Lexicon Pharmaceuticals Inc (LXRX) 2016 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 finance call.

(Operator Instructions)

Thank you. I would now like to turn the call over to Chas Schultz, Senior Director of Finance and Communications. You may begin.

Thank you, Victoria. Good morning, and welcome to the Lexicon Pharmaceuticals fourth-quarter and year-end 2016 conference call. I'm 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; Alex Santini, Lexicon's Chief Commercial Officer; Dr. Praveen Tyle, Lexicon's Executive Vice President of Research and Development; and Jeff Wade, Lexicon's Executive Vice President of Corporate and Administrative Affairs and Chief Financial Officer.

We expect that you've seen a copy of our earnings press release that was distributed this morning. During this call, we will review the information provided in the release, provide an update on our clinical programs and then use the remainder of our time 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 homepage for today's webcast.

Before we begin, I would like to state that we will be making forward-looking statements including statements relating to the safety and efficacy and the therapeutic and commercial potential of XERMELO. These statements may include characterizations of the results of clinical trials of XERMELO and the market opportunity for XERMELO.

This call may also contain forward-looking statements relating to Lexicon's growth and future operating results, discovery and development of our drug candidates, 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 success of our commercialization efforts for XERMELO, the timing and results of clinical trials and preclinical studies of our other drug candidates, our dependence upon strategic alliances and other third-party relationships, our ability to obtain patent protection for our discoveries, limitations opposed 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 we have filed with the Securities and Exchange Commission. I'll now turn the call over to Mr. Coates.

Thank you Chas, and good morning to all of you who have chosen to be with us this morning. As always we make these presentations on behalf of extraordinary men and women here at Lexicon who work tirelessly every day to advance our science into the hands of patients. With that being said, we are extremely pleased to once again remind everyone that XERMELO was approved as of Tuesday, February 28, as the first and only orally administrated therapy for the treatment of carcinoid syndrome diarrhea in combination with somatostatin analog therapy in adults inadequately controlled by SSA therapy.

As we all know, carcinoid syndrome is a rare and debilitating condition that affects people with metastatic neuroendocrine tumors and is characterized by frequent and debilitating diarrhea that often prevents patients from leading active, predictable lives. We are very, very pleased that it was Lexicon who has introduced a new therapy in this category, where a new modality has not been in this marketplace almost 30 years. Very, very pleased that we have started our activity with our sales force being in the market today and the drug being available for patients at the pharmacy on Monday.

Next slide. 2016 has been just a remarkable year. It's a year of tremendous execution of being a fully integrated pharmaceutical company.

XERMELO, which was formally known as telotristat etiprate for carcinoid syndrome, we filed it in the first quarter of 2016. We received a prior review, and throughout the year we established our commercial presence in the US in preparation for its launch.

Sotagliflozin for type 1 diabetes, we completed and presented top-line data from two Phase 2 studies, supporting the additional elements of the profile of the compound. Also, we are very, very pleased, we achieved the primary endpoint in both of our pivotal Phase 3 studies for type 1 diabetes, and we're completing the work going into 2017. As of type 2 diabetes for sotagliflozin, we are very pleased that Sanofi has now initiated and we've entered into Phase 3 type 2 diabetes.

We also introduced two new compounds into the clinic in 2016, LX2761, which is an SGLT1 compound by itself, entered into Phase 1 development; and LX9211 for neuropathic pain with a very novel target. We licensed the clinical and commercial rise from BMS. We completed all of the IND-enabling studies, and we are ready to initiate the clinical studies.

Last but not least, we ended the year with a very strong balance sheet. With that, I'm going to turn it over to Jeff Wade, our CFO, to walk you through.

Thank you, Lonnel. I will provide a brief financial update. As indicated in our press release today, we had revenues for the 2016 fourth quarter of $23 million, which was a decrease from $127 million in the prior-year period.

The decrease was primarily due to recognition of revenues from the upfront payment received under our collaboration and license agreement with Sanofi, which in the 2015 period included the portion of the upfront payment attributable to the value of the license, and in 2016 reflected revenues associated with the performance of our obligations related to type 1 diabetes development activities and shared funding for type 2 diabetes development. Our revenues of $83.3 million for the year ended December 31, 2016, decreased from $130 million from the prior-year period for the same reasons.

