Lexeo Tumbles 9% Despite Positive FDA Update on Heart Gene Therapy
Investors weigh promising clinical pathway and manufacturing green light for LX2006 against the company's Q3 net loss and ongoing cash burn.
Lexeo Therapeutics (NASDAQ: LXEO) shares fell more than 9% in Wednesday trading, a surprising downturn that defied a series of positive operational updates for its lead gene therapy candidate, LX2006, aimed at treating Friedreich’s ataxia cardiomyopathy.
The decline to approximately $9.04 a share came as investors appeared to focus more on the clinical-stage company's third-quarter net loss than on significant regulatory and manufacturing progress. Lexeo announced that the U.S. Food and Drug Administration had approved its commercial-scale manufacturing process for LX2006, a critical step that de-risks its supply chain ahead of a planned pivotal study in the first half of 2026.
This manufacturing clearance is a key building block for Lexeo's strategy. The company is pursuing an accelerated approval pathway for the drug, a possibility the FDA has indicated it is open to, according to a company announcement. LX2006 has already received Breakthrough Therapy designation from the FDA, underscoring its potential to treat the rare, debilitating heart condition associated with Friedreich’s ataxia.
The regulatory confidence stems from encouraging interim data from its Phase I/II SUNRISE-FA trial. The study showed that LX2006 led to a mean 18% improvement in the Left Ventricular Mass Index (LVMI), a key measure of heart health, at six months. The improvement was even more pronounced at the 12-month mark, reaching 23% in patients who had abnormal LVMI at the start of the trial.
Despite these positive clinical and regulatory milestones, the market's reaction was tethered to the company's financials. In its third-quarter report, Lexeo posted a net loss of $20.3 million, or $0.33 per share, with research and development expenses accounting for $15.7 million of that figure. This cash burn, typical for a biotech firm in the development phase, seems to have overshadowed the pipeline's progress for day traders.
The company remains well-capitalized to pursue its clinical goals. Lexeo reported a cash position of $122.8 million and recently completed a $154 million equity financing in October. Management stated this provides a sufficient cash runway to fund operations into 2028, a period that would see it well through the planned pivotal trial for LX2006.
Wall Street analysts, who often focus on a longer-term horizon, appear to remain optimistic. The consensus rating on Lexeo is a 'Moderate Buy,' with an average price target of $19.56, suggesting significant upside from its current levels. This stands in stark contrast to the day's bearish sentiment.
The disconnect highlights the inherent volatility in the biotech sector, where promising clinical news can be temporarily eclipsed by short-term financial metrics. For Lexeo, the path forward is clear: execute the pivotal trial for LX2006 and prove that its scientific promise can translate into a commercially viable therapy. With funding secured and a clear regulatory pathway, the focus now shifts to clinical execution in 2026.