Lexicon Pharmaceuticals, Inc.LXRX

Morningstar Rating

Stock Research and Analysis

by Karen Andersen, CFA

Since 2002, mouse genetics firm Lexicon has formed several meaningful drug-discovery and -development alliances with some of the biggest players in the industry, such as Bristol-Myers Squibb BMY and Genentech (now part of Roche RHHBY). However, these Read more

Bulls Say

Mouse models could offer a safe and efficient method of selecting drug targets: 99% of human genes actually have their counterpart in a mouse gene, and there is a strong correlation between knockout data and the effects of drugs currently on the market.

Lexicon's lead drug candidates could serve large markets if approved, and several other programs are pushing into clinical development; all told, the firm's technology could generate as many as 150 promising drug candidates.

Previous research alliances with large firms like Roche and Bristol-Myers Squibb reflect positively on the potential for Lexicon's mouse genetics technology to generate commercially successful drugs.

With positive Phase II data for three drug candidates now under its belt, we think Lexicon is in a good position to engage in new collaborative relationships. Read more

Bears Say

Lexicon's most promising drug candidate, LX4211 in diabetes, faces a steep road ahead. Regulatory hurdles for safety in diabetes are particularly high; potential liver and cancer-related risks recently caused the FDA to reject Bristol and AstraZeneca's similar compound, dapagliflozin.

Most of Lexicon's pipeline is only in midstage clinical trials, and given disappointing Phase II results from LX6171 and LX2931, the firm could find it difficult to build additional partnerships and maintain current alliances.

Lexicon is testing backup compound LX1033 as a replacement for LX1031, and if the firm fails to improve convenience of dosing while maintaining safety and efficacy, commercial potential could be limited.

Recent stock offerings have been very dilutive for Lexicon shareholders, and ongoing development without a partner will eventually burn through the firm's new cash hoard. Read more

Management

We give Lexicon standard marks for stewardship, as a qualified management team has brought the firm's pipeline closer to the market, despite diluting shareholders and bringing in private equity firm (and now majority shareholder) Invus to fund this Read more

Profile

Lexicon Pharmaceuticals is a biopharmaceutical company that uses mouse genetics to discover the function of genes and find promising drug targets. Lexicon then designs and Read more