Lexicon Pharmaceuticals Inc.

03/05/2026 | Press release | Distributed by Public on 03/05/2026 15:51

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read with our financial statements and notes included elsewhere in this annual report on Form 10-K.
Overview
We are a biopharmaceutical company with a mission of pioneering medicines that transform patients' lives. We are devoting most of our resources to the research and development of our most advanced drug candidates and the commercialization of our approved drug, INPEFA®(sotagliflozin):
•We are developing sotagliflozin, an orally-delivered small molecule drug candidate, as a treatment for hypertrophic cardiomyopathy, or HCM, and are conducting the SONATA-HCM pivotal Phase 3 clinical trial of sotagliflozin in that indication.
•We are separately pursuing regulatory approval of ZYNQUISTA®(sotagliflozin) as a treatment for type 1 diabetes. The U.S. Food and Drug Administration, or FDA, issued complete response letters regarding our New Drug Application, or NDA, for ZYNQUISTA in type 1 diabetes in March 2019 and December 2024. At our request, the FDA has issued a public Notice of Opportunity for Hearing, or NOOH, on whether there are grounds for denying approval of our NDA and those proceedings are ongoing.
The FDA has separately provided feedback that a third-party-funded, investigator-initiated study of sotagliflozin appears to be of adequate design and employs sufficient data collection methods to provide viable evidence of the incidence of diabetic ketoacidosis, or DKA, with adequate safety data, prior to its completion, to support review of a resubmission of the NDA. We are preparing to potentially resubmit the NDA for ZYNQUISTA in type 1 diabetes if supported by patient exposure and safety data from such study.
•We are developing pilavapadin, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain. We have completed two Phase 2 clinical trials evaluating the safety and tolerability of pilavapadin and its effects on diabetic peripheral neuropathic pain, or DPNP. We have reported results from our PROGRESS Phase 2b clinical trial of pilavapadin in DPNP, which demonstrated clear evidence of effect at the 10 mg dose, and positive results from our RELIEF-DPN-1 Phase 2a clinical trial of pilavapadin in DPNP. We have received Fast Track designation from the FDA for development of pilavapadin in that indication and are currently advancing third party collaboration discussions for its further development and commercialization.
•We have developed LX9851, an orally-delivered small molecule drug candidate, as a treatment for obesity and associated cardiometabolic disorders. We have granted Novo Nordisk an exclusive, worldwide, royalty-bearing license to develop, manufacture and commercialize LX9851 and have completed preclinical development of LX9851 in preparation for the filing of an investigational new drug application, or IND, with the FDA and commencement of clinical development by Novo Nordisk.
•We continue to make INPEFA (sotagliflozin) commercially available in the United States. INPEFA is approved to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits in adults with heart failure or type 2 diabetes mellitus, chronic kidney disease, or CKD, and other cardiovascular risk factors.
•We are conducting preclinical research and development of compounds from a number of additional drug programs originating from our internal drug discovery efforts.
Sotagliflozin, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts and pilavapadin originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb. Our efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets. We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery.
We have worked both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and research and development programs. We seek to retain exclusive or co-exclusive rights to the benefits of certain research and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians. We seek to collaborate with other pharmaceutical and biotechnology companies with respect to the research, development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or
commercialization in the United States for indications treated by primary care physicians, or when the collaboration may otherwise provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
We have derived substantially all of our revenues from strategic collaborations and other research and development collaborations and technology licenses, as well as from commercial sales of our approved drug products. To date, we have generated a substantial portion of our revenues from a limited number of sources.
Our operating results and, in particular, our ability to generate additional revenues are dependent on many factors, including the success of our ongoing research and development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; and general and industry-specific economic conditions which may affect research, development and commercialization expenditures.
Our ability to secure future revenue-generating agreements will depend upon our ability to address the needs of our potential future collaborators and licensees, and to negotiate agreements that we believe are in our long-term best interests. We may determine, as we have with INPEFA in heart failure in the United States, that our interests are better served by retaining rights to our discoveries and advancing our therapeutic programs to a later stage, which could limit our near-term revenues and increase expenses. Because of these and other factors, our operating results have fluctuated in the past and are likely to do so in the future, and we do not believe that period-to-period comparisons of our operating results are a good indication of our future performance.
Since our inception, we have incurred significant losses and, as of December 31, 2025, we had an accumulated deficit of approximately $2.0 billion. Our losses have resulted principally from costs incurred in research and development, selling, general and administrative costs associated with our operations, and non-cash stock-based compensation expenses associated with stock options and restricted stock units granted to employees and consultants. Research and development expenses consist primarily of salaries and related personnel costs, external research costs related to our nonclinical and clinical efforts, material costs, facility costs, depreciation on property and equipment, and other expenses related to our drug discovery and development programs. Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, sales and marketing, and administrative personnel, professional fees and other corporate expenses, including information technology, facilities costs and general legal activities. We expect to continue to incur significant research and development costs in connection with the continuing research and development of our drug candidates. As a result, we will need to generate significantly higher revenues to achieve profitability.
Critical Accounting Policies
Our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, which require that we make numerous estimates and assumptions. Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position. The critical accounting policies and estimates described in this section are those that are most important to the depiction of our financial condition and results of operations and the application of which requires our most subjective judgments in making estimates about the effect of matters that are inherently uncertain. We describe our significant accounting policies more fully in Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Research and Development Expenses
Research and development expenses consist of costs incurred for research and development activities solely sponsored by us as well as collaborative research and development activities. These costs include direct and research-related overhead expenses and are expensed as incurred. Technology license fees for technologies that are utilized in research and development and have no alternative future use are expensed when incurred.
We record our research and development costs by type or category, rather than by project. Significant categories of costs include personnel, facilities and equipment costs and third-party and other services. In addition, a significant portion of our research and development expenses is not tracked by project as it benefits multiple projects. Consequently, fully-loaded research and development cost summaries by project are not available.
We are presently devoting most of our resources to the continued research and development of sotagliflozin, pilavapadin, and our other drug candidates.
Sotagliflozin, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts. Pilavapadin originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb. Those efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets. We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery.
The drug development process takes many years to complete. The cost and length of time varies due to many factors including the type, complexity and intended use of the drug candidate. We estimate that drug development activities are typically completed over the following periods:
Phase Estimated Completion Period
Preclinical development 1-2 years
Phase 1 clinical trials 1-2 years
Phase 2 clinical trials 1-2 years
Phase 3 clinical trials 2-4 years
We expect research and development costs to remain substantial in the future as we continue to fund our research and development efforts and advance new drug candidates into clinical development. Due to the variability in the length of time necessary for drug development, the uncertainties related to the cost of these activities and ultimate ability to obtain regulatory approval for commercialization, accurate and meaningful estimates of the ultimate costs to bring our drug candidates to market are not available.
We record significant accrued liabilities related to unbilled expenses for products or services that we have received from service providers, specifically related to ongoing preclinical studies and clinical trials. These costs primarily relate to clinical study management, monitoring, laboratory and analysis costs, drug supplies, toxicology studies and investigator grants. We may have multiple drug candidates in concurrent preclinical studies and clinical trials at clinical sites throughout the world. In order to ensure that we have adequately provided for ongoing preclinical and clinical development costs during the period in which we incur such costs, we maintain accruals to cover these expenses. Substantial portions of our preclinical studies and clinical trials are performed by third party laboratories, medical centers, contract research organizations and other vendors. For preclinical studies, we accrue expenses based upon estimated percentage of work completed and the contract milestones remaining. For clinical studies, expenses are accrued based upon an assessment of progress of the clinical studies for services that have been performed, the number of patients enrolled over the duration of the study and milestones. We monitor patient enrollment, the progress of clinical studies and related activities to the extent possible through internal reviews of data reported to us by the vendors and clinical site visits. Our estimates depend on the timeliness and accuracy of the data provided by our vendors regarding the status of each program and total program spending. We periodically evaluate the estimates to determine if adjustments are necessary or appropriate based on information we receive. Although we use consistent milestones or subject or patient enrollment and other indicators of clinical study progress to drive expense recognition, the assessment of these costs is a subjective process that requires judgment. Upon settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements.
The financial terms of these agreements are subject to negotiation and vary from contract to contract. In accruing the relevant costs, we estimated the time period over which services were to be performed and the level of effort required to complete or wind down each study. Upon completion and settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements.
Results of Operations
The following discussion and analysis should be read with "Results of Operations" and our financial statements and notes included in our previously filed annual report on Form 10-K for the year ended December 31, 2024.
