Lexicon Pharmaceuticals Inc (LXRX) 2012 Q1 法說會逐字稿

Welcome to the Lexicon Pharmaceuticals first quarter 2012 conference call. (Operator Instructions) Please be advised that this call is being recorded 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 the Lexicon Pharmaceuticals first quarter 2012 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 give an update on the status of our programs. Dr. Lapuerta will then provide additional information on our lead clinical programs, and Mr. Wade will review our financial results for the first quarter 2012 and discuss our financial guidance for 2012. We will then open the call to 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 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 LX-4211, LX-1033, LX-2931, LX-7101, and telotristat etiprate, also known as LX-1032, 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 related 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 requirements 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 good morning everyone. We're off to a strong start here in Q1 of 2012, and this morning we'll be updating you as to the progress of our pipeline. On the call, we'll spend most of our time on LX-4211 in diabetes. We've had some new news regarding that, which we released this morning, and additional indication we'll be studying now, in addition to Type II diabetes, will be Type I diabetes, in a proof of concept trial, which I'll discuss. And then we'll move on to discuss telotristat etiprate in carcinoid syndrome, and our current thinking regarding the Phase III program for that compound.

At the end of the call, I'll be summarizing the timing regarding milestones affecting all the drugs in the pipeline, and I'll be giving very brief updates, then, on LX-1033 for IBS, LX-2931 for rheumatoid arthritis, and LX-7101 in glaucoma.

So, what I can say about all of the programs currently as we are here at the end of the first quarter is that they're all on track. In fact, a few are running somewhat ahead of schedule, and so we're pleased with the progress of the pipeline in its entirety.

So, with that brief introduction, I'd like to turn to a discussion of a new opportunity we have in front of us, in Type I diabetes, or juvenile diabetes. This is the type of diabetes, of course, is by definition insulin-dependent diabetes. The cause of Type I diabetes is loss of function of the pancreatic beta cells, typically affecting people initially in their youth, and then establishing itself as a life-long disease condition.

Now, there's approximately three million people in the world with Type I diabetes, an estimated 1.3 million in the United States, and maintaining control of their blood glucose, because of the lack of functioning beta cells, they're entirely insulin-dependent for maintaining that control. So insulin, as a well-established drug for glycemic control, has certain issues that make it challenging for the Type I diabetic and also non-compliance with injections can be a problem. 80% of Type I diabetics are on three or more insulin injections per day, another 20% in the United States are on insulin pumps. But there's issues regarding fear of hypoglycemia, which is one of the most common side effects of insulin therapy, and this can lead to deviations from compliance with insulin therapy.

In addition, long-term poor glycemic control can produce kidney disease and retinal damage and long-term cardiovascular disease as well.

So, we see the opportunity for LX-4211 here as very unique. Of course, it's an oral agent, which is unique in this space, as there are no currently approved oral therapies for Type I diabetes. And what we know about LX-4211's mechanism has led us to believe that we can enhance glycemic control significantly while reducing insulin needs. And we think this will address a significant unmet medical need in this population.

We have -- we have seen LX-4211 perform well on animal models of Type I diabetes, and the potential benefits include not only more consistent glycemic control in addition to insulin therapy, or in combination with insulin therapy, of course, but also there are benefits by reducing the potential dose of insulin, which would include less hypoglycemia, a greater ability to reach hemoglobin A1c targets, and therefore, reduce the long-term consequences of toxic levels of glucose.

And then there's a lifestyle factor also we'd like to consider here, which is the elimination, potentially, of one or more insulin doses in some patients. And then finally, insulin use itself is also associated with weight gain, and we think that by reducing the total dose of insulin used, that could reduce that side effect. Of course, we've also seen favorable effects on body weight with LX-4211 therapy.

So, I'd like to describe briefly now the Type I diabetes proof of concept study that we have outlined, and received funding for. We'll begin this program with a multi-center, randomized, placebo-controlled study. It will be a double blind study in patients with inadequately controlled Type I diabetes. This will be in subjects that are 18 to 55 years of age with established Type I diabetes, and they can be either on the continuous subcutaneous insulin infusion, which is the insulin pump, or on multiple dose injections, which would be some combination of short-acting insulin at mealtime with long-acting insulin for their basal dose.