Our research and development expenses for the 2016 fourth quarter increased 33% to $40.4 million from $30.4 million in the prior-year period, primarily due to increases in the external clinical development costs related to sotagliflozin. Our R&D expenses of $178.2 million, for the year ended December 31, 2016, reflected an 87% increase from $95.2 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 the base and contingent payments. Changes in this liability based on the development of the programs and the time until those payments are expected to made are recorded in our consolidated statements of operations.

The fair value of Symphony Icon purchase liability was reduced by $0.7 million in the year ended December 31, 2016, primarily as a result of our amendment of the payment terms announced in October and did not change in the fourth quarter. This compares to an increase in this liability of $0.8 million and $5.9 million for the fourth quarter and full year of 2015, respectively.

Our general and administrative expenses for 2016 fourth quarter were $14 million, an increase of 117% from $6.4 million in the prior-year period. The increase was primarily due to increased costs in preparation for commercialization of XERMELO. Our G&A expenses of $43 million for the year ended December 31, 2016 reflected an 81% increase from $23.8 million for the prior-year period.

In 2014, we began to market our buildings and land in The Woodlands, Texas for sale. We recognized at that time a non-cash impairment losses on our buildings of $1.2 million and $3.6 million for the three months and year ended December 31, 2015, as a result of writing down the value of the buildings to the estimated net selling price. We have subsequently taken the facility off the market and are now accounting for them as held and used.

Our net loss for the 2016 fourth quarter was $32.4 million, or $0.31 per share, compared to a net profit of $86.8 million, or $0.76 per diluted share in the prior-year period. Our net loss for the year ended December 31, 2016, was $141.4 million, or $1.36 per share, compared to a net loss of $4.7 million, or $0.05 per share for the corresponding period in 2015.

For the three months and year ended December 31, 2016, our net loss included non-cash stock-based compensation expense of $1.7 million and $7.5 million respectively. For the three months and year ended December 31, 2015, net loss included $1.4 million and $6.8 million, respectively. Finally, as of December 31, 2016, we had $346.5 million in cash and investments as compared to $395.6 million as of September 30, 2016 and $521.4 million as of December 31, 2015.

Next we will turn to our 2017 objectives, which this is going to be a very significant year for Lexicon, a transformative year. As we've discussed previously, we've recently received FDA approval for XERMELO and the commercial launch of that product is underway.

In sotagliflozin in type 1 diabetes, we are expecting inTandem3 data from our third Phase 3 study midyear of this year. In addition, we will receive additional -- important additional efficacy data from inTandem1 and inTandem2 that we don't have as of yet which is not part of the top line, but we expect during the course of this year.

That concludes time and range data from the continuous glucose monitoring sub-studies, information about body weight changes and blood pressure in patients with hypertension, which will be important in understanding the full benefit of sotagliflozin in the type 1 diabetes setting. In sotagliflozin in type 2 diabetes, as we mentioned previously, the first Phase 3 studies were launched in the fourth quarter of last year and the balance of the core Phase 3 program will be launching in 2017 over the course of the year.

For LX2761, Phase 1 studies are underway and we expect initial Phase 1 data in 2017. Finally for LX9211 for neuropathic pain, we are expecting to file an IND middle of this year and to begin Phase 1 studies also in this year. In addition to the launch of the drug and with the launch of the drug, we have become a fully integrated commercial stage pharmaceutical Company, and with these other assets, we also have a very strong pipeline with an important 2017 ahead of us.

With that in mind, we will turn to our forward-looking financial guidance for 2017. We expect contractual revenues from existing collaboration and licensing agreements in 2017 to be in the range of $65 million to $75 million. Our revenue expectations incorporate progress in the type 1 diabetes development program for sotagliflozin that we are leading under the Sanofi alliance, progress in the type 2 diabetes program that Sanofi is leading under the alliance and our associated funding participation in those efforts, and milestone payments under our alliance with Ipsen.

These revenue numbers do not incorporate revenues from sales of XERMELO. We are not providing revenue guidance for XERMELO for the year on this call, although we will provide some additional color regarding our expectations when we review our first-quarter financial results.

Given the timing of the recent approval, we expect net sales of XERMELO in the balance of the first quarter, amounting to a little less than four weeks, to be minimal. As noted previously, XERMELO was made available for prescription on approval.

