Lexicon Pharmaceuticals Inc (LXRX) 2011 Q3 法說會逐字稿

Thank you for holding. Welcome to the Lexicon Pharmaceuticals' third quarter 2011 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 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 Lexicon Pharmaceuticals' third quarter 2011 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; Dr. Pablo Lapuerta, Lexicon's Senior Vice President of Clinical Development and Chief Medical Officer; and Jeff Wade, Lexicon's Executive Vice President of Corporate Development and Chief Financial Officer.

We expect that you have 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, and 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 the third quarter. Dr. Zambrowicz will then give an update on our LX4211 program. Dr. Lapuerta will then review our LX1032 and LX1033 programs, and Mr. Wade will review our financial results for the third quarter and discuss our financial guidance for 2011. We will then open the call for your questions. If you would like to view the slides for today's call, please access the Lexicon website at www.lexpharma.com. You will see a link on our home page for today's webcast.

Before we begin, I would like to state that we would be making forward-looking statements, including statements relating to Lexicon's research and development of LX1031, LX1032, LX1033, LX2931, and LX4211, and 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, financial 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 of results of clinical trials and pre-clinical studies of our drug candidates, our dependence upon strategic alliances and 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 requirement of substantial funding to conduct our drug discovery and development activities. For a list and a 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 welcome everyone. We'll commence with our traditional pipeline slide as we'll be focusing as usual on this call on our four programs in Phase 2 development. All of these of course are small molecule programs developed by Lexicon's research teams and all operate through novel mechanisms of action.

Three of these programs have achieved proof-of-concept already and the fourth, 2931, is we believe on its way. 1032 for carcinoid syndrome telotristat etiprate also has Fast Track status with the FDA and orphan status with the EMA. I think I'd also like to mention one of the point on this slide you will note that LX1031, the program for irritable bowel syndrome, which includes the follow-on compound LX1033. We have slightly also the designation on 1031 to indicate that we are now focusing our attention on 1033 and progressing it rapidly into Phase 2 development and we'll be giving you an outline of that study, which we intend to commence in 2012.

I'll also say that I guess it's not captured on this slide nor will we be able to cover in the call is a very significant amount of preclinical and non-clinical work that is proceeding on each of these programs as we are focusing on making 4211 and 1032 Phase 3 ready programs and we believe also 1033 will be soon in that category.

Turning to the next slide on our clinical milestones and goals. I'd like to first focus on the Q3 2011 box in which you see the milestones that we've achieved in the past quarter and we'll be discussing each of these on today's call. First, LX4211, we've completed a very interesting mechanistic study and helped the volunteers and we'll be sharing with you some top line data from that. These are new data that we'll be discussing here that have revealed we think some of the very interesting properties about LX4211. I would also like to mention that we will be presenting at an upcoming conference in Boston that will be later this week, specifically our presentation [follows on] Friday, November 4 at 2.30 PM and that is at the Cambridge Healthtech Institute conference, which is focused on type 2 diabetes and they have significant section on the SGLT2 inhibitors and we have a session there discussing our dual inhibition of SGLT1 and SGLT2 by LX4211. So we'll be showing I think some new preclinical datas there regarding the methods of our action.

Next then on this call we'll turn to LX1032. We have previously reported top line Phase 2a results from telotristat etiprate in carcinoid syndrome, but today we're going to take some time to look into some individual patient's data that contributes to the -- of course the aggregate data and we think it provides important insights into the benefits this drug is providing the patients in this study. So, I hope you will find that interesting.

Then we'll briefly discuss LX1033 where we have completed the Phase 1 program for that and show you some of the top line results there that contribute to our confidence and proceeding into Phase -- a full Phase 2 program in early 2012 and update you briefly on LX2931 where we successfully initiated our dose escalation trial that's underway and that so far has gone well and is proceeding on track. So that will be the outline for the call and then each of these as we cover each of these programs, Wade mentioned some of the forward-looking milestones that we anticipate in Q4 and in 2012.

So with that introduction, I'd like to turn the call over to Dr. Brian Zambrowicz to start off with LX4211.

Thank you, Arthur. I will be describing data from our recent study of LX4211 in healthy subjects, as you go to the next slide please. This was a mechanistic study that we undertook with two purposes in mind. The first was related to dose timing. Previously in our Phase 2a study, we dosed LX4211 two hours before breakfast. And in this study, we touched the dosing regimens relative to meals to identify regimens that gave optimal effects due to SGLT1 inhibition in the gastrointestinal tract.

The second reason is that we're very interested in looking at the effects of LX4211 on postprandial glucose levels in healthy subjects. The reason for our interest was because through the SGLT2 selective compounds currently in Phase 3 clinical trials have been tested in these healthy subjects and are reported to produce no reductions in blood glucose levels after either a morning meal or a glucose challenge. So for the first time this allowed us to compare effects of LX4211 to these SGLT2 selective agents to determine whether dual inhibition produces more robust reduction in postprandial glucose levels. So in this study our primary endpoint was to look at the pharmacodynamic effects of LX4211 in healthy subjects. Secondary objectives was to evaluate safety and tolerability. And we measured a number of parameters, including urinary glucose excretion, fasting and postprandial glucose levels and insulin. And as biomarkers for our SGLT1 inhibition, we are measuring both PYY, as well as active and total GLP-1.

Looking at the next slide, this is the study design, it began with the screening periods (inaudible) the subject was sequestered. We were able to get a baseline measure for the fasting and postprandial glucose, as well as insulin levels GLP-1 and PYY. And then we had seven days of dosing. And the purpose of those seven days of dosing were to get them to what would -- we considered a steady state level of LX4211. And during this seven days of dosing they were dosed 1 hour before breakfast each day.

And then starting with day one -- starting with day eight they were randomized, as you can see in the table below to one of five different dosing regimens. A, B and C were dosing 1 hour, 0.5 hours or immediately before breakfast 400 milligrams once a day. D was dosing 400 milligrams once a day immediately before lunch and E was a split dose, we wanted to dose 1 hour before breakfast 200 milligrams and the other 200 milligrams one hour before dinner to see that if there wasn't any further benefit of splitting that dose. I want to mention that A, B and C dosing 1 hour or 0.5 hour or immediately before breakfast gave pretty much the same exact results. There were no difference with respect to glucose, insulin or on GLP-1 and PYY measures. And for that reason I'm going to focus on the immediately before breakfast dosing in comparison with the split dosing. I should say that we were very encouraged that the timing of dosing before breakfast didn't appear to matter. I think that will be very appealing as we move forward as far as dose timing.

Next slide, first, I'm showing you the effects of LX4211 dosing on their glucose levels throughout the day, particularly focusing on the postprandial glucose levels. In black, what you can see are the baseline measures for postprandial glucose. And then the two dosing regimens shown here are in purple, the immediately before breakfast dosing of 400 milligrams. And in gold the split dose, the 1 hour before breakfast and 1 hour before dinner. And we are very pleased by this data because we had pretty profound reductions in postprandial glucose levels both at breakfast and lunch,

particularly obvious that breakfast where there were a much straighter excursions of glucose in the blood after the meal. This was very positive to us because it did suggest that the dual inhibition of both SGLT1 and SGLT2 was acting very differently than what has been reported for the SGLT2 selective compound.

In our study the healthy subjects on LX4211 were not getting excursions above 105 mg/dl of glucose after their breakfast meal and that's in contrast to no effects observed with the SGLT2 selective compound. There were significant reductions at breakfast, lunch and dinner for the split dose and at breakfast, lunch and throughout the day for the immediately before breakfast dose.

Next slide, these reductions in postprandial glucose levels were achieved with lower insulin levels throughout the day. You can see that with both dosing regimens there were significant reductions in insulin levels at the breakfast, lunch, dinner time frames and throughout the day.

Next slide, we were also very interested in looking at our biomarkers of SGLT1 inhibition in the gastrointestinal tract. This shows our effects on total GLP-1 levels and what we observed in purple with the single-dose immediately before breakfast is nice elevations of total GLP-1 at breakfast and lunch without much effects at dinner. Those effects at breakfast and lunch and throughout the day was significant for the -- once-a-day dosing immediately before breakfast. We also observed similar elevations in active GLP-1 with these dosing regimens.

Next slide. In addition, we measured PYY levels and again, what we observed is in purple with once-a-day dosing immediately before breakfast, we had elevations of PYY throughout the day, as well as at each of the three meal times, breakfast, lunch and dinner. We observed similar although slightly reduced effects with the split dosing regimen. And again, this was very encouraging and that this immediately before breakfast dosing regimen appeared to be giving us very strong effects on our SGLT1 dependent biomarkers.

