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 June 30, As of December 31,
2025 2024
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 21,364 $ 66,656
Short-term investments 117,643 171,301
Accounts receivable, net 2,183 3,473
Inventory 168 231
Prepaid expenses and other current assets 3,726 4,532
Total current assets 145,084 246,193
Property and equipment, net 2,132 2,484
Goodwill 44,543 44,543
Operating lease right-of-use-assets 4,456 4,832
Restricted cash 29,000 —
Other assets 368 368
Total assets $ 225,583 $ 298,420
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 5,899 $ 14,801
Accrued liabilities 11,481 30,447
Deferred revenue 17,456 —
Total current liabilities 34,836 45,248
Long-term debt, net 56,107 100,298
Other long-term liabilities 5,200 6,924
Total liabilities 96,143 152,470
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 2,123,560 2,117,325
Accumulated deficit ( 1,989,285 ) ( 1,967,242 )
Accumulated other comprehensive (loss) income ( 14 ) 119
Treasury stock, at cost, 2,381,939 and 1,528,008 shares, respectively
( 5,187 ) ( 4,615 )
Total stockholders’ equity 129,440 145,950
Total liabilities and stockholders’ equity $ 225,583 $ 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 June 30, Six Months Ended June 30,
2025 2024 2025 2024
Revenues:
Net product revenue $ 1,322 $ 1,617 $ 2,584 $ 2,710
Licensing revenue 27,544 — 27,544 —
Royalties and other revenue — 30 — 67
Total revenues 28,866 1,647 30,128 2,777
Operating expenses:
Cost of sales 33 166 63 197
Research and development, including stock-based compensation of $ 1,620 , $ 1,679 , $ 3,194 and $ 3,273 , respectively
15,747 17,643 31,050 32,015
Selling, general and administrative, including stock-based compensation of $ 1,575 , $ 3,180 , $ 3,044 and $ 5,888 respectively
9,350 39,192 20,958 71,252
Total operating expenses 25,130 57,001 52,071 103,464
Income (loss) from operations 3,736 ( 55,354 ) ( 21,943 ) ( 100,687 )
Interest and other expense ( 2,318 ) ( 2,211 ) ( 4,153 ) ( 7,159 )
Interest income and other 1,834 4,136 4,053 6,020
Net income (loss) $ 3,252 $ ( 53,429 ) $ ( 22,043 ) $ ( 101,826 )
Net income (loss) per common share, basic $ 0.01 $ ( 0.17 ) $ ( 0.06 ) $ ( 0.37 )
Net income (loss) per common share, diluted $ 0.01 $ ( 0.17 ) $ ( 0.06 ) $ ( 0.37 )
Weighted average common shares outstanding, basic 363,294 310,836 362,687 278,113
Weighted average common shares outstanding, diluted 363,570 310,836 362,687 278,113
Other comprehensive income (loss):
Unrealized loss on investments ( 39 ) ( 143 ) ( 133 ) ( 224 )
Comprehensive income (loss) $ 3,213 $ ( 53,572 ) $ ( 22,176 ) $ ( 102,050 )
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
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
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)
Six Months Ended June 30,
2025 2024
Cash flows from operating activities:
Net loss $ ( 22,043 ) $ ( 101,826 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 352 283
Stock-based compensation 6,238 9,161
Amortization/accretion of debt-related costs 803 1,042
Accretion of marketable securities purchased at a discount ( 2,540 ) ( 4,713 )
Other non-cash adjustments ( 1,561 ) ( 397 )
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,290 ( 1,610 )
Decrease (increase) in inventories 63 ( 204 )
Decrease (increase) in prepaid expenses and other current assets 806 ( 2,545 )
Decrease in other long-term assets 376 337
Decrease in accounts payable and other liabilities ( 10,569 ) ( 3,198 )
Net cash used in operating activities ( 26,785 ) ( 103,670 )
Cash flows from investing activities:
Purchases of property and equipment — ( 250 )
Purchases of investments ( 90,943 ) ( 260,297 )
Maturities of investments 147,008 138,000
Net cash provided by (used in) investing activities 56,065 ( 122,547 )
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 — 241,410
Payments for tax withholding on share-based compensation vesting ( 572 ) ( 1,730 )
Repayment of debt borrowings ( 45,000 ) —
Other debt financing fees — ( 400 )
Net cash (used in) provided by financing activities ( 45,572 ) 239,369
Net (decrease) increase in cash, cash equivalents and restricted cash ( 16,292 ) 13,152
Cash, cash equivalents, and restricted cash at beginning of period 66,656 22,465
Cash, cash equivalents, and restricted cash at end of period $ 50,364 $ 35,617
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,888 $ 6,512
Supplemental disclosure of non-cash investing and financing activities:
Accrued financing costs $ — $ 910
Conversion of preferred stock to common stock — 115
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 six month period ended June 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 June 30, 2025
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
(in thousands)
Cash and cash equivalents $ 21,364 $ — $ — $ 21,364
Restricted cash 29,000 — — 29,000
Total cash and cash equivalents and restricted cash $ 50,364 $ — $ — $ 50,364
Securities maturing within one year:
U.S. treasury securities 94,853 5 ( 12 ) 94,846
Corporate debt securities 22,804 4 ( 11 ) 22,797
Total short-term investments $ 117,657 $ 9 $ ( 23 ) $ 117,643
Total cash and cash equivalents, restricted cash and short-term investments $ 168,021 $ 9 $ ( 23 ) $ 168,007
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 June 30, 2025 and December 31, 2024, Lexicon’s investments in an unrealized loss position had an estimated fair value of $ 76.4 million and $ 12.9 million, respectively. There were no realized gains or losses during either of the six month periods ended June 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 June 30, 2025
Level 1 Level 2 Level 3 Total
(in thousands)
Cash and cash equivalents $ 21,364 $ — $ — $ 21,364
Short-term investments 94,846 22,797 — 117,643
Restricted cash $ 29,000 $ — $ — $ 29,000
Total cash and cash equivalents, short-term investments and restricted cash $ 145,210 $ 22,797 $ — $ 168,007
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) 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 June 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 ( 2,438 ) ( 2,086 )
Net property and equipment $ 2,132 $ 2,484
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Accrued Liabilities.
