Shares of Lexicon Pharmaceuticals LXRX have jumped 30% after signing a licensing deal for its pre-clinical obesity drug LX9851 with pharma giant Novo Nordisk NVO last week.

Per the deal terms, Lexicon will complete certain preclinical activities before Novo Nordisk takes over the development, manufacturing and commercialization of LX9851. NVO will also be responsible for LX9851’s investigational new drug (IND) filing.

In return, LXRX is eligible to receive $75 million as an upfront payment from NVO. Including milestone payments, the deal is worth up to $1 billion. Lexicon will also earn tiered royalties on potential net sales of the drug.

Performance of the LXRX Stock

The deal with Novo Nordisk impressed investors, which resulted in the stock’s price soaring. The licensing agreement highlights the company’s strategic focus on optimizing its differentiated product pipeline. Last November, Lexicon outlined the plan to reposition itself as a ‘clinical development-focused company’ after the FDA identified deficiencies in the regulatory filing, seeking approval for sotagliflozin in the type 1 diabetes (T1D) indication.

Post the above setback, LXRX decided to discontinue developing the drug for the T1D indication and announced plans to reduce its workforce by 60%.

Year to date, Lexicon’s shares have significantly underperformed the industry, as seen in the chart below. During this timeframe, the stock has also underperformed the broader Medical sector and the S&P 500 Index. The company’s shares are trading below the 50 and 200-day moving averages.

LXRX Stock Underperforms Industry, Sector & S&P 500

Image Source: Zacks Investment Research

LXRX Boasts LX9851’s Potential in the Obesity Space

Unlike the popular obesity drugs that are designed to target GLP-1 or GIPR, Lexicon is taking a novel route with its weight-loss drug. A small-molecule candidate, LX9851, is designed to inhibit ACSL5, a key enzyme in fat metabolism and energy regulation. This orally administered drug is designed to enhance satiety by activating the ileal brake mechanism, delaying gastric emptying and suppressing appetite.

Preclinical data presented at Obesity Week 2024 showed that LX9851, when combined with Novo’s semaglutide (marketed as Ozempic for diabetes and Wegovy for obesity), led to greater reductions in weight, food intake and fat mass than semaglutide alone.

Lexicon also shared additional data, which showed that the drug could play a role in preventing weight regain after stopping semaglutide treatment while also improving liver steatosis, reinforcing its promise as a next-generation obesity treatment.

LXRX’s Zacks Rank

Lexicon currently carries a Zacks Rank #3 (Hold).

Lexicon Pharmaceuticals, Inc. Price

Lexicon Pharmaceuticals, Inc. price | Lexicon Pharmaceuticals, Inc. Quote

Key Biotech Picks

A couple of better-ranked stocks from the sector are ANI Pharmaceuticals ANIP and 89bio ETNB. ANIP sports a Zacks Rank #1 (Strong Buy) at present and ETNB carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, estimates for ANI Pharmaceuticals’ 2025 earnings per share (EPS) have risen from $5.54 to $6.35. EPS estimates for 2026 have increased from $6.75 to $7.21 during the same period. Year to date, shares of ANIP have risen 23%.

ANIP’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 17.32%.

Estimates for 89bio’s loss per share have narrowed from $2.66 to $1.98 for 2025 in the past 60 days. During the same time frame, loss per share estimates for 2026 have improved from $3.06 to $2.15. ETNB’s shares have lost 13% year to date.

89bio’s earnings missed estimates in three of the trailing four quarters and beat the mark on one occasion, delivering an average negative surprise of 46.18%.

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This article originally published on Zacks Investment Research (zacks.com).

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