Lexicon Announces Oversubscribed $250 Million Private Placement of Equity Securities

Rhea-AI Summary

Lexicon Pharmaceuticals, Inc. announced a private investment in public equity financing, expecting to raise around $250 million. The company will sell approximately 2.3 million shares of Series A Convertible Preferred Stock at $108.50 per share, convertible into about 115.2 million common shares. Each preferred stock will convert into 50 common shares upon stockholder approval.

Insights

Financial Analyst

Lexicon Pharmaceuticals' recent move to secure a private investment in public equity (PIPE) financing is a strategic effort to bolster its capital structure. The transaction involves the sale of 2.3 million shares of Series A Convertible Preferred Stock at $108.50 per share, which is expected to convert into 115.2 million shares of common stock. This significant infusion of capital, amounting to approximately $250 million before fees and expenses, is a substantial liquidity event for the company.

The decision to opt for PIPE financing rather than a public offering suggests a targeted approach to fundraising, possibly to expedite the process and minimize dilution for current shareholders. The conversion ratio of 1:50 (one share of preferred stock to fifty shares of common stock) indicates a potential future dilution for existing shareholders, but also reflects the investors' confidence in the company's long-term prospects.

This capital raise's impact on the stock market can be multifaceted. On one hand, it could be perceived positively as it provides the company with the necessary funds to advance its pipeline, drive growth, or pay down debt. On the other hand, the market may react to the dilutive nature of the conversion, potentially affecting the stock price. Investors will be closely monitoring the use of proceeds and any subsequent announcements regarding strategic initiatives post-financing.

Market Research Analyst

The private investment in Lexicon Pharmaceuticals must be contextualized within the broader biopharmaceutical market, where companies often require significant capital for research and development. The $250 million raise is indicative of Lexicon's need to fund its operations, likely related to drug development or commercialization efforts. It's crucial to analyze how this cash influx will be allocated to understand its potential impact on the company's growth trajectory.

Investors and market observers will be interested in the terms of the deal, particularly the conversion price of the preferred shares to common stock. The premium paid by investors in the PIPE could suggest a belief in Lexicon's value proposition and its pipeline's potential. Furthermore, the selection of accredited investors implies a strategic partnership, potentially bringing not just capital but also expertise and network opportunities to Lexicon.

The long-term implications of this financing could include accelerated drug development timelines or expanded market reach for Lexicon's products. However, it is also important to monitor the execution risk associated with the deployment of these funds and the company's ability to meet milestones that justify the investment.

Legal Expert

From a legal standpoint, the transaction's structure as a private investment in public equity (PIPE) requires careful scrutiny. PIPE deals are subject to regulatory considerations, including securities laws and stock exchange rules. The requirement for stockholder approval indicates that Lexicon is mindful of the governance aspects of this financing and is taking steps to ensure compliance with Nasdaq regulations.

Investors will be examining the terms of the securities purchase agreement for any provisions that could affect their position, such as anti-dilution clauses, voting rights, or liquidation preferences associated with the Series A Convertible Preferred Stock. The legal framework surrounding this transaction must ensure the protection of both the company and the investors, balancing the need for capital with shareholder rights.

It is also important to consider the implications of the conversion terms on corporate control. The conversion of preferred shares to common stock could potentially shift the balance of voting power within the company, depending on the distribution of the new common shares among the investing parties.

THE WOODLANDS, Texas, March 11, 2024 (GLOBE NEWSWIRE) -- Lexicon Pharmaceuticals, Inc. (Nasdaq: LXRX) (“Lexicon”) today announced it has entered into a securities purchase agreement (the “purchase agreement”) for a private investment in public equity financing that is expected to result in gross proceeds of approximately $250 million, before deducting placement agent fees and offering expenses. Pursuant to the terms of the purchase agreement, Lexicon will sell approximately 2.3 million shares of series a convertible preferred stock (the “Series A Convertible Preferred Stock”), at a price per share of $108.50, convertible into approximately 115.2 million shares of its common stock, par value $0.001, to a select group of accredited investors pursuant to the terms of the purchase agreement.

Subject to Lexicon stockholder approval, each share of Series A Convertible Preferred Stock will automatically convert into 50 shares of common stock. The private placement is expected to close on or about March 13, 2024, subject to customary closing conditions.

The financing included participation from both new and existing investors, including an affiliate of Invus, L.P., Lexicon’s largest stockholder, who purchased its pro rata share pursuant to its preemptive right under Lexicon’s Fifth Amended and Restated Certificate of Incorporation, and Braidwell LP, Great Point Partners, LLC, OrbiMed and a large investment management firm.

Lexicon currently intends to use a portion of the net proceeds that it will receive from the offering, together with its existing cash and cash equivalents and short-term investments, to fund the continued research, development and commercialization of its drug programs, and for working capital and other general corporate purposes.

Jefferies, Leerink Partners and Piper Sandler acted as placement agents.

The securities to be sold in the private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or other applicable jurisdiction's securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions' securities laws. The purchase agreement contains customary registration rights whereby Lexicon has agreed to file a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) registering the resale of the shares of common stock issuable upon the conversion of the shares of Series A Convertible Preferred Stock issued in the private placement concurrently with or within 10 business days after filing the preliminary proxy statement for Lexicon’s 2024 annual meeting of stockholders.

This press release does not constitute an offer to sell, or the solicitation of an offer to buy, these securities, nor will there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale is not permitted.

About Lexicon Pharmaceuticals

Lexicon is a biopharmaceutical company with a mission of pioneering medicines that transform patients’ lives. Through its Genome5000™ program, Lexicon scientists studied the role and function of nearly 5,000 genes and identified more than 100 protein targets with significant therapeutic potential in a range of diseases. Through the precise targeting of these proteins, Lexicon is pioneering the discovery and development of innovative medicines to safely and effectively treat disease. Lexicon has advanced multiple medicines to market and has a pipeline of promising drug candidates in discovery and clinical and preclinical development in heart failure, neuropathic pain, diabetes and metabolism and other indications.

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to Lexicon’s financial position and long-term outlook on its business, including the commercialization of its approved products and the clinical development of, regulatory filings for, and potential therapeutic and commercial potential of its other drug candidates. In addition, this press release also contains forward-looking statements relating to Lexicon’s growth and future operating results, discovery, development and commercialization of products, strategic alliances and intellectual property, as well as other matters that are not historical facts or information. All forward-looking statements, including, without limitation, statements about the completion and timing of private placement and the use of proceeds therefrom are based on management’s current assumptions and expectations and involve risks, uncertainties and other important factors, specifically including Lexicon’s ability to meet its capital requirements, successfully commercialize its approved products, successfully conduct preclinical and clinical development and obtain necessary regulatory approvals of its other drug candidates on its anticipated timelines, achieve its operational objectives, obtain patent protection for its discoveries and establish strategic alliances, as well as additional factors relating to manufacturing, intellectual property rights, and the therapeutic or commercial value of its approved products and other drug candidates. Any of these risks, uncertainties and other factors may cause Lexicon’s actual results to be materially different from any future results expressed or implied by such forward-looking statements. Information identifying such important factors is contained under “Risk Factors” in Lexicon’s annual report on Form 10-K for the year ended December 31, 2022 and other subsequent disclosure documents filed with the Securities and Exchange Commission. Lexicon undertakes no obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

For Investor Inquiries:
Lisa DeFrancesco
Lexicon Pharmaceuticals, Inc.
lexinvest@lexpharma.com

For Media Inquiries:
Alina Cocuzza
Lexicon Pharmaceuticals, Inc.
acocuzza@lexpharma.com 

FAQ

What type of financing did Lexicon Pharmaceuticals announce?

Lexicon Pharmaceuticals announced a private investment in public equity financing.

How much is Lexicon Pharmaceuticals expecting to raise through the financing?

Lexicon Pharmaceuticals is expecting to raise approximately $250 million.

How many shares of Series A Convertible Preferred Stock will Lexicon Pharmaceuticals sell?

Lexicon Pharmaceuticals will sell approximately 2.3 million shares of Series A Convertible Preferred Stock.

At what price per share will the Series A Convertible Preferred Stock be sold?

The Series A Convertible Preferred Stock will be sold at a price per share of $108.50.

How many common shares will the Series A Convertible Preferred Stock be convertible into?

The Series A Convertible Preferred Stock will be convertible into approximately 115.2 million common shares.

How many common shares will each preferred stock convert into?

Each preferred stock will automatically convert into 50 common shares upon stockholder approval.