As of June 30, As of December 31,
2025 2024
(in thousands)
Accrued research and development services $ 4,257 $ 12,251
Accrued compensation and benefits 4,292 14,712
Short-term lease liability 909 1,175
Other 2,023 2,309
Total accrued liabilities $ 11,481 $ 30,447
As of June 30, 2025 and December 31, 2024, $ 0.6 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.
Net Income (Loss) Per Share. Net income (loss) per common share is computed using the weighted average number of shares of common stock outstanding. Shares associated with warrants, stock options and restricted stock units that could potentially dilute earnings per share in the future are not included in the computation of diluted earnings per share when the company has a net loss because they are antidilutive. For the three months ended June 30, 2025, approximately 0.3 million share-based awards were included in the calculation of diluted earnings per share. For the three month period ended June 30, 2024 and six month periods ended June 30, 2025 and June 30, 2024, no share-based awards were included in the computation of diluted earnings per share of common stock because the effect would have been anti-dilutive due to the net loss in these periods.
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 quarter ended June 30, 2025, the Company recognized $ 27.5 million as licensing revenue on the condensed consolidated statements of comprehensive income (loss) based on partial completion of the IND-enabling activities. The remaining $ 17.5 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 June 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 June 30, 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 June 30, 2025, the Company reflected the carrying value of the Oxford Term Loans of $ 56.1 million in long-term debt on the condensed consolidated balance sheet. The carrying value above reflects an unamortized discount of $ 5.9 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
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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. As of June 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 June 30, 2025.
7. Commitments and Contingencies
Operating Lease Obligations. 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. 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. 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.
As of June 30, 2025 and December 31, 2024, the right-of-use assets for the office space leases of $ 4.5 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) and long-term operating lease liabilities of approximately $ 4.4 million and $ 4.6 million, respectively, as of June 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 six months ended June 30, 2025 and 2024, the Company incurred lease expense of $ 0.4 million and $ 0.8 million, respectively. During each of the six months ended June 30, 2025 and 2024, the Company made cash payments for lease liabilities of $ 0.7 million. As of June 30, 2025 and December 31, 2024, the weighted-average remaining lease terms were 8.4 years and 8.6 years, respectively, with weighted-average discount rates of 9.7 % 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 June 30, 2025:
(in thousands)
2025 $ 518
2026 865
2027 881
2028 898
2029 914
Thereafter 3,832
Total undiscounted operating lease liability 7,908
Less: amount of lease payments representing interest ( 2,564 )
Present value of future lease payments 5,344
Less: short-term operating lease liability ( 909 )
Long-term operating lease liability $ 4,435
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 June 30, 2025 and 2024 of $ 3.2 million and $ 4.9 million, respectively, and for the six months ended June 30, 2025 and 2024 of $ 6.2 million and $ 9.2 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 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 six months ended June 30, 2025 and 2024:
Expected Volatility Risk-free Interest Rate Expected Term Dividend
Rate
Six Months Ended June 30, 2025
Employees 105 % 3.9 % 4 — %
Officers and non-employee directors 115 % 4.3 % 6 — %
Six Months Ended June 30, 2024
Employees 96 % 4.5 % 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 ( 2,388 ) 2.41
Outstanding at June 30, 2025 23,285 2.10
Exercisable at June 30, 2025 7,835 $ 4.03
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 ( 1,539 ) 1.39
Outstanding at June 30, 2025 16,323 $ 0.95
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 June 30, Six Months Ended June 30,
2025 2024 2025 2024
(in thousands) (in thousands)
Revenues:
Net product revenue $ 1,322 $ 1,617 $ 2,584 $ 2,710
Licensing revenue 27,544 — 27,544 —
Royalties and other revenue — 30 — 67
Total revenues 28,866 1,647 30,128 2,777
Operating expenses:
Cost of sales 33 166 63 197
Research and development 14,127 15,964 27,736 28,742
Sales and marketing 1,233 28,982 3,908 51,662
General and administrative 6,466 6,839 14,292 13,474
Other segment expense (1)
3,271 5,050 6,072 9,389
Total operating expenses 25,130 57,001 52,071 103,464
Income (loss) from operations 3,736 ( 55,354 ) ( 21,943 ) ( 100,687 )
Interest and other expense ( 2,318 ) ( 2,211 ) ( 4,153 ) ( 7,159 )
Interest income and other 1,834 4,136 4,053 6,020
Net income (loss) $ 3,252 $ ( 53,429 ) $ ( 22,043 ) $ ( 101,826 )
(1) For the three and six months ended June 30, 2025 and 2024, other segment expense primarily includes, among other items, stock compensation of $ 1.6 million, $ 1.7 million, $ 3.2 million, and $ 3.3 million, respectively, related to research and development personnel; $ 0.01 million, $ 1.2 million, $ 0.05 million , and $ 2.0 million, respectively, related to sales and marketing personnel; and $ 1.6 million, $ 2.0 million, $ 3.0 million, and $ 3.9 million, respectively, related to general and administrative personnel.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.