Next slide. And finally as far as the data from this study, we were very interested again in looking at the triglyceride effects. If you can remember, in our Phase 2a study, we saw very nice reductions in triglycerides in both 30% in both our dose times relative to placebo. This is very much unlike what has been observed with SGLT2-selective compounds. And so we were interested in these healthy subjects whether we were again seeing reductions in triglyceride levels that are in blue. You can see that in spite of the fact that these subjects were beginning with relatively normal triglyceride levels, they achieved a roughly 37% reduction by day 13 of their dosing.

Next slide. And to summarize this study, we observed no hypoglycemia, abdominal pain or diarrhea in healthy subjects treated with LX4211, again providing support for the GI safety of inhibiting SGLT1. We would see GLP-1 and PYY secretions stimulated by LX4211 inhibition of SGLT1 in the gastrointestinal tract providing further support for the GI mechanism of action of our drug. And then we saw, a number of effects that further differentiate LX4211 from the SGLT2-selective compounds. The first was the large decreases in postprandial glucose excursions after breakfast and lunch. And this was achieved in spite of the fact that we were achieving lower urinary glucose excretion in healthy subjects when observed with the SGLT2-selective compounds in healthy subjects.

And finally, again we saw a large reduction in triglyceride level. Just to update you on the ongoing Phase 2b study, enrollment is proceeding on target with the expectations that top line data will be available by mid-2012. With that, I am going to turn the call over to Dr. Pablo Lapuerta and he will be describing about LX1032 and LX1033 programs.

Thank you, Brian. I'll review some of the data we have for telotristat etiprate and carcinoid syndrome. On slide 15, there is a summary of the top line results from our placebo controlled study. In this study, we looked at responders in terms of specific cut-offs that we folks would not -- we've seen on placebo, but that could be seen with telotristat etiprate.

A clinical response we define as at least a 30% reduction in bowel movements for at least two weeks, there were no responses on placebo and we are five on telotristat etiprate. Our biochemical response, we define it as a 50% reduction or normalization in urinary 5-HIAA, which is a measure of serotonin synthesis, or serotonin metabolism I should say. And there were no responses on placebo, but nine on telotristat etiprate.

In these patients with carcinoid syndrome and multiple gastrointestinal complaints, we asked about adequate relief at week four and there were no patients with adequate relief on placebo and yet they were fixed with telotristat etiprate. These top line results have held up and can be considered final and what we have done in the last two weeks is to perform some additional analysis that support our understanding of efficacy.

On slide 16, we have the distribution of individual patient responses and our study of carcinoid syndrome. Patients entered with the baseline number of bowel movements between five and eight in general. And they had significant reductions in bowel movement frequency with telotristat etiprate but not placebo.

What you have on this slide is a ranking of all subjects from best on the left to worst on the right. And if you look at the five best responses, they were all on telotristat etiprate and they were the five patients who had a reduction in bowel movements greater than 30% for at least two weeks during the four-week study. But if you look more broadly, there are 13 patients that had some decline in bowel movements during the study, 12 of them are in telotristat etiprate. And in contrast, if you look at the far right of the graph, you have seven patients who have some worsening in bowel movements during the study and four of the seven are in placebo.

So, in addition to observing significant reductions of bowel cutoffs, looking at the distribution of responses throughout the study among all patients shows a clear separation between telotristat etiprate and placebo. Other analysis that we did explored the meaning of adequate release that was being reported frequently by patients on telotristat etiprate. On the top line slide, I had showed you that no patients had adequate relief on placebo, but that 50% of patients before had adequate relief on telotristat etiprate.

Here on slide 17, we see the results not simply for week four but for weeks one, two, and three and we see them across all doses of telotristat etiprate in the study. There were no responses reporting adequate relief on placebo [at either weeks] one, two, three, or four whereas across the four groups of telotristat etiprate and the four weeks of the study, 14 of 16 instances of dosing and week in the study showed responses on telotristat etiprate.

We looked further at these responses to look at how they related to bowel movement frequency and changes in other gastrointestinal symptoms, use of [octreotide] and flushing in the study. Several examples follow on the next few slides.

