What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-10-30 · 63 added, 97 removed, 76 unchanged (68% of the section changed)

3 unchanged sentences

• We are developing LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain.

We identified the target of LX9211, adapter-associated kinase 1, or AAK1, in our target discovery efforts as a promising approach for the treatment of neuropathic pain, and identified LX9211 and another development candidate in a neuroscience drug discovery alliance with Bristol-Myers Squibb from which we hold exclusive development and commercialization rights.

In preclinical studies, LX9211 demonstrated central nervous system penetration and reduction in pain behavior in multiple models of neuropathic pain, and has been demonstrated not to affect opiate pathways.

We have reported top-line results from two Phase 1 clinical trials of LX9211, and are now conducting a Phase 2 clinical trial of LX9211 in diabetic peripheral neuropathic pain and preparing to initiate a second Phase 2 clinical trial of LX9211 in post-herpetic neuralgia.

• We are developing Zynquista™ (sotagliflozin), an orally-delivered small molecule drug candidate, as a treatment for type 1 diabetes, in support of which we completed a Phase 3 program involving approximately 3,000 patients with type 1 diabetes.

The FDA has issued a complete response letter 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.

Zynquista has been approved in the European Union for use as an adjunct to insulin therapy to improve glycemic control in adults with type 1 diabetes and a body mass index ≥ 27 kg/m 2 , who could not achieve adequate glycemic control despite optimal insulin therapy, but has not yet been commercially launched.

We have recently completed a Phase 3 development program for sotagliflozin in type 2 diabetes involving approximately 5,000 patients across nine studies (exclusive of outcomes studies), and are completing the close-out of two outcomes studies involving approximately 10,500 and 1,200 patients, respectively, with primary endpoints evaluating a composite of total cardiovascular death, hospitalizations for heart failure and urgent visits for heart failure.

• We are conducting preclinical research and development and preparing to conduct clinical development of compounds from a number of additional drug discovery and development programs.

In September 2020, we completed the sale of our XERMELO ® (telotristat ethyl) product and related assets to TerSera Therapeutics LLC, or TerSera.

We commercially launched XERMELO following regulatory approval in the United States in February 2017 for the treatment of carcinoid syndrome diarrhea in combination with SSA therapy in adults inadequately controlled by SSA therapy.

In connection with the sale, TerSera assumed responsibility for the continued development of XERMELO as a treatment for biliary tract cancer, currently in a Phase 2 clinical trial.

We are eligible to receive development, regulatory and sales milestone payments from TerSera of up to an aggregate of $65 million for the development and commercialization of XERMELO in patients with biliary tract cancer and mid-teens percentage royalty payments from TerSera on net sales of XERMELO in biliary tract cancer.

Sotagliflozin, XERMELO and compounds from a number of additional drug discovery and development programs originated from our own internal drug discovery efforts, and LX9211 and other compounds targeting AAK1 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb.

These efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets.

We have reported results from two Phase 1 clinical trials of LX9211 and are now conducting a Phase 2 clinical trial of LX9211 in diabetic peripheral neuropathic pain and a second Phase 2 clinical trial of LX9211 in post-herpetic neuralgia.

LX9211 has received Fast Track designation from the FDA for development in diabetic peripheral neuropathic pain.

• We are developing sotagliflozin, an orally-delivered small molecule drug candidate, as a treatment for heart failure and type 1 diabetes.

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.

We are now working towards an application for regulatory approval to market sotagliflozin for heart failure and seeking a strategic collaboration for the commercialization of sotagliflozin, if approved.

We have reported positive results from three Phase 3 clinical trials evaluating the effect of sotagliflozin on type 1 diabetes in approximately 800, 800 and 1,400 patients, respectively.

The FDA issued a complete response letter regarding our application for regulatory approval to market sotagliflozin for type 1 diabetes in the United States and, at our request, has issued a public Notice of Opportunity for Hearing on whether there are grounds for denying approval of our application.

Sotagliflozin has been approved in the European Union for use as an adjunct to insulin therapy in the treatment of type 1 diabetes, but has not yet been commercially launched.

