What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-03 · 54 added, 42 removed, 325 unchanged (23% of the section changed)

3 unchanged sentences

(In thousands, except par value)

As of June 30, As of December 31,

As of September 30, As of December 31,

Assets (unaudited)

36 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

35 unchanged sentences

Balance at June 30, 2021 145,640 146 1,583,653 ( 1,439,043 ) ( 5 ) ( 7,518 ) 137,233

Stock-based compensation — — 2,712 — — — 2,712

Issuance of common stock under Equity Incentive Plans 170 — 658 — — — 658

Issuance of common stock under an Open Market Sale Agreement, net of issuance fees 4,177 4 19,119 — — — 19,123

Net loss — — — ( 23,122 ) — — ( 23,122 )

Unrealized loss on investments — — — — ( 1 ) — ( 1 )

Balance at September 30, 2021 149,987 $ 150 $ 1,606,142 $ ( 1,462,165 ) $ ( 6 ) $ ( 7,518 ) $ 136,603

The accompanying notes are an integral part of these condensed consolidated financial statements.

Lexicon Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

Common Stock Additional Accumulated Other

Shares Par Value Paid-In Capital Accumulated Deficit Comprehensive Gain (Loss) Treasury Stock Total

Balance at December 31, 2021 150,082 $ 150 $ 1,608,749 $ ( 1,487,776 ) $ ( 10 ) $ ( 7,518 ) $ 113,595

11 unchanged sentences

Balance at June 30, 2022 150,114 $ 150 $ 1,608,730 $ ( 1,535,839 ) $ ( 150 ) $ ( 2,061 ) $ 70,830

Stock-based compensation — — 2,648 — — — 2,648

Issuance of common stock, net of issuance fees 39,100 39 94,229 — — — 94,268

Net loss — — — ( 23,387 ) — — ( 23,387 )

Unrealized loss on investments — — — — ( 341 ) — ( 341 )

Balance at September 30, 2022 189,214 $ 189 $ 1,705,607 $ ( 1,559,226 ) $ ( 491 ) $ ( 2,061 ) $ 144,018

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

39 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the six-month period ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022.

Operating results for the nine-month period ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022.

The accompanying condensed consolidated financial statements include the accounts of Lexicon and its wholly-owned subsidiaries.

7 unchanged sentences

Lexicon considers all highly-liquid investments with original maturities of three months or less to be cash equivalents.

As of June 30, 2022 and December 31, 2021, short-term investments consisted of U.S.

As of September 30, 2022 and December 31, 2021, short-term investments consisted of U.S.

treasury bills and corporate debt securities.

6 unchanged sentences

Accrued liabilities consisted of the following:

As of June 30, As of December 31,

As of September 30, As of December 31,

(in thousands)

9 unchanged sentences

Operating lease right-of-use assets and associated lease liabilities are recorded in the balance sheet at the lease commencement date based on the present value of future lease payments to be made over the expected lease term.

As the implicit rate is not determinable in its leases, Lexicon used a borrowing rate of 9 % at the commencement date in determining the present value of future payments.

As the implicit rate is not determinable in its leases, Lexicon used a borrowing rate ranging between 9 % and 9.7 % at the commencement date in determining the present value of future payments.

Revenue Recognition:

35 unchanged sentences

Expected volatility is based on the historical volatility in the Company’s stock price.

The Company utilized the Black-Scholes valuation model for estimating the fair value of the stock option compensation granted, with the following weighted-average assumptions for stock options granted in the six months ended June 30, 2022 and 2021:

Expected Volatility Risk-free Interest Rate Expected Term Dividend

June 30, 2022:

September 30, 2022:

Employees 107 % 2.4 % 4 — %

Officers and non-employee directors 91 % 1.9 % 7 — %

June 30, 2021:

September 30, 2021:

Employees 102 % 0.6 % 4 — %

Officers and non-employee directors 90 % 1.1 % 7 — %

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the six months ended June 30, 2022:

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the nine months ended September 30, 2022:

Options Weighted Average Exercise Price

4 unchanged sentences

Forfeited ( 609 ) 7.41

Outstanding at June 30, 2022 12,108 5.34

Exercisable at June 30, 2022 5,423 $ 7.35

During the six months ended June 30, 2022, Lexicon granted its employees and non-employee directors annual restricted stock units.

