Lexicon Pharmaceuticals Inc (LXRX) 2010 Q4 法說會逐字稿

Thank you for holding. Welcome to the Lexicon Pharmaceuticals fourth quarter and year-end 2010 conference call. At this time all participants are in a listen-only mode. There will be a question-and-answer session to follow . Please be advised that this call is being taped at Lexicon's request. At this time I would like to introduce you to your host for today's call, Wade Walke, senior director of communications and Investor Relations. Please go ahead, Dr. Walke.

Good morning. And welcome to the Lexicon Pharmaceuticals fourth quarter and year-end 2010 conference call. I'm Wade Walke and with me today are Dr. Arthur Sands, Lexicon's President and Chief Executive Officer, Dr. Brian Zambrowicz, Lexicon's Executive Vice President and Chief Scientific Officer, and Jeff Wade, Lexicon's Executive Vice President of Corporate Development and Chief Financial Officer.

We expect that you've seen a copy of our earnings press release that was distributed this morning. During this call, we will review the information provided in the release, provide an update on our clinical programs, then use the remainder of our time to answer your questions. The call will begin with Dr. Sands, who will discuss our key accomplishments for 2010. Dr. Zambrowicz will then discuss the status of our drug development programs, and Mr. Wade will review our financial results for the fourth quarter and full-year 2010 and discuss our financial guidance for 2011. We will then open the call to your questions.

If you'd like to view the slides for today's call, please access the Lexicon web site at www.lexpharma.com. You will see a link on the home page for today's webcast.

Before we begin, I would like to state that we will be making forward-looking statements, including statements relating to Lexicon's research and development of LX1031, LX1032, LX1033, LX2931, and LX4211and the potential therapeutic and commercial potential of those drug candidates.

This call may also contain forward-looking statements relating to Lexicon's future operating results, financing arrangements, cash and investments, discovery and development of products, strategic alliances and intellectual property. Various risks may cause Lexicon's actual results to differ materially from those expressed or implied in such forward-looking statements, including uncertainties relating to the timing and results of clinical trials and preclinical studies of our drug candidates, our dependence upon strategic alliancesand ability to enter into additional collaboration and license agreements, the success and productivity of our drug discovery efforts, our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial funding to conduct our drug discovery and development activities. For a list and description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission. I will now turn the call over to Dr. Sands.

Thank you, Wade. And thank you, everyone, for joining us this morning to discuss 2010 and also really focus on 2011 and some of the key goals we have for ourselves. We'll be referring to slides if you have access to those throughout the talk. And I'm going to start on our first pipeline slide that pictures is our four programs in Phase II development. And really our accomplishments for 2010 all centered on achieving proof of concept around these four programs. And that is, of course, a key step in the progression of our new drug candidates that operate through novel mechanisms of action. And I think in each one of these programs, we have accomplished significant steps forward in proving these mechanisms.

I think overall 2010 was clearly dominated by the results in our diabetes program LX4211, which really has I think throughout the year, as we learn more and more about this drug candidate, exceeded our expectations, with regard to its mechanism of action and its effects in patients. And so I'd like to spend most of this call discussing that program as we go into the body of the call.

But on the next slide, I do want to highlight for each of the programs, our 2011 objectives that are based on what we accomplished in 2010 and our logical steps forward for each of these. So on the 2011 pipeline objective slide, starting with LX4211, a key goal is to initiate the Phase IIB study in Q2 for this program, this will be an approximately 300 patient trial in Type 2 diabetes. And our goal is through the year, to have enrollment be on track, such that in the first half of 2012, we'll be able to complete that study and have the results. So in addition to this, I should say we're conducting a number of nonclinical procedures and steps such that the program can be essentially Phase III ready as we look forward to getting the Phase IIB results in 2012. So there's high degree of activity and focus on this program to prepare it as it moves forward into the later stage development.

In addition, a major effort is focused on expanding our understanding of the duel mechanism of actions of inhibiting SGLT1 and SGLT2. This is critical because we are breaking new ground here. And we believe what we can learn from this mechanism will speak directly to differentiating the product as we go forward in the late phase development and move to commercialization. So product differentiation, based on the mechanism and the advantages we think we'll have, we'll be conducting a number of experiments during 2011 to accentuate that.

