Lexicon Pharmaceuticals Inc (LXRX) 2015 Q4 法說會逐字稿

Good morning. My name is Victoria, and I will be your conference operator today. At this time I would like to welcome everyone to the Lexicon Pharmaceuticals fourth quarter financial call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. (Operator Instructions). Thank you. I would now like to turn the call over to Chas Schultz, Senior Director of Finance and Communications.

Thank you Victoria. Good morning, and welcome to the Lexicon Pharmaceuticals fourth quarter and year-end 2015 conference call. I am Chas Schultz, and with me today are Lonnel Coats, Lexicon's President and Chief Executive Officer, Dr. Pablo Lapuerta, Lexicon's Executive Vice President and Chief Medical Officer, and Jeff Wade, Lexicon's Executive Vice President of Corporate and Administrative Affairs 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 call to answer 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 clinical development of telotristat etiprate and sotagliflozin. These statements may include characterizations of the results of the projected timing of clinical trials of such compounds, and the potential therapeutic and commercial potential of such compounds. This call may also contain forward-looking statements relating to Lexicon's growth and future operating results, discovery and development of products, strategic alliances and intellectual property, as well as other matters that are not historical facts or information.

Various risks may cause Lexicon's actual results to differ materially from those expressed or implied in such forward-looking statements. These risks include uncertainties related to the timing and 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, our ability to obtain patent protections for our discoveries, limitations imposed by patents owned or controlled by third parties, and the requirements of substantial funding to conduct our drug development and commercialization activities.

For a list and a description of the risks and uncertainties that we face, please see the reports that we have filed with the Securities and Exchange Commission. I will now turn the call over to Mr. Coats.

Good morning. This is Lonnel Coats, CEO of Lexicon. I want to thank everyone for joining us this morning. And as always, I make this presentation on behalf of the extraordinary men and women who are working very hard every day to unlock the value of Lexicon's assets, to ensure patients have the benefit of our science. As you all know, we have had a very focused strategy here at Lexicon to create value for our stakeholders. My job and the job of this team is to translate Lexicon's precision science into stakeholder value, by focusing on our two late-stage assets. Our orphan drug telotristat etiprate for carcinoid syndrome, and our diabetes drug sotagliflozin. As we have said many times, we believe each of these assets by themselves upon clinical and regulatory success, has the potential to drive significant corporate value.

Our strategic goal has been to maintain the US rights for each of these assets, while adding value to worldwide strategic partnerships. I am very pleased to say, as you all may know, in 2014 we successfully executed upon this strategy, by signing on Ipsen SA as our worldwide partner outside of the US and Japan for telotristat etiprate. This was Lexicon's first commercial collaboration. In 2015, we signed into our second commercial collaboration, we signed a worldwide sotagliflozin collaboration with Sanofi, which will unlock the full potential of sotagliflozin for both Type 1 and Type 2 diabetes. At Lexicon we are quickly building a culture of execution excellence.

In 2015 it was truly a remarkable and transformative year for our Company and our stakeholders, we announced the execution of two successful Phase 3 trials on telotristat etiprate for carcinoid syndrome. We announced the execution of the worldwide collaboration with Sanofi that unlocks the full value of sotagliflozin in both Type 1 and Type 2 diabetes. We executed the full Phase 3 program for Type 1 diabetes, that would allow us to announce top line results by the end of this year. Last but not least we practiced good financial discipline, and executed well on our business development strategy, which allows us to end the year with over $500 million in cash and investments.

I'm pleased to say I fully expect that 2016 will be another year full of value creation potential. We intend to file by the end of this quarter, end of this month our first NDA for telotristat etiprate for carcinoid syndrome, with the potential of Lexicon receiving its first FD approval, and our first commercial launch by the end of this year, 2016. We will execute the worldwide collaboration with Sanofi for sotagliflozin to expand clinical trials to include Type 2 diabetes in 2016, and we'll execute our Phase 3 Type 1 trials, to be in a position to announce top line data for sotagliflozin in Type 1 in the second half of this year. And our goal is to remain well capitalized to fund all of our clinical trials, and potentially expand telotristat etiprate to other indications.

So let me take a moment and remind everybody of the Sanofi collaboration. This collaboration truly will unlock the potential of sotagliflozin, but equally important it adds significant value for our stakeholders. It is $1.7 billion in aggregate up front and potential milestone payments. Lexicon will retain the development responsibility for Type 1 diabetes with the option to co-promote and lead the role in the US for Type 1 diabetes commercialization. Sanofi has the responsibility for the development of Type 2 diabetes, and the worldwide commercialization of the asset. If we break out the $1.7 billion in upfront milestone payments to Lexicon, we have already received the first upfront payment of $300 million. We have development and regulatory milestones up to $430 million, and we have sales milestone payments up to $990 million.

As I stated before, Lexicon will have the responsibility for Type 1 diabetes costs. Sanofi will have the responsibility for Type 2 diabetes costs, while Lexicon is sharing up to $100 million in costs for the Type 2 program. Royalties on net sales of sotagliflozincan is tiered, and escalating royalties based on territory and indication, ranging from low double digit percentages to 40% of net sales specifically in the US, and for Type 1 diabetes. Now for us, we are very proud of this partnership, because we truly believe it unlocks the full potential for our patients living with diabetes. We will be in a position as the lead for Type 1 diabetes to be able to announce results on that program in the second half, as I said already. I will also tell you that enrollment in the first pivotal Phase 3 clinical trial has completed. We are continuing to execute on that program. And as I stated before, fully expect to announce results in the second half of this year.

We also believe in the collaboration with Sanofi going into Type 2 diabetes will be the opportunity that we all have looked forward to, and that opportunity should take place in the second half of 2016. We truly believe in Sanofi's rich history of innovation in diabetes and strong worldwide reach, will make for a strong collaboration that will indeed unlock the full potential of sotagliflozin for patients living with diabetes, and also extend the opportunity for us to bring forth shareholder value through this collaboration.

With that being stated, I am going to turn it over to Jeff to go over the financial results. Jeff.

Thank you Lonnel. I will provide a brief financial update. As indicated in our press release today, we had revenues for the 2015 fourth quarter of $127.3 million, an increase from $21.5 million in the prior year period. The increase was primarily due to revenues recognized from our collaboration and license agreement with Sanofi. For the year revenues increased to $130 million from $22.9 million in 2014. Our research and development expenses for the 2015 fourth quarter increased 52% to $30.4 million from $20 million in the prior year period, primarily due to increases in external clinical and non-clinical research and development costs. For the year, our R&D expenses increased 7% to $95.2 million from $89.3 million in 2014.

In connection to 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 $0.8 million in the fourth quarter, and the liability increased by $5.9 million for the year. Our general and administrative expenses for the 2015 fourth quarter were $6.4 million, an increase of 62% from $4 million in the prior year period. The increase was primarily due to increased costs in preparation for the commercialization of telotristat etiprate.

For the year, our G&A expenses increased 23% to $23.8 million from $19.4 million in 2014. In 2014 we began to market our buildings and land in The Woodlands, Texas for sale. We recognized non-cash impairment charges on our buildings of $3.6 million in 2015, and $13.1 million in 2014, as a result of writing down the buildings to the estimated net selling price. In January 2016 we entered into a purchase and sale agreement, under which we have agreed to sell these buildings and lands, subject to the negotiation and execution of a leaseback agreement with respect to a portion of the buildings.

Our net income from the 2015 fourth quarter was $86.8 million, or $0.76 per diluted share, compared to a net loss of $2.9 million, or $0.03 per share in the prior year period. Our net loss for the year was $4.7 million, or $0.05 per share, compared to a net loss of $100.3 million, or $1.31 per share in 2014. For the three months and year-ended December 31st, 2015, our net income and loss included non-cash stock-based compensation expense of $1.4 million and $6.8 million respectively. For the three months and year-ended December 31st, 2014 net loss included non-cash stock-based compensation expense of $1.5 million and $7.1 million respectively.

In May 2015 we completed a 1-for-7 reverse stock split. All references to common shares and per share data for all periods presented in this earnings call have been adjusted to give effect to this reverse stock split. Finally as of December 31st, 2015, we had $521.4 million in cash and investments, as compared to $256.4 million as of September 30th, 2015, and $339.3 million as of December 31st, 2014.

Now let's turn to our forward-looking guidance for 2016. We expect contractual revenues from existing agreements in 2016 to be in the range of $65 million to $80 million. Our revenue expectations incorporate milestone achievements for telotristat etiprate in carcinoid syndrome, progress in the Type 1 diabetes development program for sotagliflozin that we are leading under the Sanofi alliance, and progress in the type 2 diabetes, that program that Sanofi is leading under the alliance and our associated funding participation in those efforts. We expect that our operating expenses in 2016 will be in the range of $225 million to $250 million. Non-cash expenses are expected to be approximately $11 million of this total, including $6 million in stock-based compensation, $4 million in the increase in fair value of Symphony Icon purchase liability, and $1 million in depreciation and amortization. We expect our 2016 net cash used in operations to be in the range of $205 million to $230 million. I will now turn the call back to Lonnel.

Thank you Jeff. We have had a remarkable 2015, but I will assure you that we are not resting on our laurels. We have a tremendous opportunity to execute well, get our NDA in at the end of this month, get ourselves prepared to launch this product throughout the course of the year. So in the second half we will start layering in the organization to get ready for commercialization. We have our leadership team in place to commercialize this asset. We are working very diligently with our partner Sanofi, and we are very proud of their eagerness and their excitement about our asset, sotagliflozin. So we fully expect that it will be in clinic for Type 2 diabetes by end of year. So we think we have many opportunities to create value this year, and we will focus on execution to ensure that happens. With that being said, I will end the call there, and open the floor for questions.

Certainly. (Operator Instructions). You do have a question from the line of Alan Carr.

Hi, guys, this is Esther on for Alan. Thanks for taking my question. First on telotristat, could you tell us what your commercial strategy is, and where are you in preparations, and what other indications are you thinking about for telotristat? And then for sotagliflozin in type 1, can you tell us what your expectations are for the outcomes of the Phase 3 trials? Like what you would expect for reductions in A1c, and differences in quality of life, et cetera? Thank you.

Okay. So our plan for, there are a lot of questions there, so I'm going to break them into pieces. First of all, telotristat etiprate commercialization. Our plan is to commercialize that drug in the US on our own. We're preparing for the filing right now. Towards the end of the year as Lonnel mentioned, we'll start building out the field force associated with that. We have an advantage there in that the audience that we're prescribing for, are patients who are being treated with somatostatin analogs. That's something that allows us to identify the patients and physicians who are using somatostatin analogs to treat underlying disease in carcinoid syndrome, and then the drug that we are developing is being developed in combination with somatostatin analog therapy. So we feel that we can be very efficient in the ability to reach those physicians, and to provide the drug to those patients. With respect to other indications, that's something, right now we're really focused on getting the NDA filed. We'll get into other indications as we get past that point. But we do think reducing serotonin, reducing serotonin synthesis in the periphery, serotonin being an important molecule, that is an opportunity for other potential indications, and what we will be very focused on and considering in those other indications, are indications that provide the same level of value as will be provided in this Orphan space for carcinoid syndrome.

In terms of the diabetes programs, we haven't really disclosed what our expectations are exactly in terms of results with respect to A1c. A1c is the key end point here though. We're looking for clinically meaningful reduction in A1c, and a good safety profile in Type 1 diabetes setting. And our expectation is based on, in Phase 2 we saw in just a 4-week period we saw 0.55% reduction in A1c. We would generally expect to see a greater effect in longer duration studies, and so our expectation is based on those results, and the past history that we have had with the compound in Type 2 diabetes. Hopefully that will answer your questions, and I didn't forget any of them.

I'll add to Jeff's commentary. As you go into the Orphan drug space and look at how we want to compete there, particularly around ensuring market access, we have a remarkable team that's assembled to ensure that we have market access for the drug at start. We believe that we will have the ability to have a good price on this product, because you're coming into a very stable market relative to pricing. You have a market that has a CAGR over the last three or four quarters of about 8% or 9%, so we think we're coming in at a very healthy time where we can get a good value. The good news here, this drug, telotristat etiprate was discovered by Lexicon, developed by Lexicon. So our commercializing this asset really would be a big hallmark for us, because very few companies get the opportunity to go from discovery all the way to market with their own asset. And so this will be very meaningful to Lexicon, and we expect the margins to be very strong on this product that will allow us to commercialize it at a modest and reasonable level.

Thank you.