• We are conducting preclinical research and development and preparing to conduct clinical development of compounds from a number of additional drug programs originating from our internal drug discovery efforts.

LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb, and sotagliflozin and compounds from a number of additional drug programs originated from our own internal drug discovery efforts.

Those efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets.

We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery.

We are working both independently and through strategic collaborations and alliances with third parties to capitalize on our drug target discoveries and drug discovery and development programs.

We are working both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and drug discovery and development programs.

We seek to retain exclusive or co-exclusive rights to the benefits of certain drug discovery and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians.

We seek to collaborate with other pharmaceutical and biotechnology companies with respect to drug discovery or the development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may otherwise provide us with access to expertise and resources that we do not possess internally or are complementary to our own.

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

We have derived substantially all of our revenues from strategic collaborations and other research and development collaborations and technology licenses, as well as from commercial sales of our XERMELO product following its commercial launch in February 2017 until our sale of XERMELO and related assets to TerSera in September 2020.

To date, we have generated a substantial portion of our revenues from a limited number of sources.

Our operating results and, in particular, our ability to generate additional revenues are dependent on many factors, including the success of our ongoing nonclinical and clinical development efforts and ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts;

our ability to effectively close out the Phase 3 development program for sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease in a timely manner;

TerSera’s ability to successfully develop and commercialize XERMELO for biliary tract cancer and our receipt of milestone payments and royalties from such efforts;

our success in establishing new collaborations and licenses;

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

and general and industry-specific economic conditions which may affect research and development expenditures.

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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.

Since our inception, we have incurred significant losses and, as of September 30, 2020, we had an accumulated deficit of $1.4 billion.

Since our inception, we have incurred significant losses and, as of March 31, 2021, we had an accumulated deficit of $1.4 billion.

Our losses have resulted principally from costs incurred in research and development, selling, general and administrative costs associated with our operations, and non-cash stock-based compensation expenses associated with stock options and restricted stock units granted to employees and consultants.

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Recent Accounting Pronouncements

There are no recent accounting pronouncements that have a material impact to our condensed consolidated financial statements.

There are no recent accounting pronouncements that could have a material impact to our condensed consolidated financial statements.

Results of Operations

Total revenues and dollar and percentage changes as compared to the corresponding periods in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Total revenues and dollar and percentage changes as compared to the corresponding period in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended March 31,

Total revenues $ — $ 8.0

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Percentage decrease (100) %

• Net product revenue – Net product revenue recognized from the sale of XERMELO in the United States for the three months ended September 30, 2020 decreased 22% to $6.5 million as compared to the corresponding period in 2019, due to the Xermelo sale on September 8, 2020.

Net product revenue for the nine months ended September 30, 2020 increased 4% to $23.4 million as compared to the corresponding period in 2019.

Revenue from sales of bulk tablets of XERMELO to Ipsen were $1.3 million for the nine months ended September 30, 2019.

Product revenues are recorded net of estimated product returns, pricing discounts including rebates offered pursuant to mandatory federal and state government programs and chargebacks, prompt pay discounts and distribution fees and co-pay assistance.

• Net product revenue – Net product revenue for the three months ended March 31, 2020 was $7.9 million.

We sold XERMELO and related assets to TerSera on September 8, 2020.

Product revenues were recorded net of estimated product returns, pricing discounts including rebates offered pursuant to mandatory federal and state government programs and chargebacks, prompt pay discounts and distribution fees and co-pay assistance.

Revenue recognition policies require estimates of the aforementioned sales allowances each period.

• Collaborative agreements – Revenue from collaborative agreements for the three and nine months ended September 30, 2019 was $285.9 million and $289.2 million.

Revenue from collaborative agreements for the three and nine months ended September 30, 2019 included $260 million from the Termination Agreement with Sanofi and recognition of amounts allocated to the performance obligation for development activities of sotagliflozin in the Sanofi Agreement.

• Royalties and other revenue – Royalty revenue for the three months ended March 31, 2020 was $0.1 million from the product sales of XERMELO by Ipsen in countries outside the United States.

Cost of Sales

Total cost of sales and dollar and percentage changes as compared to the corresponding periods in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Total cost of sales $ 0.6 $ 0.6 $ 1.9 $ 2.5

Dollar decrease $ 0.0 $ (0.6)

Percentage decrease 0 % (21) %

Cost of sales consists of third-party manufacturing costs, freight and indirect overhead costs associated with sales of XERMELO.

Cost of sales for the nine months ended September 30, 2019 included costs related to the bulk tablet sales to Ipsen.

Cost of sales for the three and nine months ended September 30, 2020 includes $0.3 million and $1.2 million, respectively, and for the three and nine months ended September 30, 2019 includes $0.4 million and $1.3 million, respectively, of amortization of intangible assets relating to XERMELO.

Cost of sales was $0.6 million for the three months ended March 31, 2020 and included $0.4 million of amortization of intangible assets relating to XERMELO.

Research and Development Expenses

Research and development expenses and dollar and percentage changes as compared to the corresponding periods in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Research and development expenses and dollar and percentage changes as compared to the corresponding period in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended March 31,

Total research and development expense $ 12.6 $ 55.2

Dollar increase $ 13.5 $ 101.3

Percentage increase 51 % 197 %

Dollar decrease $ 42.6

Percentage decrease 77 %

Research and development expenses consist primarily of third-party and other services principally related to nonclinical and clinical development activities, salaries and other personnel-related expenses, stock-based compensation expense, and facility and equipment costs.

• Third-party and other services – Third-party and other services for the three months ended September 30, 2020 increased to $31.7 million from $18.5 million, and for the nine months ended September 30, 2020 increased to $125.9 million from $24.0 million as compared to the corresponding periods in 2019 primarily due to increases in external clinical development costs relating to sotagliflozin subsequent to the termination of our collaboration with Sanofi.

• Third-party and other services – Third-party and other services for the three months ended March 31, 2021 decreased 84% to $7.2 million as compared to the corresponding period in 2020 primarily due to decreases in external clinical development costs relating to sotagliflozin subsequent to the wind down of the activities beginning in March 2020.

Third-party and other services relate principally to our clinical trial and related development activities, such as nonclinical and clinical studies and contract manufacturing.

• Personnel – Personnel costs for the three months ended September 30, 2020 increased 18% to $5.6 million as compared to the corresponding period in 2019, primarily due to the severance costs related to the reduction in force of our personnel in September 2020, partially offset by the lower costs related to employee salaries and management bonuses.

For the nine months ended September 30, 2020, personnel costs decreased 3% to $15.6 million as compared to the corresponding period in 2019, primarily due to lower headcount as a result of the reduction in force, partially offset by the severance costs.

• Personnel – Personnel costs for the three months ended March 31, 2021 decreased 48% to $2.9 million as compared to the corresponding period in 2020, primarily due to lower employee salaries and benefit costs as a result of the reduction in force of our personnel in September 2020.

Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.

• Stock-based compensation – Stock-based compensation expense for the three months ended September 30, 2020 decreased 39% to $1.0 million, and for the nine months ended September 30, 2020 decreased 4% to $5.2 million as compared to the corresponding periods in 2019, primarily due to cancellation of unvested share-based awards as a result of the reduction in force of our personnel in September 2020.

• Facilities and equipment – Facilities and equipment costs for each of the three months ended September 30, 2020 and 2019 was $0.7 million, and for each of the nine months ended September 30, 2020 and 2019 was $2.0 million.

• Other – Other costs for the three months ended September 30, 2020 increased 14% to $1.2 million, and for the nine months ended September 30, 2020 increased 4% to $4.0 million as compared to the corresponding periods in 2019, primarily due to increases in our insurance costs, partially offset by lower costs of travel.

• Stock-based compensation – Stock-based compensation expense for the three months ended March 31, 2021 decreased 41% to $1.3 million as compared to the corresponding period in 2020, primarily due to cancellation of unvested share-based awards as a result of the reduction in force of our personnel in September 2020.

• Facilities and equipment – Facilities and equipment costs for the three months ended March 31, 2021 and 2020 was $0.3 million and $0.7 million, respectively.

• Other – Other costs for the three months ended March 31, 2021 decreased 38% to $0.9 million as compared to the corresponding period in 2020, primarily due to lower costs of travel.

