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þ
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
|
|
q
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
|
Delaware
|
76-0474169
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(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
Number)
|
Yes
|
ü
|
No
|
Yes
|
No
|
Yes
|
No
|
ü
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Page
|
||
Factors
Affecting Forward-Looking Statements
|
||
3
|
||
Item
1.
|
3
|
|
Consolidated Balance Sheets – June 30,
2009 (unaudited) and December 31, 2008
|
3
|
|
Consolidated Statements of Operations
(unaudited) – Three and Six Months Ended June 30, 2009 and
2008
|
4
|
|
Consolidated Statements of Stockholders’
Equity (unaudited) – Six Months Ended June 30, 2009 and
2008
|
5
|
|
Consolidated Statements of Cash Flows
(unaudited) – Six Months Ended June 30, 2009 and 2008
|
6
|
|
Notes to Consolidated Financial Statements
(unaudited)
|
7
|
|
Item
2.
|
18
|
|
Item
3.
|
27
|
|
Item
4.
|
27
|
|
28
|
||
Item
1A.
|
28
|
|
Item
4.
|
30
|
|
Item
6.
|
31
|
|
Signatures
|
32
|
Item
1.
|
Financial
Statements
|
As
of June 30,
|
As
of December 31,
|
|||||||
2009
|
2008
|
|||||||
Assets
|
(unaudited)
|
|||||||
Current
assets:
|
||||||||
Cash and cash
equivalents
|
$
|
49,166
|
$
|
85,873
|
||||
Short-term investments,
including restricted investments of $430
|
30,504
|
629
|
||||||
Short-term investments held by
Symphony Icon, Inc.
|
7,735
|
16,610
|
||||||
Accounts receivable, net of
allowances of $35
|
530
|
568
|
||||||
Prepaid expenses and other
current assets
|
8,017
|
5,487
|
||||||
Total current
assets
|
95,952
|
109,167
|
||||||
Long-term
investments
|
56,409
|
55,686
|
||||||
Property
and equipment, net of accumulated depreciation and amortization of $73,271
and $71,102, respectively
|
61,526
|
65,087
|
||||||
Goodwill
|
25,798
|
25,798
|
||||||
Other
assets
|
4,648
|
5,770
|
||||||
Total assets
|
$
|
244,333
|
$
|
261,508
|
||||
Liabilities
and Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$
|
3,210
|
$
|
7,926
|
||||
Accrued
liabilities
|
6,863
|
6,615
|
||||||
Current portion of deferred
revenue
|
1,274
|
5,672
|
||||||
Current portion of long-term
debt
|
1,004
|
963
|
||||||
Total current
liabilities
|
12,351
|
21,176
|
||||||
Deferred
revenue, net of current portion
|
14,212
|
14,212
|
||||||
Long-term
debt
|
65,970
|
29,529
|
||||||
Other
long-term liabilities
|
690
|
764
|
||||||
Total
liabilities
|
93,223
|
65,681
|
||||||
Commitments
and contingencies
|
||||||||
Equity:
|
||||||||
Lexicon Pharmaceuticals, Inc.
stockholders’ equity:
|
||||||||
Preferred stock, $.01 par
value; 5,000 shares authorized; no shares issued and
outstanding
|
—
|
—
|
||||||
Common stock, $.001 par value;
300,000 shares authorized; 137,331 and 136,797 shares issued and
outstanding, respectively
|
137
|
137
|
||||||
Additional paid-in
capital
|
676,001
|
672,838
|
||||||
Accumulated
deficit
|
(529,028
|
)
|
(487,395
|
)
|
||||
Accumulated other
comprehensive loss
|
(1
|
)
|
—
|
|||||
Total Lexicon Pharmaceuticals,
Inc. stockholders’ equity
|
147,109
|
185,580
|
||||||
Noncontrolling interest in
Symphony Icon, Inc.