We anticipate approximately 25 subjects overall. We think we can achieve our proof-of-concept goals within a four-week treatment period, so this is a fairly short treatment period in which time we can derive a significant amount of information. The dose we're targeting here is a 600-milligram total daily dose of LX-4211. The initial dosing being 400 milligrams just before breakfast where we've seen excellent control in both healthy normals and Type II diabetics over postprandial glucose at breakfast and lunch. And then 200 milligrams just before dinner, and of course, it'll be all compared to placebo.

The endpoints that we'll be looking at in this study are listed on this slide. The primary objective, and I think the most quantitative endpoint for this short-term study, is the reduction in the total daily amount of exogenous insulin required when patients are also on LX-4211. So, we anticipate there being a reduction in insulin required once LX-4211 is added, and of course we'll compare that to the placebo group.

There are secondary objectives as well, which are very important, and the first one there is to further define LX-4211's effects in terms of reducing the dose of insulin required between the meal-time insulin, or the bolus insulin requirements, and the basal insulin, which is the longer-acting insulin, or the baseline requirements that they have. These will be studied independently as a secondary endpoint.

In addition to this, then there are endpoints we can measure in the short-term study that revolve around improvements in glycemic control, and the -- one of the most quantitative ones will be the effects on the fasting plasma glucose over time, and postprandial glucose, again, where we've seen significant effects in previous studies with LX-4211.

And then we'll also be measuring through a continuous glucose monitor, which gives us a measure of glucose -- blood glucose concentrations essentially every five minutes through a device. We'll be measuring the time spent in the normal glucose range, or euglycemic range. And this will speak to the ability of LX-4211 to enhance glucose control overall and also importantly reduce the amount of time spent either hypoglycemic, that is with low blood sugar, or hyperglycemic, that is with high blood sugar.

Now longer-term studies are possible after this, and in those kinds of studies we'd anticipate endpoints including hemoglobin A1c and long-term measures of glycemic control, which we would hope would improve.

So, that's a brief outline of our study in Type I diabetes. We think, again, it offers a new opportunity for this drug to expand its potential indications, in addition to our Type II effort, which we will be updating you on now, as I turn the call over to Pablo Lapuerta. Pablo?

Thank you, Arthur. In Type II diabetes, one of the updates that we have is that we have initiated a study in renal impairment. The setting of renal impairment in Type II diabetes is attractive for several reasons.

One is that the population is very large. Up to 40% of patients with Type II diabetes eventually will suffer from some degree of renal failure. Another is that the population has a high unmet need. Metformin is contraindicated in this population, thiazolidinediones are contraindicated, many of the sulfonylureas are contraindicated. Using insulin can be difficult in this population, so we have a very high unmet need. But another reason is that we believe that LX-4211 can differentiate in renal impairment, and this is a good opportunity for us.

SGLT2 selective inhibitors have been shown to be less effective in patients with renal impairment, but LX-4211 provides, in addition to SGLT2 inhibition, the SGLT1 inhibition in the gastrointestinal tract, and that could provide benefit by reducing glucose absorption and enhancing GLP-1 and PYY.

So with that in mind, we put together a small study. We plan to enroll 20 patients. That will give us some initial data in the setting of renal impairment. These patients have Type II diabetes and moderate to severe renal impairments. They'll be treated with LX-4211 at the 400-milligram dose or a placebo for seven days, and we'll have assessment of postprandial glucose at the end of the seven days. We expect to have results in the second half of 2012, and results in 2012 will help us prepare for a large renal impairment study that we anticipate would be part of our Phase III program.

Another update relates to our ongoing study, a Phase IIb study in Type II diabetes. We've mentioned the study at several calls. At this call we can update that we completed randomizing all 299 patients. We've also completed dosing for all of those patients. We had good participation in the study, approximately 90% of patients completed the study with no serious adverse events related to study drug. The overall safety is blinded, but we're seeing a pattern that's consistent with the known tolerability profile of LX-4211.

So in June 2012, we expect to have data on this study with information on reductions in hemoglobin A1c at week twelve, our primary endpoints, but we'll also have other data on achievement of hemoglobin A1c less than 7%, fasting plasma glucose, weight, blood pressure, and triglycerides that describe the profile of LX-4211.

