Beautiful Efficacy, Wrong Pill

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Lexicon Pharmaceuticals (Nasdaq: LXRX  ) presented beautiful data yesterday showing a pill it gave rheumatoid arthritis patients decreased symptoms in 49% of patients.

Shares plunged, although they bounced back to end the day down just 6%.

The problem? The pill it gave patients was a dummy pill with no active ingredient. The placebo effect strikes again.

By comparison, the placebo group in a trial testing Pfizer's (NYSE: PFE  ) rheumatoid arthritis drug, tasocitinib, only reported a 26.7% response rate using the same measurement.

The amazing effect that taking a pill had on patients' minds even beat the lowest two doses of the drug LX2931 that Lexicon was actually testing. The 70 mg and 110 mg doses only scored 44% and 41% response rates, respectively.

The 150 mg dose did beat placebo with a 60% response rate. Looked at alone, that's not too shabby -- Pfizer's tasocitinib produced a 59.8% and 65.7% at two doses -- but given the high placebo rate, it's not clear how much of that 60% is just patients thinking they feel better.

About the only good news for Lexicon is that the side effects seem to be fairly benign. Increasing the dose further could get it over the placebo hurdle should it show up in a later trial.

But going through another phase 2 trial to work out the dose would just put it further behind. Pfizer's tasocitinib has already completed one phase 3 trial; Rigel Pharmaceuticals (Nasdaq: RIGL  ) and Incyte (Nasdaq: INCY  ) are also further ahead, having completed phase 2 trials for their respective drugs. The oral rheumatoid arthritis market is heating up, and latecomers may have trouble entering the market if more than one of those drugs gets established quickly.

Lexicon says it will start looking for a partner, but I'm not sure which big pharma company would be interested in jumping in somewhat late to the game on a drug that doesn't have clear efficacy yet. Pfizer is probably out. Similarly, AstraZeneca has dibs on Rigel's R788, and Eli Lilly (NYSE: LLY  ) licensed Incyte's INCB28050, so both of those probably aren't going to pick up another one.

Lexicon may end up having to run a new trial on its own before it can attract a partner. And if that's the case, a 6% decrease for the stock likely isn't severe enough.

Interested in keeping track of Lexicon as it sorts out its data mess? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on Lexicon.

Motley Fool Rule Breakers is always on the hunt for hot drug stocks and other cutting-edge picks. Click here to see all of our latest discoveries with a free 30-day trial subscription.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is a Motley Fool Inside Value recommendation. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1401341, ~/Articles/ArticleHandler.aspx, 10/23/2016 4:10:06 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 day ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
INCY $87.72 Down -0.77 -0.87%
Incyte CAPS Rating: **
LLY $78.25 Down -0.49 -0.62%
Eli Lilly and Co. CAPS Rating: ***
LXRX $16.03 Down -0.16 -0.99%
Lexicon Pharmaceut… CAPS Rating: **
PFE $32.18 Down -0.36 -1.11%
Pfizer CAPS Rating: ****
RIGL $2.59 Down -0.14 -5.13%
Rigel Pharmaceutic… CAPS Rating: ***