Lexicon shares fall 20% after $94.6M discounted equity offering
Biotech prices shares at $1.30, 9.7% below market, adding roughly 39 million new shares to existing float
Lexicon Pharmaceuticals shares plunged 20% on Friday after the biotechnology company announced it would raise approximately $94.6 million through a heavily discounted public offering and concurrent private placement, diluting existing shareholders by roughly 11%.
The Woodlands, Texas-based company priced 32 million shares at $1.30 per share, representing a 9.7% discount to Thursday's closing price of $1.44. The offering, which includes an underwriter option to purchase an additional 4.8 million shares, is expected to close on or about February 2.
The concurrent private placement to an affiliate of Invus, L.P., Lexicon's largest stockholder, includes 22.4 million common shares plus Series B Convertible Preferred Stock that could convert into an additional 13.9 million common shares. In total, approximately 39 million new shares will be issued.
Lexicon intends to use the net proceeds to fund ongoing research and development of its drug candidates, including the Phase 3 SONATA-HCM trial for hypertrophic cardiomyopathy, with enrollment expected to conclude mid-2026 and topline data anticipated in early 2027. The company is also advancing Pilavapadin to Phase 3 for diabetic peripheral neuropathic pain and preparing for a potential ZYNQUISTA NDA resubmission in type 1 diabetes in 2026.
The equity raise comes as Lexicon faces significant profitability challenges. The company reported an Altman Z-Score of -9.8, indicating potential bankruptcy risk, while operating margins remain deeply negative at -85.9% over the trailing twelve months. Despite these challenges, Lexicon reported unaudited cash, investments, and restricted cash of $125.2 million as of year-end 2025, which the company projects will fund operations into 2027.
The stock has been under pressure throughout the week, declining 14.77% in the five days leading up to the offering announcement and falling 12.28% on January 28 alone. The broader market reaction reflects investor concerns about dilution at a time when the company is already burning through cash to advance its pipeline.
Analyst sentiment remains divided on the stock. The average twelve-month price target among six analysts stands at $3.23, suggesting potential upside of more than 120% from current levels, with targets ranging from a low of $1.00 to a high of $6.00, according to MarketBeat. Citi analyst Yigal Nochomovitz recently raised the firm's price target to $2.10 from $1.90, citing confidence in new milestones associated with LX9851 and its collaboration with Novo Nordisk. However, other analysts have downgraded the stock from a "Buy" to "Hold" due to what they termed "small weaknesses in the technical picture."
Lexicon's recent performance includes a 264.7% revenue growth over three years, though quarterly revenue growth year-over-year slowed to 7.1%. The company also received a $10 million milestone payment from Novo Nordisk in January 2026, providing some near-term cash inflow alongside the equity raise.
The substantial dilution from this offering will increase Lexicon's share count from its current 363.4 million outstanding shares, pressuring earnings per share as the company works to bring its pipeline candidates to market. Investors will be watching closely whether the additional capital accelerates development timelines enough to justify the dilution in the coming quarters.