LEXICON PHARMACEUTICALS, INC. 10-Q

Item 1A. Risk Factors The following risks and uncertainties are important factors that could cause actual results or events to differ materially from those indicated by forward-looking statements. The factors described below are not the only ones we face and additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Risks Related to Our Business and Industry • We face business disruption and related risks resulting from the outbreak of the novel coronavirus 2019 (COVID-19), including significant restrictions in the ability of our field commercial and medical teams to interact with third parties, delays in the enrollment of ongoing clinical trials and the initiation of planned clinical trials and other operational impacts, each of which could have a material adverse effect on our business. • 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 our ability to obtain regulatory approval in the United States for sotagliflozin in type 1 diabetes. If we 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 our ability to effectively close out the clinical trials included in the Phase 3 clinical development program for sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease in a timely manner. If we fail to effectively close out such program on the anticipated timelines, our cash position 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 any 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. 24 • 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 any products that we or our collaborators may develop. • If we are unable to obtain adequate coverage and reimbursement from third-party payers for any products that we or our collaborators may develop, our revenues and prospects for profitability will suffer. • We may not be able to manufacture 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 any 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 any products that we or our collaborators may develop. Risks Related to Our Capital Requirements and Financial Results • 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 adversely affected. Risks Related to Our Relationships with Third Parties • We are significantly dependent upon our collaborations with Ipsen 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 a limited distribution network of specialty pharmacies and specialty distributors for distribution of XERMELO in fulfillment of prescriptions 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. 25 • 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. Risks Related to Our Intellectual Property • 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. Risks Related to Employees and Facilities Operations • 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. Risks Related to Environmental and Product Liability • 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. Risks Related to Our Common Stock • 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. 26 • 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. For additional discussion of the risks and uncertainties that affect our business, see “Item 1A. Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission.