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(LXRX) Lexicon Pharmaceuticals, Inc. What is with all the hype??

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March 24, 2010 – Comments (16) | RELATED TICKERS: LXRX , PFE , GNVC

Recently topsecret10 brought to my attention a skeptical play called  Lexicon Pharmaceuticals, Inc. (LXRX). I noticed that it burn through cash and doesn't really make a profit. It recently also had a second of many public offerings for stock in the amount of 110 Million Dollars. The Woodlands, Texas based company has also been rummored to be a take over target. However, I cannot imagine who would want to buy all this debt? 

As quoted from topsecret10 "Look up INVUS CORP. They are a primary backer of Lexicon,and they will be buying more shares just like last time.....     TS" I have looked this corparation up and he is correct in what they have been doing. But what i do not get is that www.fool.com have Lexicon Pharm rated as a 5 star ***** and yet you can no longer add it to your caps. 

So if anyone can answer this please do.

Why can I not add it to my cap and why is it still a 5 star rating if you cannot add it to your caps? Also, why so much hype around a 5 ***** star rating if the fool.com doesn't believe in it any longer? Or is that just a perception of mine and I just missed something. Now I did buy Lexicon Pharm (Only 75 shares and 100 shares for my Dad's IRA) But that is about all the risk I want to take. So companies like (GNVC) Genvec, who also burn thorugh money and (LXRX) Lexicon Phram seem to be a good thing ?? Or is it that I am just nuts. Genvec trades way too high for its valuation and yet people seem to keep bidding it higher. LXRX according to topsecret10's statement do a sort of swing trade even though it has no real cash. Do not get me wrong I like risk and I love the underdog. But would soeone please explain to me what all the hype is about as far as LXRX goes, because I do think I am missing something. Also, why is it that (PFE)Pfiezer cannot get any legs under it? I don't know maybe its just me and I am missing the point.

 

16 Comments – Post Your Own

#1) On March 24, 2010 at 2:35 PM, expatriot08 (29.04) wrote:

Good questions! Wish I had the answers for LXRX.  I have been looking into that one as well. I thought with the recent offering they would drop lower but there seems to be plenty of buying interest.

 

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#2) On March 24, 2010 at 2:46 PM, zzlangerhans (99.74) wrote:

Lexicon is diluting because they have to raise money to purchase Symphony Icon, a separate corporate identity that was established relative to important compounds in the Lexicon pipeline. If Lexicon doesn't purchase Symphony, they lose their pipeline so they really have no choice. I haven't had time to research further about Symphony but Lexicon is off my buy list becuase of this unusual and problematic situation.

GenVec is enjoying upward momentum because of impending interim data from a pancreatic cancer trial that has been ongoing for years. If the data is good, the price will skyrocket up. If the data is bad, the share price will tank. All developmental biotechs lose money and this in and of itself is not a useful metric to determine whether the share price will rise or fall.

5-star companies that have fallen below the 1.5 price or 100M cap threshold will usually remain 5-star until bankruptcy as there is minimal incentive for green thumbers to close their losing picks, and no one can place new red thumbs.

In closing, two pieces of advice. One, do not invest in small cap biotech stocks unless you have done very intensive research into their pipeline and finances. Two, do not invest in stocks because of how many stars they have in CAPS.

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#3) On March 24, 2010 at 2:57 PM, SUPERMANSTOCKS (55.85) wrote:

I get the cap thing. I would never invest because they have 5 stars. I just found it odd and very confusing the way fool did that. So thank you for clearing that up. Smyphony Icon eh? I will look into them. Other than that I will take my risk with LXRX. It seems as if they could pay at least 50.00 sheckles, which never hurt my bottom line.

 

Also I own PFE. which is looking good today and I'm out around 19-20.00. GNVC I made money on them. But I do not like them at all.

 

Thank you for the info.

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#4) On March 24, 2010 at 3:02 PM, SUPERMANSTOCKS (55.85) wrote:

Found it.

 

http://www.symphonyicon.com/  - Smyphony Icon- it outline the drug LX is working on when you go to the site.

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#5) On March 24, 2010 at 3:21 PM, portefeuille (99.55) wrote:

06/17/07 Lexicon Pharmaceuticals Announces Two Agreements to Finance Long-Term Drug Development Strategy (pdf)

http://www.symphonyicon.com/clinicalprograms/index.htm

 

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Symphony Icon.   In June 2007, we entered into a series of related agreements providing for the financing of the clinical development of certain drug programs, including LX1031 and LX1032, along with any other pharmaceutical compositions modulating the same targets as those drug candidates.  Under the financing arrangement, we licensed to Symphony Icon, a wholly-owned subsidiary of Holdings, our intellectual property rights related to the programs and Holdings contributed $45 million to Symphony Icon in order to fund the clinical development of the programs.  We also entered into a share purchase agreement with Holdings under which we issued and sold to Holdings shares of our common stock in exchange for $15 million and we received an exclusive option to acquire all of the equity of Symphony Icon, thereby allowing us to reacquire the programs.  The purchase option is exercisable by us at any time, in our sole discretion, until June 15, 2011 at an exercise price of (a) $81 million, if the purchase option is exercised before June 15, 2010 and (b) $90 million, if the purchase option is exercised on or after June 15, 2010 and before June 15, 2011.  The purchase option exercise price may be paid in cash or a combination of cash and common stock, at our sole discretion, provided that the common stock portion may not exceed 40% of the purchase option exercise price.
 
We and Symphony Icon are developing the programs in accordance with a specified development plan and related development budget.  We are the party primarily responsible for the development of the programs. Our development activities are supervised by Symphony Icon’s development committee, which is comprised of an equal number of representatives from us and Symphony Icon. The development committee reports to Symphony Icon’s board of directors, which is currently comprised of five members, including one member we designated, two members designated by Holdings, and two independent directors whom we and Holdings selected mutually.
 
Upon the recommendation of Symphony Icon’s development committee, Symphony Icon’s board of directors may require us to pay Symphony Icon up to $15 million for Symphony Icon’s use in the development of the programs in accordance with the specified development plan and related development budget.  The development committee’s right to recommend that Symphony Icon’s board of directors submit any further funding requirements to us will terminate on the one-year anniversary of the expiration of the purchase option, subject to limited exceptions.  Through December 31, 2009, Symphony Icon’s board of directors has requested us to pay Symphony Icon $4.3 million under the agreement, all of which has been paid, and we expect that additional funding will be needed in the future.

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10.   Arrangements with Symphony Icon, Inc.
 
On June 15, 2007, Lexicon entered into a series of related agreements providing for the financing of the clinical development of certain of its drug candidates, including LX1031 and LX1032, along with any other pharmaceutical compositions modulating the same targets as those drug candidates (the “Programs”).  The agreements include a Novated and Restated Technology License Agreement pursuant to which the Company licensed to Symphony Icon, a wholly-owned subsidiary of Symphony Icon Holdings LLC (“Holdings”), the Company’s intellectual property rights related to the Programs.  Holdings contributed $45 million to Symphony Icon in order to fund the clinical development of the Programs.
 
Under a Share Purchase Agreement, dated June 15, 2007, between the Company and Holdings, the Company issued and sold to Holdings 7,650,622 shares of its common stock on June 15, 2007 in exchange for $15 million and the Purchase Option (as defined below).
 
Under a Purchase Option Agreement, dated June 15, 2007, among the Company, Symphony Icon and Holdings, the Company has received from Holdings an exclusive purchase option (the “Purchase Option”) that gives the Company the right to acquire all of the equity of Symphony Icon, thereby allowing the Company to reacquire all of the Programs.  The Purchase Option is exercisable by the Company at any time, in its sole discretion, until June 15, 2011 at an exercise price of (a) $81 million, if the Purchase Option is exercised before June 15, 2010 and (b) $90 million, if the Purchase Option is exercised on or after June 15, 2010 and before June 15, 2011.  The Purchase Option exercise price may be paid in cash or a combination of cash and common stock, at the Company’s sole discretion, provided that the common stock portion may not exceed 40% of the Purchase Option exercise price.  Lexicon has calculated the value of the Purchase Option as the difference between the fair value of the common stock issued to Holdings of $23.6 million and the $15.0 million in cash received from Holdings for the issuance of the common stock.  Lexicon has recorded the value of the Purchase Option as an asset, and is amortizing this asset over the four-year option period.  The unamortized balance of $3.1 million and $5.3 million is recorded in other assets in the accompanying consolidated balance sheets as of December 31, 2009 and 2008, respectively, and the amortization expense of $2.1 million is recorded in other expense, net in the accompanying consolidated statements of operations for each of the years ended December 31, 2009 and 2008.
 
Under an Amended and Restated Research and Development Agreement, dated June 15, 2007, among the Company, Symphony Icon and Holdings (the “R&D Agreement”), Symphony Icon and the Company are developing the Programs in accordance with a specified development plan and related development budget.  The R&D Agreement provides that the Company will continue to be primarily responsible for the development of the Programs.  The Company’s development activities are supervised by Symphony Icon’s development committee, which is comprised of an equal number of representatives from the Company and Symphony Icon.  The development committee will report to Symphony Icon’s board of directors, which is currently comprised of five members, including one member designated by the Company and two independent directors.
 
Under a Research Cost Sharing, Payment and Extension Agreement, dated June 15, 2007, among the Company, Symphony Icon and Holdings, upon the recommendation of the development committee, Symphony Icon’s board of directors may require the Company to pay Symphony Icon up to $15 million for Symphony Icon’s use in the development of the Programs in accordance with the specified development plan and related development budget.  The development committee’s right to recommend that Symphony Icon’s board of directors submit such funding requirement to the Company will terminate on the one-year anniversary of the expiration of the Purchase Option, subject to limited exceptions.  Through December 2009, Symphony Icon’s board of directors has requested the Company to pay Symphony Icon $4.3 million under this agreement, all of which has been paid through December 31, 2009, and management expects that additional funding will be needed in the future.
 
Lexicon has determined that Symphony Icon is a variable interest entity for which it is the primary beneficiary.  This determination was based on Holdings’ lack of controlling rights with respect to Symphony Icon’s activities and the limitation on the amount of expected residual returns Holdings may expect from Symphony Icon if Lexicon exercises its Purchase Option.  Lexicon has determined it is a variable interest holder of Symphony Icon due to its contribution of the intellectual property relating to the Programs and its issuance of shares of its common stock in exchange for the Purchase Option, which Lexicon intends to exercise if the development of the Programs is successful.  Lexicon has determined that it is a primary beneficiary as a result of certain factors, including its primary responsibility for the development of the Programs and its contribution of the intellectual property relating to the Programs.  As a result, Lexicon has included the financial condition and results of operations of Symphony Icon in its consolidated financial statements.  Symphony Icon’s cash and cash equivalents have been recorded on Lexicon’s consolidated financial statements as short-term investments held by Symphony Icon.  The noncontrolling interest in Symphony Icon on Lexicon’s consolidated balance sheet initially reflected the $45 million proceeds contributed into Symphony Icon less $2.3 million of structuring and legal fees.  As the collaboration progressed, this line item was reduced by Symphony Icon’s losses, which were $10.5 million, $20.0 million and $12.4 million in the years ended December 31, 2009, 2008 and 2007, respectively. The reductions to the noncontrolling interest in Symphony Icon have been reflected in Lexicon’s consolidated statements of operations using a similar caption and has reduced the amount of Lexicon’s reported net loss.  Through December 31, 2009, Lexicon has not charged any license fees and has not recorded any revenue from Symphony Icon, and does not expect to do so based on the current agreements with Symphony Icon and Holdings.
 
As discussed in Note 3, Recent Accounting Pronouncements, Lexicon has determined that upon adoption of SFAS 167 on January 1, 2010, Lexicon will no longer be the primary beneficiary of Symphony Icon, and therefore will no longer include the financial condition and results of operations of Symphony Icon in its consolidated financial statements.

...

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(from here)

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#6) On March 24, 2010 at 3:26 PM, portefeuille (99.55) wrote:

So this might explain the timing, as zzlangerhans wrote above ...

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The purchase option is exercisable by us at any time, in our sole discretion, until June 15, 2011 at an exercise price of (a) $81 million, if the purchase option is exercised before June 15, 2010 and (b) $90 million, if the purchase option is exercised on or after June 15, 2010 and before June 15, 2011.

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#7) On March 24, 2010 at 3:35 PM, SUPERMANSTOCKS (55.85) wrote:

All the info we can get. However, it does sound like a mess. I do like the drugs LXRX is attempting ot develop. One of which could have helped a family member about 18-20 years ago. My point was to understand mostly. However, it was also to post somethining in which it could help others.

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#8) On March 24, 2010 at 4:12 PM, SUPERMANSTOCKS (55.85) wrote:

Thank you for the info guys. Keep it coming if you have more

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#9) On March 24, 2010 at 4:37 PM, topsecret09 (38.81) wrote:

  Invus corperation does not make big bets on  losing propositions. I was hoping that the stock would drop to the $1.15 offering,but It looks like It Is trying to establish a new trading range just above this price. I am patiently waiting to buy more. While the dillution Is a negative,they now have quite a bit of cash to further their drug development programs. The risk /reward favors the reward side on this stock under a buck and a half....  You could also see a reverse split on this one In the future,,,,   TS

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#10) On March 24, 2010 at 4:47 PM, SUPERMANSTOCKS (55.85) wrote:

I am not wanting a reverse split. I am already facing that with ETFC. I do want it to move as close to 1.74- 1.80 as I can get it. That would make me some quick money as well as my Dad

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#11) On March 24, 2010 at 5:02 PM, topsecret09 (38.81) wrote:

 Any reverse split would probably not occur for awhile, and If It does reverse I don't see that as a net negative at all...  I bought International Remote Imaging (IRIS)  long ago at 12 1/2 cents a share. They reversed 1 for 5....  I sold the stock some years later at $22.00....    TS

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#12) On March 24, 2010 at 7:59 PM, SUPERMANSTOCKS (55.85) wrote:

So how do you feel it would benefit any of us? (The reverse split). I see it as a negative. But that is only me so far.

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#13) On March 24, 2010 at 8:53 PM, SUPERMANSTOCKS (55.85) wrote:

LXRX

After Hours: 1.45 +0.01 (0.69%)

Not a huge move but its the one I want

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#14) On March 25, 2010 at 10:29 AM, cwyllie (< 20) wrote:

Well, can't say I have done the research on LXRX but I know GNVC inside and out, they are one of my accounts here in Germantown MD and I have been to the company many times.  GNVC is a good but because they have a pipeline of excellent candidates and have the attention of Novartis, NIH and many other major players who are investing heavily in their adenovector  technology.  This company has dozens of US Patents.  TNFerade is in its stage 3 clinical trials and when they get good news here in a couple weeks, you will see it likely pop like HGSI did when they got their news on the Lupus drug.  Why the activity, HGSI went from$1.32 to $31.62 and GNVC has a deeper pipeline with more potential.  You could have invested in GNVC a year ago for sub $1.00 and now you'd be sitting pretty, GNVC is likely to be riding in the $7.00 to $10.00 range in a month or or so and the players that know the industry are in already (the founder of MedImmune recently bought in and he is a very bright guy.  I recommend research, you will likely discover that GNVC is a diamond in the ruff.

Read this for starters :

http://baltimore.citybizlist.com/yourcitybiznews/detail.aspx?id=70927

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#15) On March 25, 2010 at 4:57 PM, SUPERMANSTOCKS (55.85) wrote:

I have owned GNVC already and sold it for a profit. But You have to admit they do burn through money like no other!

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#16) On April 01, 2010 at 6:23 PM, SUPERMANSTOCKS (55.85) wrote:

Thank God I own LXRX. Its had a great week. As opposed to GNVC which got dumped! I knew it

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