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.
|
||
|
Consolidated Balance Sheets - March 31, 2019 (unaudited) and December 31, 2018
|
|
|
Consolidated Statements of Comprehensive Loss (unaudited) - Three Months Ended March 31, 2019 and 2018
|
|
|
Consolidated Statements of Stockholders’ Equity/(Deficit) (unaudited) - Three Months Ended March 31, 2019 and 2018
|
|
|
Consolidated Statements of Cash Flows (unaudited) - Three Months Ended March 31, 2019 and 2018
|
|
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
|
|
As of March 31,
|
|
As of December 31,
|
||||
|
|
2019
|
|
2018
|
||||
Assets
|
|
(unaudited)
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
45,778
|
|
|
$
|
80,386
|
|
Short-term investments
|
|
87,367
|
|
|
79,666
|
|
||
Accounts receivable, net of allowances of $4
|
|
4,390
|
|
|
5,924
|
|
||
Inventory
|
|
4,606
|
|
|
4,680
|
|
||
Prepaid expenses and other current assets
|
|
4,686
|
|
|
2,668
|
|
||
Total current assets
|
|
146,827
|
|
|
173,324
|
|
||
Property and equipment, net of accumulated depreciation and amortization of $60,466 and $60,006, respectively
|
|
15,475
|
|
|
15,865
|
|
||
Goodwill
|
|
44,543
|
|
|
44,543
|
|
||
Other intangible assets, net of accumulated amortization of $3,678 and $3,237, respectively
|
|
49,678
|
|
|
50,119
|
|
||
Other assets
|
|
1,993
|
|
|
285
|
|
||
Total assets
|
|
$
|
258,516
|
|
|
$
|
284,136
|
|
Liabilities and Equity
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
13,874
|
|
|
$
|
17,759
|
|
Accrued liabilities
|
|
10,800
|
|
|
14,482
|
|
||
Current portion of deferred revenue
|
|
2,432
|
|
|
3,395
|
|
||
Current portion of long-term debt, net of deferred issuance costs
|
|
1,115
|
|
|
1,115
|
|
||
Total current liabilities
|
|
28,221
|
|
|
36,751
|
|
||
Deferred revenue, net of current portion
|
|
24,623
|
|
|
23,651
|
|
||
Long-term debt, net of deferred issuance costs
|
|
243,912
|
|
|
243,887
|
|
||
Deferred tax liabilities
|
|
6,014
|
|
|
6,014
|
|
||
Other long-term liabilities
|
|
1,433
|
|
|
238
|
|
||
Total liabilities
|
|
304,203
|
|
|
310,541
|
|
||
Commitments and contingencies
|
|
|
|
|
||||
Equity (Deficit):
|
|
|
|
|
||||
Preferred stock, $.01 par value; 5,000 shares authorized; no shares issued and outstanding
|
|
—
|
|
|
—
|
|
||
Common stock, $.001 par value; 225,000 shares authorized; 106,679 and 106,162 shares issued, respectively
|
|
106
|
|
|
106
|
|
||
Additional paid-in capital
|
|
1,451,365
|
|
|
1,447,954
|
|
||
Accumulated deficit
|
|
(1,493,374
|
)
|
|
(1,471,577
|
)
|
||
Accumulated other comprehensive income (loss)
|
|
33
|
|
|
(12
|
)
|
||
Treasury stock, at cost, 407 and 236 shares, respectively
|
|
(3,817
|
)
|
|
(2,876
|
)
|
||
Total deficit
|
|
(45,687
|
)
|
|
(26,405
|
)
|
||
Total liabilities and equity (deficit)
|
|
$
|
258,516
|
|
|
$
|
284,136
|
|
|
|
Three Months Ended March 31,
|
|
||||||
|
|
2019
|
|
2018
|
|
||||
Revenues:
|
|
|
|
|
|
||||
Net product revenue
|
|
$
|
6,740
|
|
|
$
|
5,460
|
|
|
Collaborative agreements
|
|
2,439
|
|
|
19,832
|
|
|
||
Royalties and other revenue
|
|
37
|
|
|
82
|
|
|
||
Total revenues
|
|
9,216
|
|
|
25,374
|
|
|
||
Operating expenses:
|
|
|
|
|
|
||||
Cost of sales (including finite-lived intangible asset amortization)