Our sales force is out in the field as of today, and we will have XERMELO in our specialty pharmacies available to be dispensed to patients on Monday, which is a testament to our extensive preparation and the talent and capabilities of our team. We expect sales to ramp up over the course of the year, and as you would probably expect, given the timing of the launch, that sales will be weighted significantly towards the second half.

We expect that our operating expenses in 2017 will be in the range of $230 million to $260 million. Non-cash expenses are expected to be approximately $12 million of this total, including $8 million in stock-based compensation, $2 million in increasing fair value of Symphony Icon purchase liability, and $2 million in depreciation and amortization.

Our operating expenses are expected to include R&D expenses in the range of $160 million to $180 million and SG&A expenses in the range of $70 million to $80 million. Finally, we expect our 2017 net cash used in operations to be in the range of $210 million to $225 million. I will now turn the call back to Lonnel.

Thank you, Jeff. As Jeff said, we expect 2017 to be truly a transformative year as Lexicon has now moved into becoming a commercial stage Company. We are very excited to have introduced to the marketplace XERMELO.

We are off to a remarkable start. I'm very proud of our team. I think we have now initiated a best-in-class preparation and start in being able to get in the market very quickly and have the product be available to patients within 72 hours. With that being said, I'll open up the floor for any questions.

(Operator Instructions)

Yigal Nochomovitz, Citigroup.

Hello, guys. Thanks for taking the question.

(Inaudible) XERMELO and the market dynamics that you are anticipating. Could you just run through some of these questions? Could you talk about the Medicare Part D versus commercial split in the population for carcinoid? What you expect on medication adherence in this population of patients? Any comments on gross to net? Finally, how are you modeling or thinking about the peak share that you can get in the carcinoid patients that aren't controlled on SSAs? Thank you.

Thank you, Yigal. I will let Jeff speak to the gross and net. Then we'll turn it over to Alex for the other questions you have.

On gross to net, most of what's going to make the difference in gross to net is going to be co-pay assistance and other expenses associated with distribution of XERMELO. It is hard to have any product that has gross to net of less than about 10% to 15%, so that is something to consider as we go forward. That is assuming -- that is once we get to steady state. Initially, that will be probably a bigger spread.

Alex, can you take the questions around Medicare and the distribution of our business?

The patient mix from a Medicare and commercial perspective, we have approximated that about 50% of the patient volume will come from the Medicare sector and 45% of the patient volume will come from our commercial sector. Then the other 5% will be made up of our Medicaid, our VA system, and other category.

Okay. Then, any thoughts on medication adherence?

As you are aware, we have a very robust model in place with specialty pharmacies. What we have developed is a best-in-class compliance and adherence regimen that will be administered through our specialty pharmacy. As you can imagine, this is a chronic medication, 28-day cycle, 13 scripts on an annual basis. Our goal and our hope is that patients who are receiving symptomatic relief will stay on product for a long period of time, especially recognizing that the safety profile is quite good. From a compliance/adherence perspective, we are certainly shooting for 13 out of 13 scripts on an annual basis, but we will have to make a determination after a few months on the marketplace to see how solid our adherence and compliance achievement levels are.

Okay, thanks.

Then switching to diabetes, just a question on what the label could look like in Type 1. You've done the juvenile study with JDRF, obviously, and about 1/6 of the patients in the United States that are Type 1 are pediatric. Is that how you are going to get the pediatric population and the label through JDRF, or is that going to come later? Because obviously the Phase 3s you did were in the adults. Thanks.

Yes. Yigal, the study that we did with JDRF actually was in young adults. Initially, what we're looking at is a population of adults that are Type 1 diabetics. That would be our initial target for sotagliflozin in Type 1 diabetes. There are approximately 1.1 million adult people with Type 1 diabetes in the US. We will be doing pediatric studies with the objective of extending this to people who are younger than that, particularly to adolescents. That is something that will take place after we complete the Phase 3 program in adults with Type 1 diabetes, consistent with the way that FDA would want us to proceed.

To that point, Yigal, I think that we will keep our relationship with JDRF, and certainly as the product makes inroads for adults living with Type 1 diabetes, it is an opportunity for us to continue to work in collaboration with JDRF in designing and developing studies for pediatric use.

Great, thank you.

Jessica Fye, JPMorgan.

Hey, guys. Thanks for taking my questions.

Maybe sticking with XERMELO, can you talk about what your expectations are for price in Europe? Also the press release reminds us that the asset is unpartnered in Japan. What is the status of partnership talks there and timelines for approval?