Turning to LX1032, for carcinoid syndrome, our goal is to complete the Phase IIA studies in Q2 of 2011. And as you may have surmised, the enrollment has been slower in this project than we had hoped. We can address some of that later. However, we're very close to completing these studies and we think, having done a very thorough Phase IIA study in both the United States and in Europe, two studies, that the data supports our moving forward. We should be in a position to plan a registrational trial with the FDA after this study. In addition to this, on this program, we have on previous occasions shared other preclinical results that show activity of this compound in another indication, inflammatory bowel disease, that is ulcerative colitis and Crohn's disease in preclinical models. And so we are in the process of planning a proof of concept trial in the second half of 2011 in the other indication. So significant amount of activity in LX1032 anticipated here.

And for 2931, we announced the results of the 2931 Phase IIA trial in 2010, which was one of our goals last year. And based on preliminary signal of efficacy in that trial, this year we plan to initiate a dose escalation study in RA patients. And that we anticipate being able to initiate in the third quarter of 2011.

Turning to LX1031 and LX1033. These are two compounds that we have as direct candidates for irritable bowel syndrome. And our goal there is to select the between these two compounds based on potency and dosing regimes. And I think what's significant here is for LX1033, we are initiating the Phase I study this quarter, to evaluate that. And if we see favorable results from that study, we would then be in a position by the third quarter to select between these two candidates. We've also done significant reformulation work for LX1031. So I think by the third quarter, we should be able to choose based on the biomarker results of our affecting the serotonin pathway and then move forward swiftly to initiate proof of concept trial in the fourth quarter of 2011.

Now turning to the next slide, there's another wave of small molecule drug development candidates, which also have drug development goals for 2011. And they're listed there. First off, LX7011 for glaucoma, this is a new mechanism of action that we're exploring that reduces intraocular pressure by increasing flow of the aqueous humor through the trabecular meshwork. We're in the process of this year completing the IND enabling studies. We have selected an eye drop formulation, which was a significant amount of formulation work that had to be completed on this program. So we have chosen the formulation. We're conducting the formal IND enabling studies and our goal for 2011 is to file the IND and in the second half initiate a Phase I/II clinical trial in glaucoma patients, where we would be getting biomarker readouts there with regard to intraocular pressure.

The next program, LX5061 for osteoporosis is a new drug candidate that has very exciting novel anabolic mechanism of action that stimulates bone growth. So there's a small molecule that would stimulate bone growth for osteoporosis. The goal with this program in 2011 is to complete the IND enabling studies and file the IND. So in addition to our IND enabling studies, we are monitoring biomarkers that should be indicative of the mechanism of action working in animals, of course, before we proceed into human studies.

And then the third new drug candidate, LX 2311 is a new small molecule mechanism that reduces inflammation by blocking lymphocyte activation and proinflammatory (inaudible) production. We've seen very potent effects in our preclinical models. Our goal for this year is to complete the IND enabling studies and prepare for an IND filing in Q1 2012.

So we would have three new drug candidates then progressing into drug development stages. So taken together, it's a significant number of programs, and molecules progressing. If you sum up a number of these milestones on the next slide, and look at them in a timeline fashion, you can see some of the expected events by quarter as we go through the year.

So with starting here now in Q2, our two major events are the liftoff of the Phase IIB study in Type 2 diabetes, which should commence in Q2. And then reporting the Phase IIA results from carcinoid syndrome. Q3 you can see a very busy quarter, where we anticipate completion of the Phase I study and having data from LX1033,again being able to then select the candidate for IBS. And for LX1032, actually initiating the 2A study for IBD, this new exploration of a new indication for that compound. Of course, we also hope to be at discussions with the FDA as well on the registrational study for carcinoid syndrome around that time. And then LX 2931, we should be initiating in Q3 our dose escalation trial in RA patients. And we should be filing the IND for LX7101 for glaucoma.

By Q4, the goal there is to have the IND for LX5061 for osteoporosis filed. And then looking forward, as we roll forward into the first half of 2012, looking at some of the major goals, 12 months out or so, we do believe that we'll be having our report from our LX4211 Phase IIB trial in the first half. That of course will be a very significant milestone for the Company. We should be reporting on the effects of the dose ranging study in rheumatoid arthritis and we should also be reporting on the 2A study in IBD. So a number of I think important data being read out here in the first half of next year. And then, of course, filing a new IND for 2311 in autoimmune disease.

