Lexicon dips as analyst questions diabetes drug

June 11, 2013

NEW YORK (AP) -- Shares of Lexicon Pharmaceuticals Inc. slipped Tuesday after a Morgan Stanley analyst downgraded the stock based on his view of its experimental diabetes drug LX4211.

THE SPARK: Analyst David Friedman lowered his rating on the shares to "Underweight" from "Equal-weight" and his price target to $1.50 per share from $2. He said LX4211 is about four years away from the market, and while annual sales could eventually reach $1 billion, the drug is not worth very much for Lexicon shares right now. He added that LX4211 will face a lot of competition from similar drugs, including Johnson & Johnson's Invokana, and it may not stand out from those products.

Friedman expects peak sales of $1 billion for LX4211 in 2026.

THE BIG PICTURE: Lexicon is based in The Woodlands, Texas. It has no approved products. Its most advanced drug is telotristat, a treatment for a condition called carcinoid syndrome, which causes severe diarrhea and can lead to malnutrition, heart disease, and death. LX4211 is its next most advanced product, and it is in mid-stage clinical testing.

Lexicon is also studying treatments for irritable bowel syndrome, ulcerative colitis, rheumatoid arthritis, and glaucoma.

SHARE ACTION: Shares of Lexicon Pharmaceuticals lost 4 cents to $2.33 in afternoon trading, after dropping as low as $2.17 earlier in the session. The stock has traded between $1.55 and $3.28 in the past 52 weeks.