On sotagliflozin, when you meet with the FDA in the first half of this year, do you expect to ask them how they are thinking about the two doses? I'm trying to think about whether they may want to see an inTandem3-like study at 200?

Maybe while I'm one rattling off questions, did Sanofi have right of first refusal on the SGLT1? And what happened there, that your developing it, it seems, independently? Thanks.

Jessica, I'm going to do my best to see if I can recall (laughter).

I have them written down here.

Jeff, you want to start?

I will start with the partnership-related questions. XERMELO, as you note, is not partnered in Japan. Our thought with regard to Japan was that we would wait until we proceed with the second indication before considering partnership for that market. That continues to be our intention.

Also relating to a partnership question, the pricing in Europe: that is something that is obviously something that is within Ipsen's purview as our partner in Europe. I will only say that SSA pricing in Europe is lower than SSA pricing in the US. It's probably around 30% of pricing in the US. So that is going to be something that they will have to negotiate as they proceed with discussions around pricing there.

I think the final partnership-related question that you had was relating to LX2761. The arrangement that we had with Sanofi is there's a right of first negotiation. We have a framework for us to consider adding LX2761 into the partnership, but it is something that would require an agreement between us and Sanofi. The hope would be that, as we develop this asset, that it is something that we add to the relationship that we have with them.

Jessica, I think your question that is around our meeting with the FDA; certainly we are hoping to present to the FDA our pivotal program. As you know, we have completed that, and we hope to get feedback from the Agency both on what they believe is remaining for us do in preparation for our submission. Included in that certainly will be the 200 and 400 milligram dose, as they both were contained in our pivotal program, Phase 3 program. We should have full context of information from them, and if there is something remaining for us to do, we will be in a good position to try to get that done in preparation for intent to file by first quarter of 2018.

Okay. Thank you.

Stephen Willey, Stifel.

Yes, good morning. Thanks for taking the questions.

Maybe just on XERMELO first. Wondering if you can maybe comment as to how long you think the reimbursement adjudication process will take at the specialty pharmacy level? And if the Company is going to be providing any starter kit just to ensure that no script goes unfilled?

Great question, Stephen. Let me turn it over to our Chief Commercial Officer, Alex.

Good morning again. Thank you for the question.

As you are probably aware, payers will conduct their customary review of any new product that comes into the marketplace and then complete an assessment to formulary placement. They will do a review of our efficacy profile and our safety profile, and based upon the feedback that we have heard from payers, we believe that we'll have a favorable position. The timing of that position will vary from payer to payer. On an interim basis, right out of the gate we will have a program that's called the Quick Start program, where we will offer XERMELO to patients that are either being delayed in terms of their benefit design or denied according to their benefit design. So we do have a breach program for getting patients started on our drug while the reviews are taking place at the payer organizations.

Just a follow-up. How long is that Quick Start process, or that Quick Start product?

The Quick Start program, the initial Quick Start program will be a two-week supply of product that will be made available to them. The STs will be administering that program in accordance with the benefit design that payers will or will not have in place. Our goal is to have our account management team simultaneously providing that input to the payers on the clinical value of the drugs. We are hoping that we get rapid uptake and rapid approval by payer organizations, and our Quick Start program will be there to support it. The program will remain in place, at the moment indefinitely, until we have a very secure and favorable formulary program in place.

Okay. Maybe just a question on sotagliflozin. Just wondering if we can maybe get a little bit more granularity around the remaining Type 1 milestones? Should we think about the 52-week safety and efficacy data updates as separate readouts? I'm thinking about both inTandem1 and inTandem2.

Then, the secondary endpoint data that's going to be emerging of these studies, I guess including the CGM data, is that going to be pooled? Or will that be presented as a pooled analysis? Or should we also expect to perhaps see separate readouts from each of the two pivotals?

I'm going to take both or three parts of your question, and then I'm going to have Dr. Lapuerta start off. And then to the pooled data, when we can expect it, I'll have Jeff take it from there.

Your questions are about the 52-week analysis, about the secondary endpoints and about the CGM being pooled. Now, if I could start with the 52 weeks. The 52 weeks are very important for safety in particular, and one of the things that we'll be examining is the time course, the safety events. So I think these will be very important readouts.