So in addition to nearing completion with this Phase IIb study, we're busy preparing for Phase III, and one of the activities that we undertook in the past few months is to meet with several European Union regulatory agencies. We met with agencies in Germany, Austria, and United Kingdom in order to get feedback on our proposed Phase III program. We're very aware of the importance of moving forward into Phase III effectively, and that's why we've been proactive in seeking regulatory input.

With regard to telotristat etiprate, we've undergone our Phase III planning, and that's been marked by an end-of-Phase-II meeting that was completed with the Food and Drug Administration. It was a positive interaction and has led to our current Phase III plan. We believe we can move forward with a single pivotal study for an indication in carcinoid syndrome for telotristat etiprate. That single pivotal study will have a twelve-week blinded treatment period that's placebo controlled. We plan to move forward with two doses, 250 milligrams three times daily and 500 milligrams three times daily, and a placebo. The sample size will be approximately 100 patients, and our focus will be on the reduction in the number of bowel movement frequency in carcinoid syndrome patients with diarrhea.

We're also proceeding with European Medicines Agency in seeking protocol assistance, that's Scientific Advice on our proposed Phase III program, and it's Scientific Advice for a [norson] drug. We're on track to initiate the study in the second half of 2012.

I also have an update on the telotristat etiprate Phase II study in ulcerative colitis. This is a proof of concept study, and it will also be providing important safety information for patients with ulcerative colitis. It may have the potential to expand the target population for telotristat etiprate. The name of the study is called [Parsig]. It's a Phase II study of the relationship between serotonin and efficacy in ulcerative colitis. We hope to have about 60 patients with mild to moderate ulcerative colitis randomized to placebo and two different doses of telotristat etiprate. It's an eight-week study with efficacy measures that are common in ulcerative colitis studies. So we initiated the study effectively. Enrollment is progressing. Randomization is a bit ahead of schedule.

Those are our key updates. And with that I would like to turn the call over to Jeff Wade.

Thank you, Pablo. I will provide a brief financial update. As indicated in our press release today, we had revenues for the three months ended March 31, 2012, of $0.3 million, a decrease of 50% from $0.6 million in the prior-year period.

Our research and development expenses for the 2012 first quarter decreased 4% to $23 million from $23.9 million in the prior-year period. The decrease was primarily attributable to decreases in facility and personnel costs partially offset by an increase in external manufacturing, clinical research, and development costs.

In connection with our acquisition of Symphony Icon, we made an initial estimate of the fair value of our liability for the base in contingent payments. Changes in this liability based on the development of the programs and the time until the payments are expected to be made are recorded in our consolidated statements of operations. The associated increase in fair value at Symphony Icon purchase liability was $2.1 million in the three months ended March 31, 2012.

Our general and administrative expenses for the 2012 first quarter were $4.6 million, a decrease of 4% from $4.8 million in the prior-year period. The decrease was primarily attributable to decreases in personnel and facility costs.

Our net loss for the 2012 first quarter was $29.9 million or $0.06 per share compared to a net loss of $29.6 million or $0.09 per share in the prior-year period. For the three months ended March 31, 2012, our net loss included non-cash stock-based compensation expense of $1.7 million compared to $1.5 million in the corresponding period in 2011.

Let me now turn to our cash in investments. As of March 31, 2012, we had $253.7 million in cash in investments as compared to $281.7 million as of December 31, 2011.

Now let's look -- turn to our forward-looking guidance for 2012. We expect contractual revenues from existing agreements in 2012 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. That said, we believe our productive pipeline will provide Lexicon with attractive opportunities for future alliances.

We expect operating expenses in 2012 to be in the range of $110 million to $120 million, which is unchanged from our prior forecast. Non-cash expenses are expected to be approximately $19 million of that total including $9 million in increase in fair value of Symphony Icon purchase liability, $6 million in stock-based compensation, and $4 million in depreciation and amortization. Taking into account cash received under existing contractual relationships only, we expect our 2012 net cash used in operations to be in the range of $93 million to $98 million, which is consistent with our previous guidance.

I will now turn the call back to Arthur.

Thank you, Jeff. And as we look over the next twelve months, you can see on this slide we have a number of key milestones coming up, all involving reporting of important results from a number of our programs. And then on the bottom of the timeline you can see the -- our anticipated timing of launching of our Phase III effort in carcinoid syndrome in 2012, and then looking forward into 2013, the approximate timing of our launch of LX-4211.

