2012-10-12 17:03:11 -

By Jake King

Two pertinent announcements from Lexicon Pharmaceuticals (NASDAQ:LXRX) are
giving shares a 7% lift on Friday morning. The company reported top-line data
from the latest Phase II trial of telotristat etiprate (LX1032) in Carcinoid
Syndrome (CS), and initiated a 105-patient Phase III trial testing the drug on
patients that are refractory to somatostatin analog therapy, the current
standard-of-care and only approved treatment for CS.

With the initiation of a Phase III trial, LX1032 just became the company's most
advanced compound, followed by LX4211, a SGLT-1/SGLT-2 inhibitor for the
treatment of Type-2 diabetes. Analysts are focusing primarily on the opportunity
in LX4211, as quality diabetes treatments represent a major market opportunity.
Bristol-Myers Squibb (NYSE:BMY) purchased Amylin Pharmaceuticals for $7B this
year in pursuit of the company's Type-2 diabetes franchise. The uniqueness   of
the dual-inhibitor makes LX4211 an appealing target to large pharmaceuticals,
and a partnership seems possible in the near future as the total diabetes care
market continues to grow, expected to top $100B by 2016. BMY, Johnson and
Johnson (NYSE:JNJ), and Eli-Lilly (NYSE:LLY) all have SGLT-2 inhibitor compounds
in late development, validating the mechanism of LX4211, and Lexicon''s
candidate could be differentiated with the dual activity and potentially lower
GI side effects. The potential for telotristat etiprate should not be
overlooked, however, as the drug may be able to satisfy a major unmet medical
need. Carcinoid Syndrome patients have only one option in treatment,
somatostatin analog therapy. Bears point out that the treatment is ruled largely
by generics, severely inhibiting LX1032's ability to displace the existing
products. Almost all patients eventually become refractory to the therapy,
however, leaving LX1032 as the only potential product for patients who become
resistant. The FDA seems to agree, as telotristat etiprate received Fast-Track
designation, as well as Orphan Drug status, indicating that the regulatory body
recognizes the medical necessity. Carcinoid syndrome is a chronic condition
caused by neuroendocrine tumors, often in the GI tract, and can result in
malnutrition and heart disease in the long-term.

Notably, Lexicon has sufficient cash and equivalents, plus short-term
investments, to continue operating for at least the next year without a capital
raise. The company plans to initiate a Phase III trial for LX4211 in early
2013, and while it is still far from marketing either product, the stock may see
more action as partnership discussions continue and excitement builds for the
LX4211 and LX1032 trials.

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