What changed in this filing

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Item 1. Financial Statements

2020-07-29 compared with 2020-04-27 · 78 added, 43 removed, 380 unchanged (24% of the section changed)

3 unchanged sentences

(In thousands, except par value)

As of March 31, As of December 31,

As of June 30, As of December 31,

Assets (unaudited)

23 unchanged sentences

Commitments and contingencies

Stockholders’ Equity:

Stockholders’ Equity/(Deficit):

Preferred stock, $ 0.01 par value;

9 unchanged sentences

( 4,843 ) ( 3,817 )

Total stockholders’ equity 54,777 117,101

Total liabilities and equity $ 370,567 $ 417,715

Total stockholders’ equity/(deficit) ( 10,687 ) 117,101

Total liabilities and equity/(deficit) $ 322,540 $ 417,715

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net product revenue $ 8,985 $ 8,672 $ 16,862 $ 15,412

4 unchanged sentences

Cost of sales (including finite-lived intangible asset amortization)

728 1,327 1,296 1,880

Research and development, including stock-based compensation of $ 1,949 , $ 1,903 , $ 4,125 and $ 3,671 , respectively

2 unchanged sentences

14,113 14,263 28,801 28,373

Impairment loss on buildings

1,600 — 1,600 —

Total operating expenses 73,742 28,227 144,179 54,912

7 unchanged sentences

Other comprehensive loss:

Unrealized gain on investments

Unrealized gain (loss) on investments

( 548 ) 53 228 98

Comprehensive loss

13 unchanged sentences

Balance at March 31, 2019 106,679 106 1,451,365 ( 1,493,374 ) 33 ( 3,817 ) ( 45,687 )

Stock-based compensation — — 3,766 — — — 3,766

Net loss — — — ( 23,018 ) — — ( 23,018 )

Unrealized gain on investments — — — — 53 — 53

Balance at June 30, 2019 106,679 $ 106 $ 1,455,131 $ ( 1,516,392 ) $ 86 $ ( 3,817 ) $ ( 64,886 )

Balance at December 31, 2019 106,679 $ 106 $ 1,462,172 $ ( 1,341,444 ) $ 84 $ ( 3,817 ) $ 117,101

5 unchanged sentences

Balance at March 31, 2020 107,711 108 1,466,604 ( 1,408,055 ) 860 ( 4,740 ) 54,777

Stock-based compensation — — 4,258 — — — 4,258

Issuance of common stock under Equity Incentive Plans 187 — — — — — —

Repurchase of common stock — — — — — ( 103 ) ( 103 )

Net loss — — — ( 69,071 ) — — ( 69,071 )

Unrealized loss on investments — — — — ( 548 ) — ( 548 )

Balance at June 30, 2020 107,898 108 1,470,862 ( 1,477,126 ) 312 ( 4,843 ) ( 10,687 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Amortization of debt issuance costs 726 708

Impairment loss on building 1,600 —

Changes in operating assets and liabilities:

4 unchanged sentences

Increase (decrease) in accounts payable and other liabilities 32,532 ( 13,842 )

Increase in deferred revenue — 9

Decrease in deferred revenue — ( 535 )

Net cash used in operating activities ( 68,352 ) ( 52,520 )

22 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.

Operating results for the six-month period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.

The accompanying condensed consolidated financial statements include the accounts of Lexicon and its wholly-owned subsidiaries.

7 unchanged sentences

Lexicon considers all highly-liquid investments with original maturities of three months or less to be cash equivalents.

As of March 31, 2020 and December 31, 2019, short-term investments consisted of U.S.

As of June 30, 2020, short-term investments consisted of U.S.

treasury bills and corporate debt securities.

As of December 31, 2019, short-term investments consisted of U.S.

treasury bills.

9 unchanged sentences

Inventory consisted of the following:

As of March 31, As of December 31,

As of June 30, As of December 31,

(in thousands)

3 unchanged sentences

Total inventory $ 3,989 $ 4,243

Accrued liabilities:

Accrued liabilities consisted of the following:

As of June 30, As of December 31,

(in thousands)

Accrued research and development services $ 47,721 $ 29,033

Accrued compensation and benefits 6,697 9,644

Short term lease liability 553 553

Other 2,367 2,921

Accrued liabilities $ 57,338 $ 42,151

Revenue Recognition:

53 unchanged sentences

Expected volatility is based on the historical volatility in the Company’s stock price.

