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By Erik Kobayashi-Solomon | 01-22-2010 01:40 PM

Will 'Knockout' Mice Make a Knockout Stock?

After a strong runup from our recommendation, is it time to take money off the table in Lexicon Pharmaceuticals?

Erik Kobayashi-Solomon: Hi, I'm Erik Kobayashi-Solomon, co-editor of Morningstar OptionInvestor, and today it's my great pleasure to welcome Karen Andersen, who's a senior analyst in charge of biotechnology stocks. Karen, thanks for coming.

Karen Andersen: Pleasure to be here.

Kobayashi-Solomon: Now, Karen, back in November I did something a little unusual. Ours is an options newsletter but there were no options on Lexicon, so I said Lexicon stock is basically an option, and recommended to readers that they buy the stock. It's appreciated by 40% since then, so I hope our viewers are pretty happy with that. But I want to ask you a little bit about Lexicon.

Andersen: OK.

Kobayashi-Solomon: When I first started reading about it there was all this stuff about knockout mice and genetic engineering, and it sounds crazy to me. I wonder, is Lexicon a real company or is it just a science experiment? I mean, is there something economic that we can invest in here?

Andersen: Sure. Well, you know, the knockout mouse technology is actually fairly widely used in the biotech industry. A knockout mouse is just a way of designing a mouse that lacks a specific gene. Looking at that mouse is sort of a window into what would happen if we designed a drug that targeted this gene.

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