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Item 1. Financial Statements

2025-05-14 compared with 2024-11-13 · 132 added, 137 removed, 235 unchanged (53% of the section changed)

3 unchanged sentences

(In thousands, except par value and share amounts)

As of September 30, As of December 31,

As of March 31, As of December 31,

Assets (unaudited)

6 unchanged sentences

Total current assets 245,806 246,193

Property and equipment, net of accumulated depreciation and amortization of $ 1,961 and $ 4,538 , respectively

Property and equipment, net 2,308 2,484

Goodwill 44,543 44,543

6 unchanged sentences

Accrued liabilities 12,948 30,447

Deferred revenue 45,000 —

Current portion of long-term debt 42,056 —

Total current liabilities 110,693 45,248

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Series A Convertible preferred stock;

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

no shares issued or outstanding at December 31, 2023

2,304,147 shares issued and none outstanding at March 31, 2025 and December 31, 2024

Common stock, $ 0.001 par value;

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(In thousands, except per share amounts)

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

2024 2023 2024 2023

Three Months Ended March 31,

Net product revenue $ 1,262 $ 1,093

15 unchanged sentences

Other comprehensive loss:

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

Unrealized loss on investments ( 94 ) ( 81 )

Comprehensive loss $ ( 25,389 ) $ ( 48,478 )

4 unchanged sentences

Common Stock Preferred Stock Additional Accumulated Other

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

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

Balance at December 31, 2023 245,793 $ 245 — $ — $ 1,862,558 $ ( 1,766,839 ) $ 31 $ ( 2,885 ) $ 93,110

Stock-based compensation — — — — 4,302 — — — 4,302

Issuance of preferred stock, net of fees — — 2,304 23 241,552 — — — 241,575

Issuance of common stock under Equity Incentive Plans 1,972 3 — — 85 — — — 88

Repurchase of common stock — — — — — — — ( 824 ) ( 824 )

Payments for tax withholding on share-based compensation vesting — — — — — — — ( 1,730 ) ( 1,730 )

Net loss — — — — — ( 48,397 ) — — ( 48,397 )

Unrealized gain (loss) on investments — — — — — — 265 — 265

Unrealized loss on investments — — — — — — ( 81 ) — ( 81 )

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 — — — — 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

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.

Lexicon Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

Common Stock Preferred Stock Additional Accumulated Other

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

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

Balance at December 31, 2024 363,020 $ 363 $ — $ — $ 2,117,325 $ ( 1,967,242 ) $ 119 $ ( 4,615 ) $ 145,950

Stock-based compensation — — — — 3,043 — — — 3,043

Issuance of preferred stock, net of fees — — 2,304 23 241,552 — — — 241,575

Issuance of common stock under Equity Incentive Plans 2,540 3 — — ( 3 ) — — — —

Repurchase of common stock — — — — — — — ( 1,730 ) ( 1,730 )

Payments for tax withholding on share-based compensation vesting — — — — — — — ( 572 ) ( 572 )

Net loss — — — — — ( 25,295 ) — — ( 25,295 )

Unrealized gain (loss) on investments — — — — — — ( 81 ) — ( 81 )

Unrealized loss on investments — — — — — — ( 94 ) — ( 94 )

Balance at March 31, 2025 365,560 $ 366 — $ — $ 2,120,365 $ ( 1,992,537 ) $ 25 $ ( 5,187 ) $ 123,032

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

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)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

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Stock-based compensation 3,043 4,302

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

Amortization/accretion of debt-related costs 401 517

Accretion of marketable securities purchased at a discount ( 1,326 ) ( 1,399 )

1 unchanged sentence

Changes in operating assets and liabilities:

Increase in accounts receivable ( 1,885 ) ( 290 )

Increase in inventories ( 255 ) ( 336 )

Increase in prepaid expenses and other current assets ( 1,576 ) ( 1,935 )

Decrease (increase) in accounts receivable 1,026 ( 516 )

Decrease (increase) in inventories 30 ( 133 )

