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Here's Why Lexicon Pharmaceuticals (NASDAQ:LXRX) Can Manage Its Debt Despite Losing Money

Simply Wall St · 3d ago

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We note that Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Lexicon Pharmaceuticals Carry?

As you can see below, Lexicon Pharmaceuticals had US$56.5m of debt at September 2025, down from US$99.9m a year prior. However, its balance sheet shows it holds US$116.0m in cash, so it actually has US$59.4m net cash.

debt-equity-history-analysis
NasdaqCM:LXRX Debt to Equity History December 18th 2025

A Look At Lexicon Pharmaceuticals' Liabilities

We can see from the most recent balance sheet that Lexicon Pharmaceuticals had liabilities of US$21.7m falling due within a year, and liabilities of US$64.0m due beyond that. Offsetting this, it had US$116.0m in cash and US$2.33m in receivables that were due within 12 months. So it can boast US$32.5m more liquid assets than total liabilities.

This surplus suggests that Lexicon Pharmaceuticals has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Lexicon Pharmaceuticals has more cash than debt is arguably a good indication that it can manage its debt safely. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Lexicon Pharmaceuticals's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Check out our latest analysis for Lexicon Pharmaceuticals

Over 12 months, Lexicon Pharmaceuticals reported revenue of US$71m, which is a gain of 1,255%, although it did not report any earnings before interest and tax. When it comes to revenue growth, that's like nailing the game winning 3-pointer!

So How Risky Is Lexicon Pharmaceuticals?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Lexicon Pharmaceuticals lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$73m and booked a US$69m accounting loss. However, it has net cash of US$59.4m, so it has a bit of time before it will need more capital. Importantly, Lexicon Pharmaceuticals's revenue growth is hot to trot. High growth pre-profit companies may well be risky, but they can also offer great rewards. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 2 warning signs for Lexicon Pharmaceuticals that you should be aware of before investing here.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.