Equity Incentive Awards

3 Months Ended

Mar. 31, 2024

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 of $4.3 million and $3.4 million for the three months ended March 31, 2024 and 2023, respectively, is recorded separately 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 different 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 following weighted-average assumptions were used for stock options granted in the three months ended March 31, 2024 and 2023:


	Expected Volatility		Risk-free Interest Rate		Expected Term	Dividend Rate
March 31, 2024
Employees	96	%	4.3	%	4	—	%
Officers and non-employee directors	104	%	4.2	%	6	—	%
March 31, 2023
Employees	112	%	4.1	%	4	—	%
Officers and non-employee directors	98	%	3.9	%	6	—	%

The following is a summary of stock option activity under Lexicon’s stock-based compensation plans for the three months ended March 31, 2024:


	Stock Options	Weighted Average Exercise Price
	(in thousands)
Outstanding at December 31, 2023	18,705	$	3.93
Granted	3,822	2.16
Exercised	(51)	1.72
Expired	(148)	12.04
Forfeited	(670)	2.21
Outstanding at March 31, 2024	21,658	3.62
Exercisable at March 31, 2024	9,631	$	5.03

The following is a summary of restricted stock unit activity under Lexicon’s stock-based compensation plans for the three months ended March 31, 2024:


	RSU’s	Weighted Average Grant Date Fair Value
	(in thousands)
Outstanding at December 31, 2023	5,015	$	2.78
Granted	8,270	2.15
Vested	(1,921)	3.12
Forfeited	(297)	2.32
Outstanding at March 31, 2024	11,067	$	2.26