Lexicon Checks A Key Box

There are times when it feels like the companies I own/follow conspire to make sure I can't take days off. That was the case on Friday, when Lexicon Pharmaceuticals (NASDAQ:LXRX) announced the first top-line Phase III results for its key drug sotagliflozin in Type 1 diabetes. The results were positive, taking the stock up almost 20%, but they don't answer all of the remaining questions on this drug.

I continue to believe that Lexicon is meaningfully undervalued, with about 50% upside to my new fair value. Lexicon still needs to fully prove out the efficacy and safety of sotagliflozin in Type 1 diabetes and Sanofi (NYSE:SNY) needs to do its part with the Type 2 indication. What's more, investors would do well to remember that the FDA can be very demanding and unpredictable when it comes to new treatments for diabetes. That said, I think the risk-reward here is still interesting and worthwhile.

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Lexicon Checks A Key Box