit cost of materials during that period; however, the time period over which this inventory is consumed will depend on a number of factors, including the amount of future INPEFA sales, use of this inventory in clinical development or other research activities, production lead times, and/or the ability to utilize inventory prior to its expiration date. We estimate our cost of goods sold as a percentage of net product revenue will be less than 10% subsequent to the utilization of all of the remaining “zero-cost” inventory.

Previous wording

•Third-party services – Third-party services relate principally to our clinical trial and related development activities, such as preclinical and clinical studies and contract manufacturing. Overall, third-party services for the three months ended March 31, 2024 increased 32% to $7.2 million as compared to the corresponding period in 2023 primarily related to increased external research and development costs.

Current wording

•Third-party services – Third-party services relate principally to our clinical trial and related development activities, such as preclinical and clinical studies and contract manufacturing. Overall, third-party services for the three months ended June 30, 2024 increased 20% to $10.2 million and for the six months ended June 30, 2024 increased 24% to $17.4 million, as compared to the corresponding periods in 2023 primarily related to increased external research and development costs.

Previous wording

•Personnel – Personnel costs for the three months ended March 31, 2024 increased to $4.2 million from $4.0 million as compared to the corresponding period in 2023. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.

Current wording

•Personnel – Personnel costs for the three months ended June 30, 2024 increased to $4.3 million from $3.6 million, and for the six months ended June 30, 2024 increased to $8.6 million from $7.5 million as compared to the corresponding periods in 2023. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.

Previous wording

•Stock-based compensation – Stock-based compensation expenses for the three months ended March 31, 2024 increased 32% to $1.6 million, as compared to the corresponding period in 2023, due to increased headcount.

Current wording

•Stock-based compensation – Stock-based compensation expenses for the three months ended June 30, 2024 increased 29% to $1.7 million, and for the six months ended June 30, 2024 increased 31% to $3.3 million, as compared to the corresponding periods in 2023, due to increased headcount.

Previous wording

•Facilities, equipment, and other –Facilities, equipment, and other costs relate primarily to rent, insurance, travel and training, and software licensing costs. Facilities, equipment, and other costs for the three months ended March 31, 2024 and 2023 were $1.3 million and $1.4 million, respectively.

Current wording

•Facilities, equipment, and other –Facilities, equipment, and other costs relate primarily to rent, insurance, travel and training, and software licensing costs. Facilities, equipment, and other costs for the three months ended June 30, 2024 and 2023 were $1.4 million and $1.1 million, respectively. For the six months ended June 30, 2024 and 2023 these costs were $2.7 million and $2.5 million, respectively.

Previous wording

•Personnel – Personnel costs for the three months ended March 31, 2024 increased 113% to $16.4 million, as compared to the corresponding period in 2023, primarily due to higher employee salaries and benefit costs as a result of increased headcount during 2024 in conjunction with the commercialization of INPEFA. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.

Current wording

•Personnel – Personnel costs for the three months ended June 30, 2024 increased 20% to $17.2 million, and for the six months ended June 30, 2024 increased 52% to $33.6 million, as compared to the corresponding periods in 2023, primarily due to higher employee salaries and benefit costs as a result of increased headcount in conjunction with the commercialization of INPEFA. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.

Previous wording

•Professional and consulting fees – Professional and consulting fees for the three months ended March 31, 2024 increased 37% to $9.6 million, as compared to the corresponding period in 2023, primarily due to higher marketing and professional fees in conjunction with the commercialization of INPEFA.

Current wording

•Professional and consulting fees – Professional and consulting fees for the three months ended June 30, 2024 increased 48% to $14.6 million, and for the six months ended June 30, 2024 increased 44% to $24.3 million, as compared to the corresponding periods in 2023, primarily due to higher marketing and professional fees in conjunction with the commercialization of INPEFA.

Previous wording

•Stock-based compensation – Stock-based compensation expenses for the three months ended March 31, 2024 increased 22% to $2.7 million, as compared to the corresponding period in 2023 due to increased headcount.

Current wording

•Stock-based compensation – Stock-based compensation expenses for the three months ended June 30, 2024 increased 27% to $3.2 million, and for the six months ended June 30, 2024 increased 25% to $5.9 million, as compared to the corresponding periods in 2023 due to increased headcount.

Previous wording

•Facilities, equipment, and other – Facilities, equipment, and other costs for the three months ended March 31, 2024 and 2023 were $3.3 million and $2.2 million, respectively. The increase of $1.1 million in these costs in 2024 was primarily due to travel in conjunction with the commercialization of INPEFA.

Current wording

•Facilities, equipment, and other – Facilities, equipment, and other costs for the three months ended June 30, 2024 and 2023 were $4.2 million and $3.3 million, and for the six months ended June 30, 2024 and 2023 were $7.5 million and $5.5 million, respectively. The increase was primarily due to travel in conjunction with the commercialization of INPEFA.

Previous wording

Interest and Other Expense. Interest and other expense was $4.9 million and $1.8 million, respectively, during the three months ended March 31, 2024 and 2023, primarily due to the borrowing of additional $50 million in Oxford debt in June 2023.

Current wording

Interest and Other Expense. Interest and other expense was $2.2 million and $2.0 million, respectively, during the three months ended June 30, 2024 and 2023, and $7.2 million and $3.8 million, respectively, during the six months ended June 30, 2024 and 2023 reflecting the additional $50 million of Oxford debt borrowed in June 2023.

Previous wording

Interest Income and Other, Net. Interest income and other, net increased to $1.9 million from $1.0 million during the three months ended March 31, 2024 from the corresponding period in 2023.

Current wording

Interest Income and Other, Net. Interest income and other, net increased to $4.1 million from $1.3 million during the three months ended June 30, 2024 and increased to $6.0 million from $2.3 million during the six months ended June 30, 2024 from the corresponding periods in 2023 reflecting the increase in cash and investments due to net proceeds received from the March 2024 preferred stock issuance.

Previous wording

Net loss and Net loss per Common Share. Net loss was $48.4 million, or $0.20 per share, in the three months ended March 31, 2024 as compared to a net loss of $31.9 million, or $0.17 per share, in the corresponding period in 2023.

Current wording

Net loss and Net loss per Common Share. Net loss was $53.4 million, or $0.17 per share, in the three months ended June 30, 2024 as compared to a net loss of $44.9 million, or $0.22 per share, in the corresponding period in 2023. Net loss was $101.8 million, or $0.37 per share, in the six months ended June 30, 2024 as compared to a net loss of $76.8 million, or $0.39 per share, in the corresponding period in 2023.

Previous wording

In March 2022, we entered into a loan and security agreement with Oxford that provides up to $150 million in borrowing capacity, available in five tranches, under which $100 million has been funded under the first three tranches. The fourth $25 million tranche is available for draw at our option upon the achievement of specified INPEFA net sales and until April 25, 2025. The fifth $25 million tranche is available for draw at our option, subject to Oxford’s consent, at any time prior to the expiration of the 36-month interest-only payment period. The loan and security agreement includes a financial covenant relating to INPEFA net sales and a separate financial covenant which requires us to maintain a minimum cash and investments balance of $10 million until the achievement of specified INPEFA net sales. Upon funding of the fourth tranche, the minimum cash and investments balance will increase to $25 million.

Current wording

In March 2022, we entered into a loan and security agreement with Oxford that provides up to $150 million in borrowing capacity, available in five tranches, under which $100 million has been funded under the first three tranches. The fourth $25 million tranche is available for draw at our option upon the achievement of specified INPEFA net sales and until April 25, 2025. The fifth $25 million tranche is available for draw at our option, subject to Oxford’s consent, at any time prior to the expiration of the 60-month interest-only payment period. On June 28, 2024, we entered into a sixth amendment to our Loan Agreement extending the interest-only period with an amortization date of May 1, 2027, extending the maturity date to March 1, 2029, and modifying the exit fee provision and existing financial covenants.

Previous wording

On March 11, 2024, we entered into an agreement with certain accredited investors pursuant to which we agreed to sell 2,304,147 shares of our Series A Convertible Preferred Stock, at a price of $108.50 per share. We received net proceeds of approximately $242 million, after deducting placement agent fees and offering expenses from the private placement offering. Each share of preferred stock will automatically convert into 50 shares of our common stock upon the filing and acceptance of an amendment to our certificate of incorporation by the Secretary of State of Delaware increasing the number of authorized shares of our common stock to 450,000,000 shares. For additional information on the private placement offering, please refer to Note 8 of the Notes to the Condensed Consolidated Financial Statements.

Current wording

On March 11, 2024, we entered into an agreement with certain accredited investors pursuant to which we agreed to sell 2,304,147 shares of our Series A Convertible Preferred Stock, at a price of $108.50 per share. We received net proceeds of $241.4 million, after deducting placement agent fees and offering expenses from the private placement offering. On May 10, 2024, each share of preferred stock was converted into 50 shares of our common stock, or an aggregate of 115,207,350 shares. For additional information on the private placement offering, please refer to Note 8 of the Notes to the Condensed Consolidated Financial Statements.

Previous wording

As of March 31, 2024 and December 31, 2023, we had $355.6 million and $170.0 million in cash, cash equivalents and short-term investments, respectively. We used cash of $55.1 million from operations in the three months ended March 31, 2024, largely reflective of the net loss for the period of $48.4 million which included non-cash charges of $4.7 million primarily related to stock-based compensation expense. Investing activities used cash of $110.2 million in the three months ended March 31, 2024, primarily due to net purchases of investments. Financing activities provided cash of $239.4 million, primarily from the issuance of sale of 2,304,147 shares of our Series A Convertible Preferred Stock in a private placement at a price of $108.50 per share.

Current wording

As of June 30, 2024 and December 31, 2023, we had $310.0 million and $170.0 million in cash, cash equivalents and short-term investments, respectively. We used cash of $103.7 million from operations in the six months ended June 30, 2024, largely reflective of the net loss for the period of $101.8 million which included non-cash charges of $5.4 million primarily related to stock-based compensation expense. Investing activities used cash of $122.5 million in the six months ended June 30, 2024, primarily due to net purchases of investments. Financing activities provided cash of $239.4 million, primarily from the issuance of sale of 2,304,147 shares of our Series A Convertible Preferred Stock in a private placement at a price of $108.50 per share.

Previous wording

We are exposed to limited market and credit risk on our cash equivalents which have maturities of three months or less at the time of purchase. We had approximately $355.6 million in cash and cash equivalents and short-term investments as of March 31, 2024. We maintain a short-term investment portfolio which consists of U.S. Treasury bills and corporate debt securities that mature three to 12 months from the time of purchase, which we believe are subject to limited market and credit risk. We currently do not hedge interest rate exposure or hold any derivative financial instruments in our investment portfolio.

Current wording

We are exposed to limited market and credit risk on our cash equivalents which have maturities of three months or less at the time of purchase. We had approximately $310.0 million in cash and cash equivalents and short-term investments as of June 30, 2024. We maintain a short-term investment portfolio which consists of U.S. Treasury bills and corporate debt securities that mature three to 12 months from the time of purchase, which we believe are subject to limited market and credit risk. We currently do not hedge interest rate exposure or hold any derivative financial instruments in our investment portfolio.