UPDATE 2-Lexicon to stop development of memory drug, shares fall

(Adds analyst, company comments; share movement)

BANGALORE, Dec 12 (Reuters) - Lexicon Pharmaceuticals Inc LXRX.O said its would stop the development of its experimental drug to treat age-associated memory impairment, after it failed a mid-stage trial, sending its shares down as much as 12 percent.

The biopharmaceutical company said the trial of the drug, LX6171, did not show significant effects on attention or memory in patients, compared to a dummy drug, although it was well tolerated.

In a statement, Lexicon said the trial did not result in significant effects on parameters of attention or memory that would justify further studies in therapeutic indications prioritized by it.

“We weren’t surprised. We felt that it would be difficult for the drug to show any cognitive benefit in only 28 days of therapy,” analyst Edward Tenthoff of Piper Jaffray told Reuters. He has a sell rating on the stock.

We will evaluate interest from third parties in the compound and its target for other neurobehavioral indications where the target may be relevant, such as schizophrenia, Chief Executive Arthur Sands said in a statement.

Lexicon is not prepared to pursue development of the drug without partners, Phil Brown, senior vice president of clinical development, told Reuters.

Lexicon plans to focus its resources on four other compounds in its pipeline. Two of those compounds, designed to treat irritable bowel syndrome and carcinoid syndrome, are in mid-stage studies.

Carcinoid syndrome is seen in patients with carcinoid tumors, which occur mainly in the gastrointestinal tract. They secrete excessive amounts of serotonin hormone that can cause severe diarrhea, abdominal discomfort and wheezing, among others.

Brown said the company was interested in partnering opportunities for these programs.

Lexicon shares, which have lost about 62 percent of their value over the past year, were trading down 20 cents at $1.43 Friday on Nasdaq. (Editing by Deepak Kannan, Amitha Rajan)