What changed in this filing

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Item 1A. Risk Factors

2022-03-10 compared with 2021-03-12 · 91 added, 98 removed, 384 unchanged (33% of the section changed)

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Risks Related to Our Business and Industry

• We depend heavily on our ability to obtain regulatory approval in the United States for sotagliflozin in heart failure.

If we fail to obtain such regulatory approval, our business will suffer and our stock price will likely decline.

• If approved, we will depend heavily on the commercial success of sotagliflozin in heart failure.

If we do not achieve commercial success with sotagliflozin, our business will suffer and our stock price will likely decline.

• We depend heavily on our ability to obtain positive results from our ongoing Phase 2 clinical trials of LX9211 in diabetic neuropathic pain and post-herpetic neuralgia.

If we fail to successfully complete and obtain positive results from such clinical trials, our business will suffer and our stock price will likely decline.

• Clinical testing of our drug candidates in humans is an inherently risky and time-consuming process that may fail to demonstrate safety and efficacy, which could result in the delay, limitation or prevention of regulatory approval.

• Our drug candidates are subject to a lengthy and uncertain regulatory process that may not result in the necessary regulatory approvals, which could adversely affect our and our collaborators’ ability to commercialize products.

• 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;

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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.

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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.

• Invus has additional rights under its stockholders’ agreement relating to the membership of our board of directors and under our certificate of incorporation relating to preemptive and consent rights, which provide Invus with substantial influence over significant corporate matters.

Risks Related to Our Business and Industry

We depend heavily on our ability to obtain regulatory approval in the United States for sotagliflozin in heart failure.

If we fail to obtain such regulatory approval, our business will suffer and our stock price will likely decline.

We are preparing a resubmission of our application for regulatory approval to market sotagliflozin in the United States for heart failure after voluntarily withdrawing our initial application to correct a technical issue with the submission.

We cannot offer any assurances that the FDA will accept our resubmission or grant marketing approval for sotagliflozin in heart failure, on acceptable timelines or at all.

Furthermore, regulatory approval in the United States for sotagliflozin in heart failure, even if obtained, may limit the type of patients in which sotagliflozin may be used or otherwise require specific warning or labeling language, any of which may reduce the commercial potential of sotagliflozin in heart failure.

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

Should we fail to obtain regulatory approval in the United States, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.

If approved, we will depend heavily on the commercial success of sotagliflozin in heart failure.

If we do not achieve commercial success with sotagliflozin, our business will suffer and our stock price will likely decline.

If approved, we expect that a significant portion of our total revenues will be attributable to sales of sotagliflozin for heart failure in the United States, but we cannot be certain that sotagliflozin will be commercially successful.

If approved, our future sales of sotagliflozin will depend on numerous factors, including:

• the number of patients suffering from heart failure;

• competition from dapagliflozin, empagliflozin and, to some extent, other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan;

• the safety profile of sotagliflozin, 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 sotagliflozin;

• the effectiveness of our commercial strategy for marketing sotagliflozin 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 sotagliflozin by patients, the medical community and third-party payers;

• our ability to meet the demand for commercial supplies of sotagliflozin and to maintain and successfully monitor commercial manufacturing arrangements for sotagliflozin 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 sotagliflozin, if approved, will have a competitive commercial profile, our current estimates of the revenues that sotagliflozin 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 sotagliflozin 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 sotagliflozin 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 positive results from our ongoing Phase 2 clinical trials of LX9211 in diabetic neuropathic pain and post-herpetic neuralgia.

If we fail to successfully complete and obtain positive results from such clinical trials, our business will suffer and our stock price will likely decline.

We are 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.

We cannot offer any assurances or predict with any certainty that such Phase 2 clinical trials will be successfully completed, that positive clinical data will be obtained from such clinical trials or that such clinical trials will demonstrate a competitive commercial profile for LX9211, in any such case on the expected timelines.

Should we fail to obtain positive results from such clinical trials, 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.

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In some cases, we or our collaborators may not be able to complete the trial at all.