|
|
553
|
|
|
533
|
|
|
||
Research and development, including stock-based compensation of $1,768 and $1,655, respectively
|
|
12,022
|
|
|
47,696
|
|
|
||
Selling, general and administrative, including stock-based compensation of $1,643 and $1,419, respectively
|
|
14,110
|
|
|
14,857
|
|
|
||
Total operating expenses
|
|
26,685
|
|
|
63,086
|
|
|
||
Loss from operations
|
|
(17,469
|
)
|
|
(37,712
|
)
|
|
||
Interest expense
|
|
(5,117
|
)
|
|
(5,113
|
)
|
|
||
Interest and other income, net
|
|
789
|
|
|
1,005
|
|
|
||
Net loss
|
|
$
|
(21,797
|
)
|
|
$
|
(41,820
|
)
|
|
Net loss per common share, basic and diluted
|
|
$
|
(0.21
|
)
|
|
$
|
(0.40
|
)
|
|
Shares used in computing net loss per common share, basic and diluted
|
|
106,054
|
|
|
105,668
|
|
|
||
|
|
|
|
|
|
||||
Other comprehensive income (loss):
|
|
|
|
|
|
||||
Unrealized gain (loss) on investments
|
|
45
|
|
|
(172
|
)
|
|
||
Comprehensive loss
|
|
$
|
(21,752
|
)
|
|
$
|
(41,992
|
)
|
|
|
|
Common Stock
|
|
Additional
|
|
|
|
Accumulated Other
|
|
|
|
|
|||||||||||||||
|
|
Shares
|
|
Par Value
|
|
Paid-In Capital
|
|
Accumulated Deficit
|
|
Comprehensive Gain (Loss)
|
|
Treasury Stock
|
|
Total
|
|||||||||||||
Balance at December 31, 2017
|
|
105,711
|
|
|
$
|
106
|
|
|
$
|
1,435,526
|
|
|
$
|
(1,365,241
|
)
|
|
$
|
(222
|
)
|
|
$
|
(1,904
|
)
|
|
$
|
68,265
|
|
Cumulative effect of change in accounting principle
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,212
|
|
|
—
|
|
|
—
|
|
|
14,212
|
|
||||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
3,074
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,074
|
|
||||||
Issuance of common stock under Equity Incentive Plans
|
|
337
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
||||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(972
|
)
|
|
(972
|
)
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41,820
|
)
|
|
—
|
|
|
—
|
|
|
(41,820
|
)
|
||||||
Unrealized loss on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(172
|
)
|
|
—
|
|
|
(172
|
)
|
||||||
Balance at March 31, 2018
|
|
106,048
|
|
|
$
|
106
|
|
|
$
|
1,438,625
|
|
|
$
|
(1,392,849
|
)
|
|
$
|
(394
|
)
|
|
$
|
(2,876
|
)
|
|
$
|
42,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at December 31, 2018
|
|
106,162
|
|
|
$
|
106
|
|
|
$
|
1,447,954
|
|
|
$
|
(1,471,577
|
)
|
|
$
|
(12
|
)
|
|
$
|
(2,876
|
)
|
|
$
|
(26,405
|
)
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
3,411
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,411
|
|
||||||
Issuance of common stock under Equity Incentive Plans
|
|
517
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Repurchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(941
|
)
|
|
(941
|
)
|
||||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,797
|
)
|
|
—
|
|
|
—
|
|
|
(21,797
|
)
|
||||||
Unrealized gain on investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
45
|
|
||||||
Balance at March 31, 2019
|
|
106,679
|
|
|
$
|
106
|
|
|
$
|
1,451,365
|
|
|
$
|
(1,493,374
|
)
|
|
$
|
33
|
|
|
$
|
(3,817
|
)
|
|
$
|
(45,687
|
)
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net loss
|
|
$
|
(21,797
|
)
|
|
$
|
(41,820
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
901
|
|
|
925
|
|
||
Stock-based compensation
|
|
3,411
|
|
|
3,074
|
|
||
Amortization of debt issuance costs
|
|
346
|
|
|
307
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Decrease in accounts receivable
|
|
1,534
|
|
|
343
|
|
||
(Increase) decrease in inventory
|
|
74
|
|
|
(164
|
)
|
||
(Increase) decrease in prepaid expenses and other current assets
|
|
(2,018
|
)
|
|
150
|
|
||
(Increase) decrease in other assets
|
|
91
|
|
|
(3
|
)
|
||
Increase (decrease) in accounts payable and other liabilities
|
|
(8,171
|
)
|
|
9,382
|
|
||
Increase (decrease) in deferred revenue
|
|
9
|
|
|
(18,969
|
)
|
||
Net cash used in operating activities
|
|
(25,620
|
)
|
|
(46,775
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Purchases of property and equipment
|
|
(70
|
)
|
|
(40
|
)
|
||
Purchases of investments
|
|
(87,256
|
)
|
|
(46,892
|
)
|
||
Maturities of investments
|
|
79,600
|
|
|
53,995
|
|
||
Net cash (used in) provided by investing activities
|
|
(7,726
|
)
|
|
7,063
|
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Proceeds from issuance of common stock
|
|
—
|
|
|
25
|
|
||
Repurchase of common stock
|
|
(941
|
)
|
|
(972
|
)
|
||
Repayment of debt borrowings
|
|
(321
|
)
|
|
(581
|
)
|
||
Net cash used in financing activities
|
|
(1,262
|
)
|
|
(1,528
|
)
|
||
Net decrease in cash and cash equivalents
|
|
(34,608
|
)
|
|
(41,240
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
80,386
|
|
|
61,661
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
45,778
|
|
|
$
|
20,421
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
||||
Cash paid for interest
|
|
$
|
3,698
|
|
|
$
|
774
|
|
|
|
|
|
|
||||
Supplemental disclosure of non-cash activities:
|
|
|
|
|
||||
Unrealized gain (loss) on investments
|
|
$
|
45
|
|
|
$
|
(172
|
)
|
|
|
As of March 31,
|
|
As of December 31,
|
||||
|
|
2019
|
|
2018
|
||||
|
|
(in thousands)
|
||||||
Raw materials
|
|
$
|
3,571
|
|
|
$
|
3,564
|
|
Work-in-process
|
|
232
|
|
|
232
|
|
||
Finished goods
|
|
803
|
|
|
884
|
|
||
Total inventory
|
|
$
|
4,606
|
|
|
$
|
4,680
|
|
|
|
Expected Volatility
|
|
Risk-free Interest Rate
|
|
Expected Term
|
|
Dividend
Rate
|
|||
March 31, 2019:
|
|
|
|
|
|
|
|
|
|||
Employees
|
|
63
|
%
|
|
2.5
|
%
|
|
4
|
|
—
|
%
|
Officers and non-employee directors
|
|
63
|
%
|
|
2.6
|
%
|
|
8
|
|
—
|
%
|
March 31, 2018:
|
|
|
|
|
|
|
|
|
|||
Employees
|
|
60
|
%
|
|
2.5
|
%
|
|
4
|
|
—
|
%
|
Officers and non-employee directors
|
|
63
|
%
|
|
2.8
|
%
|
|
8
|
|
—
|
%
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|||
|
|
(in thousands)
|
|
|
|||
Outstanding at December 31, 2018
|
|
6,152
|
|
|
$
|
10.68
|
|
Granted
|
|
2,132
|
|
|
5.18
|
|
|
Expired
|
|
(197
|
)
|
|
10.15
|
|
|
Forfeited
|
|
(56
|
)
|
|
10.63
|
|
|
Outstanding at March 31, 2019
|
|
8,031
|
|
|
9.24
|
|
|
Exercisable at March 31, 2019
|
|
3,886
|
|
|
$
|
10.64
|
|
|
|
Shares
|
|
Weighted Average Grant Date
Fair Value
|
|||
|
|
(in thousands)
|
|
|
|||
Outstanding at December 31, 2018
|
|
1,286
|
|
|
$
|
10.17
|
|
Granted
|
|
2,257
|
|
|
5.14
|
|
|
Vested
|
|
(517
|
)
|
|
9.60
|
|
|
Forfeited
|
|
(23
|
)
|
|
7.85
|
|
|
Outstanding at March 31, 2019
|
|
3,003
|
|
|
$
|
6.50
|
|
2.
