aibioLexicon signs up to $100 million loan with Hercules Capital
Tickers LXRX
Lexicon signed a loan of up to $100 million from Hercules in three tranches. The first $55 million was funded at closing, and Hercules receives warrants at $1.59 a share.
Key facts
- Company
- Lexicon Pharmaceuticals, Inc. (NASDAQ: LXRX)
- News type
- Debt Financing
- Primary source
- Lexicon Pharmaceuticals, Inc. 8-K (2026-05-06)
The loan
Lexicon Pharmaceuticals, Inc. and its subsidiaries entered into a loan and security agreement on May 4, 2026 with Hercules Capital, Inc. and certain of its affiliates. The agreement provides up to $100 million of borrowing capacity in three tranches, each maturing in May 2030. The first $55 million tranche was funded at closing.
The second $20 million tranche can be drawn at Lexicon's option within 30 days after the Tranche 2 Milestones are achieved, and no later than June 15, 2028. The third $25 million tranche can be drawn at Lexicon's option, subject to Hercules's consent, before the interest-only period ends. The filing names no placement agent or advisor for the agreement, and it does not state how Lexicon will use the proceeds.
Interest, security and fees
The loans bear interest at a floating rate equal to the prime rate plus 3.10%, but not less than 9.85%. Payments are interest-only during an initial 18-month period. That period can be extended to 24 months if performance milestones are met, and to 30 months if further milestones are met. The loans are secured by a first lien on the assets of Lexicon and its subsidiaries.
The loans carry financial covenants, including a minimum cash covenant that begins on June 1, 2027 and moves to January 1, 2028 once the Tranche 2 Milestones are met, unless Lexicon meets specified market capitalization requirements. A minimum revenue covenant on net product sales applies after a draw of the second or third tranche. If an event of default occurs and continues, additional interest accrues and Hercules may declare all amounts due. Lexicon may prepay at its option at any time, and prepayments carry a fee of 3.0% of the principal repaid, on a declining scale. A final payment of 6.25% of the amount funded is due on prepayment or at maturity.
Lexicon also agreed to grant Hercules warrants for shares equal to 2% of the principal funded, at an exercise price of $1.59 a share. Warrants for 691,823 shares were granted when the first tranche was funded. Funding of the second and third tranches would bring warrants for another 251,572 and 314,465 shares. The warrants are exercisable for five years from issuance and can be exercised on a net cashless basis. The 8-K says they were issued without registration under Section 4(a)(2) of the Securities Act.
What the extensions depend on
The 8-K lists the first performance milestone as the ongoing SONATA-HCM Phase 3 clinical trial of sotagliflozin in hypertrophic cardiomyopathy. For the extension to 24 months, the trial must achieve its primary endpoint with an acceptable safety profile, and secondary data must support a U.S. filing for both obstructive and non-obstructive HCM. Lexicon must also meet specified financial requirements. The longer extension to 30 months requires FDA approval of sotagliflozin for both forms of HCM in a manner that supports Lexicon's planned commercialization strategy.
The trial is still ongoing, so the longer interest-only period and the second tranche rest on outcomes not yet reached. The interest-only period is followed by an amortization period through the maturity date.
The company and its filings
The 10-K, filed March 5, 2026, includes a risk factor noting that Invus, L.P. and its affiliates own about 48.3% of Lexicon's common stock. An affiliate also holds Series B Convertible Preferred Stock that would take Invus to about 50.6% on conversion. The 10-K says that gives Invus substantial control over the election of directors and over corporate policy, including any merger, and that Invus has designated three of the eight directors.
The loan adds a lender with a first lien on the company's assets.
Revenue, losses and cash
The 10-K reports revenue of $49.8 million for 2025, against $31.1 million for 2024. Research and development expense was $61.1 million in 2025, against $84.5 million in 2024. The net loss narrowed to $50.3 million from $200.4 million. Cash used in operations was $67.9 million in 2025, against $178.8 million in 2024.
Year-end 2024 cash and cash equivalents were $66.7 million, and short-term investments were $171.3 million. The floor on the interest rate means the cost of the debt cannot fall below 9.85%, even if prime rates fall.