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

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 drug candidates that we develop for any indication or may limit the approved indications or impose other conditions.

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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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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:

We no longer maintained a commercialization infrastructure following our sale of XERMELO (telotristat ethyl) and related assets to TerSera and will need to reestablish such capabilities in order to

commercialize any future products, including sotagliflozin for heart failure.

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

• inability to recruit, retain and effectively manage adequate numbers of effective sales and marketing personnel;

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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.

We may not be able to successfully increase the manufacturing capacity, whether in collaboration with third-party manufacturers or on our own, for any approved product in a timely or economic manner, or at all.

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

We may not be able to successfully increase the manufacturing capacity, whether in collaboration with third-party manufacturers or on our own, for any approved product in a

timely or economic manner, or at all.

Significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve.

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

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;

• 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;

• 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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• state and federal government price reporting laws that require us to calculate and report complex pricing metrics to government programs, where such reported price may be used in the calculation of reimbursement and/or discounts on our marketed drugs (participation in these programs and compliance with the applicable requirements may subject us to potentially significant discounts on our products, increased infrastructure costs, and potentially limit our ability to offer certain marketplace discounts);

• state and federal marketing expenditure tracking and reporting laws, which generally require certain types of expenditures in the United States to be tracked and reported.

• state and federal expenditure tracking and reporting laws, which generally require certain types of expenditures in the United States to be tracked and reported.

For example, the Physician Payments Sunshine Act, among other things, imposes reporting requirements on certain manufacturers to annually report to CMS information related to payments

and other transfers of value to physicians and certain advanced non-physician health care practitioners and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

Compliance with such requirements may require investment in infrastructure to ensure that tracking is performed properly, and some of these laws result in the public disclosure of various types of payments and relationships, which could potentially have a negative effect on our business and/or increase enforcement scrutiny of our activities.

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Current healthcare laws and regulations and future legislative or regulatory reforms to the healthcare system may negatively affect our revenues and prospects for profitability.

In the United States and some foreign countries, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of pharmaceutical products, restrict or regulate post-approval activities, and affect the ability to profitably sell pharmaceutical products that obtain marketing approval.

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of drug candidates.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have obtained and we may not achieve or sustain profitability.

Moreover, complying with any new legislation or regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.

A primary trend in the United States and some foreign countries is toward reform and cost containment in the health care industry.

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals that may have the effect of reducing the prices that we are able to charge for products we or our collaborators may develop.

Healthcare reform measures which may be adopted in the future in the United States and foreign jurisdictions may result in more rigorous coverage criteria and significant downward pressure on the prices drug manufacturers may charge.

Healthcare reform measures which may be adopted in the future in the United States and foreign

jurisdictions may result in more rigorous coverage criteria and significant downward pressure on the prices drug manufacturers may charge.

As a result, our revenues and prospects for profitability could be significantly harmed.

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As a result, our competitors may be able to more easily develop products that would render any products that we or our collaborators develop obsolete and noncompetitive.

For example, dapagliflozin, empagliflozin and canagliflozin are currently being marketed by AstraZeneca, Boehringer Ingelheim and Eli Lilly, and Janssen (a subsidiary of Johnson & Johnson), respectively, for the treatment of type 2 diabetes and certain other indications, such as heart failure, cardiovascular death, major adverse cardiovascular events and end-stage kidney disease.

For example, dapagliflozin and empagliflozin are currently being marketed by AstraZeneca and through an alliance between Boehringer Ingelheim and Eli Lilly, respectively, for the treatment of heart failure and certain other indications.

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 other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan, currently marketed for the treatment of heart failure by Novartis, and vericiguat, currently marketed for the treatment of heart failure by Merck, or which may gain regulatory approval for the treatment of heart failure, such as omecamtiv mecarbil, currently being developed for the treatment of heart failure by Cytokinetics.

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.

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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.

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 have been 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.

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, and effectively manage the clinical and commercial supply of our products.

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.

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As of December 31, 2021, we had $86.7 million in cash, cash equivalents and investments.

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 nonclinical and clinical development of LX9211, sotagliflozin and our other drug candidates.

