Lexicon Pharma Reports First Quarter 2017 Financial Results And Provides A Business Update

THE WOODLANDS, Texas, May 2, 2017 /PRNewswire/ -- Lexicon Pharmaceuticals, Inc. (Nasdaq: LXRX), today reported financial results for the three months ended March 31, 2017 and provided an overview of key milestones for the company's newly-launched commercial product, XERMELO, and its pipeline drug candidates.

"The first quarter was a transformative one for Lexicon marked by the approval and launch of XERMELO in the U.S. I am extremely proud of the extraordinary men and women at Lexicon who ensured that XERMELO was available to patients within days following approval," said Lonnel Coats, Lexicon's president and chief executive officer. "Eight weeks into the launch, we continue to make significant strides in providing access to XERMELO and communicating its benefits to patients. We are very pleased with the speed and depth of XERMELO adoption, which we believe is a reflection of the early positive feedback we have received from both patients and physicians. In addition, we continue to advance our robust pipeline of drug candidates and look forward to reporting on multiple milestones, including new data from our three Phase 3 sotagliflozin trials, starting this month."

First Quarter 2017 Product and Pipeline Progress

XERMELO (telotristat ethyl) 250 mg

• On February 28^th, the U.S. Food and Drug Administration (FDA) approved XERMELO as the first and only oral therapy for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog (SSA) therapy in adults inadequately controlled by SSA therapy.
• Prescriptions for XERMELO were available to patients that same day, and the drug was available for shipment within 72 hours of launch.
• The Company initiated its LexCares program within hours of launch to ensure access and appropriately remove adherence hurdles for patients in need of this innovative therapy.

Sotagliflozin

• In May, the Company expects to report additional efficacy data from the U.S. Phase 3 inTandem1 study. Data will include secondary endpoints such as body weight and blood pressure in hypertensive type 1 diabetes mellitus (T1DM) patients.
• In Q3 2017, Lexicon anticipates additional data release from the E.U. and Israel Phase 3 inTandem2 study in patients with T1DM. Data will include secondary endpoints such as body weight and blood pressure in hypertensive T1DM patients, as well as pooled continuous glucose monitoring (CGM) results from inTandem1 and inTandem2.
• Lexicon previously announced that primary endpoints were met in both the inTandem1 and inTandem2 studies, demonstrating a statistically significant reduction in A1C at 24 weeks on a background of optimized insulin.
• The Company anticipates top-line data release in mid-2017 from the global Phase 3 inTandem3 study evaluating approximately 1,400 T1DM patients treated with sotagliflozin 400mg once daily or placebo on a background of any insulin therapy, but without insulin optimization prior to randomization. The primary endpoint of the study is the proportion of patients with A1C less than 7.0% and no severe hypoglycemia and no diabetic ketoacidosis (DKA) events.
• Lexicon's partner, Sanofi, continues to enroll type 2 diabetes mellitus (T2DM) patients in several Phase 3 clinical trials.

LX2761

• Phase 1 clinical trials for LX2761 remain ongoing, and the Company anticipates the release of data this year from these studies in healthy subjects and patients with T2DM.

LX9211

• The Company expects to file an IND for LX9211 in neuropathic pain in mid-2017, followed by initiation of a Phase 1 clinical trial this year.

First Quarter 2017 Financial Highlights

Revenues: Lexicon's revenues for the three months ended March 31, 2017 increased to $18.3 million from $12.5 million for the corresponding period in 2016, primarily due to revenues recognized from the collaboration and license agreement with Sanofi. Revenues for the three months ended March 31, 2017 included $0.7 million of net revenues recognized in March 2017 from the sale of XERMELO in the U.S.

Cost of Sales: Lexicon had cost of sales related to sales of XERMELO of $0.2 million for the three months ended March 31, 2017, including finite-lived intangible asset amortization. Lexicon began capitalizing inventory during the three months ended March 31, 2017 following FDA approval of XERMELO, as the related costs were expected to be recoverable through the commercialization of the product. Manufacturing costs for XERMELO incurred prior to FDA approval were recorded as research and development expenses. The pre-commercialization inventory of XERMELO is expected to be sold over approximately the next two years. As a result, cost of sales for XERMELO for the next two years will reflect a lower average per unit cost of materials than would otherwise be expected. During the three months ended March 31, 2017, intangible assets relating to XERMELO of $24.7 million were reclassified from indefinite-lived to finite-lived assets once the FDA approved XERMELO, and the Company began amortizing this asset using the straight-line method over its estimated useful life. Cost of sales for the three months ended March 31, 2017 includes $0.1 million of amortization of this intangible asset. 

Research and Development Expenses: Research and development expenses for the three months ended March 31, 2017 increased 18 percent to $43.6 million from $37.0 million for the corresponding period in 2016, primarily due to increases in external clinical development costs relating to sotagliflozin. 

