Lexicon Pharmaceuticals Still A Very High-Risk/High-Reward Biopharma Name

 

As the clock keeps ticking, Lexicon Pharmaceuticals (LXRX) have continued to skid – falling about a third since my last update as investor enthusiasm over the company’s opportunity to disrupt the heart failure market with its SGLT-1/2 inhibitor Zynquista as faded. While nothing has changed, that’s actually part of the problem – Lexicon is going to need a partner to successfully launch this drug, and every month without a partner erodes Street confidence in the long-term potential of the drug.

Valuing Lexicon today remains exceptionally difficult as there are a lot of unknowables that have a big influence on the valuation. If AstraZeneca (AZN) and Lilly (LLY) (and Boehringer Ingelheim) report strong positive data from the DELIVER and EMPEROR-Preserved studies of their SGLT-2 drugs in patients with preserved ejection fraction, differentiating Zynquista in the market will be even harder. Likewise, if Lexicon has to go it alone (as opposed to securing a larger pharmaceutical company to market/co-market the drug), the road ahead is considerably rockier.

I’ve reduced my fair value on Lexicon to account for a longer, slower revenue ramp on Zynquista. Still, it’s worth mentioning again that this is a stock where the price could move rapidly on the basis of competitor clinical updates, FDA action on the Type 1 diabetes indication for Zynquista, and/or the results of the company’s Phase II proof-of-concept studies for pain drug LX9211.

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Lexicon Pharmaceuticals Still A Very High-Risk/High-Reward Biopharma Name