þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
q
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
76-0474169
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification Number)
|
Yes
|
þ
|
|
No
|
|
Yes
|
þ
|
|
No
|
|
Yes
|
|
|
No
|
þ
|
|
|
Page
|
Item 1.
|
||
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
|
|
|
|
|
|
As of September 30,
|
|
As of December 31,
|
||||
|
|
2017
|
|
2016
|
||||
Assets
|
|
(unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
83,293
|
|
|
$
|
46,600
|
|
Short-term investments
|
|
113,524
|
|
|
299,904
|
|
||
Accounts receivable, net of allowances of $4
|
|
10,597
|
|
|
7,492
|
|
||
Inventory
|
|
2,149
|
|
|
—
|
|
||
Prepaid expenses and other current assets
|
|
4,458
|
|
|
3,878
|
|
||
Total current assets
|
|
214,021
|
|
|
357,874
|
|
||
Property and equipment, net of accumulated depreciation and amortization of $58,794 and $59,875, respectively
|
|
18,167
|
|
|
19,390
|
|
||
Goodwill
|
|
44,543
|
|
|
44,543
|
|
||
Other intangible assets, net of accumulated amortization of $1,030 and $0, respectively
|
|
52,327
|
|
|
53,357
|
|
||
Other assets
|
|
429
|
|
|
461
|
|
||
Total assets
|
|
$
|
329,487
|
|
|
$
|
475,625
|
|
Liabilities and Equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
52,628
|
|
|
$
|
52,877
|
|
Accrued liabilities
|
|
12,729
|
|
|
32,114
|
|
||
Current portion of deferred revenue
|
|
48,738
|
|
|
63,372
|
|
||
Current portion of long-term debt, net of deferred issuance costs
|
|
14,633
|
|
|
16,280
|
|
||
Total current liabilities
|
|
128,728
|
|
|
164,643
|
|
||
Deferred revenue, net of current portion
|
|
26,545
|
|
|
48,934
|
|
||
Long-term debt, net of deferred issuance costs
|
|
85,512
|
|
|
85,167
|
|
||
Deferred tax liabilities
|
|
10,023
|
|
|
18,675
|
|
||
Other long-term liabilities
|
|
303
|
|
|
805
|
|
||
Total liabilities
|
|
251,111
|
|
|
318,224
|
|
||
Commitments and contingencies
|
|
|
|
|
||||
Equity:
|
|
|
|
|
||||
Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued and outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, $.001 par value; 225,000 shares authorized; 105,710 and 104,582 shares issued, respectively
|
|
106
|
|
|
105
|
|
||
Additional paid-in capital
|
|
1,433,263
|
|
|
1,411,222
|
|
||
Accumulated deficit
|
|
(1,353,026
|
)
|
|
(1,250,363
|
)
|
||
Accumulated other comprehensive loss
|
|
(63
|
)
|
|
(195
|
)
|
||
Treasury stock, at cost, 122 and 306 shares, respectively
|
|
(1,904
|
)
|
|
(3,368
|
)
|
||
Total equity
|
|
78,376
|
|
|
157,401
|
|
||
Total liabilities and equity
|
|
$
|
329,487
|
|
|
$
|
475,625
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Net product revenue
|
|
$
|
5,830
|
|
|
$
|
—
|
|
|
$
|
10,443
|
|
|
$
|
—
|
|
Collaborative agreements
|
|
21,112
|
|
|
27,686
|
|
|
46,781
|
|
|
60,181
|
|
||||
Subscription and license fees
|
|
—
|
|
|
31
|
|
|
64
|
|
|
119
|
|
||||
Total revenues
|
|
26,942
|
|
|
27,717
|
|
|
57,288
|
|
|
60,300
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of sales (including finite-lived intangible asset amortization)
|
|
599
|
|
|
—
|
|
|
1,361
|
|
|
—
|
|
||||
Research and development, including stock-based compensation of $1,345, $1,051, $3,698 and $3,013, respectively
|
|
39,137
|
|
|
52,533
|
|
|
109,653
|
|
|
137,751
|
|
||||
Increase (decrease) in fair value of Symphony Icon, Inc. purchase liability
|
|
—
|
|
|
(2,146
|
)
|
|
