Amarin Corporation plc (ADR) (AMRN), Lexicon Pharmaceuticals, Inc. (LXRX): Which of These Billion-Dollar Biotechs Is a Buy?

Last month Pfizer Inc. (NYSE:PFE) and Merck & Co., Inc. (NYSE:MRK) announced a partnership to develop Pfizer’s SGLT inhibitor. Johnson & Johnson (NYSE:JNJ) already has an approved drug of this caliber, Invokana – as does Bristol Myers Squibb Co. (NYSE:BMY) and AstraZeneca plc (ADR) (NYSE:AZN) with Forxiga. Therefore, it is going to be difficult to find a partner to swallow the costs associated with the drug’s development.

In 2012, Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) posted a loss from operating activities of almost $100 million and has an accumulated deficit of nearly $1 billion. In biotechnology, especially for a candidate in early Phase 3 development, these costs are very expensive. Furthermore, there is no guarantee that it will ever earn an FDA approval – and if it does – the market for diabetes might be too congested for it to produce large sales.

Final Thoughts

With all things considered, I choose a stock with an approved drug that could reach blockbuster status over a company that is 20% more expensive that is still year(s) from entering the market (if successful).

Lexicon has cash of almost $200 million, although significant, it will not be large enough to complete the Phase 3 trial and then enter the market. Thus, if the company does not find a large partner it will have to raise money with an offering of sorts.

Amarin Corporation plc (ADR) (NASDAQ:AMRN) is financially stable. The company has the same $200 million in cash but its product has already launched. Therefore, I view Amarin as the safer investment choice, without question, with the highest amount of short-term and long-term upside.

Brian Nichols is long AMRN. The Motley Fool has no position in any of the stocks mentioned. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Which of These Billion-Dollar Biotechs Is a Buy? originally appeared on Fool.com and is written by Brian Nichols.

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