Increase in Fair Value of Symphony Icon Purchase Liability: In connection with the acquisition of Symphony Icon, Lexicon made an initial estimate of the fair value of the liability for the associated base and contingent payments. Changes in this liability, based on the development of the programs and the time until such payments are expected to be made, are recorded in Lexicon's consolidated statements of operations. For the three months ended March 31, 2017 and 2016, the fair value of the Symphony Icon purchase liability increased by $2.1 million and $1.0 million, respectively. During the three months ended March 31, 2017, Lexicon made the final payment in cash and common stock related to the Symphony Icon purchase liability.

Selling, General and Administrative Expenses: Selling, general and administrative expenses for the three months ended March 31, 2017 increased 77 percent to $14.9 million from $8.4 million for the corresponding period in 2016, primarily due to increased costs incurred in connection with the commercial launch of XERMELO. 

Income Tax Benefit:  Income tax benefit for the three months ended March 31, 2017 was $8.7 million.  During the three months ended March 31, 2017, Lexicon's valuation allowance for its deferred tax assets decreased by $8.7 million due to the reclassification of intangible assets relating to XERMELO from indefinite-lived to finite-lived assets. This resulted in the related deferred tax liability now being considered a source of taxable income. Lexicon recorded an $8.7 million deferred tax benefit with a corresponding reduction in its deferred tax liability in the three months ended March 31, 2017 as a result of this reclassification.

Consolidated Net Loss: Net loss for the three months ended March 31, 2017 was $34.9 million, or $0.33 per share, compared to a net loss of $34.9 million, or $0.34 per share, in the corresponding period in 2016. For the three months ended March 31, 2017 and 2016, net loss included non-cash, stock-based compensation expense of $2.2 million and $1.8 million, respectively.

Cash and Investments: As of March 31, 2017, Lexicon had $259.7 million in cash and investments, as compared to $346.5 million as of December 31, 2016. Cash used during the three months ended March 31, 2017 included a final $10.5 million cash payment to Symphony Icon and significant funding in support of Lexicon's Phase 3 clinical trials of sotagliflozin in T1DM, which the Company expects will decrease as 2017 progresses.  Lexicon's use of cash remains consistent with prior guidance, and the Company continues to expect that its current liquidity and capital resources, together with expected revenues, will be sufficient to fund its operations at least through 2018.

Conference Call and Webcast Information

Lexicon management will hold a live conference call and webcast today at 6:00 pm EDT / 5:00 pm CDT to review its financial and operating results and to provide a general business update. The dial-in number for the conference call is 888-645-5785 (U.S./Canada) or 970-300-1531 (international). The conference ID for all callers is 8318299. The live webcast and replay may be accessed by visiting Lexicon's website at www.lexpharma.com/investors. An archived version of the webcast will be available on the website for 14 days.

About Lexicon

Lexicon is a fully integrated biopharmaceutical company that is applying a unique approach to gene science based on Nobel Prize-winning technology to discover and develop precise medicines for patients with serious, chronic conditions. Through its Genome5000 program, Lexicon scientists have studied the role and function of nearly 5,000 genes over the last 20 years and have identified more than 100 protein targets with significant therapeutic potential in a range of diseases. Through the precise targeting of these proteins, Lexicon is pioneering the discovery and development of innovative medicines to safely and effectively treat disease. In addition to XERMELO, Lexicon has a pipeline of promising drug candidates in clinical and pre-clinical development in diabetes and metabolism and neuropathic pain. For additional information please visit www.lexpharma.com.

Safe Harbor Statement

This press release contains "forward-looking statements," including statements relating to Lexicon's commercialization of XERMELO (telotristat ethyl) 250 mg and clinical development of sotagliflozin, LX2761 and LX9211. In addition, this press release also contains forward looking statements relating to Lexicon's growth and future operating results, discovery and development of products, strategic alliances and intellectual property, as well as other matters that are not historical facts or information. All forward-looking statements are based on management's current assumptions and expectations and involve risks, uncertainties and other important factors, specifically including the degree of market acceptance of XERMELO, the availability of coverage and reimbursement for XERMELO, Lexicon's dependence on third parties for manufacturing and distribution of XERMELO, Lexicon's compliance with applicable legal and regulatory requirements and other factors relating to the commercialization of XERMELO. Other risks include Lexicon's ability to meet its capital requirements, successfully conduct preclinical and clinical development and obtain necessary regulatory approvals of sotagliflozin, LX2761, LX9211 and its other potential drug candidates, achieve its operational objectives, obtain patent protection for its discoveries and establish strategic alliances, as well as additional factors relating to manufacturing, intellectual property rights, and the therapeutic or commercial value of its drug candidates. Any of these risks, uncertainties and other factors may cause Lexicon's actual results to be materially different from any future results expressed or implied by such forward-looking statements.  Information identifying such important factors is contained under "Risk Factors" in Lexicon's annual report on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission. Lexicon undertakes no obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

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SOURCE Lexicon Pharmaceuticals, Inc.