LXRX Chart

Shares of Lexicon Pharmaceuticals (NASDAQ:LXRX), a clinical-stage biopharmaceutical company focused on the development of small-molecule drugs, exploded higher by 109% in 2015, based on data from S&P Capital IQ, thanks to two major catalysts.

The first break for Lexicon Pharmaceuticals came in early August, when it reported positive top-line results for a late-stage study known as TELESTAR for experimental drug telotristat etiprate. Telotristat etiprate is an oral drug designed for patients with carcinoid syndrome that, in clinical trials, showed a statistically significant reduction in bowel movements when added to current standards of care at both the 250 mg and 500 mg dose. The promising results certainly caught Wall Street and investors off guard, and telotristat etiprate looks to become Lexicon's first commercial product, if it's approved by the Food and Drug Administration.

Image source: Centers for Disease Control and Prevention.

Lexicon's second big break came in November, when it announced that its promising type 1 and type 2 diabetes therapy sotagliflozin had found a licensing partner. Under the terms of the announced deal, Sanofi (NASDAQ:SNY) agreed to pay Lexicon $300 million upfront, removing near-term cash concerns for Lexicon, as well as providing the opportunity to earn an additional $1.4 billion in development, regulatory, and sales milestone payments. Sanofi plans to head the development of sotagliflozin as it pertains to type 2 diabetes (this represents 90%-95% of all diabetes cases), while Lexicon will be responsible for trials pertaining to type 1 diabetes.

What makes sotagliflozin so unique, and the likely reason Sanofi latched on with such a potentially large dangling carrot, is its operating pathway. Sotagliflozin is an SGLT1 and SGLT2 inhibitor. SGLT2 inhibitors like Invokana, Jardiance, and Farxiga have already been approved by the FDA, and they've not only helped improve glycemic balance in type 2 diabetes patients, but they've also induced weight loss and lowered systolic blood pressure for these patients. SGLT2 inhibitors work by blocking glucose absorption in the kidneys and allowing patients to remove excess glucose through their urine. SGLT1 works via the gastrointestinal tract, doing much the same (i.e., inhibiting glucose absorption in order to control a patients' blood sugar level). The combination of SGLT1 and SGLT2 into one drug is intriguing, and it could very well lead to blockbuster status if approved.

What can shareholders look forward to in 2016? The big catalyst looks to be the release of phase 3 data in two out of three type 1 diabetes trials, with the third expected early in 2017. If all goes well, Lexicon could be set for another outstanding performance in 2016.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.