Revenues
Revenues for the year ended December 31, 2025 were $49.8 million and primarily consisted of the upfront payment of $45 million received from our license agreement with Novo Nordisk and net product revenues of $4.6 million recognized from sales of INPEFA. Revenues for the year ended December 31, 2024 were $31.1 million and primarily consisted of the upfront payment of $25.0 million received from the Viatris licensing agreement and net product revenues of $6.0 million recognized from sales of INPEFA.
Cost of Sales
Cost of sales for the years ended December 31, 2025 and 2024 were approximately $0.3 million and $0.6 million, respectively, and primarily consist of third-party manufacturing costs and freight associated with sales of INPEFA. Prior to receiving regulatory approval of INPEFA on May 26, 2023, we had completed or begun the manufacturing of certain INPEFA raw materials. These raw materials were either received at "zero-cost" to us in conjunction with a terminated agreement in 2019 or recorded as research and development expense. Based on our expectations for future manufacturing costs, we estimate these amounts totaled approximately $39.0 million. We began capitalizing inventory manufactured subsequent to regulatory approval of INPEFA as the related costs were expected to be recoverable through the commercialization of the product. At December 31, 2025, substantially all of the "zero-cost" INPEFA raw materials remains available to us. However, the time period over which this inventory is consumed will depend on a number of factors, including the amount of future INPEFA sales, use of this inventory to satisfy the manufacturing and supply agreements associated with strategic alliances (for further information, see Note 7) or in clinical development or other research activities, production lead times, and/or the ability to utilize inventory prior to its expiration date. Any future sales of INPEFA will utilize this "zero-cost" inventory and will result in a lower average per unit cost of materials during that period. We estimate our cost of goods sold as a percentage of net product revenue will be less than 10% subsequent to the utilization of all of the remaining "zero-cost" inventory.
Research and Development Expenses
Research and development expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions):
Year Ended December 31,
2025 2024 2023
Total research and development expense $ 61.1 $ 84.5 $ 58.9
Dollar (decrease) increase $ (23.4) $ 25.6
Percentage (decrease) increase (28) % 43 %
Research and development expenses consist primarily of third-party services primarily including external research costs related to our nonclinical and clinical efforts and material costs, salaries and related personnel costs, stock-based compensation and facility, equipment, and other costs related to our drug discovery and development programs each of which are described below.
Years Ended December 31, 2025 and 2024
•Third-party services -Third-party services relate principally to our clinical trial and related development activities, such as preclinical and clinical studies and contract manufacturing. Overall, third-party services decreased 42% in 2025 to $33.0 million from $56.7 million as compared to the corresponding period in 2024, primarily driven by lower clinical external research expense associated with our current drug candidates and lower professional consulting fees.
•Personnel -Salaries, bonuses, employee benefits, payroll taxes and recruiting costs are included in personnel costs. Personnel costs decreased 1% in 2025 to $16.5 million from $16.7 million as compared to the corresponding period in 2024.
•Stock-based compensation -Stock-based compensation expense increased 9% in 2025 to $6.3 million from $5.8 million as compared to the corresponding period in 2024.
•Facilities, equipment, and other -Facilities, equipment, and other costs relate primarily to rent, insurance, travel and training, and software licensing costs. Facilities, equipment, and other costs were $5.3 million in each of 2025 and 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions):
Year Ended December 31,
2025 2024 2023
Total selling, general and administrative expense $ 37.3 $ 143.1 $ 114.0
Dollar (decrease) increase $ (105.8) $ 29.1
Percentage (decrease) increase (74) % 26 %
Selling, general and administrative expenses consist primarily of personnel costs to support the commercialization of INPEFA and support of our research and development activities, professional and consulting fees, stock-based compensation expense, and facilities, equipment, and other costs each of which are described further below.
Years Ended December 31, 2025 and 2024
•Personnel- Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs. Personnel costs decreased 79% in 2025 to $14.1 million from $68.1 million as compared to the corresponding period in 2024, primarily due to lower employee salaries and benefits costs as a result of decreased headcount from our restructuring in late 2024.
•Professional and consulting fees- Professional and consulting fees decreased 78% in 2025 to $11.6 million from $52.7 million as compared to the corresponding period in 2024, primarily due to lower marketing costs in conjunction with our restructuring and decision to significantly reduce marketing efforts for INPEFA in late 2024.
•Stock-based compensation- Stock-based compensation expense decreased 19% in 2025 to $6.2 million from $7.7 million as compared to the corresponding period in 2024, due to decreased headcount from our reduction in the field force in late 2024.
•Facilities, equipment, and other- Facilities, equipment, and other costs relate primarily to rent, insurance, travel and training, and software licensing costs. Facilities, equipment, and other costs decreased 63% in 2025 to $5.4 million from $14.6 million as compared to the corresponding period in 2024. The decrease was primarily due to lower travel as a result of our restructuring in late 2024.
Interest and Other Expense
Interest and Other Expense. Interest on the outstanding debt principal, amortization/accretion of debt issuance cost and discount and other related items are included in interest and other expense. Interest and other expense decreased to $8.3 million in 2025 from $15.6 million as compared to the corresponding period in 2024, primarily due to the $45 million prepayment made on the Oxford Term Loans in April 2025.
Interest Income and Other
Interest Income and Other. Interest earned on cash, cash equivalents and short-term investments is included in interest income and other. Interest income and other decreased to $6.9 million in 2025 from $12.3 million as compared to the corresponding period in 2024 reflecting an decrease in cash and investments.
Net Loss and Net Loss per Common Share
Net loss was $50.3 million, or $0.14 per share, in 2025, as compared to a net loss of $200.4 million, or $0.63 per share, in 2024.
Liquidity and Capital Resources
We have financed our operations from inception primarily through sales of common and preferred stock, contract and milestone payments we received under our collaborations and strategic licenses, target validation, database subscription and technology license agreements, government grants and contracts, and financing under debt, lease and other project financing arrangements, as well as from commercial sales of our approved drug products.
As of December 31, 2025 and 2024, total cash, cash equivalents, short-term investments, and restricted cash were $125.2 million and $238.0 million, respectively. Our December 31, 2025 balance includes $29 million in restricted cash as further described below. We used cash of $67.9 million in our operations in 2025, primarily reflective of the net loss for the year of $50.3 million (which included total non-cash stock compensation expense of $12.5 million) and working capital changes. Investing activities provided cash of $113.0 million in 2025, primarily due to net maturities of investments. Financing activities used cash of $48.5 million, primarily from repayment of debt borrowings.
Common and Preferred Stock Issuance.In February 2026, we received approximately $96.7 million in net proceeds from the issuance of our common and preferred stock as follows:
•34,089,403 shares of our common stock sold in an underwritten public offering for $1.30 per share, resulting in net proceeds of approximately $41.1 million (after deducting underwriting discounts and commissions and other offering expenses); and
•22,400,000 shares of our common stock and 408,434.7 shares of our Series B Convertible Preferred Stock sold to affiliates of Invus for $1.30 per share and $65.00 per share, respectively, resulting in aggregate gross proceeds of $55.6 million. The preferred stock is automatically convertible into 20,421,735 shares of our common stock upon the satisfaction of certain conditions.
For further details of the offering transaction, including certain approvals required for conversion of the preferred stock, please see Note 13 of the Notes to Consolidated Financial Statements.
Open Market Sales Agreement. In December 2023, we entered into an Open Market Sale AgreementSMwith Jefferies LLC pursuant to which we may offer and sell shares of our common stock having an aggregate sales price of up to $75 million from time to time through Jefferies as sales agent. As of December 31, 2025, the full amount is still available for issuance under the agreement.
Financing Obligations. In March 2022, we entered into a loan and security agreement with Oxford Finance LLC that provided up to $150 million in borrowing capacity, available in five tranches, under which $100 million has been funded under the first three tranches. Availability of the fourth $25 million tranche expired on April 15, 2025. The fifth $25 million tranche is available for draw at our option, subject to Oxford's consent, at any time prior to December 1, 2026.
In March 2025, we entered into a seventh amendment to the loan and security agreement (a) providing for a prepayment to the lenders of $45 million 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 and (d) eliminating the previous financial covenant relating to net sales of INPEFA, as well as certain other terms.
Pursuant to the terms of the seventh amendment to the loan and security agreement, (a) in April 2025, we repaid $45 million to Oxford, including a pro-rata portion of the final payment exit fees, on a pro-rata basis across each loan tranche, (b) in December 2025, we repaid an additional $3 million to Oxford, including a pro-rata portion of the final payment exit fees, on a pro-rata basis across each loan tranche and (c) in December 2025, the original amortization date of May 1, 2027 and the original maturity date of March 1, 2029 were accelerated to December 1, 2026 and November 1, 2027, respectively. Aggregate payments of $4.6 million and $54.4 million, including debt principal and final exit fee payments (equal to 7% of the remaining amount funded under the loans), will be due during the fiscal years ended December 31, 2026 and December 31, 2027, respectively, with respect to all borrowed loan tranches as of December 31, 2025.
In February 2026, we repaid an additional $5 million (including pro-rata final payment exit fees) to Oxford on a pro-rata basis across each loan tranche upon our receipt of a $10 million milestone payment from Novo Nordisk in accordance to the terms of the seventh amendment to the loan and security agreement. For additional details, please see Note 7 of the Notes to
Consolidated Financial Statements. Additionally, we may elect to prepay the loans in whole at our option at any time subject to prepayment fees, which have declined to 1% of a portion of the outstanding amounts of each loan tranche.
Among other items, 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) 50% of the outstanding principal amount of the loans and (b) the required minimum amount of $29 million. As of December 31, 2025, we maintained $29 million in the blocked account.
As of December 31, 2025, we were in compliance with all debt covenants under the loan and security agreement.
Collaborations and Strategic Alliances. In March 2025, we entered into an exclusive license agreement with Novo Nordisk A/S for the worldwide development, manufacture and commercialization of LX9851, our preclinical drug candidate for obesity and associated cardiometabolic disorders, pursuant to which we received an upfront payment of $45 million in April 2025 and a milestone payment of $10 million in February 2026.
In October 2024, we 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 we received an upfront payment of $25 million.
For additional information on these exclusive license agreements, please see Note 7 of the Notes to Consolidated Financial Statements.
Other commitments. Upon the regulatory approval of sotagliflozin for the treatment of type 1 diabetes in a major market, we will be required to make certain royalty payments, totaling $4.5 million, in three equal annual installments of $1.5 million. Under our drug discovery alliance with Bristol-Myers Squibb, we will be required to make a milestone payment of $5 million upon dosing of the first patient in a Phase 3 clinical trial of pilavapadin.
For a further discussion of our commitments and contingencies, please see Note 10 of the Notes to Consolidated Financial Statements.
Outlook. Our future capital requirements will be substantial and will depend on many factors, including the success of our ongoing research and development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; the amount and timing of our research, development and commercialization expenditures; the resources we devote to commercializing, developing and supporting our products and other factors. Our capital requirements will also be affected by any expenditures we make in connection with license agreements and acquisitions of and investments in complementary technologies and businesses.
We expect to continue to devote substantial capital resources to the research and development of our drug candidates and for other general corporate activities. We believe that our current unrestricted cash and investment balances and cash and revenues we expect to derive from strategic and other collaborations and other sources will be sufficient to fund our currently planned operations for at least the next 12 months from the date of this report.
In future periods, if cash on hand or generated by operations is insufficient to satisfy our liquidity requirements, we will need to obtain additional liquidity through future strategic and other collaborations or sell additional equity or debt securities or obtain additional credit arrangements. Additional financing may not be available on terms acceptable to us or at all and the sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. If we are unable to obtain adequate financing when needed, we may have to delay or reduce the scope of our commercialization efforts or one or more of our clinical trials and other research and development programs.
Disclosure about Market Risk
We are exposed to limited market and credit risk on our cash equivalents which have maturities of three months or less at the time of purchase. We had approximately $125.2 million in cash and cash equivalents, short-term investments and restricted cash as of December 31, 2025. We maintain a short-term investment portfolio which consists of U.S. Treasury bills and corporate debt securities that mature three to 12 months from the time of purchase, which we believe are subject to limited market and credit risk. We currently do not hedge interest rate exposure or hold any derivative financial instruments in our investment portfolio.
We are subject to interest rate sensitivity on our outstanding Oxford Term Loans which bear interest at a floating rate equal to the 1-month CME Term SOFR rate. Interest on the Oxford Term Loans is payable in cash monthly and the term loans are fully matured by November 2027, unless earlier repaid in accordance with their terms.
We have operated primarily in the United States and substantially all sales to date have been made in U.S. dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations.
Lexicon Pharmaceuticals Inc. published this content on March 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 05, 2026 at 21:51 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]