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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
Effective Tax Rate Reconciliation. A reconciliation of the statutory tax rate to the effective tax rate for the years ended December 31, 2024, 2023 and 2022 consists of the following:
Year Ended December 31,
202420232022
(in thousands)
Expected income tax expense (benefit) at 21%
$(42,085)$(37,196)$(21,408)
State income taxes, net of federal benefit319 (3,895)— 
Equity compensation3,758 1,530 1,627 
Research and development credit(4,241)(712)— 
State income taxes, tax rate change2,922 (4,723)— 
Write off of NOL carryovers due to expiration8,111 — — 
Change in valuation allowance30,762 44,410 19,543 
Other (1)
454 586 238 
Income tax benefit$— $— $— 
(1) Other is primarily comprised of nondeductible expenses and expiring attribute carryovers for the year ended December 31, 2024, expiring NOLs and nondeductible expenses for the year ended December 31, 2023 and nondeductible expenses for the year ended December 31, 2022.
Deferred Tax Assets and Liabilities. Lexicon recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized differently in the financial statements and tax returns. The components of Lexicon’s deferred tax assets (liabilities) at December 31, 2024 and 2023 are as follows:

 
 As of December 31,
 20242023
 (in thousands)
Deferred tax assets:  
Net operating loss carryforwards$316,034 $288,264 
Research and development tax credits34,243 30,002 
Orphan drug credits24,524 24,524 
Capitalized research and development38,688 37,357 
Stock-based compensation4,327 6,965 
Interest1,748 1,359 
Other2,726 3,308 
Total deferred tax assets422,290 391,779 
Deferred tax liabilities:  
Other(1,357)(1,608)
Total deferred tax liabilities(1,357)(1,608)
Less: valuation allowance(420,933)(390,171)
Net deferred tax liabilities$— $— 

Net Operating Losses/Valuation Allowance. At December 31, 2024, Lexicon had both federal and state NOL carryforwards of approximately $1.4 billion and $158.6 million, respectively.  The Company had $778.9 million of U.S. federal NOL carryforwards as of December 31, 2024, which can be carried forward indefinitely. The remaining federal and state NOL carryforwards will begin to expire in 2025. 

The Company maintains a valuation allowance on net operating losses and other deferred tax assets. Accordingly, the Company has not reported any tax benefit relating to the remaining net operating loss carryforwards and income tax credit carryforwards that are available for utilization in future periods. On a periodic basis, the valuation allowance is reassessed on deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. In 2024, the Company reassessed the valuation allowance and considered negative evidence, including the cumulative losses over the three years ended December 31, 2024 and positive evidence including the projections of future income. After assessing both the negative and the positive evidence, the Company concluded that it should continue to maintain the valuation allowance on net operating losses and other deferred tax assets as of December 31, 2024 given the significance of the weight of the negative evidence. Based on recent financial performance and future projections, the Company could record a reversal of all, or a portion of the valuation allowance associated with U.S. deferred tax assets in future periods. However, any such change is subject to actual performance and other considerations that may present positive or negative evidence at the time of the assessment. Significant judgment is required in making these assessments to maintain or reverse valuation allowances and, to the extent future expectations change the Company would have to assess the recoverability of these deferred tax assets at that time.

Based on the federal tax law limits and the Company’s cumulative loss position, the Company concluded it was appropriate to establish a full valuation allowance for its net deferred tax assets until an appropriate level of profitability is sustained.  During the year ended December 31, 2024, the valuation allowance increased $30.8 million, primarily due to NOLs generated, increases in deferred tax assets associated with capitalized research and development expense and deferred tax assets for state jurisdictions.

Other. As of December 31, 2024 and 2023, the Company did not have any unrecognized tax benefits and had no accruals for interest or penalties related to income tax matters. Any interest and penalties related to uncertain tax positions will be reflected as a component of income tax expense. The Company is subject to U.S. federal and state income taxes. The tax years 2021 through 2023 remain open to examination by the Internal Revenue Service of the United Sates and the tax years 2020 through 2023 remain open to examination by various state tax authorities.