Decrease (increase) in prepaid expenses and other current assets 1,213 ( 1,879 )

Decrease in other long-term assets 186 166

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

Decrease in accounts payable and other liabilities ( 21,692 ) ( 9,108 )

Net cash used in operating activities ( 43,778 ) ( 55,130 )

Cash flows from investing activities:

Purchases of property and equipment ( 557 ) ( 470 )

Purchases of investments ( 64,971 ) ( 183,224 )

Maturities of investments 105,553 73,000

Net cash used in investing activities ( 69,078 ) ( 101,841 )

Net cash provided by (used in) investing activities 40,582 ( 110,224 )

Cash flows from financing activities:

Proceeds from issuance of common stock for equity incentive plans — 88

Proceeds from issuance of common stock, net of fees — 138,823

Proceeds from issuance of preferred stock, net of fees — 241,425

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

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

Payments for tax withholding on share-based compensation vesting ( 572 ) ( 1,730 )

Other debt financing fees — ( 400 )

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

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

Net cash (used in) provided by financing activities ( 572 ) 239,383

Net (decrease) increase in cash and cash equivalents ( 3,768 ) 74,029

Cash and cash equivalents at beginning of period 66,656 22,465

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Supplemental disclosure of non-cash investing and financing activities:

Conversion of preferred stock to common stock 115 —

Issuance of equity-classified warrants — 307

Accrued financing costs $ — $ 150

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

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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.

Lexicon has 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 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.

Operating results for the three month period ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ended December 31, 2025.

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, 2024, as filed with the SEC.

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Recent Accounting Pronouncements Issued But Not Yet Adopted .

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures , which is effective retrospectively for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures , which is effective prospectively for annual periods beginning after December 15, 2024.

Early adoption is permitted for both standards.

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

The Company does not expect this accounting pronouncement to have a material impact on the financial statements.

Cash and Cash Equivalents and Investments

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

The fair value of cash and cash equivalents and investments held are as follows:

As of March 31, 2025

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

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Total short-term investments $ 131,926 $ 31 $ ( 6 ) $ 131,951

Total cash and cash equivalents and investments $ 258,020 $ 356 $ ( 7 ) $ 258,369

Total cash and cash equivalents and short-term investments $ 194,814 $ 31 $ ( 6 ) $ 194,839

As of December 31, 2024

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Total short-term investments $ 171,183 $ 136 $ ( 18 ) $ 171,301

Total cash and cash equivalents and investments

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

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.

Total cash and cash equivalents and short-term investments $ 237,839 $ 136 $ ( 18 ) $ 237,957

As of March 31, 2025 and December 31, 2024, Lexicon’s investments in an unrealized loss position had an estimated fair value of $ 57.3 million and $ 12.9 million, respectively.

There were no realized gains or losses during either of the three month periods ended March 31, 2025 and 2024.

Fair Value Measurements

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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 September 30, 2024 and December 31, 2023.

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.

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

Assets at Fair Value as of September 30, 2024

Assets at Fair Value as of March 31, 2025

Level 1 Level 2 Level 3 Total

2 unchanged sentences

Short-term investments 110,132 21,819 — 131,951

Total cash and cash equivalents and investments $ 223,407 $ 34,962 $ — $ 258,369

Total cash and cash equivalents and short-term investments $ 173,020 $ 21,819 $ — $ 194,839

Assets at Fair Value as of December 31, 2024

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Short-term investments 127,990 43,311 — 171,301

Total cash and cash equivalents and investments $ 164,061 $ 5,965 $ — $ 170,026

The carrying amount of cash and cash equivalents, prepaid expenses and other assets, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

Total cash and cash equivalents and short-term investments $ 194,646 $ 43,311 $ — $ 237,957

The carrying amount of cash and cash equivalents, prepaid expenses and other assets, accounts payable, accrued expenses and current portion of long-term debt are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

The fair value of the Oxford Term Loans (see Note 6) is determined under Level 2 in the fair value hierarchy and approximates carrying value as the loans bear interest at a rate that approximates prevailing market rates for instruments with similar characteristics.

