Item 1. Financial Statements
Item 1. Financial Statements
Lexicon Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value and share amounts)
As of September 30, As of December 31,
2025 2024
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 49,656 $ 66,656
Short-term investments 66,294 171,301
Accounts receivable, net 2,334 3,473
Inventory 158 231
Prepaid expenses and other current assets 4,085 4,532
Total current assets 122,527 246,193
Property and equipment, net 1,981 2,484
Goodwill 44,543 44,543
Operating lease right-of-use-assets 7,508 4,832
Restricted cash 29,000 —
Other assets 368 368
Total assets $ 205,927 $ 298,420
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 3,797 $ 14,801
Accrued liabilities 13,620 30,447
Deferred revenue 4,303 —
Total current liabilities 21,720 45,248
Long-term debt, net 56,508 100,298
Other long-term liabilities 7,540 6,924
Total liabilities 85,768 152,470
Commitments and contingencies (Note 7)
Stockholders’ Equity:
Preferred stock, $ 0.01 par value; 5,000,000 shares authorized; 2,304,147 Series A Convertible Preferred shares issued and none outstanding
— —
Common stock, $ 0.001 par value; 450,000,000 shares authorized; 365,780,799 and 363,020,303 shares issued, respectively
366 363
Additional paid-in capital 2,127,005 2,117,325
Accumulated deficit ( 2,002,054 ) ( 1,967,242 )
Accumulated other comprehensive (loss) income 29 119
Treasury stock, at cost, 2,381,939 and 1,528,008 shares, respectively
( 5,187 ) ( 4,615 )
Total stockholders’ equity 120,159 145,950
Total liabilities and stockholders’ equity $ 205,927 $ 298,420
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Lexicon Pharmaceuticals, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Revenues:
Net product revenue $ 1,008 $ 1,741 $ 3,592 $ 4,451
Licensing revenue 13,154 — 40,698 —
Royalties and other revenue 20 9 20 76
Total revenues 14,182 1,750 44,310 4,527
Operating expenses:
Cost of sales 10 71 73 268
Research and development, including stock-based compensation of $ 1,832 , $ 1,460 , $ 5,026 and $ 4,733 , respectively
18,757 25,780 49,806 57,795
Selling, general and administrative, including stock-based compensation of $ 1,612 , $ 1,341 , $ 4,656 and $ 7,229 respectively
7,602 39,592 28,562 110,844
Total operating expenses 26,369 65,443 78,441 168,907
Loss from operations
( 12,187 ) ( 63,693 ) ( 34,131 ) ( 164,380 )
Interest and other expense ( 2,155 ) ( 4,562 ) ( 6,308 ) ( 11,721 )
Interest income and other 1,573 3,444 5,628 9,464
Net loss $ ( 12,769 ) $ ( 64,811 ) $ ( 34,811 ) $ ( 166,637 )
Net loss per common share, basic and diluted $ ( 0.04 ) $ ( 0.18 ) $ ( 0.10 ) $ ( 0.54 )
Weighted average common shares outstanding, basic and diluted 363,399 361,492 362,927 306,109
Other comprehensive income (loss):
Unrealized gain (loss) on investments 43 542 ( 90 ) 318
Comprehensive loss $ ( 12,726 ) $ ( 64,269 ) $ ( 34,901 ) $ ( 166,319 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Lexicon Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
Common Stock Preferred Stock Additional Accumulated Other
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
Payments for tax withholding on share-based compensation vesting — — — — — — — ( 1,730 ) ( 1,730 )
Net loss — — — — — ( 48,397 ) — — ( 48,397 )
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 — — — — 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 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 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.
