With positive top-line phase III data for its carcinoid-syndrome therapy boosting shares by 61 percent, Lexicon Pharmaceuticals Inc. was still undervalued in the view of some analysts, as Wall Street awaits late-stage data on the firm's larger opportunity: a therapy for type I diabetes, and possibly type 2.

The Woodlands, Texas-based Lexicon's stock (NASDAQ:LXRX) closed Monday at $13.60, up $5.16, as company backers cheered news that the pivotal phase III trial known as Telestar met its primary endpoint. "Now that we have these data, we will go through our final clean-up process and get ready for a meeting with the [FDA]," CEO Lonnel Coats told investors during a conference call. "I suspect that will [happen] in the very near term, over the next couple of months. We fully expect to try to stay on our schedule, which we communicated before, to file a new drug application by the end of the first quarter of 2016."

Results show telotristat etiprate, a small-molecule tryptophan hydroxylase inhibitor developed by the company, worked in cancer patients with carcinoid syndrome whose condition was not adequately controlled by standard of care somatostatin analogs. The compound could become the first oral treatment and the first new player in more than 16 years for carcinoid syndrome, a rare disease that affects patients with neuroendocrine tumors that originate in the gastrointestinal tract and spread to the liver or other organs. It's characterized by debilitating diarrhea, facial flushing, abdominal pain, heart-valve damage and other serious consequences.

Cowen and Co. analyst Phil Nadeau pointed out that the company did not disclose the magnitude of benefit in the primary endpoint, though at week 12 the reduction in the average number of daily bowel movements was 35 percent, 29 percent, and 17 percent, respectively, for patients given 500 mg of telotristat, 250 mg of telotristat, and placebo. "Lexicon did note that the magnitude of placebo-adjusted improvement was lower during earlier weeks of the study, as telotristat's benefit increased over time, implying that the magnitude of benefit on the primary endpoint was less than that disclosed for week 12," Nadeau wrote in a research report. Data on secondary endpoints – change from baseline in 5-hydroxyindoleacetic acid levels, flushing, and abdominal pain – were not made known either, though they were said to be "consistent with the data from the primary endpoint," he added, with safety outcomes similar to phase II results. The 250-mg dose resembled placebo more than the 500-mg dose in this respect, especially in gastrointestinal discomfort and mood. (See BioWorld Today, Oct. 15, 2012.)

Pablo Lapuerta, Lexicon's chief medical officer, said during the call that in phase II experiments telotristat (which reduces serotonin) was well tolerated at all doses. "We had one patient who reported depression and yet it was mild, and she chose to have treatment with a selective serotonin reuptake inhibitor and continued on therapy with telotristat because of the benefits it was providing," he said. "She went into long-term treatment and did very well. The important thing is that patients are continuing on therapy," with no serious adverse events or discontinuations due to problems, he added.

TYPE 1 DIABETES MARKET WORTH $1B

Nadeau expects the compound to be launched worldwide in 2017, and generate sales by 2020 of $395 million. He called Lexicon "fairly valued for its potential." Morningstar analyst Karen Anderson, however, said the firm deserves more credit even after Monday's run-up. "We're maintaining our fair value estimate at $19 per share, which includes a 60 percent probability of approval for the drug," she wrote in a research report. "We expect that full data could be presented later this year [during a scientific meeting], at which point we may raise our probability of approval and valuation."

CEO Coats said that "with these kinds of results, you try to get to the conference as fast as possible" so they can be presented. "We leave that up to the conference organizers as to whether or not we are in time to be able to achieve the objective, but I would simply say look for these results at a conference very soon." The European Society for Medical Oncology meeting takes place in late September.

Formerly known as LX1032, telotristat landed Lexicon $23 million up front as part of a potential $145 million licensing arrangement with Paris-based Ipsen SA to commercialize the drug outside North America and Japan. (See BioWorld Today, Oct. 23, 2014.)

Lexicon's type I diabetes candidate sotagliflozin, in phase III trials and due to yield data by the end of next year, boasts a dual mechanism of action as an SGLT-1/SGLT-2 inhibitor which could give it an edge over SGLT-2 inhibitors such as London-based Astrazeneca plc's Farxiga (dapagliflozin), as well as Invokana (canagliflozin), from Johnson & Johnson, of New Brunswick, N.J., especially in patients with renal impairment. Lexicon will need to establish a partnership to go after the more lucrative type 2 diabetes market, but sales in type 1 disease could exceed $1 billion globally, Anderson estimated. "Focusing on type 1 diabetes significantly reduces costs of development for Lexicon (under $100 million for the first two phase III trials), but the firm will still need to conduct a larger safety study to gain approval," she noted. "Hypoglycemia fears and weight gain prevent these patients from controlling their blood sugar adequately with insulin, and sotagliflozin appeared to reduce mealtime insulin needs and led to better blood sugar control and weight loss (without increasing hypoglycemia risk) in an early stage clinical study."