What happened

Shares of Lexicon Pharmaceuticals (NASDAQ:LXRX) fell over 31% today after the company announced that an advisory committee of the U.S. Food and Drug Administration reached a stalemate when deciding whether the benefits of Zynquista outweighed the risks. The final vote was eight in favor of approval and eight against approval. The impasse means investors have no way of knowing the path forward for the drug candidate, although it isn't necessarily doomed. 

That doesn't make the added uncertainty any less painful. Some analysts expected the drug candidate, intended to help treat type 1 diabetes alongside standard insulin treatments, to have blockbuster potential. If it was approved in both type 1 diabetes and type 2 diabetes -- an indication being funded by Sanofi -- then it had the potential to hit peak sales of $1.3 billion by 2024. That might be in doubt now or, at the very least, the timeline has been pushed back. 

As of 10:56 a.m. EST, the stock had settled to a 24% loss.

A disheartened-looking man in a lab coat seated at a table with a microscope and test tubes on it.

Image source: Getty Images.

So what

It's important to note that advisory committee votes do not decide if a drug candidate is granted marketing approval, but rather provide a way for experts to weigh in on the body of clinical trial data. The decision granting marketing approval is ultimately made by regulators at the FDA, who typically follow the recommendation of an advisory committee.

So what happens in a stalemate? A tie goes to the runner, right? Not quite. The split decision injects a healthy dose of uncertainty into the future of Zynquista. The FDA could shake off the concerns of the advisory committee, request additional clinical trials be conducted to collect more data, or outright reject the application from Lexicon Pharmaceuticals requesting marketing approval.

Now what

Few things have the potential to wreck a stock quite like uncertainty. Unfortunately for Lexicon Pharmaceuticals, there's now a fair bit of uncertainty hanging over the regulatory decision for Zynquista. While the surprise advisory committee recommendation doesn't mean the FDA will reject the drug candidate's bid for marketing approval, having to run additional trials would cost millions of dollars and delay its market launch -- if that happens at all. Investors will simply have to wait for the FDA to make its marketing approval decision on March 22.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.