Biotech companies yet to generate revenue are some of the riskiest growth stocks out there, but if you can invest in one while it's taking off, your portfolio will thank you.

On that note, according to analysts on Wall Street, shares of Lexicon Pharmaceuticals (LXRX 5.71%) could rise by over 162% this year -- and they're already up by nearly 40%. And the company hasn't even launched its first medicine yet, though that could soon change if management has its way.

Let's think about whether this stock could be a smart pickup right now.

Catalysts are coming up, but success is far from assured

Lexicon has a couple of programs that could send its shares flying upward, both of which are based on its molecule called sotagliflozin. One program is for heart failure in people with diabetes, while the other is simply for type 1 diabetes. Both programs have completed their phase 3 clinical trials.

At present, it looks as if the diabetes-only program is dead in the water. Regulators gave it the thumbs-down in early 2019 and have repeatedly rebuffed Lexicon's attempts to appeal the decision.

But the company should be hearing back from regulators regarding the heart failure program in May, which would put it on track for commercialization shortly thereafter. That would generate recurring revenue for the first time in company history. It's unclear whether regulators will be more skeptical regarding the heart failure project as a result of their prior rulings regarding the diabetes project, since both are based on sotagliflozin.

Regardless, Lexicon also has a trio of other medicines in development that are in phase 2, which could provide additional opportunities for growth in the medium term.

The analysts are calling for Lexicon to bring in $62.1 million in sales in 2024, on average, assuming the heart failure program gets the green light from the Food and Drug Administration (FDA). That would doubtlessly send the stock toward blast-off. But the consequences of getting refused might also be quite significant for shareholders.

Right now, the biotech has $138.3 million in cash and $55.2 million in debt, and 2022's total expenses were $100.9 million. If the FDA has issues with the sotagliflozin-for-heart-failure candidate, Lexicon will still have enough money in the bank to keep the lights on for more than a year to troubleshoot, which is likely sufficient time to address problems that don't require additional clinical trials to resolve.

If, at the end of its cash runway, there's still no sign of a drug approval in sight, however, it could be curtains for Lexicon, because lenders will be loath to issue new loans to a business with few avenues for repayment.

The risk might be worth the upside

Lexicon's near term is very much a common setup for late-clinical-stage biotech companies in terms of the balance between risk and reward.

While an investment in Lexicon now is significantly less risky than an investment when the candidate was at an earlier stage of its clinical trial, the stock is by no means a safe pick. But for investors who already have a well-diversified portfolio and who are hungry for exposure to massive growth, it fits the bill quite well, and it has the added benefit of the major fork in the road coming up soon.

Of course, if the product whiffs with the FDA, you're going to lose a lot of your investment, likely to the tune of 30% in the span of several hours. Don't rush to buy Lexicon stock if that prospect frightens you. If you do decide to invest, be sure to size your position conservatively so you don't lose too much money if things go sideways.

Furthermore, it could pay to avoid selling even if the stock crashes. Remember, a rejection from the FDA isn't the end of the line; the biotech can appeal the decision, submit new analyses of clinical evidence, or adjust its filings to cater to what regulators want to see. And given that none of the sotagliflozin trials failed due to lack of efficacy, there's a solid chance Lexicon is sitting on a winner.