Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Lexicon Pharmaceuticals Lost 28.8% in January

By Maxx Chatsko – Updated Apr 19, 2019 at 10:57AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's lead drug candidate got thrown into a whirlwind of uncertainty.

What happened

Shares of Lexicon Pharmaceuticals (LXRX -5.16%) fell nearly 29% last month, according to data provided by S&P Global Market Intelligence. The company announced that its lead drug candidate, Zynquista, didn't muster a majority of support from an advisory committee at the U.S. Food and Drug Administration. The adjuvant therapy for type-1 diabetes didn't get outright rejected, either. Rather, the vote ended in a stalemate, with eight panelists seeing a net benefit, and the other eight panelists taking a more cautious approach. 

That plunged the drug candidate's future into uncertainty -- taking the stock with it. Shares of Lexicon Pharmaceuticals had gained nearly 18% since the start of the year, until the advisory committee's impasse was reported. They tumbled nearly 39% from the day the news was reported to the end of the month.

A red arrow on a declining chart

Image source: Getty Images.

So what

The stalemate from the advisory committee doesn't necessarily seal the fate of Zynquista. Regulators at the FDA will ultimately decide whether or not the drug candidate will hit the market, although they typically take the panel's recommendation into consideration. Even then, the FDA could ask Lexicon Pharmaceuticals to conduct further study and collect more data. While that might delay the drug's potential market launch, it would be a better outcome than an outright rejection.

Wall Street analysts and investors will be watching. The drug was expected to have blockbuster potential (read: annual sales of $1 billion or more) if it received marketing approval as an adjuvant therapy in both type 1 and type 2 diabetes. Considering the company reported an operating loss of $91 million through the first nine months of 2018, adding such a high-potential commercial product to the portfolio would help alleviate concerns over the financial flexibility of the business. 

Check out the latest Lexicon earnings call transcript.

Now what

Investors have suffered through a pretty rough stretch lately. Lexicon Pharmaceuticals stock peaked in July 2018 at nearly $13 per share, but shares currently trade at just under $5 apiece. While all is not lost for Zynquista, the new uncertainty regarding the next steps for the expected blockbuster will likely weigh on the stock for the foreseeable future.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lexicon Pharmaceuticals Stock Quote
Lexicon Pharmaceuticals
$2.02 (-5.16%) $0.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.