Investors may know by the end of Thursday if Lexicon Pharmaceuticals Inc. will have a second drug ready to reach the market or if the small-cap biotech company needs to go back to the drawing board.
Lexicon and its partner Sanofi will face questions as advisers to the Food and Drug Administration meet to consider one of the first new treatments intended for type 1 diabetes since insulin became a medication almost a century ago. The once-a-day pill sotagliflozin, with the proposed brand name of Zynquista, would be used in conjunction with insulin to improve blood sugar control.
Briefing documents released ahead of the meeting in Silver Spring, Maryland, show that safety is likely to be at the center of any debate. The SGLT-2 inhibitor class of drugs, to which sotagliflozin belongs, are tied to a potentially life-threatening side effect called diabetic ketoacidosis (DKA), where the body is flooded with ketones. On-market SGLT-2s are currently approved for type 2 diabetes, not type 1, where DKA is more common and more severe. Lexicon’s drug also inhibits SGLT-1, which the developers say makes it unique from the other therapies.
“While all patients with type 1 diabetes may to some degree be at risk for DKA, sotagliflozin therapy clearly increases that risk, and the risk may be unpredictable,” FDA staff wrote in a report on Tuesday.
JPMorgan analyst Jessica Fye, who has the only sell rating on Lexicon, wrote that the report’s focus on DKA was “as expected.” She was more concerned about the FDA’s cautious stance on sotagliflozin’s benefits beyond reducing blood sugar. Fye’s $10 price target is the lowest on Wall Street for Lexicon, according to data compiled by Bloomberg.
Lexicon, based in The Woodlands, Texas, may have a 50/50 shot of winning approval this year, although “a delay appears increasingly probable,” Gabelli analyst Kevin Kedra wrote. He saw the language in the briefing documents as neutral, with some cautious signals. Kedra pointed to the lack of any discussion about a potential REMS, or risk evaluation and mitigation strategies, program. “It appears that the FDA is still trying to determine how significant DKA is as a side effect,” he said.
“The government shutdown could greatly impede that work or at least serve as a convenient scapegoat for a delayed decision,” Kedra said.
Of the DKA risk, the drug’s developers are “confident we’ll find a way to manage it,” said Sanofi’s medical head of diabetes, Rachele Berria. Patients can monitor ketones effectively to make sure they don’t develop the side effect, and the discussion this Thursday will likely be around how sotagliflozin can be delivered as safely as possible, Lexicon Chief Medical Officer Pablo Lapuerta said in a phone call before the documents were released.
Wedbush’s Liana Moussatos, with a Street-high target of $42, has been more bullish, saying “sotagliflozin is likely to be the first approved oral anti-diabetic drug to be used in combination with insulin,” in a November note before the panel was first announced. If approved, sotagliflozin sales could reach over $4 billion by 2024, she estimates.
In the U.S., roughly 1.25 million patients have the type 1 form of the disease, where the body doesn’t produce any insulin at all, in contrast to the more common type 2 diabetes. An FDA decision on Zynquista is expected by March 22. While the agency often follows the guidance of the advisory committee, it is not required to do so.
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