2,101
|
|
|
(703
|
)
|
||||
Selling, general and administrative, including stock-based compensation of $1,235, $879, $3,516 and $2,709, respectively
|
|
16,724
|
|
|
12,263
|
|
|
50,069
|
|
|
29,077
|
|
||||
Total operating expenses
|
|
56,460
|
|
|
62,650
|
|
|
163,184
|
|
|
166,125
|
|
||||
Loss from operations
|
|
(29,518
|
)
|
|
(34,933
|
)
|
|
(105,896
|
)
|
|
(105,825
|
)
|
||||
Interest expense
|
|
(1,619
|
)
|
|
(1,646
|
)
|
|
(4,821
|
)
|
|
(4,933
|
)
|
||||
Interest and other income, net
|
|
415
|
|
|
564
|
|
|
1,393
|
|
|
1,748
|
|
||||
Net loss before taxes
|
|
(30,722
|
)
|
|
(36,015
|
)
|
|
(109,324
|
)
|
|
(109,010
|
)
|
||||
Income tax benefit
|
|
—
|
|
|
—
|
|
|
8,652
|
|
|
—
|
|
||||
Net loss
|
|
$
|
(30,722
|
)
|
|
$
|
(36,015
|
)
|
|
$
|
(100,672
|
)
|
|
$
|
(109,010
|
)
|
Net loss per common share, basic and diluted
|
|
$
|
(0.29
|
)
|
|
$
|
(0.35
|
)
|
|
$
|
(0.96
|
)
|
|
$
|
(1.05
|
)
|
Shares used in computing net loss per common share, basic and diluted
|
|
105,582
|
|
|
103,885
|
|
|
105,119
|
|
|
103,799
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on investments
|
|
151
|
|
|
(258
|
)
|
|
132
|
|
|
297
|
|
||||
Comprehensive loss
|
|
$
|
(30,571
|
)
|
|
$
|
(36,273
|
)
|
|
$
|
(100,540
|
)
|
|
$
|
(108,713
|
)
|
|
|
Common Stock
|
|
Additional
|
|
|
|
Accumulated Other
|
|
|
|
|
|||||||||||||||
|
|
Shares
|
|
Par Value
|
|
Paid-In Capital
|
|
Accumulated Deficit
|
|
Comprehensive Gain (Loss)
|
|
Treasury Stock
|
|
Total
|
|||||||||||||
Balance at December 31, 2015
|
|
103,860
|
|
|
$
|
104
|
|
|
$
|
1,397,646
|
|
|
$
|
(1,108,934
|
)
|
|
$
|
(219
|
)
|
|
$
|
(2,747
|
)
|
|
$
|
285,850
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5,722
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,722
|
|
||||||
Issuance of common stock under Equity Incentive Plans
|
|
463
|
|
|
—
|
|
|
2,943
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,943
|
|
||||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(621
|
)
|
|
(621
|
)
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109,010
|
)
|
|
—
|
|
|
—
|
|
|
(109,010
|
)
|
||||||
Unrealized gain on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
297
|
|
|
—
|
|
|
297
|
|
||||||
Balance at September 30, 2016
|
|
104,323
|
|
|
$
|
104
|
|
|
$
|
1,406,311
|
|
|
$
|
(1,217,944
|
)
|
|
$
|
78
|
|
|
$
|
(3,368
|
)
|
|
$
|
185,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2016
|
|
104,582
|
|
|
$
|
105
|
|
|
$
|
1,411,222
|
|
|
$
|
(1,250,363
|
)
|
|
$
|
(195
|
)
|
|
$
|
(3,368
|
)
|
|
$
|
157,401
|
|
Cumulative effect of change in accounting principle
|
|
—
|
|
|
—
|
|
|
1,991
|
|
|
(1,991
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of common stock to designees of Symphony Icon Holdings LLC
|
|
660
|
|
|
—
|
|
|
10,499
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,499
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
7,214
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,214
|
|
||||||
Issuance of common stock under Equity Incentive Plans
|
|
468
|
|
|
1
|
|
|
5,480
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,481
|
|
||||||
Issuance of treasury stock
|
|
—
|
|
|
—
|
|
|
(3,143
|
)
|
|
—
|
|
|
—
|
|
|
3,143
|
|
|
—
|
|
||||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,679
|
)
|
|
(1,679
|
)
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100,672
|
)
|
|
—
|
|
|
—
|
|
|
(100,672
|
)
|
||||||
Unrealized gain on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
132
|
|
|
—
|
|
|
132
|
|
||||||
Balance at September 30, 2017
|
|
105,710
|
|
|
$
|
106
|
|
|
$
|
1,433,263
|
|
|
$
|
(1,353,026
|
)
|
|
$
|
(63
|
)
|
|
$
|
(1,904
|
)
|
|
$
|
78,376
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net loss
|
|
$
|
(100,672
|
)
|
|
$
|
(109,010
|
)
|
Adjustments to reconcile consolidated net loss to net cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
2,475
|
|
|
1,548
|
|
||
Increase (decrease) in fair value of Symphony Icon, Inc. purchase liability
|
|
2,101
|
|
|
(703
|
)
|
||
Stock-based compensation
|
|
7,214
|
|
|
5,722
|
|
||
Amortization of debt issuance costs
|
|
412
|
|
|
389
|
|
||
Deferred tax benefit
|
|
(8,652
|
)
|
|
—
|
|
||
Loss on disposal of property and equipment
|
|
2
|
|
|
12
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
(Increase) decrease in accounts receivable
|
|
(3,105
|
)
|
|
173
|
|
||
(Increase) in inventory
|
|
(2,149
|
)
|
|
—
|
|
||
(Increase) decrease in prepaid expenses and other current assets
|
|
(580
|
)
|
|
7,694
|
|
||
(Increase) decrease in other assets
|
|
32
|
|
|
(25
|
)
|
||
Increase (decrease) in accounts payable and other liabilities
|
|
(11,738
|
)
|
|
18,705
|
|
||
Decrease in deferred revenue
|
|
(37,023
|
)
|
|
(51,342
|
)
|
||
Net cash used in operating activities
|
|
(151,683
|
)
|
|
(126,837
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Purchases of property and equipment
|
|
(224
|
)
|
|
(83
|
)
|
||
Purchases of investments
|
|
(59,237
|
)
|
|
(336,649
|
)
|
||
Maturities of investments
|
|
245,749
|
|
|
298,525
|
|
||
Net cash provided by (used in) investing activities
|
|
186,288
|
|
|
(38,207
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Proceeds from issuance of common stock
|
|
5,481
|
|
|
2,943
|
|
||
Repurchase of common stock
|
|
(1,679
|
)
|
|
(621
|
)
|
||
Repayment of debt borrowings
|
|
(1,714
|
)
|
|
(1,495
|
)
|
||
Net cash provided by financing activities
|
|
2,088
|
|
|
827
|
|
||
Net increase (decrease) in cash and cash equivalents
|
|
36,693
|
|
|
(164,217
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
46,600
|
|
|
202,989
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
83,293
|
|
|
$
|
38,772
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
3,272
|
|
|
$
|
3,406
|
|
|
|
|
|
|
||||
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
||||
Common stock issued in satisfaction of Symphony Icon payment obligation
|
|
$
|
10,499
|
|
|
$
|
—
|
|
Unrealized gain on investments
|
|
$
|
132
|
|
|
$
|
297
|
|
Raw materials
|
|
$
|
734
|
|
Work-in-process
|
|
41
|
|
|
Finished goods
|
|
1,374
|
|
|
Total inventory
|
|
$
|
2,149
|
|
•
|
The delivered item or items have value to the customer on a stand-alone basis; and
|
•
|
If there is a general right of return relative to the delivered items, delivery or performance of the undelivered items is considered probable and within the Company’s control.
|
•
|
The consideration payable to the Company is commensurate with the Company’s performance necessary to achieve the milestone or the increase in value to the collaboration resulting from the Company’s performance;
|
•
|
Relates solely to the Company’s past performance; and
|
•
|
Is reasonable relative to all of the other deliverables and payments within the arrangement.
|
|
|
Expected Volatility
|
|
Risk-free Interest Rate
|
|
Expected Term
|
|
Dividend
Rate
|
|||
September 30, 2017:
|
|
|
|
|
|
|
|
|
|||
Employees
|
|
61
|
%
|
|
1.7
|
%
|
|
4
|
|
—
|
%
|
Officers and non-employee directors
|
|
70
|
%
|
|
2.2
|
%
|
|
8
|
|
—
|
%
|
September 30, 2016:
|
|
|
|
|
|
|
|
|
|||
Employees
|
|
63
|
%
|
|
1.1
|
%
|
|
4
|
|
—
|
%
|
Officers and non-employee directors
|
|
83
|
%
|
|
1.6
|
%
|
|
8
|
|
—
|
%
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|||
|
|
(in thousands)
|
|
|
|||
Outstanding at December 31, 2016
|
|
4,834
|
|
|
$
|
11.24
|
|
Granted
|
|
847
|
|
|
14.51
|
|
|
Exercised
|
|
(458
|
)
|
|
11.98
|
|
|
Expired
|
|
(149
|
)
|
|
26.59
|
|
|
Forfeited
|
|
(82
|
)
|
|
13.55
|
|
|
Outstanding at September 30, 2017
|
|
4,992
|
|
|
11.23
|
|
|
Exercisable at September 30, 2017
|
|
2,896
|
|
|
$
|
11.06
|
|
|
|
Shares
|
|
Weighted Average Grant Date
Fair Value
|
|||
|
|
(in thousands)
|
|
|
|||
Outstanding at December 31, 2016
|
|
875
|
|
|
$
|
8.13
|
|
Granted
|
|
418
|
|
|
14.44
|
|
|
Vested
|
|
(286
|
)
|
|
8.78
|
|
|
Forfeited
|
|
(38
|
)
|
|
10.98
|
|
|
Outstanding at September 30, 2017
|
|
969
|
|
|
$
|
10.55
|
|
2.
|
Recent Accounting Pronouncements
|
3.
|
Cash and Cash Equivalents and Investments
|
|
|
As of September 30, 2017
|
||||||||||||||
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Cash and cash equivalents
|
|
$
|
83,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
83,293
|
|
Securities maturing within one year:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
90,533
|
|
|
—
|
|
|
(57
|
)
|
|
90,476
|
|
||||
Corporate debt securities
|
|
23,054
|
|
|
—
|
|
|
(6
|
)
|
|
23,048
|
|
||||
Total short-term investments
|
|
$
|
113,587
|
|
|
$
|
—
|
|
|
$
|
(63
|
)
|
|
$
|
113,524
|
|
Total cash and cash equivalents and investments
|
|
$
|
196,880
|
|
|
$
|
—
|
|
|
$
|
(63
|
)
|
|
$
|
196,817
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
As of December 31, 2016
|
||||||||||||||
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
|
|
|
|
(in thousands)
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
46,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,600
|
|
Securities maturing within one year:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
227,911
|
|
|
1
|
|
|
(107
|
)
|
|
227,805
|
|
||||
Corporate debt securities
|
|
72,188
|
|
|
1
|
|
|
(90
|
)
|
|
72,099
|
|
||||
Total short-term investments
|
|
$
|
300,099
|
|
|
$
|
2
|
|
|
$
|
(197
|
)
|
|
$
|
299,904
|
|
Total cash and cash equivalents and investments
|
|
$
|
346,699
|
|
|
$
|
2
|
|
|
$
|
(197
|
)
|
|
$
|
346,504
|
|
4.
|
Fair Value Measurements
|
•
|
Level 1 - quoted prices in active markets for identical investments, which include U.S. treasury securities
|
•
|
Level 2 - other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.), which includes corporate debt securities
|
•
|
Level 3 - significant unobservable inputs (including the Company’s own assumptions in determining the fair value of the Symphony Icon purchase consideration liability)
|
|
|
Assets and Liabilities at Fair Value as of September 30, 2017
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
$
|
83,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
83,293
|
|
Short-term investments
|
|
90,476
|
|
|
23,048
|
|
|
—
|
|
|
113,524
|
|
||||
Total cash and cash equivalents and investments
|
|
$
|
173,769
|
|
|
$
|
23,048
|
|
|
$
|
—
|
|
|
$
|
196,817
|
|
|
|
Assets and Liabilities at Fair Value as of December 31, 2016
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
$
|
45,093
|
|
|
$
|
1,507
|
|
|
$
|
—
|
|
|
$
|
46,600
|
|
Short-term investments
|
|
227,805
|
|
|
72,099
|
|
|
—
|
|
|
299,904
|
|
||||
Total cash and cash equivalents and investments
|
|
$
|
272,898
|
|
|
$
|
73,606
|
|
|
$
|
—
|
|
|
$
|
346,504
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Accrued liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,912
|
|
|
$
|
18,912
|
|
Total liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,912
|
|
|
$
|
18,912
|
|
Balance at December 31, 2016
|
|
$
|
18,912
|
|
Change in valuation of purchase consideration payable to former Symphony Icon stockholders
|
|
2,101
|
|
|
Payment of contingent payment obligation with common stock and cash
|
|
(21,013
|
)
|
|
Balance at September 30, 2017
|
|
$
|
—
|
|
|
|
|
||
Balance at December 31, 2015
|
|
$
|
22,815
|
|
Change in valuation of purchase consideration payable to former Symphony Icon stockholders
|
|
(703
|
)
|
|
Payment of contingent payment obligation with cash
|
|
(3,200
|
)
|
|
Balance at September 30, 2016
|
|
$
|
18,912
|
|
5.
|
Debt Obligations
|
6.
|
Arrangements with Symphony Icon, Inc.
|
8.
|
Collaboration and License Agreements
|
•
|
The exclusive license granted to Ipsen to develop and commercialize telotristat ethyl in the Licensed Territory;
|
•
|
The obligation to participate in committees which govern the development of telotristat ethyl until commercialization; and
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
We have obtained approval from the FDA to sell our first commercial product, XERMELO
®
(telotristat ethyl), an orally-delivered small molecule drug for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog, or SSA, therapy in adults inadequately controlled by SSA therapy. We have commenced sales and marketing of XERMELO, and it is now commercially available to patients in the United States. We have granted Ipsen Pharma SAS an exclusive, royalty-bearing right to commercialize XERMELO outside of the United States and Japan, and Ipsen has obtained approval from the European Commission to market XERMELO in the member states of the European Union, Norway and Iceland.
|
•
|
We are developing sotagliflozin, an orally-delivered small molecule drug candidate, as a treatment for type 1 and type 2 diabetes. We have reported positive top-line data from two pivotal Phase 3 clinical trials and a third Phase 3 clinical trial of sotagliflozin in type 1 diabetes patients. We have granted Sanofi an exclusive, worldwide (excluding Japan), royalty-bearing right to develop, manufacture and commercialize sotagliflozin, and Sanofi is presently conducting Phase 3 development of sotagliflozin in type 2 diabetes.
|
•
|
We are developing LX2761, an orally-delivered small molecule drug candidate, as a treatment for diabetes. We are presently conducting Phase 1 clinical development of LX2761. We have granted Sanofi certain rights of first negotiation with respect to the future development and commercialization of LX2761.
|
•
|
We are developing LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain. We are presently conducting Phase 1 clinical development of LX9211.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total revenues
|
|
$
|
26.9
|
|
|
$
|
27.7
|
|
|
$
|
57.3
|
|
|
$
|
60.3
|
|
Dollar decrease
|
|
$
|
(0.8
|
)
|
|
|
|
$
|
(3.0
|
)
|
|
|
||||
Percentage decrease
|
|
(3
|
)%
|
|
|
|
(5
|
)%
|
|
|
•
|
Net product revenue
– Net product revenue for the
three
and
nine
months ended
September 30, 2017
was
$5.8 million
and
$10.4 million
, respectively, due to revenues recognized from the sale of XERMELO in the United States and sales of bulk tablets of telotristat ethyl to Ipsen. Product revenues are recorded net of estimated product returns, pricing discounts including rebates offered pursuant to mandatory federal and state government programs and chargebacks,
|
•
|
Collaborative agreements
– Revenue from collaborative agreements for the
three
months ended
September 30, 2017
decreased
24%
to
$21.1 million
, and for the
nine
months ended
September 30, 2017
decreased
22%
to
$46.8 million
, primarily due to revenues recognized as a result of the timing of clinical trial activities under the collaboration and license agreement with Sanofi.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total research and development expense
|
|
$
|
39.1
|
|
|
$
|
52.5
|
|
|
$
|
109.7
|
|
|
$
|
137.8
|
|
Dollar decrease
|
|
$
|
(13.4
|
)
|
|
|
|
$
|
(28.1
|
)
|
|
|
||||
Percentage decrease
|
|
(26
|
)%
|
|
|
|
(20
|
)%
|
|
|
•
|
Third-party and other services –
Third-party and other services for the
three
months ended
September 30, 2017
decreased
31%
to
$30.5 million
, and for the
nine
months ended
September 30, 2017
decreased
28%
to
$81.9 million
as compared to the corresponding periods in
2016
, primarily due to decreases in external clinical development costs relating to sotagliflozin. Third-party and other services relate principally to our clinical trial and related development activities, such as nonclinical and clinical studies and contract manufacturing.
|
•
|
Personnel –
Personnel costs for the
three
months ended
September 30, 2017
increased
10%
to
$5.1 million
, and for the
nine
months ended
September 30, 2017
increased
24%
to
$17.2 million
, as compared to the corresponding periods in
2016
, primarily due to increases in personnel. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.
|
•
|
Stock-based compensation
– Stock-based compensation expense for the
three
months ended
September 30, 2017
increased
28%
to
$1.3 million
, and for the
nine
months ended
September 30, 2017
increased
23%
to
$3.7 million
, as compared to the corresponding periods in
2016
.
|
•
|
Facilities and equipment –
Facilities and equipment costs for the
three
months ended
September 30, 2017
decreased
11%
to
$0.8 million
, and for the
nine
months ended
September 30, 2017
decreased
8%
to
$2.3 million
, as compared to the corresponding periods in
2016
.
|
•
|
Other –
Other costs for the
three
months ended
September 30, 2017
decreased
4%
to
$1.4 million
, and for the
nine
months ended
September 30, 2017
increased
20%
to
$4.5 million
, as compared to the corresponding periods in
2016
.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total selling, general and administrative expense
|
|
$
|
16.7
|
|
|
$
|
12.3
|
|
|
$
|
50.1
|
|
|
$
|
29.1
|
|
Dollar increase
|
|
$
|
4.5
|
|
|
|
|
$
|
21.0
|
|
|
|
||||
Percentage increase
|
|
36
|
%
|
|
|
|
72
|
%
|
|
|
•
|
Personnel
– Personnel costs for the
three
months ended
September 30, 2017
increased
90%
to
$7.1 million
, and for the
nine
months ended
September 30, 2017
increased
134%
to
$22.9 million
, as compared to the corresponding periods in
2016
, primarily due to increases in personnel, including increases in sales and marketing personnel, in connection with commercialization of XERMELO. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.
|
•
|
Professional and consulting fees
– Professional and consulting fees for the
three
months ended
September 30, 2017
decreased
9%
to
$5.8 million
, and for the
nine
months ended
September 30, 2017
increased
17%
to
$15.7 million
, as compared to the corresponding periods in
2016
, primarily due to changes in marketing and consulting costs in connection with commercialization of XERMELO.
|
•
|
Stock-based compensation
– Stock-based compensation expense for the
three
months ended
September 30, 2017
increased
41%
to
$1.2 million
, and for the
nine
months ended
September 30, 2017
increased
30%
to
$3.5 million
, as compared to the corresponding periods in
2016
, primarily due to awards granted to sales and marketing personnel.
|
•
|
Facilities and equipment
– Facilities and equipment costs for the
three
months ended
September 30, 2017
increased
26%
to
$0.5 million
, and for the
nine
months ended
September 30, 2017
increased
37%
to
$1.6 million
, as compared to the corresponding periods in
2016
.
|
•
|
Other –
Other costs for the
three
months ended
September 30, 2017
increased
136%
to
$2.1 million
, and for the
nine
months ended
September 30, 2017
increased
210%
to
$6.4 million
, as compared to the corresponding periods in
2016
, primarily due to increases in travel and contributions to a foundation supporting carcinoid syndrome patients.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
We will need additional capital in the future and, if it is unavailable, we will be forced to delay, reduce or eliminate our commercialization efforts or product development programs. If additional capital is not available on reasonable terms, we will be forced to obtain funds, if at all, by entering into financing agreements on unattractive terms.
|
•
|
We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
|
•
|
Our operating results have been and likely will continue to fluctuate, and we believe that period-to-period comparisons of our operating results are not a good indication of our future performance.
|
•
|
We have substantial indebtedness that may limit cash flow available to invest in the ongoing needs of our business.
|
•
|
We may not have the ability to raise the funds necessary to repurchase the notes evidencing our existing indebtedness upon a fundamental change, and our future debt may contain limitations on our ability to repurchase the notes.
|
•
|
We will depend heavily on the commercial success of XERMELO in the United States. If we do not achieve commercial success with XERMELO, our business will suffer and our stock price will likely decline.
|
•
|
Clinical testing of our drug candidates in humans is an inherently risky and time-consuming process that may fail to demonstrate safety and efficacy, which could result in the delay, limitation or prevention of regulatory approval.
|
•
|
Our drug candidates are subject to a lengthy and uncertain regulatory process that may not result in the necessary regulatory approvals, which could adversely affect our and our collaborators’ ability to commercialize products.
|
•
|
The commercial success of XERMELO and any other products that we or our collaborators may develop will depend upon the degree of market acceptance among physicians, patients, health care payers, private health insurers and the medical community.
|
•
|
If we are unable to implement and maintain an effective and specialized sales force, marketing infrastructure and distribution capabilities, we will not be able to commercialize XERMELO or our drug candidates successfully.
