By Trisha Roy

(Reuters) – The U.S. FDA denied Lexicon Pharmaceuticals Inc’s appeal against the rejection of its add-on treatment for type 1 diabetes, marking the company’s third major setback this year and sending its shares plunging 18% on Monday.

Lexicon said it intended to reappeal the decision against Zynquista’s approval with the FDA’s Center for Drug Evaluation and Research (CDER).

“We plan to initiate the engagement with CDER very shortly here this month and think we will have an answer on this matter by the end of February at the latest,” a company executive said on a conference call.

Lexicon said it did not intend to run new analyses for review with CDER for the oral drug, Zynquista, co-developed with French drugmaker Sanofi SA.

Wedbush Securities analyst Liana Moussatos pointed out that the move to appeal to CDER meant “basically going over the head of the office they are dealing with now”.

“We do not yet know what the FDA wants to see,” she said, noting the health agency has not yet approved any SGLT inhibitors, the class of medicines Zynquista belongs to, for type 1 diabetes.

The U.S. Food and Drug Administration in March declined to approve Zynquista, two months after a panel of independent advisers to the health regulator raised concerns of the risk of a complication called diabetic ketoacidosis (DKA).

DKA is a life-threatening condition wherein a certain type of acid, called ketones, builds up when the body starts to use fat instead of glucose as a source of energy.

Separately, an FDA advisory panel in November voted against the use of a type 1 diabetes drug from Eli Lilly and Co and Boehringer Ingelheim as an add-on to insulin, calling out the risk of DKA.

Sanofi terminated its partnership with Lexicon in July, following the results of late-stage studies testing Zynquista in patients with type 2 diabetes.

Lexicon said it was in talks to partner with both big and mid-sized companies to bring Zynquista as a treatment for type 2 diabetes and other indications to market.

Shares of the company were trading down 18.7% at $2.87.

(Reporting by Trisha Roy in Bengaluru; Editing by Shinjini Ganguli)

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