|
Recent Accounting Pronouncements
|
3.
|
Cash and Cash Equivalents and Investments
|
|
|
As of March 31, 2019
|
||||||||||||||
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Cash and cash equivalents
|
|
$
|
45,778
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,778
|
|
Securities maturing within one year:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
87,334
|
|
|
35
|
|
|
(2
|
)
|
|
87,367
|
|
||||
Corporate debt securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total short-term investments
|
|
$
|
87,334
|
|
|
$
|
35
|
|
|
$
|
(2
|
)
|
|
$
|
87,367
|
|
Total cash and cash equivalents and investments
|
|
$
|
133,112
|
|
|
$
|
35
|
|
|
$
|
(2
|
)
|
|
$
|
133,145
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
As of December 31, 2018
|
||||||||||||||
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
|
|
|
|
(in thousands)
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
80,386
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80,386
|
|
Securities maturing within one year:
|
|
|
|
|
|
|
|
|
||||||||
U.S. treasury securities
|
|
73,983
|
|
|
—
|
|
|
(9
|
)
|
|
73,974
|
|
||||
Corporate debt securities
|
|
5,695
|
|
|
—
|
|
|
(3
|
)
|
|
5,692
|
|
||||
Total short-term investments
|
|
$
|
79,678
|
|
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
$
|
79,666
|
|
Total cash and cash equivalents and investments
|
|
$
|
160,064
|
|
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
$
|
160,052
|
|
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
|
|
|
Assets and Liabilities at Fair Value as of March 31, 2019
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
$
|
45,778
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45,778
|
|
Short-term investments
|
|
87,367
|
|
|
|
|
|
—
|
|
|
87,367
|
|
||||
Total cash and cash equivalents and investments
|
|
$
|
133,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
133,145
|
|
|
|
Assets and Liabilities at Fair Value as of December 31, 2018
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
$
|
80,386
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
80,386
|
|
Short-term investments
|
|
73,974
|
|
|
5,692
|
|
|
—
|
|
|
79,666
|
|
||||
Total cash and cash equivalents and investments
|
|
$
|
154,360
|
|
|
$
|
5,692
|
|
|
$
|
—
|
|
|
$
|
160,052
|
|
5.
|
Debt Obligations
|
|
(in thousands)
|
||
2019
|
$
|
456
|
|
2020
|
620
|
|
|
2021
|
632
|
|
|
2022
|
645
|
|
|
2023
|
—
|
|
|
Total undiscounted operating lease liability
|
2,352
|
|
|
Less: amount of lease payments representing interest
|
(366
|
)
|
|
Present value of future lease payments
|
1,986
|
|
|
Less: short-term operating lease liability
|
(553
|
)
|
|
Long-term operating lease liability
|
$
|
1,433
|
|
7.
|
Collaboration and License Agreements
|
•
|
The exclusive license granted to Ipsen to develop and commercialize XERMELO in the Licensed Territory;
|
•
|
The obligation to participate in committees which govern the development of XERMELO until commercialization; and
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
We are commercializing XERMELO
®
(telotristat ethyl), an orally-delivered small molecule drug, in the United States for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog, or SSA, therapy in adults inadequately controlled by SSA therapy. We have granted Ipsen Pharma SAS an exclusive, royalty-bearing right to commercialize XERMELO outside of the United States and Japan. Ipsen is commercializing XERMELO in multiple countries, including the United Kingdom and Germany, and is preparing to commercialize XERMELO in certain additional countries. We are also developing telotristat ethyl as a treatment for biliary tract cancer and are conducting a Phase 2a clinical trial of telotristat ethyl in biliary tract cancer patients.