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Lexicon Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands)
(Unaudited)
Common Stock Preferred Stock Additional Accumulated Other
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 common stock under Equity Incentive Plans 2,540 3 — — ( 3 ) — — — —
Payments for tax withholding on share-based compensation vesting — — — — — — — ( 572 ) ( 572 )
Net loss — — — — — ( 25,295 ) — — ( 25,295 )
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 — — — — 3,195 — — — 3,195
Issuance of common stock under Equity Incentive Plans 221 — — — — — — — —
Net income — — — — — 3,252 — — 3,252
Unrealized loss on investments — — — — — — ( 39 ) — ( 39 )
Balance at June 30, 2025 365,781 $ 366 — $ — $ 2,123,560 $ ( 1,989,285 ) $ ( 14 ) $ ( 5,187 ) $ 129,440
Stock-based compensation — — — — 3,445 — — — 3,445
Net loss — — — — — ( 12,769 ) — — ( 12,769 )
Unrealized gain on investments — — — — — — 43 — 43
Balance at September 30, 2025 365,781 $ 366 — $ — $ 2,127,005 $ ( 2,002,054 ) $ 29 $ ( 5,187 ) $ 120,159
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Lexicon Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30,
2025 2024
Cash flows from operating activities:
Net loss $ ( 34,811 ) $ ( 166,637 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 503 409
Stock-based compensation 9,682 11,962
Amortization/accretion of debt-related costs 1,205 1,444
Accretion of marketable securities purchased at a discount ( 3,272 ) ( 7,418 )
Other non-cash adjustments ( 1,579 ) 481
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,139 ( 1,885 )
Decrease (increase) in inventories 73 ( 255 )
Decrease (increase) in prepaid expenses and other current assets 448 ( 1,576 )
Decrease in other long-term assets 567 513
Decrease (increase) in accounts payable and other liabilities ( 24,573 ) 5,673
Net cash used in operating activities ( 50,618 ) ( 157,289 )
Cash flows from investing activities:
Purchases of property and equipment — ( 557 )
Purchases of investments ( 117,668 ) ( 302,921 )
Maturities of investments 225,858 234,400
Net cash provided by (used in) investing activities 108,190 ( 69,078 )
Cash flows from financing activities:
Proceeds from issuance of common stock for equity incentive plans — 89
Proceeds from issuance of preferred stock, net of fees — 241,400
Payments for tax withholding on share-based compensation vesting ( 572 ) ( 1,730 )
Repayment of debt borrowings ( 45,000 ) —
Other debt financing fees — ( 1,306 )
Net cash (used in) provided by financing activities ( 45,572 ) 238,453
Net (decrease) increase in cash, cash equivalents and restricted cash 12,000 12,086
Cash, cash equivalents, and restricted cash at beginning of period 66,656 22,465
Cash, cash equivalents, and restricted cash at end of period $ 78,656 $ 34,551
Supplemental disclosure of cash flow information:
Cash paid for interest $ 6,645 $ 9,794
Supplemental disclosure of non-cash investing and financing activities:
Conversion of preferred stock to common stock — 115
Right-of-use assets obtained in exchange for operating lease obligations $ 3,243 —
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Lexicon Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Lexicon Pharmaceuticals, Inc. (“Lexicon” or the “Company”) include the accounts of Lexicon and its wholly-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 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 three and nine month periods ended September 30, 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.
Use of Estimates. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Significant Accounting Policies. There have been no significant changes to our summary of significant policies discussed in our annual report on Form 10-K for the year ended December 31, 2024.
Recent Accounting Pronouncements Issued But Not Yet Adopted . 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. The Company does not expect this accounting pronouncement to have a material impact on the financial statements.