Supplemental Financial Information

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)

Raw materials $ 103 $ —

Work-in-progress 83 100

Finished goods 450 281

Inventory $ 636 $ 381

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

The following tables show the Company’s additional balance sheet information:

Estimated Useful Lives As of March 31, As of December 31,

In Years 2025 2024

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Net property and equipment $ 2,308 $ 2,484

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,

As of March 31, As of December 31,

(in thousands)

5 unchanged sentences

Total accrued liabilities $ 12,948 $ 30,447

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.

As of March 31, 2025 and December 31, 2024, $ 1.1 million and $ 8.8 million of accrued severance is included in accrued compensation and benefits within accrued liabilities on the condensed consolidated balance sheet as noted in the table above.

Collaborations and Strategic Alliances

Novo Nordisk .

In March 2025, the Company entered into an exclusive license agreement (the “License Agreement”) with Novo Nordisk A/S for the worldwide development, manufacture and commercialization of LX9851, the Company’s preclinical drug candidate for obesity and associated cardiometabolic disorders.

Under the License Agreement, the Company granted Novo Nordisk an exclusive, worldwide, royalty-bearing right and license under its patent rights and know-how to develop, manufacture and commercialize LX9851.

In April 2025, the Company received an upfront payment of $ 45 million under the License Agreement and is eligible to receive (a) up to an aggregate of $ 485 million upon the achievement of specified regulatory and commercial launch milestones and (b) up to an aggregate of $ 475 million upon the achievement of specified sales milestones.

The Company is also entitled to tiered, escalating royalties ranging from single-digit to low-double-digit percentages of annual net sales of LX9851, subject to customary royalty reduction provisions.

Under the License Agreement, the Company is also required to use commercially reasonable efforts to complete agreed-upon IND-enabling activities for LX9851 pursuant to an approved research plan as well as provide clinical supply of LX9851 to Novo Nordisk at an agreed upon transfer price for a specified time period.

For accounting purposes, pursuant to ASC 606, Revenue from Contracts with Customers , the Company determined that its obligation to provide the licensed technology and perform the IND-enabling activities is a single combined performance obligation and allocated the entire $ 45 million upfront payment to this single combined performance obligation.

The Company identified the obligation to provide clinical supply of LX9851 at an agreed upon transfer price for a specified time period as a separate performance obligation, but allocated none of the $ 45 million upfront payment to the clinical supply obligation as the supply is being offered subject to reasonable and customary contract manufacturing terms at its stand-alone selling price.

As of March 31, 2025, the Company had provided the licensed technology under its patent rights and know-how to develop, manufacture and commercialize LX9851, but had not yet completed any of the IND-enabling activities.

Accordingly, the $ 45 million upfront payment was recorded as accounts receivable and as deferred revenue on the condensed consolidated balance sheet.

The Company will recognize such amount as revenue using the input method over the period the IND-enabling activities are performed.

Any future milestone or royalty payments that the Company would be eligible to receive were excluded from the upfront payment, as all milestone or royalty amounts were fully constrained based on the probability of achievement.

Any future milestone payments or royalties the Company is entitled to receive upon achievement of future sales of the licensed products by Novo Nordisk will be recognized when the related sales occur.

The Company also concluded that the License Agreement is not a collaborative agreement under ASC 808, Collaborative arrangements , as Novo Nordisk is responsible for all regulatory and commercialization activities for LX9851 as well as conducting any additional clinical trials required to obtain such regulatory approvals.

In October 2024, the Company entered into an exclusive license agreement with Viatris Inc.

for the development and commercialization of sotagliflozin in all markets outside of the United States and Europe pursuant to which the Company received an upfront payment of $ 25 million.

For additional information, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Debt Obligations

Oxford Term Loans Overview.

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”).

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 originally provided up to $ 150 million in borrowing capacity (the “Oxford Term Loans”).