|
4,001
|
10,247
|
||||||
Total equity
|
151,110
|
195,827
|
||||||
Total liabilities and
equity
|
$
|
244,333
|
$
|
261,508
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues:
|
||||||||||||||||
Collaborative
research
|
$
|
2,787
|
$
|
7,953
|
$
|
6,392
|
$
|
15,587
|
||||||||
Subscription and license
fees
|
202
|
1,613
|
765
|
2,872
|
||||||||||||
Total
revenues
|
2,989
|
9,566
|
7,157
|
18,459
|
||||||||||||
Operating
expenses:
|
||||||||||||||||
Research
and development, including stock-based compensation of $766, $950, $1,595,
and $2,077, respectively
|
20,220
|
30,075
|
43,084
|
57,524
|
||||||||||||
General
and administrative, including stock-based compensation of $590, $633,
$1,203, and $1,285, respectively
|
5,551
|
5,877
|
10,425
|
11,759
|
||||||||||||
Total operating
expenses
|
25,771
|
35,952
|
53,509
|
69,283
|
||||||||||||
Loss
from operations
|
(22,782
|
)
|
(26,386
|
)
|
(46,352
|
)
|
(50,824
|
)
|
||||||||
Gain
on long-term investments, net
|
306
|
—
|
823
|
—
|
||||||||||||
Interest
income
|
239
|
1,418
|
566
|
4,199
|
||||||||||||
Interest
expense
|
(729
|
)
|
(675
|
)
|
(1,395
|
)
|
(1,345
|
)
|
||||||||
Other
expense, net
|
(576
|
)
|
(539
|
)
|
(1,521
|
)
|
(1,086
|
)
|
||||||||
Consolidated
net loss
|
(23,542
|
)
|
(26,182
|
)
|
(47,879
|
)
|
(49,056
|
)
|
||||||||
Less:
Net loss attributable to noncontrolling interest in Symphony Icon,
Inc.
|
3,469
|
6,148
|
6,246
|
11,072
|
||||||||||||
Net
loss attributable to Lexicon Pharmaceuticals, Inc.
|
$
|
(20,073
|
)
|
$
|
(20,034
|
)
|
$
|
(41,633
|
)
|
$
|
(37,984
|
)
|
||||
Net
loss attributable to Lexicon Pharmaceuticals, Inc. per common share, basic
and diluted
|
$
|
(0.15
|
)
|
$
|
(0.15
|
)
|
$
|
(0.30
|
)
|
$
|
(0.28
|
)
|
||||
Shares
used in computing net loss attributable to Lexicon Pharmaceuticals, Inc.
per common share, basic and diluted
|
137,331
|
136,796
|
137,203
|
136,795
|
Lexicon
Pharmaceuticals, Inc. Stockholders
|
||||||||||||||||||||||||||||||||
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Accumulated
Other Comprehensive Loss
|
Total
|
Noncontrolling
Interest
|
Total
Equity
|
|||||||||||||||||||||||||||
Common
Stock
|
||||||||||||||||||||||||||||||||
Shares
|
Par
Value
|
|||||||||||||||||||||||||||||||
Balance
at December 31, 2007
|
136,796
|
$
|
137
|
$
|
666,702
|
$
|
(410,535
|
)
|
$
|
(4
|
)
|
$
|
256,300
|
$
|
30,271
|
$
|
286,571
|
|||||||||||||||
Stock-based
compensation
|
—
|
—
|
3,362
|
—
|
—
|
3,362
|
—
|
3,362
|
||||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
(37,984
|
)
|
—
|
(37,984
|
)
|
(11,072
|
)
|
(49,056
|
)
|
||||||||||||||||||||
Unrealized
loss on investments
|
—
|
—
|
—
|
—
|
(3,221
|
)
|
(3,221
|
)
|
—
|
(3,221
|
)
|
|||||||||||||||||||||
Comprehensive
loss
|
(41,205
|
)
|
(52,277
|
)
|
||||||||||||||||||||||||||||
Balance
at June 30, 2008
|
136,796
|
$
|
137
|
$
|
670,064
|
$
|
(448,519
|
)
|
$
|
(3,225
|
)
|
$
|
218,457
|
$
|
19,199
|
$
|
237,656
|
|||||||||||||||
Balance
at December 31, 2008
|
136,797
|
$
|
137
|
$
|
672,838
