Why Lexicon Pharmaceuticals Inc. Shares Exploded Higher

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What: Shares of Lexicon Pharmaceuticals (NASDAQ: LXRX  ) , a clinical-stage biopharmaceutical company geared toward treating a wide array of human diseases, advanced as much as 34% after reporting positive clinical data on LX4211 for the treatment of type 2 diabetes in patients with moderate-to-severe renal impairment.

So what: According to the press release, LX4211, which is an inhibitor of both sodium glucose transporters SGLT1 and SGLT2, met its primary endpoint in a proof-of-concept trial by reducing elevated glucose levels after a meal. In addition to providing "clinically meaningful and statistically significant reductions in post-prandial glucose," LX4211 also helped raise GLP-1 levels. This is important as GLP-1 is a hormone that helps control glucose levels and appetite in the body.

Now what: There are 25.3 million diabetics in this country and another 79 million that are pre-diabetic -- and 90% of those cases will turn out to be type 2 diabetes, so this is certainly encouraging news. Of those cases, about 30% involve some level of renal impairment, giving Lexicon a wide potential target audience. The only semi-similar pathway of action currently approved in the U.S. is Johnson & Johnson's (NYSE: JNJ  ) Invokana, which is strictly an SGLT2 inhibitor. But if Lexicon's drug in mid- and late-stage trials exhibits similar effectiveness in terms of glucose control, weight-loss, and A1C reduction, it, too, could become a potential hit. I firmly believe that SGLT1 and SGLT2 therapies have the potential to make DPP-4 inhibitors practically obsolete within three years and this would certainly be another experimental candidate worth keeping a close eye on.

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