LEXICON PHARMACEUTICALS INC

Previous 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.

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, or CKD, and other cardiovascular risk factors.

Previous 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.

Current wording

We are separately pursuing regulatory approval of ZYNQUISTA™ (sotagliflozin) as a treatment for type 1 diabetes. We have a pending New Drug Application, or NDA, for ZYNQUISTA 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 conducting preclinical development of LX9851, an orally-delivered small molecule drug candidate, as a treatment for obesity and tool for weight management.

Current wording

•We are conducting preclinical development of LX9851, an orally-delivered small molecule drug candidate, as a treatment for obesity and associated cardiometabolic disorders.

Previous wording

INPEFA, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb. Our efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets. We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery.

Current wording

Sotagliflozin, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb. Our efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets. We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery.

Previous wording

Our ability to secure future revenue-generating agreements will depend upon our ability to address the needs of our potential future collaborators and licensees, and to negotiate agreements that we believe are in our long-term best interests. We may determine, as we have with INPEFA in heart failure, that our interests are better served by retaining rights to our discoveries and advancing our therapeutic programs to a later stage, which could limit our near-term revenues and increase expenses. Because of these and other factors, our operating results have fluctuated in the past and are likely to do so in the future, and we do not believe that period-to-period comparisons of our operating results are a good indication of our future performance.

Current wording

Our ability to secure future revenue-generating agreements will depend upon our ability to address the needs of our potential future collaborators and licensees, and to negotiate agreements that we believe are in our long-term best interests. We may determine, as we have with INPEFA in the United States, that our interests are better served by retaining rights to our discoveries and advancing our therapeutic programs to a later stage, which could limit our near-term revenues and increase expenses. Because of these and other factors, our operating results have fluctuated in the past and are likely to do so in the future, and we do not believe that period-to-period comparisons of our operating results are a good indication of our future performance.

Previous 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.

Current wording

Revenues were approximately $1.8 million and $0.2 million, respectively, for the three months ended September 30, 2024 and 2023 and $4.5 million and $0.5 million, respectively, for the nine months ended September 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 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.

Current wording

Cost of sales during the three and nine months ended September 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 September 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, collaboration agreements, 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 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.

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 September 30, 2024 increased 66% to $18.7 million and for the nine months ended September 30, 2024 increased 43% to $36.2 million, as compared to the corresponding periods in 2023 primarily driven by higher clinical external research expense associated with our current drug candidates.

Previous 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.

Current wording

•Personnel – Personnel costs for the three months ended September 30, 2024 increased to $4.2 million from $3.6 million, and for the nine months ended September 30, 2024 increased to $12.8 million from $11.1 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 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.

Current wording

•Stock-based compensation – Stock-based compensation expenses for the three months ended September 30, 2024 increased 9% to $1.5 million, and for the nine months ended September 30, 2024 increased 23% to $4.7 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 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.

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 September 30, 2024 and 2023 were $1.4 million and $1.3 million, respectively. For the nine months ended September 30, 2024 and 2023 these costs were $4.1 million and $3.8 million, respectively.

Previous 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.

Current wording

•Personnel – Personnel costs for the three months ended September 30, 2024 increased 18% to $19.0 million, and for the nine months ended September 30, 2024 increased 38% to $52.6 million, as compared to the corresponding periods in 2023. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs. The increase is driven by higher employee salaries and benefit costs, including $3.4 million in severance costs primarily reflecting the partial reduction in the field force in September 2024.

Previous 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.

Current wording

•Professional and consulting fees – Professional and consulting fees for the three months ended September 30, 2024 increased 57% to $15.9 million, and for the nine months ended September 30, 2024 increased 49% to $40.1 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 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.

Current wording

•Stock-based compensation – Stock-based compensation expenses for the three months ended September 30, 2024 decreased 48% to $1.3 million, and for the nine months ended September 30, 2024 decreased 1% to $7.2 million, as compared to the corresponding periods in 2023 reflecting forfeitures of unvested awards due to decreased headcount, including the partial reduction in the field force in September 2024.

Previous 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.

Current wording

•Facilities, equipment, and other – Facilities, equipment, and other costs for the three months ended September 30, 2024 and 2023 were $3.4 million and $3.5 million, and for the nine months ended September 30, 2024 and 2023 were $10.9 million and $8.9 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 $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.

Current wording

Interest and Other Expense. Interest and other expense was $4.6 million and $3.9 million, respectively, during the three months ended September 30, 2024 and 2023, and $11.7 million and $7.7 million, respectively, during the nine months ended September 30, 2024 and 2023, reflecting the additional $50 million borrowed under the Oxford Term Loans in June 2023.

Previous 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.

Current wording

Interest Income and Other, Net. Interest income and other, net increased to $3.4 million from $3.0 million during the three months ended September 30, 2024 and increased to $9.5 million from $5.3 million during the nine months ended September 30, 2024 from the corresponding periods in 2023, reflecting the increase in cash and investments due to net proceeds received from the March 2024 convertible preferred stock issuance.

