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Lexicon Pharma Offers 'A 2-Part Story With Upside Prospects'

LXRX, SNYNF | October 7, 2016

H.C. Wainwright has started coverage of Lexicon Pharmaceuticals, Inc. (NASDAQ: LXRX) with a Buy rating and $26 price target on potential upside from telotristat in carcinoid syndrome and sotagliflozin for type 1 diabetes.

"We would be buyers of LXRX going into the December readout of the second inTandem2 pivotal trial for sotagliflozin in type 1 diabetes and the February FDA approval decision for telotristat ethyl for carcinoid syndrome," analyst Shaunak Deepak wrote in a note.

Once FDA approves, telotristat ethyl will become Lexicon's its first commercial product. Telotristat has been shown to significantly reduce the frequency of bowel movements in patients with carcinoid syndrome who are not responding adequately to the standard of care, somatostatin analogs (SSAs).

The analyst said Lexicon will be able to efficiently market telotristat as it is targeting patients already failing SSAs.

"Further, with SSAs costing roughly $70,000 annually and eventually failing to provide adequate bowel control in half of patients, we believe Lexicon could reach peak sales in excess of $300 million," Deepak noted.

In addition, sotagliflozin, an inhibitor of both SGLT1 and SGLT2, has shown a differentiated benefit with significant improvements seen in its first pivotal trial in type 1 diabetes (T1DM). The company is set to conduct second pivotal trial in December and third trial in mid-2017.

Based on data, the analyst believes that Lexicon and Sanofi SA (ADR) (NYSE: SNY) will opt to file for T1DM approval for sotagliflozin, and could launch as early as 2019 in both lucrative and highly competitive diabetes drug market.

"Based on the stage of development, we believe Lexicon has an 80 percent chance of success with sotagliflozin in T1DM and a 60 percent chance in T2DM," Deepak added.

Shares of Lexicon Pharmaceuticals closed Thursday's regular trading at $18.50.

At last check, Lexicon was up 1.89 percent in Friday's session, trading at $18.84.

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