Outstanding at September 30, 2022 12,182 5.28

Exercisable at September 30, 2022 5,728 $ 7.18

During the nine months ended September 30, 2022, Lexicon granted its employees and non-employee directors annual restricted stock units.

Outstanding employee restricted stock units vest in three annual installments.

Outstanding non-employee director restricted stock units vest fully on the first anniversary of the grant.

The following is a summary of restricted stock units activity under Lexicon’s stock-based compensation plans for the six months ended June 30, 2022:

The following is a summary of restricted stock units activity under Lexicon’s stock-based compensation plans for the nine months ended September 30, 2022:

Shares Weighted Average Grant Date

4 unchanged sentences

Forfeited ( 254 ) 3.47

Outstanding at June 30, 2022 2,919 $ 3.17

Outstanding at September 30, 2022 2,773 $ 3.15

Net Loss per Common Share:

2 unchanged sentences

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740) Simplifying Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards.

The guidance amended certain disclosure requirements that had become redundant, outdated or superseded.

Additionally, this guidance amends accounting for the interim period effects of changes in tax laws or rates, and simplifies aspects of the accounting for franchise taxes.

The guidance is effective for annual periods beginning after December 15, 2020, including interim periods therein.

The adoption of ASU 2019-12 in the first quarter of 2021 did not have a material impact on the condensed consolidated financial statements.

In August 2020, the FASB issued ASU No.

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40), which removes the separation models for convertible debt with cash conversion or beneficial conversion features.

2 unchanged sentences

Cash and Cash Equivalents and Investments

The fair value of cash and cash equivalents and investments held at June 30, 2022 and December 31, 2021 are as follows:

As of June 30, 2022

The fair value of cash and cash equivalents and investments held at September 30, 2022 and December 31, 2021 are as follows:

As of September 30, 2022

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

16 unchanged sentences

$ 86,753 $ — $ ( 10 ) $ 86,743

There were no realized losses during either of the six months ended June 30, 2022 and 2021, respectively.

There were no realized losses during either of the nine months ended September 30, 2022 and 2021, respectively.

The cost of securities sold is based on the specific identification method.

8 unchanged sentences

The inputs or methodology used for valuing securities are not necessarily an indication of the credit risk associated with investing in those securities.

The following table provides the fair value measurements of applicable Company assets that are measured at fair value on a recurring basis according to the fair value levels defined above as of June 30, 2022 and December 31, 2021.

Assets and Liabilities at Fair Value as of June 30, 2022

Assets and Liabilities at Fair Value as of September 30, 2022

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total cash and cash equivalents and investments $ 71,626 $ 15,117 $ — $ 86,743

The Company did not have any Level 3 assets or liabilities as of June 30, 2022 or December 31, 2021.

The Company did not have any Level 3 assets or liabilities as of September 30, 2022 or December 31, 2021.

Transfers between levels are recognized at the actual date of the circumstance that caused the transfer.

4 unchanged sentences

Monthly interest-only payments are due during an initial 36-month period, which may be extended at Lexicon’s option to 48 months if Lexicon maintains compliance with a financial covenant relating to net sales of sotagliflozin following regulatory approval.

The interest-only period will be followed by principal payments of $ 8.7 million, $ 13.0 million, and $ 4.8 million during the fiscal years ended December 31, 2025, December 31, 2026 and December 31, 2027, respectively.

The interest-only period will be followed by an amortization period extending through the maturity date.

Principal payments of $ 8.7 million, $ 13.0 million, and $ 4.8 million will be due during the fiscal years ended December 31, 2025, December 31, 2026 and December 31, 2027, respectively, with respect to the first tranche.

The first $ 25 million tranche was funded at closing.

The second $ 25 million tranche is available for draw at Lexicon’s option prior to August 25, 2022.

The second $ 25 million tranche is available for draw at Lexicon’s option from December 1 through December 31, 2022.

The third $ 50 million tranche is available for draw at Lexicon’s option prior to June 30, 2023, but within 60 days of U.S.

9 unchanged sentences

Dollar LIBOR plus 7.90 %, but not less than 8.01 %, subject to additional interest if an event of default occurs and is continuing.

As of June 30, 2022, the interest rate was 9.02 %.

As of September 30, 2022, the interest rate was 10.45 %.

If an event of default occurs and is continuing, Oxford may declare all amounts outstanding under the loan and security agreement to be immediately due and payable.

4 unchanged sentences

During March 2022, in connection with the first tranche of the loan and security agreement, the Company received cash proceeds of $ 24.2 million, net of debt issuance costs of $ 0.4 million and a facility fee of $ 0.5 million.

The debt issuance costs and facility fee have been recorded as a debt discount on the Company’s condensed consolidated balance sheet, which together with the final payment exit fee of $ 1.5 million and warrant fair value of $ 0.7 million are being amortized to interest expense throughout the life of the term loan using the effective interest rate method.

As of June 30, 2022, the balance of the debt discount was $ 2.9 million.

During the six months ended June 30, 2022, the Company recognized interest expense of $ 0.8 million.

As of June 30, 2022, the carrying value of the Oxford Term Loans was $ 23.6 million.

The debt issuance costs and facility fee have been recorded as a debt discount on the condensed consolidated balance sheet, which together with the final payment exit fee of $ 1.5 million and warrant fair value of $ 0.7 million are being amortized to interest expense throughout the life of the term loan using the effective interest rate method.

On August 29, 2022, the Company entered into a first amendment to its loan and security agreement with Oxford providing that the second $25 million tranche under the facility will be available for draw at Lexicon’s option from December 1 through December 31, 2022 in exchange for $ 0.3 million of cash consideration.

As of September 30, 2022, the balance of the debt discount was $ 2.7 million.

During the nine months ended September 30, 2022, the Company recognized interest expense of $ 1.6 million.

As of September 30, 2022, the carrying value of the Oxford Term Loans was $ 23.8 million.

The fair value of the Oxford Term Loans approximates its carrying value and was determined using Level 2 inputs using discounted cash flow analysis, based on the Company’s estimated current incremental borrowing rate.

2 unchanged sentences

In addition to the financial covenant, additional covenants include those restricting dispositions, fundamental changes to its business, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated debt.

The Company was in compliance with its debt covenants as of June 30, 2022.

The Company was in compliance with its debt covenants as of September 30, 2022.

Convertible Debt.

9 unchanged sentences

In July 2022, the Company entered into a lease agreement for a 22,000 square-foot office space in Bridgewater, New Jersey to which it plans to relocate the New Jersey offices.

The term of the lease is expected to commence in December 2022, will extend for ten years and 11 months from such commencement date and provides for escalating yearly base rent payments starting at $820,000 and increasing to $986,000 in the final year of the lease.

As of June 30, 2022, the right-of-use assets for the office space leases had a balance of $ 1.8 million, which is included in other assets in the condensed consolidated balance sheet.

The lease agreement will extend for ten years and 11 months from the date Lexicon occupies the building and provides for escalating yearly base rent payments starting at $820,000 and increasing to $986,000 in the final year of the lease.

As of September 30, 2022, the right-of-use assets for the office space leases had a balance of $ 7.1 million, which is included in other assets in the condensed consolidated balance sheet.

Current and non-current liabilities relating to the leases were $ 1.4 million and $ 5.4 million, respectively, which are included in accrued liabilities and other long-term liabilities in the condensed consolidated balance sheet, respectively.

The following table reconciles the undiscounted cash flows of the operating lease liability to the recorded lease liability at June 30, 2022:

The following table reconciles the undiscounted cash flows of the operating lease liability to the recorded lease liability at September 30, 2022:

(in thousands)

Thereafter 6,525

Total undiscounted operating lease liability 11,084

13 unchanged sentences

The net proceeds are reflected as issuances of common stock in the accompanying condensed consolidated financial statements.

Subsequent Events

Common Stock :

In August 2022, Lexicon sold an aggregate of 39,100,000 shares of its common stock at a price of $ 2.50 per share in a public offering and concurrent private placement to two affiliates of Invus, L.P., resulting in net proceeds of approximately $ 94.3 million, after deducting underwriting discounts and commissions and estimated offering expenses.

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 1. Financial Statements