LEXICON PHARMACEUTICALS, INC. 10-Q

Item 1A. Risk Factors The following risks and uncertainties are important factors that could cause actual results or events to differ materially from those indicated by forward-looking statements. The factors described below are not the only ones we face and additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Risks Related to Our Business and Industry • 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 and obtain regulatory approval to market sotagliflozin for heart failure in the United States. If we fail to effectively gain such alignment or obtain such regulatory approval, our business will suffer and our stock price will likely decline. • 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. 22 • 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. • If we are unable to maintain adequate coverage and reimbursement from third-party payers for any products that we or our collaborators may develop, our revenues and prospects for profitability will suffer. • We may not be able to manufacture products that we or our collaborators may develop in commercial quantities, which would impair our ability to commercialize such products. • We and our collaborators are subject to extensive and rigorous ongoing regulation relating to any products that we or our collaborators may develop. • We are subject to certain healthcare laws, regulation and enforcement; our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition. • Current healthcare laws and regulations and future legislative or regulatory reforms to the healthcare system may negatively affect our revenues and prospects for profitability. • 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 and our planned commercial launch, if approved, of sotagliflozin for heart failure in the United States. If additional capital is not available on reasonable terms, we will be forced to obtain funds, if at all, by entering into financing agreements on unattractive terms. • We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability. • Our operating results have 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. • We have indebtedness that may limit cash flow available to invest in the ongoing needs of our business. Risks Related to Our Relationships with Third Parties • 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. • Conflicts with our collaborators could jeopardize the success of our collaborative agreements and harm our product development efforts. • 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 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. 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. 23 • We may be involved in patent litigation and other disputes regarding intellectual property rights and may require licenses from third parties for our planned nonclinical and clinical development and commercialization activities. We may not prevail in any such litigation or other dispute or be able to obtain required licenses. • Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business, reputational harm and financial loss. • We may be subject to damages resulting from claims that we, our employees or independent contractors have wrongfully used or disclosed alleged trade secrets of their former employers. Risks Related to 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. • The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to operate and expand our operations. • Our facilities are located near coastal zones, and the occurrence of a hurricane or other disaster could damage our facilities and equipment, which could harm our operations. Risks Related to Environmental and Product Liability • We have used hazardous chemicals and radioactive and biological substances in our business. Any claims relating to improper handling, storage or disposal of these substances could be time consuming and costly. • Our business has a substantial risk of product liability and we face potential product liability exposure far in excess of our limited insurance coverage. Risks Related to Our Common Stock • Invus, L.P. 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. • Our stock price may be extremely volatile. • We are subject to securities litigation, which is expensive and could divert management attention. • Future issuances or sales of our common stock, or the perception that such issuances or sales may occur, may depress our stock price. • 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. For additional discussion of the risks and uncertainties that affect our business, see “Item 1A. Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission. 24 Item 6. Exhibits Exhibit No. Description *31.1 — Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2 — Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32.1 — Certification of Principal Executive and Principal Financial Officers Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS — XBRL Instance Document 101.SCH — XBRL Taxonomy Extension Schema Document 101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF — XBRL Taxonomy Extension Definition Linkbase Document 101.LAB — XBRL Taxonomy Extension Label Linkbase Document 101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document 104 — Cover Page Interactive Data File (embedded within the Inline XBRL document) _____________________ * Filed herewith. 25 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Lexicon Pharmaceuticals, Inc. Date: August 6, 2021 By: /s/ Lonnel Coats Lonnel Coats President and Chief Executive Officer Date: August 6, 2021 By: /s/ Jeffrey L. Wade Jeffrey L. Wade Executive Vice President, Corporate and Administrative Affairs and Chief Financial Officer 26