Our currently planned operations for the next twelve months include the continued nonclinical and clinical development of sotagliflozin, LX9211 and our other drug candidates and preparations for the commercial launch of sotagliflozin in the United States for the treatment of heart failure, if approved.

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

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

• our success in establishing new collaborations and licenses;

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

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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 continued nonclinical and clinical development of LX9211, sotagliflozin and our other drug candidates.

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 sotagliflozin, LX9211 and our other drug candidates, and in the commercial launch of sotagliflozin in the United States for the treatment of heart failure, if approved.

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

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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 planned nonclinical and clinical development of LX9211, sotagliflozin and our other drug candidates.

We expect to spend significant amounts to fund our planned nonclinical and clinical development of sotagliflozin, LX9211 and our other drug candidates and our planned commercial launch of sotagliflozin in the United States for the treatment of heart failure, if approved.

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

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

• 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 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, including for sotagliflozin for the treatment of heart failure;

• 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 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 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.

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.

However, we may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under our existing debt.

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

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.

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.

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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.

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.

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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.

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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 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 lack the capability to manufacture materials for nonclinical studies and clinical trials and commercial supplies for any products which gain regulatory approval.

Our reliance on third parties to manufacture our drug candidates may harm or delay our research, development and commercialization efforts.

We currently do not have the manufacturing capabilities or experience necessary to produce materials for nonclinical studies or clinical trials or commercial supplies for any products which gain regulatory approval 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.

These manufacturers may not be able to produce material on a timely basis or manufacture material at the quality level or in the quantity required to meet our development timelines and applicable regulatory requirements.

These manufacturers may not be able to produce material on a timely basis or manufacture material at the quality level or in the quantity required to meet our development and commercialization timelines and applicable regulatory requirements.

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 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 or commercialization 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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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 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.

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.

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We have taken security measures to protect our proprietary information and trade secrets, but these measures may not provide adequate protection.

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.

meaningfully protect 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.

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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.

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.

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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.

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.

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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.

Retaining and, where advisable, recruiting qualified commercial, medical and clinical personnel will be critical to commercially launching sotagliflozin for heart failure, if approved, and advancing our nonclinical and clinical development programs for sotagliflozin, LX9211 and our other drug candidates.

Competition is intense for experienced commercial, 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.

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

Invus has additional rights under its stockholders ’ agreement relating to the membership of our board of directors and under our certificate of incorporation relating to preemptive and consent rights, which provide 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.

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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 second amended and restated certificate of incorporation also grants holders of 20% or more of our issued and outstanding common stock customary preemptive rights and consent rights prior to us taking any of the following actions:

(1) 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, (2) 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 (3) 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.

Invus currently has such preemptive and consent rights as a result of its ownership position in our issued and outstanding common stock.

Each of 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.

Our stock price may be extremely volatile.

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• 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 LX9211, sotagliflozin and our other drug candidates;

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

• the announcement of new products by our competitors;

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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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In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted.

A securities class action suit against us, such as the securities litigation which is currently pending, could result in substantial costs and divert management’s attention and resources, which could have a material and adverse effect on our business.

We are subject to securities litigation, which is expensive and could divert management attention.

Companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation and we are currently a target of this type of litigation.

On January 28, 2019, a purported securities class action complaint captioned Daniel Manopla v.

Lexicon Pharmaceuticals, Inc., Lonnel Coats, Jeffrey L.

Wade and Pablo Lapuerta, M.D.

was filed against us, and certain of our officers in the U.S.

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

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 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.

The complaint seeks, on behalf of the purported class, an unspecified amount of monetary damages, interest, fees and expenses of attorneys and experts, and other relief.

This case, and other litigation of this type, could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business.

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

A securities class action suit against us could result in substantial costs and divert management’s attention and resources, which could have a material and adverse effect on our business.

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 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.

A substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options and vesting of restricted stock units.

If we or our stockholders issue or sell substantial amounts of our common stock (including shares issued upon the 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.

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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-K

Item 1A. Risk Factors