Your next question comes from the line of Jessica Fye with JPMorgan.

Hey guys, this is Ryan on for Jess. I appreciate you taking our questions. I guess as a follow-up to the comment, your answer to the previous question, you were saying that the physicians and patients are relatively well identified, and you can have a very focused and sort of narrow approach towards commercializing to those physicians. But maybe you could comment a little bit on what that means for sort of the launch curve, and your expectation there?

Well, we do think there is definitely a need for this drug. And there are patients right now that are in need for this, because of the fact that this is going to be the first new class of therapy that's introduced into this patient population in like the last 18 years. So we do think that there is a net need there. So we think that it's there's going to be robust uptake, in terms of that's what we're planning for. Beyond that, I wouldn't really say very much. But when we have looked at the overall patient population, physicians generally tell us that 40% to 45% of patients who have carcinoid syndrome, are not being adequately controlled with the existing standard of care, somatostatin analogs alone. So that's really where the opportunity lies.

Great. And I guess as a follow-up, have you started engaging in payor discussions yet?

Yes.

And are they, I guess you said that you would price at a modest and reasonable level. So could you kind of give us a little bit more color as to sort of how receptive payors have been in these discussions?

Let me first put my modest and reasonable commentary back into perspective. Modest and reasonable meaning the cost of us going into commercializing on our own would be modest and reasonable. Although I would say the price is also reasonable. We would price the product at parity, if not a premium. Because we believe, based on the results, that we will have and what the agency ultimately we hope will give us, we would then set price at that time. But we would expect price to be at market, parity, or a slight premium.

Great. Thanks for taking my questions.

You bet.

Your next question comes from the line of Colin Bristow, Bank of America Merrill Lynch.

Hey, thanks for taking my questions, and congratulations on the progress. So just to follow-on from the last question, could you remind us how you see the size of the opportunity for telotristat? And back to the launch curve question, is there any analogous launch curves that you would point us towards, to help us think about modeling this? And how should we think about the differences between a launch in the US and EU? And then a couple of on sotagliflozin, the SGL2s, the SGL2 market, since [Jardiance] stayed there, we have seen impressive share gains within the class, but a less profound effect on class growth. Could you talk about how this lines up with your expectations, and how you see trends moving forward, given in the second half we'll see the data get on the label, and a potential guideline update. And just on the CV benefit yourselves, what are your hypothesis on what is driving this CV, this reduction, it seems that blood pressure was not the sole driver of the benefit? Thanks.

Okay. That's a lot of questions. I'll try to remember them all. So I'm going to start towards the end and then move back. We think that the class of sodium-glucose transporter drugs has an opportunity for significant growth, and I think that there's definitely going to be some payor resistance. Because they are going to want to see more data. But we think that class will end up growing, the class of SGL2 inhibitors. We think we're differentiated from that by the SGL2-1 mechanism and that provides significant additional benefits. It is based on both our thoughts about the potential efficacy of sotagliflozin, what we have seen in Phase 2, and also safety. We think that we may have advantages in both of those areas because of that SGLT2-1 mechanism.

So our view in general is that most of the benefit of the empa reg trial in emplagliflozin is based on blood pressure. And we think that all of the evidence weights towards that. And if you want to call it a diuretic effect, that there's a diuretic effect that contributes to that, well, SGL2 inhibitors call diuresis. We don't think there's anything unique to emplagliflozin. We do think that there is some data that we have, that suggests that we might have some potential to differentiate in terms of blood pressure. And we've seen this across a variety of different studies, obviously we've got to prove that out, but we do think that there may be an opportunity for us there.

And lastly, I think one of the key areas of differentiation that we're going to be looking at is in patients with renal impairment, because as renal function declines, the benefits of the inhibiting SGL2 reduces. I mean, that's been shown in a number of different studies. And what we've seen is that because of the GI oriented SGL1 mechanism, that there is an opportunity to maintain benefit in patients that have lower renal function, that's going to be something that's going to be a key element of what we're looking at in Type 2 diabetes. I'm going to try to remember what your questions were on telotristat etiprate.

Launch curve and analogs.

Oh, yes. So I'm not sure that I have any good analogs from the launch curve perspective. I'm going to go back to a couple of your questions. In the US and Europe, there will be differences in terms of what the uptake is, probably in between the US and Europe. Among other things, the process for getting approvals in Europe is different, in that you have got to get pricing approvals, and that's going to take some time to sort of work through the system.