So if we look at the key results coming up that's in front of us, Pablo updated you with respect to LX-4211 and the Phase IIb results, which is on track. Then shortly thereafter in early Q3 we expect to have results from LX-2931, our S1P lyase inhibitor, which is currently being studied in a dose escalation protocol in patients with rheumatoid arthritis. That has proceeded well through the various dose levels, and so we look forward to those results.

Later that quarter, our trial in glaucoma with our new agent, LX-7101, is actually progressing ahead of schedule, and so we see results for that hopefully in the -- nearing the end of the third quarter. Enrollment's going well, and to remind you, that is a new kinase inhibitor that we've developed. It's an eye drop formulation. It's being tested in approximately 60 patients with glaucoma, the endpoints there being not only safety but also intraocular pressure, which is, of course, the most important endpoint.

And then, as we go into Q4, we, at the end of Q3 or beginning of Q4, we're anticipating getting results from our European open-label study in carcinoid syndrome. That study is important because that is the study in which we've had a treatment period of twelve weeks, and as you recall, the US placebo-controlled study was a four-week treatment period, so we'll be looking at an extended -- extended treatment period with that result. And so that, again, will be anticipated around early Q4.

Moving into 2013, LX-1033 results in IBS. That is a trial that is also enrolling very well, somewhat ahead of schedule. That's a trial of our locally acting tryptophan hydroxylase inhibitor in 360 patients with IBS-D. And then shortly thereafter, our results from telotristat etiprate in ulcerative colitis. So a very dense twelve months coming up here with respect to clinical results, and we'll be keeping you updated.

So I'm sure by now you may have formulated some questions, and I'd like to open it up to Q&A.

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

Hi, this is actually Karen Jay in for Cory Kasimov. Thanks for taking our questions. I just have a few. The first is we'd like to hear your thoughts on the recent [Fusion B] decision for DAPA and what do you think is driving the different views from the FDA and potential read-through for 4211?

Pablo, seeing as how you've recently returned from Europe, would you like to take that question?

Absolutely. We see it as very positive news. We see it as very positive in the sense that -- [GL] looks likely that DAPA will close and will be approved in Europe and that people will be more comfortable with SGLT2 inhibition and the benefits that it provides, and that will pave the way for another drug like LX-4211.

In terms of why it was approved in Europe and not yet in the US, I think some of it may have to do with the concept as to whether you can study safety post marketing or you need additional pre-marking studies to study safety. And what we saw was that Bristol-Myers Squibb has announced that they're going to look at safety in a large cardiovascular outcome study, and I think that's a good path forward.

And do those differing decisions in the US and EU influence at all or help with partnership negotiations, if at all?

I think it does help just because it does sort of clear up some of the questions. In some ways it's a validation that the drug should improved in Europe and gives us confidence that we should be able to do that. And we think eventually it'll get approved in the United States as well, so it looks to be more of a delay than an insurmountable hurdle.

Okay. And just one more question on the 4211 data coming midyear. In addition to the efficacy endpoints you mentioned in your prepared comments, will we have any insight into dynamics of the hormone levels for GLP-1 and say PYY?

Brian, go ahead and answer that.

Those are not endpoints that we're tracking in this study. We've done multiple additional studies now in both patients with Type II diabetes and healthy subjects where we've confirmed and built upon the SGLT1 mechanism of action in greater detail. We'll be publishing those as papers and scientific journals.

The focus of this study is to see how the dual-inhibition can potentially differentiate and enhance the benefits over what has been observed with SGLT2 selective compounds. So the key is looking at the HbA1c, glycemic control, and the metabolic and cardiovascular benefits, and how dual-inhibition could further enhance those.

Okay. Thank you.

Thank you.

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

Good morning. Thanks for taking my questions. First one on telotristat. Could you update us on your thinking strategically there? Are you still looking for a partner or are you committed to taking that forward on your own?

Our plan, as I think we've talked about previously, we are planning on taking that forward on our own. We had been talking to people about potential for partnerships at [GS], but our baseline plan is to take that forward on our own and that continues to be our objective.

Okay. And you mentioned you had an End-of-Phase-II meeting with the FDA. I think in the past you had said that end of Phase II temp meeting with EMEA would follow after. Have you had that meeting yet or is that on the calendar?

Pablo?

The meeting is on the calendar for towards the end of June.

Okay. And then on LX-4211, in your milestone slide there's a note that that's going to move into Phase III contingent on results from the relevant studies. Could you give us maybe a little bit more of an idea of kind of what the hurdle is to moving that into Phase III? What do you need to see in the ongoing Phase II as well as the renal or Type I study to move that forward versus what would trip up the program?

Well that's a big question. Pablo, would you like to try to answer that first?

Yes. I think that Phase II study is going to help us most with dose selection for Phase III. So we're studying four different doses in Phase II, and we want to select one of them to move forward. And so we're looking for a hemoglobin A1c lowering and we're looking for support of the profile that we've seen to date with LX-4211 where we've seen some data on blood pressure reduction and weight reduction and triglyceride reduction.

So we'd like to see that profile come together at a dose that we can take forward into Phase III. And in terms of safety, we want to see a safety profile that's consistent with what we've seen before, and that's a safety profile where we don't have serious adverse events related to a study drug and where we have overall good tolerability with patients staying on therapy.

So that's what we're looking for, and we think the Phase IIb study will be sufficient to provide that information to make that choice and so that Phase III can start in 2013, somewhere between the first and second quarter.

And Brian, would you like to add anything to that answer?

Sure. We've really been doing our homework as far as building a story of differentiation for LX-4211, particularly with respect to the selective SGLT2 inhibitors such as (inaudible) [flows] and we think we have an opportunity to show enhancements and benefit that would come out of our Phase IIb studies.

But I would just remind you that we have additional data that we've already obtained or is coming to further that differentiation story, and that includes sitagliptin or DPP-4 inhibitor combination with LX-4211 where clearly the ability to cause an enhanced release of these beneficial GI peptides after a meal in combination with a DPP-4 inhibitor that prevents a breakdown of GLP-1, that's an enhanced benefit we demonstrated improving or further elevating active GLP-1 levels and improving glycemic control with less insulin required.

That's not an effect of elevating active GLP-1 that you could anticipate with a selective SGLT2 compound. We discussed today the renal impairment study. That's a very important study. We believe that the SGLT1 mechanism of action will benefit those patients, and that's a population that doesn't -- can't achieve much benefit with selective SGLT2 inhibition.

And finally I think we're continuing to build the differentiation story because of the Type I studies that we'll be initiating where the non-insulin-dependent mechanisms of action of LX-4211, both increasing urinary glucose excretion and reducing intestinal glucose absorption we believe can benefit those patients. So again, multiple opportunities for differentiation.

Great. That's very helpful. Thanks for taking my questions.

Thank you.

Your next question comes from the line of Alan Carr from Needham & Company.

Hi. Thanks for taking my questions. I was wondering if you can tell us more about whose the non-profit behind this Type I diabetes trial as well as the cost and timelines around it in terms of results and that sort of thing?

So as we indicated in the press release, the funding is coming from an independent and non-profit organization. Its founder has an established interest in funding diabetes and other medical research. They're going to be funding the cost of the proof of concept trial that we had talked about earlier in the call. There's also a framework in place that allows -- that allows us, if we want to, to request funding for a Phase IIb trial, although that additional funding's not committed. The funding that we're receiving should cover the cost of the trials, however.

The arrangement is, just for a little bit of detail on this, it's not unlike other funding arrangements by disease such as non-profit in that if we achieve success measured in this case by filing an NDA and getting approval in the Type I diabetes indication, we will return capital to the non-profit in form of a capped payment to -- for them to redeploy in other research in the field.

So that's a little bit of information about the group and the nature of the structure.

And timelines for starting and for results?

I think the start is soon. I'll let Pablo answer that question, or Arthur.

Well I think we'll start this quarter, and we'll have to gauge enrollment, but I would anticipate being done by the end of the year.

Thanks. And then any updated thoughts on the SGLT1 and 2 landscape there? Obviously you talked a bit earlier about the positive opinion from CHMP, but in a broader sense, other compounds that we should be looking out for, data, et cetera, around those compounds that we should be looking for in the next few months?

Brian, would you like to comment on that?

Sure. We, of course, have been continuing to pursue from a medicinal chemistry standpoint the SGLT1 mechanism of action focusing on discovering locally acting compounds that stay in the gastrointestinal tract producing very, very low systemic exposure and virtually no urinary glucose excretion.

We believe that these would -- could be particularly appealing agents by reducing glucose absorption by the small intestine and enhancing the GI response after meals of the beneficial peptides including GLP-1 and PYY. And while maximizing safety, there's no need to get on board or get systemic exposure if the agent is meant solely to inhibit SGLT1. And we're getting very close to putting compound into a formal preclinical development.

We're very excited. We think this will be a very interesting class of agents, and if you consider particularly the renally impaired that can't benefit from SGLT2 inhibition, this could be an attractive type of agent.

I would also say that there was a recent publication that just came out at the end of last month describing an SGLT1 highly selective compound from Kissei Pharmaceuticals. They're partnered with GSK on their SGLT1 selective compound, which has gotten through Phase I. And again, that data as well as data that GSK has publically shown really support everything we've been describing for SGLT1 inhibition with LX-4211.

Okay. Great. Thanks. And then the last one I wanted to ask about was the 1032 Phase III trial. It sounds like there's a fair number of similarities with what you were guiding for previously, maybe on the lower end in terms of the size of the trial. What are your thoughts on when, granted you don't know enrollment rates and that sort of things, but your best guess in terms of when that trial might be able to wrap up?

Well I'd say that probably it's a little early to make that forecast, Alan, so I think we'd probably defer on that once we get this thing up and running. I think we have been anticipating -- we've been outlining 18 months to 24 months for the trial. I think that that -- I think that's realistic.

But enrollment could make a big difference. And I think importantly there we'll be going into this trial now armed with positive results from the Phase II program. That can be very encouraging for patients and for physicians to participate, so that may make a -- that may make a substantial difference in enrollment rates. So we'll have to really see how it goes within the first six months of the trial I think before we can make an accurate forecast.

That's helpful. Thanks very much.

Thanks.

Your next question comes from the line of Liana Moussatos from Wedbush Securities.

Hi. I just have a mechanistic question kind of following up on what you're talking about with Phil. Can you talk about how inhibiting SGLT1 could lead to decreased excretion of glucose and how that could decrease the -- potentially decrease the potential for skin infections?

Yes. Brian, you want to address the urinary tract or general tract --?

Sure. I'll give that a shot. One of the things we observed in Phase IIa with LX-4211 was a decrease -- a nice linear decrease in urinary glucose excretion between day one of dosing and day 28 of dosing. For instance, in the high-dose arm at 300 milligrams given once daily of LX-4211, we had roughly 80 grams of glucose in the urine over the first 24 hours after the first dose. However, by day 28, that had dropped to 65 grams. And so we believe that that was a result of the enhanced glycemic control that the patients were coming under and that if that trends continue, and there were no signs that it was dropping off, there could be a continued decrease in urinary glucose excretion over time, which we think would -- could correlate with a decrease in risk of genital and urinary tract infection.

And I think that does stand in contrast to some of the published data for SGLT2 selective compounds, some of which have shown the same amount of urinary glucose secretion two years into dosing as on day one of dosing. So that could provide another potential area of differentiation with SGLT2 selective inhibitors. We really will have to demonstrate that in the clinical studies.

Right. And I think the only thing I'd add, Liana, is that in the current twelve-week study we do have a sub-study of willing participants who are going to be giving us the required 24-hour urine collection over this twelve weeks, so we should have -- be able to test that hypothesis with regard to the amount of glucose in the urine over time.

But as Brian indicated, ultimately it's the adverse event rate that will probably be the most -- will be most important to the patient.

Thank you. And can you talk about how you can maintain control of blood glucose if there's a decrease in glucose excreted?

Yes. I think that that's really the SGLT1 component of the mechanism, and that's where that added effect is -- we think is probably what is leading not only to the decreased urinary glucose excretion but you can recall from our Phase IIa data, that did not alter the fact that both fasting plasma glucose as well as postprandial glucose was dramatically affected even 28 days into the study in spite of the fact that you were losing urinary glucose excretion.

So that fasting plasma glucose at day 28 was continuing to improve over day one and day 13. Likewise postprandial, and that speaks to the SGLT1 mechanism of action. And we know the SGLT1 mechanism is particularly profound in its effects on postprandial glucose. And that all read out of course into the pretty robust HbA1c drop that we observed in that study.

Okay. Thank you very much.

Thank you.

Your next question comes from the line of Stephen Willey from Stifel Nicolaus.

Yes, hi. Good morning. Thanks for taking the questions. Just going back I guess to your second half guidance for the initiation of Phase III. I think we all pretty much know that pharma BD tends to not move very quickly, so can you maybe just give us a little bit of characterization with respect to kind of where those discussions are at this point and any color I guess on the number of parties that you're kind of holding hands with going into this IIb data readout?

So what I can tell you about the diabetes program?

Yes.

Yes. So we're talking to -- so we're talking to -- we're very active on the partnership front. There's a lot of interest in seeing the IIb data. We're obviously doing a lot of groundwork in preparation for that. And we're -- we have a relatively broad [map] in terms of the groups that we're talking to.

We're doing the work to try to be prepared to go into Phase III, so we're doing a lot of the planning. We're doing the studies that are required to be able to do that. We -- obviously there is going to be some time to do -- to go through partnership discussions, but we're doing everything we can to be in a position to make that transition into Phase III as quickly as we can and without a delay. And part of the dialogue that we've had with potential partners is informed our Phase III planning too.

So it is something that we are taking into account.

All right, thanks. That's helpful. And then just on the Phase III carcinoid program. The primary endpoint right now, which you indicated would likely be reduction in bowel movement frequency, will that be a responder analysis? And I guess if it's not, what kind of level of statistical powering are you comfortable with given that you're going to have about 100 patients in kind of one-to-one-to-one randomization across a couple of doses?

Pablo, would you like to address that?

Yes, we're looking at the primary endpoint as a reduction in bowel movement frequency rather than a responder analysis. As a continuous measure, the total number of bowel movements that you have projected over a twelve-week period we believe is a more sensitive measure than looking at the proportion who just achieve a certain threshold or miss a certain threshold.

So we think that we will have more robust data with a continuous measure as the primary endpoint. And looking at the data we have from our two Phase II studies, we believe that a sample size of approximately 100 patients will leave us with well over 90% power and the ability to show robust results.

And then will you have some kind of run in phase I guess where you try to determine a baseline for all three cohorts prior to --?

Yes, exactly. We'll have a run in where we measure bowel movement frequency every day, and so that'll add to the power because we'll be able to have individual data on change in bowel movement frequency.

Okay. Thank you very much.

(Operator Instructions) Your next question comes from the line of David Friedman from Morgan Stanley.

Hi. Thanks for taking the question. Just around some of the Phase III planning you're doing. Do you guys have a sense as to the cost of the Phase III program for 4211, and is that something that in the absence of a partner you would be able to take on?

Pablo, do you want to address that? That's a two-part question. Maybe you could talk -- first speak to the scale of the program and then we'll talk -- let Jeff comment on the partnering aspect.

Yes. We believe that Phase III programs in diabetes have to be large in order to achieve the cardiovascular safety information that the FDA requires. And so the program that we've put together for LX-4211 involves 9,000 patients. That's similar to what other companies have been doing in diabetes. And one of the big drivers is a 6,000-patient cardiovascular outcome study that's part of the Phase III program. So it is a big program. We think it's in the right direction, and that's why we were proactive about getting regulatory input.

And to the specific cost, I think Jeff Wade can answer that.

Yes. I'm not sure I want to lay out the specific costs. It's a multi-hundred million-dollar development plan for Phase III in diabetes. And I think our plan and our expectation is that we would do that with a partner. And so that's our -- all of our planning is based on the expectation that we would do that, which is not dissimilar from a lot of the big pharma companies who are also partnered on these kind of programs.

Thank you.

Thank you.

(Operator Instructions) At this time there are no further questions. I will now turn it back over to Dr. Arthur Sands for closing remarks.

Yes. Well I'd like to thank everyone for their questions and participation today. I think next time we meet in this format there'll be a lot less speculation about results, and we'll actually be talking about results for the IIb trial, so it should be an exciting next meeting. Thank you all.

Thank you. That concludes today's conference call. You may now disconnect.