The Company utilized the Black-Scholes valuation model for estimating the fair value of the stock option compensation granted, with the following weighted-average assumptions for options granted in the three months ended March 31, 2020 and 2019:

Expected Volatility Risk-free Interest Rate Expected Term Dividend

March 31, 2020:

June 30, 2020:

Employees 90 % 1.3 % 4 — %

Officers and non-employee directors 78 % 1.4 % 8 — %

March 31, 2019:

June 30, 2019:

Employees 63 % 2.4 % 4 — %

Officers and non-employee directors 63 % 2.6 % 8 — %

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the three months ended March 31, 2020:

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the six months ended June 30, 2020:

Options Weighted Average Exercise Price

4 unchanged sentences

Forfeited ( 298 ) 7.45

Outstanding at March 31, 2020 10,721 7.11

Exercisable at March 31, 2020 4,731 $ 9.83

During the three months ended March 31, 2020, Lexicon granted its employees annual restricted stock units.

Outstanding at June 30, 2020 10,606 7.05

Exercisable at June 30, 2020 4,972 $ 9.72

During the six months ended June 30, 2020, Lexicon granted its employees annual restricted stock units.

Outstanding employee restricted stock units vest in three to four annual installments.

The following is a summary of restricted stock units activity under Lexicon’s stock-based compensation plans for the three months ended March 31, 2020:

The following is a summary of restricted stock units activity under Lexicon’s stock-based compensation plans for the six months ended June 30, 2020:

Shares Weighted Average Grant Date

4 unchanged sentences

Forfeited ( 339 ) 4.16

Outstanding at March 31, 2020 4,824 $ 4.29

Outstanding at June 30, 2020 4,416 $ 4.27

Net Loss per Common Share:

10 unchanged sentences

2017-04, Intangibles-Goodwill and Other, which is intended to simplify the subsequent measurement of goodwill.

The pronouncement allows an entity, during its annual or interim goodwill impairment evaluation, to compare the fair value of a reporting unit with its carrying amount.

The pronouncement allows an entity, during its annual or interim goodwill

impairment evaluation, to compare the fair value of a reporting unit with its carrying amount.

An impairment charge is immediately recognized by which the carrying amount exceeds the fair value.

2 unchanged sentences

Cash and Cash Equivalents and Investments

The fair value of cash and cash equivalents and investments held at March 31, 2020 and December 31, 2019 are as follows:

As of March 31, 2020

The fair value of cash and cash equivalents and investments held at June 30, 2020 and December 31, 2019 are as follows:

As of June 30, 2020

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

3 unchanged sentences

treasury securities 110,503 312 — 110,815

Corporate debt securities 4,108 — — 4,108

Total short-term investments $ 114,611 $ 312 $ — $ 114,923

9 unchanged sentences

$ 271,575 $ 94 $ ( 10 ) $ 271,659

There were no realized losses during either of the three months ended March 31, 2020 and 2019, respectively.

There were no realized losses during either of the six months ended June 30, 2020 and 2019, respectively.

The cost of securities sold is based on the specific identification method.

8 unchanged sentences

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities.

The following table provides the fair value measurements of applicable Company assets that are measured at fair value on a recurring basis according to the fair value levels defined above as of March 31, 2020 and December 31, 2019.

Assets and Liabilities at Fair Value as of March 31, 2020

Assets and Liabilities at Fair Value as of June 30, 2020

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total cash and cash equivalents and investments $ 271,659 $ — $ — $ 271,659

The Company did not have any Level 3 assets or liabilities as of March 31, 2020 or December 31, 2019.

The Company did not have any Level 3 assets or liabilities as of June 30, 2020 or December 31, 2019.

Transfers between levels are recognized at the actual date of circumstance that caused the transfer.

4 unchanged sentences

Refer to Note 5, Debt Obligations, for fair value measurements of debt obligations.

Refer to Note 8, Impairment Loss on Buildings, for fair value measurement of fixed assets.

Debt Obligations

15 unchanged sentences

The Company determined the expected life of the debt was equal to the seven-year term of the Convertible Notes.

As of March 31, 2020, the balance of unamortized debt issuance costs was $ 0.8 million, which offsets long-term debt on the condensed consolidated balance sheets.

As of March 31, 2020, the carrying value of the Convertible Notes was $86.7 million.

The fair value of the Convertible Notes was $ 55.2 million as of March 31, 2020 and was determined using Level 2 inputs based on the indicative pricing published by certain investment banks or trading levels of the Convertible Notes, which are not listed on any securities exchange or quoted on an inter-dealer automated quotation system.

As of June 30, 2020, the balance of unamortized debt issuance costs was $ 0.7 million, which offsets long-term debt on the condensed consolidated balance sheets.

As of June 30, 2020, the carrying value of the Convertible Notes was $86.8 million.

The fair value of the Convertible Notes was $ 44.7 million as of June 30, 2020 and was determined using Level 2 inputs based on the indicative pricing published by certain investment banks or trading levels of the Convertible Notes, which are not listed on any securities exchange or quoted on an inter-dealer automated quotation system.

Mortgage Loan.

3 unchanged sentences

Lexicon incurred $ 0.4 million of debt issuance costs in connection with the mortgage loan, which offsets the current portion of long-term debt on the condensed consolidated balance sheets and are amortized as interest expense over the two-year term of the loan agreement.

As of March 31, 2020, the balance of unamortized debt issuance costs was $ 0.1 million.

The condensed consolidated balance sheet includes mortgage debt, the carrying value of the debt, of $ 10.7 million as of March 31, 2020 and is included in current portion of long-term debt.

The buildings and land that serve as collateral for the mortgage loan are included in property and equipment at $ 59.2 million and $ 2.7 million, respectively, before accumulated depreciation, as of March 31, 2020.

As of June 30, 2020, the balance of unamortized debt issuance costs was $ 0.03 million.

The condensed consolidated balance sheet includes mortgage debt, the carrying value of the debt, of $ 10.5 million as of June 30, 2020 and is included in current portion of long-term debt.

The buildings and land that serve as collateral for the mortgage loan are included in property and equipment at $ 57.6 million and $ 2.7 million, respectively, before accumulated depreciation, as of June 30, 2020.

The fair value of the loan agreement approximates its carrying value.

The fair value of the loan agreement was determined using Level 2 inputs using discounted cash flow analysis, based on the Company’s estimated current incremental borrowing rate.

In January 2020, Lexicon's wholly owned subsidiary entered into a real estate purchase and sale agreement under which Lexicon agreed to sell its facilities in The Woodlands, Texas.

Such sale is subject to normal and customary closing conditions, including a study period, which extends until June 8, 2020, during which the purchaser may conduct inspections, analyses and other studies of the property and may terminate the agreement in its discretion.

Such sale is also subject to the negotiation and execution by the parties of a leaseback agreement for a period of up to six months with respect to a portion of the property concurrently with closing.

BioPharma Term Loan.

10 unchanged sentences

The Company determined the expected life of the debt was equal to the five-year term of the BioPharma Term Loan.

As of March 31, 2020, the balance of unamortized debt issuance costs was $ 2.2 million, which offsets long-term debt on the

condensed consolidated balance sheets.

As of March 31, 2020, the carrying value of the BioPharma Term Loan was $147.8 million.

As of June 30, 2020, the balance of unamortized debt issuance costs was $ 2.0 million, which offsets long-term debt on the condensed consolidated balance sheets.

As of June 30, 2020, the carrying value of the BioPharma Term Loan was $148.0 million.

The fair value of the BioPharma Term Loan approximates its carrying value.

22 unchanged sentences

The costs of additional clinical trials will be allocated between the parties based on the nature of such clinical trials.