So it will be a little bit different, both in terms of timing and in terms of sort of sequencing of countries in Europe, as opposed to being able to launch immediately in the US. So I guess that would be the thing that I would say about the sort of differences between the two. We do think that this is going to be an area where we have an opportunity to really provide value to patients who need a new therapy. And so as I mentioned previously, we think that the opportunity is there for a pretty robust uptake in terms of the launch of this product. And we're working hard to eliminate barriers to make sure that patients can actually get the drug, so that when we make it available, that we're able to get it in the hands of patients.

Colin, I would add to a couple of the things that Jeff has said. In the work we're doing right now , because the question was asked earlier about work with payors. We are doing work with payors. Relative to us achieving the value proposition of our submission, should we achieve that, then we think we have a way forward where you have very few barriers by payors put in place to allow this drug to flow through. So therefore we should see a pretty nice uptake early.

The second reason you should see the uptake early is to the point Jeff made before. When you start to look at the numbers in terms of, let me first state that SSAs work. I want to be very clear about that. They do work. But over time and for some patients, in the very early pay point in time, maybe 5% to 7% of patients, they don't maintain the benefit. But over time the vast majority maintain the benefit. And so therefore they came off SSA therapy, they would be worse. So they have to remain on SSA therapy. However, how do they get better? Which is the question. The way they get better if you add telotristat etiprate on, which is what we're showing is the opportunity for them to improve, and get back to where they may have lost ground.

Because of that you will see that the vast majority of patients will be in a situation where they're already up-titrated to try to control their disease, you are seeing a tremendous amount of intervention with other things that are not approved, to try to control patients, get them back within a reasonable range, that simply does not have good evidence behind it, or no drugs that are approved beyond SSAs. So the opportunity to bring telotristat etiprate to improve the circumstance will be quite significant. And there will be quite a number of patients, I believe, that I believe will be available to use the drug up front. With the payors again, as long as we're able to achieve what we think we're going to achieve in our labeling, I think we should have a pretty good opportunity to get off to a pretty good start, relative to how we price the product, and be able to penetrate the market.

Let me also speak to the SGLT market that you talked about. It's not unusual when something like this happens, you have a single drug in a category, it starts to take share in the category. However I believe, and this is Lonnel's belief, as the other SGLT2's start to call out with their data, I think we will start to see what I believe will be a very strong class effect, relative to cardiovascular improvement. So when that happens, I think that is the opportunity where you will see the class grow. We in fact believe very strongly that is going to be the case.

For us in development we have every opportunity to look at these factors, and build our studies any way in which we play to win. And what I love about the collaboration with Sanofi, in our engagement, I simply will tell you they are coming in to win. How we structure our studies, how we put them together, how we approach the marketplace, all would be relative to what we believe is the strength of this drug, and being a dual mechanistic drug, and where we see there are strengths and opportunities for us to take part of the market, if not be able to compete in every area of the marketplace, will be how our Phase 3 trials will be designed.

We're taking the opportunity now to align between the two companies, to be able to do this work. And then when we have the opportunity at the end of the year, we will communicate our overall strategy relative to our Phase 3 program for Type 2 diabetes. But we feel very strongly the market will grow. SGLT2's will grow, not just with their class, but within the total marketplace, and we believe that we have every opportunity to be remarkably competitive when we do get to market. Hopefully I got all of the questions.

We have a question from the line of Liana Moussatos with Wedbush Securities.

Congratulations on all your progress. Is there a difference between what's considered clinically meaningful for A1c drop between Type 1 and Type 2 diabetics?

I will turn this over to Dr. Lapuerta.

I think the FDA is looking for a reduction of about 0.3% in A1c, when they're thinking about approving a drug for reducing A1c. And I don't think the FDA has made much of a distinction between Type 1 and Type 2 diabetes. What I will say though, is that with the use of sotagliflozin in Type 1 diabetes there's an opportunity beyond A1c control to reduce the use of insulin. So it is possible that the A1c reduction in Type 1 diabetes could be a little bit lower, because some patients are responding by reducing their insulin to some extent. That may be more important to them in terms of treating their diabetes safely. Whereas that's going to happen less often in Type 2 diabetes where the majority of patients are not on insulin. What it means is that you could see clinical trials of Type 2 diabetes have slightly larger A1c reductions. We think that would be fine, and that the clinical meaningfulness of reduction in Type 1, would be a combination of looking at A1c reduction of at least 0.3%, and insulin reduction. In particular insulin reduction that we believe can improve the safety profile of managing Type 1 diabetes.

Are there some parameters, quantitative parameters on decreasing insulin use, that we can go by when the data comes out?

Well, we have seen some reduction in insulin use on the Type 1 study that we've published, the pilot study. So that could give you some indication of the potential. But I think in terms of what's clinically meaningful, patients are very happy to reduce their insulin. They start seeing that their glucose profiles are more reliable and better managed, and they're very excited about it. I think that for clinically meaningful reductions in insulin, one of the things to look at is reductions in hypoglycemia. And we can look at that in two ways. One is spending more time within a euglycemic range. And I think that's going to happen with our program with sotagliflozin That's very important to patients. And another is we do have the potential to reduce severe hypoglycemia. We have a large enough program that perhaps not in any individual study, but across the program if we see trends that show a reduction in severe hypoglycemia, I think that would be highly relevant, and really make any reduction in A1c really worthwhile to patients with sotagliflozin in Type 1 diabetes.

Liana, just adding on to that, the idea of having a patient needing to use less insulin is not really, there's no numerical number related to the insulin use. That's not really the meaningful element of this. What would be meaningful is, if by using less insulin patients have better glycemic control overall, and more safe glycemic control, as Pablo mentioned, by potentially reducing hypoglycemia. Improving glycemic control, without increasing or maybe even reducing hypoglycemia, is really where that value is for this indication.

Thank you very much. That was a great answer.

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

Good morning. Thanks for taking my questions, and let me add my congratulations on all of your progress. First I was wondering if we could get an update on that JDRF trial? I think we are expecting that data this quarter. Is that trial still on track, and in what form will the data be released?

Phil, this is Lonnel. No, I think at one of the meetings we announced that the trial will not call out until the second half. I'll tell you two things. One is that the scientific rigor that's put into that trial is certainly causing for a lower enrollment pace, a slower enrollment pace than we would have anticipated. However, it's a Phase 2 trial. So what we have really done is put a lot of time and energy into our pivotal program, which is why we have just stated earlier today, is that the first of our Phase 3 trials have finished enrollment. And that's ahead of schedule. Now we're going to be bringing the second one into the fold as well, which will put us in a position to actually be able to announce the pivotal results in the second half. So with that being said, the study 204, which is JDRF study, you shouldn't expect to hear much on that until the second half of this year.

Got it. And the JDRF trial, since it's a Phase 2 study, that really doesn't make up anything in your filing package for Type 1 diabetes. Is that correct?

No, no, nothing.

Okay. Great. Second, on telotristat, is Ipsen still on track to file an MA in Q2? I believe that was your prior guidance.

Well, we're going to do everything we can to help them with that. But I'll let them answer how much they stay on schedule, but we're working very closely to get our NDA in by the end of the month. I think if we achieve that, they will have the ability to achieve their target as well.

Great. Okay. And then just one last question on the finances for the revenue guidance for 2016. Could you give us some idea of the proportion that's a milestone versus research funding versus something like amortizations of the Sanofi up front?

So there's not any research funding, well, not any research funding that's coming in to us that falls into that category. The significant majority of it is basically, is related to Sanofi. I would say the vast majority of it is related to Sanofi. And the Sanofi is driven by two different things. So when we recognize revenues, because this license has multiple elements, the revenue recognition is divided up between three different elements. One is the value of the license. One is the value of our continuing obligation to develop in Type 1 diabetes. And the other is our contribution of funding to Type 2 diabetes. So that upfront is allocated among those three elements. We have recognized $126.8 million of that Sanofi up front, and 2015 is attributable to the license element. The rest is attributed to those other two. Our development in Type 1 diabetes, and our funding of the Type 2 program. And so most of the revenues that we will be recognizing in 2015 are related to basically those two elements, our continued development in Type 1, and the beginning of our contribution towards the Type 2 program.

Got it. So just as we think about modeling this, would it be fair to divide the revenue guidance almost equally among the four quarters, with maybe a little bit more in Q2 for the inception of some sort of a milestone based on Ipsen's MA filing?

It may be a little bit more in Q2, and a little bit weighted towards the back end of the year. And the reason it would be weighted towards the back end of the year is because that's when we'll start doing work for the Type 2 diabetes program.

Got it. Okay. That's very helpful. Thanks for taking my questions.

Sure.

And it looks like your final question comes from the line of Stephen Willey with Stifel.

Yes, thanks for taking the questions, and congratulations as well. Could you maybe just characterize how enrollment is going in the larger safety study, that I know it is running concurrently with respect to the two [FDC] studies in Type 1? And also maybe just on what your thought process is here, with respect to being able to potentially file on Type 1 only, and if that's a regulatory dialog that we should expect to initiate once data is in hand?

That's a great question. Let me talk to the regulatory dialog and then I'll turn it over to Jeff. Yes, in terms of whether we go Type 1 alone first, and then the Type 2 or how we sequence this, one, we're getting alignment within our [alliance] itself. I think we also feel very strongly we have very good data. When we have the top line results, we all should try to do our very best to have a conversation with the Agency, and advance the program for Type 1 first. But more importantly to your point, we have to have a dialog with the Agency. And I would see that dialog taking place after we have our pivotal data in hand, which would give us the opportunity to speak more directly about what we've seen, and what we know. And then we can determine what order we would go in. But it's still our objective to file the Type 1 program ahead of Type 2.

And on your question regarding, Stephen, regarding the enrollment, we did as we mentioned enrollment in one of the pivotal studies. The other pivotal study enrollment is going very well. And also what we didn't mention was that enrollment in the third study, that is going according to plan. And the plan was really to have all of these, we'll have top line data from the two pivotal studies towards the end of this year, data from the third study and complete reports from the two pivotal studies in the 2017 time frame.

Okay. And then I guess maybe just a quick question. I know some of the pipeline development, I think has been probably a bit shelved over the past couple of years, just given the resource constraint, and I know I think one of the assets that was shelved was a locally acting SGLT1 specific inhibitor. So I'm just wondering if you guys have any development plans maybe get that program moving forward in 2016? Thanks.

Great question, Stephen. Yes, we do have plans to keep that program moving. we haven't disclosed that publicly at this moment, as we're having conversations. But you can fully expect that we will have something to say soon. And that we see as an asset. And we fully expect to put that program into the clinic. When we have clarity around the timing of when we'll be able to do that, we will definitely get that out. But you're right, we do have that asset, and we see it as something that we will develop, and need to develop, and the timing of when we put it into clinic is really the question at the moment.

And then just to clarify, that's unencumbered from the current Sanofi deal?

There's a framework within the Sanofi deal to encompass that. So there basically is an ability, and our expectation frankly is that this would be developed in the alliance. But there is a framework, and there's a framework to allow Sanofi to participate in that. And again that's the expectation. But should we not be able to come to an agreement, there's also a framework under which we can take it forward on our own.

Yes, so to Jeff's point, the value here is to try to do it within the alliance. Find the proper timing when we can introduce it. I think both sides see it as an asset. It's just how we do the timing around development of the asset. I think what it will come down to, and it will be better for it to be done inside of the alliance, because that will be the funding mechanism that we can work through. But if we have to go outside of the alliance because there's not an agreement, we still see it as an asset, and it is something that we want to develop.

Understood. Thanks guys.

There are currently no further questions.

Excellent. Well, I want to thank everybody who joined us this morning on this call. We have a lot to do. We have every intention of filing our NDA at the end of this month for telotristat etiprate. We are very, very excited to file our first NDA here at Lexicon. A lot of extraordinary men and women are working on this day and night, weekends. But we all recognize that it's a rare opportunity to work on an innovation, and file an NDA in this industry. And we're all pleased and privileged to have the opportunity to do so. Also, I want to remark that our partners, Ipsen, are working very closely with us on our NDA, as they get ready for their MAA. So we certainly hope that as we make great progress on filing the NDA, we should make equally good progress on filing the MAA. So with that being said, we look forward to calling out our progress as the year unfolds. Thank you again for attending this meeting.

Again. Thank you for your participation. This concludes today's call. You may now disconnect.