What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-02 · 95 added, 61 removed, 258 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except par value and share amounts)

As of March 31, As of December 31,

As of June 30, As of December 31,

Assets (unaudited)

17 unchanged sentences

Long-term debt, net 99,499 99,508

Long-term operating lease liabilities 5,079 5,265

Other long-term liabilities 6,001 5,265

Total liabilities 133,376 136,319

3 unchanged sentences

5,000,000 shares authorized

Series A Convertible preferred stock, 2,304,147 and no shares issued, respectively

Series A Convertible preferred stock;

2,304,147 shares issued and none outstanding at June 30, 2024;

no shares issued or outstanding at December 31, 2023

Common stock, $ 0.001 par value;

3 unchanged sentences

Accumulated deficit ( 1,868,665 ) ( 1,766,839 )

Accumulated other comprehensive income/(loss) ( 50 ) 31

Accumulated other comprehensive (loss) income ( 193 ) 31

Treasury stock, at cost, 1,528,008 and 867,973 shares, respectively

6 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended March 31,

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

2024 2023 2024 2023

Net product revenue $ 1,617 $ 291 $ 2,710 $ 291

13 unchanged sentences

Net loss per common share, basic and diluted $ ( 0.17 ) $ ( 0.22 ) $ ( 0.37 ) $ ( 0.39 )

Shares used in computing net loss per common share, basic and diluted 245,390 189,014

Weighted average common shares outstanding, basic and diluted 310,836 204,783 278,113 196,942

Other comprehensive loss:

14 unchanged sentences

Balance at March 31, 2023 190,430 $ 190 — $ — $ 1,712,558 $ ( 1,621,654 ) $ ( 163 ) $ ( 2,885 ) $ 88,046

Stock-based compensation — — — — 3,815 — — — 3,815

Issuance of equity-classified warrants — — — — 307 — — — 307

Issuance of common stock under Equity Incentive Plans 75 — — — — — — — —

Issuance of common stock, net of fees 55,288 55 — — 138,979 — — — 139,034

Net loss — — — — — ( 44,904 ) — — ( 44,904 )

Unrealized gain (loss) on investments — — — — — — 63 — 63

Balance at June 30, 2023 245,793 $ 245 — $ — $ 1,855,659 $ ( 1,666,558 ) $ ( 100 ) $ ( 2,885 ) $ 186,361

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 Preferred Stock Additional Accumulated Other

8 unchanged sentences

Balance at March 31, 2024 247,765 $ 248 2,304 $ 23 $ 2,108,497 $ ( 1,815,236 ) $ ( 50 ) $ ( 4,615 ) $ 288,867

Stock-based compensation — — — — 4,859 — — — 4,859

Fees related to preferred stock — — — — ( 175 ) — — — ( 175 )

Issuance of common stock under Equity Incentive Plans 48 — — — 1 — — — 1

Conversion of preferred stock to common stock 115,207 115 ( 2,304 ) ( 23 ) ( 92 ) — — — —

Net loss — — — — — ( 53,429 ) — — ( 53,429 )

Unrealized gain (loss) on investments — — — — — — ( 143 ) — ( 143 )

Balance at June 30, 2024 363,020 $ 363 — $ — $ 2,113,090 $ ( 1,868,665 ) $ ( 193 ) $ ( 4,615 ) $ 239,980

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

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

10 unchanged sentences

Decrease in other long-term assets 337 561

Decrease in accounts payable and other liabilities ( 9,108 ) ( 2,770 )

(Decrease) increase in accounts payable and other liabilities ( 3,198 ) 2,995

Net cash used in operating activities ( 103,670 ) ( 69,730 )

3 unchanged sentences

Maturities of investments 138,000 88,870

Net cash (used in) provided by investing activities ( 110,224 ) 12,093

Net cash used in investing activities ( 122,547 ) ( 62,515 )

Cash flows from financing activities:

Proceeds from issuance of common stock for equity incentive plans 89 —

Proceeds from issuance of common stock, net of fees — 139,034

Proceeds from issuance of preferred stock, net of fees 241,410 —

Repurchase of common stock for equity incentive plans ( 1,730 ) ( 824 )

Proceeds from debt borrowings, net of fees — 49,961

Other ( 400 ) —

Net cash provided by (used in) financing activities 239,383 ( 824 )

Net increase (decrease) in cash and cash equivalents 74,029 ( 20,344 )

Net cash provided by financing activities 239,369 188,171

Net increase in cash and cash equivalents 13,152 55,926

Cash and cash equivalents at beginning of period 22,465 46,345

4 unchanged sentences

Accrued financing costs $ 910 $ —

Conversion of preferred stock to common stock 115 —

Issuance of equity-classified warrants — 307

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

9 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 three month period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ended December 31, 2024.

Operating results for the six month period ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ended December 31, 2024.

For further information, refer to the financial statements and footnotes thereto included in Lexicon’s annual report on Form 10-K for the year ended December 31, 2023, as filed with the SEC.

11 unchanged sentences

Cash and Cash Equivalents and Investments

The fair value of cash and cash equivalents and investments held at March 31, 2024 and December 31, 2023 are as follows:

As of March 31, 2024

The fair value of cash and cash equivalents and investments held at June 30, 2024 and December 31, 2023 are as follows:

As of June 30, 2024

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

16 unchanged sentences

$ 169,996 $ 42 $ ( 12 ) $ 170,026

As of March 31, 2024 and December 31, 2023, our investments in an unrealized loss position had an estimated fair value of $ 216.0 million and $ 58.5 million, respectively.

There were no realized gains or losses during either of the three month periods ended March 31, 2024 and 2023.

As of June 30, 2024 and December 31, 2023, our investments in an unrealized loss position had an estimated fair value of $ 268.9 million and $ 58.5 million, respectively.

There were no realized gains or losses during either of the six month periods ended June 30, 2024 and 2023.

Fair Value Measurements

7 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 tables provide 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 March 31, 2024 and December 31, 2023.

There were no transfers between Level 1 and Level 2 during the periods presented.

Assets at Fair Value as of March 31, 2024

Assets at Fair Value as of June 30, 2024

Level 1 Level 2 Level 3 Total

12 unchanged sentences

Supplemental Financial Information

The following tables show the Company’s additional balance sheet information as of March 31, 2024 and December 31, 2023:

As of March 31, As of December 31,

The following tables show the Company’s additional balance sheet information as of June 30, 2024 and December 31, 2023:

As of June 30, As of December 31,

(in thousands)

3 unchanged sentences

Inventory $ 585 $ 381

As of March 31, As of December 31,

Estimated Useful Lives As of June 30, As of December 31,

In Years 2024 2023

(in thousands)

Property and Equipment:

Computers and software 3 - 5

$ 1,222 $ 2,408

Furniture and fixtures 5 - 7

Leasehold improvements 3 - 7

Total property and equipment 3,789 6,525

Accumulated depreciation and amortization ( 1,835 ) ( 4,538 )

Net property and equipment $ 1,954 $ 1,987

During the six months ended June 30, 2024, the Company retired $ 1.4 million of computers and software and $ 1.6 million of furniture and fixtures, all of which had been fully depreciated.

As of June 30, As of December 31,

(in thousands)

Accrued Liabilities:

6 unchanged sentences

Oxford Term Loans Overview.

Lexicon and one of its subsidiaries entered into a loan and security agreement with Oxford Finance LLC (“Oxford”) in March 2022 (as subsequently amended) that provides up to $ 150 million in borrowing capacity (the “Oxford Term Loans”).

Lexicon and one of its subsidiaries entered into a loan and security agreement (the “Loan Agreement”) with Oxford Finance LLC and the lenders listed therein (“Oxford”) in March 2022 (as subsequently amended) that provides up to $ 150 million in borrowing capacity (the “Oxford Term Loans”).

On June 28, 2024, Lexicon and its subsidiary entered into a sixth amendment to the Loan Agreement extending the interest-only period with an amortization date of May 1, 2027, extending the maturity date to March 1, 2029 and modifying the exit fee provision and existing financial covenants as noted below.

The Oxford Term Loans are available in five tranches, each maturing in March 2029.

3 unchanged sentences

The fifth $ 25 million tranche is available for draw at Lexicon’s option, subject to Oxford’s consent, at any time prior to the expiration of the interest-only period in March 2027 as described below.

As of March 31, 2024, the carrying value of the Oxford Term Loans on the condensed consolidated balance sheet was $ 99.9 million, reflecting an unamortized discount of $ 6.1 million to the face value of long-term debt related to debt issuance costs, the final payment exit fee, and the warrant fair value described below, which are being amortized into interest and other expense throughout the life of the term loan using the effective interest rate method.

As of June 30, 2024, the carrying value of the Oxford Term Loans on the condensed consolidated balance sheet was $ 99.5 million, reflecting an unamortized discount of $ 7.5 million to the face value of long-term debt related to debt issuance costs, the final payment exit fee, and the warrant fair value described below, which are being amortized into interest and other expense.

A final payment exit fee of $ 7.0 million equal to 7 % of the amount funded under the Oxford Term Loans is due upon prepayment or maturity.

1 unchanged sentence

Concurrent with the funding of each of the first three tranches, Lexicon granted Oxford warrants to purchase 420,673 shares of Lexicon’s common stock at an exercise price of $ 2.08 per share, 224,128 shares of Lexicon’s common stock at an exercise price of $ 1.95 per share and 183,824 shares of Lexicon’s common stock at an exercise price of $ 2.38 per share, respectively.

Subject to and upon funding of the fourth tranche, Lexicon will grant Oxford a warrant to purchase shares of its common stock having a value equal to 1.75 % of such tranche, as determined by reference to a 10 -day average closing price of the shares, and having an exercise price equal to such average closing price.

average closing price of the shares, and having an exercise price equal to such average closing price.

All warrants are exercisable for five years from their respective grant dates and feature a net cashless exercise provision.

3 unchanged sentences

Monthly interest-only payments are due during an initial 60-month period from the original March 2022 borrowing date.

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

Payments of $ 34.8 million, $ 52.2 million, and $ 19.0 million, including debt principal and final exit fee payments, will be due during the fiscal years ended December 31, 2025, December 31, 2026 and December 31, 2027, respectively, with respect to all borrowed loan tranches as of March 31, 2024.

The interest-only period will be followed by an amortization period extending through the maturity date with monthly principal payments beginning May 1, 2027.

Payments of $ 34.8 million, $ 52.2 million, and $ 20.0 million, including debt principal and final exit fee payments, will be due during the fiscal years ended December 31, 2027, December 31, 2028 and December 31, 2029, respectively, with respect to all borrowed loan tranches as of June 30, 2024.

Any prepayment of the Oxford Term Loans is subject to prepayment fees of up to 3 % which decline over the three years following the funding date of each loan tranche.

The Company has classified its debt as long-term based on its intent and ability to refinance with the recent equity financing (see Note 8) if the Company is unable to meet the financial covenants within one year .

Following the June 2023 amendment to the Loan Agreement, the floating interest rate is currently based on the sum of (a) the 1-month CME Term Secured Overnight Financing Rate (SOFR), (b) 0.10 %, and (c) 7.90 % for the first and second tranches and 7.00 % for the third and fourth tranches.

Prior to June 2023, the Oxford Term Loans bore interest at a floating rate equal to the 30-day U.S.

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

Following the June 2023 amendment to the loan and security agreement, the floating interest rate is currently based on the sum of (a) the 1-month CME Term Secured Overnight Financing Rate (SOFR), (b) 0.10 %, and (c) 7.90 % for the first and second tranches and 7.00 % for the third and fourth tranches.

As of March 31, 2024, the weighted average interest rate of the Oxford Term Loans was 12.9 %.

During the three months ended March 31, 2024, the Company recognized interest expense of $ 3.8 million, including $ 0.5 million in amortization of discount and related debt issuance costs.

Dollar LIBOR plus 7.90 %, but not less than 8.01 %.

As of June 30, 2024, the weighted average interest rate of the Oxford Term Loans was 12.9 %.

Restrictive Provisions/Covenants.

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.

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

Additionally, Lexicon may prepay the Oxford Term Loans in whole at its option at any time.

Lexicon’s obligations under the Oxford Term Loans are secured by a first lien security interest in all of the assets of the Company and its subsidiaries.

