Equity Incentive Awards

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation: The Company has stockholder-approved equity incentive plans that permit the grant of stock options, restricted stock unit awards, 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 is recorded in research and development expense and selling, general, and administrative expense as noted on the Company’s condensed consolidated statements of comprehensive 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 a change in the 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 Company utilized the Black-Scholes valuation model for estimating the fair value of the stock option compensation granted, with the following weighted-average assumptions for stock options granted in the nine months ended September 30, 2023 and 2022:


	Expected Volatility		Risk-free Interest Rate		Expected Term	Dividend Rate
September 30, 2023
Employees	93	%	3.9	%	4	—	%
Officers and non-employee directors	100	%	3.9	%	6	—	%
September 30, 2022
Employees	107	%	2.4	%	4	—	%
Officers and non-employee directors	91	%	1.9	%	7	—	%

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the nine months ended September 30, 2023:


	Stock Options	Weighted Average Exercise Price
	(in thousands)
Outstanding at December 31, 2022	12,349	$	5.10
Granted	7,216	2.43

Expired	(152)	14.68
Forfeited	(785)	4.52
Outstanding at September 30, 2023	18,628	4.01
Exercisable at September 30, 2023	7,700	$	5.75

The following is a summary of restricted stock unit activity under Lexicon’s stock-based compensation plans for the nine months ended September 30, 2023:


	RSU’s	Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at December 31, 2022	2,748	$	3.78
Granted	4,199	2.41
Vested	(1,290)	3.80
Forfeited	(250)	2.73
Outstanding at September 30, 2023	5,407	$	2.76