EXHIBIT 99.1
LEXICON GENETICS REPORTS 2004
SECOND QUARTER FINANCIAL RESULTS
THE WOODLANDS, TEXAS, JULY 29, 2004 - Lexicon Genetics Incorporated (Nasdaq:
LEXG), a biopharmaceutical company focused on the discovery of breakthrough
treatments for human disease, today reported financial results for the three and
six months ended June 30, 2004.
REVENUES: Lexicon's revenues for the three months ended June 30, 2004 increased
21 percent to $10.8 million from $8.9 million for the corresponding period in
2003. The increase was primarily attributable to collaborative research revenue
recognized under Lexicon's neuroscience alliance for drug development with
Bristol-Myers Squibb Company, offset by a decline in technology license fees.
For the six months ended June 30, 2004, revenues increased 33 percent to $22.6
million from $17.0 million for the corresponding period of 2003.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses for the
three months ended June 30, 2004 increased nine percent to $22.6 million from
$20.8 million for the corresponding period in 2003. The increase primarily
reflects higher personnel and laboratory supply costs for the continued
advancement of Lexicon's drug discovery programs. Those higher costs were
partially offset by the absence of any non-cash, stock-based compensation
expense in the three months ended June 30, 2004 as compared to $1.3 million in
the three months ended June 30, 2003, as a result of the completion earlier in
the year of the amortization of stock-based compensation related to option
grants made prior to the Company's April 2000 initial public offering. For the
six months ended June 30, 2004, research and development expenses increased 11
percent to $45.0 million from $40.6 million for the corresponding period in
2003. Research and development expenses included non-cash stock-based
compensation expense of $0.4 million and $2.6 million for the six months ended
June 30, 2004 and 2003, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for the
three months ended June 30, 2004 decreased 22 percent to $4.6 million from $6.0
million for the corresponding period in 2003, primarily due to the fact there
was no non-cash, stock-based compensation expense in the three months ended June
30, 2004 as compared to $1.3 million in the three months ended June 30, 2003.
For the six months ended June 30, 2004, general and administrative expenses
decreased 18 percent to $9.7 million from $11.8 million for the corresponding
period in 2003. General and administrative expenses included non-cash
stock-based compensation expense of $0.4 million and $2.6 million for the six
months ended June 30, 2004 and 2003, respectively.
NET LOSS: Net loss for the three months ended June 30, 2004 decreased to $16.8
million, or $0.26 per share, from a net loss of $17.6 million, or $0.34 per
share, in the corresponding period in 2003. Net loss for the six months ended
June 30, 2004 decreased to $32.3 million, or $0.51 per share, from a net loss of
$34.8 million, or $0.66 per share, in the corresponding period in 2003.
CASH AND INVESTMENTS: As of June 30, 2004, Lexicon had $104.3 million in cash
and investments, including restricted cash and investments, compared to $145.4
million as of March 31, 2004 and $161.0 million as of December 31, 2003.
Restricted cash and investments were $0.4 million on June 30, 2004 and $57.5
million on both March 31, 2004 and December 31, 2003. Pursuant to the
refinancing of the synthetic lease of Lexicon's headquarters and research
facility in The Woodlands, Texas in April 2004, Lexicon repaid the $54.8 million
funded under the synthetic lease with proceeds from a $34.0 million conventional
mortgage and $20.8 million in cash. This transaction eliminated all restrictions
on the cash and investments that had secured Lexicon's obligations under the
synthetic lease.
SUBSEQUENT EVENT: On July 28, 2004, Lexicon and Takeda Pharmaceutical Company,
Ltd. announced the formation of a collaboration to develop new drugs for the
treatment of high blood pressure. The alliance is designed to accelerate the
development and commercialization of new drugs directed against promising
hypertension targets discovered in Lexicon's Genome5000 TM program. In the
collaboration, Takeda will have exclusive access to all drug targets from
Lexicon's Genome5000 program that control blood pressure. Takeda will be
responsible for the screening, medicinal chemistry, preclinical and clinical
development and worldwide commercialization of drugs directed against Lexicon's
novel blood pressure targets, and will bear all related costs. Lexicon will
receive an upfront payment of $12 million from Takeda for the initial,
three-year term of the agreement. Takeda has the option to extend the term of
the alliance for an additional two years in exchange for further committed
funding. Takeda will make research milestone payments to Lexicon for each target
selected for therapeutic development. In addition, Takeda will make clinical
development and product launch milestone payments to Lexicon for each product
commercialized from the collaboration. Lexicon will also earn royalties on
worldwide sales of drugs commercialized by Takeda.
"Our newly formed collaboration with Takeda positions Lexicon to develop and
commercialize drugs for high blood pressure with a recognized leader in this
disease area," said Arthur T. Sands, M.D., Ph.D., president and chief executive
officer of Lexicon. "The Takeda collaboration further demonstrates the value and
productivity of our Genome5000 engine. The same powerful engine has produced our
internal drug discovery pipeline and we continue to make significant progress
with our lead small molecule and antibody drug development programs."
SECOND QUARTER 2004 HIGHLIGHTS
Key events in the second quarter of 2004 included:
APPOINTMENT OF VICE PRESIDENT OF BIOTHERAPEUTICS: Lexicon appointed Gregory M.
Landes as vice president of biotherapeutics. Dr. Landes brings to Lexicon over
25 years of experience in antibody drug discovery and development and functional
genomics. He is responsible for directing the development of antibodies and
therapeutic proteins for promising targets discovered in Lexicon's Genome5000
program. Prior to joining Lexicon, Dr. Landes was vice president of product
discovery at Abgenix, Inc. and vice president of genetics and genomics at
Genzyme Corp. Dr. Landes has authored more than 45 peer-reviewed publications.
He holds a B.A. in Chemistry and a Ph.D. in Biochemistry from the University of
Kansas and was a post-doctoral scholar at U.C.L.A.
REFINANCING OF SYNTHETIC LEASE OF HEADQUARTERS AND RESEARCH FACILITY: Lexicon
refinanced the $54.8 million synthetic lease of its headquarters and research
facility in The Woodlands, Texas with a $34.0 million conventional mortgage and
repaid the balance of its obligations under the lease arrangement. The
refinancing transaction increases Lexicon's financial flexibility, extends its
ability to fund its drug discovery and development operations and allows it to
control its research facility in The Woodlands, which is key to the long-term
success of the Company's growth strategy.
LEXICON CONFERENCE CALL:
Dr. Arthur T. Sands, president and chief executive officer, and Julia P.
Gregory, executive vice president, corporate development and chief financial
officer, will host the conference call at 11:00 a.m. EDT on Thursday, July 29,
2004. They will review Lexicon's operating highlights and financial results for
the six months ended June 30, 2004 and will discuss the Company's expectations
for the third quarter.
Conference call participants may dial: 800/268-8047 (domestic USA), 312/461-0644
(international). Pass code for all callers: 750629.
The audio web cast can be heard by logging on to www.lexicon-genetics.com. It
will be archived and available for review through August 3, 2004.
ABOUT LEXICON GENETICS
Lexicon Genetics is a biopharmaceutical company focused on the discovery of
breakthrough treatments for human disease. Lexicon is systematically discovering
the physiological and behavioral functions of genes to identify potential points
of therapeutic intervention, or drug targets. Lexicon makes these discoveries
using its proprietary gene knockout technology to model the physiological
effects that could be expected from prospective drugs directed against novel
targets. The Company has advanced knockout-validated targets into drug discovery
programs in six therapeutic areas: diabetes and obesity, cardiovascular disease,
cancer, immune system disorders, ophthalmic disease, and psychiatric and
neurological disorders. Lexicon is working both independently and through
strategic collaborations and alliances to accelerate the development and
commercialization of its discoveries. Additional information about Lexicon is
available through its corporate website, www.lexicon-genetics.com.
SAFE HARBOR STATEMENT
This press release contains "forward-looking statements," including statements
about Lexicon's growth and future operating results, discovery and development
of products, strategic alliances and intellectual property, as well as other
matters that are not historical facts or information. These forward-looking
statements are based on management's current assumptions and expectations and
involve risks, uncertainties and other important factors, specifically including
those relating to Lexicon's ability to develop drug candidates from its
discoveries, achieve its operational objectives, obtain patent protection for
its discoveries and establish strategic alliances, that may cause Lexicon's
actual results to be materially different from any future results expressed or
implied by such forward-looking statements. Information identifying such
important factors is contained under "Factors Affecting Forward-Looking
Statements" and "Business - Risk Factors" in Lexicon's annual report on Form
10-K for the year ended December 31, 2003, as filed with the Securities and
Exchange Commission. Lexicon undertakes no obligation to update or revise any
such forward-looking statements, whether as a result of new information, future
events or otherwise.
# # #
CONTACT FOR LEXICON GENETICS:
Carol Schafer
Vice President, Finance and Communications
281/863-3880
cschafer@lexgen.com
LEXICON GENETICS INCORPORATED
SELECTED FINANCIAL DATA
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
CONSOLIDATED STATEMENTS OF OPERATIONS DATA ----------------------- -----------------------
(In thousands, except per share data) 2004 2003 2004 2003
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
Revenues:
Subscription and license fees ....................................... $ 2,567 $ 4,310 $ 6,115 $ 7,412
Collaborative research .............................................. 8,211 4,590 16,505 9,583
Compound libraries and other ........................................ -- 21 -- 32
-------- -------- -------- --------
Total revenues .................................................... 10,778 8,921 22,620 17,027
Operating expenses:
Research and development, including stock-based compensation
of $0, $1,285, $416 and $2,555, respectively ........................ 22,580 20,794 44,981 40,628
General and administrative, including stock-based compensation
of $0, $1,276, $411 and $2,552, respectively ....................... 4,642 5,979 9,686 11,783
-------- -------- -------- --------
Total operating expenses .......................................... 27,222 26,773 54,667 52,411
-------- -------- -------- --------
Loss from operations ................................................... (16,444) (17,852) (32,047) (35,384)
Interest and other income .............................................. 361 316 789 784
Interest expense ....................................................... (705) (83) (996) (164)
-------- -------- -------- --------
Net loss ............................................................... $(16,788) $(17,619) $(32,254) $(34,764)
======== ======== ======== ========
Net loss per common share, basic and diluted ........................... $ (0.26) $ (0.34) $ (0.51) $ (0.66)
======== ======== ======== ========
Shares used in computing net loss per common share ..................... 63,369 52,496 63,217 52,434
</Table>
<Table>
<Caption>
CONSOLIDATED BALANCE SHEET DATA AS OF JUNE 30, AS OF DECEMBER 31,
(In thousands) 2004 2003
-------------- ------------------
(UNAUDITED)
Cash and investments, including restricted cash and investments of
$430 and $57,514, respectively ................................................ $ 104,310 $ 161,001
Property and equipment, net ...................................................... 81,810 83,676
Goodwill ......................................................................... 25,798 25,798
Intangible assets other than goodwill, net ....................................... 2,440 3,040
Total assets ..................................................................... 221,179 284,199
Deferred revenue ................................................................. 36,778 47,692
Long-term debt ................................................................... 37,289 56,344
Accumulated deficit .............................................................. (246,197) (213,943)
Total stockholders' equity ....................................................... 136,301 166,216
</Table>