|
$
|
(487,395
|
)
|
$
|
—
|
$
|
185,580
|
$
|
10,247
|
$
|
195,827
|
||||||||||||||||
Stock-based
compensation
|
—
|
—
|
3,163
|
—
|
—
|
3,163
|
—
|
3,163
|
||||||||||||||||||||||||
Grant
of restricted stock
|
534
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
(41,633
|
)
|
—
|
(41,633
|
)
|
(6,246
|
)
|
(47,879
|
)
|
||||||||||||||||||||
Unrealized
loss on investments
|
—
|
—
|
—
|
—
|
(1
|
)
|
(1
|
)
|
—
|
(1
|
)
|
|||||||||||||||||||||
Comprehensive
loss
|
(41,634
|
)
|
(47,880
|
)
|
||||||||||||||||||||||||||||
Balance
at June 30, 2009
|
137,331
|
$
|
137
|
$
|
676,001
|
$
|
(529,028
|
)
|
$
|
(1
|
)
|
$
|
147,109
|
$
|
4,001
|
$
|
151,110
|
Six
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Consolidated net
loss
|
$
|
(47,879
|
)
|
$
|
(49,056
|
)
|
||
Adjustments to reconcile
consolidated net loss to net cash used in operating
activities:
|
||||||||
Depreciation
|
3,317
|
4,128
|
||||||
Impairment of fixed
assets
|
445
|
—
|
||||||
Amortization of Symphony Icon,
Inc. purchase option
|
1,071
|
1,071
|
||||||
Stock-based
compensation
|
2,798
|
3,362
|
||||||
Gain on long-term
investments
|
(725
|
)
|
—
|
|||||
Gain on ARS
Rights
|
(98
|
)
|
—
|
|||||
Loss on disposal of property and
equipment
|
4
|
—
|
||||||
Changes in operating assets and
liabilities:
|
||||||||
Decrease in accounts
receivable
|
38
|
1,091
|
||||||
Increase in prepaid expenses
and other current assets
|
(2,530
|
)
|
(4,209
|
)
|
||||
Decrease in other
assets
|
51
|
54
|
||||||
Decrease in accounts payable
and other liabilities
|
(4,177
|
)
|
(23
|
)
|
||||
Decrease in deferred
revenue
|
(4,398
|
)
|
(9,621
|
)
|
||||
Net cash used in operating
activities
|
(52,083
|
)
|
(53,203
|
)
|
||||
Cash
flows from investing activities:
|
||||||||
Purchases of property and
equipment
|
(242
|
)
|
(1,403
|
)
|
||||
Proceeds from disposal of
property and equipment
|
37
|
—
|
||||||
Maturities of investments held
by Symphony Icon, Inc.
|
8,875
|
9,784
|
||||||
Purchases
of investments
|
(59,955
|
)
|
(39,847
|
)
|
||||
Maturities of
investments
|
30,179
|
171,811
|
||||||
Net cash provided by (used in)
investing activities
|
(21,106
|
)
|
140,345
|
|||||
Cash
flows from financing activities:
|
||||||||
Proceeds from debt
borrowings
|
37,392
|
—
|
||||||
Repayment of debt
borrowings
|
(910
|
)
|
(431
|
)
|
||||
Net cash provided by (used in)
financing activities
|
36,482
|
(431
|
)
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
(36,707
|
)
|
86,711
|
|||||
Cash
and cash equivalents at beginning of period
|
85,873
|
22,938
|
||||||
Cash
and cash equivalents at end of period
|
$
|
49,166
|
$
|
109,649
|
||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash paid for
interest
|
$
|
1,267
|
$
|
1,311
|
||||
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||
Unrealized loss on
investments
|
$
|
(1
|
)
|
$
|
(3,221
|
)
|
Expected
Volatility
|
Risk-free
Interest Rate
|
Expected
Term
|
Estimated
Forfeitures
|
Dividend
Rate
|
||||||||||||||||
June
30, 2009:
|
||||||||||||||||||||
Employees
|
78
|
%
|
1.9
|
%
|
5
|
24
|
%
|
0
|
%
|
|||||||||||
Officers
and non-employee directors
|
77
|
%
|
2.7
|
%
|
8
|
6
|
%
|
0
|
%
|
|||||||||||
June
30, 2008:
|
||||||||||||||||||||
Employees
|
66
|
%
|
2.9
|
%
|
6
|
21
|
%
|
0
|
%
|
|||||||||||
Officers
and non-employee directors
|
66
|
%
|
3.8
|
%
|
9
|
4
|
%
|
0
|
%
|
Options
|
Weighted
Average Exercise Price
|
||||||
(in
thousands)
|
|||||||
Outstanding
at December 31, 2008
|
16,898
|
$
|
5.13
|
||||
Granted
|
4,811
|
1.44
|
|||||
Expired
|
(1,518
|
)
|
6.63
|
||||
Forfeited
|
(542
|
)
|
2.64
|
||||
Outstanding
at June 30, 2009
|
19,649
|
4.18
|
|||||
Exercisable
at June 30, 2009
|
11,554
|
$
|
5.73
|
Shares
|
Weighted
Average Grant Date
Fair
Value
|
||||||
(in
thousands)
|
|||||||
Outstanding
at December 31, 2008
|
—
|
$
|
—
|
||||
Granted
|
534
|
1.45
|
|||||
Nonvested
at June 30, 2009
|
534
|
$
|
1.45
|
As
of June 30, 2009
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Estimated
Fair Value
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
49,166
|
$
|
—
|
$
|
—
|
$
|
49,166
|
||||||||
Securities
maturing within one year:
|
||||||||||||||||
Certificates
of deposit
|
509
|
—
|
—
|
509
|
||||||||||||
U.S.
treasury securities
|
29,996
|
—
|
(1
|
)
|
29,995
|
|||||||||||
Total short-term
investments
|
$
|
30,505
|
$
|
—
|
$
|
(1
|
)
|
$
|
30,504
|
|||||||
Securities
maturing after one year through five years:
|
||||||||||||||||
ARS
Rights
|
—
|
12,158
|
—
|
12,158
|
||||||||||||
Securities
maturing after ten years:
|
||||||||||||||||
Auction
rate securities
|
56,900
|
—
|
(12,649
|
)
|
44,251
|
|||||||||||
Total long-term
investments
|
$
|
56,900
|
$
|
12,158
|
$
|
(12,649
|
)
|
$
|
56,409
|
|||||||
Short-term
investments held by Symphony Icon, Inc.:
|
||||||||||||||||
Cash
and cash equivalents
|
7,735
|
—
|
—
|
7,735
|
||||||||||||
Total short-term investments
held by Symphony Icon, Inc.
|
$
|
7,735
|
$
|
—
|
$
|
—
|
$
|
7,735
|
||||||||
Total
cash and cash equivalents and investments
|
$
|
144,306
|
$
|
12,158
|
$
|
(12,650
|
)
|
$
|
143,814
|
As
of December 31, 2008
|
||||||||||||||||
Amortized
Cost
|
Gross
Unrealized Gains
|
Gross
Unrealized Losses
|
Estimated
Fair Value
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
85,873
|
$
|
—
|
$
|
—
|
$
|
85,873
|
||||||||
Securities
maturing within one year:
|
||||||||||||||||
Certificates of
deposit
|
629
|
—
|
—
|
629
|
||||||||||||
Total short-term
investments
|
$
|
629
|
$
|
—
|
$
|
—
|
$
|
629
|
||||||||
Securities
maturing after one year through five years:
|
||||||||||||||||
ARS Rights
|
—
|
12,060
|
—
|
12,060
|
||||||||||||
Securities
maturing after ten years:
|
||||||||||||||||
Auction rate
securities
|
57,000
|
—
|
(13,374
|
)
|
43,626
|
|||||||||||
Total long-term
investments
|
$
|
57,000
|
$
|
12,060
|
$
|
(13,374
|
)
|
$
|
55,686
|
|||||||
Short-term
investments held by Symphony Icon, Inc.:
|
||||||||||||||||
Cash and cash
equivalents
|
16,610
|
—
|
—
|
16,610
|
||||||||||||
Total short-term investments
held by Symphony Icon, Inc.
|
$
|
16,610
|
$
|
—
|
$
|
—
|
$
|
16,610
|
||||||||
Total
cash and cash equivalents and investments
|
$
|
160,112
|
$
|
12,060
|
$
|
(13,374
|
)
|
$
|
158,798
|
|
·
|
Level
1 – quoted prices in active markets for identical
investments
|
|
·
|
Level
2 – other significant observable inputs (including quoted prices for
similar investments, market corroborated inputs,
etc.)
|
|
·
|
Level
3 – significant unobservable inputs (including the Company’s own
assumptions in determining the fair value of
investments)
|
Financial Assets at Fair
Value as of June
30, 2009
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
49,166
|
$
|
—
|
$
|
—
|
$
|
49,166
|
||||||||
Short-term
investments
|
30,504
|
—
|
—
|
30,504
|
||||||||||||
Short-term
investments held by Symphony Icon, Inc.
|
7,735
|
—
|
—
|
7,735
|
||||||||||||
Long-term
investments
|
—
|
—
|
56,409
|
56,409
|
||||||||||||
Total
cash and cash equivalents and investments
|
$
|
87,405
|
$
|
—
|
$
|
56,409
|
$
|
143,814
|
Financial Assets at Fair
Value as of
December 31, 2008
|
||||||||||||||||
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
85,873
|
$
|
—
|
$
|
—
|
$
|
85,873
|
||||||||
Short-term
investments
|
629
|
—
|
—
|
629
|
||||||||||||
Short-term
investments held by Symphony Icon, Inc.
|
16,610
|
—
|
—
|
16,610
|
||||||||||||
Long-term
investments
|
—
|
—
|
55,686
|
55,686
|
||||||||||||
Total
cash and cash equivalents and investments
|
$
|
103,112
|
$
|
—
|
$
|
55,686
|
$
|
158,798
|
Long-term
Investments
|
||||
(in
thousands)
|
||||
Balance
at December 31, 2008
|
$
|
55,686
|
||
Unrealized
gains included in earnings as gain on long-term investments,
net
|
823
|
|||
Net
sales and settlements
|
|
(100
|
)
|
|
Balance
at June 30, 2009
|
$
|
56,409
|
Three
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands)
|
||||||||
Net
loss attributable to Lexicon Pharmaceuticals, Inc.
|
$
|
(20,073
|
)
|
$
|
(20,034
|
)
|
||
Unrealized
gain (loss) on short-term investments
|
4
|
(190
|
)
|
|||||
Unrealized
loss on long-term investments
|
—
|
(703
|
)
|
|||||
Net
comprehensive loss attributable to Lexicon Pharmaceuticals,
Inc.
|
$
|
(20,069
|
)
|
$
|
(20,927
|
)
|
Six
Months Ended June 30,
|
||||||||
2009
|
2008
|
|||||||
(in
thousands)
|
||||||||
Net
loss
|
$
|
(41,633
|
)
|
$
|
(37,984
|
)
|
||
Unrealized
gain (loss) on short-term investments
|
(1
|
)
|
19
|
|||||
Unrealized
loss on long-term investments
|
—
|
(3,240
|
)
|
|||||
Net
comprehensive loss attributable to Lexicon Pharmaceuticals,
Inc.
|
$
|
(41,634
|
)
|
$
|
(41,205
|
)
|
Item
2.
|
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||||
Total
revenues
|
$
|
3.0
|
$
|
9.6
|
$
|
7.2
|
$
|
18.5
|
|||||||
Dollar
decrease
|
$
|
(6.6
|
)
|
$
|
(11.3
|
)
|
|||||||||
Percentage
decrease
|
(69
|
)%
|
(61
|
)%
|
|
·
|
Collaborative research
– Revenue from collaborative research for the three months ended
June 30, 2009 decreased 65% to $2.8 million, and for the six
months ended June 30, 2009 decreased 59% to $6.4 million, as
compared to the corresponding period in 2008, primarily due to reduced
revenues in the three and six months ended June 30, 2009 under our
alliances with Bristol-Myers Squibb and N.V. Organon due to our progress
towards completing the target discovery portion of the alliances, and the
completion in 2008 of the target discovery portion of our alliance with
Genentech.
|
|