Shares of Lexicon Pharmaceuticals (LXRX) jumped about 11% higher by afternoon trading on news that Phase II trials for its compound telotristat etiprate (LX 1032) in the treatment of carcinoid syndrome were successful, and that the company was ready to move onto Phase III trials (which began the registration process today - right after Phase II results gave Lexicon the green light).
Telotristat etiprate has FDA fast-track and orphan drug designation for carcinoid syndrome, and is looking at a very likely FDA approval given that Phase III trials also prove the drug's worth.
We're going to see the Phase II data presented at the next North American Neuroendocrine Tumor Society, which is being held on October 13th in San Diego (that's tomorrow, which is a Saturday). While some investors may be interested in chasing telotristat around, it's generally agreed that Lexicon's flagship product (known as "LX4211", the first dual inhibitor of SGLT1 and SGLT2) is going to have a much bigger impact on the company's prospects.
This is because LX4211 is a diabetes drug. Diabetes is an already-enormous drug market that is expected by some to balloon to a monstrous $114 billion by 2016. With a market that big, its obvious that any blockbuster diabetes product would be hugely profitable. That seems to be the hope for Lexicon investors, anyway, given that the company is trading at a net worth ~$1.3 billion.
LX4211 finished Phase II trials, which announced results on June 25th and caused a ~30% rally in the stock (which subtracts the ~10% or so that is being caused by today's Phase II results for telotristat etiprate.
LXRX will surely enjoy more upside if we see telotristat perform in interim Phase III results, but I'd be far more worried (or hopeful) about LX4211's Phase III trials. These are set to begin in early 2013, and will garner attention from the market.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.