What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-09 compared with 2021-08-06 · 43 added, 34 removed, 114 unchanged (40% of the section changed)

2 unchanged sentences

We are devoting most of our resources to the research and development of our most advanced drug candidates:

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

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.

3 unchanged sentences

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.

The Office of the FDA Commissioner has granted our joint request with the FDA’s Center for Drug Evaluation and Research to extend the previously granted abeyance of such proceedings until November 26, 2021 to allow for the continuation of good faith discussions between the parties.

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

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

• 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.

10 unchanged sentences

the ability of our collaborators and licensees to successfully develop and commercialize products and our receipt of milestone payments and royalties from such efforts;

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

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.

3 unchanged sentences

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 June 30, 2021, we had an accumulated deficit of $1.4 billion.

Since our inception, we have incurred significant losses and, as of September 30, 2021, we had an accumulated deficit of $1.5 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.

11 unchanged sentences

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 June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

2 unchanged sentences

Percentage decrease (100) % (99) %

• Net product revenue – Net product revenue for the three months ended June 30, 2020 was $9.0 million, and for the six months ended June 30, 2020 was $16.9 million.

• Net product revenue – Net product revenue for the three months ended September 30, 2020 was $6.5 million, and for the nine months ended September 30, 2020 was $23.4 million.

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

1 unchanged sentence

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

• Royalties and other revenue – Royalties and other revenues for the three months ended June 30, 2021 increased 31% to $0.2 million, and for the six months ended June 30, 2021 decreased 13% to $0.26 million as compared to the corresponding periods in 2020 primarily due to milestone payments from a licensing agreement.

Royalties and other revenues for the three months ended June 30, 2020 were $0.2 million, and for the six months ended June 30, 2020 were $0.3 million, primarily from royalties of product sales of XERMELO by Ipsen in countries outside the United States.

• Royalties and other revenue – Royalties and other revenues for the nine months ended September 30, 2021 decreased 21% to $0.3 million as compared to the corresponding period in 2020.

Cost of Sales

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

Cost of sales was $0.7 million for the three months ended June 30, 2020, and was $1.3 million for the six months ended June 30, 2020, and included $0.4 million and $0.9 million, respectively, of amortization of intangible assets relating to XERMELO.

Cost of sales was $0.6 million and $1.9 million for the three and nine monthly periods ended September 30, 2020, respectively, and included $0.3 million and $1.2 million, respectively, 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 June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

3 unchanged sentences

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 June 30, 2021 decreased 89% to $5.5 million, and for the six months ended June 30, 2021 decreased 87% to $12.7 million, as compared to the corresponding periods 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 – Third-party and other services for the three months ended September 30, 2021 decreased 66% to $10.7 million, and for the nine months ended September 30, 2021 decreased 81% to $23.4 million, as compared to the corresponding periods 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 June 30, 2021 decreased 51% to $2.2 million, and for the six months ended June 30, 2021 decreased 49% to $5.1 million, as compared to the corresponding periods 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.

• Personnel – Personnel costs for the three months ended September 30, 2021 decreased 55% to $2.5 million, and for the nine months ended September 30, 2021 decreased 51% to $7.6 million, as compared to the corresponding periods 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 expenses for the three months ended June 30, 2021 decreased 39% to $1.2 million, and for the six months ended June 30, 2021 decreased 40% to $2.5 million, as compared to the corresponding periods 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 June 30, 2021 decreased 39% to $0.4 million, and for the six months ended June 30, 2021 decreased 45% to $0.7 million, as compared to the corresponding periods in 2020, primarily due to lower depreciation expense subsequent to the sale of our facilities in December 2020.

• Other – Other costs for the three months ended June 30, 2021 decreased 27% to $1.0 million, and for the six months ended June 30, 2021 decreased 33% to $1.9 million, as compared to the corresponding periods in 2020, primarily due to lower costs of insurance and travel.

• Stock-based compensation – Stock-based compensation expenses for the three months ended September 30, 2021 increased 11% to $1.1 million, and for the nine months ended September 30, 2021 decreased 30% to $3.6 million, as compared to the corresponding periods 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 September 30, 2021 decreased 33% to $0.4 million, and for the nine months ended September 30, 2021 decreased 41% to $1.2 million, as compared to the corresponding periods in 2020, primarily due to lower depreciation expense subsequent to the sale of our facilities in December 2020.

• Other – Other costs for the three months ended September 30, 2021 decreased 25% to $0.9 million, and for the nine months ended September 30, 2021 decreased 30% to $2.8 million, as compared to the corresponding periods in 2020, primarily due to lower insurance and software license expenses.

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 June 30, Six Months Ended June 30,

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

2021 2020 2021 2020

3 unchanged sentences

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 June 30, 2021 decreased 65% to $2.4 million, and for the six months ended June 30, 2021 decreased 61% to $5.5 million, as compared to the corresponding periods 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.

• Personnel – Personnel costs for the three months ended September 30, 2021 decreased 69% to $2.4 million, and for the nine months ended September 30, 2021 decreased 64% to $7.9 million, as compared to the corresponding periods 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 June 30, 2021 decreased 13% to $2.8 million, and for the six months ended June 30, 2021 decreased 14% to $5.2 million, as compared to the corresponding periods in 2020, primarily due to lower marketing expenses, partially offset by higher legal fees.

• Stock-based compensation – Stock-based compensation expenses for the three months ended June 30, 2021 decreased 31% to $1.6 million, and for the six months ended June 30, 2021 decreased 31% to $3.2 million, as compared to the corresponding periods 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 June 30, 2021 decreased 19% to $0.4 million, and for the six months ended June 30, 2021 decreased 26% to $0.7 million, as compared to the corresponding periods in 2020, primarily due to lower property taxes and depreciation expense subsequent to the sale of our facilities in December 2020.

• Other – Other costs for the three months ended June 30, 2021 decreased 41% to $0.8 million, and for the six months ended June 30, 2021 decreased 46% to $1.6 million, as compared to the corresponding periods in 2020, primarily due to decreases in travel and training expenses due to the COVID-19 pandemic.

• Professional and consulting fees – Professional and consulting fees for the three months ended September 30, 2021 increased 11% to $2.2 million, primarily as a result of higher legal fees, partially offset by lower marketing expenses.

Professional and consulting fees for the nine months ended September 30, 2021 decreased 8% to $7.4 million, as compared to the corresponding periods in 2020, primarily due to lower marketing expenses and professional and consulting fees, partially offset by higher legal fees.

• Stock-based compensation – Stock-based compensation expenses for the three months ended September 30, 2021 increased 80% to $1.6 million, and for the nine months ended September 30, 2021 decreased 13% to $4.7 million, as compared to the corresponding periods 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 September 30, 2021 decreased 18% to $0.4 million, and for the nine months ended September 30, 2021 decreased 23% to $1.1 million, as compared to the corresponding periods in 2020, primarily due to lower property taxes and depreciation expense subsequent to the sale of our facilities in December 2020.

• Other – Other costs for the three months ended September 30, 2021 decreased 26% to $0.7 million, and for the nine months ended September 30, 2021 decreased 41% to $2.3 million, as compared to the corresponding periods in 2020, primarily due to decreases in travel due to the COVID-19 pandemic and software license expense.

Impairment Loss on Buildings

1 unchanged sentence

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

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.

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.

Interest Expense and Interest and Other Income, Net

Interest Expense .

Interest expense for the three and six months ended June 30, 2021 decreased 97% to $0.2 million, and $0.3 million, respectively, as compared to the corresponding periods in 2020, primarily due to our repayment of our $150 million BioPharma term loan in September 2020 and our exchange of $75.8 million in aggregate principal amount of Convertible Notes in September and October 2020.

Interest expense for the three and nine months ended September 30, 2021 decreased 96% to $0.2 million, and $0.5 million, respectively, as compared to the corresponding periods in 2020, primarily due to our repayment of our $150 million BioPharma term loan in September 2020 and our exchange of $75.8 million in aggregate principal amount of Convertible Notes in September and October 2020.

Interest and Other Income, Net.

Interest and other income, net for each of the three and six months ended June 30, 2021 was $0.1 million, and for the three and six months ended June 30, 2020 was $0.6 million and $1.6 million, respectively.

Net Loss and Net Loss per Common Share

Net loss and Net loss per Common Share.

Net loss was $18.1 million, or $0.13 per share, in the three months ended June 30, 2021 as compared to $69.1 million, or $0.65 per share, in the corresponding period in 2020.

Net loss was $39.0 million, or $0.27 per share, in the six months ended June 30, 2021 as compared to $135.7 million, or $1.27 per share, in the corresponding period in 2020.

Interest and other income, net for the three and nine months ended September 30, 2021 was $0.01 million and $0.1 million, respectively, and for the three and nine months ended September 30, 2020 was $0.3 million and $1.9 million, respectively.

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

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

Net loss was $23.1 million, or $0.16 per share, in the three months ended September 30, 2021 as compared to net income of $82.6 million, or $0.71 per diluted share, in the corresponding period in 2020.

Net loss was $62.1 million, or $0.43 per share, in the nine months ended September 30, 2021 as compared to $53.1 million, or $0.50 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.

2 unchanged sentences

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

As of June 30, 2021, we had $118.5 million in cash, cash equivalents and short-term investments.

As of September 30, 2021, we had $120.9 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 $47.0 million from operations in the six months ended June 30, 2021.

We used cash of $64.2 million from operations in the nine months ended September 30, 2021.

This consisted primarily of the net loss for the period of $62.1 million and a net decrease in operating liabilities net of assets of $10.6 million, partially offset by non-cash charges of $8.3 million related to stock-based compensation expense.

Investing activities used cash of $3.6 million in the six months ended June 30, 2021, primarily due to net purchases of investments and $1.0 million of asset purchases.

Financing activities provided cash of $14.2 million, primarily as a result of $16.9 million net proceeds from the sale of common stock under our Open Market Sale Agreement SM with Jefferies LLC which was partially offset by $2.7 million used to repurchase common stock.

Investing activities used cash of $4.0 million in the nine months ended September 30, 2021, primarily due to net purchases of investments of $2.8 million and $1.2 million of asset purchases.

Financing activities provided cash of $34.0 million, primarily as a result of $36.7 million net proceeds from the sales of common stock during January, August and September of 2021 under our Open Market Sale Agreement SM with Jefferies LLC which was partially offset by $2.7 million used to repurchase common stock.

Other commitments.

14 unchanged sentences

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 LX9211, sotagliflozin and our other drug candidates;

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.

11 unchanged sentences

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

We had approximately $118.5 million in cash and cash equivalents and short-term investments as of June 30, 2021.

We had approximately $120.9 million in cash and cash equivalents and short-term investments as of September 30, 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.

7 unchanged sentences

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