What changed in this filing

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Item 1. Financial Statements

2024-11-13 compared with 2024-08-02 · 65 added, 46 removed, 307 unchanged (27% of the section changed)

3 unchanged sentences

(In thousands, except par value and share amounts)

As of June 30, As of December 31,

As of September 30, As of December 31,

Assets (unaudited)

24 unchanged sentences

Series A Convertible preferred stock;

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

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

no shares issued or outstanding at December 31, 2023

4 unchanged sentences

Accumulated deficit ( 1,933,476 ) ( 1,766,839 )

Accumulated other comprehensive (loss) income ( 193 ) 31

Accumulated other comprehensive income 349 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 June 30, Six Months Ended June 30,

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

2024 2023 2024 2023

16 unchanged sentences

Other comprehensive loss:

Unrealized (loss) gain on investments ( 143 ) 63 ( 224 ) 328

Unrealized gain (loss) on investments 542 ( 13 ) 318 315

Comprehensive loss $ ( 64,269 ) $ ( 50,538 ) $ ( 166,319 ) $ ( 127,048 )

19 unchanged sentences

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

Stock-based compensation — — — — 3,898 — — — 3,898

Net loss — — — — — ( 50,525 ) — — ( 50,525 )

Unrealized gain (loss) on investments — — — — — — ( 13 ) — ( 13 )

Other — — — — ( 211 ) — — — ( 211 )

Balance at September 30, 2023 245,793 $ 245 — $ — $ 1,859,346 $ ( 1,717,083 ) $ ( 113 ) $ ( 2,885 ) $ 139,510

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

19 unchanged sentences

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

Stock-based compensation — — — — 2,801 — — — 2,801

Net loss — — — — — ( 64,811 ) — — ( 64,811 )

Unrealized gain (loss) on investments — — — — — — 542 — 542

Balance at September 30, 2024 363,020 $ 363 — $ — $ 2,115,891 $ ( 1,933,476 ) $ 349 $ ( 4,615 ) $ 178,512

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:

4 unchanged sentences

Amortization of debt-related costs 1,444 1,156

Accretion of marketable securities purchased at a discount ( 7,418 ) ( 3,613 )

Other non-cash adjustments 481 —

4 unchanged sentences

Decrease in other long-term assets 513 389

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

Increase in accounts payable and other liabilities 5,673 9,108

Net cash used in operating activities ( 157,289 ) ( 111,349 )

10 unchanged sentences

Proceeds from debt borrowings, net of fees — 49,962

Other ( 400 ) —

Other debt financing fees ( 1,306 ) —

Net cash provided by financing activities 238,453 187,961

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

Net increase (decrease) in cash and cash equivalents 12,086 ( 25,229 )

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

3 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Accrued financing costs $ 910 $ —

Conversion of preferred stock to common stock 115 —

10 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

We have made certain reclassification adjustments to conform prior-period amounts to the current presentation.

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, 2024 are not necessarily indicative of the results that may be expected for the year ended December 31, 2024.

Operating results for the nine month period ended September 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.

9 unchanged sentences

Early adoption is permitted for both standards.

We do not expect these accounting pronouncements to have a material impact on our financial statements.

We are evaluating the impact of these accounting pronouncements and do not currently expect them to have a material impact on our financial statements.

Cash and Cash Equivalents and Investments

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

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

As of September 30, 2024

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

16 unchanged sentences

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

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.

As of September 30, 2024 and December 31, 2023, Lexicon’s investments in an unrealized loss position had an estimated fair value of $ 14.8 million and $ 58.5 million, respectively.

There were no realized gains or losses during either of the nine month periods ended September 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 June 30, 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 June 30, 2024

Assets at Fair Value as of September 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 June 30, 2024 and December 31, 2023:

As of June 30, As of December 31,

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

As of September 30, As of December 31,

(in thousands)

3 unchanged sentences

Inventory $ 636 $ 381

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

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

In Years 2024 2023

8 unchanged sentences

Net property and equipment $ 2,135 $ 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,

During the nine months ended September 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 September 30, As of December 31,

(in thousands)

5 unchanged sentences

Total accrued liabilities $ 21,845 $ 17,157

During the nine months ended September 30, 2024, the Company incurred $ 3.4 million of severance costs reflected in selling, general, and administrative expenses of which $ 1.9 million was paid as of September 30, 2024.

