Lexicon Pharmaceuticals, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with the three months ended March 31, 2020. Lexicon is a biopharmaceutical company focused on drug development. It sold XERMELO and related assets to TerSera in September 2020 and reported no product revenue in Q1 2021.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $0.027 million | $8.0 million |
| Operating expenses | $20.9 million | $70.4 million |
| Operating loss | $20.8 million | $62.4 million |
| Interest expense | $0.2 million | $5.1 million |
| Net loss | $21.0 million | $66.6 million |
| Net loss per share | $0.15 | $0.63 |
| Operating cash used | $25.2 million | $22.1 million |
Revenue was $27,000, principally royalties and other revenue; there was no net product or collaboration revenue. With negligible revenue and an operating loss, a meaningful operating margin is not provided. Research and development expense fell 77% to $12.6 million, primarily because sotagliflozin clinical activities were wound down beginning in March 2020, and due to lower personnel costs following a September 2020 workforce reduction. Selling, general and administrative expense declined 44% to $8.3 million, mainly reflecting lower personnel costs.
Liquidity, debt and capital
- Cash, cash equivalents and short-term investments totaled $141.4 million at March 31, 2021, down from $152.3 million at December 31, 2020. Cash and cash equivalents alone were $97.7 million.
- Cash used in investing activities was $17.7 million, primarily net purchases of investments. Financing provided $14.3 million, including $16.9 million in net proceeds from an equity sale, partly offset by $2.7 million of share repurchases/withholdings.
- Remaining convertible notes had a carrying value of $11.7 million and mature December 1, 2021; they bear 5.25% interest. The company repaid its $150 million BioPharma term loan in September 2020 and exchanged $75.8 million principal amount of convertible notes in 2020.
- Total liabilities were $40.7 million and stockholders’ equity was $152.5 million at quarter-end. The filing reports an accumulated deficit of $1.4 billion.
Business, outlook and risks
- Lexicon is conducting Phase 2 trials of LX9211 for diabetic peripheral neuropathic pain and post-herpetic neuralgia; LX9211 has FDA Fast Track designation for the former indication.
- The company is pursuing regulatory approval and a strategic commercialization collaboration for sotagliflozin in heart failure. For type 1 diabetes, the FDA issued a complete response letter; the company requested, and the FDA issued, a public Notice of Opportunity for Hearing on whether to deny the application. Sotagliflozin is approved in the EU for a specified type 1 diabetes population but had not yet launched commercially.
- Management believes available cash and investments, together with expected cash and revenues from collaborations and other sources, will fund operations for at least 12 months. It expects substantial continued R&D spending and says additional financing may be needed thereafter; financing may be unavailable or dilutive.
- Key uncertainties include clinical and regulatory outcomes, obtaining alignment with regulators on the sotagliflozin heart-failure strategy, finding a commercialization partner, access to capital, and reliance on third parties for trials and manufacturing. COVID-19 could disrupt operations and delay trials.
- Lexicon is pursuing arbitration against Sanofi over approximately $23.2 million withheld from a final settlement payment; Sanofi disputes Lexicon’s position and seeks its own declaratory relief and potential damages. A securities class-action case dismissed with prejudice in 2020 is on appeal.
Most important facts for investors to verify
- Whether sotagliflozin can obtain a viable regulatory pathway for heart failure and whether Lexicon secures a commercialization partner.
- Enrollment, timing and results of the LX9211 Phase 2 trials, and the resources required to advance the pipeline.
- Cash burn and funding runway relative to the remaining convertible-note maturity in December 2021; potential dilution from future financing.
- Outcome and timing of the Sanofi arbitration and securities-litigation appeal, including any financial impact.
- Whether TerSera’s XERMELO development and commercialization generate future milestones or royalties; timing and amounts are uncertain.