Under the Ipsen Agreement, Ipsen has paid Lexicon an aggregate of $ 47.2 million through March 31, 2020, consisting of $ 24.5 million in upfront payments and a $ 6.4 million milestone payment upon the acceptance of the filing submitted by Ipsen to the European Medicines Agency for XERMELO as an adjunct to somatostatin analog therapy for the long-term treatment of carcinoid syndrome, a $ 5.1 million milestone upon Ipsen’s receipt of approval from the European Commission for the marketing of XERMELO in all member states of the European Union, Norway and Iceland, a $ 3.8 million milestone upon Ipsen’s first commercial sale in Germany, a $ 3.8 million milestone upon Ipsen’s first commercial sale in the United Kingdom, a $ 1.3 million milestone upon Ipsen’s receipt of approval from Health Canada and a $ 2.3 million milestone upon Ipsen’s first commercial sale in Canada.

Under the Ipsen Agreement, Ipsen has paid Lexicon an aggregate of $ 47.2 million through June 30, 2020, consisting of $ 24.5 million in upfront payments and a $ 6.4 million milestone payment upon the acceptance of the filing submitted by Ipsen to the European Medicines Agency for XERMELO as an adjunct to somatostatin analog therapy for the long-term treatment of carcinoid syndrome, a $ 5.1 million milestone upon Ipsen’s receipt of approval from the European Commission for the marketing of XERMELO in all member states of the European Union, Norway and Iceland, a $ 3.8 million milestone upon Ipsen’s first commercial sale in Germany, a $ 3.8 million milestone upon Ipsen’s first commercial sale in the United Kingdom, a $ 1.3 million milestone upon Ipsen’s receipt of approval from Health Canada and a $ 2.3 million milestone upon Ipsen’s first commercial sale in Canada.

In addition, Lexicon is eligible to receive from Ipsen (a) up to an aggregate of approximately $ 9.6 million upon the achievement of specified regulatory and commercial launch milestones and (b) up to an aggregate of € 72 million upon the achievement of specified sales milestones.

29 unchanged sentences

If or when the constraint is determined to be resolved, the Company will re-evaluate the overall transaction price and recognize an adjustment on a cumulative catch-up basis in the period that the adjustment was evaluated.

Revenue recognized under the Agreement was $ 0.1 million and $ 2.4 million for the three months ended March 31, 2020 and 2019, respectively.

Revenue recognized under the Agreement was $0.2 million and $ 3.1 million for the six months ended June 30, 2020 and 2019, respectively.

Royalty revenue of $ 0.2 million and $ 0.1 million was recognized for the six months ended June 30, 2020 and 2019, respectively.

In November 2015, Lexicon entered into a Collaboration and License Agreement, which was subsequently amended in July 2017 (collectively, the “Sanofi Agreement”), with Sanofi for the worldwide development of Lexicon’s diabetes drug candidate sotagliflozin.

4 unchanged sentences

The parties have cooperated in the transition of responsibility for ongoing clinical studies and other activities, and each party is responsible for its own expenses associated with such transition, subject to certain exceptions.

In March 2020, Lexicon announced its plan to close out the clinical studies related to the Phase 3 development program for sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease.

In March 2020, Lexicon announced its plan to close out the clinical studies related to the Phase 3

development program for sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease.

Revenue relating to the Termination Agreement was recognized in the third quarter of 2019.

Revenue recognized under collaboration agreements with Sanofi was $ 0.1 million for the three months ended March 31, 2019.

Revenue recognized under collaboration agreements with Sanofi was $ 0.3 million for the six months ended June 30, 2019.

Impairment Loss on Buildings

In July 2020, Lexicon's wholly owned subsidiary entered into a real estate purchase and sale agreement under which Lexicon agreed to sell its facilities in The Woodlands, Texas for a purchase price of $11.5 million.

The sale agreement is subject to normal and customary closing conditions, including a study period, which extends until August 24, 2020, during which the purchaser may conduct inspections, analyses and other studies of the property and may terminate the agreement in its discretion.

Such sale is also subject to the negotiation and execution by the parties of a leaseback agreement for a period of up to nine months with respect to a portion of the property concurrently with closing.

As of June 30, 2020, the assets are classified as held and used.

The Company determined the net carrying value of the buildings and related assets exceeds the estimated purchase price, which is deemed the current fair value, by $ 1.6 million.

As a result, the Company recorded an impairment loss on the buildings in the accompanying condensed consolidated statement of comprehensive loss for the six months ended June 30, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements