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Lexicon reveals two agreements to fund long-term drug development

Lexicon Pharmaceuticals has entered into a major financing agreement with Invus Group to help fund the company's transition into an integrated biopharmaceutical company

US biopharmaceutical company Lexicon Pharmaceuticals has entered into a major financing agreement with Invus Group to help fund the company's transition into an integrated biopharmaceutical company.

Invus will invest USD 205m in 2007, with a potential addition of USD 345m over the next four years.

Lexicon also announced it had entered into a USD 60m product development collaboration with Symphony Capital Partners and its co-investors to move LX6171 for cognitive disorders (phase 1b), LX1031 for irritable bowel syndrome (phase 1b) and LX1032 for gastrointestinal disorders (preclinical) to advanced clinical trials.

Under the Invus agreement, Invus has received warrants to purchase 16.5m shares of Lexicon common stock, for a per share purchase price of USD 3.09, the ten-day volume weighted average as of 14 June 2007. Invus will purchase, at that price, the number of shares that remain subject to the warrants, and the warrants will terminate. Invus will also purchase approximately 34.3m additional shares of common stock which, when added to the shares already owned by Invus, will bring its ownership to 40 per cent of the post-transaction outstanding shares of common stock.

The purchase price for these additional 34.3m shares will be USD 4.50, a 46 per cent premium over the 15 June closing price of USD 3.08. Lexicon will have the right to issue common stock before the commencement of the rights offerings at a price above USD 4.50 per share.

For the Symphony transaction, USD 45m was provided to Symphony Icon, a company established to accelerate development of Lexicon's first three product candidates and hold the license to the intellectual property of LX6171, LX1031 and LX1032. An additional USD 15m of equity capital was provided directly to Lexicon for general corporate purposes.

Through a purchase option, Lexicon retains the exclusive right, but not the obligation, to acquire 100 per cent of the equity of Symphony Icon at exercise prices that range from USD 72m in the second year up to USD 90m in the fourth year of the collaborative development period. The option exercise may be paid in cash or a combination of cash and Lexicon common stock at Lexicon's discretion.

If Lexicon chooses not to exercise the purchase option, Symphony Icon will retain the rights to the three programmes. In exchange for the purchase option and USD 60m of funding, Lexicon issued around 7.7m shares of Lexicon common stock to Symphony Icon's investors at a purchase price of USD 3.14, the ten-day closing price average as of 12 June 2007. The collaboration is intended to last up to four years.

Symphony Icon has retained RRD International, a regulatory and clinical development advisory group, to serve as Symphony Icon's management team. Lexicon will continue to lead the development of LX1031, LX1032 and LX6171.

Morgan Stanley and Vinson & Elkins are representing Lexicon in the Invus transaction. Cahill Gorgon & Reindel advised Lexicon's board of directors. Simpson Thacher & Bartlett are representing Invus in the Invus transaction. Paul, Weiss, Rifkind, Wharton & Garrison are representing Symphony in the Symphony Icon transaction.

20th June 2007


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