UPDATE: Bank of America Merrill Lynch Initiates Underperform On Lexicon Pharmaceuticals As Price Of Stock Is Too High

In a report published Friday, Bank of America Merrill Lynch analyst Colin Bristow initiated an Underperform rating on Lexicon Pharmaceuticals

and initiated a price target of $1.50. In the report, Bank of America Merrill Lynch says "We are initiating coverage of Lexicon Pharmaceuticals with an Underperform rating and $1.50 PO. The majority (>70%) of LXRX's $1bn market cap is attributed to its pipeline asset LX4211, an SGLT 1/2 inhibitor, for Type II diabetes. The key to our Underperform thesis is that the market is significantly overvaluing this asset. We believe LX4211 will be differentiated from the competition on lower rates of urinary/genital infections and efficacy in renal-impaired patients but do not see this profile as strong enough to offset headwinds from its fifth-to-market entry. We assume LX4211 launches in 2017 and generates WW sales of $1.5bn in 2022 on 25% market share, with LXRX's second pipeline asset, telotristat for carcinoid syndrome, generating $122mn in the same period. Despite these bullish estimates, we cannot get to the stock's current valuation, which, all else equal, would imply LX4211 reaches peak sales of ~$2.2bn (implies 37.5% market share)." Lexicon Pharmaceuticals closed on Thursday at $1.95.