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Item 1A. Risk Factors

2021-03-12 compared with 2020-03-12 · 189 added, 216 removed, 293 unchanged (58% of the section changed)

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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.

Risk Factor Summary

Below is a summary of the material risks to our business, operations and the investment in our common stock.

This summary does not include all of the risks we face and you should carefully review and consider the full discussion of our risk factors below, together with the other information in this annual report on Form 10-K.

Risks Related to Our Business and Industry

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 expect that a significant portion of our total revenues for the next several years will be attributable to sales of XERMELO in the United States, but we cannot be certain that XERMELO will be commercially successful.

Our future sales of XERMELO will depend on numerous factors, including:

• the number of patients with carcinoid syndrome diarrhea who are inadequately controlled by SSA therapy, as well as the number of newly diagnosed carcinoid syndrome diarrhea patients;

• competition from SSA therapies, radiopharmaceutical products and any additional products for the treatment of carcinoid syndrome diarrhea that may be approved by the FDA in the future;

• the safety profile of XERMELO, including whether previously unknown side effects or increased incidence or severity of known side effects as compared to those seen during development are identified with the commercial use of XERMELO;

• the effectiveness of our commercial strategy for marketing XERMELO and our execution of that strategy, including our pricing strategy and the effectiveness of our efforts to obtain and maintain adequate third-party reimbursement;

• the acceptance of XERMELO by patients, the medical community and third-party payers;

• our ability to meet the demand for commercial supplies of XERMELO and to maintain and successfully monitor commercial manufacturing arrangements for XERMELO with third-party manufacturers to ensure they meet our standards and those of the FDA, which extensively regulates and monitors pharmaceutical manufacturing facilities.

While we believe that XERMELO has a competitive commercial profile, our current estimates of the revenues that XERMELO could generate in future periods may change based upon the above factors, and could prove to be incorrect.

If our revenues, market share or other indicators of market acceptance of XERMELO fail to meet the expectations of investors or public market analysts, the market price of our common stock could decline.

In addition, if one or more of the factors above negatively affects XERMELO sales, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.

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 upon such regulatory approval, our business will suffer and our stock price will likely decline.

The FDA issued a complete response letter in March 2019 regarding our application for regulatory approval to market sotagliflozin for type 1 diabetes in the United States and has confirmed that position in denying two appeals of the complete response letter in November 2019 and March 2020.

We cannot offer any assurances that the FDA will grant marketing approval for sotagliflozin in type 1 diabetes, on acceptable timelines or at all.

Furthermore, regulatory approval in the United States for sotagliflozin in type 1 diabetes, even if obtained, may limit the type of patients in which sotagliflozin may be used, such as on the basis of body mass index as in the European Union, or otherwise require specific warning or labeling language or a formal risk evaluation and mitigation strategy, or REMS, any of which may reduce the commercial potential of sotagliflozin in type 1 diabetes.

Even if approved, our existing capital resources and commercial infrastructure are insufficient to commercially launch sotagliflozin for type 1 diabetes and we may not be successful in obtaining such resources, building such infrastructure or otherwise effectively commercializing sotagliflozin for type 1 diabetes.

Should we fail to obtain regulatory approval in the United States for sotagliflozin in type 1 diabetes, or fail to successfully commercialize sotagliflozin upon such regulatory approval, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.

We depend heavily on our ability to successfully complete Phase 3 clinical development of sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease, and obtain regulatory approvals for sotagliflozin in those indications.

If we fail to successfully complete such Phase 3 clinical development and obtain such regulatory approvals, or fail to successfully commercialize sotagliflozin for type 2 diabetes, heart failure and chronic kidney disease upon such regulatory approvals, our business will suffer and our stock price will likely decline.

We are conducting a comprehensive Phase 3 development program for sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease.

Our existing capital resources are insufficient to complete the two long-term outcomes studies included in such Phase 3 development program that are designed to demonstrate benefits in heart failure and chronic kidney disease.

Although we seek to collaborate with another pharmaceutical or biotechnology company with respect to the development and commercialization of sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease under terms which would provide additional funding for the completion of the Phase 3 development program, we may be unable to successfully enter into any such collaborative arrangement on reasonable terms, or at all.

If we are unable to enter into any such collaborative arrangement, or if we are otherwise unable to raise sufficient additional capital, we will likely elect to, and may be forced to, delay, reduce or wind down the long-term outcomes studies included in such Phase 3 development program.

Even if such additional funding is secured, we cannot offer any assurances or predict with any certainty that such Phase 3 development will be successfully completed, that positive clinical data will be obtained from such Phase 3 development efforts or that regulatory authorities will grant marketing approval for sotagliflozin in type 2 diabetes, heart failure or chronic kidney disease, in any such case on the expected timelines.

Furthermore, regulatory approvals for sotagliflozin, even if obtained, may limit the type of patients in which sotagliflozin may be used for type 2 diabetes, heart failure or chronic kidney disease or otherwise require specific warning or labeling language, each of which may reduce the commercial potential of sotagliflozin in those indications.

We cannot offer any assurances that the Phase 3 clinical development program will demonstrate a competitive commercial profile for sotagliflozin in type 2 diabetes, heart failure or chronic kidney disease.

Even if approved with a competitive commercial profile, our existing resources and commercial infrastructure are insufficient to commercially launch sotagliflozin for type 2 diabetes, heart failure and chronic kidney disease and we or any potential collaborator may be unsuccessful in obtaining such resources, building such infrastructure or otherwise effectively commercializing sotagliflozin for type 2 diabetes, heart failure or chronic kidney disease.

Should we or any potential collaborator fail to obtain regulatory approvals for sotagliflozin in those indications or fail to successfully commercialize sotagliflozin upon such regulatory approvals, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.

• 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.

• We depend on our ability to gain alignment with certain regulatory authorities on our regulatory strategy for sotagliflozin in heart failure.

If we fail to effectively gain such alignment, our business will suffer and our stock price will likely decline.

• 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.

• Our competitors may develop products that impair the value of any products that we or our collaborators may develop.

• We face business disruption and related risks resulting from the outbreak of the novel coronavirus, or COVID-19, including delays in the enrollment of ongoing clinical trials and other operational impacts, each of which could have a material adverse effect on our business.

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 research and development programs.

• We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.

Risks Related to Our Relationships with Third Parties

• We depend on our ability to establish a strategic collaboration for the commercialization of sotagliflozin in heart failure.

If we are unable to establish such a collaboration, sotagliflozin may not be commercialized in heart failure, our business will suffer and our stock price will likely decline.

• We depend on our ability to establish collaborations with pharmaceutical and biotechnology companies for the development and commercialization of our other drug candidates.

If we are unable to establish such collaborations, or if pharmaceutical products are not successfully and timely developed and commercialized under such collaborations, our opportunities to generate revenues from our other drug candidates will be greatly reduced.

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.

Risks Related to Our Employees and Facilities

• The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to operate and expand our operations.

Risks Related to Environmental and Product Liability

• 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.

and its 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 its stockholders’ agreement relating to the membership of our board of directors, which provides Invus with substantial influence over significant corporate matters.

Risks Related to Our Business and Industry

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.

In order to obtain regulatory approvals for the commercial sale of any products that we or our collaborators may develop, we or our collaborators are required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of our drug candidates.

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A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after achieving positive results in earlier trials.

Although Phase 2 proof-of-concept clinical trials of sotagliflozin in type 2 diabetes patients were positive, we cannot assure you that the Phase 3 development program for sotagliflozin being conducted in type 2 diabetes, heart failure and chronic kidney disease will yield positive results.

Negative or inconclusive results from a nonclinical study or a clinical trial could cause us, our collaborators or the FDA or other equivalent foreign regulatory agencies to terminate a nonclinical study or clinical trial or require that we or our collaborators repeat or modify it.

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Clinical trials must be conducted in accordance with the FDA’s current Good Clinical Practices.

The FDA and these institutional review boards have authority to oversee our and our collaborators’ clinical trials, and the FDA may require large

numbers of subjects or patients.

The FDA and these institutional review boards have authority to oversee our and our collaborators’ clinical trials, and the FDA may require large numbers of subjects or patients.

In addition, we or our collaborators must manufacture, or contract for the manufacture of, the drug candidates that we use in our clinical trials under the FDA’s current Good Manufacturing Practices.

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Moreover, clinical trials may not show our drug candidates to be both safe and effective.

Thus, the FDA and other regulatory authorities may not approve any additional drug candidates that we develop for any indication or may limit the approved indications or impose other conditions.

Thus, the FDA and other regulatory authorities may not approve any drug candidates that we develop for any indication or may limit the approved indications or impose other conditions.

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.

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These agencies also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval.

We depend on our ability to gain alignment with certain regulatory authorities on our regulatory strategy for sotagliflozin in heart failure.

If we fail to effectively gain such alignment, our business will suffer and our stock price will likely decline.

We have reported positive results from two Phase 3 clinical trials evaluating the effect of sotagliflozin on long-term outcomes related to cardiovascular death and heart failure in approximately 10,500 and 1,200 patients, respectively.

Both clinical trials were initiated by Sanofi and transitioned to us in connection with the termination of our collaboration, following which both clinical trials were closed out early beginning in March 2020.

In connection with the early close-out of the studies, the primary endpoints were modified so that, among other things, the events of cardiovascular death, hospitalizations for heart failure and urgent visits for heart failure were determined by clinical investigators rather than by independent adjudication.

The FDA has provided feedback that the results of the two clinical trials can support the filing of an application for regulatory approval for an indication to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent visits for heart failure in patients with type 2 diabetes with either worsening heart failure or additional risk factors for heart failure.

However, we cannot offer any assurances that other regulatory authorities, including the European Medicines Agency, will accept the determination of such events without independent adjudication or will not raise other concerns relating to the early close out of the studies.

Should such other regulatory authorities require independent adjudication of such events or otherwise object to our strategy of seeking regulatory approval of sotagliflozin in heart failure on the basis of the studies, as closed out early, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.

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.

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• sufficient third-party coverage or reimbursement.

If we are unable to maintain an effective sales force, marketing infrastructure and distribution capabilities, we will not be able to successfully commercialize any products that we or our collaborators may develop.

In order to successfully commercialize any product that we or our collaborators may develop, we or they must build or maintain an effective commercialization infrastructure supporting such product, including sales force, marketing organization and distribution capabilities.

If we are unable to reestablish an effective sales force, marketing infrastructure and distribution capabilities, we will not be able to successfully commercialize any products that we or our collaborators may develop.

In order to successfully commercialize any product that we or our collaborators may develop, we or they must establish or maintain an effective commercialization infrastructure supporting such product, including sales force, marketing organization and distribution capabilities.

We no longer maintain a commercialization infrastructure following our sale of XERMELO and related assets to TerSera and would need to reestablish such capabilities in order to commercialize any future products.

Factors that may hinder efforts to effectively establish, manage and maintain such infrastructure for products that we or our collaborators may develop include:

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The conduct of such a clinical trial could be expensive and result in delays in the commercialization of our drug candidates.

Third-party payers are challenging the prices charged for medical products and services, and many third-party payers limit reimbursement for newly approved health care

Third-party payers are challenging the prices charged for medical products and services, and many third-party payers limit reimbursement for newly approved health care products.

In particular, third-party payers may limit the indications for which they will reimburse patients who use any products that we or our collaborators may develop.

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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.

Other than XERMELO, our drug candidates have been manufactured in relatively small quantities for nonclinical and clinical trials.

Our drug candidates have been manufactured in relatively small quantities for nonclinical and clinical trials.

If any of these drug candidates are approved by the FDA or other regulatory agencies for commercial sale, we or our collaborators will need to manufacture them in larger quantities.

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The laws that may affect our ability to operate include, without limitation:

• the federal Anti-Kickback Law, which constrains our marketing practices, educational programs, pricing policies, relationships with healthcare providers or other entities, and other business activities, by prohibiting, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

• the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies, relationships with healthcare providers or other entities, and other business activities, by prohibiting, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

• federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent;

• federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

• state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

• the Foreign Corrupt Practices Act, a United States law which regulates certain financial relationships with foreign government officials (which could include, for example, certain medical professionals);

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We also anticipate pricing pressures in connection with the sale of products we or our collaborators may develop due to the increasing influence of health maintenance organizations and additional legislative proposals.

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.

Many companies in our industry have received a governmental request for documents and information relating to drug pricing and patient support programs.

We may become subject to similar requests, which would require us to incur significant expense and result in distraction for our management team.

Additionally, to the extent there are findings, or even allegations, of improper conduct on the part of our company, such findings could further harm our business, reputation and/or prospects.

It is possible that such inquiries could result in negative publicity or other negative actions that could harm our reputation, changes in our product pricing and distribution strategies, reduced demand for our approved products and/or reduced reimbursement of approved products, including by federal health care programs such as Medicare and Medicaid and state health care programs.

Our competitors may develop products that impair the value of any products that we or our collaborators may develop.

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Each of those products act through SGLT2, one of the targets of sotagliflozin.

We expect that our principal competition for sotagliflozin for the treatment of heart failure would include such selective SGLT2 inhibitors which have already received or may gain regulatory approval for the treatment of heart failure, as well as angiotensin-converting enzyme, or ACE, inhibitors and the combination drug sacubitril/valsartan, currently marketed for the treatment of heart failure by Novartis.

In addition, there may be drug candidates of which we are not aware at an earlier stage of development that may compete with our drug candidates.

We face business disruption and related risks resulting from the recent outbreak of the novel coronavirus 2019 (COVID-19), which could have a material adverse effect on our business.

Our commercialization efforts and development programs could be disrupted and materially adversely affected by the recent outbreak of COVID-19.

As a result of measures imposed by the governments in affected regions, many commercial activities, businesses and schools have been suspended as part of quarantines and other measures intended to contain this outbreak.

The spread of COVID-19 from China to other countries has resulted in the International Health Regulations Emergency Committee of the World Health Organization declaring the outbreak of COVID-19 as a “public health emergency of international concern,” and the World Health Organization characterizing COVID-19 as a pandemic.

While the COVID-19 outbreak may still be in early stages, international stock markets have begun to reflect the uncertainty associated with the potential economic impact of the outbreak and the significant declines in the Dow Industrial Average at the end of February and in March 2020 has been largely attributed to the effects of COVID-19.

We are still assessing the potential impact COVID-19 may have on our ability to effectively conduct our commercialization efforts and development programs and otherwise conduct our business operations as planned, but there can be no assurance that we will be able to avoid part or all of any impact from the spread of COVID-019 or its consequences, including downturns in business sentiment generally or in our industry and business in particular.

We face business disruption and related risks resulting from the outbreak of the novel coronavirus, or COVID-19, including delays in the enrollment of ongoing clinical trials and other operational impacts, each of which could have a material adverse effect on our business.

Our business has been disrupted and could be materially adversely affected by the COVID-19 pandemic.

In response to the ongoing pandemic and resulting state and local restrictions, we implemented work-from-home policies for all employees except certain key essential members involved in business-critical activities.

The effects of our work-from-home policies may negatively impact productivity, disrupt our business and delay our ongoing research and development efforts, the magnitude of which will depend, in part, on the length and severity of the pandemic and other limitations on our ability to conduct our business in the ordinary course.

Clinical site initiation and patient enrollment may be delayed due to concerns for patient safety and prioritization of healthcare resources toward the COVID-19 pandemic.

Some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, our ability to recruit and retain patients, principal investigators and site staff (who as healthcare providers may have heightened exposure to COVID-19) may be hindered, which would adversely impact our clinical trial operations.

For example, due to the impact of the COVID-19

pandemic, we delayed initiation of our Phase 2 clinical trials of LX9211 and enrollment in such trials continue to be negatively affected by the pandemic.

In addition, the pandemic could cause significant disruption in the operations of third party manufacturers and research and development organizations upon whom we rely and, as a result, could severely impact our business operations.

These and similar, and perhaps more severe, disruptions in our operations due to the COVID-19 pandemic could negatively impact our business, operating results and financial condition.

While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, the pandemic has also resulted in disruption of global financial markets.

This disruption, if sustained or recurrent, could make it more difficult for us to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The global COVID-19 pandemic continues to rapidly evolve.

The ultimate impact of the COVID-19 pandemic or a similar health pandemic or epidemic is highly uncertain and subject to change.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or the global economy as a whole.

These effects could have a material impact on our operations.

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.

We will need additional capital in the future and, if it is unavailable, we will be forced to delay, reduce or eliminate our research and 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.

As of December 31, 2020, we had $152.3 million in cash, cash equivalents and investments.

We anticipate that our existing capital resources and the cash and revenues we expect to derive from product revenues, collaborations and other sources will enable us to fund our currently planned operations for at least the next 12 months.

We anticipate that our existing capital resources and the cash and revenues we expect to derive from collaborations and other sources will enable us to fund our currently planned operations for at least the next 12 months.

However, we caution you that we may generate less cash and revenues or incur expenses more rapidly than we currently anticipate.

Our currently planned operations for the next twelve months include the continued commercialization of XERMELO in the United States and the continued nonclinical and clinical development of telotristat ethyl, sotagliflozin, LX9211 and our other drug candidates.

Our currently planned operations for the next twelve months include the continued nonclinical and clinical development of LX9211, sotagliflozin and our other drug candidates.

Although difficult to accurately predict, the amount of our future capital requirements will be substantial and will depend on many factors, including:

• the success of our sales, marketing, distribution and other commercialization activities for XERMELO in the United States and the revenues we generate from such activities;

• the success of Ipsen’s sales, marketing, distribution and other commercialization activities for XERMELO outside of the United States and Japan and our receipt of any milestone payments and royalties;

• our ability to obtain regulatory approval for the marketing and sale of sotagliflozin for type 1 diabetes in the United States;

• the timing, progress and results of our clinical trials of telotristat ethyl, sotagliflozin, LX9211 and our other drug candidates and our ability to obtain necessary regulatory approvals based on such clinical trials;

• our success in establishing new collaborations and licenses, including for the development and commercialization of sotagliflozin;

• the timing, progress and results of our clinical trials of LX9211, sotagliflozin and our other drug candidates and our ability to obtain necessary regulatory approvals based on such clinical trials;

• our success in establishing new collaborations and licenses, including for the commercialization of sotagliflozin in heart failure;

• the amount and timing of our research, development and commercialization expenditures;

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If we raise additional capital by issuing equity securities, our then-existing stockholders will experience dilution and the terms of any new equity securities may have preferences over our common stock.

The affirmative and restrictive covenants and the pledge of substantially all of our assets as collateral under our existing term loan with BioPharma Credit PLC and BioPharma Credit Investments IV Sub LP, or the BioPharma Term Loan, restrict our ability to raise additional capital by issuing debt securities.

We cannot be certain that additional financing, whether debt or equity, will be available in amounts or on terms acceptable to us, if at all.

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We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.

We have incurred net losses since our inception, including an aggregate net loss of $113.4 million for the three years ended December 31, 2019.

We have incurred aggregate net losses since our inception, including an aggregate net loss of $49.0 million for the three years ended December 31, 2020.

As o f December 31, 2020, we had an accumulated deficit of $1.4 billion.

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The size of our net losses will depend, in part, on the rate of decline or growth in our revenues and on the amount of our expenses.

We expect to continue to incur significant expenses over the next several years as we expect to make significant investments in the commercialization of XERMELO in the United States and the continued nonclinical and clinical development of telotristat ethyl, sotagliflozin, LX9211 and our other drug candidates.

Prior to the commercial launch of XERMELO, we derived substantially all of our revenues from strategic collaborations and other research and development collaborations and technology licenses.

Future revenues from our commercialization of XERMELO are uncertain because they depend on a number of factors, including market acceptance of XERMELO, the success of our sales, marketing, distribution and other commercialization activities and the cost and availability of reimbursement for XERMELO.

We expect to continue to

incur significant expenses over the next several years as we expect to make significant investments in the continued nonclinical and clinical development of LX9211, sotagliflozin and our other drug candidates.

We have derived a substantial portion of our revenues from strategic collaborations and other research and development collaborations and technology licenses.

Future revenues from our existing collaborations are uncertain because they depend, to a large degree, on the achievement of milestones and payment of royalties we earn from any products developed or commercialized under the collaborations.

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Because of these and other factors, our operating results have fluctuated in the past and are likely to do so in the future, and we do not believe that period-to-period comparisons of our operating results are a good indication of our future performance.

We expect to spend significant amounts to fund our commercialization activities with respect to XERMELO in the United States and our planned nonclinical and clinical development of telotristat ethyl, sotagliflozin, LX9211 and our other drug candidates.

We expect to spend significant amounts to fund our planned nonclinical and clinical development of LX9211, sotagliflozin and our other drug candidates.

As a result, we will need to generate substantial additional revenues to achieve profitability in future periods.

Even if we do achieve profitability in future periods, we may not be able to sustain or increase such profitability on a quarterly or annual basis.

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.

Our operating results have fluctuated 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.

Our operating results have fluctuated in the past and are likely to fluctuate in the future.

A number of factors, many of which we cannot control, could subject our operating results to volatility, including:

• our ability to successfully commercialize XERMELO in the United States and the amount of revenues generated from such commercialization efforts;

• our ability to obtain regulatory approval of sotagliflozin for type 1 diabetes in the United States;

• the success of our ongoing nonclinical and clinical development efforts;

• the timing and amount of expenses incurred with respect to our nonclinical and clinical development and commercialization efforts;

• our success in establishing new collaborations and technology licenses, including for the development and commercialization of sotagliflozin, and the timing and financial terms of such arrangements;

• the success rate of our development efforts leading to opportunities for new collaborations and licenses, as well as milestone payments and royalties;

• the success of our ongoing nonclinical and clinical development efforts and our ability to obtain regulatory approval of our drug candidates as a result of such efforts;

• the timing and amount of expenses incurred with respect to our nonclinical and clinical development efforts;

• our success in establishing new collaborations and technology licenses, including for the commercialization of sotagliflozin in heart failure, and the timing and financial terms of such arrangements;

• the timing and willingness of our collaborators to commercialize pharmaceutical products that would result in milestone payments and royalties;

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Due to the likelihood of fluctuations in our revenues and expenses, 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.

We have incurred $245.2 million of indebtedness.

Although the affirmative and restrictive covenants and the pledge of substantially all of our assets as collateral under the BioPharma Term Loan restrict our ability to obtain additional debt

financing, we could in the future incur additional indebtedness beyond such amount.

Our substantial debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

• requiring us to dedicate a substantial portion of cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital, capital expenditures, product commercialization and development efforts and other general corporate purposes;

We have indebtedness that may limit cash flow available to invest in the ongoing needs of our business.

We have incurred $11.6 million of indebtedness and we could in the future incur additional indebtedness beyond such amount.

Our debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, inc luding:

• requiring us to dedicate a significant portion of cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund our research and development efforts and other general corporate purposes;

• increasing our vulnerability to adverse changes in general economic, industry and market conditions;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete.

• placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents and marketable securities and funds from external sources.

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Funds from external sources may not be available on acceptable terms, if at all.

In addition, a failure to comply with the covenants under our existing debt instruments could result in an event of default under those instruments.

In the event of an acceleration of amounts due under our debt instruments as a result of an event of default, including upon the occurrence of an event that would reasonably be expected to have a material adverse effect on our business, operations, properties, assets or condition or a failure to pay any amount due, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and the lenders could seek to enforce their security interests in the collateral securing such indebtedness.

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.

Our obligations under the BioPharma Term Loan are secured by a first lien security interest in substantially all of our assets.

In addition, the BioPharma Term Loan requires that we comply with certain affirmative and restrictive covenants, including among other things, covenants restricting dispositions, fundamental changes in our business, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated debt, any of which could restrict our business and operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.

Our failure to comply with any of these covenants could result in a default under the BioPharma Term Loan, which could permit the lenders to declare all or part of any outstanding borrowings to be immediately due and payable.

If we are unable to repay those amounts, the lenders could enforce the security interest granted to them to secure that debt, which would seriously harm our business.

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.

We have entered into a collaboration agreement with Ipsen for the commercialization of XERMELO outside of the United States and Japan.

We have also established collaborative arrangements with other pharmaceutical and biotechnology companies with respect to the research, development and commercialization of drug candidates from other programs.

We have derived a substantial majority of our revenues to date from these strategic collaborations and other research and development collaborations and technology licenses.

Future revenues from our existing collaborations depend upon the achievement of milestones and payment of royalties we earn from any future products developed under the collaborations.

If our relationship terminates with any of our collaborators, as occurred with our terminated collaboration agreement with Sanofi, our reputation in the business and scientific community may suffer and revenues will be negatively impacted to the extent such losses are not offset by additional collaboration agreements.

If milestones are not achieved under our collaborations or our collaborators are unable to successfully develop and commercialize products from which milestones and royalties are payable, we will not earn the revenues contemplated by those collaborations.

We have limited or no control over the resources that any collaborator may devote to the development and commercialization of products under our alliances.

We depend on our ability to establish a strategic collaboration for the commercialization of sotagliflozin in heart failure.

If we are unable to establish such a collaboration, sotagliflozin may not be commercialized in heart failure, our business will suffer and our stock price will likely decline.

Our existing resources and infrastructure are insufficient for the commercialization of sotagliflozin for heart failure.

Although we seek to collaborate with another pharmaceutical or biotechnology company or companies under terms which would enable reliance on their resources and infrastructure, in whole or in part, for those commercialization efforts and provide additional funding to support our own activities in support of such efforts, including seeking regulatory approvals, we may be unable to successfully enter into any such collaborative arrangement on reasonable terms, or at all.

If we are unable to enter into any such collaborative arrangement, or if we are otherwise unable to raise sufficient additional capital, we will minimally require substantial additional resources to pursue and may elect or be forced to forego pursuit of regulatory approval for and commercialization of sotagliflozin in heart failure.

We depend on our ability to establish collaborations with pharmaceutical and biotechnology companies for the development and commercialization of our other drug candidates.

We have derived a substantial majority of our revenues to date from collaborative arrangements with other pharmaceutical and biotechnology companies for the research, development and commercialization of our drug candidates and other research and development collaborations and technology licenses.

Future revenues from our existing and future collaborations depend upon the achievement of milestones and payment of royalties we earn from any future products developed under those arrangements.

If our relationship terminates with any collaborator, as occurred with our collaboration with Sanofi, our reputation in the business and scientific community may suffer and revenues will be negatively impacted to the extent such losses are not offset by additional collaborations or strategic alliances.

If milestones are not achieved or our collaborators are unable to successfully develop and commercialize products from which milestones and royalties are payable, we will not earn the revenues contemplated by those arrangements.

We have limited or no control over the resources that any third party may devote to the development and commercialization of products under our collaborations.

Any of our present or future collaborators may not perform their obligations as expected.

These collaborators may breach or terminate their agreements with us or otherwise fail to conduct research,

development or commercialization activities successfully or in a timely manner.

Further, our collaborators may elect not to develop pharmaceutical products arising out of our collaborative arrangements or may not devote sufficient resources to the development, regulatory approval, manufacture, marketing or sale of these products.

If any of these events occurs, we may not receive collaboration revenue or otherwise realize anticipated benefits from such collaborations, our product development efforts may be delayed and our business, operating results and financial condition could be adversely affected.

Our collaborators may breach or terminate their agreements with us or otherwise fail to conduct research, development or commercialization activities successfully or in a timely manner.

Further, our collaborators may elect not to develop pharmaceutical products arising out of our arrangements or may not devote sufficient resources to the development, regulatory approval, manufacture, marketing or sale of these products.

If any of these events occurs, we may not receive revenue or otherwise realize anticipated benefits from such collaborations, our product development efforts may be delayed and our business, operating results and financial condition could be adversely affected.

Conflicts with our collaborators could jeopardize the success of our collaborative agreements and harm our product development efforts.

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Some of our collaborators are also potential competitors or may become competitors in the future.

Our collaborators could develop competing products, preclude us from entering into collaborations with their competitors or terminate their agreements with us prematurely.

Our collaborators could develop competing products, preclude

us from entering into collaborations with their competitors or terminate their agreements with us prematurely.

Any of these events could 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 network of third-party manufacturers to manufacture and supply XERMELO for commercial sale.

As a result of our reliance on these third-party manufacturers and suppliers, including sole source suppliers for certain steps in the manufacture of XERMELO, we could be subject to significant supply disruptions.

Our supply chain for sourcing raw materials and manufacturing drug product ready for distribution is a multi-step endeavor.

Third-party contract manufacturers procure raw materials, convert these raw materials into API, and then convert the API into final dosage form.

Establishing and managing this supply chain requires a significant financial commitment and the creation and maintenance of numerous third party contractual relationships.

Although we attempt to effectively manage the business relationships with companies in our supply chain, we do not have control over their operations.

We require our own commercial supply of XERMELO for sale in the United States, and are required under our collaboration agreement to supply Ipsen’s commercial requirements of XERMELO in the European Union and other territories outside of the United States and Japan.

We currently rely, and expect to continue to rely, on sole source third-party manufacturers to produce final drug product and package and label XERMELO.

While we have identified and expect to qualify and engage back-up third-party manufacturers as additional or alternative suppliers for the production of final drug product and packaging and labeling of XERMELO, we currently do not have such arrangements in place.

Moreover, some of these alternative manufacturers will need to be approved by the FDA before we can use them for manufacturing XERMELO.

It is also possible that supplies of materials that cannot be second-sourced can be managed with inventory planning.

There can be no assurance, however, that failure of any of our sole source third-party manufacturers to meet our and Ipsen’s commercial demands for XERMELO in a timely manner, or our failure to engage qualified additional or back-up suppliers for the production of final drug product and packaging and labeling of XERMELO, would not have a material adverse effect on commercialization of XERMELO and our business.

Supply disruptions may result from a number of factors, including shortages in product raw materials, labor or technical difficulties, regulatory inspections or restrictions, shipping or customs delays or any other performance failure by any third-party manufacturer on which we rely.

Any supply disruptions could disrupt sales of XERMELO, which could have a material adverse impact on our business.

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 a single third-party logistics provider for shipping and warehousing of our commercial supply of XERMELO and a limited distribution network of specialty pharmacies and specialty distributors for dispensation of XERMELO to patients in fulfillment of prescriptions in the United States.

Although our third-party logistics provider stores our commercial supply of XERMELO at two separate warehouses, the use of a single third-party logistics provider increases

the risk that a fire or damage from another type of disaster at either of the warehouses may result in a disruption of our commercialization efforts.

Our use of a limited distribution network of specialty pharmacies and specialty distributors for dispensation of XERMELO involves certain additional risks, including, but not limited to, risks that these specialty pharmacies and specialty distributors will:

• not provide us accurate or timely information regarding their inventories, the number of patients who are using XERMELO or complaints about XERMELO;

• reduce or discontinue their efforts to sell or support or otherwise not effectively sell or support XERMELO;

• not devote the resources necessary to sell XERMELO in the volumes and within the time frames that we expect;

• be unable to satisfy their financial obligations to us;

• cease operations.

If our third-party logistics provider or any of our specialty pharmacies or specialty distributors do not fulfill their contractual obligations to us, or refuse or fail to adequately distribute XERMELO and serve patients, or the agreements are terminated without adequate notice, shipments of XERMELO, and associated revenues, would be adversely affected.

In addition, we expect that it may take a significant amount of time if we were required to change our third-party logistics provider or any of our specialty pharmacies or specialty distributors.

We rely on third parties to carry out drug development activities.

We rely on third parties to carry out our nonclinical studies and clinical trials, which may harm or delay our research and development efforts.

We rely on clinical research organizations and other third-party contractors to carry out many of our drug development activities, including the performance of nonclinical laboratory and animal tests under the FDA’s current Good Laboratory Practices regulations and the conduct of clinical trials of our drug candidates in accordance with protocols we establish.

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Such a failure by these third parties could significantly impair our ability to develop and commercialize the affected drug candidates.

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.

We currently do not have the manufacturing capabilities or experience necessary to produce materials for nonclinical studies, clinical trials or commercial sales and intend in the future to continue to rely on collaborators and third-party contractors to produce such materials.

We lack the capability to manufacture materials for nonclinical studies, clinical trials and rely on third parties to manufacture our drug candidates, which may harm or delay our research and development efforts.

We currently do not have the manufacturing capabilities or experience necessary to produce materials for nonclinical studies or clinical trials and intend in the future to continue to rely on collaborators and third-party contractors to produce such materials.

We will rely on selected manufacturers to deliver materials on a timely basis and to comply with applicable regulatory requirements, including the current Good Manufacturing Practices of the FDA, which relate to manufacturing and quality control activities.

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In addition, there are a limited number of manufacturers that operate under the FDA’s current Good Manufacturing Practices and that are capable of producing such materials, and we may experience difficulty finding manufacturers with adequate capacity for our needs.

If we are unable to contract for the production of sufficient quantity and quality of materials on acceptable terms, our product development and commercialization efforts may be delayed.

If we are unable to contract for the production of sufficient quantity and quality of materials on acceptable terms, our product development efforts may be delayed.

Moreover, noncompliance with the FDA’s current Good Manufacturing Practices can result in, among other things, fines, injunctions, civil and criminal penalties, product recalls or seizures, suspension of production, failure to obtain marketing approval and withdrawal, suspension or revocation of marketing approvals.

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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.

Our success will depend in part upon our ability to obtain patents and maintain adequate protection of the intellectual property related to our products and technologies.

Our commercial success will depend in part upon our ability to obtain patents and maintain adequate protection of the intellectual property related to our products and technologies.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, are generally uncertain and involve complex legal and factual questions.

We will be able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our products and technologies are covered by valid and enforceable patents or other intellectual property rights, or are effectively maintained as trade secrets or otherwise protected from disclosure by non-disclosure agreements.

We will continue to apply for patents covering our products and technologies as, where and when we deem appropriate.

However, pending patent

applications do not provide protection against competitors because they are not enforceable until they issue as patents.

However, pending patent applications do not provide protection against competitors because they are not enforceable until they issue as patents.

Further, the disclosures contained in our current and future patent applications may not be sufficient to meet statutory requirements for patentability and our applications may fail to result in issued patents.

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If anyone infringes upon our or our collaborators’ patent rights, enforcing these rights may be difficult, costly and time-consuming and, as a result, it may not be cost-effective or otherwise expedient to pursue litigation to enforce those patent rights.

Our patents may be challenged by third parties as invalid or unenforceable under U.S.

or foreign laws, or they may be infringed by third parties.

Further, as we customarily assess whether to apply for new patents based on our ongoing research and development activities, this assessment and the filing for additional patent protection may require significant expenditures and therefore may not be commercially practicable.

Our patents and other intellectual property rights may be challenged by third parties and may be invalidated, cancelled or held unenforceable under U.S.

or foreign laws, or they may be infringed or misappropriated by third parties.

As a result, we may be involved in the defense and enforcement of our patent or other intellectual property rights in a court of law, U.S.

Patent and Trademark Office inter partes review or reexamination proceeding, foreign opposition proceeding or related legal and administrative proceeding in the United States and elsewhere.

The costs of defending our patents or enforcing our proprietary rights in post-issuance administrative proceedings and litigation may be substantial and the outcome can be uncertain.

The costs of defending our patents or enforcing our other intellectual property rights, such as trademarks and trade secrets, in post-issuance administrative proceedings and litigation may

be substantial and the outcome can be uncertain.

An adverse outcome may allow third parties to use our intellectual property without a license and negatively impact our business.

In addition, because patent applications can take many years to issue, third parties may have pending applications, unknown to us, which may later result in issued patents that cover the production, manufacture, commercialization or use of our products and drug candidates.

If any such patents are issued to other entities, we will be unable to obtain patent protection for the same or similar discoveries that we make relating to our products and drug candidates.

Moreover, we may be blocked from using our drug targets or drug candidates or developing or commercializing our products and other drug candidates, or may be required to obtain a license that may not be available on reasonable terms, if at all.

Further, others may discover uses for our drug targets and drug candidates other than those covered in our issued or pending patents, and these other uses may be separately patentable.

Even if we have a patent claim on a particular technology or product, the holder of a patent covering the use of that technology or product could exclude us from selling a product that is based on the same use of that product.

If any such patents are issued to other entities, we may be unable to obtain patent protection for the same or similar discoveries that we make relating to our products and drug candidates.

Moreover, we may be blocked from using our drug targets or drug candidates or developing or commercializing our products and other drug candidates, or may be required to obtain a license from a third party that may not be available on reasonable terms, if at all.

Further, others may discover uses for our products and technology other than those covered in or claimed by our issued or pending patents, such as other uses for our drug targets and drug candidates, and these other uses may be separately patentable.

Even if we have a patent claim on a particular technology or product, the holder of a patent covering the use of a similar technology or product could exclude us from selling a product that is based on the same use of that product.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions.

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Such compulsory licenses could be extended to include some of our products and drug candidates, which could limit our potential revenue opportunities.

Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection, which makes it difficult to stop infringement.

We rely on trade secret protection for some of our confidential and proprietary information.

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While we seek to protect our proprietary information by entering into confidentiality agreements with employees, collaborators and consultants, we cannot assure you that our proprietary information will not be disclosed, or that we can meaningfully protect our trade secrets.

In addition, our competitors may independently develop substantially equivalent proprietary information or may otherwise gain access to our trade secrets.

In addition, our competitors may independently develop or duplicate substantially equivalent proprietary information or may otherwise gain access to or misappropriate our trade secrets.

For example, publicly available information, such as information in issued patents, published patent applications and scientific literature, can be used by third parties to independently develop technology and we cannot provide assurance that any such independently developed technology will not be equivalent or superior to our proprietary technology.

We rely on registered trademarks to protect our investment in our brand and goodwill.

However, competitors may challenge the validity of those trademarks and other brand names in which we have invested or may invest.

Such challenges can be expensive and may adversely affect our ability to maintain the goodwill gained in connection with a particular trademark.

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.

Our products and those of our collaborators, as well as our nonclinical and clinical development efforts, may give rise to claims that they infringe the patents of others.

Our products and those of our collaborators, as well as our nonclinical and clinical development efforts, may give rise to claims that they infringe or misappropriate the patents or other intellectual property rights of others.

We are aware that other companies and institutions are developing products acting through the same drug targets through which some of our drug candidates currently in clinical development act, have conducted research on many of the same targets that we have identified and have filed patent applications potentially covering drug targets that we have identified and certain therapeutic products addressing such targets.

In some cases, patents have issued from these applications.

In some cases, patents have issued, and may issue in the future, from these applications.

In addition, many companies and institutions have well-established patent portfolios directed to common techniques, methods and means of developing, producing and manufacturing pharmaceutical products.

These or other companies or institutions could bring legal actions against us or our collaborators for damages or to stop us or our collaborators from engaging in certain nonclinical or clinical development activities or from manufacturing and marketing therapeutic products that allegedly infringe their patent rights.

If any of these actions are successful, in addition to our potential liability for

damages, these entities would likely require us or our collaborators to obtain a license in order to continue engaging in the infringing activities or to manufacture or market the infringing therapeutic products or may force us to terminate such activities or manufacturing and marketing efforts.

We may deem it advisable to pursue litigation against others to enforce our patents and intellectual property rights and may be the subject of litigation brought by third parties to enforce their patent and intellectual property rights.

In addition, we may become involved in litigation based on intellectual property indemnification undertakings that we have given to certain of our collaborators.

Patent litigation is expensive and requires substantial amounts of management attention.

The eventual outcome of any such litigation is uncertain and involves substantial risks.

If any of these actions are successful, in addition to our potential liability for damages, these entities may require us or our collaborators to obtain a license in order to continue engaging in the infringing activities or to manufacture or market the infringing therapeutic products or may force us to terminate such activities or manufacturing and marketing efforts.

We may deem it advisable to pursue litigation or other dispute resolution proceedings against others to enforce our patents and intellectual property rights and may be the subject of litigation brought by third parties to enforce their patent and intellectual property rights.

In addition, we may become involved in litigation or other dispute resolution proceedings based on intellectual property indemnification undertakings that we have given to certain of our collaborators.

Patent and other intellectual property litigation is expensive and requires substantial amounts of management attention.

The eventual outcome of any such litigation or dispute resolution proceedings is uncertain and involves substantial risks.

If we are sued for infringement or misappropriation and lose, we could be required to pay substantial damages and/or be enjoined from using or selling the allegedly infringing or misappropriation products or technology.

The results or costs of any such litigation or dispute resolution proceedings may have an adverse effect on our business, operating results and financial condition.

We believe that there will continue to be significant litigation in our industry regarding patent and other intellectual property rights.

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If we become involved in future intellectual property litigation, it could consume a substantial portion of our resources and could negatively affect our results of operations.

Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.

Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business, reputational harm and financial loss.

In the ordinary course of our business, we collect, maintain and transmit sensitive data on our networks and systems, including our intellectual property and proprietary or confidential business information (such as research data and personal information) and confidential information with respect to our customers, clinical trial patients and our business partners.

We have also outsourced significant elements of our information technology infrastructure and, as a result, third parties may or could have access to our confidential information.

We have also outsourced significant elements of our information technology infrastructure and, as a result, third parties may or could have access to our confidential information and personal data.

The secure maintenance of this information is critical to our business and reputation.

We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access.

We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access and unintentional breaches.

These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack and motive (including corporate espionage).

Cyber threats may be generic, or they may be custom-crafted against our information systems.

Our network and storage applications and those of our vendors may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions.

It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents.

Our network and storage applications and those of our vendors may be subject to unauthorized access by hackers or information security breaches due to operator error, malfeasance or other system disruptions.

It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents, particularly for cyber incidents such as advanced persistent threats.

These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information.

A data security breach could also lead to public exposure of personal information of our clinical trial patients, customers and others.

Cyber-attacks could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources.

Our network security and data recovery measures and those of our vendors may not be adequate to protect against such security breaches and disruptions.

Cyber-attacks and information security breaches could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources.

Our network security and data recovery measures and those of our vendors may not be able to detect or prevent every attempted breach and may not permit us to respond effectively to every breach.

These incidents could also subject us to liability, expose us to significant expense and cause significant harm to our reputation and business.

Reputational harm resulting from a significant cyber incident may cause unquantifiable damage to our established goodwill.

Moreover, as cyber incidents continue to evolve, we will likely be required to expend additional resources to enhance our security posture and cybersecurity defenses or to investigate and remediate any vulnerability to or consequences of cyber incidents.

Our insurance coverage may not be sufficient to prevent or recover from cyberattacks, including coverage of applicable resulting losses arising from the incident.

Further, each foreign jurisdiction and U.S.

state in which we operate may have laws governing how we must respond to a cyber incident that results in the unauthorized access, disclosure, or loss of personal information.

Additionally, new laws and regulations governing data privacy and unauthorized disclosure of confidential information, including recent California legislation providing for a private right of action, pose increasingly complex compliance challenges and could potentially elevate our costs over time.

As legislation continues to develop and cyber incidents continue to evolve, we will likely be required to expend significant resources to continue to modify or enhance our protective measures to comply with such legislation and to detect, investigate and remediate vulnerabilities to cyber incidents.

Any failure by us to comply with such laws and regulations could result in reputational harm, loss of goodwill, penalties, liabilities and/or mandated changes in our business practices.

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.

Many of our employees and independent contractors were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors.

We may be subject to claims that these employees, independent contractors or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.

Litigation may be necessary to defend against these claims.

Even if we are successful in defending against these claims, litigation could result in substantial costs and divert management’s attention.

We may be subject to claims that these

employees, independent contractors or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.

Litigation or other dispute resolution proceedings may be necessary to defend against these claims.

Even if we are successful in defending against these claims, litigation or other dispute resolution proceedings could result in substantial costs and divert management’s attention.

If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel.

A loss of key research personnel and/or their work product could hamper or prevent our ability to commercialize certain drug candidates, which could severely harm our business.

Risks Related to Employees and Facilities Operations

Risks Related to Our Employees and Facilities

If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected.

We have experienced and may continue to experience growth in the number of our employees and in the scope of our operations.

We may experience growth in the number of our employees and in the scope of our operations.

This growth places significant demands on our management, operational and financial resources, and our current and planned personnel, systems, procedures and controls may not be adequate to support our growth.

To effectively manage our potential growth, we must continue to improve existing, and implement new, operational and financial systems, procedures

and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies or control deficiencies.

To effectively manage our potential growth, we must continue to improve existing, and implement new, operational and financial systems, procedures and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies or control deficiencies.

We may need to increase our medical, clinical, commercial and other personnel, and recruiting and retaining qualified individuals is difficult.

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The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to operate and expand our operations.

We are highly dependent upon the principal members of our management, as well as medical, clinical and commercial staff, the loss of whose services might adversely impact the achievement of our objectives.

Retaining and, where advisable, recruiting qualified medical, clinical and commercial personnel are critical to support activities related to successfully executing on our commercial plan for XERMELO and advancing our nonclinical and clinical development programs for telotristat ethyl, sotagliflozin, LX9211 and our other drug candidates.

Competition is intense for experienced medical, clinical and commercial personnel, and we may be unable to retain or recruit such personnel with the expertise or experience necessary to allow us to successfully develop and commercialize our products.

We are highly dependent upon the principal members of our management, as well as medical and clinical staff, the loss of whose services might adversely impact the achievement of our objectives.

Retaining and, where advisable, recruiting qualified medical and clinical personnel are critical to advancing our nonclinical and clinical development programs for LX9211, sotagliflozin and our other drug candidates.

Competition is intense for experienced medical and clinical personnel, and we may be unable to retain or recruit such personnel with the expertise or experience necessary to allow us to successfully develop and commercialize our products.

Further, all of our employees are employed “at will” and, therefore, may leave our employment at any time.

Facility security breaches may disrupt our operations, subject us to liability and harm our operating results.

Any break-in or trespass of our facilities that results in the misappropriation, theft, sabotage or any other type of security breach with respect to our proprietary and confidential information, including research or clinical data, or that results in damage to our equipment and assets could subject us to liability and have a material adverse impact on our business, operating results and financial condition.

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.

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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 research and development processes have historically involved the controlled use of hazardous materials, including chemicals and radioactive and biological materials.

Our operations have produced hazardous waste products.

We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials.

Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials.

We may face liability for any injury or contamination that results from our use or the use by third parties of these materials, and such liability may exceed our insurance coverage and our total assets.

We have used hazardous chemicals and radioactive and biological substances in our business.

Any claims relating to improper handling, storage or disposal of these substances could be time consuming and costly.

Our research and development processes have historically involved the controlled use of hazardous substances, including chemicals and radioactive and biological materials, and our operations have produced hazardous waste products.

See “Part I, Item 1.

Business – Government Regulation – Environmental Matters” for more discussion on these and other environmental matters.

Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and production efforts.

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We may be held liable if any product that we or our collaborators develop or commercialize, or any product that is made with the use or incorporation of any of our technologies, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale.

Regardless of merit or eventual outcome, product liability claims could result in

decreased demand for our products and product candidates, injury to our reputation, withdrawal of patients from our clinical trials, product recall, substantial monetary awards to third parties and the inability to commercialize any products that we may develop.

Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our products and product candidates, injury to our reputation, withdrawal of patients from our clinical trials, product recall, substantial monetary awards to third parties and the inability to commercialize any products that we may develop.

These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products.

We have obtained limited product liability insurance coverage for our clinical trials and commercial activities.

We have obtained limited product liability insurance coverage for our clinical trials.

However, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer.

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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.

and Invus C.V., which we collectively refer to as Invus, and their affiliates currently own approximately 60.8% of the outstanding shares of our common stock and are thereby able to control the election and removal of our directors and determine our corporate and management policies, including potential mergers or acquisitions, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate transactions.

and its affiliates own a controlling interest in our outstanding common stock and may have interests which conflict with those of our other stockholders.

and its affiliates, which we collectively refer to as Invus, currently own approximately 52.3% of the outstanding shares of our common stock and are thereby able to control the election and removal of our directors and determine our corporate and management policies, including potential mergers or acquisitions, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate transactions.

This concentration of ownership may delay or deter possible changes in control of our company, which may reduce the value of an investment in our common stock.

The interests of Invus and its affiliates may not be aligned with the interests of other holders of our common stock.

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.

Under our stockholders’ agreement with Invus, L.P., Invus has the right to designate a number of directors equal to the percentage of all the outstanding shares of our common stock owned by Invus and its affiliates, rounded up to the nearest whole number of directors.

Invus has additional rights under its stockholders ’ agreement relating to the membership of our board of directors, which provides Invus with substantial influence over significant corporate matters.

Under its stockholders’ agreement, Invus has the right to designate a number of directors equal to the percentage of all the outstanding shares of our common stock owned by Invus and its affiliates, rounded up to the nearest whole number of directors.

Invus has designated three of the nine current members of our board of directors.

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Invus also has the right to require proportionate representation of Invus-appointed directors on the audit, compensation and corporate governance committees of our board of directors, subject to certain restrictions.

Invus-designated directors currently serve as one of the three members of each of the compensation committee and the corporate governance committee of our board of directors.

No Invus-designated directors currently serve on the audit committee of our board of directors.

The provisions of the stockholders’ agreement relating to Invus’ rights to designate members of our board of directors and its audit, compensation and corporate governance committees will terminate if the percentage of all the outstanding shares of our common stock owned by Invus and its affiliates falls below 10%.

Invus also has the right to terminate these provisions at any time in its discretion.

Invus-designated directors currently serve as one of the three members of each of the compensation committee and the corporate governance committee of our board of directors, and no Invus-designated directors currently serve on the audit committee of our board of directors.

These rights provide Invus with substantial influence over significant corporate matters and Invus’ interest in those matters may not be aligned with the interests of other holders of our common stock.

Furthermore, in December 2020, we entered into a subscription agreement with an affiliate of Invus and certain other institutional investors.

Pursuant to the subscription agreement, we agreed to take all necessary steps to (a) include and recommend the amendment to our certificate of incorporation described below in the proxy statement to be sent to stockholders in advance of our next annual meeting of stockholders (and subsequent meetings of stockholders, if necessary) and (b) solicit from eligible stockholders (including, if necessary, prior to subsequent meetings) proxies in favor of such amendment.

The amendment to our certificate of incorporation would grant holders of 20% or more of our issued and outstanding common stock (y) customary preemptive rights and (z) consent rights prior to us taking any of the following actions:

(i) creating or issuing any new class or series of shares of capital stock (or securities convertible into or exercisable for shares of capital stock) having rights, preferences or privileges senior to or on parity with the common stock, (ii) subject to certain exceptions, repurchasing, retiring, redeeming or otherwise acquiring any equity securities (or securities convertible into or exchangeable for equity

securities) or any subsidiary and (iii) adopting, or proposing to adopt, or maintaining any shareholders’ rights plan, “poison pill” or other similar plan or agreement, unless such stockholder is exempt from such plan or agreement.

Because Invus owns a majority of our outstanding common stock, the amendment to our certificate of incorporation will be adopted and Invus will possess such rights if Invus votes to ratify and approve the amendment.

Our stock price may be extremely volatile.

The trading price of our common stock has been highly volatile, and we believe the trading price of our common stock will remain highly volatile and may fluctuate substantially due to factors such as the following, many of which we cannot control:

• the commercial success of XERMELO and the revenues we generate from sales of XERMELO;

• results or delays in our or our collaborators’ clinical trials;

• the announcement of FDA approval or non-approval, or delays in the FDA review process, of our or our collaborators’ drug candidates or those of our competitors or actions taken by regulatory agencies with respect to our, our collaborators’ or our competitors’ clinical trials;

• actions taken by regulatory agencies with respect to XERMELO, sotagliflozin, LX9211 and our other drug candidates;

• actions taken by regulatory agencies with respect to LX9211, sotagliflozin and our other drug candidates;

• the announcement of new products by our competitors;

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• the announcement of an in-licensed drug candidate or strategic acquisition;

• litigation, including intellectual property infringement and product liability lawsuits, involving us;

• litigation, including intellectual property infringement and misappropriation, and product liability lawsuits, involving us;

• failure to achieve operating results projected by securities analysts;

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For example, negative publicity regarding drug pricing and price increases by pharmaceutical companies has negatively impacted, and may continue to negatively impact, the markets for biotechnology and pharmaceutical stocks.

Likewise, the broader financial markets could experience significant volatility that could also negatively impact the markets for biotechnology and pharmaceutical stocks.

Likewise, the broader financial markets could experience significant volatility that could also negatively impact the markets for biotechnology and

pharmaceutical stocks.

These broad market fluctuations have adversely affected and may in the future adversely affect the trading price of our common stock.

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District Court for the Southern District of Texas, Houston Division.

A first amended complaint was filed on July 30, 2019 and we filed a motion to dismiss such first amended complaint on September 30, 2019.

The plaintiff filed an opposition to our motion to dismiss on November 14, 2019 and we filed a reply in support of our motion to dismiss on December 13, 2019.

Our motion to dismiss was granted and the action was dismissed with prejudice by the District Court on August 14, 2020.

The lead plaintiffs filed a notice of appeal to the U.S.

Court of Appeals for the Fifth Circuit on September 11, 2020 and a brief in support of its appeal on December 17, 2020.

We filed a response brief on February 18, 2021.

The lawsuit purports to be a class action brought on behalf of purchasers of our securities during the period from March 11, 2016 through January 17, 2019.

The complaint alleges that the defendants violated federal securities laws by making materially false and misleading statements and/or omissions concerning

data from our Phase 3 clinical trials of sotagliflozin in type 1 diabetes patients and the prospects of FDA approval of sotagliflozin for the treatment of type 1 diabetes.

The complaint alleges that the defendants violated federal securities laws by making materially false and misleading statements and/or omissions concerning data from our Phase 3 clinical trials of sotagliflozin in type 1 diabetes patients and the prospects of FDA approval of sotagliflozin for the treatment of type 1 diabetes.

The complaint purports to assert claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

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Any adverse determination in litigation could also subject us to significant liabilities.

Future sales of our common stock, or the perception that such sales may occur, may depress our stock price.

Future issuances or sales of our common stock, or the perception that such issuances or sales may occur, may depress our stock price.

A substantial number of shares of our common stock is reserved for issuance upon conversion of notes evidencing our current indebtedness, upon the exercise of stock options and upon vesting of restricted stock units.

If our stockholders sell substantial amounts of our common stock (including shares issued upon the conversion of notes, exercise of stock options or vesting of restricted stock units) in the public market, or if the market perceives that such sales may occur, the market price of our common stock could fall and it may become more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

For example, following an acquisition, a significant number of shares of our common stock held by new stockholders may become freely tradable or holders of registration rights could cause us to register their shares for resale.

Sales of these shares of common stock held by existing stockholders could cause the market price of our common stock to decline.

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.

The conversion of some or all of our 5.25% Convertible Senior Notes due 2021 will dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the notes.

Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence of the notes may encourage short selling by market participants because the conversion of the notes could be used to satisfy short positions, or anticipated conversion of the notes into shares of our common stock could depress the price of our common stock.

If we or our stockholders issue or sell substantial amounts of our common stock (including shares issued upon the conversion of notes, exercise of stock options or vesting of restricted stock units) in the public market, or if the market perceives that such sales may occur, the market price of our common stock could fall and it may become more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate.

In addition, any such issuance or sale of our common stock will dilute the ownership interests of existing stockholders and may cause the market price of our common stock to decline.

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.

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If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price and trading volume to decline.

We may engage in future acquisitions, which may be expensive and time consuming and from which we may not realize anticipated benefits.

We may acquire additional businesses, technologies and products if we determine that these businesses, technologies and products complement our existing technology or otherwise serve our strategic goals.

If we do undertake any transactions of this sort, the process of integrating an acquired business, technology or product may result in operating difficulties and expenditures and may not be achieved in a timely and non-disruptive manner, if at all, and may absorb significant management attention that would otherwise be available for ongoing development of our business.

If we fail to integrate acquired businesses, technologies or products effectively or if key employees of an acquired business leave, the anticipated benefits of the acquisition would be jeopardized.

Moreover, we may never realize the anticipated benefits of any acquisition, such as increased revenues and earnings or enhanced business synergies.

Future acquisitions could result in potentially dilutive issuances of our equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to intangible assets, which could materially impair our results of operations and financial condition.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors