Lexicon Pharmaceuticals, Inc. (NASDAQ: LXRX) is a fully integrated biopharmaceutical company that is applying a unique approach to gene science based on Nobel Prize-winning technology to discover and develop precise medicines for patients with serious, chronic conditions. Through its Genome5000™ program, Lexicon scientists have studied the role and function of nearly 5,000 genes over the last 20 years and have identified more than 100 protein targets with significant therapeutic potential in a range of diseases. 

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On Nov. 1^st, 2018, the company announced its financial results for the quarter ended September 30, 2018 and provided an update on its operations and upcoming milestones.

Third Quarter Product and Pipeline Highlights

XERMELO® (telotristat ethyl) 250 mg

• XERMELO was approved in Australia in September for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog (SSA) therapy in adults inadequately controlled by somatostatin analog (SSA) therapy.
• In the third quarter, Ipsen launched XERMELO in several European countries including Sweden and Switzerland.

Sotagliflozin

• In September, clinical data for sotagliflozin were presented at the European Association for the Study of Diabetes (EASD) 54th annual meeting. Data from patient exit interviews from a sotagliflozin Phase 3 study were also presented, reporting meaningful improvements in patient-reported outcomes.

Management commentary:

“In the third quarter, our collaborator, Sanofi, and we have been working diligently with regulatory agencies to make sotagliflozin available for patients with type 1 diabetes as quickly as possible, and we continue to make progress in growing XERMELO® for its current indication,” said Lonnel Coats, Lexicon’s president and chief executive officer. “Our collaborator, Ipsen, continues to gain approvals and market authorizations for XERMELO in Europe. We are making good progress on our pipeline. By the end of the year, we expect to start a clinical trial for telotristat ethyl, the investigational form of XERMELO, in biliary tract cancer as well as announce data for LX2761 in diabetes and LX9211, a neuropathic pain candidate, in healthy volunteers.” 

Upcoming Milestones/Catalysts

• 4Q 2018 – Phase 1b data for LX2761 in type 2 diabetes
• 4Q 2018 – Phase 1a data for LX9211 (neuropathic pain candidate) in healthy volunteers
• 4Q 2018 – Initiation of clinical development of telotristat ethyl in biliary tract cancer
• March 22, 2019 – PDUFA date for sotagliflozin in type 1 diabetes 

On December 20, 2018, the company announced topline results from its Phase I study on LX2761 and commented; “Results from our Phase 1 studies build on previously reported promising preclinical data for LX2761 and confirm the drug candidate’s unique preclinical profile as a potent, gastrointestinal tract-selective SGLT1 inhibitor,” said Praveen Tyle, Ph.D., executive vice president of Research and Development. “We are evaluating next steps for this compound and look forward to providing updates in the future.”

Recently, on Nov 29^th, the company announced that, the U.S. Food and Drug Administration (FDA) Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) plans to review Lexicon collaborator Sanofi’s New Drug Application (NDA) for sotagliflozin, an investigational oral treatment for adults with type 1 diabetes, on January 17, 2019. 

The FDA accepted the NDA for sotagliflozin on May 22, 2018. The NDA included data from the inTandem clinical trial program, which includes three Phase 3 clinical trials assessing the safety and efficacy of sotagliflozin in approximately 3,000 adults with inadequately controlled type 1 diabetes.

The target date for an FDA action regarding sotagliflozin under the Prescription Drug User Fee Act (PDUFA) is anticipated to be March 22, 2019. 

Analyst ratings and target price:

Per www.marketbeat.com, Their average twelve-month price target is $25.25, suggesting that the stock has a possible upside of 247.80%. The high price target for LXRX is $42.00, and the low-price target for LXRX is $10.00. There is currently one sell rating, three hold ratings and 3 buy ratings for the stock, resulting in a consensus rating of “Hold.”

Below are the excerpts of recent analyst rating/Price targets on the company:

Source: www.marketbeat.com

About the Company: Lexicon Pharmaceuticals is a fully integrated biopharmaceutical company that is applying a unique approach to gene science based on Nobel Prize-winning technology to discover and develop precise medicines for people with serious, chronic conditions. Using a patient driven approach, Lexicon is working to discover and develop innovative medicines to safely and effectively treat disease and improve patient lives.

Product Revenue: Product revenues consist of commercial sales of XERMELO in the United States and sales of bulk tablets of XERMELO to Ipsen Pharma SAS (“Ipsen”).

Product Pipeline: Lexicon is presently devoting most of its resources to the commercialization or development of its four most advanced drug candidates:

• XERMELO® (telotristat ethyl), which has been approved in the United States, the European Union and certain other territories for carcinoid syndrome diarrhea;
• Sotagliflozin, which is currently in development for type 1 and type 2 diabetes;
• LX2761, which is currently in development for diabetes; and
• LX9211, which is currently in development for neuropathic pain.

Financial Results (In thousands):

Revenue and profitability:

Revenues: Revenues for the three months ended September 30, 2018, decreased to $6.9 million from $26.9 million for the corresponding period in 2017, primarily due to lower revenues recognized from the collaboration and license agreement with Sanofi, partially offset by an increase in net product revenues.  Net product revenues for the three months ended September 30, 2018, included $6.3 million from net sales of XERMELO in the U.S., up 19% from the prior year quarter and 5% from the second quarter of 2018. 

Cost of Sales: Cost of sales related to sales of XERMELO for each of the three months ended September 30, 2018, and 2017 was $0.6 million. 

Research and Development (R&D) Expenses: Research and development expenses for the three months ended September 30, 2018, decreased to $13.8 million from $39.1 million for the corresponding period in 2017, primarily due to lower external clinical development costs relating to sotagliflozin.

Selling, General and Administrative (SG&A) Expenses: Selling, general and administrative expenses for the three months ended September 30, 2018, decreased to $15.6 million from $16.7 million for the corresponding period in 2017, primarily due to decreased marketing costs. 

Net Loss: Net loss for the three months ended September 30, 2018, was $27.5 million, or $0.26 per share, compared to a net loss of $30.7 million, or $0.29 per share, in the corresponding period in 2017. For the three months ended September 30, 2018, and 2017, net loss included non-cash, stock-based compensation expense of $2.9 million and $2.6 million, respectively.

Liquidity and financial flexibility:

Cash and Investments: As of September 30, 2018, Lexicon had $187.3 million in cash and investments, as compared to $310.8 million as of December 31, 2017.

Key Stock Influences:

• Successful completion of the upcoming milestones would lead future direction for the company. Any adversities related to these upcoming milestones might adversely impact the overall investor sentiments.
• LXRX is still an early stage entity and has not yet generated meaningful revenue and will likely operate at a loss as it grows its market position and seeks ways to monetize it.  
• LXRX has a history of operating losses. Therefore, any time or cost overrun in its ongoing R&D activities and its impact on business & financial profile will remain a key business sensitivity factor. 
• The company may experience financial, regulatory, or operational difficulties, which may impair its ability to commercialize their products.
• Biotech/Pharma space in itself is a high-risk sector due to uncertainties associated with the novel drug development. Therefore, a favorable outcome of the upcoming catalyst is necessary for the stock to retain its momentum.

Stock Chart:

• On Friday, January 4^th, LXRX was at $7.22 on volume of 508K shares exchanging hands. Market capitalization is $769.016 million. The current RSI is 51.10
• In the past 52 weeks, shares of LXRX have traded as low as $6.75 and as high as $13.97
• At $7.22, shares of LXRX are trading below its 50-day moving average (MA) at $7.70 and below its 200-day MA at $9.83
• The present support and resistance levels for the stock are at $6.77 & $7.67 respectively. 

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