So looking forward to the next 12 months, a number of important milestones first. These are all significant, with regard to our drug discovery engine, the activity of our engine. So with that, I'd like to then turn it over to in depth discussion of some of the recent findings for LX4211 in diabetes and I'll turn it over to Brian.

Thank you, Arthur. I'll be giving an update on LX4211. This is the first in class dual inhibitor of two sodium dependent glucose transporters, SGLT1 and SGLT2. It's a once-a-day oral drug candidate for Type 2 diabetes. In our Phase IIA clinical trials, we saw a large and rapid improvement in glycemic control that read out as a strong decrease in (inaudible) hemoglobin A1c over only four weeks of dosing. In addition, we saw some favorable decreases in triglycerides, blood pressure and body weight. We do believe this compound has the potential for best in class or to be first in class.

And that's illustrated on the next slides. The reason it's unique is because of its dual inhibition, of both SGLT1 and SGLT2. SGLT1 is the major glucose galactose transporter in the gastrointestinal tract. It's the key transporter for uptake of these nutrients from the diet. And as I'll describe later, inhibiting this target triggers secondary benefits that are really helping us in our treatment of Type 2 diabetics. SGLT2 is better known, it's the major transporter for reuptake of glucose in the kidneythat would otherwise be lost in the urine.

The uniqueness of our compound is further illustrated in the table on the next slide. What we've done here is we've shown the SGLT inhibitor landscape. These are SGLT inhibitors in different stages of clinical development. And what I'd like you to focus on is the columns that show SGLT1 and SGLT2 inhibition. What you can see is most of the agents in development are selective SGLT2 inhibitors. Our compound is unique in that it's a dual inhibitor of SGLT1 and SGLT2.

What also stands out is the compound at the bottom of this table, the [GSK] compound, which is quite unique in being a selective SGLT1 inhibitor. This lends additional support to the concept that SGLT1 is a viable target on its own for Type 2 diabetes.

Moving onto the next slide. Our Phase IIA study, to remind you, was done at a single center, was a sequestered double blind placebo controlled, done in 36 patients with Type 2 diabetes. They were washed out of metformin for two weeks and then administered 4211 over 28 days, or a placebo. The objectives of the study were to look at safety and tolerability, but also to measure a variety of parameters related to glycemic control and other cardiovascular and metabolic parameters.

On the next slide, we did see favorable safety profiles, with adverse events generally mild and equally distributed across all those groups, including placebo.

If you move then to the next slide, the thing that really stood out about the Phase IIA study was the dramatic effect we had on hemoglobin A1c with only four weeks of dosing. And in our low-dosed arm, we had a 0.66% drop, in the high dose arm a 0.76% drop relative to placebo. These sort of strong effects on hemoglobin A1c with such a short dosing period caused us to hypothesize that inhibiting SGLT1 might be giving us additional benefits besides just inhibiting or delaying glucose absorption in the gastrointestinal tract. We hypothesized that it may be triggering the natural homeostatic mechanism of the gut to be able to sense nutrients and respond by releasing beneficial peptides such as GLP1 and PYY. And based on that hypothesis, we did go back to our blood samples from that study and we were able to show on day one and 28 of dosing, that we had trends of increases in GLP1 in both dose arms relative to placebo throughout the day. So we were very encouraged by that but we wanted to build upon that mechanistic data.

On the next slide, most recently we reported earlier in the year a new study. In order to prepare for the Phase IIB, study, we needed to move from a liquid formulation to a solid oral dose formulation. And in order to do that we wanted to make sure that the new tablet formulation had equivalent effects at both SGLT1 and SGLT2. And inaddition, we wanted to take advantage of this study to build out the mechanistic data, that I just described to you.

So for SGLT 2, it was pretty straightforward. It's a simple pharmacokinetic formulation and (inaudible) relationship, where systemic exposure correlates with SGLT2 inhibition in the kidney and glucose released in the urine. As we compared the three dose formulations, 300 milligrams given either as the liquid formulation, or two 150 milligram tablets or six 50 milligram tablets, we saw they were all acting very similarly, as far as their effect on SGLT2.

