Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Please also see the section titled "Special Note Regarding Forward Looking Statements." Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "we," "us" and "our" refer to Lexeo Therapeutics, Inc.

Overview

We are a clinical stage genetic medicine company dedicated to reshaping heart health by applying pioneering science to fundamentally change how cardiovascular diseases are treated. We are advancing a portfolio of therapeutic candidates that take aim at the underlying genetic causes of conditions, including Friedreich ataxia, or FA, cardiomyopathy, plakophilin-2, or PKP2, arrhythmogenic cardiomyopathy, or ACM, and other devastating diseases with high unmet need.

LX2006 for the treatment of FA cardiomyopathy

Our most advanced cardiovascular product candidate, LX2006 for the treatment of FA cardiomyopathy, is currently being evaluated in SUNRISE-FA, our ongoing Phase 1/2 clinical trial and in a Cornell investigator-initiated trial.

Interim Clinical Data Updates

In October 2025, we provided an interim clinical update, which included baseline characteristics and safety data from the 17 treated participants across the two studies, and clinical efficacy data from the 16 participants who had reached at least six months follow-up as of that time. A summary of key observations from the October 2025 interim update is set forth below.

In March 2026, we shared updated interim clinical data for LX2006 at the American College of Cardiology, or ACC, Annual Meeting. Phase 1/2 interim clinical data presented at the ACC Annual Meeting continue to show sustained or deepening improvements across both cardiac and neurologic measures of FA, including statistically significant improvement in mean mFARS scores for LX2006-treated participants compared to a propensity-matched control cohort from the UNIFAI natural history study.

Treatment with LX2006 has been generally well tolerated with no Grade 3 treatment-related SAEs to date, no clinically significant complement activation, minimal, transient liver function test, or LFT, elevations, and no signs of frataxin over-expression observed in cardiac tissue. One previously disclosed, possibly treatment-related Grade 2 event of asymptomatic myocarditis observed one year after dosing. No participants discontinued from either study.

Regulatory Alignment

In February 2025, we announced further alignment on elements of the accelerated development pathway following a Type B Regenerative Medicine Advanced Therapy, or RMAT, meeting with the U.S. Food and Drug Administration, or FDA, including frataxin expression co-primary endpoint to be evaluated for any increase from baseline rather than numerical threshold.

In July 2025, we announced Breakthrough Therapy designation based on interim clinical data from Phase 1/2 trials showing clinically meaningful improvements in cardiac biomarkers and functional measures. We also announced that LX2006 was selected for the Chemistry, Manufacturing, and Controls Development and Readiness Pilot, or CDRP, Program, created to facilitate chemistry, manufacturing and controls, or CMC, registrational readiness and support faster patient access.

In October 2025, in response to our questions regarding the possibility of a faster path to a Biologics License Application, or BLA, the FDA indicated openness to a BLA submission for accelerated approval that includes clinical data from the ongoing Phase 1/2 studies of LX2006 pooled with new clinical data to be generated in the planned pivotal study. The FDA also previously agreed to evaluate the co-primary endpoint of LVMI at a time point earlier than 12 months. Collectively, we believe this regulatory feedback has the potential to reduce the size and length of the planned pivotal study, possibly accelerating the overall timeline to BLA submission. We plan to initiate the LX2006 pivotal study in the second quarter of 2026, pending finalization of the trial protocol.

In February 2026, we submitted the final registrational trial design and statistical analysis plan, or SAP, for the SUNRISE-FA 2 pivotal study to the FDA following a Type B meeting. We are in contact with the FDA and are awaiting final feedback on the study protocol. We plan to provide an update when the protocol and SAP are finalized.

LX2020 for the treatment of arrhythmogenic cardiomyopathy

Our second most advanced cardiovascular product candidate, LX2020 for the treatment of ACM caused by mutations in the PKP2 gene, referred to as PKP2-ACM, is currently being evaluated in HEROIC-PKP2, an ongoing Phase 1/2 clinical trial.

Interim Clinical Data Updates

In January 2026, we provided an interim clinical data update, which included baseline characteristics and safety data from the ten participants dosed, including three participants in cohort 1 at the low dose and seven participants in cohorts 2 and 3 at the high dose. Clinical efficacy data were inclusive of those participants with at least 6 months of follow-up (n=8). A summary of key observations from the January 2026 interim update is set forth below.

Across all participants dosed, LX2020 has been generally well-tolerated to date with no clinically significant complement activation.

Each of our gene therapy candidates utilizes the vector construct, dose and route of administration that we believe will result in the most favorable biodistribution and safety profile for our product candidate for each disease. Our most advanced programs use the AAVrh10 vector due to its high transduction efficiency in myocardial cells, potential for lower toxicity given the opportunity to utilize lower doses compared to other well-established AAV serotypes, and low pre-existing immunity.

Current and Future Capital Requirements

To date, we have funded our operations primarily through proceeds from the sale of shares of our convertible preferred stock, common stock, and pre-funded warrants and warrants to purchase our common stock. As of March 31, 2026, we had $227.6 million of cash, cash equivalents, and investments in U.S. Treasury securities. We have incurred significant operating losses since the commencement of our operations. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current gene therapy candidates or any future gene therapy candidates. Our net losses for the three months ended March 31, 2026 and the year ended December 31, 2025 were $20.2 million and $100.0 million, respectively, and our accumulated deficit was $400.3 million at March 31, 2026. We expect to continue to incur significant losses for the foreseeable future as we advance our current and future product candidates through preclinical and clinical development, continue to build our operations and operate as a public company.

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures to continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:

Components of our results of operations

Revenue

To date, we have not generated any revenue from product sales. If our development efforts for LX2006 and LX2020, or any future product candidates, are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales, royalties or payments from such collaboration or license agreements, or a combination of product sales and payments from such agreements.

Operating expenses

Research and development

Research and development expenses consist of costs incurred for our research activities, including our discovery efforts and the preclinical and clinical development of our programs. These expenses include:

We record research and development costs as expenses when incurred. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. When third-party service providers' billing terms do not coincide with our period-end, we are required to make estimates of our obligations to those third parties incurred in a given accounting period and record accruals at the end of the period. We base these estimates on our knowledge of the research and development programs, services performed for the period, past history for related activities and the expected duration of the third-party service contract, where applicable. If timelines or contracts are modified based upon changes in the scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis; therefore, actual results could differ from our estimates. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.

Our direct research and development expenses are tracked on a program-by-program basis and consist primarily of external costs, such as fees paid to CROs, CMOs, central laboratories and certain outside consultants in connection with our research and discovery, preclinical development, process development, manufacturing, clinical development, clinical trials, regulatory and quality assurance activities. We do not allocate professional services costs and licensing fees and other similar costs to specific programs because these costs are deployed across multiple programs.

Research and development activities are central to our business model and account for a significant portion of our operating expenses. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect our research and development expenses to increase for the foreseeable future as we further advance LX2006 and LX2020, and any other future product candidates that we may develop, into and through preclinical studies and clinical trials and pursue regulatory approvals. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future research, preclinical studies and clinical trials, regulatory developments and our assessments as to each product candidate's commercial potential. In addition, we cannot forecast whether any of our current or future product candidates will be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset our expenses.

General and administrative

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense for personnel in executive, accounting, business development, legal, human resources and administrative functions. General and administrative expenses also include corporate facility costs not otherwise included in research and development expenses, depreciation, and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, as well as professional fees for legal, consulting, investor and public relations, accounting and audit services.

We expect that in the near to medium term future our general and administrative expenses may increase relative to those incurred during the three months ended March 31, 2026 on a quarterly basis and on an annualized basis, due to anticipated sales and marketing costs as we approach expected commercialization of our product candidates, if approved, while supporting the continued research and development of our programs and the growth of our business.

Other expense, net

Other expense, net includes foreign exchange gains and (losses).

Interest expense

Interest expense is primarily associated with our finance right of use asset equipment leases.

Interest income

Interest income is primarily related to interest earned from our investments in U.S. government money market funds and interest earned from our investments in U.S. Treasury securities, as well as interest earned on interest-bearing demand deposit cash accounts and a cash collateral account.

(Amortization of premium) accretion of discount on investments in U.S. Treasury securities, net

(Amortization of premium) and accretion of discount on investments in U.S. Treasury securities, net consists of amortization of premium and accretion of discount on our investments in U.S. Treasury securities.

Income taxes

Provision for income taxes consists of U.S. federal and state income taxes in the jurisdictions where we conduct business. Since our inception, we have not recorded any income tax benefits for the net losses we have incurred in each year or for our research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss, or NOL, carryforwards and tax credits will not be realized. Accordingly, we have recorded a full valuation allowance against our net deferred tax assets at March 31, 2026, December 31, 2025 and March 31, 2025. As of March 31, 2026, December 31, 2025 and March 31, 2025, we had no unrecognized tax benefits.

Results of operations

Comparison of the three months ended March 31, 2026 and 2025

The following table summarizes our results of operations for the three months ended March 31, 2026 and 2025 (in thousands):

Research and development expenses

The following table summarizes our research and development expenses incurred for the three months ended March 31, 2026 and 2025 (in thousands):

The net decrease of $1.5 million in total research and development expenses for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to decreases in (i) employee and stock-based compensation expenses of $1.5 million primarily due to decreased headcount, (ii) CMC expenses of $0.8 million, and (iii) preclinical and quality expenses of $0.4 million. These decreases were primarily offset by increases in (i) clinical trial expenses of $0.5 million, (ii) milestone expenses of $0.4 million associated with our LX1001 program, and (iii) program and portfolio management expenses of $0.3 million.

General and administrative expenses

The net decrease of $10.0 million in general and administrative expenses for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to decreases in (i) third-party legal fees and associated costs of $10.5 million, and (ii) employee and stock-based compensation expenses of $0.4 million primarily due to decreased headcount. These decreases were partially offset by increased professional services and consultant expenses of $0.4 million.

Interest income

We recognized interest income of $2.1 million and $1.2 million for the three months ended March 31, 2026 and March 31, 2025, respectively, primarily related to interest earned on our investments in U.S. government money market funds, our investments in U.S Treasury securities, and our interest-bearing demand deposit cash accounts, with the increase due to higher invested balances, which was partially offset by lower interest rates.

Liquidity and capital resources

Sources of liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates. Since our inception through March 31, 2026, we funded our operations primarily through proceeds from the sale of shares of our convertible preferred stock, common stock, and pre-funded warrants and warrants to purchase our common stock. As of March 31, 2026 and December 31, 2025, we had cash, cash equivalents, and investments in U.S. Treasury Securities of $227.6 million and $246.6 million, respectively.

As of March 31, 2026, we had not sold any shares of common stock pursuant to the ATM Program. In April 2026, we sold 4,424,778 shares of our common stock under the ATM Program for net proceeds of $23.6 million after transaction costs.

We believe that our cash, cash equivalents, and investments in U.S. Treasury securities balances will be sufficient to fund our planned operating expenses and capital expenditure requirements into 2028. Our total future capital requirements will depend on many factors and are subject to the risks and uncertainties set forth in "Item 1A Risk Factors."

Cash flows

The following table summarizes our sources and uses of cash for the three months ended March 31, 2026 and March 31, 2025 (in thousands):

Operating activities

During the three months ended March 31, 2026, net cash used in operating activities consisted primarily of our net loss of $20.2 million and $4.2 million of net cash used in changes in operating assets and liabilities, which were partially offset by $2.8 million of stock-based compensation expense and $0.5 million of depreciation expense and amortization of operating and finance right-of-use assets.

During the three months ended March 31, 2025, net cash used in operating activities consisted primarily of our net loss of $32.7 million, which was partially offset by $6.7 million of net cash provided by changes in operating assets and liabilities, $3.7 million of stock-based compensation expense, and $0.5 million of depreciation and amortization of operating and finance right-of-use assets.

Investing activities

During the three months ended March 31, 2026 and March 31, 2025, net cash provided by investing activities was $27.5 million and $15.6 million, respectively, and consisted primarily of proceeds from sales or maturities of investments.

Financing activities

During the three months ended March 31, 2026, net cash provided by financing activities consisted primarily of proceeds received from the exercise of common warrants of $2.4 million, as well as proceeds received from common stock issuances under the 2023 ESPP of $0.1 million, which were partially offset by $0.1 million of principal payments made on equipment finance leases.

During the three months ended March 31, 2025, net cash provided by financing activities consisted of proceeds received from common stock issuances under the 2023 ESPP of $0.2 million, which was partially offset by $0.2 million of principal payments made on equipment finance leases.

Funding requirements

We expect our expenses and capital requirements to increase significantly in connection with our ongoing activities, particularly as we advance our lead product candidates and other development programs. Accordingly, we will continue to require substantial additional funding to support our continuing operations.

The timing and amount of our future operating and capital requirements will largely depend on many factors, including:

We may be unable to raise additional funds or enter into potential collaborations, strategic partnerships or marketing, distribution, licensing or other similar agreements or arrangements on favorable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your stockholder ownership interest will be diluted. If we fail to raise capital or enter into such agreements or arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of our product candidates or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Critical accounting policies and significant judgments and estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Other than as disclosed in Note 2 to the condensed financial statements included in this Quarterly Report on Form 10-Q, there have been no significant changes to our critical accounting estimates from those described in our audited financial statements as of and for the year ended December 31, 2025 included in our Annual Report on Form 10-K, filed with the SEC on March 30, 2026.

JOBS Act accounting election

We qualify as an "emerging growth company" pursuant to the provisions of the JOBS Act. As an emerging growth company, we have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies.

Item 3. Quantitative and qualitative disclosures about market risk.

We are a smaller reporting company, as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information under this item.