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Why Lexicon Pharmaceuticals Stock Popped by Almost 6% Today

Source The Motley Fool

Key Points

He feels it's a clear buy at the current price.
In his view, sotagliflozin has excellent potential to win FDA approval for a new indication.
10 stocks we like better than Lexicon Pharmaceuticals ›

An analyst's rather bullish initiation of coverage shone a light on Lexicon Pharmaceuticals (NASDAQ: LXRX) stock on Monday. Investors clearly took notice of this, as they piled into the company's stock to send it to a gain of nearly 6% on the day.

A heartening evaluation

Before market open, Cantor Fitzgerald prognosticator Steve Seedhouse flagged Lexicon as an overweight (buy, in other words) at a price target of $8 per share. That's more than four times the stock's current level of $1.90.

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Person in a lab gazing into a microscope.

Image source: Getty Images.

According to reports, in his inaugural Lexicon analysis, Seedhouse waxed bullish about the company's progress toward earning a new indication for sotagliflozin.

The drug, which has Food and Drug Administration (FDA) approval to treat heart failure and related risks under the brand name Inpefa, is currently being developed for other indications, including hypertrophic cardiomyopathy (HCM; thickening of the heart muscle). Lexicon is currently in late-stage development for this effort.

Positive indications

Seedhouse wrote in his Lexicon take that sotagliflozin works via a different mechanism than other drugs treating HCM. As such, if approved, it will complement instead of compete with them. Heart afflictions are common ailments in this country and around the world, so the potential for the drug is considerable if it wins regulatory green lights for this indication.

That said, no drug is guaranteed approval, no matter how it might have performed in the past. Lexicon is an attractive stock, to be sure, but like any small pharmaceutical and biotech company, its equity carries a higher-than-average degree of risk.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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