Slide 18 is the example of subject 1002 who was on a [115] milligram TID of telotristat etiprate. This patient had no adequate relief at baseline or week one, but had adequate relief reported at week two.

What we see in the blue is the stool frequency. The patient entered the study with a average of about 10 bowel movements per day during a period of tier 19 days of documented daily diaries on bowel movement frequency. There is a green arrow where the days changed from minus 1 to positive numbers that's were telotristat etiprate treatment was initiated. As soon as telotristat etiprate treatment was initiated, the bowel movement frequency begins to decline. And declines to the point where by week three, there are many days with about six bowel movements and the patient is reporting relief of symptoms.

It's interesting to note from this slide as well is that the patient had flushing. This is in the red bars. And on two to three episodes per day throughout a good part of the baseline period. And then by week two on telotristat etiprate had only one more episode of flushing between -- that's between day seven and 28, only one episode. So flushing has essentially stopped for this patient in addition to having a reduction in bowel movement frequency.

What's further of interest is with this patient, there was no extension in place, but the patient was followed off the drug for several days and after the study completed, there was a return in bowel movement frequency to baseline and return of the flushing. So this patient experienced a response in terms of reduced bowel movement frequency and reduced flushing and they were closely associated with initiation and discontinuation of treatment.

The next slide is the experience of subject 1010 on 500 mg TID of telotristat etiprate. This patient experienced adequate relief that was reported at weeks one and four. And this adequate relief was associated with a reduction in bowel movement frequency. The baseline average was around eight, the average on drug came down to around six. But perhaps what's of special interest here is like in the higher case. There is an association with interruption of therapy. Here the interruption was actually during the study treatment. The patient had an episode of bronchitis. The physician felt that while the bronchitis was being treated it was best to start the study drug. And so, from about days 17 to 22 the patient was off drug. The episode of bronchitis resolved, the treatment was resumed and the bowel movement frequency came back down on drug again. So it came down with therapy between days one and 17, went back up during days 18 to 21 or 22, off drug, and then came back down when the drug was initiated again.

Another thing that's of interest with this patient is that the patient had multiple daily doses of immediate-reacting octreotide injections. You see this on the list of numbers that start in black, beginning with 24234, this whole sequence. And that turns to red once the patient started telotristat etiprate treatment. You have two to four injections a day for this patient on many days during the baseline phase. And then once the patient starts on therapy, there are many [zeroes]. No more use of immediate-reacting octreotide.

Perhaps the only exception is that brief period while the patient was off drug there were several injections again, and they stopped once the patient came back on drug. So not only was there a reduction in bowel movement frequency, but there was a reduction in octreotide used which has been used as sort of a rescue therapy with patients with advanced carcinoid syndrome.

Another example that was illustrative of the experience with telotristat etiprate with subject 1008 on [350] milligram TID on slide 20. This patient had a adequate relief reported at week four with a reduction in flushing and a reduction in frequency.

So the average number of bowl movements prior to treatment, you see, in those 28 days before treatment was started was around six. It came down to around five, perhaps a little bit less in the last two weeks of therapy where the patient reported adequate relief and there was a complete cessation of flushing with therapy. This patient did not have a 30% reduction in bowl movements for two weeks during the study, but was reporting adequate relief with clear clinical benefit.

On slide 21 is the experience of patient 5001 on a [150] milligram TID of telotristat etiprate. This patient also reported adequate relief at weeks one, two, three and four. These were associated with a reduction in frequency and urgency. The reduction in frequency was modest, about 30 bowel movements over the course of the study from an average of 5.2 per day to 4.2 per day.

However, what you have here is a description of the patient's reports of urgency which were collected on the same daily diary. Urgency, its presence is indicated by a red Y and its absence is indicated by a green N on this line below the graph, and you see that during that period of the 28 days of run-in, the patient had many Ys and once the patient started on telotristat etiprate treatment, started having many Ns with less bowel movement urgency.

Slide 22 describe some of the consistency that we are seeing among the efficacy measures and the reductions in bowel movement frequency have been greater for patients with reductions in urinary 5-HIAA at week four and patients with adequate relief at week four. If you look at the change in bowel movement frequency at week four, it goes down about 30% in patients who have inhibition of serotonin synthesis as indicated by a greater than 50% reduction in urinary 5-HIAA and it doesn't go down for patients who do not have a reduction in urinary 5-HIAA.

