Lexicon Pharma: From Idea to IPO

My involvement in the entrepreneurship community at is deep seated in my interests in biotechnology and medicine. In my explorations, I have spoken to many founders and experts in these fields. This article is a conversation with Dr. Arthur Sands, a visionary in the pharmaceutical industry. He provides insight into the growth of his company from both technological and emotional standpoints, and imparts his knowledge and advice on young founders and curious individuals.


In 2000, Lexicon Pharmaceuticals went public with an initial public offer of $220 million, one of the largest in the history of biotechnology. Dr. Arthur Sands, the founder of the company, recalls the thrill of the moment:

“It was a destiny. We had raised a huge amount of capital and the cost of capital was low.”

Hallmark moments like these in a company’s history challenge its creators with entirely new responsibilities. However, Sands remembers the moment with fondness.

“It was the correct move. The United States has set up a unique system of freedom and free investment, and proper controls that actually allow for the public to invest in companies. People can do things here that they couldn’t do elsewhere. It’s another aspect of freedom — economic freedom.”

Lexicon was founded in 1995 by Sands who was then a graduate student at Baylor College of Medicine. At the time, Baylor College was at the forefront of human genomics, one of only three sequencing centers for the human genome. Dr. Sands credits this innovative environment as a fertile ground for entrepreneurship.

“I had the very good fortune of being at the cutting edge of my field (genomics) at an early age, as I was getting my M.D and PhD. I think it’s very important to be part of that climate and culture. Being at the forefront allowed me to start thinking about what’s really needed in the world. And that was the genesis of Lexicon.”

Initially, the company created knockout mice, altering certain mouse genes in order to study the phenotypic effects of Type II diabetes. These mice were also used as a model for testing pharmaceuticals for diabetes. The name Lexicon was derived from the company’s mission: to help define the function of genes. Through resources within Baylor College, Sands connected with an investor who provided his first infusion of capital of $7 million into his idea.

“In order for someone to make a big investment, I think there has to be a conceptual connection, and there also has to be a personal connection.”

Afterwards, Sands reached out to investors in New York. In 1998, he raised $32 million, and then went public in 2000. While 2000 was a great year for the company, the next decade brought financial trouble not only for Lexicon, but for many American companies.

“2000 was great — it was a bubble. But when the Trade Center was destroyed, it destroyed Wall Street. There was an immediate and long term shut down. People got so demoralized that they didn’t invest in the future. But we kept going. Our science worked and what we were doing was right on spot. And so we persevered, but it was a lost decade for the United States.”

Following 9/11, the 2008 recession was another devastating blow.

“Our stock went from $4.50 to $0.70 a share simply because the markets collapsed. It was a disaster. It’s amazing that small companies managed to carry on, and that we carried on. It was very difficult being an entrepreneur at that time.”

Around the time of the recession, Lexicon changed its interests to reflect shifts in the market. In 2007 they began to focus on drug research, a rather dramatic shift from the previous mouse knockout business plan that the company had followed earlier. Now, Lexicon focuses on drugs like Sotagliflozin, which may potentially be used to treat type 1 and type 2 diabetes by regulating glucose reabsorption by the kidney and gastrointestinal tract.

“We had the mouse by the tail. At the time, the biotech market was realizing that the mouse might hold the key to understanding the human. So, we shifted gears from just being a mouse technology company to actually a human technology company, which led to much higher value. It’s important to set your sights on the right value equation. It’s hard to do and not immediately obvious, but it’s there.”

Even with the right formula and an eager market, it was not easy to change the course of the company.

“You have to be brave. Because that step up, that change in business plan, takes a lot of investment. You need to hire a whole new slate of people and understand the entire spectrum of drug development. But since the world was realizing this change with us, we were able to raise the necessary capital and to make that step in drug discovery.”

Then, about a year and a half ago, Sands left Lexicon and joined the team of a then-small company, Nurix. His main interests lay in drug discovery, but his company had shifted and was no longer focused on research.

“In 2008, we took on a major investment group during the recession to bring in capital, which enabled the drugs to go forward in a terrible economic climate. But they had no desire to continue the research pipeline going. They only wanted to fund the late stage assets, and not the long term research. That was my time to leave because I couldn’t get done what I wanted to get done.”

Consequently, Sands began to search for a place where he would be a better fit.

“Nurix was nucleated around this new concept in drug discovery which I though made a lot of sense. I joined the company a year and a half ago, which was thirteen people at the time. They wanted someone who knew how to build a company from scratch. Now we are fifty people, and done our first major pharmaceutical partnership with Celgene.”

Nurix studies enzymes that regulate the Ubiquitin Proteasome System, which is responsible for degrading certain proteins. Changes in these enzymes have been linked to cancer, and are therefore a promising area of study to understand cancer and develop treatments.

His experiences with a disinterested board of directors proved that it was impossible to accomplish change and innovation without an inspired and enterprising team.

“As an entrepreneur, at every level you have to align with people who have a worldview like yours, people who share your vision. You have to go through many years of developing your product and proving to the world that your product works. And for that you need a lot of money and a lot people who share your vision to succeed. “

The focus of the new company Nurix, unlike Lexicon, was cancer research as opposed to diabetes.

“The knockout mice we developed at Lexicon were exquisite for describing particular functions like diabetes, but were not the best system at the beginning to go after cancer. This is because cancer is much more genetically fundamental and therefore much more challenging.”

However, much has changed in the biotechnology field in recent years pertaining to cancer. This is due in large part to next generation sequencing technology, which provides an understanding of the roles certain human genes play in cancers.

“Now is the time to address cancer, based on the technology that we have available to us. We are having terrific advances in cancer, such as immunotherapy drugs. It’s remarkable. I’d never thought I’d see people talking about cures to cancer!”

Dr. Sands is optimistic about the future of drug discovery and biotechnology.

“I think the next frontier following cancer is Alzheimer’s and Neuroscience. We have the very beginnings and the tools to study these advanced fields, which were once not accessible to us..”

As for advice to young entrepreneurs:

“Immerse yourself in the cutting edge — there is always a new frontier. It’s a tough field but it’s exciting. I’ve never regretted it. “