Previous 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.

Current wording

Net loss and Net loss per Common Share. Net loss was $64.8 million, or $0.18 net loss per share, in the three months ended September 30, 2024 as compared to a net loss of $50.5 million, or $0.21 net loss per share, in the corresponding period in 2023. Net loss was $166.6 million, or $0.54 net loss per share, in the nine months ended September 30, 2024 as compared to a net loss of $127.4 million, or $0.60 net loss 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 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.

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 with an amortization date of May 1, 2027. Payments of $34.8 million, $52.2 million, and $20.0 million, including debt principal and final exit fee payments, will be due during the fiscal years ended December 31, 2027, December 31, 2028 and December 31, 2029, respectively, with respect to all borrowed loan tranches as of September 30, 2024.

Previous wording

In December 2023, we entered into an Open Market Sale Agreement SM with Jefferies LLC pursuant to which we may offer and sell shares of our common stock having an aggregate sales price of up to $75 million from time to time through Jefferies as sales agent. As of June 30, 2024, the full amount is still available for issuance under this agreement.

Current wording

In December 2023, we entered into an Open Market Sale Agreement SM with Jefferies LLC pursuant to which we may offer and sell shares of our common stock having an aggregate sales price of up to $75 million from time to time through Jefferies as sales agent. As of September 30, 2024, the full amount is still available for issuance under the agreement.

Previous 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.

Current wording

As of September 30, 2024 and December 31, 2023, we had $258.4 million and $170.0 million in cash, cash equivalents and short-term investments, respectively. We used cash of $157.3 million from operations in the nine months ended September 30, 2024, largely reflective of the net loss for the period of $166.6 million which included non-cash charges of $6.9 million primarily related to stock-based compensation expense. Investing activities used cash of $69.1 million in the nine months ended September 30, 2024, primarily due to net purchases of investments. Financing activities provided cash of $238.5 million, primarily from the issuance of sale of 2,304,147 shares of our Series A Convertible Preferred Stock in a private placement in March 2024 at a price of $108.50 per share. The preferred shares were converted into an aggregate of 115,207,350 common shares in May 2024.

Previous wording

Our future capital requirements will be substantial and will depend on many factors, including the success of our commercialization of INPEFA in the United States; the success of our commercial launch of sotagliflozin for patients with type 1 diabetes and CKD, if approved; the success of our ongoing research and development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; the amount and timing of our research, development and commercialization expenditures; the resources we devote to commercializing, developing and supporting our products and other factors. Our capital requirements will also be affected by any expenditures we make in connection with license agreements and acquisitions of and investments in complementary technologies and businesses.

Current wording

Our future capital requirements will be substantial and will depend on many factors, including the success of our commercialization of INPEFA in the United States; the success of our commercial launch of ZYNQUISTA for patients with type 1 diabetes and CKD, if approved; the success of our ongoing research and development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; the amount and timing of our research, development and commercialization expenditures; the resources we devote to commercializing, developing and supporting our products and other factors. Our capital requirements will also be affected by any expenditures we make in connection with license agreements and acquisitions of and investments in complementary technologies and businesses.

Previous wording

We expect to continue to devote substantial capital resources to the commercialization of INPEFA for heart failure; the commercial launch of sotagliflozin for patients with type 1 diabetes and CKD, if approved; the research and development of our drug candidates; and for other general corporate activities. We believe that our current unrestricted cash and investment balances as well as future revenues will be sufficient to fund our currently planned operations for at least the next 12 months from the date of this report. In future periods, if cash on hand or generated by operations is insufficient to satisfy our liquidity requirements, we will need to obtain additional liquidity through future strategic and other collaborations or sell additional equity or debt securities or obtain additional credit arrangements. If we are unable to obtain adequate financing when needed, we may have to delay or reduce the scope of our commercialization efforts or one or more of our clinical trials and other research and development programs. Additional financing may not be available on terms acceptable to us or at all. The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders.

Current wording

We expect to continue to devote substantial capital resources to the commercialization of INPEFA for heart failure; the commercial launch of ZYNQUISTA for patients with type 1 diabetes and CKD, if approved; the research and development of our drug candidates; and for other general corporate activities. We believe that our current unrestricted cash and investment balances as well as future revenues will be sufficient to fund our currently planned operations for at least the next 12 months from the date of this report. In future periods, if cash on hand or generated by operations is insufficient to satisfy our liquidity requirements, we will need to obtain additional liquidity through future strategic and other collaborations or sell additional equity or debt securities or obtain additional credit arrangements. If we are unable to obtain adequate financing when needed, we may have to delay or reduce the scope of our commercialization efforts or one or more of our clinical trials and other research and development programs. Additional financing may not be available on terms acceptable to us or at all. The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders.

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 $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.

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 $258.4 million in cash and cash equivalents and short-term investments as of September 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.