The same thing with adequate relief, patients who are reporting adequate relief to us at week four are experiencing a 33% reduction in bowl movements. Patients who are not reporting adequate relief are having no reduction in bowl movement frequency. So this consistency among the efficacy measures in our placebo-controlled Phase 2 study is encouraging and it is consistent with some of the results we are seeing in the European open-label study. And I will describe and share some of the individual responses from that study as well.

Slide 23 is the design of our European open-label study. This is a bit different from the U.S. study and that there is no placebo control. It's a longer period of treatment, it's 12 weeks of treatment. And the treatment will go through a serial dose escalation. So patients are titrated.

Slide 24 is the experience of patient 7001 with benefits across multiple parameters consistent with what we have seen in the U.S. studies. The chart at the top is the patient's bowl movement frequency. At base line the average was 4.7 and you can see that reflected to some extent with the zero milligram doses. And there is a bar that's a green line that goes across the graph that is set at that baseline 4.7.

You could see a consistent experience with bowel movements below that baseline throughout the study. And gradually reducing even more as the patient went up in dose. Finally on 500 milligrams the patient began to report adequate relief. What's interesting with patient 7001 that the benefit was not simply any reduction in bowl movement frequency. The patient had considerable amounts of flushing at baseline. The average was 3.0 and we have a bar on slide 25 that describes that baseline.

And you can see several days at three and several days above three during the baseline period, perhaps a couple of days without flushing during the baseline period as well. But then with treatment, a real reduction in flushing with many days without any flushing at all.

The patient also reported nausea at baseline. This is also collected through the daily diary that we have for Europe. And the patient had several episodes of nausea and then -- during the baseline phase and then during treatment very little nausea, a little bit at the 250 milligram dose, but not at 350 and absolutely none at 500 milligrams.

Finally with the patient 7001, on slide 26 we have a measures of stool consistency, the higher the number the worse is consistency and the more liquid the stool. And so the patient had a baseline of 3.2 and as you can see throughout most of the study, the numbers were better on telotristat etiprate and they improved as the patient reached the 500 milligram dose.

Patient 7003 also was typical of the European experience with the benefits across multiple parameters, the frequency of base line was 8.5 and with treatment the frequency gradually came down and came down on most of the 500 milligram dose, which is at the point where the patient reported adequate relief of symptoms.

On slide 28, this patient like others in the U.S. and Europe had flushing at baseline. The baseline mean was three episodes per day and the incidence of flushing comes down as the patient reaches 250, 350 and then 500 milligram doses. And there is a good period of time without any flushing at all at the end of the treatment period in those last three weeks.

The stool consistency also gradually improved. This was a more moderate improvement, but improved below baseline as the treatment dose increased to 500 milligrams. And the patient reported decreases in nausea.

On slide 29, the patient reported nausea on multiple days with the baseline average score of around two. And then as therapy was advanced there was some nausea at [115] milligram still persisting from baseline, but then once the patient reached 250, it was less, 350 it was very little and the 500 milligrams was tolerated as well with much less nausea than baseline.

The patient also reported on the diary, abdominal pain. It was graded on a scale from zero to three. And the patient had numerous assessments of three during baseline, had an average of two and then as the patient goes on to the 350 milligram and 500 milligram doses, the abdominal pain goes down [to 01] for most of the time spent on therapy.

So, overall, on slide 30, we can summarize the telotristat etiprate's Phase 2 efficacy data saying that clinical response, biochemical response and adequate relief we're seeing with telotristat etiprate, but not with placebo and our placebo-controlled trial. And that the individual patient data providing us helpful insight into the aggregate results.

Perhaps one of the most compelling things that we're finding in both the U.S. and we have seen this in Europe as well is that the benefits are linked to initiation and resumption of therapy with telotristat etiprate. If patients interrupt the bowel movement frequency goes up. Once patients restarts the benefit returns. The adequate relief that we saw frequently in the placebo controlled study was associated as should be expected with reductions in stool frequency and individual responses on other measures. These varied according to the individual.

We had an individual with a marked reduction in octreotide use. More consistent among the data in both the U.S. and Europe where reductions in flushing, urgency, and consistency. In Europe, we had systematic data on nausea and saw reductions in nausea with many patients on therapy. And we saw reductions in abdominal pain as well.

