Sunday, November 8, 2015

Seeking Alpha: Lexicon Pharmaceuticals Produces Another Positive Surprise

This has been quite the year for Lexicon Pharmaceuticals (NASDAQ:LXRX), as long-suffering shareholders have finally seen the stock do well on the back of optimism about the company's oral treatment (telotristat etiprate) for the GI effects of carcinoid syndrome and its progress into Phase III testing of its SGLT-1/SGLT-2 inhibitor sotagliflozin for Type 1 diabetes. Now the company has achieved a more surprising success, with Friday's announcement of a partnership with diabetes giant Sanofi (NYSE:SNY) to develop and commercialize sotagliflozin for both Type 1 and Type 2 diabetes.

Lexicon investors (or at least most of them) had pretty much written off the chance of a major partnership more than a year ago, as the company had been shopping the drug to partners for about two years without reaching any sort of agreement. Now, though, the $1 billion-plus potential of sotagliflozin in Type 2 diabetes is at least back on the table as a point of discussion.

There are still plenty of unknowns here to confound valuation. What sort of pricing will the company get for telotristat etiprate? Will it become the go-to choice for patients getting inadequate relief from somatostatin analogs? Does Sanofi have the marketing muscle to drive meaningful market share with a drug that will be quite late to market? Will sotagliflozin show any distinctive efficacy or safety aspects in large-scale studies (good or bad) that will impact its market potential? Will the company choose to rejuvenate its internal drug development programs? These are all important questions, but I would nevertheless argue that Lexicon remains meaningfully undervalued today.

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Lexicon Pharmaceuticals Produces Another Positive Surprise

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