UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC. 20549

SCHEDULE 14A

(Rule 14A-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

 

Filed by the Registrant x

Filed by a Party other than the Registrant

LEXICON PHARMACEUTICALS, INC.

2445 Technology Forest Blvd., 11th Floor

The Woodlands, Texas 77381

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

March 17, 202326, 2024

LEXICON PHARMACEUTICALS, INC. (CIK 0001062822)

2445 Technology Forest Blvd., 11th Floor

The Woodlands, Texas 77381

(281) 863-3000

PROXY STATEMENT

FOR

GENERAL INFORMATION

Purpose of this Proxy Statement

We have prepared this proxy statement to solicit proxies on behalf of our board of directors for use at our 20232024 annual meeting of stockholders and any adjournment or postponement of such meeting.

Notice of Internet Availability of Proxy Materials

As permitted by rules adopted by the Securities and Exchange Commission, we are providing access to our proxy materials over the Internet. Accordingly, beginning on March 17, 2023,26, 2024, we are mailing to our stockholders a notice containing instructions on how to access our proxy materials, including our proxy statement and annual report, and vote electronically over the Internet. The notice also provides instructions on how stockholders may request a paper copy of our proxy materials free of charge. Our proxy materials may be accessed by stockholders at any time after the date of mailing of the notice.

Date, Time and Place of Annual Meeting

We believe that the online format facilitates stockholder attendance and participation by Hilton The Woodlandsleveraging technology to allow us to communicate in a safe, effective and efficient manner with our stockholders. This online format also empowers stockholders around the world to participate at Hughes Landing, 1855 Hughes Landing Boulevard, The Woodlands, Texas 77380.no cost. We have designed the online format to enhance stockholder access and participation and protect stockholder rights by, among other things, providing stockholders multiple opportunities to submit questions for the annual meeting and offering live technical support for all stockholders attending the annual meeting online.

Matters to Be Considered at the Annual Meeting

At the annual meeting, our stockholders will be asked to consider and act upon the following matters:

Our board of directors does not intend to bring any other matters before the annual meeting and has not been informed that any other matters are to be presented by others. Our bylaws contain several requirements that must be satisfied in order for any of our stockholders to bring a proposal before one of our annual meetings, including a requirement of delivering proper advance notice to us. Stockholders are advised to review our bylaws if they intend to present a proposal at any of our annual meetings.

Shares Entitled to Vote

You are entitled to vote at the annual meeting and at any postponement or adjournment thereof if you were the record owner of shares of our common stock or our preferred stock designated as Series A Convertible Preferred Stock (referred to herein as “preferred stock”) as of the close of business on February 27, 2023,March 18, 2024, the record date for the annual meeting established by our board of directors. Holders of our common stock and our preferred stock are collectively referred to herein as our “stockholders.” On the record date, 188,725,743246,236,753 shares of our common stock were outstanding.outstanding and 2,304,147 shares of our preferred stock were outstanding, representing 115,207,350 shares of our common stock on an as-converted basis. If you

Quorum

We must have a quorum to conduct any business at the annual meeting. This means that at least a majority of our outstanding shares eligible to vote on each proposal at the annual meeting must be represented at the annual meeting with respect to such proposal, either in person during the annual meeting or by proxy. Cast abstentions are counted for purposes of determining whether a quorum is present. In addition, shares held by intermediaries that are voted for at least one matter at the annual meeting will be counted as being present for purposes of determining a quorum for all matters. This is true even if the beneficial owner’s discretion has been withheld for voting on some or all other matters (commonly referred to as a “broker non-vote”).

Vote Necessary to Approve Proposals

Our Class IIIII directors will be elected by a plurality vote.vote of holders of our common stock and our preferred stock. As a result, the three persons receiving the greatest number of votes will be elected to serve as our Class IIIII directors. Withholding authority to vote for a director nominee will not affect the outcome of the election of directors.

The ratification and approval of the amendment to our 2017 Equity Incentive PlanSixth Amended and Restated Certificate of Incorporation will require the affirmative vote of thea majority of the votes cast by holders of our common stock (but not preferred stock) with respect to such matter. Any abstention from voting or broker non-vote with respect to such matter will not count as a vote for or against the amendment and will not affect the outcome of the proposal.

The approval on an advisory basis of the compensation paid to our named executive officers will require the affirmative vote of thea majority of the votes cast by holders of our common stock and our preferred stock with respect to such matter. Any abstention from voting or broker non-vote with respect to such matter will not count as a vote for or against the compensation paid to our named executive officers and will not affect the outcome of the advisory vote.

The approval on an advisory basis of the frequency of future advisory votes on the compensation paid to our named executive officers will be determined by which option of once every one, two or three years receives the greatest number of votes cast with respect to such matter. Any abstention from voting or broker non-vote with respect to such matter will not count as a vote for any of the tree options for the frequency of future advisory votes on the compensation paid to our named executive officers and will not affect the outcome of the advisory vote.

Any other business that may properly come before the annual meeting for a vote will require the affirmative vote of a majority of the votes cast by holders of our common stock and preferred stock with respect to such matter unless a greater vote is required by law or our charter or bylaws. Any abstention or broker non-vote with respect to any such matter will not count as a vote for or against the proposal and will not affect the outcome of the proposal.

How to Vote Your Shares

You may receive more than one proxy depending on how you hold your shares. If you hold your shares through an intermediary, such as a broker or bank, you may receive materials from them asking you how you want your shares to be voted at the annual meeting.

How to Vote by Proxy

How Your Proxy Will Be Voted

Giving us your proxy means that you are authorizing us to vote your shares at the annual meeting and at any adjournment or postponement thereof in the manner you direct. You may vote for our nominees for election as Class IIIII directors, or withhold your vote for any one or more of those nominees. YouHolders of our common stock may vote for or against the ratification and approval of the amendment to our 2017 Equity Incentive Plan, for or against the ratificationSixth Amended and approvalRestated Certificate of the amendment toIncorporation and holders of our 2017 Non-Employee Directors’ Equity Incentive Plan,common stock and preferred stock may vote for or against the approval on an advisory basis of the compensation paid to our named executive officers whether to hold future advisory votes on the compensation paid to our named executive officers once every one, two or three years and for or against the ratification and approval of the appointment of Ernst & Young LLP as our independent auditors for the year ending December 31, 2023,2024, or abstain from voting on those proposals.

If any of our nominees for election as Class IIIII directors become unavailable for any reason before the election, we may reduce the number of directors serving on our board of directors, or our board of directors may designate substitute nominees, as necessary. We have no reason to believe that any of our nominees for election as Class IIIII directors will be unavailable. If our board of directors designates any substitute nominees, the persons receiving your proxy will vote your shares for such substitute(s) if they are instructed to do so by our board of directors or, in the absence of any such instructions, in accordance with their own best judgment.

If you vote by proxy but do not specify how you want your shares voted, your shares will be voted in favor of our nominees for election as Class IIIII directors, in favor of the ratification and approval of the amendmentour Sixth Amended and Restated Certificate of Incorporation (with respect to our 2017 Equity Incentive Plan, in favor of the ratification and approval of the amendmentany shares entitled to our 2017 Non-Employee Directors’ Equity Incentive Plan,vote thereon), in favor of the approval on an advisory basis of the compensation paid to our named executive officers to hold future advisory votes on the compensation paid to our named executive officers every year and in favor of the ratification and approval of the appointment of Ernst & Young LLP as our independent auditors for the year ending December 31, 2023.2024.

If you vote by proxy and any additional business properly comes before the annual meeting, the persons receiving your proxy will vote your shares on those matters as instructed by our board of directors or, in the absence of any such instructions, in accordance with their own best judgment. As of the date of this proxy statement, we are not aware of any other matter to be raised at the annual meeting.

How to Revoke Your Proxy

You may revoke your proxy at any time before your shares are voted by providing our corporate secretary with either a new proxy with a later date or a written notice of your desire to revoke your proxy at the following address:

Attention: Corporate Secretary

You may also revoke your proxy at any time prior to your shares having been voted by attending the annual meeting in persononline and notifying the inspector of election of your desire to revoke your proxy. Your proxy will not automatically be revoked merely because you attend the annual meeting.meeting online.

Inspector of Election

Broadridge Financial Solutions, Inc. will count votes and provide a representative who will serve as an inspector of election for the annual meeting.

List of Stockholders Entitled to Vote

A list of our stockholders entitled to vote at the annual meeting will be available online for inspection during the annual meeting. The stockholder list will also be available for inspection for ten days prior to the annual meeting at our corporate

Solicitation of Proxies and Expenses

We are asking for your proxy on behalf of our board of directors. We will bear the entire cost of preparing, printing and soliciting proxies. We will send notices of Internet availability of proxy materials and, if requested, paper copies of our proxy materials to all of our stockholders of record as of the record date and to all intermediaries, such as brokers and banks, that held any of our shares on that date on behalf of others. These intermediaries will then forward the notices and, if requested, paper copies of our proxy materials to the beneficial owners of our shares, and we will reimburse them for their reasonable out-of-pocket expenses for forwarding such materials. Our directors, officers and employees may solicit proxies by mail, in person or by telephone or other electronic communication. Our directors, officers and employees will not receive additional compensation for their solicitation efforts, but they will be reimbursed for any out-of-pocket expenses they incur. No solicitation of proxies will be made by specially engaged employees or paid solicitors.

Householding

As permitted by rules adopted by the Securities and Exchange Commission, we are delivering a single notice of Internet availability of proxy materials, annual report and proxy statement, as applicable, to any household at which two or more stockholders reside if we believe the stockholders are members of the same family, unless otherwise instructed by one or more of the stockholders. We will promptly deliver separate copies of these documents upon the written or oral request of any stockholder at a shared address to which a single copy of the documents were delivered.

If your household received a single set of any of these documents, but you would prefer to receive your own copy, or if you share an address with another stockholder and together both of you would like to receive only a single set of these documents, please follow these instructions:

Appraisal rights are not available to our stockholders in connection with the matters to be considered at the annual meeting.

PROPOSAL NUMBER 1:

Our board of directors, which currently has nineeight members, is divided or “classified” into three classes. Directors in each class are elected to hold office for a term ending on the date of the third annual meeting following the annual meeting at which they were elected. The current term of our Class IIIII directors will expire at this annual meeting. The current terms of our Class IIII and Class III directors will expire at our 20242025 and 20252026 annual meetings of stockholders, respectively.

The board of directors has nominated and urges you to vote for the election of the individuals identified below, who have been nominated to serve as Class IIIII directors until our 20262027 annual meeting of stockholders or until their successors are duly elected and qualified. Each of these individuals is a member of our present board of directors. Your signed proxy will be voted for the nominees named below unless you specifically indicate on the proxy that you are withholding your vote.

Nominees for Class IIIII Directors

Mr. SobeckiAmouyal provides us with the benefit of his diversifiedbroad business and financial experience, including a particularas well as his expertise in riskcompensation and performance management and the assessment and business strategyprioritization of research and development and relationships in the financial communityprojects, gained in his active participation in the identification, selection, negotiation and oversight of investments by The Invus Group and his service as a director of public and private companies.consulting experience with The Boston Consulting Group. Mr. SobeckiAmouyal is a designee of Invus, L.P. and its affiliates pursuant to our stockholders’ agreement with Invus described under the heading “Transactions with Related Persons - Arrangements with Invus.”

Dr. SwainMs. Sullivan provides us with the benefit of her extensive medicalexperience in a wide variety of disciplines within the pharmaceutical industry, including market access, marketing, brand management, operations, research and scientific research experience gained in her more than 30 years as a practicing physiciandevelopment, capital allocation, partnerships and research scientist,strategic collaborations, corporate governance, corporate finance, and mergers and acquisitions, as well as her organizational and management skills developed in her numerous leadership positions with a variety of prominent research and academic institutions.pharmaceutical companies.

The Board of Directors recommends that stockholders vote “FOR” the foregoing nominees for election as Class IIIII directors.

Current and Continuing Directors

Information regarding the business experience of Dr. Barker, Mr. SobeckiAmouyal, Mr. Coats and Dr. SwainMs. Sullivan is set forth above under the heading “- Nominees for Class IIIII Directors.”

Mr. Debbane provides us with the benefit of his extensive financial markets and investment expertise gained in more than 30 years of leading the identification, selection, negotiation and oversight of a wide range of investments in his role as president and chief executive officer of The Invus Group, as well as his background in strategic consulting across a broad range of industries developed while with The Boston Consulting Group. Mr. Debbane is a designee of Invus, L.P. and its affiliates pursuant to our stockholders’ agreement with Invus described under the heading “Transactions with Related Persons - Arrangements with Invus.”

Mr. CoatsDr. Barker provides us with the benefit of his extensive experience in a wide variety of disciplines within the pharmaceutical industry, including the development and commercialization of pharmaceutical products, the identification,

Dr. Lefkowitz provides us with the benefit of his medical expertise and his extensive experience in biological and pharmaceutical research, particularly with respect to the identification of drug targets and preclinical evaluation of drug candidates, gained in more than 40 years as a member of the faculty at Duke University Medical Center.

Dr. NiesSwain provides us with the benefit of hisher extensive clinical developmentmedical and scientific research experience particularly with respect to the design, managementgained in her more than 30 years as a practicing physician and reporting of clinical trials,research scientist, as well as hisher organizational and management skills developed while serving in his variousher numerous leadership positions with Merck and the University of Colorado Health Sciences Center.

PROPOSAL NUMBER 2:

RATIFICATION AND APPROVAL OF AMENDMENT TO 2017 EQUITY INCENTIVE PLANSIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

We use stock options, restricted stock unitsOur board of directors believes that it is advisable to ratify and other stock awards as a partapprove our Sixth Amended and Restated Certificate of our overall compensation program in order to alignIncorporation increasing the long-term interestsnumber of our employees with those of our stockholders. These awards are made principally under our 2017 Equity Incentive Plan, the purpose of which is to secure and retain the services of employees, directors and consultants, and to provide them with incentives to exert maximum efforts for our success by giving them the opportunity through the granting of stock options, restricted stock units and other stock awards to benefit from increases in the valueauthorized shares of our common stock from 300,000,000 shares to 450,000,000 shares. As of March 18, 2024, of the 300,000,000 shares of our common stock authorized by our Fifth Amended and Restated Certificate of Incorporation, 246,236,753 shares were issued and outstanding, 1,528,008 shares were issued and held in treasury, 45,794,531 shares were reserved for issuance under our equity incentive plans and 828,625 shares were reserved for issuance under outstanding warrants. After the proposed increase in the number of authorized shares of our common stock to 450,000,000 shares and the automatic conversion of our preferred stock into 115,207,350 shares of common stock immediately thereafter, 40,404,733 shares of our common stock would be authorized but not issued or reserved for issuance.

Our board of directors believes that the increase in the number of authorized shares of our common stock will provide us with greater flexibility in effecting future acquisitions and financings without the delay and expense associated with obtaining the approval or consent of our stockholders at the same time the shares are needed. We expect that our future growth may require the use of our common stock from time to time either as consideration for acquisitions or as part of a financing for us either through the use of our common stock or securities convertible into our common stock. Such shares may be issued in

Each additional authorized share of common stock would have the same rights and privileges as incentiveeach share of currently authorized common stock. Under our Fifth Amended and Restated Certificate of Incorporation, holders of 20% or more of our issued and outstanding common stock, options. Weincluding Invus, L.P. and its affiliates based on their current ownership interest in our common stock, have preemptive rights to purchase additional shares of our common stock. Such preemptive rights would not be affected or modified by the Sixth Amended and Restated Certificate of Incorporation.

Accordingly, we are asking that stockholdersholders of our common stock ratify and approve an amendmentthe Sixth Amended and Restated Certificate of Incorporation, the complete text of which is set forth in Appendix A to the 2017 Equity Incentive Plan increasing the total numberthis proxy statement. Invus, L.P. and its affiliates, as current owners of shares that may be issuedapproximately 49.95% of our outstanding common stock, have agreed to vote in favor of this proposal pursuant to stock awards granted under the plana letter agreement by 25,000,000 shares to 55,000,000 shares, alland among them and our company. The Sixth Amended and Restated Certificate of which may be granted as incentive stock options, with the objective of maintaining the availability to our board of directors of this portion of our overall compensation program. The proposed amendment to the planIncorporation was approved by our board of directors, subject to stockholder approval, on February 9, 2023.March 8, 2024.

The termsIf the Sixth Amended and Restated Certificate of Incorporation is approved by the 2017 Equity Incentive Plan are summarized belowrequisite vote of holders of our common stock, we will file the Sixth Amended and Restated Certificate of Incorporation with the complete textDelaware Secretary of State as soon as reasonably practicable after the plan is set forth in Appendix A to this proxy statement, in each case reflecting the amendment described above.annual meeting and it will become effective upon such filing.

The Board of Directors recommends that stockholders vote “FOR” the ratification and approval of the amendment to our 2017 Equity Incentive Plan.Sixth Amended and Restated Certificate of Incorporation.

PROPOSAL NUMBER 3:

ADVISORY VOTE TO APPROVE COMPENSATION PAID TO NAMED EXECUTIVE OFFICERS

Section 14A of the Securities and Exchange Act of 1934, as amended, requires that we provide our stockholders with an opportunity to vote, on a non-binding and advisory basis, on the compensation of our named executive officers, as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission.

As described below under “Executive and Director Compensation - Compensation Discussion and Analysis,” we have developed a compensation policy that is designed to attract and retain key executives responsible for our success and motivate management to enhance long-term stockholder value. We believe our compensation policy strikes an appropriate balance between the implementation of responsible, measured compensation practices and the effective provision of incentives for our named executive officers to exert maximum efforts for our success.

Accordingly, we ask our stockholders to vote on the following resolution at the annual meeting:

As this vote is advisory, it will not be binding upon the board of directors or the compensation committee and neither the board of directors nor the compensation committee will be required to take any action as a result of the outcome of this vote. However, the compensation committee will carefully consider the outcome of this vote when considering future executive compensation policies.

The Board of Directors recommends that stockholders vote “FOR” the approval, on an advisory basis, of the compensation paid to our named executive officers, as disclosed in this proxy statement.

        

(1)    “Audit fees” include professional services rendered for (i) the audit of our internal control over financial reporting, as required by the Sarbanes-Oxley Act of 2002, for the fiscal years ended December 31, 20212022 and 2022,2023, (ii) the audit of our annual financial statements for the fiscal years ended December 31, 20212022 and 2022,2023, (iii) the reviews of the financial statements included in our quarterly reports on Form 10-Q for such years and (iv) the issuance of consents and other matters relating to registration statements filed by us.

(2)    “Audit-related fees” include assurance or related services reasonably related to our audit for the fiscal years ended December 31, 20212022 and 2022.2023. These fees related to the audit of the financial statements of our 401(k) plan.

The audit committee reviewed and approved all the fees described above. As part of its duties, the audit committee has determined that the provision by Ernst & Young LLP of the services described above is compatible with maintaining the auditors’ independence.

Audit Committee Pre-Approval Policies and Procedures

The audit committee has adopted policies and procedures requiring the pre-approval of all audit and non-audit services rendered by our independent auditors, either as part of the audit committee’s approval of the scope of the engagement of the independent auditors or on a case-by-case basis before the independent auditors are engaged to provide each service. The audit committee’s pre-approval authority may be delegated to one or more of its members, but any pre-approval decision must be reported to the full audit committee at its next regularly scheduled meeting.

Audit Committee Report

The role of the audit committee is to assist the board of directors in its oversight of our financial reporting process. The audit committee reviews our internal accounting procedures and consults with, and reviews the services provided by, our independent auditors.

The management of our company is responsible for the preparation, presentation and integrity of our financial statements, our accounting and financial reporting principles and internal controls and procedures designed to assure compliance with the accounting standards and applicable laws and regulations. Our independent auditors are responsible for auditing our financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

Based upon the review and discussions described in this report, and subject to the limitations on the role and responsibilities of the audit committee referred to in the audit committee charter, the audit committee recommended to the board of directors that the audited financial statements be included in our annual report on Form 10-K for the year ended December 31, 2022.

Audit Committee

The foregoing audit committee report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate this audit committee report by reference, and shall not otherwise be deemed filed under such acts.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission computing the number of shares beneficially owned by a person and the percentage ownership of that person. Shares of common stock underlying stock options held by that person that are currently exercisable or exercisable within 60 days of February 27, 2023March 18, 2024 and restricted stock units held by that person that are scheduled to vest within 60 days of February 27, 2023March 18, 2024 are considered outstanding. These shares, however, are not considered outstanding when computing the percentage ownership of each other person.

Independence of the Board of Directors

After reviewing all relevant transactions and relationships involving each member of the board of directors (and his or her family), the board of directors has affirmatively determined that Raymond Debbane, Philippe J. Amouyal, Samuel L. Barker, Ph.D., Robert J. Lefkowitz, M.D., Alan S. Nies, M.D., Frank P. Palantoni, Christopher J. Sobecki, Diane E. Sullivan and Judith L. Swain, M.D., which members constitute a majority of the board of directors, are “independent” in accordance with the applicable listing standards of The Nasdaq Stock Market, Inc. In making such determinations, the board of directors considered the percentage of our outstanding common stock owned by Invus and its affiliates (which percentage will remain approximately the same following the conversion of our preferred stock) and the effect of such ownership on the independence of Mr. Debbane, Mr. Amouyal and Mr. Sobecki.

Board Committees

The current members of our audit committee are Samuel L. Barker, Ph.D. (chair), Frank P. PalantoniDiane E. Sullivan and Judith L. Swain, M.D. The board of directors, in its business judgment, has determined that Dr. Barker, Mr. PalantoniMs. Sullivan and Dr. Swain are “independent” in accordance with the applicable listing standards of The Nasdaq Stock Market, Inc. The board of directors, in its business judgment, has also determined that Samuel L. Barker, Ph.D. is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K.

The compensation committee may delegate any of its authority to subcommittees consisting of one or more compensation committee members, with all subcommittee decisions being presented to the full compensation committee at its next scheduled meeting. The compensation committee did not delegate any such authority with respect to 20222023 compensation matters.

The compensation committee may retain compensation consultants, legal counsel or other advisors when it deems appropriate to assist in its evaluation of executive compensation. The compensation committee has engaged Pearl Meyer & Partners, LLC as independent compensation consultants as described under the heading “Executive and Director Compensation - Compensation Discussion and Analysis.”

The compensation committee meets in connection with most regularly scheduled meetings of the board of directors, and holds meetings after the commencement of each year specifically devoted to evaluating corporate and individual performance during the prior year and making compensation decisions on such basis. In preparation for such decisions, our chief executive officer generally reviews the performance of officers other than himself and, in consultation with the compensation committee and at its direction, makes certain recommendations to the compensation committee relating to their compensation. The compensation committee reviews such recommendations and makes changes to such recommendations as it deems appropriate. All executive compensation determinations are made by the compensation committee independently from management.

The current members of our compensation committee are Mr. Palantoni (chair), Philippe J. Amouyal and(chair), Samuel L. Barker, Ph.D. and Judith L. Swain, M.D. The board of directors, in its business judgment, has determined that Mr. Palantoni, Mr. Amouyal, Dr. Barker and Dr. BarkerSwain are “independent” in accordance with the applicable listing standards of The Nasdaq Stock Market, Inc. In making such determinations, the board of directors considered the matters relating to Mr. Amouyal described under the heading “Corporate Governance - Independence of the Board of Directors.”

The corporate governance committee has not established any specific minimum qualifications for membership on our board of directors. Rather, the committee will generally consider all relevant factors, which may include independence, experience, diversity, leadership qualities and strength of character. As the corporate governance committee does not uniquely consider diversity relative to the other factors, the committee has not established a policy with regard to the consideration of diversity in identifying potential director candidates. The corporate governance committee uses its available network of contacts when compiling a list of potential director candidates and may also engage outside consultants when appropriate. The committee also considers potential director candidates recommended by stockholders and other parties and all potential director candidates are evaluated based on the above criteria. Because the corporate governance committee makes no distinction in its evaluation of candidates based on whether such candidates are recommended by stockholders or other parties, no formal policy or procedure has been established for the consideration of director candidates recommended by stockholders.

Any stockholder wishing to propose a potential director candidate may submit a recommendation in writing within the time frame specified in our bylaws. All such communications should be sent to 2445 Technology Forest Blvd., 11th Floor, The Woodlands, Texas 77381, Attn: Corporate Governance Committee. Submissions should include the full name of the proposed candidate and a detailed description of the candidate’s qualifications, business experience and other relevant biographical information.

The current members of our corporate governance committee are Raymond Debbane (chair), Robert J. Lefkowitz, M.D. and Judith L. Swain, M.D. The board of directors, in its business judgment, has determined that Mr. Debbane, Dr. Lefkowitz and Dr. Swain are “independent” in accordance with the applicable listing standards of The Nasdaq Stock Market, Inc. In making such determinations, the board of directors considered the matters relating to Mr. Debbane described under the heading “Corporate Governance - Independence of the Board of Directors.”

Board Diversity

Diversity is among the relevant factors considered by our board of directors and corporate governance committee for membership on our board of directors. The table below provides certain highlights relating the composition and diversity of our board of directors. Each of the categories listed in the below table has the meaning used in Nasdaq Listing Rule 5605(f).

Board Leadership Structure and Role in Risk Oversight

The current leadership structure of our board of directors reflects a separation of the roles of chairman and principal executive officer. This leadership structure is intended to provide our board of directors with an appropriate level of independence from management and encourage a high degree of autonomy within our board of directors.

Our board of directors administers its risk oversight responsibilities by evaluating the material risks, including operational risks and liquidity risks, facing our company or inherent in our corporate strategy. This is accomplished through regular discussions with management and by reference to the independent understanding and knowledge of many such risks possessed by members of our board of directors. Our board of directors regularly reviews the viability and prudence of our corporate strategy in light of the evolving nature of such risks and makes adjustments to that strategy when appropriate. Our board of directors oversees management’s implementation of our corporate strategy, remains alert for excessive risk-taking in such implementation and provides timely input to management regarding any critical risk issues. Our board of directors receives regular presentations and reports from management on risks relating to cybersecurity, compliance and other operational aspects of our business and receives prompt and timely information regarding any specific incident posing a significant risk. The efforts of our board of directors to oversee any risks relating to our financial reporting or internal accounting procedures are supplemented by the regular interactions of our audit committee with the individuals with day-to-day responsibilities for such functions.

Board and Committee Meetings and Attendance in 20222023

In 2022,2023, the board of directors met eightsix times and took certain additional actions by unanimous written consent, the audit committee met fivesix times, the compensation committee met four times and took certain additional actions by unanimous written consent and the corporate governance committee met two times. During 2022,2023, none of our incumbent directors attended fewer than 75 percent of the aggregate number of meetings of the board of directors and committees during the period served.

It is our policy to encourage the members of our board of directors to attend all annual meetings of stockholders. AllEight of the nine individuals who were members of our board of directors at such time attended our 20222023 annual meeting of stockholders.

Code of Business Conduct and Ethics

Hedging Policies and Practices

We have adopted a policy that prohibits our employees, officers and directors, or any of their designees, from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds), or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of any of our securities. Such policy also provides that such individuals should not engage in the trading of options to purchase or sell our securities.

Corporate Governance Guidelines

Stockholder Communications with the Board of Directors

We believe that our stockholders are currently provided a reasonable means to communicate with our board of directors and individual directors. As a result, our board of directors has not established a formal process for stockholders to send communications to the board of directors or individual directors. However, the corporate governance committee will consider, from time to time, whether adoption of a formal process for such stockholder communications has become necessary

During 2022, Frank P. Palantoni,2023, current directors Philippe J. Amouyal and Samuel L. Barker, Ph.D. and former directors Frank P. Palantoni and Alan S. Nies, M.D. served as members of the compensation committee of our board of directors. Mr. Amouyal is a designee of Invus pursuant to our stockholders’ agreement with Invus, L.P. described under the heading “Transactions with Related Persons - Arrangements with Invus.” During 2022,2023, none of our executive officers served as a member of the board of directors or compensation committee of another entity, one of whose executive officers served as a member of our board of directors or compensation committee.

Arrangements with Invus

In June 2007, we entered into a securities purchase agreement with Invus, L.P., under which Invus, L.P. made an initial investment in our common stock in August 2007. Invus, L.P. and its affiliates, which we collectively refer to as Invus, have subsequently made additional investments in our common stock and currently own approximately 50.5%49.95% of our outstanding common stock.stock (which percentage will remain approximately the same following the conversion of our preferred stock).

Invus also has the right to require proportionate representation of Invus-appointed directors on the audit, compensation and corporate governance committees of our board of directors, subject to certain restrictions. Invus-designated directors currently serve as one of the threetwo members of each of the compensation committee and one of the three members of the corporate governance committee of our board of directors. No Invus-designated directors currently serve on the audit committee of our board of directors.

The provisions of the stockholders’ agreement relating to Invus’ rights to designate members of our board of directors and its audit, compensation and corporate governance committees will terminate if the percentage of all the outstanding shares of our common stock owned by Invus and its affiliates falls below 10%. Invus also has the right to terminate these provisions at any time in its discretion.

Related Party Transaction Policies

We have adopted written policies and procedures for the review, approval and ratification of interested transactions with related parties. Subject to certain exceptions provided in Item 404(a) of Regulation S-K, an “interested transaction” means any transaction, arrangement or relationship in which we are or will be a participant and the amount involved will or may be expected to exceed $120,000 in any calendar year, and in which any related party has or will have a direct or indirect material interest. A “related party” means (a) any executive officer, director, nominee for election as a director or any person beneficially owning five percent or more of our common stock (assuming conversion of our preferred stock) and (b) any immediate family member of such parties.

Compensation Discussion and Analysis

We have developed a compensation policy that is designed to attract and retain key executives responsible for our success and motivate management to enhance long-term stockholder value. All compensation decisions are made by our compensation committee pursuant to authority delegated by our board of directors. The annual compensation package for executive and other officers typically consists primarily of three elements:

We generally seek to set targeted total cash compensation, consisting of base salaries and annual cash bonus award targets, and total direct compensation, consisting of targeted total cash compensation and long-term stock-based incentive awards, at or near the median of a peer group of biopharmaceutical companies if such compensation level is justified by company performance, individual performance and prevailing financial conditions.

In determining peer group compensation, we use available data from a comprehensive survey of the compensation practices of several hundred companies in the biopharmaceutical industry. We expand on this survey data with reviews of the publicly-disclosed compensation practices of a group of biopharmaceutical companies selected for comparison purposes based on one or more factors, including market capitalization, revenues and stage of development.

In making compensation determinations and reviewing comparative data, the compensation committee reviews total direct compensation in its totality, assigning dollar values to each of the elements of such compensation, including base salary, annual cash bonus award targets and long-term stock-based incentive awards. The committee generally allocates a greater percentage of total direct compensation to long-term stock-based incentive awards in acknowledgment of the unique challenges present in the biopharmaceutical industry and in order to reinforce the alignment of interests between our executive and other officers and our stockholders.

In determining the level and composition of compensation of each of our executive and other officers, we take into account various qualitative and quantitative indicators of corporate and individual performance. In evaluating the performance of management, the compensation committee takes into consideration such factors as the commercial performance of our approved drug products, our efforts and preparations for regulatory approval and commercial launch of our drug candidates, the progress exhibited by our drug candidates in human clinical trials, the number and quality of drug candidates in clinical trials, the number and quality of preclinical drug candidates, the value and scope of strategic collaborations and alliances with leading pharmaceutical companies, and the ability to otherwise finance our operations from external sources. In addition, the compensation committee recognizes performance and achievements that are more difficult to quantify, such as the successful supervision of major corporate projects and demonstrated leadership ability.

The compensation committee generally makes executive compensation determinations in February of each year, taking into account both company and individual performance over the preceding year, as well as prevailing financial conditions. The compensation committee meets at least once in advance of the meeting in which executive compensation determinations are actually made to discuss considerations relating to those determinations.

The compensation committee may also retain compensation consultants, legal counsel or other advisors when it deems appropriate to assist in its evaluation of executive or director compensation. In February 2019, the compensation committee engaged Pearl Meyer & Partners, LLC as an independent compensation consultant to assess the market competitiveness of our non-employee director compensation and provide the compensation committee with recommendations based on such assessment. At the compensation committee's request, Pearl Meyer produced and reviewed market non-employee director compensation data, participated in certain compensation committee meetings and prepared an assessment of and recommendations with respect to our non-employee director compensation. In February 2019, the committee assessed the independence of Pearl Meyer and concluded that no conflict of interest existed that would prevent Pearl Meyer from providing the services performed for the compensation committee under such engagement. In November 2020 and July 2022, the compensation committee engaged Pearl Meyer & Partners, LLC as an independent compensation consultant to assess the market competitiveness of our executive compensation and provide the compensation committee with recommendations based on such assessment. At the compensation committee's request, Pearl Meyer produced and reviewed market executive compensation data, participated in certain compensation committee meetings and prepared an assessment of and recommendations with respect to our executive compensation. In November 2020 and July 2022, the committee assessed the independence of Pearl Meyer and concluded that no conflict of interest existed that would prevent Pearl Meyer from providing the services performed for the compensation committee under such engagement. In August 2023, the compensation committee engaged Pearl Meyer as an independent compensation consultant to assess the market competitiveness of our non-employee director compensation and provide the compensation committee with recommendations based on such assessment. At the compensation committee's request, Pearl Meyer produced and reviewed market non-employee director compensation data, participated in certain compensation committee meetings and prepared an assessment of and recommendations with respect to our non-employee director compensation. In August 2023, the committee assessed the independence of Pearl Meyer and concluded that no conflict of interest existed that would prevent Pearl Meyer from providing the services performed for the compensation committee under such engagement. The compensation committee did not engage any other consultants with respect to 2020, 2021, 2022 or 20222023 compensation matters.

We received a favorable advisory vote on the compensation of our named executive officers at our 20222023 annual meeting of stockholders, with over 88%81% of the votes cast with respect to such matter voting in favor of such compensation. The compensation committee believes those voting results affirm our stockholders’ support of our approach to executive compensation and did not make any material changes to its approach. The compensation committee will continue to consider the outcome of our advisory votes to approve executive compensation when making future decisions with respect to the compensation paid to our named executive officers.

In February 2021, the compensation committee made determinations regarding 2020 cash bonus awards and 2021 base salaries, bonus targets and long-term stock-based incentive awards, taking into account the following factors in its evaluation of corporate performance in 2020:

The committee’s compensation determinations in February 2021 reflected its assessment that we largely achieved our objectives relating to XERMELO (telotristat ethyl), sotagliflozin, LX9211, our other drug development programs and our financial performance. Taking into account the balance of factors described above, it was the committee’s assessment that our overall corporate objectives were largely achieved.

For named executive officers other than Mr. Coats, the compensation committee also took into account individual goals, which consisted principally of the expected individual contributions of each named executive officer towards the achievement of the year’s corporate goals, together with Mr. Coats’ and the committee’s independent assessment of each named executive officer’s overall performance and contributions to the company during the year, in the course of making subjective judgments about individual performance in connection with compensation determinations. Mr. Coats had no individual goals for 2020 apart from the corporate goals.

The committee’s determinations for Mr. Coats were based entirely upon its determination of achievement of the year’s corporate goals, together with the compensation committee’s assessment of his strategic and operational leadership. For other named executive officers, the compensation committee based its determinations principally upon its determination of achievement of the year’s corporate goals, but also took into account, to a lesser extent, each named executive officer’s individual goals. In the case of Mr. Wade, the compensation committee took into account his contributions toward our financial management, our debt reduction and capital raising efforts, the successful operation of our commercial financial systems and our business development and alliance management activities, as well as his strategic and operational leadership. In the case of Mr. Crum, the compensation committee took into account his contributions toward our legal and compliance oversight and our debt reduction and capital raising efforts, as well as his strategic and operational leadership. In the case of Dr. Kassler-Taub,Main, the compensation committee took into account his contributions toward the transferour commercial supply of the sotagliflozin program from SanofiXERMELO and the regulatory supportclinical and preclinical supply of sotagliflozin in heart failure,our development programs, as well as his strategic and operational leadership.

In February 2022, the compensation committee made determinations regarding 2021 cash bonus awards and 2022 base salaries, bonus targets and long-term stock-based incentive awards, taking into account the following factors in its evaluation of corporate performance in 2021:

The committee’s compensation determinations in February 2022 reflected its assessment that we significantly achieved our objectives relating to sotagliflozin,INPEFA, LX9211, our other drug development programs and our financial performance. Taking

For named executive officers other than Mr. Coats, the compensation committee also took into account individual goals, which consisted principally of the expected individual contributions of each named executive officer towards the achievement of the year’s corporate goals, together with Mr. Coats’ and the committee’s independent assessment of each named executive officer’s overall performance and contributions to the company during the year, in the course of making subjective judgments about individual performance in connection with compensation determinations. Mr. Coats had no individual goals for 2021 apart from the corporate goals.

The committee’s determinations for Mr. Coats were based entirely upon its determination of achievement of the year’s corporate goals, together with the compensation committee’s assessment of his strategic and operational leadership. For other named executive officers, the compensation committee based its determinations principally upon its determination of achievement of the year’s corporate goals, but also took into account, to a lesser extent, each named executive officer’s individual goals. In the case of Mr. Wade, the compensation committee took into account his contributions toward our financial management, our capital raising efforts, the successful operation of our financial systems and our business development and alliance management activities, as well as his strategic and operational leadership. In the case of Mr. Crum, the compensation committee took into account his contributions toward our legal and compliance oversight and our capital raising efforts, as well as his strategic and operational leadership. In the case of Dr. Granowitz, the compensation committee took into account his contributions toward the medical support of sotagliflozinINPEFA and our other drug development programs, as well as his strategic and operational leadership. In the case of Dr. Kassler-Taub,Main, the compensation committee took into account his contributions toward our submission of a new drug application for sotagliflozin for the treatment of heart failure and regulatory support of the clinical and preclinical supply of our development programs and the progress of LX9211 in neuropathic pain,our drug discovery programs, as well as his strategic and operational leadership.

In February 2023, the compensation committee made determinations regarding 2022 cash bonus awards and 2023 base salaries, bonus targets and long-term stock-based incentive awards, taking into account the following factors in its evaluation of corporate performance in 2022:

The committee’s compensation determinations in February 2023 reflected its assessment that we achieved our objectives relating to sotagliflozin,INPEFA, LX9211, our other drug development programs and our financial performance. Taking into account the balance of factors described above, it was the committee’s assessment that our overall corporate objectives were achieved.

For named executive officers other than Mr. Coats, the compensation committee also took into account individual goals, which consisted principally of the expected individual contributions of each named executive officer towards the achievement of the year’s corporate goals, together with Mr. Coats’ and the committee’s independent assessment of each named executive officer’s overall performance and contributions to the company during the year, in the course of making subjective judgments about individual performance in connection with compensation determinations. Mr. Coats had no individual goals for 2022 apart from the corporate goals.

The committee’s determinations for Mr. Coats were based entirely upon its determination of achievement of the year’s corporate goals, together with the compensation committee’s assessment of his strategic and operational leadership. For other named executive officers, the compensation committee based its determinations principally upon its determination of achievement of the year’s corporate goals, but also took into account, to a lesser extent, each named executive officer’s

Base salary of executive and other officers is established through negotiation between the company and the officer at the time he or she is hired, and then subsequently adjusted when the officer’s base compensation is subject to review or reconsideration. While we have entered into employment agreements with certain of our executive officers, these agreements provide that base salaries after the initial year will be reviewed and determined by the compensation committee. When establishing base salary levels for executive and other officers, the compensation committee, in accordance with its general compensation policy, considers numerous factors, including the responsibilities relating to the position, the qualifications of the executive and the relevant experience the individual brings to the company, strategic goals for which the executive has responsibility, and compensation levels of companies at a comparable stage of commercialization and development who compete with us for business, scientific and executive talents. When considering increases to base salary levels for officers, which typically occurs each February, we consider corporate and individual performance in addition to the foregoing factors. No pre-determined weights are given to any one of these factors.

In February 2020, 2021, 2022, 2023 and 2023,2024, we increased base salaries for each of our named executive officers following reviews of peer group salary data. The base salaries of our named executive officers are generally competitive with those paid by our peer group companies, with most falling near the median for such peer group companies. In establishing base salaries for 2020, 2021, 2022, 2023 and 2023,2024, we considered the competitiveness of our cash compensation arrangements for executive officers and our cash position and needs for the applicable year.

In February 2020, 2021, 2022, 2023 and 2023,2024, the compensation committee approved a mix of annual stock option grants and restricted stock unit awards under our 2017 Equity Incentive Plan to eligible employees, with stock options comprising a larger portion of such mix for executive and other officers. In making such grants, the compensation committee considered corporate and individual performance in the prior year, total direct compensation objectives for individual officers, and information regarding stock incentive award grants made by other companies in the biopharmaceutical industry.

Employment Arrangements

Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information regarding the annual total compensation of our chief executive officer and our employees:

Based on this information, the ratio of the annual total compensation of Mr. Coats to the median of the annual total compensation of all employees was 1720 to 1.

We identified our median compensated employee using our total employee population as of December 31, 20222023 and consistently applying payroll records reflecting taxable wages for 2022.2023. In making this identification, we annualized the compensation of all permanent employees who were newly hired during 2022.2023. We did not use any material estimates, assumptions, adjustments or statistical sampling to identify our median compensated employee. Once identified, we calculated the annual total compensation of our median compensated employee in a manner consistent with that used to calculate the annual total compensation of Mr. Coats and disclosed in the Summary Compensation Table above.

SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, apply certain exclusions and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios.

Pay Versus Performance

The following table presents compensation information for Lonnel Coats, our chief executive officer, and average compensation information for the other individuals named in the summary compensation table, as well as certain measures relating to company performance.

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