Selling, General and Administrative Expenses

Selling, general and administrative expenses and dollar and percentage changes as compared to the corresponding periods in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Selling, general and administrative expenses and dollar and percentage changes as compared to the corresponding period in the prior year are as follows (dollar amounts are presented in millions):

Three Months Ended March 31,

Total selling, general and administrative expense $ 8.3 $ 14.7

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Percentage decrease 44 %

Selling, general and administrative expenses consist primarily of personnel costs to sell XERMELO and to support our research and development activities, professional and consulting fees, stock-based compensation expense, and facility and equipment costs.

• Personnel – Personnel costs for the three months ended September 30, 2020 increased 17% to $7.7 million, and for the nine months ended September 30, 2020 increased 2% to $21.9 million as compared to the corresponding periods in 2019, primarily due to the severance costs related to the reduction in force of our personnel in September 2020, partially offset by the lower costs related to employee salaries and management bonuses.

Selling, general and administrative expenses consist primarily of personnel costs to support our research and development activities, professional and consulting fees, stock-based compensation expense, and facility and equipment costs.

• Personnel – Personnel costs for the three months ended March 31, 2021 decreased 58% to $3.2 million as compared to the corresponding period in 2020, primarily due to lower employee salaries and benefit costs as a result of the reduction in force of our personnel in September 2020.

Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs.

• Professional and consulting fees – Professional and consulting fees for the three months ended September 30, 2020 decreased 38% to $2.0 million, and for the nine months ended September 30, 2020 decreased 8% to $8.1 million as compared to the corresponding periods in 2019, primarily due to lower marketing expenses and legal fees.

• Stock-based compensation – Stock-based compensation expense for the three months ended September 30, 2020 decreased 53% to $0.9 million as compared to the corresponding period in 2019, and for each of the nine months ended September 30, 2020 and 2019 was $5.4 million.

The decrease was due to cancellation of unvested share-based awards as a result of the reduction in force of our personnel in September 2020.

• Facilities and equipment – Facilities and equipment costs for each of the three months ended September 30, 2020 and 2019 were $0.5 million and for each of the nine months ended September 30, 2020 and 2019 were $1.4 million.

• Other – Other costs for the three months ended September 30, 2020 decreased 45% to $1.0 million, and for the nine months ended September 30, 2020 decreased 26% to $3.9 million as compared to the corresponding periods in 2019, primarily due to decreases in travel expenses due to the COVID-19 pandemic.

Gain on the sale of XERMELO

In September 2020, a gain of $132.8 million was recognized in connection with the sale of XERMELO and related assets to TerSera.

Impairment Loss on Buildings

In the second quarter of 2020, we began negotiations to sell our facilities in the Woodlands, Texas.

We recognized an impairment loss of $1.6 million as a result of writing down the buildings to the estimated net selling price.

Impairment Loss on Intangible Asset

In September 2019, an impairment loss of $28.6 million was recognized to an indefinite lived intangible asset associated with the 2010 acquisition of Symphony Icon, due to the decision to terminate research and development activities related to a program for irritable bowel syndrome that was among the assets acquired.

Loss on Debt Extinguishments, Net

Immediately following the closing of the sale of XERMELO and related assets to TerSera in September 2020, we repaid term borrowings of $150.0 million to BioPharma Credit PLC and BioPharma Credit Investments IV Sub LP.

A debt extinguishment loss of $8.6 million was recognized.

In September 2020, we entered into separate, privately negotiated exchange agreements to exchange $67.1 million aggregate principal amount of its 5.25% Convertible Senior Notes due 2021, or the Convertible Notes.

As a result, a debt extinguishment gain of $8.4 million was recognized.

• Professional and consulting fees – Professional and consulting fees for the three months ended March 31, 2021 decreased 16% to $2.4 million as compared to the corresponding period in 2020, primarily due to lower marketing expenses, partially offset by higher legal fees.

• Stock-based compensation – Stock-based compensation expense for the three months ended March 31, 2021 decreased 31% to $1.6 million as compared to the corresponding period in 2020, primarily due to cancellation of unvested share-based awards as a result of the reduction in force of our personnel in September 2020.