|
•
|
If we are unable to obtain adequate coverage and reimbursement from third-party payors for XERMELO and any other products that we or our collaborators may develop, our revenues and prospects for profitability will suffer.
|
•
|
We and our collaborators are subject to extensive and rigorous ongoing regulation relating to XERMELO and any other approved products.
|
•
|
We are subject to certain healthcare laws, regulation and enforcement; our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition.
|
•
|
Current healthcare laws and regulations and future legislative or regulatory reforms to the healthcare system may negatively affect our revenues and prospects for profitability.
|
•
|
Our competitors may develop products that make XERMELO or our collaborators’ other products obsolete.
|
•
|
We may not be able to manufacture our drug candidates in commercial quantities, which would prevent us from commercializing our drug candidates.
|
•
|
We depend on third-party manufacturers, including sole source suppliers, to manufacture commercial quantities of XERMELO. We may not be able to maintain these relationships and could experience supply disruptions outside of our control.
|
•
|
We rely on a single third-party logistics provider and two independent specialty pharmacies for distribution of XERMELO in the United States, and their failure to distribute XERMELO effectively would adversely affect sales of XERMELO.
|
•
|
We are significantly dependent upon our collaborations with Ipsen, Sanofi and other pharmaceutical and biotechnology companies. If pharmaceutical products are not successfully and timely developed and commercialized under our collaborations, our opportunities to generate revenues from milestones and royalties will be greatly reduced.
|
•
|
Conflicts with our collaborators could jeopardize the success of our collaborative agreements and harm our product development efforts.
|
•
|
We rely on third parties to carry out drug development activities.
|
•
|
We lack the capability to manufacture materials for nonclinical studies, clinical trials or commercial sales and rely on third parties to manufacture our drug candidates, which may harm or delay our product development and commercialization efforts.
|
•
|
If we are unable to adequately protect our intellectual property, third parties may be able to use our products and technologies, which could adversely affect our ability to compete in the market.
|
•
|
We may be involved in patent litigation and other disputes regarding intellectual property rights and may require licenses from third parties for our planned nonclinical and clinical development and commercialization activities. We may not prevail in any such litigation or other dispute or be able to obtain required licenses.
|
•
|
We have not sought patent protection outside of the United States for some of our inventions, and some of our licensed patents only provide coverage in the United States. As a result, our international competitors could be granted foreign patent protection with respect to our discoveries.
|
•
|
We may be subject to damages resulting from claims that we, our employees or independent contractors have wrongfully used or disclosed alleged trade secrets of their former employers.
|
•
|
The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to expand our operations.
|
•
|
Our collaborations with outside scientists may be subject to restriction and change.
|
•
|
Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.
|
•
|
Facility security breaches may disrupt our operations and harm our operating results.
|
•
|
Our facilities are located near coastal zones, and the occurrence of a hurricane or other disaster could damage our facilities and equipment, which could harm our operations.
|
•
|
We have used hazardous chemicals and radioactive and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
|
•
|
Our business has a substantial risk of product liability and we face potential product liability exposure far in excess of our limited insurance coverage.
|
•
|
Invus, L.P., Invus C.V. and their affiliates own a controlling interest in our outstanding common stock and may have interests which conflict with those of our other stockholders.
|
•
|
Conversion of the notes evidencing our current indebtedness may dilute the ownership interest of our existing stockholders, including holders who had previously converted their notes, or may otherwise depress the price of our common stock.
|
•
|
Invus has additional rights under our stockholders’ agreement with Invus, L.P. which provides Invus with substantial influence over certain significant corporate matters.
|
•
|
Our stock price may be extremely volatile.
|
•
|
We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.
|
•
|
Future sales of our common stock, or the perception that such sales may occur, may depress our stock price.
|
•
|
If we are unable to meet Nasdaq continued listing requirements, Nasdaq may take action to delist our common stock.
|
Item 6.
|
Exhibits
|
Exhibit No.
|
|
Description
|
*†10.1
|
—
|
|
*31.1
|
—
|
|
*31.2
|
—
|
|
*32.1
|
—
|
|
101.INS
|
—
|
XBRL Instance Document
|
101.SCH
|
—
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XBRL Taxonomy Extension Schema Document
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101.CAL
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—
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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—
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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—
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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—
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Filed herewith.
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†
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Confidential treatment has been requested for a portion of this exhibit. The confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission.
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Lexicon Pharmaceuticals, Inc.
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Date:
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November 8, 2017
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By:
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/s/ Lonnel Coats
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Lonnel Coats
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President and Chief Executive Officer
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Date:
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November 8, 2017
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By:
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/s/ Jeffrey L. Wade
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Jeffrey L. Wade
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Executive Vice President, Corporate and Administrative Affairs and Chief Financial Officer
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Exhibit No.
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Description
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*†10.1
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—
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Amendment No. 1 to Collaboration and License Agreement, dated July 1, 2017, with Sanofi-Aventis Deutschland GmbH
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*31.1
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—
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Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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*31.2
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—
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Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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*32.1
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—
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Certification of Principal Executive and Principal Financial Officers Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS
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—
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XBRL Instance Document
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101.SCH
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—
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XBRL Taxonomy Extension Schema Document
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101.CAL
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—
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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—
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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—
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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—
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Filed herewith.
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†
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Confidential treatment has been requested for a portion of this exhibit. The confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission.
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1.
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Amended Development Plan for T2DM
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2.
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Amendments to Definitions.
The Agreement shall
be amended as follows, with effect from and after the Amendment Effective Date
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2.1
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The definition of “306 Study” shall be deleted and replaced with the following:
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2.2
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The definition of “311 Study” shall be deleted and replaced with the following:
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2.3
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The definition of “T2DM CVOT” shall be deleted and replaced with the following:
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2.4
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The following new definition shall be added:
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2.5
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The definition of “Benefit Data” shall be replaced with the following:
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2.6
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The definition of “Initial Data” shall be replaced with the following:
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2.7
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The definition of “European Union” shall be replaced with the following:
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2.8
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A new definition of “European Territory” shall be added as Section 1.196 as follows:
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2.9
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The definition of “Tier 2 Countries” shall be replaced with the following
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3.
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Amendment of Positive Results Definition
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4.
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Amendment of Development Milestone Payments
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(a)
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Development Milestones.
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(i)
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achievement of Positive Results (as determined in accordance with Section 3.1.3(a)) with respect to [**],[**];
provided
that, if [**], this milestone payment shall become payable concurrently with [**];
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(ii)
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achievement of Positive Results (as determined in accordance with Section 3.1.3(c)) from [**],[**];
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(iii)
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achievement of Positive Results (as determined in accordance with Section 3.1.3(c)) from [**],[**];
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(iv)
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achievement of Positive Results (as determined in accordance with Section 3.1.3(b)) from [**],[**]; and
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(v)
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[**], one hundred million Dollars ($100,000,000).
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5.
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Amendment to Royalties for Major Markets (ex-US)
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5.1
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Section 7.3.1(iii)
of the Agreement shall be deleted and replaced by the following effective as of the Amendment Effective Date:
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5.2
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Section 7.3.1(iv)
of the Agreement shall be deleted and replaced by the following effective as of the Amendment Effective Date:
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6.
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No other Amendment.
Except as expressly modified by this Amendment, the Agreement remains in full force and effect.
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7.
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Other applicable provisions
. This Amendment shall be considered part of the Agreement and Section 13.8 of the Agreement shall be interpreted to include this Amendment as part of the Parties’ agreement. Article 13 of the Agreement is incorporated herein by reference and shall apply hereto.
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SANOFI-AVENTIS DEUTSCHLAND GmbH
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LEXICON PHARMACEUTICALS, INC.
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Sanofi
Code
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Study
Design
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Background
Therapy
(Rescue)
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N
Total/
arm
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Arms
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Core Treatment period Double-bl.
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eGFR
mL/min/
1.73 m2
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Long-term Extension: Double- blind
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Primary
endpoints
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Comments / Core Development Plan (CDP)
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Decision Points
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
[**]
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[**]
[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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[**]
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Lexicon Pharmaceuticals, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Lonnel Coats
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Lonnel Coats
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President and Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q of Lexicon Pharmaceuticals, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Jeffrey L. Wade
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Jeffrey L. Wade
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Executive Vice President, Corporate and Administrative Affairs and Chief Financial Officer
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1.
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Lexicon's Quarterly Report on Form 10-Q for the period ended
September 30, 2017
, and to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934, and
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2.
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The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Lexicon.
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By:
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/s/ Lonnel Coats
|
|
Lonnel Coats
|
|
President and Chief Executive Officer
|
By:
|
/s/ Jeffrey L. Wade
|
|
Jeffrey L. Wade
|
|
Executive Vice President, Corporate and Administrative
Affairs and Chief Financial Officer
|