Collaboration and License Agreements

12 Months Ended

Dec. 31, 2021

Collaboration and License Agreements [Abstract]

Collaboration and License Agreements

Collaboration and License Agreements

Lexicon has derived substantially all of its revenues from drug discovery and development alliances, target validation collaborations for the development and, in some cases, analysis of the physiological effects of genes altered in knockout mice, product sales, government grants and contracts, technology licenses, subscriptions to its databases and compound library sales.

Ipsen. In October 2014, Lexicon entered into a License and Collaboration Agreement, which was subsequently amended in March 2015 (collectively, the “Ipsen Agreement”), with Ipsen for the development and commercialization of XERMELO outside of the United States and Japan (the “Licensed Territory”). The Ipsen Agreement was assigned to TerSera in September 2020 in connection with the XERMELO sale.

Under the Ipsen Agreement, Lexicon granted Ipsen an exclusive, royalty-bearing right and license under its patent rights and know-how to commercialize XERMELO in the Licensed Territory. Ipsen was responsible for using diligent efforts to commercialize XERMELO in the Licensed Territory pursuant to a mutually approved commercialization plan. Subject to certain exceptions, Lexicon was responsible for conducting clinical trials required to obtain regulatory approval for XERMELO for carcinoid syndrome in the European Union, including those contemplated by a mutually approved initial development plan, and had the first right to conduct most other clinical trials of XERMELO. Lexicon was responsible for the costs of all clinical trials contemplated by the initial development plan. The costs of additional clinical trials were to be allocated between the parties based on the nature of such clinical trials. Under the Ipsen Agreement, Ipsen paid Lexicon an aggregate of $47.2 million through September 30, 2020.

Revenue recognized under the Agreement was $0.3 million and $4.9 million for the years ended December 31, 2020 and 2019, respectively. Revenue for each of the years ended December 31, 2020 and 2019 included $0.3 million of royalties from Ipsen. Revenue for the year ended December 31, 2019 included $1.3 million from sales of bulk tablets of XERMELO to Ipsen.

Sanofi. In November 2015, Lexicon entered into a Collaboration and License Agreement, which was subsequently amended in July 2017 (collectively, the “Sanofi Agreement”), with Sanofi for the worldwide development and commercialization of Lexicon’s diabetes drug candidate sotagliflozin. In December 2016, Sanofi terminated its rights under the Sanofi Agreement with respect to Japan.

Effective as of September 9, 2019 (the “Settlement Date”), Lexicon entered into a Termination and Settlement Agreement and Mutual Releases (the “Termination Agreement”) with Sanofi, pursuant to which the Sanofi Agreement was terminated and associated disputes between Lexicon and Sanofi were settled.

Under the terms of the Termination Agreement, Lexicon regained all rights to sotagliflozin and assumed full responsibility for the worldwide development and commercialization of sotagliflozin in all indications. Sanofi paid Lexicon $208 million in September 2019, $12.1 million in March 2020 and $2.7 million in September 2020. An arbitration panel issued a judgment in Sanofi’s favor in November 2021 with respect to a dispute regarding amounts withheld by Sanofi from its March and September 2020 payments offsetting certain third party costs and internal costs incurred by Sanofi and asserted by Sanofi to be payable under the terms of the Termination Agreement. Such judgment obligates Lexicon to reimburse Sanofi for its attorneys’ fees and costs relating to the arbitration proceedings, which could require a payment up to $2.1 million. Neither party will owe any additional payments pursuant to the Sanofi Agreement or Termination Agreement. The parties have cooperated in the transition of responsibility for ongoing clinical studies and other activities, and each party is responsible for its own expenses associated with such transition, subject to certain exceptions. Beginning in March 2020, Lexicon closed out early the clinical studies related to the Phase 3 development program for sotagliflozin in type 2 diabetes and heart failure.

Under the Sanofi Agreement, Sanofi paid Lexicon an upfront payment of $300 million in December 2015. The Company recognized $126.8 million of the $300 million upfront payment for the license in 2015. The Company was recognizing the $113.8 million allocated to the development services performance obligation and the $59.4 million allocated to the funding performance obligation over the estimated period of performance as the development and funding occurred. The Termination Agreement was accounted for as a modification under ASC 606. Upon execution of the Termination Agreement in September 2019, the Company recognized the remaining $23.5 million allocated to its performance obligations as revenue and reduced its remaining deferred revenue balance accordingly. In addition, the Company recognized revenue of $260 million, representing the full expected cash consideration from the Termination Agreement. Subsequent to the Termination Agreement, the Company has no remaining performance obligations to Sanofi. Revenue recognized under the collaboration agreements with Sanofi was $286 million for the year ended December 31, 2019.