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

The first two $ 25 million tranches totaling $ 50 million were funded in 2022 and the third $ 50 million tranche was funded in June 2023.

The fourth $ 25 million tranche will be available for draw at Lexicon’s option upon the achievement of specified INPEFA net sales and until April 15, 2025.

An unused fee will be due in the event Lexicon does not draw the full amount when available under the fourth tranche.

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 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.

Availability of the fourth $ 25 million tranche expired on April 15, 2025.

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 with a current amortization date of May 1, 2027.

In March 2025, the Company entered into a seventh amendment to the loan and security agreement (the “Seventh Amendment”) with Oxford (a) providing for a prepayment to the lenders of $ 45 million, which occurred in April 2025, and certain additional contingent future prepayments totaling $ 8 million, (b) modifying the amortization date and repayment amortization schedule under the loans under certain circumstances, (c) modifying the financial covenant relating to minimum cash as further described below and (d) eliminating the previous financial covenant relating to net sales of INPEFA ® (sotagliflozin), as well as certain other terms.

Interest, Principal Payments, and Carrying Value of Debt.

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.

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 tranche.

As of March 31, 2025, the weighted average interest rate of the Oxford Term Loans was 11.9 %.

In April 2025 the Company repaid $ 45 million (including final payment exit fees) to Oxford on a pro-rata basis across each loan tranche pursuant to the terms of the Seventh Amendment.

Additional payments of $ 20.2 million, $ 30.2 million, and $ 11.6 million, including debt principal and final exit fee payments (equal to 7 % of the remaining amount funded under the Oxford Term Loans), 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 a result of the Seventh Amendment, the current amortization date of May 1, 2027 and the final maturity date of March 1, 2029 are subject to potential acceleration to December 1, 2026 and November 1, 2027, respectively, dependent upon the occurrence of certain future events.

Additionally, Lexicon may prepay the Oxford Term Loans in whole at its option at any time subject to prepayment fees of up to 3 % which decline over the three years following the funding date of each loan tranche.

As of March 31, 2025, the Company reflected the $ 42.1 million of outstanding principal repaid in April 2025 in current maturities of long-term debt and the remaining carrying value of the Oxford Term Loans of $ 58.6 million in long-term debt on the condensed consolidated balance sheet.

The carrying value above reflect an unamortized discount of $ 6.3 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.

Oxford Warrants.

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.

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

The Company allocated the proceeds from each term loan tranche to the corresponding warrant using the relative fair value method and used the Black-Scholes model to calculate the fair value of the warrants.

These warrants reduced the carrying value of long-term debt and are classified as equity instruments in additional paid-in capital on the condensed consolidated balance sheet.

Interest and Principal Payments.

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 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 September 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.

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 %.

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

For additional information on these warrants refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Restrictive Provisions/Covenants.

Among other restrictive provisions and covenants, the loan and security agreement includes a financial covenant which requires us to maintain a minimum balance of unrestricted cash, cash equivalents.

short-term investments, and restricted cash, inclusive of a required minimum amount of $ 29 million to be maintained in a blocked account, in an amount equal to not less than the greater of (a) fifty percent ( 50 %) of the outstanding principal amount of the Oxford Term Loans and (b) the required minimum amount of $ 29 million.

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

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.

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 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 September 30, 2024.

The Company was in compliance with its debt covenants as of March 31, 2025.

Commitments and Contingencies

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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.

In July 2024, Lexicon entered into a new lease agreement for its existing office space in The Woodlands, Texas.

The term of the lease begins September 2025, extends through January 2031 and provides for 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 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:

As of March 31, 2025 and December 31, 2024, the right-of-use assets for the office space leases of $ 4.6 million and $ 4.8 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 $ 4.5 million and $ 4.6 million, respectively, as of March 31, 2025 and December 31, 2024 are included in other long-term liabilities in the condensed consolidated balance sheet.

During each of the three months ended March 31, 2025 and 2024, the Company incurred lease expense of $ 0.4 million.

During each of the three months ended March 31, 2025 and 2024, the Company made cash payments for lease liabilities of $ 0.3 million.

As of March 31, 2025 and December 31, 2024, the weighted-average remaining lease terms were 8.5 years and 8.6 years, respectively, with weighted-average discount rates of 9.7 % for each year.

The following table reconciles the undiscounted cash flows of the operating lease liability to the recorded lease liability at March 31, 2025:

(in thousands)

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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 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.

Compensation expense for the three months ended March 31, 2025 and 2024 of $ 3.0 million and $ 4.3 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.

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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 nine months ended September 30, 2024 and 2023:

The following weighted-average assumptions were used for stock options granted in the three months ended March 31, 2025 and 2024:

Expected Volatility Risk-free Interest Rate Expected Term Dividend

September 30, 2024

Three Months Ended March 31, 2025

Employees (1)

— % — % — — %

Officers and non-employee directors 115 % 4.3 % 6 — %

September 30, 2023

Three Months Ended March 31, 2024

Employees 96 % 4.3 % 4 — %

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

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

(1) For the three months ended March 31, 2025, there were no stock options granted to employees.

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans:

Stock Options Weighted Average Exercise Price

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Forfeited ( 1,270 ) 2.22

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:

Outstanding at March 31, 2025 23,702 2.18

Exercisable at March 31, 2025 7,560 $ 4.18

The following is a summary of restricted stock unit activity under Lexicon’s stock-based compensation plans:

RSU’s Weighted Average Grant Date

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Forfeited ( 932 ) 1.28

Outstanding at September 30, 2024 8,562 $ 2.25

Outstanding at March 31, 2025 16,525 $ 1.00

Other Capital Agreements

Convertible Preferred Stock.

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.

In March 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 $ 241.3 million, after deducting placement agent fees and offering expenses from the private placement offering.

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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”).

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.

In May 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.

Segment Information

Lexicon operates as a single reportable segment, primarily focusing on the discovery, development and commercialization of pharmaceutical products for the treatment of human disease.

Substantially all of the Company’s revenues have been derived from drug discovery alliances, target validation collaborations for the development and, in some cases, analysis of the physiological effects of genes altered in knockout mice, technology licenses, subscriptions to its databases, product sales, government grants and contracts and compound library sales, as well as from commercial sales of its approved drug product.

The chief operating decision maker (“CODM”) is the Company’s chief executive officer (“CEO”).

The CEO manages and allocates resources on a total company basis by assessing the overall level of resources available and how to best deploy these resources across research and development projects in line with the Company’s long-term company-wide strategic goals.

The CEO evaluates single-segment consolidated financial information against budget for purposes of making operating decisions, planning and forecasting for future periods, and deciding the level of investment in the Company’s various operating activities and other capital allocation activities.

The CODM assesses financial performance based on consolidated net income (loss) (as reported on the consolidated statement of comprehensive loss).

The CEO also uses consolidated cash and cash equivalents and short-term investments (which can be found on our Consolidated Balance Sheets) as a measure of segment assets for allocating resources.

Summary of segment net loss, including segment expenses were as follows:

Three Months Ended March 31,

(in thousands)

Net product revenue $ 1,262 $ 1,093

Royalties and other revenue — 37

Total revenues 1,262 1,130

Operating expenses:

Cost of sales 30 31

Research and development 13,609 12,777

Sales and marketing 2,674 22,681

General and administrative 7,826 6,635

Other segment expense (1)

Total operating expenses 26,941 46,463

Loss from operations ( 25,679 ) ( 45,333 )

Interest and other expense ( 1,835 ) ( 4,948 )

Interest income and other, net 2,219 1,884

Net loss $ ( 25,295 ) $ ( 48,397 )

(1) For the three months ended March 31, 2025 and 2024, other segment expense primarily includes, among other items, stock compensation of $ 1.6 million related to research and development personnel for each period;

$ 0.04 million and $ 0.8 million related to sales and marketing personnel, respectively;

and $ 1.4 million and $ 1.9 million related to general and administrative personnel.

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