We're moving forward with telotristat etiprate to do a proof-of-concept as well and another indication, which is ulcerative colitis. Slide 31 summarizes the basic design of the study, we call it [PARSEC], a Phase 2 study of the relationship between serotonin with efficacy and ulcerative colitis. We plan to study 60 patients with mild-to-moderate ulcerative colitis. With patients randomized to placebo, 500 milligram daily of telotristat etiprate or 500 milligram three times daily of telotristat etiprate.

Patients will be treated for eight weeks. These are patients who will receive treatment on top of the standard of care, which is mesalamine and efficacy measures will include an aggregate assessments that includes the clinical response and colonoscopy. The colonoscopy itself, histology and then biomarker of inflammation in the stool called fecal calprotectin. And we are on track to initiate this study in December and we would expect top line data in the first quarter of 2013.

Let me share with you as well an update of where we are with LX1033 for irritable bowel syndrome. Slide 33 provides results from a Phase 1 study where we found that plasma 5-HIAA levels that we have correlated with urine 5-HIAA levels are reduced with telotristat -- I'm sorry -- with LX1033. Over a 14-day experience in Phase 1, we had approximately 30% reductions with our 500 milligram, 750 milligram, and a 1,000 milligram doses of LX1033.

The results were highly significant compared to placebo. And these encourage us that we can use our plasma 5-HIAA measures as a promising new biomarker in this area. Whereas previously we had relied only on urinary measures, which are difficult to obtain.

On slide 34, we have some new data that we've done in a Phase 1 study as well with an even lower dose of LX1033 and that's the 500 milligram BID dose. That appears to achieve a maximum reduction of plasma 5-HIAA. That same 30% reduction we saw on 500 milligram TID, we're seeing with 500 milligram BID. So we're encouraged by our opportunity to examine a potent drug with lower doses than we previously explored in irritable bowel syndrome with our prior therapy LX1031.

In our Phase 1 experience, LX1033 was safe. Slide 35 is our summary. We had an excellent safety profile, significant reductions in 5-HIAA biomarker at lower and less frequent dosing that -- than we have seen at -- with LX1031. And these biomarker reductions on the ballpark of the magnitude that we have associated with clinical benefit in patients with irritable bowel syndrome. So this allows us to move forward with LX1033 and we're encouraged that we can do that with fasting plasma 5-HIAA as what may be a superior biomarker compared to 24-hour urine 5-HIAA with a real advantage and convenience of feasibility.

On slide 36, we are moving forward with LX1033 from Phase 1 to Phase 2 in irritable bowel syndrome patients. Our strategy is to assess efficacy in irritable bowel syndrome for selection of a dose for Phase 3. And we hope in Phase 2 to have a large program that will help us to find our Phase 3 biomarker strategy to examine whether a biomarker like plasma 5-HIAA can be used to identify responder patients or to adjust dose of LX1033.

We plan to study 360 patients with irritable bowel syndrome, diarrhea predominant, we'll randomize them one to one to one to one on a placebo 500 milligrams twice daily, 500 milligrams three times daily and a 1,000 milligrams twice daily of LX1033. We will treat them for four weeks and we will look at a stool consistency as a primary efficacy endpoint. We will be looking at other endpoints as well that are consistent with irritable bowel syndrome programs. And our experience in this area of stool consistency is a very sensitive indicator of efficacy for LX1031 and that will help us in selecting a dose of LX1033. We're on track to begin enrollment in this trial in the first quarter of 2012.

I will now turn the call over to Jeff.

Thank you, Pablo. I will provide a brief financial update. As indicated in our press release today, we had third quarter revenues of $0.4 million, a decrease of 55% from $0.8 million in the prior-year period. Our revenues of $1.5 million for the nine months ended September 30, 2011 reflected a 59% decrease from $3.7 million for the prior-year period.

Our research and development expenses for the 2011 third quarter were $19.7 million, an increase of 4% from $18.9 million in the prior-year period. The increase was primarily attributable to an increase in external, preclinical and clinical research and development costs, offset in part by a decrease in personnel costs. Our R&D expenses at $63.7 million for the nine months ended September 30, 2011 reflected a 6% increase from $60.3 million in the prior-year period.

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 this liability based on the development of the programs and the time until such payments are expected to be made are recorded in our consolidated statements of operations. The associated increase in fair value of Symphony Icon purchase liability was $2.3 million in the third quarter and $5.2 million for the first nine months of 2011.

Our general and administrative expenses for the 2011 third quarter were $4.1 million, a decrease of 18% from $4.9 million in the prior-year period. The decrease was primarily attributable to decreased personnel costs. Our G&A expenses of $13.3 million for the nine months ended September 30, 2011 reflected a 14% decrease from $15.5 million for the prior-year period.

Our net loss for the 2011 third quarter was $26.1 million or $0.08 per share compared to a net loss of $27.5 million or $0.08 per share in the prior-year period. Our net loss for the nine months ended September 30, 2011 was $82.4 million or $0.24 per share compared to a net loss of $78.8 million or $0.27 per share for the corresponding period in 2010.

For the three and nine months ended September 30, 2011, our net loss included non-cash stock-based compensation expense of $1.4 million and $4.4 million respectively. For the three and nine months ended September 30, 2010, net loss included non-cash stock-based compensation expense of $1.3 million and $4 million respectively.

Let me now turn to our cash and investments. As of September 30, 2011, we had $144.2 million in cash and investments as compared to $164.8 million as of June 30, 2011 and $211.1 million as of December 31, 2010.

Now, let's turn to our forward-looking guidance for 2011. We expect contractual revenues from existing agreements in 2011 of between $1.5 million and $2 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 continue to expect operating expenses in 2011 to be in the range of $110 million to $120 million. And non-cash expenses were expected to comprise about $18 million of this total, including $7 million, an increase in fair value of Symphony Icon purchase liability, $5 million in stock based compensation, and $6 million in depreciation and amortization.

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 $90 million to $95 million, which is down slightly from our previous guidance of $92 million to $97 million.

I will now turn the call back to Arthur.

Thank you, Jeff. As you are formulating your questions for us, I would just like to comment that, you can see we certainly have a very full clinical program and have absorbed a significant amount of data, which is very encouraging. And so, we've taken some extra time to share that with you today.

Specifically, our data on LX1032 telotristat etiprate has been particularly well received in our partnership discussions. And as you may have noticed in our press release that we issued this morning, I stated that we are in fact progressing with plans to partner LX1032 on the basis of and the strength of that Phase 2 data. And we are currently engaged in active discussions with multiple parties about the program.

So, assuming successful completion of those discussions, we would anticipate partnering this program in the near-term and as usual -- usually I had some questions on our partnering activities. So, we can certainly take any in that regard as well.

So, we can now open it up to Q&A.

(Operator Instructions). Liana Moussatos, Wedbush Securities.

Hi. Thank you for taking my question. For the European study for 1032, can you give us timing of that?

Pablo, would you like to answer that please?

Yes. So the European study, we recruited eight patients and we have a couple on screening. So, we will have a few more. Our original target for that European study was to have a total of 16 patients. But, given the nature of the results that we have and what we feel are clear signals of efficacy, we will be terminating that study at the end of the year because it's met its scientific objectives.

So, the final number of patients may be something like 10 or 11 patients.

Okay. And for the RA program can you give us an update on timing of that?

Pablo, would you like to keep going?

Yes. We initiated a study of 10 patients, in rheumatoid arthritis. We've already recruited several of the patients and they're going through increasing doses of 2931, the study is going smoothly and we would expect to have results in the first quarter of 2012.

Thank you very much.

Thank you, Liana.

Cory Kasimov, JPMorgan.

Hi there. It's actually Matt Lowe in for Cory. Just regarding an update on the Phase 2b trial for 4211 and the pace of getting sites up and running, did the [dapo] panel have any obvious impact on the phase enrollment or could you just comment generally on how the enrollment rate has progressed in that study. Thanks?

Pablo?

We're very pleased with the enrollment and site participation in the study. We have enrolled 150 patients, so we're more than halfway done with the study today. And the pace of enrollment has picked up in the last couple of months. We don't feel it was adversely impacted by the (inaudible) Advisory Committee. The investigators seem pleased with their protocol and with the patient experience. And sites that recruits a few patients, they end up recruiting a few more. So the study is proceeding well and the investigators are supportive.

Okay, that's great. Thank you.

Alan Carr, Needham & Company.

Hi, thanks for taking my question. Want to come back to 1032 and commercial and partnering strategy. You mentioned that you are making progress in partnership discussions, is that worldwide or just ex-U.S.? And then to continue on 1032, wondering you can tell me, how things are looking in terms of on the regulatory front there in terms of what discussions with the FDA on Phase 3 design and that sort of thing?

So, we're discussing different models for partnership, but mostly worldwide partnership and so we believe those discussions are progressing pretty well.

With regard to the discussions with the FDA, it's our plan to schedule meeting with the FDA and outline -- with registrational trial based on the data that we've accumulated to-date. And I think that also is -- provides a timing framework for us with regard to partnership. Since we would anticipate that any partner coming on board would have obviously a vested interest in participating with us in planning that FDA meeting and of course the registrational trial. So that, all of those fronts kind of come together with our overall plan to move into Phase 3 for that program as rapidly as possible.

If a partnership doesn't emerge in the near term, do you plan to move forward with meetings with the FDA or would you just postpone that until you have a partnership firmed up?

We're moving forward with the FDA meetings, absolutely. And I think that will be instrumental for giving us real clarity as to what's required for the Phase 3 program, the budget et cetera. So, this is all going forward and will be, that's going to be the driver of the scheduling of that.

Okay. And then you have three preclinical programs, 7101, 5061, and 2311. I don't think you brought them up today. Do you still plan to move those into the clinic late this year or early next year or are you going to be focusing the vast majority of your efforts on the four Phase 2 programs?

Certainly we're focusing the vast majority of our efforts on the four Phase 2 programs. As you know the other programs as they progress through IND-enabling studies, it's hard to predict and they consume less resources along the way. I'd like to ask Brian to talk briefly about each of those starting with our first anticipated IND filing, the first program on that list.

Sure, LX7101 for glaucoma, we have an upcoming meeting with the FDA to finalize our plans before we file our IND. We anticipate filing that IND [earlier on]. The next one coming up would be LX2311 for autoimmune disease. And we anticipate that we would file an IND for that program somewhere between mid-year to third quarter 2012. And finally, LX5061, we did encounter some unexpected toxicity, that we haven't seen before [one of our] GLP studies and so we have stopped LX5061 and are working on a backup compound to move forward.

Okay, thanks for the update.

Thank you, Alan.

(Operator Instructions). Nicholas Bishop, Cowen and Company.

Hi, there. I've two questions. The first one is on LX1032 and you've provided a lot of interesting detail on some of the outcomes, benefits to patients besides the reduction in bowel movement frequency. And still your expectation to that would be the primary endpoint of a Phase 3 or will there be room for some of these other benefits to be in that outcome?

Pablo would you like to address that?

Well, we feel that there is plenty of room for these other benefits to be in the label. They may not be in the primary endpoint, but they may still be in the label based on discussions with regulatory agencies. And so that's one of the things we hope to map out in our strategy. We feel that adequate relief is really telling us a lot about patients, but there is an attraction and robust data around bowel movement frequency. So, the discussions with regulatory agencies will focus on how do we get a primary endpoint that's subjective and that satisfies the requirements, but how do we get the other information that completes the understanding of the clinical response of the subject in the label.

Okay, thank you. And then just one quick financial one. Operating expenses have been sort of -- well R&D and SG&A have been declining over the last few quarters. And I guess I have two questions about that. One is based on your guidance, should we expect an increase in either of those in the fourth quarter or is that trend likely to continue? And also you mentioned some reduction in personnel expense, I wonder if you can comment on what the nature of that is?

Sure. The reduction in personnel expense, I'll answer the second part first. The reduction in personnel expense relates to reductions that we had earlier at the beginning of the year and that's carried through each one of these quarters. We will expect to have a somewhat higher expense, R&D expense, in the fourth quarter and that relates to the timing of clinical and CMC activities. So that -- our fourth quarter, if you kind of look at what we've spent so for and what we expect to spend in the fourth quarter and this fourth quarter expense will be somewhat higher and it's mostly related to timing of clinical activities.

Okay, thank you. That's helpful.

At this time, there are no further questions.

Well, thank you for participating in this call. We look forward to updating you next quarter. Bye-bye.

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect.