Lexicon Pharmaceuticals, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statement amounts below are in millions of dollars unless noted. Lexicon is a biopharmaceutical company commercializing INPEFA and developing LX9211 and other drug candidates.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $0.162 | $0.039 | $0.502 | $0.111 |
| Operating expenses | $49.8 | $23.1 | $125.5 | $70.6 |
| Operating loss | $49.6 | $23.1 | $125.0 | $70.5 |
| Net loss | $50.5 | $23.4 | $127.4 | $71.5 |
| Net loss per share | $0.21 | $0.13 | $0.60 | $0.45 |
INPEFA sales began following U.S. approval in May 2023 and initial shipments in June; product revenue was $0.148 million for Q3 and $0.438 million for the nine-month period. Royalties and other revenue were $0.014 million and $0.064 million, respectively. Revenue remains small relative to operating costs, so the filing does not present a meaningful commercial margin.
Research and development expense was $17.6 million in Q3 and $44.1 million for nine months, up 66% and 14%, respectively. Selling, general and administrative expense was $32.2 million and $81.4 million, up 156% for both periods, primarily reflecting hiring, marketing, and other costs for the INPEFA launch. Interest expense rose to $3.9 million in Q3 and $7.7 million for nine months, largely due to Oxford borrowings; higher interest and other income partly offset this.
- Cash and investments: $218.4 million at September 30, including $21.1 million cash and cash equivalents and $197.3 million short-term investments, compared with $138.4 million at December 31, 2022.
- Cash flows, nine months: $111.3 million used in operations; $101.8 million used in investing, mainly net purchases of investments; and $188.0 million provided by financing. Cash and cash equivalents declined $25.2 million to $21.1 million.
- Debt: Oxford term loans had a $99.3 million carrying value at September 30, against $100 million funded principal. The weighted-average interest rate was 12.9% and is floating-rate. A further $25 million tranche was available at Lexicon’s option during December 2023; another $25 million tranche is subject to Oxford consent. Lexicon reported covenant compliance.
- Other balance-sheet items: Total liabilities were $137.0 million and stockholders’ equity was $139.5 million. Accumulated deficit was $1.7 billion.
Material changes and financing
Compared with 2022, losses widened as operating expenses and interest costs increased; early INPEFA product revenue did not materially offset them. In June 2023, Lexicon sold approximately 55.3 million shares at $2.60 per share in a public offering and concurrent private placement, generating approximately $139 million net proceeds. The company also received approximately $50 million net proceeds from the third Oxford loan tranche. These financings increased liquidity but added debt and diluted existing shareholders.
Outlook, risks, and contingencies
- Management expects significant continued spending on INPEFA commercialization and research and development. It stated that available unrestricted cash and investments, together with expected collaboration and other receipts, should fund currently planned operations for at least 12 months from the November 8, 2023 filing date. If funding is insufficient, Lexicon may seek additional financing; availability and terms are uncertain, and programs could be delayed or reduced.
- INPEFA’s commercial success depends on market acceptance, sales execution, coverage and reimbursement, and reliable manufacturing. Lexicon identified reliance on INPEFA and successful late-stage development of LX9211 as key business risks.
- Lexicon is preparing a Phase 2b trial of LX9211 for diabetic peripheral neuropathic pain; it also reported positive Phase 2 results in that indication and evidence of effect in a separate post-herpetic neuralgia trial.
- The FDA issued a complete response letter for sotagliflozin in type 1 diabetes. At Lexicon’s request, the FDA issued a public Notice of Opportunity for Hearing on grounds for denying approval; the hearing process was ongoing.
- Potential commitments include $5 million due upon first-patient dosing in a Phase 3 LX9211 trial under the Bristol-Myers Squibb alliance, and $4.5 million in royalties payable in installments if sotagliflozin receives type 1 diabetes approval in a major market. The filing describes ordinary-course legal proceedings as not expected to have a material adverse effect.
Key facts for investors to verify
- INPEFA prescription growth, net revenue, payer coverage, and the ability to scale commercialization against substantial launch costs.
- Cash burn and liquidity runway, including whether management’s at-least-12-month funding expectation is met.
- Oxford loan terms, floating-rate interest burden, covenant compliance, and any decision to draw additional tranches.
- Timing, funding, and clinical progress of the LX9211 Phase 2b program, and the outcome of the FDA hearing process for type 1 diabetes.
- Effects of the June equity issuance and potential future financing on share dilution; the filing reported 244.9 million common shares outstanding on November 6, 2023.