EXHIBIT 99.1
LEXICON GENETICS REPORTS 2006
SECOND QUARTER FINANCIAL RESULTS
THE WOODLANDS, TEXAS, AUGUST 1, 2006 -- Lexicon Genetics Incorporated (Nasdaq:
LEXG), a biopharmaceutical company focused on discovering and developing
breakthrough treatments for human disease, today reported financial results for
the three and six months ended June 30, 2006.
"We continue to make progress with our drug discovery and development programs.
Our application to initiate a Phase 1 clinical trial for LX6171 has received
clearance from the United Kingdom Medicines and Healthcare Products Regulatory
Agency (MHRA), and we expect to have that trial underway shortly," said Arthur
T. Sands, M.D., Ph.D., president and chief executive officer. "LX6171 is a small
molecule compound being developed to treat cognitive disorders such as
Alzheimer's disease. LX6171 resulted from Lexicon's internal target discovery
engine and medicinal chemistry efforts."
REVENUES: Lexicon's revenues for the three months ended June 30, 2006 increased
16 percent to $16.2 million from $13.9 million for the corresponding period in
2005. The increase was primarily attributable to revenue recognized under
Lexicon's award from the Texas Enterprise Fund, its contract with the National
Institutes of Health and its expanded biotherapeutics drug discovery and
development alliance with Genentech, Inc. The increase was partially offset by a
decline in revenues recognized under Lexicon's biotherapeutics alliance with
Organon due to the timing of target discovery research activities. For the six
months ended June 30, 2006, revenues increased 33 percent to $37.1 million from
$27.8 million for the corresponding period of 2005.
RESEARCH AND DEVELOPMENT EXPENSES: Research and development expenses for the
three months ended June 30, 2006 increased 16 percent to $27.4 million from
$23.7 million for the corresponding period in 2005. This was primarily due to
increased personnel, lab supply and external research costs, and non-cash,
stock-based compensation expense of $1.1 million resulting from Lexicon's
adoption of SFAS No. 123(R) on January 1, 2006. For the six months ended June
30, 2006, research and development expenses increased 17 percent to $54.1
million, including $2.3 million in non-cash, stock-based compensation expense,
from $46.4 million for the corresponding period in 2005.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses for the
three months ended June 30, 2006 increased 19 percent to $5.7 million from $4.8
million for the corresponding period in 2005. This increase was primarily due to
non-cash, stock-based compensation expense of $0.7 million resulting from
Lexicon's adoption of SFAS No. 123(R) on January 1, 2006 and higher personnel
costs. For the six months ended June 30, 2006, general and administrative
expenses increased 19 percent to $11.0 million, including $1.4 million in
non-cash, stock-based compensation expense, from $9.2 million for the
corresponding period in 2005.
NET LOSS: Net loss for the three months ended June 30, 2006 increased to $16.9
million from a net loss of $14.8 million in the corresponding period in 2005.
Net loss per share for the three months ended June 30, 2006 was $0.26, as
compared to $0.23 for the corresponding period in 2005. For the three months
ended June 30, 2006, net loss included non-cash, stock-based compensation
expense of $1.8 million, or $0.03 per share. Net loss for the six months ended
June 30, 2006 decreased to $27.7 million, or $0.43 per share, from a net loss of
$28.1 million, or $0.44 per share, in the corresponding period in 2005. For the
six months ended June 30, 2006, net loss included non-cash, stock-based
compensation expense of $3.6 million, or $0.06 per share.
CASH AND INVESTMENTS: As of June 30, 2006, Lexicon had $65.3 million in cash and
investments, including restricted cash and investments, as compared to $87.0
million as of March 31, 2006 and $99.7 million as of December 31, 2005. In June
2006, Lexicon received a financing commitment for up to $75 million in common
stock from Azimuth Opportunity Ltd. under which Lexicon may sell registered
shares of its common stock at its sole discretion to Azimuth during an 18-month
term. Lexicon will use net proceeds from any sale of the securities for
research, drug discovery and development activities, including the preclinical
and clinical development of its lead programs. Lexicon has not drawn on this
equity financing commitment to date.
"Our business continues to perform well, as demonstrated by the expansion of our
neuroscience alliance with Bristol-Myers Squibb Company," said Julia P. Gregory,
Lexicon's executive vice president, corporate development and chief financial
officer. "Our equity line commitment provides us with flexibility in managing
our cash needs as we advance our lead drug programs into human clinical trials."
SECOND QUARTER 2006 HIGHLIGHTS
FILED APPLICATION FOR LX6171 PHASE 1 TRIAL FOR COGNITIVE DISORDERS: Lexicon
submitted a Clinical Trial Authorization (CTA) filing to the United Kingdom
Medicines and Healthcare Products Regulatory Agency (MHRA) for LX6171, an
internally discovered and developed small molecule compound for cognitive
disorders. Lexicon has received clearance from the MHRA to initiate a Phase 1
clinical trial of LX6171 in healthy volunteers to assess the compound's safety,
tolerability and pharmacokinetics. In preclinical studies, LX6171 has
demonstrated improved learning and memory in healthy and aged mice and has
exhibited a good safety profile in toxicology and safety studies. Lexicon is
developing LX6171 for potential application in the treatment of cognitive
disorders such as Alzheimer's disease, schizophrenia, vascular dementia,
attention deficit disorder and Fragile X syndrome.
EXTENDED NEUROSCIENCE ALLIANCE WITH BRISTOL-MYERS SQUIBB -- Bristol-Myers Squibb
Company extended the target discovery term of its neuroscience alliance with
Lexicon for an additional two years. Bristol-Myers Squibb and Lexicon initiated
this alliance in December 2003 to accelerate the discovery, development and
commercialization of therapies that address unmet medical needs in psychiatry
and neurology. Bristol-Myers Squibb will provide Lexicon $20 million in
additional research funding over the two-year extended research term which
begins in January 2007. For each drug developed and commercialized by
Bristol-Myers Squibb from the alliance, Lexicon will also receive clinical and
regulatory milestone payments and will earn royalties on net sales.
AWARDED GRANT FROM THE UNITED STATES ARMY: Lexicon announced it was awarded a
grant from the United States Army Medical Research & Materiel Command (USAMRMC)
for the identification of targets that may be important in the development of
drugs to prevent or treat spinal muscular atrophy (SMA), a neurodegenerative
disorder and the leading genetic cause of death in early childhood. Lexicon will
study approximately 750 genes in the SMA research program and will receive $2.0
million in funding during the one-year initial term of the grant.
LEXICON CONFERENCE CALL:
Lexicon management will hold a conference call to discuss the company's results
and provide financial guidance for the third quarter at 11:00 a.m. Eastern Time
on August 1, 2006. The dial-in number for the conference call is 800-946-0782
(within the United States) or 719-457-2657 (international). The pass code for
all callers is 5952224. Investors can access www.lexicon-genetics.com to listen
to a live webcast of the call. The webcast will be archived and available for
review through August 4, 2006.
ABOUT LEXICON GENETICS
Lexicon Genetics is a biopharmaceutical company focused on discovering and
developing 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 addressing
these targets. For targets that the company believes have high pharmaceutical
value, it engages in programs for the discovery and development of small
molecule, antibody and protein drugs. Lexicon has advanced knockout-validated
targets into drug discovery programs in six therapeutic areas: diabetes and
obesity, cardiovascular disease, psychiatric and neurological disorders, cancer,
immune system disorders and ophthalmic disease. Lexicon is working both
independently and through collaborations and strategic 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
relating to Lexicon's regulatory filings and clinical development program for
LX6171 and the potential therapeutic and commercial potential of LX6171 and
other potential drug candidates in Lexicon's preclinical pipeline. This press
release also contains forward-looking statements relating to 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. All 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 successfully conduct clinical development of LX6171 and
preclinical development of other potential drug candidates, advance additional
candidates into preclinical and clinical development, obtain necessary
regulatory approvals, achieve its operational objectives, obtain patent
protection for its discoveries and establish strategic alliances, as well as
additional factors relating to manufacturing, intellectual property rights, and
the therapeutic or commercial value of its drug candidates, 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, 2005, 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:
Bobbie Faulkner
Manager, Investor Relations
281/863-3503
bfaulkner@lexgen.com
LEXICON GENETICS INCORPORATED
SELECTED FINANCIAL DATA
<Table>
<Caption>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA THREE MONTHS ENDED SIX MONTHS ENDED
(In thousands, except per share data) JUNE 30, JUNE 30,
------------------------- --------------------------
2006 2005 2006 2005
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
Revenues:
Collaborative research.................................................. $ 15,351 $ 13,771 $34,657 $22,654
Subscription and license fees........................................... 813 127 2,462 5,169
----------- ---------- ----------- -----------
Total revenues..................................................... 16,164 13,898 37,119 27,823
Operating expenses:
Research and development, including stock-based compensation
of $1,105, ($9), $2,254 and ($20), respectively...................... 27,433 23,667 54,105 46,427
General and administrative, including stock-based compensation
of $659, $0, $1,351 and $0, respectively................................ 5,664 4,750 10,967 9,182
----------- ---------- ----------- -----------
Total operating expenses.............................................. 33,097 28,417 65,072 55,609
----------- ---------- ----------- -----------
Loss from operations....................................................... (16,933) (14,519) (27,953) (27,786)
Interest income............................................................ 900 506 1,903 997
Interest expense........................................................... (813) (827) (1,620) (1,632)
Other income, net.......................................................... (56) (2) (63) 313
----------- ---------- ----------- -----------
Net loss................................................................... $ (16,902) $(14,842) $(27,733) $(28,108)
=========== ========== =========== ===========
Net loss per common share, basic and diluted............................... $ (0.26) $ (0.23) $ (0.43) $ (0.44)
=========== ========== =========== ===========
Shares used in computing net loss per common share......................... 64,627 63,636 64,597 63,581
</Table>
<Table>
<Caption>
CONSOLIDATED BALANCE SHEET DATA AS OF JUNE 30, AS OF DECEMBER 31,
(In thousands) 2006 2005
-------------- ------------------
(UNAUDITED)
Cash and investments, including restricted cash and investments of $430............... $ 65,327 $ 99,695
Property and equipment, net........................................................... 82,174 85,265
Goodwill.............................................................................. 25,798 25,798
Intangible assets other than goodwill, net............................................ 40 640
Total assets.......................................................................... 182,671 218,714
Deferred revenue...................................................................... 71,138 81,582
Current and long-term debt............................................................ 36,568 36,940
Accumulated deficit................................................................... (325,163) (297,430)
Total stockholders' equity ........................................................... 61,855 85,802
</Table>