Lexicon Pharmaceuticals Knocked Back By The FDA's Rejection Of Zynquista

Once again the FDA has shown that when it comes to new therapies for diabetes, particularly Type 1 diabetes, the agency believes in an abundance (perhaps an overabundance) of caution. To that point, Sanofi (SNY) and Lexicon (LXRX) announced on Friday March 22 that the FDA rejected the drug application for Zynquista, Lexicon’s SGLT-1/2 inhibitor for Type 1 diabetes.

Given the 50/50 split on the AdComm vote and that aforementioned precautionary principle that has long dominated the agency’s approach to diabetes, I had estimated the odds of approval at only slightly better than 50/50 and I cannot say that the rejection was a surprise. What makes evaluating the path forward more challenging, though, is the lack of information coming from the companies regarding the details of the CRL and the path forward from here.

With this rejection, and some modified expectations for what Zynquista could do in the market long term, I’ve lowered my fair value to around $10.50. Although there’s still some value here, I can’t call this low-hanging fruit for reasons I’ll go into a little later.

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Lexicon Pharmaceuticals Knocked Back By The FDA's Rejection Of Zynquista