|
•
|
We are developing sotagliflozin, an orally-delivered small molecule drug candidate, as a treatment for type 1 and type 2 diabetes. We have granted Sanofi an exclusive, worldwide (excluding Japan), royalty-bearing right to develop, manufacture and commercialize sotagliflozin. Zynquista™ (sotagliflozin) has been approved in the European Union for use as an adjunct to insulin therapy to improve glycemic control in adults with type 1 diabetes and a body mass index ≥
27 kg/m
2
, who could not achieve adequate glycemic control despite optimal insulin therapy. The U.S. Food and Drug Administration has issued a complete response letter regarding the application for regulatory approval to market sotagliflozin for type 1 diabetes in the United States. Applications for regulatory approval to market sotagliflozin for type 1 diabetes in certain additional countries remain under regulatory review. Sanofi is also conducting a comprehensive Phase 3 development program for sotagliflozin in type 2 diabetes.
|
•
|
We are developing LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain. We have reported positive top-line data from an initial Phase 1a clinical trial of LX9211 and are conducting a Phase 1b clinical trial of LX9211.
|
•
|
We are developing LX2761, an orally-delivered small molecule drug candidate, as a treatment for diabetes. We have reported top-line data from two Phase 1 clinical trials of LX2761 and are presently evaluating the further clinical development of LX2761. We have granted Sanofi certain rights of first negotiation with respect to the future development and commercialization of LX2761.
|
|
|
Three Months Ended March 31,
|
|
||||||
|
|
2019
|
|
2018
|
|
||||
Total revenues
|
|
$
|
9.2
|
|
|
$
|
25.4
|
|
|
Dollar decrease
|
|
$
|
16.2
|
|
|
|
|
||
Percentage decrease
|
|
64
|
%
|
|
|
|
•
|
Net product revenue
– Net product revenue for the
three
months ended
March 31, 2019
increased
23%
to
$6.7 million
as compared to the corresponding period in
2018
from revenues recognized from the sale of XERMELO in the United States. Product revenues are recorded net of estimated product returns, pricing discounts including rebates offered pursuant to mandatory federal and state government programs and chargebacks, prompt pay discounts and distribution fees and co-pay assistance. Revenue recognition policies require estimates of the aforementioned sales allowances each period.
|
•
|
Collaborative agreements
– Revenue from collaborative agreements for the
three
months ended
March 31, 2019
decreased
88%
to
$2.4 million
as compared to the corresponding period in
2018
, primarily due to revenues recognized in the prior year as a result of clinical trial activities under the collaboration and license agreement with Sanofi.
|
|
|
Three Months Ended March 31,
|
|
||||||
|
|
2019
|
|
2018
|
|
||||
Total research and development expense
|
|
$
|
12.0
|
|
|
$
|
47.7
|
|
|
Dollar decrease
|
|
$
|
35.7
|
|
|
|
|
||
Percentage decrease
|
|
75
|
%
|
|
|
|
•
|
Personnel –
Personnel costs were
$6.0 million
for each of the
three
months ended
March 31, 2019
and
2018
, respectively. Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.
|
•
|
Third-party and other services –
Third-party and other services for the
three
months ended
March 31, 2019
decreased
94%
to
$2.4 million
as compared to the corresponding period in
2018
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.
|
•
|
Stock-based compensation
– Stock-based compensation expense for the
three
months ended
March 31, 2019
increased
7%
to
$1.8 million
as compared to the corresponding period in
2018
, primarily due to a shorter vesting period of the annual restricted stock unit awards granted in 2018 and 2019 compared to prior years.
|
•
|
Facilities and equipment –
Facilities and equipment costs were
$0.7 million
for each of the
three
months ended
March 31, 2019
and
2018
, respectively.
|
•
|
Other –
Other costs for the
three
months ended
March 31, 2019
decreased
16%
to
$1.2 million
as compared to the corresponding period in
2018
, primarily due to lower funding of continuing medical education grants.
|
|
|
Three Months Ended March 31,
|
|
||||||
|
|
2019
|
|
2018
|
|
||||
Total selling, general and administrative expense
|
|
$
|
14.1
|
|
|
$
|
14.9
|
|
|
Dollar decrease
|
|
$
|
0.7
|
|
|
|
|
||
Percentage decrease
|
|
5
|
%
|
|
|
|
•
|
Personnel
– Personnel costs for the
three
months ended
March 31, 2019
increased
9%
to
$7.8 million
as compared to the corresponding period in
2018
, primarily due to an increase in headcount. 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
March 31, 2019
decreased
27%
to
$2.6 million
as compared to the corresponding period in
2018
, primarily due to changes in marketing costs.
|
•
|
Stock-based compensation
– Stock-based compensation expense for the
three
months ended
March 31, 2019
increased
16%
to
$1.6 million
as compared to the corresponding period in
2018
, primarily due to a shorter vesting period of the annual restricted stock unit awards granted in 2018 and 2019.
|
•
|
Facilities and equipment
– Facilities and equipment costs were
$0.5 million
for each of the
three
months ended
March 31, 2019
and
2018
.
|
•
|
Other –
Other costs for the
three
months ended
March 31, 2019
decreased
27%
to
$1.6 million
as compared to the corresponding period in
2018
, primarily due to a decrease in contributions to charitable foundations.
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
•
|
We depend heavily on the commercial success of XERMELO. If we do not achieve commercial success with XERMELO, our business will suffer and our stock price will likely decline.
|
•
|
We depend heavily on Sanofi’s ability to successfully commercialize Zynquista in the European Union for type 1 diabetes. If Sanofi fails to successfully commercialize Zynquista for type 1 diabetes in the European Union, our business will suffer and our stock price will likely decline.
|
•
|
We depend heavily on our and Sanofi’s ability to obtain regulatory approval in the United States for sotagliflozin in type 1 diabetes. If we and Sanofi fail to obtain such regulatory approval or fail to successfully commercialize sotagliflozin for type 1 diabetes in the United States upon regulatory approval, our business will suffer and our stock price will likely decline.
|
•
|
We depend heavily on Sanofi’s ability to successfully complete Phase 3 clinical development and obtain regulatory approvals for sotagliflozin in type 2 diabetes. If Sanofi fails to successfully complete such Phase 3 clinical development and obtain such regulatory approvals, or fails to successfully commercialize sotagliflozin for type 2 diabetes upon such regulatory approvals, 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 and the medical community.
|
•
|
If we are unable to maintain an effective and specialized sales force, marketing infrastructure and distribution capabilities, we will not be able to successfully commercialize XERMELO or any other products that we or our collaborators may develop.
|
•
|
If we are unable to obtain adequate coverage and reimbursement from third-party payers for XERMELO and any other products that we or our collaborators may develop, our revenues and prospects for profitability will suffer.
|
•
|
We may not be able to manufacture XERMELO and any other products that we or our collaborators may develop in commercial quantities, which would impair our ability to commercialize such products.
|
•
|
We and our collaborators are subject to extensive and rigorous ongoing regulation relating to XERMELO and any other products that we or our collaborators may develop.
|
•
|
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.
|
•
|
Pricing for pharmaceutical products has come under increasing scrutiny by governments, legislative bodies and enforcement agencies. These activities may result in actions that have the effect of reducing our revenue or harming our business or reputation.
|
•
|
Our competitors may develop products that impair the value of XERMELO or any other products that we or our collaborators may develop.
|
•
|
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.
|
•
|
If we do not effectively manage our affirmative and restrictive covenants under the BioPharma Term Loan, our financial condition and results of operations could be negatively affected.
|
•
|
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 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 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.
|
•
|
Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.
|
•
|
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.
|
•
|
If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected.
|
•
|
The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to operate and expand our operations.
|
•
|
Facility security breaches may disrupt our operations, subject us to liability 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.
|
•
|
Invus has additional rights under our stockholders’ agreement with Invus, L.P. relating to the membership of our board of directors, which provides Invus with substantial influence over significant corporate matters.
|
•
|
Our stock price may be extremely volatile.
|
•
|
We are subject to securities litigation, which is expensive and could divert management attention.
|
•
|
Future sales of our common stock, or the perception that such sales may occur, may depress our stock price.
|
•
|
Conversion of our 5.25% Convertible Senior Notes due 2021 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.
|
•
|
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
|
•
|
We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.
|
•
|
We previously identified a material weakness in our internal control over financial reporting that, if not properly remediated, could result in us being unable to provide required financial information in a timely and reliable manner.
|
Item 2.
