Lexicon, Sanofi Agree to Diabetes Drug Pact

   By Ezequiel Minaya

Lexicon Pharmaceuticals Inc. agreed to a licensing pact in which Sanofi would pay $300 million up front, with the potential for $1.4 billion more, for rights to a developmental diabetes treatment.

Following the news, shares of Lexicon surged as much as 38%. The stock has since come off its highs, rising 22% to $12.86 in midday trading. Separately, Lexicon reported a narrower-than-expected loss for its third quarter.

The deal with Sanofi involves sotagliflozin, an investigational oral drug that is part of a class that inhibits sodium-glucose transporters 1 and 2. This class of drugs prevents the kidney from absorbing blood sugar, or glucose, as urine is formed. As a result, more glucose is excreted, which helps keep blood sugar down.

Other SGLT-2 inhibitors include Invokana from Johnson & Johnson, Farxiga from AstraZeneca PLC and Jardiance from Eli Lilly & Co. and Boehringer Ingelheim GmbH.

Lexicon's sotagliflozin is being studied in two late-stage trials for type 1 diabetes, with results expected during the second half of 2016. A late-stage trial for type 2 diabetes is expected to begin in 2016.

Sanofi is a significant player in the diabetes market but has seen such sales decline recently. Diabetes sales, which account for about 20% of the company's revenue, have fallen because Sanofi has been forced to offer larger discounts to the government, insurers and health-care providers to push its products on the U.S. market. Sanofi said recently that it expected diabetes sales to decline every year by 4%-8% at constant exchange rates until 2018.

Lexicon said the extra $1.4 billion is dependent upon the company reaching certain development, regulatory and sales milestones. Lexicon also is entitled to royalties of net sales. In response, Sanofi obtains an exclusive world-wide license to develop, manufacture and commercialize sotagliflozin.

For the third quarter, Lexicon posted a loss of $35.3 million, or 34 cents a share, narrower than its year-ago loss of $40.5 million, or 55 cents a share. During the quarter the company cut back on research and development expenses by 4%, helping to lessen the loss in the latest quarter.

Revenue rose 35% to $566,000.

Analysts had expected a loss of 36 cents per share on $400,000 in revenue.

Write to Ezequiel Minaya at Ezequiel.Minaya@wsj.com

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(END) Dow Jones Newswires

November 06, 2015 12:39 ET (17:39 GMT)

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