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2. Cash and Cash Equivalents, Restricted Cash and Investments
The fair value of cash and cash equivalents, restricted cash and investments held are as follows:
As of September 30, 2025
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
(in thousands)
Cash and cash equivalents $ 49,656 $ — $ — $ 49,656
Restricted cash 29,000 — — 29,000
Total cash and cash equivalents and restricted cash $ 78,656 $ — $ — $ 78,656
Securities maturing within one year:
U.S. treasury securities 43,223 24 — 43,247
Corporate debt securities 23,042 9 ( 4 ) 23,047
Total short-term investments $ 66,265 $ 33 $ ( 4 ) $ 66,294
Total cash and cash equivalents, restricted cash and short-term investments $ 144,921 $ 33 $ ( 4 ) $ 144,950
As of December 31, 2024
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
(in thousands)
Cash and cash equivalents $ 66,656 $ — $ — $ 66,656
Restricted cash — — — —
Total cash and cash equivalents and restricted cash $ 66,656 $ — $ — $ 66,656
Securities maturing within one year:
U.S. treasury securities 127,884 106 — 127,990
Corporate debt securities 43,299 30 ( 18 ) 43,311
Total short-term investments $ 171,183 $ 136 $ ( 18 ) $ 171,301
Total cash and cash equivalents, restricted cash and short-term investments $ 237,839 $ 136 $ ( 18 ) $ 237,957
As of September 30, 2025 and December 31, 2024, Lexicon’s investments in an unrealized loss position had an estimated fair value of $ 16.3 million and $ 12.9 million, respectively. There were no realized gains or losses during either of the nine month periods ended September 30, 2025 and 2024.
3. Fair Value Measurements
The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. The following levels are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities:
• Level 1 - quoted prices in active markets for identical assets, which include U.S. treasury securities
• Level 2 - other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.), which includes corporate debt securities
• Level 3 - significant unobservable inputs
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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. There were no transfers between Level 1 and Level 2 during the periods presented.
Assets at Fair Value as of September 30, 2025
Level 1 Level 2 Level 3 Total
(in thousands)
Cash and cash equivalents $ 49,656 $ — $ — $ 49,656
Short-term investments 43,247 23,047 — 66,294
Restricted cash $ 29,000 $ — $ — $ 29,000
Total cash and cash equivalents, short-term investments and restricted cash $ 121,903 $ 23,047 $ — $ 144,950
Assets at Fair Value as of December 31, 2024
Level 1 Level 2 Level 3 Total
(in thousands)
Cash and cash equivalents $ 66,656 $ — $ — $ 66,656
Short-term investments 127,990 43,311 — 171,301
Restricted cash — — — $ —
Total cash and cash equivalents, short-term investments and restricted cash $ 194,646 $ 43,311 $ — $ 237,957
The carrying amount of 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. The fair value of the Oxford Term Loans (see Note 6, Debt Obligations ) 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.
4. Supplemental Financial Information
Property and Equipment.
Estimated Useful Lives As of September 30, As of December 31,
In Years 2025 2024
(in thousands)
Computers and software 3 - 5
$ 2,003 $ 2,003
Furniture and fixtures 5 - 7
389 389
Leasehold improvements 3 - 7
2,178 2,178
Total property and equipment 4,570 4,570
Less: Accumulated depreciation and amortization ( 2,589 ) ( 2,086 )
Net property and equipment $ 1,981 $ 2,484
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Accrued Liabilities.
As of September 30, As of December 31,
2025 2024
(in thousands)
Accrued research and development services $ 5,322 $ 12,251
Accrued compensation and benefits 4,787 14,712
Short-term lease liability 1,642 1,175
Other 1,869 2,309
Total accrued liabilities $ 13,620 $ 30,447
As of December 31, 2024, $ 8.5 million of accrued severance is included in accrued compensation and benefits within accrued liabilities on the condensed consolidated balance sheet, all of which was paid prior to September 30, 2025.
Net Income (Loss) Per Share. Net income (loss) per common share is computed using the weighted average number of shares of common stock outstanding. Potentially dilutive shares associated with warrants, stock options and restricted stock units totaling 5.5 million and 2.4 million for the three and nine months ended September 30, 2025, and totaling 0.3 million and 0.5 million for the three and nine months ended September 30, 2024, were not included in the computation of diluted earnings per share because they are antidilutive due to the Company’s net loss in all periods presented.
5. 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 (“Novo Nordisk”) for the worldwide development, manufacturing 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.
The Company provided the licensed technology under its patent rights and know-how to develop, manufacture and commercialize LX9851 in March 2025. During the three months and nine months ended September 30, 2025, the Company recognized $ 13.2 million and $ 40.7 million as licensing revenue on the condensed consolidated statements of comprehensive income (loss) based on partial completion of the IND-enabling activities. The remaining $ 4.3 million of the $ 45 million upfront payment is recorded as deferred revenue on the condensed consolidated balance sheet. The Company will recognize the remaining amount as revenue using the input method over the remaining 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.
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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.
Viatris . 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.
6. 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 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 2023. Availability of the fourth $ 25 million tranche expired in April 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 September 30, 2025, the weighted average interest rate of the Oxford Term Loans was 11.8 %.
In April 2025, the Company repaid $ 45 million (including pro-rata 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 which have declined to 1 percent on a portion of the outstanding amounts of each loan tranche.
As of September 30, 2025, the Company reflected the carrying value of the Oxford Term Loans of $ 56.5 million in long-term debt on the condensed consolidated balance sheet. The carrying value above reflects an unamortized discount of $ 5.5 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.
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. 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. 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
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Oxford Term Loans and (b) the required minimum amount of $ 29 million. As of September 30, 2025, the Company reflected the $ 29 million minimum cash in the blocked account as restricted cash on the condensed consolidated balance sheet.
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. 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 Company was in compliance with its debt covenants as of September 30, 2025.
7. Commitments and Contingencies
Operating Lease Obligations. 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. As the implicit rate is not determinable in its leases, Lexicon uses its incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments. Lexicon does not apply this accounting to those leases with terms of twelve months or less.
Lexicon’s operating leases include leases of office space in The Woodlands, Texas and Bridgewater, New Jersey that will expire in January 2031 and January 2034, respectively. In September 2025, we entered into a new lease for 25,000 square feet of office space in The Woodlands, Texas. The term of this office lease extends through January 2031 and provides for escalating annual office rent and other fixed payments starting at approximately $ 0.8 million and increasing to approximately $ 0.9 million in the final year of the lease for total undiscounted cash payments of $ 4.5 million. In September 2025, the Company recorded a right-of use asset and right-of-use liability of approximately $ 3.2 million related to this new office lease based on the present value of future lease payments to be made over the expected lease term using a discount rate of approximately 11.9 %.
As of September 30, 2025 and December 31, 2024, total right-of-use assets for the office space leases of $ 7.5 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, Supplemental Financial Information ) and long-term operating lease liabilities of approximately $ 6.8 million and $ 4.6 million, respectively, as of September 30, 2025 and December 31, 2024 are included in other long-term liabilities in the condensed consolidated balance sheet.
During each of the three and nine months ended September 30, 2025 and 2024, the Company incurred lease expense of $ 0.4 million and $ 1.3 million, respectively. During each of the nine months ended September 30, 2025 and 2024, the Company made cash payments for lease liabilities of $ 1.0 million. As of September 30, 2025 and December 31, 2024, the weighted-average remaining lease terms were 7.2 and 8.6 years, respectively, with weighted-average discount rates of 10.6 % for each year.
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The following table reconciles the undiscounted cash flows of the operating lease liability to the recorded lease liability at September 30, 2025:
(in thousands)
2025 $ 424
2026 1,649
2027 1,683
2028 1,718
2029 1,753
Thereafter 4,842
Total undiscounted operating lease liability 12,069
Less: amount of lease payments representing interest ( 3,632 )
Present value of future lease payments 8,437
Less: short-term operating lease liability ( 1,642 )
Long-term operating lease liability $ 6,795
Legal Proceedings. Lexicon is from time to time party to claims and legal proceedings that arise in the normal course of its business and that it believes will not have, individually or in the aggregate, a material adverse effect on its results of operations, financial condition or liquidity.
8. Equity Incentive Awards
Stock-Based Compensation. 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 September 30, 2025 and 2024 of $ 3.4 million and $ 2.8 million, respectively, and for the nine months ended September 30, 2025 and 2024 of $ 9.7 million and $ 12.0 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 income (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. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of determining the fair value of stock options, the Company segregates its options into two homogeneous groups, based on exercise and post-vesting employment termination behaviors, resulting in different assumptions used for expected option lives. Historical data is used to estimate the expected option life for each group. 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, 2025 and 2024:
Expected Volatility Risk-free Interest Rate Expected Term Dividend
Rate
Nine Months Ended September 30, 2025
Employees 105 % 3.9 % 4 — %
Officers and non-employee directors 115 % 4.3 % 6 — %
Nine Months Ended September 30, 2024
Employees 96 % 4.4 % 4 — %
Officers and non-employee directors 104 % 4.2 % 6 — %
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The following is a summary of stock option activity under Lexicon’s stock-based compensation plans:
Stock Options Weighted Average Exercise Price
(in thousands)
Outstanding at December 31, 2024 15,389 $ 3.20
Granted 10,594 0.69
Exercised — —
Expired ( 310 ) 6.41
Forfeited ( 4,723 ) 2.86
Outstanding at September 30, 2025 20,950 1.96
Exercisable at September 30, 2025 7,331 $ 3.63
The following is a summary of restricted stock unit activity under Lexicon’s stock-based compensation plans:
RSU’s Weighted Average Grant Date
Fair Value
(in thousands)
Outstanding at December 31, 2024 6,300 $ 2.27
Granted 14,323 0.69
Vested ( 2,761 ) 2.35
Forfeited ( 2,393 ) 1.18
Outstanding at September 30, 2025 15,469 $ 0.96
9. Other Capital Agreements
Convertible Preferred Stock. 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 and received net proceeds of $ 241.3 million, after fees and offering expenses. In May 2024, each share of preferred stock was converted into 50 shares of common stock at par value, or 115,207,350 shares in the aggregate.
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10. 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 income (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 income (loss), including segment expenses were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(in thousands) (in thousands)
Revenues:
Net product revenue $ 1,008 $ 1,741 $ 3,592 $ 4,451
Licensing revenue 13,154 — 40,698 —
Royalties and other revenue 20 9 20 76
Total revenues 14,182 1,750 44,310 4,527
Operating expenses:
Cost of sales 10 71 73 268
Research and development 16,799 24,314 44,535 53,056
Sales and marketing 1,149 27,822 5,057 79,484
General and administrative 4,841 7,067 19,133 20,541
Other segment expense (1) (2)
3,570 6,169 9,643 15,558
Total operating expenses 26,369 65,443 78,441 168,907
Loss from operations ( 12,187 ) ( 63,693 ) ( 34,131 ) ( 164,380 )
Interest and other expense ( 2,155 ) ( 4,562 ) ( 6,308 ) ( 11,721 )
Interest income and other 1,573 3,444 5,628 9,464
Net loss $ ( 12,769 ) $ ( 64,811 ) $ ( 34,811 ) $ ( 166,637 )
(1) For the three and nine months ended September 30, 2025 and 2024, other segment expense includes stock compensation of (i) $ 1.8 million, $ 1.5 million, $ 5.0 million, and $ 4.7 million, respectively, related to research and development personnel and (ii) $ 1.6 million, $ 0.8 million, $ 4.6 million, and $ 4.7 million, respectively, related to general and administrative personnel. For the three and nine months ended September 30, 2024, other segment expense primarily includes, among other items, stock compensation of $ 0.6 million and $ 2.6 million, respectively, related to sales and marketing personnel.
(2) For the three and nine months ended September 30, 2025, other segment expense includes, among other items, severance costs of $ 0.1 million and $ 0.2 million, respectively, related to research and development personnel. For the three and nine months ended September 30, 2024, other segment expense includes, among other items, severance costs of (i) $ 2.5 million and $ 2.7 million, respectively, related to sales and marketing personnel and (ii) $ 0.9 million and $ 0.9 million, respectively, related to general and administrative personnel.
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