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
(3)
|
|||||
January 1-31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
February 1-28, 2019
|
|
170,806
|
|
(1)
|
$
|
5.51
|
|
(2)
|
—
|
|
|
—
|
|
March 1-31, 2019
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
Represents shares retained by us in satisfaction of the tax withholding obligations of recipients of restricted stock units granted in February 2015, February 2016, February 2017 and February 2018 under our 2017 Equity Incentive Plan with respect to the vesting of such restricted stock units.
|
(2)
|
Represents the market price of our common stock on the date of vesting of such restricted stock units, calculated in accordance with the process for determination of fair market value under our 2017 Equity Incentive Plan.
|
(3)
|
In the future, we may grant additional equity securities under our 2017 Equity Incentive Plan for which the recipient's tax withholding obligations with respect to the grant or vesting of such securities may be satisfied by our retention of a portion of such securities. Further, for any such equity securities which are subject to vesting conditions, the number of equity securities which we may retain in satisfaction of the recipient's tax withholding obligations may be dependent on the continued employment of such recipient or other performance-based conditions. Accordingly, we cannot predict with any certainty either the total amount of equity securities or the approximate dollar value of such securities that we may purchase in future years.
|
Item 6.
|
Exhibits
|
Exhibit No.
|
|
Description
|
*10.1
|
—
|
|
*10.2
|
—
|
|
*10.3
|
—
|
|
*31.1
|
—
|
|
*31.2
|
—
|
|
*32.1
|
—
|
|
101.INS
|
—
|
XBRL Instance Document
|
101.SCH
|
—
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
—
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
—
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
—
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
—
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
*
|
Filed herewith.
|
|
|
Lexicon Pharmaceuticals, Inc.
|
|
|
|
|
|
Date:
|
May 1, 2019
|
By:
|
/s/ Lonnel Coats
|
|
|
|
Lonnel Coats
|
|
|
|
President and Chief Executive Officer
|
Date:
|
May 1, 2019
|
By:
|
/s/ Jeffrey L. Wade
|
|
|
|
Jeffrey L. Wade
|
|
|
|
Executive Vice President, Corporate and Administrative Affairs and Chief Financial Officer
|
Exhibit No.
|
|
Description
|
*10.1
|
—
|
|
*10.2
|
—
|
|
*10.3
|
—
|
|
*31.1
|
—
|
|
*31.2
|
—
|
|
*32.1
|
—
|
|
101.INS
|
—
|
XBRL Instance Document
|
101.SCH
|
—
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
—
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
—
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
—
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
—
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
*
|
Filed herewith.
|
•
|
an annual retainer of $45,000 for service on the Board of Directors ($75,000 for service as non-executive Chairman of the Board of Directors), prorated for any partial year of service;
|
•
|
an annual retainer of $10,000 for service on the audit committee of the Board of Directors ($20,000 for service as chair of the audit committee), prorated for any partial year of service;
|
•
|
an annual retainer of $7,500 for service on the compensation committee of the Board of Directors ($15,000 for service as chair of the compensation committee), prorated for any partial year of service; and
|
•
|
an annual retainer of $5,000 for service on the corporate governance committee of the Board of Directors ($10,000 for service as chair of the corporate governance committee), prorated for any partial year of service.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Lexicon Pharmaceuticals, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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)
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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;
|
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)
|
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.
|
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)
|
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
|
|
Lonnel Coats
|
|
President and Chief Executive Officer
|
1.
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I have reviewed this Quarterly Report on Form 10-Q of Lexicon Pharmaceuticals, Inc.;
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2.
|
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;
|
3.
|
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;
|
4.
|
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
|
d)
|
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
|
5.
|
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
|
b)
|
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.
|
/s/ Jeffrey L. Wade
|
Jeffrey L. Wade
|
Executive Vice President, Corporate and Administrative Affairs and Chief Financial Officer
|
1.
|
Lexicon's Quarterly Report on Form 10-Q for the period ended
March 31, 2019
, 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
|
2.
|
The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of Lexicon.
|
By:
|
/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
|