Perhaps more importantly, the unique part of our mechanism is the SGLT1 effect, and we needed to be sure we were having similar effects again with the liquid and solid formulations. In order to measure the SGLT1 effect, we have to measure the secondary effects of its inhibition, which includes the GLP1 released that I previously described to you.

In this study, we went into Type 2 diabetic patients again. 12 of them. And the patients, very much like our Phase IIA study, were washed out of metformin for two weeks and then were dosed with single doses of each of the three formulations. And it was a three-way crossover. So each patient received each of the three formulations. And this minimized interpatient variation.

So if you move onto the next slide, the end, going (inaudible) the SGLT1 downstream effects. What we first looked at is the total GLP1. What we have here is in green we have the baseline control, in the brown we have the liquid formulation, and then in blue, we have the two 150 milligram tablet formulations. The three arrows at the bottom indicate the three meals of the day, breakfast, lunch and dinner. And we did see that at all three meals, we've had significant elevations in total GLP1. So we moved from trends in our previous study to now seeing significant improvements and elevation in GLP1.

On the next slide, we measured another peptide, PYY, for the first time. And this is a very important peptide, because this will control appetite. And what you can see is again relative to the green baseline control, we did see significant elevations of PYY with both the solid and liquid formulations throughout the day. This provides further support that we're having on (inaudible) cells in the gastrointestinal tract, because these (inaudible - audio difficulties) they release both PYY and GLP1. And our belief is that the natural homeostatic release of these peptides may optimize their benefits.

It will be interesting as we move forward to see whether this translates into additional weight loss benefits, as well as the enhanced glycemic control that we observed in the Phase IIA study.

Moving onto the next slide, we also measured the blood glucose levels throughout the course of the day. And what you can see is that both baseline blood glucose levels, as well as blood glucose level after meals, were reduced. The post-pranular effects were especially apparent at breakfast and lunch.

And moving onto the next slide, you can see that we measured plasma insulin levels as well and in spite of the lower glucose levels in the plasma throughout the day, those glucose levels were achieved with lower insulin levels. So with the strong Phase IIA data, in combination with the mechanistic data that provides the rationale for that strong Phase IIA data, we have a great deal of confidence as we move forward with our Phase IIB study. In addition, we believe we have the solid formulation for the Phase IIB studies that performs at least as well as, if not better than the liquid formulationsboth on SGLT1 and SGLT2.

Our next step is we're just about to begin a drug-drug interaction study with metformin, which is key to being able to initiate our Phase IIB study, which will be done on top of stable dose metformin. It will be a 12-week study, which as Arthur mentioned, we'll initiate in the second quarter.

Moving onto the next slide, LX1032. This is peripherally acting serotonin synthesis inhibitor currently in Phase IIA clinical studies for carcinoid syndrome. Carcinoid syndrome is the result of neuroendocrine tumors that produce large amounts of serotonin. When they metastasize, that serotonin can be released, and it acts on the gastrointestinal tract to cause severe GI symptoms, including diarrhea and GI cramping and discomfort. LX 1032 is an inhibitor of the rate-limiting enzyme for serotonin synthesis, tryptophan hydroxylase 1. So it decreases the production of serotonin. It is absorbed into the peripheral circulation, where it can reach the tumor and inhibit the serotonin production by the tumor. But it does not cross the blood brain barrier.

Since Serotonin is a key mediator of -- thought to be a key mediator of the gastrointestinal symptoms of carcinoid syndrome, we believe there's a strong rationale for this agent in treating the symptoms of carcinoid syndrome. We do have fast track status granted by the FDA for carcinoid syndrome and orphan designation from the EMEA for carcinoid tumors. As Arthur mentioned, we do have new preclinical data that supports the additional application for this compound in inflammatory bowel disease.

On our next slide, an update on the Phase IIA studies. Both ongoing in the US study, that's a randomized, double blind placebo control ascending dose study where took four separate cohorts and we dose escalated each cohort, three of each cohort being on active and one being on placebo. And we escalated them through four doses. The 150mg, 250mg, 350mg, and 500 milligrams, each given three times daily. And seven of those patients are in long-term -- in a long-term extension protocol.

In addition, there's an expansion phase for the trial, which is currently in the recruitment phase. And that's being done at the high dose, 500 milligrams, three times a day. It will be eight patients total, six on active, two on placebo, and we've begun dosing for five of those patients to date.

The EU study is an open label, serial ascending dose study, where each patient is dose escalated through the same four dose escalations that were used in the US study. But they are dose escalated with dosing on each dose over two-week intervals. And depending on their clinical benefits and lack of safety signals, they are then moved up to the next dose level. The study is planned to enroll 16 patients and we have dosed four patients to date.

On the next slide, the additional indication in inflammatory bowel disease. It is a significant unmet medical need, up to 50% of patients fail on the small molecule therapy such as 5-ASA, as well as a similar percentage failing on the biologics. There's a real need, it would be a benefit if you could even decrease the steroid usage in these patients. Currently we're planning a Phase IIA clinical study in patients with mild to moderate Crohn's disease and ulcerative colitis. Our preclinical data supports the potential for this compound in both indications. In discussions with key opinion leaders, we're in the process of designing potential studies with (inaudible) efficacy and points under consideration. And we would anticipate initiating that study in the third quarter of 2011.

On the next slide, the IBS program, LX1031 and 1033. These are also serotonin synthesis inhibitors. But unlike 1032, they are locally acting agents, that act within gastrointestinal tract, to lower the production of serotonin by the gastrointestinal tract. They get little systemic exposure and that compound is also does not cross the blood brain barrier.

In our Phase IIA study for LX1031, we saw a very safe safety profile and we saw improvements in both the global assessment of adequate relief, and stool consistencies in the high dose arm. That clinical response was correlated with a reduction in the 5-HIAA. 5-HIAA is a metabolite of serotonin. LX1033 is approximately tenfold more potent than LX1031 in a biochemical essay against tryptophan hydroxylase. And it's also more potent in animal pharmacology models, as far as reducing the 5-HIAA biomarker. And as Arthur mentioned, we've tested new formulations of LX1031 as well. And the concept is between LX1033 being a more potent agent or better formulations of LX1031. We'd like to be able to find an agent that can move forward and also reduce the dose and frequency.

We filed our IND for 1033 in December of 2010. And the Phase I study is planned to begin in the first quarter of 2011. We believe that the 5-HIAA biomarker is very important for this program. It brings an objective measure, it's a challenging indication and we really are interested in exploring how to use it efficiently in a Phase II study to maximize the signal and clinical benefit we can observein IBS patients.

Moving to the next slide, the LX1033 Phase I biomarker study has been planned. We'll be doing multiple ascending doses as shown here. 250mg, 500mg and 750 milligrams, each given three times a day. You can think of those doses being taken with meals, as well as 1,000 milligrams given twice a day. We'll dose patients over three weeks and measure the urinary and plasma 5-HIAA biomarker. Using the biomarker in comparison with the biomarker effects we saw with 1031, we should be able to correlate the extent of biomarker reduction with that seen with 1031 and the clinical benefits observed at the high dose in that Phase IIA studyallowing us to think identify a candidate that might merit moving forward into further development. The results from the Phase I study should be available in Q3, allowing us to initiate potential Phase II study by year end.

Finally on that slide, LX2931, our first in class S1P lyase inhibitor for autoimmune disorders. This is a novel, oral acting agent, inhibitor of an enzyme, S1P lyase, that breaks down an endogenous second messenger molecule, sphingosine-1-phosphate. And it showed reduced inflammatory response. improved reduced inflammatory response when dosed in animal pharmacology models of rheumatoid arthritis, multiple sclerosis and [transplant patients.] In our Phase II A, study, that we reported last year, we saw a favorable safety profile. We did see a potential signal in the ACR 20 in the high-dose arm at week 12. However, given the fact that the lymphocyte count in the peripheral blood was unchanged in the high-dose arm, we believe we are at the low end of the dose-response curve, that we've seen. And the fact that the lymphocyte biomarkers suggest we're on the low end of the dose-response, and that we need to do a go forward and explore higher doses in RA patients, and that will be our next step, to identify doses that can produce sustained lymphocyte reductions in patients with active disease. With that I'd like to turn it over to Jeff Wade to go over our financial results.

I will provide a brief financial review. As indicated in our press release today, we had revenues for the 2010 fourth quarter of $1.3 million, which was a decrease of 11% from $1.4 million in the prior-year period. For the year, revenues decreased 54%, to $4.9 million from $10.7 million in 2009.

Our research and development expenses for the 2010 fourth quarter decreased 3%, to $18.3 million from $18.8 million in the prior-year period. And for the year, our R&D expenses decreased 3% to $78.5 million from $81.2 million in 2009.

In connection with our acquisition of Symphony Icon, we made an initial estimate of the fair value of our liability for the base and contingent payments. Changes in that liability, which are based on the development of the programs and the time until the payments are expected to be made, are recorded in our consolidated statement of operations. The associated increase in fair value at Symphony Icon purchase liability was $1.6 million in the 2010 fourth quarter, and $2.7 million for the year.

Our general and administrative expenses for the 2010 fourth quarter were $3.9 million, which was a decrease of 13% from $4.4 million in the prior-year period and that decrease was primarily attributable to lower patent fees. For the year, our G&A expenses were $19.4 million, which was consistent with the prior-year period.

Our net loss for the 2010 fourth quarter was $23 million, or $0.07 per share compared to a net loss of $22 million or $0.13 per share in the prior-year period. Our net loss for the year was $101.8 million or $0.34 per share, compare a net loss of $82.8 million or $0.57 per share in 2009.

For the 2010 fourth quarter, our net loss included non-cash stock-based compensation expense of $1.5 million, compared to $1.2 million in the corresponding period in 2009. For the year, our net loss included non-cash stock-based compensation expense of $5.5 million, compared to $5.3 million in 2009.

Let me now turn to our cash and investments. At the end of the year, we had $211.1 million in cash and investments, that compares to $231 million as of September 30, and $125.1 million of net cash and investments as of the end of last year.

Now let's turn to our forward-looking financial guidance for 2011. We expect contractual revenues from existing agreements in 2011 of around $1 million. Consistent with our past practice, while we are in conversations with pharmaceutical companies about potential collaborations and alliances, we are not including forecasted revenue from those potential arrangements in our guidance. We believe that our productive pipeline will provide us with attractive opportunities for future alliances.

We expect operating expenses in 2011 to be in the range of $110 million to $120 million. Non-cash expenses are expected to be approximately $18 million of that total. That includes $8 million in an increase in fair value of Symphony Icon purchase liability, $5 million in stock-based compensation, and $5 million in depreciation and amortization.

Our operating expense expectations for 2011 take into account recent headcount cost reduction measures in early research, administrative and overhead areas, as we continue to devote a greater proportion of our R&D and overall spending towards development stage programs. Taking into account cash received under existing contractual relationships only, we expect our 2011 net cash used in operations to be in the range of $92 million to $97 million.

I will now turn the call back over to Arthur.

Thank you, Jeff. We can now open the call for questions.

(Operator Instructions). Your first question comes from the line of Corey Kasimov of JPMorgan.

Hi, good morning, guys. Thank you for taking the questions. I have a few of them for you. First one to start off with, for 4211. At this point what are the gating factors to starting that Phase IIB trial in the second quarter? Is it just the metformin interaction study? And then in terms of the design of the IIB, are you also -- is the plan still to include an active control arm in addition to placebo?

Hi, Corey. It's Brian. Yes. The only gating factor at this point for the IIB is drug-drug interaction study. And whether or not you have an active comparator, we continue to discuss that with KOLs. We've met with many. One of the issues in a Phase IIB study, the only thing you can obtain is non-inferiority. So it may not be the best setting in which to really compare two different drugs. But multiple drugs have been tested on top of metformin.

Okay. And then staying on 4211, Arthur, can you talk a little bit more -- can you update us with your latest thinking regarding the potential partnering strategy for this? Is it something you're interested in now before Phase IIB, after Phase IIB, etcetera?

Yes, and I'll invite Jeff to join in this discussion. We have a lot of parties very interested in the program. It is -- so we have ongoing conversations. It ends up being a question of value and what kind of value we can generate from the next study, versus doing a partnership early. So I think our default view is to go forward and complete the next study. We believe we'll build significant value. However, if there are partners that may intervene in that process, in a productive way, we'll entertain it. Jeff, do you want to comment as well?

I think that pretty much sums it up. But I think we are pretty confident in this program. And we believe that there's significant value here. And we are continuing to talk to people as we lead up to the Phase IIB study. But we're proceeding with the Phase IIB study on our own, as sort of a baseline expectation.

Okay. Is it possible for you guys to broadly characterize how interest in this asset may or may not have changed since you came out with the additional data regarding GLP1 and PYY?

Yes. Broadly stated. It has increased I'd say significantly. And I think it's because there's another following of now for the compound of companies that have been seeking oral GLP1 secretagogues as a potential competitor for the injectables. So I think that that's why as we go forward into 2011, we're also -- we intend to conduct additional mechanistic studies to really accentuate that differentiating feature. So that could actually open up essentially a different sort of competitive landscape for us. And new partners that we had not talked to previously in this regard. So that's why I think it really does the behoove us to go forward through the year with the study. And we'll have more for you, Corey , on the actual study design I think at the time of the next call. Because by that point, we will have completed all of the logistical studies required to initiate and we'll have the design nailed down.

Okay. Sounds good. Thanks for taking the questions.

Thanks.

And your next question comes from the line of Phil Nadeau of Cowen and Company.

Good morning. Thanks for taking my questions as well. First, a couple on 1032. In the slides it mentioned that you , in the European study, have 16 patient planned enrollment and you've dosed four patients to date. So is it really possible that that study completes next quarter? It seems like you kind of got into a big hockey stick in patients being dosed?

I think we're referring to the US study, when we talk about completion in Q2. And not the European study.

Our goal for the European study is to finish it by year end.

Okay. And do you need the data from the EU study to sit down with the regulators to plan a next trial? Or is it possible that based just on the US study, that you could design a pivotal study?

I think it's possible just on the US study. I mean, that's our current view.

Okay. And can you remind us. In the US trial, and in the EU trial, have the patients failed prior therapy before entering, can you remind us what line of therapy this is?

Well, the way it's written up is US trials only contemplate patients that have failed on Octreotide or a somatostatin analog. In the European trial, we do allow patients that are naive to somatostatin analogs. But I think in general, those type of patients are rare.

Okay. Great. Thanks for taking my questions.

Thank you.

And your next question comes from the line of David Friedman from Morgan Stanley.

Hi. Thanks. Sorry about that echo. I was wondering if you could just talk a little bit about the inflammatory bowel disease program. Where you -- if you could just discuss a little bit where your confidence comes from in starting that program. And maybe a little bit about just the mechanism that would allow the drug to have a meaningful benefit in that disease.

Sure. There's a couple reasons. One, there was a publication from an external lab where they induced the IBD model in rodents that were either wild type for our target, our TPH1, or knockouts for our target TPH1. And the knockouts were resistant to the IBD challenge. So that gives genetic support for the concept that it could be a useful mechanism in its indication.

Secondly, they went on and did a pharmacology experiment, where they treated wild type animals. That's where they'd induced the IBD model and then treated with either placebo or PCPA which is an inhibitor of our target, TPH1, and showed that with the PCPA, the TPH inhibitor, they reduced the inflammatory response in that model. So both genetic and pharmacology evidence supporting that. And they we went on and both internally, as well as with an external expert lab in this area, we've both produced data that fit very well with that published data and support the utility of 1032 in the indication. And we have run models that are thought are most closely relate to ulcerative colitis, and we've run models that are thought to be more closely related to Crohn's disease and 1032 looks to reduce the inflammatory response in both models. The other thing I'd say is we have used the positive control, which is sulfasalazine at its maximum tolerated dose in mice. And 1032 looks to be clearly superior to that agent, which is currently used to treat IBD patients.

Okay. Thank you.

Thank you.

(Operator Instructions). And there are no additional questions at this time.

All right. Well, listen, thank you for participating. If you turn to the last slide, obviously from this discussion, you can surmise that Lexicon continues with advancing our entire pipeline. We have four programs active in Phase II. I think as we go forward in the year, we'll be sharing more with you on our next wave of small molecule programs that are in IND enabling studies, as well as updating you on the multiple clinical milestones that we expect throughout the year. Thank you for your participation. Good bye.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect.