Lexicon Pharmaceuticals Inc (LXRX) 2012 Q3 法說會逐字稿

Welcome to the Lexicon pharmaceuticals third quarter 2012 conference call. (Operator Instructions)Please be advised this call is being recorded at Lexicon's request. At this time I would like to introduce your host for today's call , Alex Abuin, Vice President, Communications and Alliance Management. Please go ahead, Dr. Abuin.

Good morning and welcome to the Lexicon Pharmaceuticals third quarter 2012 conference call. I am Alex Abuin and with me today are Dr. Arthur Sands, Lexicon's President and Chief Executive Officer , Dr. Pablo Lapuerta, Senior Vice President andChief Medical 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 have seen copies of the press releases that were distributed this morning regarding our third quarter earnings and the presentation of additional LX4211 Phase IIb results at the American Heart Association annual conference. During this call we will review the information provided in the releases, 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 followed by Drs. Zambrowicz and Lapuertawho will provide an update of our clinical program. And by Mr. Wade who will review our financial results for the third quarter and discuss our financial guidance.

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 web cast.

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 LX4211, LX1031, LX1033, LX2931, LX7101, and Telotristat Etiprate also known as LX1032. And the 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 cost Lexicon's actual results to differ materially from those expressed or implied in such forward-looking statements including uncertainties related to the timing and results of clinical trials and pre-clinical studies of our drug candidates, our dependence upon strategic alliances, and the 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 discover 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, Alex. Good morning, everyone. We would like to spend most of this call discussing two important new sets of data relating to our lead program LX4211 and diabetes, and Telotristat Etiprate and carcinoid syndrome.

The first part will be focused on LX4211 and a detailed analysis of the very recent presentation of our data at the American Heart Association annual conference which was today. For that discussion we will turn to Brian Zambrowicz and let's begin with that. Brian?

Thank you, Arthur. Just to remind everyone, LX4211 is a first in class dual inhibitor of two glucose transporters, SGLT1 and SGLT2. SGLT2 is a major transporter involved in glucose reabsorbtion in the kidney. SGLT1 is a major transporter involved in glucose uptake in the gastrointestinal track after a meal. And it is the SGLT1 component of the mechanism of action of LX4211 that differentiates it from the selective SGLT2 inhibitors. Next slide.

I would like to remind you again of the design of the Phase IIb study. It was done in patients with uncontrolled diabetes on Metformin monotherapy. There were 299 patients enrolled, and they were five arms, placebo and four different doses of LX4211 were explored. 75 milligrams once a day, 200 milligrams once a day, 200 milligrams twice a day, and 400 milligrams once a day. It was a 12-week dosing period with the primary endpoint being changed from baseline in HbA1c at week 12. Next slide.

I am going to use a few slides to remind you of the top line data. First of all, the effect of LX4211 on the hemoglobin A1c over time. We will focus in these slides specifically onthe 200 milligram dose group in blue and the 400 milligram once daily dose group in black. We were very pleased to see a robust effect on hemoglobin A1c particularly with the high dose group in black where we had a 0.95% reduction relative to a -0.09% reduction in green for placebo.

We saw a -0.52% reduction in the 200 milligrams once daily dose group in blue. And we were really struck by this large improvement in HbA1c between the 200 milligram and 400 milligram once daily dosing groups, an additional 0.43% reduction in hemoglobin A1c. We go to the next slide.

We saw a similar pattern for the effects of LX4211 on fasting plasma glucose. If we focus on the blue line which is the 200 milligram once daily dose group and the 400 milligram once daily dose group in black, you can see we got a jump from 17.5 milligrams per deciliter drop in fasting plasma glucose in the 200 milligram dose group to -28.1 milligrams per deciliter. Again a very nice improvement as we saw with HbA1c in the fasting plasma glucose as we move between these two doses.

On the next slide then the last of the top line data that I will show you, we had looked into every patient using a spot-check at the ratio of glucose to creatnine. And what we have seen is in green a very low glucose to creatnine ratio is expected in placebo where we are not inducing urine glucose excretion. Very little if any effect at the low dose group in gold. What was quite apparent is we got a maximal effect on this glucose to creatnine ratio with the low dose group in blue, 39.64 grams per gram.

As we push those to 200 milligrams b.i.d. in red or 400 milligrams once daily in black, there was no further increase in the effect on SGLT2. We had a maximal effect on SGLT2 in the 200 milligram dose in blue with pushing the dose giving no further SGLT2 benefit. If we then contemplate what we just described for the effects of LX4211 on both HbA1c and fasting plasma glucose we got a very nice improvement -- additional improvement in both measures as we move between those two doses suggesting that that improved benefit between the two doses was mediated by inhibition of SGLT1.

As we go to the next slide, the new data we presented today included a very important additional measures we used to measure the effect of LX4211 on SGLT2 inhibition. In addition to the spot-check I described to you, we did a sub study including about a third of the patients in each arm where we did 24 hour urine glucose collection.

In this slide we've done the same glucose to creatnine ratio, but it is done on the full 24-hour urine glucose collection. In green is the baseline measure. In gray is the day one measure. Day one of dosing. In red is the week 12 measure.

What stands out very clearly is if you look at either in gray the day one measure or in red the week 12 measure we are seeing the exact same pattern as we had previously observed with the spot-check of the glucose to creatnine ratio. We are seeing maximal effect at the 200 milligram once daily dose group, and as we push the dose there is no further effect on this glucose to creatnine ratio. No further effect on SGLT2. If we go to the next slide we also measured the total 24-hour urine glucose excretion in grams.

And again if you look at the pattern overall with green being baseline and gray is day one of dosing and red is week 12 of dosing, again with this total urine glucose secretion measure we are again seeing the same pattern of maximal effect at the 200 milligram once daily dose. And as we push the dose to 400 milligrams, and if anything there is a reduction in urine glucose excretion over 24 hours with the total urine glucose excretion for the 400 milligram dose group being about 56 grams on day one and 57 grams at week 12.

This is very intriguing because it represents about half of the urine glucose excretion that is achieved with some of the selective SGLT2 inhibitors. We believe this confirms and builds on the data, the top line data demonstrating that LX4211 provides a clinically meaningful benefit through the inhibition of SGLT1. This SGLT1 effect continues to differentiate LX4211 from the selective SGLT2 inhibitors.

I do want to emphasize that this effect on SGLT2 is in spite of systemic exposure increasing dose proportionally as we move between the 200 milligram once daily dose and 400 milligram once daily dose. We believe we do have a full inhibition of SGLT2 in the kidney, but this low urine glucose excretion is due to the profound effect of SGLT1 inhibition on postprandial blood glucose levels. Because of these much lower postprandial blood glucose levels, there is simply less glucose to be filtered in the kidney and released in the urine. We go to the next slide.

We also used a 24-hour urine glucose measure to look at the total urine volume. What we see here is in gray is the day one measure . In red is the change from baseline to week 12. We first look at the measure on day one in gray .

We can see it is clearly the 200 b.i.d. and 400 milligram dose groups have a transient elevation in total urine volume on day one. But if we then focus on the red, the week 12 measure, we see that both of those high dose groups, particularly the 400 milligram once daily dose group , by week 12 has virtually the same urine volume as placebo. and this is the same thing we observed in our phase 2a study where we saw very transient elevation in total urine volume on the initial day of dosing, but by day 28 in that study, we really saw no difference in total urine volume relative to placebo. We go to the next slide.

I just want to remind you of the very favorable safety profile we observed in this Phase IIb study. If you look at overall, the subjects with at least one adverse event, you can see the percentages were very similar across all dose groups and placebo. We saw a 66.7% adverse event rate on placebo, and for every dose group of LX4211 we saw the same or lower frequency of adverse events. In fact in the high dose group it was 57.6%

We do believe that this in general lower frequency of [As] on LX4211 is likely real and largely due to decreased events such as worsening Type 2 diabetes and hyper glycemia. We were particularly interested in effects on the GI . There had been concern that SGLT1 inhibition could lead to GI adverse events such as diarrhea and other adverse events. And we were pleased to see in general the GI adverse events appeared to be very similar on all of the dose arms of LX4211 and placebo, with a 20% rate of GI adverse events on placebo and 22% rate on the high dose of LX4211.

We of course are also interested in the effects of SGLT2 inhibition with LX4211 on genitourinary tract infections because of the elevated urine glucose excretion. We were pleased to see that we had no signal for urinary tract infections . We had one adverse event on placebo and one on three of the four dose arms of LX4211. We did have a small signal for genital tract infection where we had zero on placebo and three on the high dose of LX4211. But we believe this is a relatively low genital infection rate relative to the selective SGLT2 inhibitors, and now we think there is clearly and firmly a mechanistic reason for this promising safety data, and that's because we have much less urine glucose excretion than is being created with the selective SGLT2 inhibitors.

Going to the next slide then to summarize the Phase IIb study , dual SGLT1 and SGLT2 inhibition with LX4211 demonstrated a clinically meaningful improvement in glucose control with consistent reductions in systolic blood pressure and body weight without increased risk of hypoglycemia. Clearly now we have solidified this interpretation that the urine glucose excretion was maximized to the 200 milligram dose group and clearly suggesting that the further benefits we see in HbA1c and fasting plasma glucose with the high dose 400 milligrams of LX4211 is mediated by SGLT1 inhibitions, and I think firmly demonstrating that this SGLT1 inhibition is clinically meaningful in the study. We do see a favorable genitourinary and gastrointestinal side effect profile.

It appear that we've added the SGLT1 inhibition without adding any significant additional GI adverse events, and we believe the genitourinary infection safety profile is very promising at this point. And again we believe it is explained mechanistically by this lower urine glucose excretion. We will require a longer term Phase III study to really nail down and further confirm both the efficacy and safety effects of LX4211. Next slide.

And then I remind you that we do have a couple of ongoing studies. We have an ongoing renal impairment study. We believe this is a very important differentiating study for LX4211. We do know that selected SGLT2 inhibitors have limited efficacy in this specific diabetes population because as patients lose kidney function and their glomerular filtration rate declines, they no longer can benefit from SGLT2 mechanism of action.

However, the decreased kidney function should have no effect on their ability to benefit from SGLT1 inhibition. So we think this is a perfect population to LX4211 in, and this is a small study -- 20 patients -- and we will be treating with the high dose of LX4211 and placebo over seven days and this will be very important as we -- and useful in guiding us for Phase III studies to look at the differentiating effects of LX4211 in this patient population.

We are also very interested on the next slide in type 1 diabetes. LX4211 has two important insulin independent mechanisms of action. First of all releasing glucose in the urine through SGLT2 inhibition does not require insulin. And then much of the effects of SGLT1 inhibition in blocking glucose uptake from the GI is not dependent on insulin as well.

We believe both of these mechanisms can benefit a type 1 diabetic. We think an oral agent could be very useful in combination with insulin in enhancing glycemic control and reducing insulin needs. And we believe we can help these patients reach their HbAc1 target, targets with less hypoglycemia and potentially less weight gain and reduced insulin usage.

It is a 30-patient study we just initiated. We will be treating for 28 days, and our primary endpoint is reduction of total insulin usage, secondary endpoints relate to improved glycemic control.

And just to summarize our goals of establishing a differentiated profile for LX4211, we believe the Phase IIb data again differentiates LX4211 and showing very robust glycemic control, very robust effects on HbA1c. We have already spoken to the -- what we believe will be an ability to differentiate in the renal impaired and type 1 diabetes . In addition because of this unique dual mechanism of action and effect of LX4211 on SGLT1 we do believe we have a unique synergy with DPP4 inhibitors due to our ability to elevate the release of GLP-1 from the gastrointestinal tract and the effects of DPP4 inhibitors on inhibiting the breakdown of GLP-1.

Of course we have demonstrated that in mechanistic study in type 2 diabetics, and we are eager to further those studies in Phase III. We do have this very favorable safety profile to date, both good GI tolerability, no hypoglycemia and a very favorable genitourinary safety profile. We think there is a good potential to demonstrate cardiovascular benefits due to the effects of LX4211 both on glycemic control and also the effects on improving blood pressure and body weight. And we continue to be on track to initiate Phase III in the first half of next year. With that I am going to turn it over to Pablo Lapuerta who will cover our most recent data on Telotristat Etiprate in carcenoid syndrome.

Thank you, Brian. Telotristat Etiprate is a serotonin [synthesis] inhibitor. Telotristat Etiprate works by blocking the tryptophan hydroxylase enzyme that produces serotonin. It is absorbed into the peripheral circulation, but does not cross the blood brain barrier. That gives an opportunity for Telotristat Etiprate to be used in the treatment of carcenoid syndrome a syndrome resultingfrom metastatic carcenoid tumors that are life-threatening tumors that produce large amounts of serotonin causing diarrhea, flushing, pain and cardiac valvular disease. Telotristat Etiprate has fast-track and orphan status from the FDA and orphan status from the European Medicines Agency.

We also have a trial ongoing for Telotristat Etiprate in ulcerative colitis. Recently we presented at the North American Neuroendocrine Tumor Society results of an open label Phase II study in patients with carcenoid syndrome. This was a 12-week open label dose escalation study.

Patients started on 150 milligrams three times a day and over the course of the trial increased to 500 milligrams three times daily and spent the last six weeks of the study on the 500 milligrams three times daily dose. Patients have been offered an open label extension. 15 patients were studied. These were patients with carcenoid syndrome and a minimum of four bowel movements per day.

On the next slide I have the results for bowel movement frequency. The main bowel movement frequency in this patient population was around six bowel movements per day. There were some benefits that were statistically significant even in the first one to two weeks with Telotristat Etiprate, but over time as patients continued on therapy and as the dose escalated, the bowl movement reductions increased an increase in magnitude until we reached a point where the bowl movements reduction was 40%.

Patients started with six bowl movements a day and ended up with 3.3. The next slide has individual patient bowel movement frequency response at week 12. And what you can see is that the vast majority of patients have good reductions in bowel movement frequency. In our experience with Telotristat Etiprate, patients reported relief of symptoms with a reduction of about 25% in the bowel movement frequency. We can see the vast majority of patients achieve that by week 12.

The next slide has stool consistency. The improvements in stool consistency followed closely the reductions in bowel movement frequency. Patients entered with loose stools and ended up with soft stools. This 20% improvement from baseline to weeks 11 to 12 is clinically meaningful.

We also saw, on the next slide, good reductions in urinary 5-hiaa. We saw some results in the first two to four weeks, but as patients stayed on the therapy longer and as the dose increased, the reduction in urinary 5-hiaa improved until it reached a point of 72% at weeks 11 to 12. This is good evidence of inhibition of serotonin synthesis.

Patients also saw reductions in flushing. This is facial flushing. We saw a 37% change from baseline from weeks 11 to 12. We saw the same pattern. Early results we did have statistical significance and yet they improved over the duration of therapy.

The main abdominal pain and discomfort, this was rated on a scale where -- that went up to 10 points and the baseline was around two points. There was abdominal pain in this population. As an average it was not very prominent and the results were not statistically significant, but followed the same overall downward trend with almost a 20% reduction in abdominal pain and discomfort on this rating scale.

The next slide has the efficacy summary for our open label study. A really profound reduction in bowel movements a day from 5.9 to 3.3, reductions in flushing episodes, improvements in stool form from loose to soft, marked reduction in urinary 5-hiaa and adequate relief being reported by patients.

At the end of the study nine out of twelve patients reported adequate relief of their carcenoid syndrome gastrointestinal symptoms. Perhaps most importantly is the safety experience in this study with more patients going for a longer term treatment. Here we have the overall summary of adverse events. These patients had many gastrointestinal symptoms and a lot of diarrhea from the carcenoid syndrome. All patients had one treatment -- a treatment emergent adverse event.

However, only half of those had adverse events that the physician felt might be related to the therapy. That were three that were serious, that were gastrointestinal-related and four that were rated as severe. However, although these were gastrointestinal advents events, the physicians felt they were not due to Telotristat Etiprate treatment. There were no events that led to discontinuation, and there was no death during the study. Overall the safety experience is encouraging.

The next slide gives a little more color on the adverse events during the study. Organizing this into the gastrointestinal disorders and vascular disorders. We paid little attention to diarrhea and we saw little diarrhea during the study. We see a general pattern where there might be one or two adverse events in weeks one or two and then generally as the study progresses, even fewer. This is a sign of good tolerability.

We look at vascular disorders because of flushing and there was only one case of flushing that was considered an adverse event. Going on to the next slide we have some more information in terms of the investigations. These patients with metastatic disease often have increases in hepatic enzymes. We saw no concerns with the use of Telotristat Etiprate in this population.

And we look at nervous system disorders. Telotristat Etiprate does not cross the blood brain barrier and yet we wanted to make sure there was no issue with anything like depression. And we just had a few cases of dizziness and headache.

So on the next slide we have our summary. Telotristat Etiprate is well tolerated at all dose levels and up to 12 weeks with patients spending half of the time at the 500 milligram, three times daily dose . The -- there were frequent gastrointestinal adverse events that were mild to moderate intensity. They are consistent with profile of patients having existing carcenoid syndrome and were not related to the study drug.

We looked at improvements in clinical symptoms and we saw a very consistent picture of evidence of patients responding to therapy and clinical symptoms and urinary 5-hiaa levels a marker of serotonin synthesis inhibition. In this 12-week study, the 12-week study is generally consistent with the results of our four-week study. The experiences in those first four weeks of the placebo-controlled study in the U.S. match very well with the first four weeks of this open label study we have conducted in the EU.

Almost all the patients are continuing into long-term extension, continuing to receive Telotristat Etiprate. This open label study in Europe has reproduced the favorable benefit risk results that we saw in our placebo-controlled study in the U.S. Together this open label study and our placebo-controlled study support advancements into a pivotal registrational trial.

On the next slide we have initiated our Phase III study. We are very pleased to have filed our investigator meeting recently and to have sites open and screening patients. We plan a single pivotal study for Phase II with a 12-week treatment period matching the experience we saw in the European open label study. The Phase III trial will have three arms. There will be two doses, 250 milligrams three times daily, and 500 milligrams three times daily and placebo. We hope to approve approximately 105 patients and we will be focusing on the reduction in the number of bowel movements.

The secondary endpoint will look at stool consistency and urinary 5-hiaa which in our experience have trended in the same direction. As a reminder I would like to provide a brief update of our Telotristat Etiprate Phase II study in ulcerative colitis. That's on the next slide. We want to see if we can establish proof of concept. We have favorable pre-clinical data that Telotristat Etiprate may be beneficial in ulcerative colitis.

And we have started enrolling patients into PARSEC, a Phase II study of the relationship between serotonin and efficacy in ulcerative colitis. These are patients with mild to moderate colitis treated to placebo, 500 milligrams once daily, and 500 milligrams two times daily. All of these patients have ulcerative colitis that merits treatment with Mesalamine and they continue on Mesalamine throughout the study. We are looking at standard efficacy measures for an ulcerative colitis program. Enrollment is progressing very well and we're satisfied with the conduct of the study so far.

On the next slide we have some of our upcoming clinical milestones. We have had a busy year in 2012 and have reached several important steps with our Phase IIb results in diabetes, our results that we announced previously in rheumatoid arthritis and glaucoma, and Telotristat Etiprate completing Phase II and starting Phase III. In 2013 we will have more results from LX1033 our drug for the treatment of irritable bowel syndrome. We'll have results from our ulcerative colitis study for Telotristat Etiprate, and more results from LX4211 in diabetes because of the ongoing renal impairment and type 1 diabetes studies we'll be reading out.

With that I would like to hand 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 September 30th, 2012 at $0.4 million consistent with the prior year period.

Our revenues of $0.9 million for the nine months ended September 30th, 2012 reflected a 42% decrease from $1.5 million from the prior year period. Our research and development expenses for the 2012 third quarter decreased 2% to $19.2 million from $19.7 million in the prior year period. The decrease was primarily attributable to decreases in lab supply, personnel and pre-clinical costs partially offset by an increase in clinical development costs.

Our R&D expenses at $61.6 million for the nine months ended September 30th 2012 reflected a 3% decrease from $63.7 million for 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 base and 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.

During the third quarter we exercised our options to pay the full $35 million balance of the Symphony Icon base payment in shares of Lexicon stock. As you may recall we had the obligation to pay this amount on or before July 30th, 2013 , and we had the right to make a payment 100% in stock through July 30th, 2012. After that time we would have been obligated to make at least half the payment in cash.

The stock price used to calculate the number of shares issued $2.64.4 was the average of the closing prices of our stock over the 20-trading day period ending immediately preceding the second trading day before the July 30th payment date. Based on that stock price we issued 13.2 million shares of stock in satisfaction of the $35 million balance of the Symphony Icon base payment.

The only remaining payment obligations s we have under the Symphony Icon arrangement are contingent on certain success-based milestones either on our receipt of partnership proceeds in which they are eligible to receive a share or on our receipt of U.S. regulatory approval for products that were funded by the Symphony Icon partnership. The associated increase in fair value of Symphony Icon purchase liability was $5.8 million in the third quarter and $10.1 million for the nine months ended September 30th, 2012.

Our general and administrative expenses for the 2012 third quarter were $4.4 million, an increase of 8% from $4.1 million in the prior year period. The increase was primarily attributable to increases in personnel, legal and patent-related costs.

Our G&A expenses of $13.1 million for the nine months ended September 30th, 2012 reflected a 2% decrease from $13.3 million for the prior year period.

Our net loss for the 2012 third quarter was $29.5 million or $0.06 cents per share compared to a net loss of $26.1 million or $0.08 cents per share in the prior year period.

Our net loss for the nine months ended September 30th 2012 was $85.3 million or $0.18 per share compared to a net loss of $82.4 million or $0.24 per share for the corresponding period in 2011.

For the three and nine months ended September 30th in 2012 our net loss included non-cash stock-based compensation expense of $1.6 million and $4.9 million respectively. For the three and nine months ended September 30th 2011 net loss included non-cash stock-based compensation expense of $1.4 million and $4.4 million respectively.

Let me now turn to our cash and investments. As of September 30th, 2012 we had $206.8 million in cash and investments as compared to $231.5 million as of June 30th, 2012 and compared to $281.7 million as of December 31st, 2011.

After the end of the quarter we completed the public offering and sale of 17.5 million shares of our common stock at $2.25 per share. The net proceeds of the offering after deducting underwriting discounts and offering expenses were approximately $37.2 million which will bolster our cash position going forward.

Now let's turn to our forward looking financial guidance for 2012. We continue to 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 revenues from those potential arrangements in our guidance.

That said, we believe our productive pipeline provides Lexicon with attractive opportunities for future alliances. We continue to expect operating expenses in 2012 to be in the range of $110 million to $120 million.

Non-cash expenses are expected to be approximately $21 million of this total including $11 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 consistent with previous guidance.

I will now turn the call back to Arthur.

Thank you, Jeff. We can now take questions.

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

Matt Lowe in for Cory today. A couple of questions. The first one is around the partnering talks of 4211. I am just wondering how those talks are coming along, any specifics you can share with us in sense of what you may be looking for from a partner, timing or anything like that, and then secondly if you can just outline the market opportunity for a carcinoid syndrome that would be great.