As of September 30, 2024, $ 1.5 million is reflected as accrued compensation and benefits within accrued liabilities on the condensed consolidated balance sheet as noted in the table above.

Debt Obligations

1 unchanged sentence

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 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.

As of September 30, 2024, the carrying value of the Oxford Term Loans on the condensed consolidated balance sheet was $ 99.9 million, reflecting an unamortized discount of $ 7.1 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.

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.

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.

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

4 unchanged sentences

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.

2 unchanged sentences

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 %.

As of September 30, 2024, the weighted average interest rate of the Oxford Term Loans was 12.7 %.

Restrictive Provisions/Covenants.

8 unchanged sentences

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.

The Company was in compliance with its debt covenants as of September 30, 2024.

Commitments and Contingencies

5 unchanged sentences

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

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:

As of September 30, 2024 and December 31, 2023, the right-of-use assets for the office space leases of $ 5.0 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 are included in accrued liabilities in the condensed consolidated balance sheet (as further described in Note 4) and long-term operating lease liabilities of approximately $ 4.7 million and $ 5.3 million, respectively, as of September 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 nine months ended September 30, 2024 and 2023, the Company incurred lease expense of $ 0.4 million and $ 1.2 million, respectively.

During the nine months ended September 30, 2024 and 2023, the Company made cash payments for lease liabilities of $ 1.0 million and $ 0.5 million, respectively.

As of September 30, 2024 and December 31, 2023, the weighted-average remaining lease terms were 8.7 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 September 30, 2024:

(in thousands)

9 unchanged sentences

Stock-Based Compensation.

The Company has stockholder-approved equity incentive plans that permit the grant of stock options, restricted stock unit awards, and other stock-based awards to employees, directors, and consultants of the Company.

The Company has stockholder-approved equity incentive plans that permit the grant of stock options, restricted stock units, and other stock-based awards to employees, directors, and consultants of the Company.

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 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.

Compensation expense for the three months ended September 30, 2024 and 2023 of $ 2.8 million and $ 3.9 million, respectively, and for the nine months ended September 30, 2024 and 2023 of $ 12.0 million and $ 11.1 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 six months ended June 30, 2024 and 2023:

The following weighted-average

assumptions were used for stock options granted in the nine months ended September 30, 2024 and 2023:

Expected Volatility Risk-free Interest Rate Expected Term Dividend

June 30, 2024

September 30, 2024

Employees 96 % 4.4 % 4 — %

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

June 30, 2023

September 30, 2023

Employees 93 % 3.9 % 4 — %

Officers and non-employee directors 100 % 3.9 % 6 — %

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

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

Stock Options Weighted Average Exercise Price

5 unchanged sentences

Forfeited ( 4,163 ) 2.56

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:

Outstanding at September 30, 2024 21,193 3.44

Exercisable at September 30, 2024 10,968 $ 4.63

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

RSU’s Weighted Average Grant Date

4 unchanged sentences

Forfeited ( 3,010 ) 2.25

Outstanding at June 30, 2024 11,165 $ 2.25

Outstanding at September 30, 2024 8,562 $ 2.25

Other Capital Agreements

5 unchanged sentences

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.

Subsequent Events

On October 16, 2024, Lexicon entered into an exclusive license agreement (the “License Agreement”) with Viatris Inc.

(“Viatris”) for the development and commercialization of sotagliflozin in all markets outside of the United States and Europe (the “Licensed Territory”).

Under the License Agreement, Lexicon granted Viatris an exclusive, royalty-bearing right and license under its patent rights and know-how to develop and commercialize sotagliflozin in the Licensed Territory and received an upfront payment of $ 25 million.

Lexicon is also eligible to receive (a) up to an aggregate of $ 12 million upon the achievement of specified regulatory milestones, (b) up to an aggregate of $ 185 million upon the achievement of specified sales milestones and (c) tiered royalties ranging from low double-digit to upper-teens percentages of annual net sales of sotagliflozin in the Licensed Territory.

Viatris is responsible for all regulatory and commercialization activities for sotagliflozin in the Licensed Territory as well as conducting any additional clinical trials required to obtain such regulatory approvals.

Lexicon and Viatris will enter into a manufacturing and supply agreement pursuant to which Lexicon will supply Viatris’s development and commercial requirements of sotagliflozin, and Viatris will pay an agreed upon transfer price for such supply.

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