Lexicon (LXRX) Settles With Sanofi For $260M, Shares Rally
Zacks Investment Research | Sep 10, 2019 09:46PM ET
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) announced that it will regain re-gain global rights to diabetes drug, Zynquista (sotagliflozin), and will receive $260 million from Sanofi (NASDAQ:SNY) per the terms of a deal related to termination of their alliance for the product’s development. The deal includes settlement of all related disputes with Sanofi. The termination of the alliance between the companies stands effective from Sep 9.
The total amount includes $208 million in upfront payment and the rest of the amount will be paid by Sanofi over the next 12 months. This payment will significantly boost Lexicon’s cash resources.
Shares of Lexicon surged 30.2% in after-market trading on Sep 10, following the announcement. However, the company’s shares have declined 74.1% so far this year compared with the issued a complete response letter (“CRL”) to the new drug application seeking approval for Zynquista for a similar indication.
Although investors cheered the payment from Sanofi, the loss of a strong partner is likely to have an unfavorable impact on Lexicon going forward. Following the termination, Lexicon may face hiccups with the launch of Zynquista in Europe, which otherwise could have been smooth given strong presence of Sanofi in that market. The company is currently looking for partnerships for development, regulatory approval and commercialization of Zynquista.
We note that the diabetes segment is a competitive space. In March, AstraZeneca’s (NYSE:AZN) SGLT2 inhibitor, Forxiga, received approval in EU for type I diabetes. However, the drug has received CRL in the United States. Meanwhile, several companies are also developing SGLT2 inhibitor, like J&J’s (NYSE:JNJ) Invokana and Eli Lilly’s Jardiance, targeting type II diabetes.
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