Thank you, Matt. I would just lead off by saying the whole process is proceeding very, very well. It is a robust process, and for some of the -- more color and detail we can turn to Jeff who is actually leading the process on our behalf. Jeff?

So as Arthur mentioned we have been very pleased with the process overall and with its progression. It continues to be our objective and expectation to complete a partnership before Phase III launch and we are continuing to work toward a Phase III launch in the first half of 2013. So that -- from that perspective. On the results of a...

There was also the question about structure and...

We are talking with companies about -- we are still talking to companies about different types of structures at this point. Our key is to progress the program forward. We are obviously expecting a partnership to be a big driver in terms of funding that development program going forward.

And then the next part was carcinoid syndrome.

So carcinoid syndrome is a disease that affects approximately 10,000 patients in the U.S. It is proportionally similar in Europe. There are -- a sizable proportion of those refractory to existing therapy that is octreotride therapy. Our trials have been designed to address that refractory population. We are going in on top of octreotride therapy.

Typically we are told that people who have carcinoid syndrome get some relief initially -- usually from octreotride therapy. And then with 12 to 24 months on average they cease to get relief from that. It is a long disease that people suffer with for a long time, and they continue on a octreotride therapy for a number of years. We will be going on top of that in the patient population that is not achieving adequate relief. So we think it is a meaningful and substantial market opportunity for Lexicon and one that we can address on our own which is why we are taking it forward in Phase III on our own.

That's helpful, thank you very much.

Your next question comes from the line of David Freedman with Morgan Stanley.

(Inaudible) in for Dave. Just a follow-up on the last question regarding a partnership for 4211. It sounds like you guys are planing to go forward into Phase III no matter what. Is that correct? If that's the case, do you feel like securing a partner while the Phase III is on-going as a possibility, or if we don't see a partnership before that Phase III starts , are we then going to wait for the Phase III data to potentially see a partnership? Thanks.

I think our expectation and our plan is to have a partner in place before we launch Phase III. It is an expensive development program, and that's our plan, and that's our expectation . We will expect to have that in place before we actually launch the studies.

Great, thanks.

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

Can you give us an idea when we would expect data from the Phase II LX4211 in renally impaired and the type 1 diabetes Phase II? And then also, I know it is longer term, but the Phase III for carcinoid and the Phase III for diabetes, would that be more of an end of 2014 or 2015?

So Pablo I know you are at a remote location there at the AHA meeting. Would you care to comment on the first part of that regarding 4211 results and renal impaired in type 1?

Yes for renal impairment we are actively recruiting. We have several sites up and running. We hope that we can recruit within the next four months . And so patients are treated for only about a week, so we would have results for you in the first half of 2013.

The same thing with LX4211 in type 1 diabetes. We recently initiated the study. We have several sites up and running. It is the study of a similar size to that in renal impairment. We hope we can have results in a similar time frame. So sometime in the spring of 2013.

Excellent. And then the second part of the question was regarding the completion of -- the enrollment period for carcinoid syndrome. We are forecasting -- we continue to forecast an 18-month enrollment period from initiation which would make the total study time to completion approximately two years from now. And then the 4211 Phase III plan, Pablo, in terms of -- that is a farther out forecast but do but do you want to comment on the timing and completion of 4211?

These Phase III programs in type 2 diabetes have generally taken around three and a half years. We've looked at our program which is a similar size to others, and we feel it can be done in a similar time frame. That means we would have a filing some time in 2016.

Thank you. And any new products coming in the clinic next year?

Brian, do you want to comment at this time?

Sure . We believe we will have one. We have a diabetes program that has come along . It is an SGLT1 inhibitor that remains in the gastrointestinal tract. It produces virtually no systemic exposure and no urine glucose excretion

And we think it may be a particularly appealing agent for the renal impaired where since they can't benefit from the SGLT2 inhibition there is no sense in bringing the drug on board. And then in addition we think that there may be patients who don't tolerate the SGLT2 inhibition due to increased infection susceptibility That compound is looking really good. We have it currently in IND enabling studies.

Do you have an LX number for that?

Yes, it is LX2761.

Thank you very much.

Thank you.

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

My questions, a couple of them, one of them in your discussions with pharma, I am wondering if you can give as you sense of where their priorities are in terms of data around a double SGLT2, SGLT1 inhibitor. Are there certain parameters, weight loss or HbA1c, that rank higher than others? And then also I'm wondering in your longer term extension for Telotristat in carcinoid syndrome in the extension trials, if you can comment on any of the efficacy trends in the longer term. Do they flatten out, or are there continued improvements in some of those parameters?

Brian, do you want to take the first part of that?

Sure, I can comment. I think in our discussions with pharma I think they are at this point quite convinced of the meaningful effects of SGLT1 inhibition. And obviously I think they are pleased with the robust effects we get with LX4211 on glycemic control. Obviously they consider the blood pressure and weight effects appealing as well.

I think what stands out is that we have multiple opportunities for differentiation. There is clearly the opportunity to straight up differentiate based on overall glycemic control and HbA1c effect, there is an opportunity to differentiate on safety, and I have given you the mechanistic reasons why. Any adverse events to the urine glucose excretion should be left with LX4211 . than with the selective SGLT2 inhibitor. And then we have these other opportunities in the renal impaired who can't benefit from SGLT2 inhibition, in type 1s with the two insulin (inaudible) mechanisms of LX4211 and its unique synergy with the DPP4.

And I think -- overall it is a very appealing package. I would argue not only do we have multiple opportunities to differentiate, but I think we have a very strong possibility on differentiating on every one of those.

And then I think the second part of that question was on the durability of the activity of Telotristat Etiprate in carcinoid syndrome at least as we see it currently in 12 weeks which is the same treatment period for our Phase III program. Pablo, do you want to comment on what you see in the trends?

Yes, so they are overall a trend that we saw up to 12 weeks , an improvement in efficacy over time as patients went up in dose and took the drug longer. You do have some experience now with long-term extensions. There is one patient who has even taken Telotristat Etiprate for over two years in a long-term extension. From that we are comfortable with the profile that we are seeing. Patients are maintaining benefits.

From 12 weeks and beyond you see the same benefit maintained?

Yes.

Thanks.

Thank you.

Your next question comes from the line of Nicholas Bishop with Cowen & Co.

Good morning. I have a question around the Telotristat Phase III trial design and that is I am not sure I see an example in your Phase II experience of challenging patients immediately with 500 milligram dose and so I am wondering what elements of the trial there are that give patients the ability to switch arms perhaps or dose deescalate if they have difficulty tolerating the 500 milligrams and just what elements of the trial are contemplating that issue?

Pablo would you like to clarify some of the design points on the trial regarding dose?

Yes. In the 500 milligram arm patients spend a week first at 250 milligrams. It is not clearly -- it was not clearly necessary, but we chose to do that because we had such good experience with titrated medication in this open label study.

In the placebo-controlled study we thought there might be some nausea with initiating just at the 500 milligram dose. We didn't see much nausea in the titration . regime. As patients continued on the 500 milligram dose in the Phase III trial, we will give the option to down titrate based on discussions with the medical monitor in consideration of issues with tolerability. With the European experience there was only one patient who was titrated down from 500 milligrams out of 15. We think most patients will be staying at 500 milligrams three times daily.

Thanks. That's helpful. And then just one follow-up. regarding the glaucoma data you reported in August. Just curious as to whether in your view this rises to the level of proof of concept. Should we expect to see more data from this compound in the future?

Brian, do you want to comment on that?

Sure. First of all we are really pleased as far as the mechanism of action working. As we went in , based on the [macro] data we of course hypothesized that LX7101 would lower intraocular pressure and it did. It significantly lowered intraocular pressure.

And secondly our hypothesis based on the genetics is it would be safer as far as tolerability and lower incidences of hyperemia than the low kinase inhibitors, and we in fact saw an extremely favorable safety profile. So I think again it is another example of the [knack] of predicting what the small molecule inhibitor would do. So we think there is still room to work on the magnitude of the effect because of this nice safety window. And we will be talking to potential partners and considering what might be the best way to proceed .

Okay. Thank you.

Thank you.

Your next question comes from the line of Kevin Kedra with Gabelli & Company

Hi guys. Had a question around partnership talks. Given that it sounds like it will be more of a first half of 2013 event if you guys try for a partnership. Is the upcoming FDA decision on J&J's canagliflozin playing any role there?Are companies waiting to read out how the FDA is looking at that product before they consider making an investment in another drug in the SGLT class?

I don't really think so. I think the data that they have presented so far is not really totally relevant to us because we are operating on a different mechanism with the dual mechanism. But I think -- so progression of our discussions don't really -- aren't really affected by the timing of the J&J, or we don't expect them to be affected by the timing of the J&J regulatory process.

Brian, do you have something...

I would just say that from our discussions I would say in general there is an acceptance of the fact that the SGLT2 class is coming and it is inevitable. We have never really gotten into a discussion that -- those sort of events would be gating for what we're talking about with LX4211.

And in regards to the recent cash rates, I wonder if you could give a little more clarity -- I want to know what your motivation was for that, was there specific upcoming trials you were thinking about, or was this an opportunistic raise?And perhaps along that line, when you think about LX1033, I know we will get the readout on the Phase II next year, but if that data comes in positive and you like what you see, is that a program you would consider taking to Phase III yourself or would that be partnered out?

I think I can address those questions. One of the reasons for us doing this capital raise was to allow us to pursue a more robust Phase III program for carcinoid and to continue to have a good cash position post the Phase III data for that program. That was one of our motivating factors in proceeding with this offering. The other thing it allows us to do is progress with Phase III preparations for 1033 during the period after we get the data and in parallel with partnership discussions but without delaying the progress to Phase III. I think our expectation at this point would be that we would partner that program. Ultimately I think that it is an indication where partnership makes a lot of sense. Our current expectation would be that we would partner that before we get fully into the Phase III program. This does allow us to make those preparations without having to delay while we are having the partnership discussions.

Thank you for your question. Are there any other questions ?

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

(Inaudible) the questions. I know you guys are doing some preliminary work now in terms of trying to sketch out some -- the Phase III program for 4211, but in your conversations to various potential partners at this point how much is heterogeneity is there in terms of what people perceive they want to have done in terms of a Phase III program?I guess that's one question and a couple sub parts to that, one, do you get the sense that there are partners that would potentially want to dose escalate beyond 400 milligrams once daily? Just given the fact that you still have decelerating HbA1cs and not necessarily any kind of dose dependencies related to [AEs] . And then two, the strategy for exploring a DPP4 combo, would that be something that would try to be developed using a fixed dose combination, or would you imagine that you would be essentially taking two separate pills and then maybe running a quick bridging study to try to get something fixed dose at the clinic?

So there are three parts there. The first part, Pablo, if you care to comment on the -- any consensus around the Phase II program and our stage. I know you've been directly involved with the EMA discussions and remember coming up on our FDA meeting too. But go ahead on the overall plans of Phase II first.

Sure. With Phase III we've seen a lot of agreement among potential partners. And part of the reason is because we've had so many regulatory interactions. And we started these early on in a proactive manner by going to the United Kingdom, to Germany, and Austria, last spring with questions about the Phase III program and the program that was well outlined, and that gave us a lot of good feedback. And it was something that we shared with partners as well. They saw regulatory minutes, supporting our overall direction including the cardiovascular outcome study in Phase III.

And since then we've had very recently just two weeks ago our end of Phase II meeting with the European Medicines Agency and so we have our own minutes from that and we will be expecting official minutes soon from the European Medicines Agency and we were very satisfied with the interaction and that's something we are sharing with our partners and that's helping both consensus around the program. The interaction with EMA was very favorable in the sense that there were no issues from the bar going forward into Phase III. There was overall acceptance of the program, the dose selection. There were no comments about significant efficacy or safety issues with the 400 milligram dose. So we are waiting for a formal advice and written minutes from the European Medicines Agency but we had a good interaction that helps us go forward build consensus with our partners.

The next part of the question was regarding the dose and us going forward with the single dose of 400 milligrams, and I think that's actually fairly easy to answer. There really has not been any discussion around that being different and the 400 looks like the logical dose to take forward in the Phase III program. Partners seem to agree with that and as Pablo indicated so far the regulatory interactions has been consistent there. So that's good I think in the future and later stages of the Phase III program our post filing one could consider exploring other doses but that would be for another day. Then the last part of the question was on the combination of DPP4 and our staging of that in the current Phase III plan and any potential plans for fixed dose combinations. Pablo, do you want to talk about the staging of the initial trials?

Yes in Phase III we do want to have data on how we compare in efficacy and safety versus a DPP4 inhibitor and so we have that in the program but when we compare ourselves to the DPP4 inhibitor, we also have a dose sign that will have a combination of LX4211 and the DPP4 inhibitor. So we hope we'll able to show synergy as we've done in a smaller mechanistic study that we released last year. And we think that will help us prepare for the eventual development of other fixed dose combinations.

In Phase III those would be given as separate agents but certainly given the general dosages of DPP4 inhibitors and 4211 one could contemplate a fixed dose combination in the future.

And I guess along those lines, is it safe to assume that a number of the parties that you are speaking to at this point also have a bit of a budding interest in the DPP4 space as well?

Yes, that's safe to assume and it's obviously something that we are navigating as well. So it's another interesting dimension of the whole set of discussion. So I think you can start to see each of these avenues of opportunities from 4211 when you look at the multiple indications that type 1 diabetes, renal impairment, the positioning in Type 2 diabetes and then also then the combination of opportunity. It opens up a number of lines of discussion that have to be thought through very carefully and we are progressing those.

Thanks.

Thank you.

(Operator Instructions) Your next question comes from the line of [Zick Bingra] a private investor.

My question was recently answered, I think somebody else asked. I was just trying to get some added color on the capital raise and I think you just talked about it. So thanks.

Okay. Well listen thank you all. It has been a very robust question and answer period . A lot of excellent questions. We covered a lot of data today. I think we have taken up our allotted time. So at this point we would like to thank you all and say goodbye.

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