• Facilities and equipment – Facilities and equipment costs for the three months ended March 31, 2021 and 2020 were $0.3 million and $0.5 million, respectively.

• Other – Other costs for the three months ended March 31, 2021 decreased 50% to $0.8 million as compared to the corresponding period in 2020, primarily due to decreases in travel expenses due to the COVID-19 pandemic.

Interest Expense and Interest and Other Income, Net

Interest Expense .

Interest expense for the three months ended September 30, 2020 and 2019 was $4.1 million and $5.2 million, and for the nine months ended September 30, 2020 and 2019 was $14.4 million and $15.5 million.

Interest expense decreased 97% to $0.2 million for the three months ended March 31, 2021, primarily due to the $150 million payoff of the BioPharma term loan in September 2020 and the $75.8 million exchange of convertible notes in September and October 2020.

Interest and Other Income, Net.

Interest and other income, net for the three months ended September 30, 2020 and 2019 was $0.3 million and $0.6 million, respectively, and for the nine months ended September 30, 2020 and 2019 was $1.9 million and $2.1 million, respectively.

Net Income (Loss) and Net Income (Loss) per Common Share

Net income (loss) and Net income (loss) per Common Share.

Net income was $82.6 million, or $0.71 per diluted share, in the three months ended September 30, 2020 as compared to $226.1 million, or $1.95 per diluted share, in the

corresponding period in 2019.

Net loss was $53.1 million, or $0.50 per share, in the nine months ended September 30, 2020 as compared to net income of $181.3 million, or $1.59 per diluted share, in the corresponding period in 2019.

Interest and other income, net for the three months ended March 31, 2021 decreased 95% from $1.0 million in the corresponding period in 2020.

Net Loss and Net Loss per Common Share

Net loss and Net loss per Common Share.

Net loss was $21.0 million, or $0.15 per share, in the three months ended March 31, 2021 as compared to $66.6 million, or $0.63 per share, in the corresponding period in 2020.

Our quarterly operating results have fluctuated in the past and are likely to do so in the future, and we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance.

Liquidity and Capital Resources

We have financed our operations from inception primarily through sales of common and preferred stock, contract and milestone payments we received under our strategic and other collaborations, target validation, database subscription and technology license agreements, product sales, government grants and contracts, third party financing arrangements and financing under debt and lease arrangements.

As of September 30, 2020, we had $111.4 million in cash, cash equivalents and short-term investments.

We have also financed certain of our research and development activities under our agreements with Symphony Icon, Inc.

As of March 31, 2021, we had $141.4 million in cash, cash equivalents and short-term investments.

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

We used cash of $108.7 million from operations in the nine months ended September 30, 2020.

This consisted primarily of the net loss for the period of $53.1 million and gain from the sale of XERMELO and related assets to TerSera of $132.8 million, partially offset by a net decrease in operating assets net of liabilities of $61.1 million, non-cash charges of $10.6 million related to stock-based compensation expense, $3.6 million related to depreciation and amortization expense, including amortization of debt issuance costs, $1.6 million related to the impairment loss and $0.3 million related to the net loss of debt extinguishments.

Investing activities provided cash of $336.7 million in the nine months ended September 30, 2020, primarily due to $176.3 million of net maturities of investments and $160.4 million of proceeds from the sale of XERMELO.

Financing activities used cash of $211.8 million, primarily to repay $210.8 million of debt borrowings and to repurchase $1.0 million of common stock.

We used cash of $25.2 million from operations in the three months ended March 31, 2021.

This consisted primarily of the net loss for the period of $21.0 million and a net decrease in operating liabilities net of assets of $7.1 million, partially offset by non-cash charges of $2.9 million related to stock-based compensation expense.

Investing activities used cash of $17.7 million in the three months ended March 31, 2021, primarily due to net purchases of investments.

Financing activities provided cash of $14.3 million, primarily as a result of $16.9 million net proceeds from the sale of common stock under an Open Market Sale agreement, which was partially offset by $2.7 million used to repurchase common stock.

Other commitments.

In April 2019, Zynquista was approved in the European Union for use as an adjunct to insulin therapy to improve glycemic control in adults with type 1 diabetes and a body mass index ≥ 27 kg/m 2 , who could not achieve adequate glycemic control despite optimal insulin therapy.

In April 2019, sotagliflozin was approved in the European Union for use as an adjunct to insulin therapy to improve glycemic control in adults with type 1 diabetes and a body mass index ≥ 27 kg/m 2 , who could not achieve adequate glycemic control despite optimal insulin therapy.

Upon the achievement of certain European regulatory pricing approvals, we will be required to make certain royalty payments, totaling $4.5 million, in three equal annual installments of $1.5 million.

In September 2020, we initiated a Phase 2 clinical trial of LX9211 in diabetic peripheral pain.

As a result of the commencement of the Phase 2 trial, we were required to make a royalty payment of $2.5 million, which was paid in October 2020.

In October 2020, Lex-Gen Woodlands, L.P.

entered into a real estate purchase and sale agreement under which we agreed to sell our facilities in The Woodlands, Texas for a purchase price of $11.9 million.

Such sale is subject to normal and customary closing conditions, including a study period, which extends until November 20, 2020, during which the purchaser may conduct inspections, analyses and other studies of the property and may terminate the agreement in its discretion.

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

In December 2020, our subsidiary, Lex-Gen Woodlands, L.P., sold our facilities in The Woodlands, Texas for $11.9 million.

Concurrent with such sale, we entered into a leaseback agreement with respect to 38,000 square feet of such facilities for a period of up to six months, with monthly gross rent payments of $101,000.

In February 2021, we leased a 25,000 square-foot office space in The Woodlands, Texas to which we plan to relocate our corporate offices.

The term of the sublease extends from March 1, 2021 through August 31, 2025, and provides for escalating yearly base rent payments starting at $506,000 and increasing to $557,000 in the final year of the lease.

In March 2015, our subsidiary Lexicon Pharmaceuticals (New Jersey), Inc.

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The term of the lease extends from June 1, 2015 through December 31, 2022, and provides for escalating yearly base rent payments starting at $482,000 and increasing to $646,000 in the final year of the lease.

Our future capital requirements will be substantial and will depend on many factors, including the success of our ongoing nonclinical and clinical development efforts and ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts;

our ability to effectively close out the Phase 3 development program for sotagliflozin in type 2 diabetes, heart failure and chronic kidney disease in a timely manner;

Our future capital requirements will be substantial and will depend on many factors, including the success of our ongoing nonclinical and clinical development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts;

TerSera’s ability to successfully develop and commercialize XERMELO for biliary tract cancer and our receipt of milestone payments and royalties from such efforts;

our success in establishing new collaborations and licenses;

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

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

1 unchanged sentence

Our capital requirements will also be affected by any expenditures we make in connection with license agreements and acquisitions of and investments in complementary technologies and businesses.

We expect to continue to devote substantial capital resources to successfully complete our nonclinical and clinical development efforts with respect to sotagliflozin, LX9211 and our other drug candidates and for other general corporate activities.

We expect to continue to devote substantial capital resources to successfully complete our nonclinical and clinical development efforts with respect to LX9211, sotagliflozin and our other drug candidates;

and for other general corporate activities.

We believe that our current unrestricted cash and investment balances and cash and revenues we expect to derive from strategic and other collaborations and other sources will be sufficient to fund our operations for at least the next 12 months.

During or after this period, if cash generated by operations is insufficient to satisfy our liquidity requirements, we will need to sell additional equity or debt securities or obtain additional

credit arrangements.

During or after this period, if cash generated by operations is insufficient to satisfy our liquidity requirements, we will need to sell additional equity or debt securities or obtain additional credit arrangements.

Additional financing may not be available on terms acceptable to us or at all.

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We currently do not hedge interest rate exposure or hold any derivative financial instruments in our investment portfolio.

We had approximately $111.4 million in cash and cash equivalents and short-term investments as of September 30, 2020.

We had approximately $141.4 million in cash and cash equivalents and short-term investments as of March 31, 2021.

We believe that the working capital available to us will be sufficient to meet our cash requirements for at least the next 12 months.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis