Why Lexicon Pharmaceuticals Is Poised to Underperform

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, biotech company Lexicon Pharmaceuticals has received a distressing two-star ranking.

With that in mind, let's take a closer look at Lexicon and see what CAPS investors are saying about the stock right now.

Lexiconfacts

Headquarters (founded)

The Woodlands, Texas (1995)

Market Cap

$1.2 billion

Industry

Biotechnology

Trailing-12-Month Revenue

$1.2 million

Management

Co-Founder/CEO Arthur Sands
Co-Founder/Chief Technology Officer Brian Zambrowicz

Return on Equity (average, past 3 years)

(51.8%)

Cash/Debt

$206.4 million / $23.8 million

Competitors

Aptalis Pharma
Deltagen
TolerRx


Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 16% of the 64 All-Star members who have rated Lexicon believe the stock will underperform the S&P 500 going forward.

Earlier today, one of those Fools, All-Star zzlangerhans, succinctly summed up the bear case for our community:

When Lexicon's cap goes over a billion bucks, something just doesn't ring right to me. I can't help but think that a lot of people buying this stub think it's a cheap stock because of the share price and don't really pay attention to the share count. The company reported some encouraging data for LX4211 and telotristat in 2012, but I don't see any likely catalysts in the near future. Cash is [$200M], but burn is [$30M] so that runway is only good until mid 2014. Expect ongoing substantial dilutive financings and further ballooning of the share count. Once the phony fiscal cliff enthusiasm gives way to renewed knee quivering in the face of economic reality, expect bloated stocks like Lexicon to be the first to give up their gains.

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The article Why Lexicon Pharmaceuticals Is Poised to Underperform originally appeared on Fool.com.

Fool contributor Brian Pacampara and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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