Debt Obligations

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Debt Obligations

Debt Obligations

Oxford Term Loans. In March 2022, Lexicon and one of its subsidiaries entered into a loan and security agreement with Oxford Finance LLC (“Oxford”) that provides up to $150 million in borrowing capacity (the “Oxford Term Loans”). The loan and security agreement was subsequently amended in August 2022, May 2023, June 2023 and December 2023. The Company incurred debt issuance costs of $0.3 million in connection with the December 2023 amendment which extended the fourth tranche period and modified the existing financial covenant relating to net sales of INPEFA and the minimum cash and investments balance requirement. In March 2024, the Company entered into a fifth amendment further modifying the existing financial covenant relating to net sales of INPEFA.

The Oxford Term Loans are available in five tranches, each maturing in March 2027. The first $25 million tranche was funded in March 2022, the second $25 million tranche was funded in December 2022 and the third $50 million tranche was funded in June 2023. The fourth $25 million tranche will be available for draw at Lexicon’s option upon the achievement of specified INPEFA net sales and until April 15, 2025. An unused fee will be due in the event Lexicon does not draw the full amount available under the fourth tranche. The fifth $25 million tranche is available for draw at Lexicon’s option, subject to Oxford’s consent, at any time prior to the expiration of the interest-only payment period as described below. A final payment exit fee equal to 6% of the amount funded under the Oxford Term Loans is due upon prepayment or maturity. The final payment exit fee of $6 million as of December 31, 2023, in the aggregate for the three borrowed tranches, is recorded as a debt discount on the consolidated balance sheet.

Concurrent with the funding of the first three tranches, Lexicon granted Oxford warrants to purchase 420,673 shares of Lexicon’s common stock at an exercise price of $2.08 per share, 224,128 shares of Lexicon’s common stock at an exercise price of $1.95 per share and 183,824 shares of Lexicon’s common stock at an exercise price of $2.38 per share, respectively. Subject to and upon funding of the fourth tranche, Lexicon will grant Oxford a warrant to purchase shares of its common stock having a value equal to 1.75% of such tranche, as determined by reference to a 10-day average closing price of the shares, and having an exercise price equal to such average closing price. All warrants are exercisable for five years from their respective grant dates and feature a net cashless exercise provision. The Company allocated the proceeds from each term loan tranche to the corresponding warrant using the relative fair value method and used the Black-Scholes model to calculate the fair value of the warrants.

As of December 31, 2023, the carrying value of the Oxford Term Loans on the consolidated balance sheet was $99.5 million, reflecting an unamortized discount of $6.5 million to the face value of long-term debt for the final payment exit fee, the warrant fair value, and debt issuance costs, which are being amortized into interest and other expense throughout the life of the term loan using the effective interest rate method.

Monthly interest-only payments are due during an initial 36-month period from the original March 2022 borrowing date. The interest-only period will be followed by an amortization period extending through the maturity date. Payments of $34.8 million, $52.2 million, and $19.0 million, including debt principal and final exit fee payments, will be due during the fiscal years ended December 31, 2025, December 31, 2026 and December 31, 2027, respectively, with respect to all borrowed loan tranches as of December 31, 2023.

Prior to the June 2023 amendment to the loan and security agreement, the Oxford Term Loans bore interest at a floating rate equal to the 30-day U.S. Dollar LIBOR plus 7.90%, but not less than 8.01%, subject to additional interest if an event of default occurs and is continuing. Following such amendment, the floating interest rate is based on the sum of (a) the 1-month CME Term Secured Overnight Financing Rate (SOFR), (b) 0.10%, and (c) 7.90% for the first and second tranches and 7% for the third and fourth tranches. As of December 31, 2023, the weighted average interest rate of the Oxford Term Loans was 12.9%. During the year ended December 31, 2023, the Company recognized interest expense of $11.6 million, including $1.5 million in amortization of discount and related debt issuance costs.

If an event of default occurs and is continuing, Oxford may declare all amounts outstanding under the loan and security agreement to be immediately due and payable. Additionally, Lexicon may prepay the Oxford Term Loans in whole at its option at any time. Any prepayment of the Oxford Term Loans is subject to prepayment fees for up to three years after the funding of each tranche of the loans.

Lexicon’s obligations under the Oxford Term Loans are secured by a first lien security interest in all of the assets of the Company and its subsidiaries. The loan and security agreement contains certain customary representations and warranties, affirmative and negative covenants and events of default applicable to Lexicon and its subsidiaries. In addition to the financial covenants, additional covenants include those restricting dispositions, fundamental changes to its business, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated debt. The loan and security agreement includes a financial covenant which requires Lexicon to maintain a minimum cash and investments balance of $10 million until the achievement of specified INPEFA net sales. Upon funding of the fourth tranche, the minimum cash and investments balance will increase to $25 million. The loan and security agreement includes a separate financial covenant relating to net sales of INPEFA as noted above. The Company was in compliance with its debt covenants as of December 31, 2023, and has classified its debt as long-term based on its intent and ability to refinance with completed equity financing (see Note 13) if the Company is unable to meet these financial covenants within one year.