Lexicon Pharmaceuticals, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a separate fourth-quarter report. Lexicon is a clinical-stage biopharmaceutical company focused primarily on sotagliflozin and LX9211; it sold XERMELO and related assets in September 2020.
Financial results and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $0.3 million | $24.0 million |
| Net loss | $87.8 million | $58.6 million |
| Net loss per share | $0.60 | $0.53 |
| Research and development expense | $55.0 million | $153.6 million |
| Selling, general and administrative expense | $32.3 million | $47.2 million |
| Cash used in operating activities | $87.0 million | $143.0 million |
| Cash, cash equivalents and short-term investments at year-end | $86.7 million | $152.3 million |
Lexicon reported no product revenue in 2021; revenue consisted of $0.3 million of royalties and other revenue. With minimal revenue, a gross margin comparison is not meaningful. The company reported a $1.5 billion accumulated deficit. At year-end, total assets were $136.9 million, total liabilities $23.3 million, and stockholders’ equity $113.6 million. The remaining $11.6 million of convertible notes was repaid in December 2021; no debt balance is shown at year-end. Operating lease liabilities totaled $2.3 million.
2021 financing activities provided $22.7 million, including $37.1 million of net proceeds from common-stock sales, partly offset by debt repayment and share repurchases. The company stated that available resources and anticipated collaboration and other receipts were expected to fund planned operations for at least 12 months from the March 10, 2022 report date. It may need further financing thereafter; additional capital may not be available on acceptable terms.
Material changes and unusual items
- Revenue fell 99% year over year, principally because 2020 included $23.4 million of XERMELO product revenue before its sale and 2021 had only $0.3 million of royalties and other revenue. Two customers accounted for all 2021 revenue: AC Biosciences (76%) and Taconic Farms (24%).
- R&D expense declined 64%, mainly because external sotagliflozin clinical-development costs fell following the wind-down of activities that began in March 2020, and because of lower headcount after a 2020 workforce reduction.
- The 2021 net loss increased despite lower expenses, partly reflecting the prior-year comparison: 2020 included a $132.6 million gain on the XERMELO sale and $1.0 million net gain on debt extinguishments. Interest expense declined to $0.8 million from $14.5 million in 2020 after debt repayments and exchanges.
- Cash and investments declined by $65.5 million during 2021. The company raised equity capital during the year, increasing common shares outstanding.
Pipeline, outlook and principal risks
- Sotagliflozin—heart failure: Two Phase 3 trials reported positive results on composite heart-failure and cardiovascular event endpoints. Lexicon submitted a U.S. application in December 2021, then voluntarily withdrew it in February 2022 to correct a technical issue and was preparing a resubmission. Approval and timing are uncertain. The trials’ primary endpoints were modified following early closeout; the filing describes the changes and reports analyses using original endpoints as consistent with the modified analyses.
- Sotagliflozin—type 1 diabetes: The FDA issued a complete response letter in 2019. A requested hearing process was ongoing. The drug was approved in the EU for a restricted type 1 diabetes population but had not been commercially launched. DKA risk is a notable safety and regulatory issue described in the Phase 3 data.
- LX9211: Two Phase 2 trials were underway for diabetic peripheral neuropathic pain and post-herpetic neuralgia. The filing provides no trial results or numerical completion guidance; COVID-19 had delayed initiation and affected enrollment. LX9211 has FDA Fast Track designation for diabetic peripheral neuropathic pain.
- Lexicon had no commercial sales infrastructure after the XERMELO sale and said it would need to rebuild capabilities or secure resources to launch sotagliflozin if approved. It relies on third-party manufacturers and research organizations.
- Key risks include clinical or regulatory setbacks, intense competition, commercialization and reimbursement challenges, need for additional capital, COVID-19-related operational disruption, dependence on collaborators, and intellectual-property and product-liability exposure. Invus and affiliates owned approximately 50.7% of common stock, giving them substantial control and governance rights.
- Management reported effective disclosure controls and internal control over financial reporting; the auditor gave unqualified opinions on the financial statements and internal controls. Ordinary-course legal proceedings were not expected by the company to have a material adverse effect.
Important facts for investors to verify
- Whether and when the sotagliflozin heart-failure application was resubmitted, accepted, and acted on by the FDA, and any resulting label or launch requirements.
- The status and outcomes of the FDA type 1 diabetes hearing process, including how safety concerns affect the application’s prospects.
- Phase 2 enrollment, timing, efficacy and safety updates for both LX9211 trials, and the effect of COVID-19 or other delays.
- Cash burn, financing needs and dilution: the stated runway was at least 12 months from the filing date, while 2021 operating cash use was $87.0 million.
- Commercial-launch funding and execution plans, competition, supply readiness, reimbursement prospects, and the company’s reliance on a small number of revenue sources.