What happened
Shares of small-cap biotech Lexicon Pharmaceuticals (LXRX -5.85%) fell by nearly 15% during the first four days of trading this week, according to data provided by S&P Global Market Intelligence. The big loss came after the company announced a $125 million stock offering on Thursday.
Lexicon's capital raise consists of both a public stock offering worth approximately $62.2 million, as well as a private placement valued at $62.8 million. The company intends to use the funds to support the commercial launch of its newly approved heart failure drug Inpefa.
So what
Last week, the Food and Drug Administration approved Inpefa as a once-daily oral preventative treatment for adults with heart failure or type 2 diabetes/chronic kidney disease at risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure.
The drug is poised to launch in a highly competitive space filled with blockbuster medicines from industry heavyweights like Boehringer Ingelheim, Eli Lilly, and AstraZeneca. Still, Lexicon's management appears confident that Inpefa can carve out a profitable niche.
At its peak, Wall Street expects the heart failure medicine to generate roughly $300 million a year in sales. That's a fairly decent commercial opportunity for a company with a $513 million market cap at the time of this writing.
Now what
Is Lexicon's stock a buy on this weakness? It all depends on your confidence level in the biotech's ability to market Inpefa. Heart failure is an enormous drug market. But Lexicon will have to compete against a slew of established competitors. As a result, there's a fair amount of uncertainty in regards to what will happen next for this small-cap pharma company.