The loan and security agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default applicable to Lexicon and its subsidiaries.

The loan and security agreement includes a financial covenant which requires Lexicon to maintain a minimum cash and investments balance of $ 10 million until the achievement of specified INPEFA net sales.

Upon funding of the fourth tranche, the minimum cash and investments balance will increase to $ 25 million.

The loan and security agreement also includes a separate financial covenant

relating to net sales of INPEFA.

In March 2024, this covenant was further amended and will be effective as of June 30, 2024.

In addition to the financial covenants, 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 March 31, 2024.

The Loan Agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default applicable to Lexicon and its subsidiaries.

The Loan Agreement includes a financial covenant which requires Lexicon to maintain a minimum unrestricted cash and investments balance of 50 % of the outstanding principal amount through June 30, 2026, tested monthly as of the last day of each month.

In addition, Lexicon is separately required to maintain a quarterly minimum unrestricted cash and investments balance of $ 10 million until the achievement of specified INPEFA net sales (which will be satisfied by meeting the monthly minimum unrestricted cash and investments covenant noted above).

Upon funding of the fourth tranche, the quarterly minimum unrestricted cash and investments balance requirement will increase to $ 25 million.

The Loan Agreement also includes a separate financial covenant relating to net product revenue which will be effective as of the quarter ending June 30, 2026.

In addition to the financial covenants, 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, 2024.

Commitments and Contingencies

Operating Lease Obligations.

Lexicon’s operating leases include leases of office space in The Woodlands, Texas and Bridgewater, New Jersey and will expire in August 2025 and January 2034, respectively.

Lexicon’s operating leases include leases of office space in The Woodlands, Texas and Bridgewater, New Jersey that will expire in August 2025 and January 2034, respectively.

In July 2024, Lexicon entered into a new lease agreement for its existing office space in The Woodlands, Texas beginning September 1, 2025 with a term of approximately five years and total undiscounted cash payments of $ 4.1 million.

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

1 unchanged sentence

Lexicon does not apply this accounting to those leases with terms of twelve months or less.

As of March 31, 2024 and December 31, 2023, the right-of-use assets for the office space leases of $ 5.4 million and $ 5.5 million, respectively, are separately included in operating lease right-of-use-assets in the condensed consolidated balance sheet.

Current liabilities relating to the leases were included in accrued liabilities in the condensed consolidated balance sheet (as further described in Note 4) and long-term operating lease liabilities are separately included in the condensed consolidated balance sheet.

During the three months ended March 31, 2024 and 2023, the Company incurred lease expense of $ 0.4 million.

During the three months ended March 31, 2024 and 2023, the Company made cash payments for lease liabilities of $ 0.3 million and $ 0.1 million, respectively.

As of March 31, 2024 and December 31, 2023, the weighted-average remaining lease terms were 8.9 years and 9 years, respectively, with weighted-average discount rates of 9.6 %.

The following table reconciles the undiscounted cash flows of the operating lease liability to the recorded lease liability at March 31, 2024:

As of June 30, 2024 and December 31, 2023, the right-of-use assets for the office space leases of $ 5.2 million and $ 5.5 million, respectively, are separately included in operating lease right-of-use-assets in the condensed consolidated balance sheet.

Current liabilities relating to the leases were included in accrued liabilities in the condensed consolidated balance sheet (as further described in Note 4) and long-term operating lease liabilities of $ 4.9 million and $ 5.3 million, respectively, as of June 30, 2024 and December 31, 2023 are included in other long-term liabilities in the condensed consolidated balance sheet.

During each of the three and six months ended June 30, 2024 and 2023, the Company incurred lease expense of $ 0.4 million and $ 0.8 million, respectively.

During the six months ended June 30, 2024 and 2023, the Company made cash payments for lease liabilities of $ 0.7 million and $ 0.3 million, respectively.

As of June 30, 2024 and December 31, 2023, the weighted-average remaining lease terms were 8.8 years and 9 years, respectively, with weighted-average discount rates of 9.6 % for each year.

The following table reconciles the undiscounted cash flows of the operating lease liability to the recorded lease liability at June 30, 2024:

(in thousands)

11 unchanged sentences

Compensation expense related to stock options and restricted stock units (“RSUs”) is determined based on the fair value of the award on the date of the grant and is recognized on a straight-line basis over the vesting period in which an employee is required to provide service.

Compensation expense of $ 4.3 million and $ 3.4 million for the three months ended March 31, 2024 and 2023, respectively, is recorded separately in research and development expense and selling, general, and administrative expense as noted on the Company’s condensed consolidated statements of comprehensive loss.

Compensation expense for the three months ended June 30, 2024 and 2023 of $ 4.9 million and $ 3.8 million, respectively, and for the six months ended June 30, 2024 and 2023 of $ 9.2 million and $ 7.2 million, respectively, is recorded separately in research and development expense and selling, general, and administrative expense as noted on the Company’s condensed consolidated statements of comprehensive loss.

The fair value of stock options is estimated at the date of grant using the Black-Scholes method requiring the input of subjective assumptions.

3 unchanged sentences

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

The following weighted-average assumptions were used for stock options granted in the three months ended March 31, 2024 and 2023:

The following weighted-average assumptions were used for stock options granted in the six months ended June 30, 2024 and 2023:

Expected Volatility Risk-free Interest Rate Expected Term Dividend

March 31, 2024

June 30, 2024

Employees 96 % 4.5 % 4 — %

Officers and non-employee directors 104 % 4.2 % 6 — %

March 31, 2023

June 30, 2023

Employees 113 % 3.8 % 4 — %

Officers and non-employee directors 99 % 3.9 % 6 — %

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the three months ended March 31, 2024:

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the six months ended June 30, 2024:

Stock Options Weighted Average Exercise Price

5 unchanged sentences

Forfeited ( 898 ) 2.69

Outstanding at March 31, 2024 21,658 3.62

Exercisable at March 31, 2024 9,631 $ 5.03

The following is a summary of restricted stock unit activity under Lexicon’s stock-based compensation plans for the three months ended March 31, 2024:

Outstanding at June 30, 2024 22,214 3.54

Exercisable at June 30, 2024 10,505 $ 4.81

The following is a summary of restricted stock unit activity under Lexicon’s stock-based compensation plans for the six months ended June 30, 2024:

RSU’s Weighted Average Grant Date

4 unchanged sentences

Forfeited ( 407 ) 2.28

Outstanding at March 31, 2024 11,067 $ 2.26

Outstanding at June 30, 2024 11,165 $ 2.25

Other Capital Agreements

1 unchanged sentence

On March 11, 2024, Lexicon entered into an agreement with certain accredited investors pursuant to which the Company agreed to sell 2,304,147 shares of its Series A Convertible Preferred Stock, par value $ 0.01 per share, in a private placement at a price of $ 108.50 per share.

The Company received net proceeds of approximately $ 242 million, after deducting placement agent fees and offering expenses from the private placement offering.

Each share of preferred stock is convertible into 50 shares of common stock following the approvals listed below.

The Company received net proceeds of $ 241.4 million, after deducting placement agent fees and offering expenses from the private placement offering.

An affiliate of Invus, L.P.

elected to participate on the same terms as each other purchaser on a pro rata basis and also agreed to vote at the Company’s 2024 annual meeting of stockholders in favor of the approval of an amendment to the Company’s certificate of incorporation increasing the total authorized common shares thereunder from 300,000,000 to 450,000,000 shares (the “New Charter”).

Following the approval of the New Charter by the Company’s shareholders, the adoption of the New Charter by the Company’s board of directors, and the filing and acceptance of the New Charter by the Secretary of State of Delaware, each share of preferred stock will automatically convert into 50 shares (subject to adjustments) of common stock, or approximately 115 million additional common shares in total.

Our convertible preferred shares, as well as other potentially dilutive securities, are not included in the calculation of diluted earnings per common share as we have reported a net loss for the three months ended March 31, 2024 and 2023, and their effect would be anti-dilutive.

On May 10, 2024, following the approval of the New Charter by the Company’s shareholders, the adoption of the New Charter by the Company’s board of directors, and the filing and acceptance of the New Charter by the Secretary of State of Delaware, each share of preferred stock was converted into 50 shares of common stock at par value, or 115,207,350 shares in the aggregate.

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