(Adds analyst comments; share movement)
By Vrinda Manocha
Jan 13 Lexicon Pharmaceuticals Inc said
its chief executive would leave and it would cut its workforce
by about 45 percent, as it moves its focus away from drug
discovery to completing the studies of its drugs in late-stage
Lexicon shares, which have lost about 15 percent of their
value last year, fell as much as 7.5 percent to $1.85 on the
Nasdaq in early trading on Monday.
The company said Arthur Sands, CEO since 1995 and a
co-founder, intends to develop a succession plan with the board.
He will continue in his position until a successor is appointed.
Analysts said Sands might have been perceived as more of a
scientist who would not be able to lead the company into a
commercial launch of the late-stage drugs.
"I think Arthur Sands could have easily done the transition
to commercial, but possibly the board felt they wanted someone
with direct commercial experience", Wedbush analyst Liana
Lexicon said it would cut 115 jobs, primarily positions in
research and discovery, to reduce costs.
The company said it would focus mainly on its drugs to treat
diabetes and carcinoid syndrome, a condition which affects some
people with a rare cancerous tumor.
"Most of the value of the company is wrapped up in these
late-stage drugs," Morningstar analyst Karen Andersen said. "It
makes sense to focus on what investors are really looking at."
Lexicon said it expects to lower expenses by about $14
million, net of severance costs and some other charges, for the
rest of 2014. It expects to save about $22 million annually.
"This could give them an extra two to three quarters of
cash," Moussatos said.
The company had $151.2 million in cash and investments as of
Sept. 30 last year.
Andersen said Lexicon needed to conserve cash while it
looked for a partner to fund the development of its diabetes
"In order to do a comprehensive diabetes program, it takes
hundreds of millions of dollars, which is more than Lexicon can
afford right now," she said.
The company is testing two other drugs in mid-stage trials
to treat irritable bowel syndrome and rheumatoid arthritis. It
also has a glaucoma drug in early-stage development.
Moussatos said that Lexicon could license the development of
the drugs to other pharmaceutical companies.
Lexicon has drug discovery agreements with Bristol-Myers
Squibb Co, Roche Holding AG's unit Genentech
and Takeda Pharmaceutical Co Ltd.
Lexicon shares, which once traded above $40, were down 4.5
percent at $1.91.
(Reporting by Vrinda Manocha in Bangalore; Editing by Joyjeet