The secondary endpoints, in particular the blood pressure. We have talked about very large blood pressure reductions in the past, and observed in three Phase 2 studies, two in Type 2 diabetes and one in Type 1 diabetes. I think this be a very important readout. Among the secondary endpoints, the CGM is very important because we believe from our first Phase 2 study in type 1 diabetes, that sotagliflozin can significantly reduce glycemic variability and improve time and range. Patients value that. The CGM data will be very important and will be coming out and will be pooled in order to provide for a robust analysis from inTandem1 and inTandem2.

There will be differences in timing, so we will have the longer-term data and some of the secondary endpoints for inTandem1 a little bit before the middle of the year. We will have inTandem3 data around the middle of the year. Then shortly after that we will have inTandem2 data and the CGM pool data. So all of that is coming in the middle part of this year.

Okay. That's helpful.

Jeff, maybe just a quick question on R&D spend and maybe even collaborative revenue. I know that you have about $100 million of dedicated spend that goes to the Sanofi Type 2 program. Can you maybe just comment as to where you are with respect to working through that?

Okay. We've spent some of it already in 2016. A big portion of that is going to be in 2017, actually, and is incorporated in the numbers we gave you. Then there will be some balance that will be remaining in 2018, but it will be a smaller portion of that, because the bulk of that cost will be incurred in 2017. That is really one of the main reasons why our R&D expenses are remaining relatively steady, because we will be starting to wind down the Type 1 diabetes program this year, towards the second half of the year. But because of the Type 2 diabetes program that we are co-funding, that will be -- a large portion of that cost will be incurred this year.

Understood. Thanks for the color, and congrats again.

Thanks.

Chris Shibutani, Cowen.

Thank you. Congratulations on the XERMELO update. I did want to focus my questions on sotagliflozin, however.

To clarify, for inTandem3, is it correct that the duration of the study would be complete at the 24-week endpoint? That you are not going to have a 52-week endpoint? [We will hear] the results at midyear, that would be the final results?

Secondly, could help us a little bit understand the secondary endpoint expectations? What kind of magnitude in weight change would we expect at the 52-week point? And to what extent would other experience from this GLT2s be a good proxy -- i.e., how might the subtle difference in mechanism that is the case with sotagliflozin influence the secondary endpoints, bodyweight, blood pressure, and the timing range? Thank you.

Thank you, Chris. I'll give the first question to Jeff and then, Pablo, if you could take the second question on the secondary measures.

Okay, yes. The answer to your first question is yes, we will have the data. It will be top-line data, but it will be data complete from the complete duration of the study, around the middle of this year, for inTandem3 because the duration is basically a six-month duration.

The secondary endpoints, Pablo?

Yes, let me state first about weight change and the potential magnitude. From what we've seen in our Type 2 population in our first studies of Type 1 diabetes at 24 weeks, the weight change observed with sotagliflozin has been significant and similar to that seen with other SGLT2 inhibitors in Type 2 and Type 1 studies. Sotagliflozin has relatively modest urinary glucose excretion, and we think that is an important part of its profile and may have important safety implications. With that modest urinary glucose excretion, we do not expect more caloric loss than with selective SGLT2 inhibitors. So we have not projected a profile of superiority in weight gain. What we have seen has been similar so far.

What we might have in the case of Type 1 diabetes is that obesity is common. We've see a mean body mass index of 29 to 30 in inTandem1, and patients are on very high doses of insulin and have a lot of issues with severe hypoglycemia from those high doses of insulin. It could be that we have good weight change data in the sense that patients are looking for a way to manage their Type 1 diabetes safely. Some patients will back off to some extent on bolus insulin, and that may have impact on weight. If you look at the SGLT2 experiences, some of the best weight gain data have been in studies in Type 2 diabetes on top of insulin for that same reason. Overall, for weight gain, we've generally seen a similar profile, although with 52-week data and patients on optimized insulin we have the potential for some good results.

Any relative -- Yes, right, blood pressure. Go ahead.

In terms of blood pressure, we've seen in Type 2 diabetes, among patients with hypertension, and that means patients whose baseline systolic blood pressure was greater than 130, we saw a 14-millimeter placebo-subtracted reduction in systolic blood pressure with the 400 mg dose. That was quite striking to us, and we had not seen that before or since with selective SGLT2 inhibitors. Then in a renal impairment study, we saw in just seven days an 11-millimeter drop in systolic blood pressure compared to placebo. Then in our Type 1 study, our Phase 2 Type 1 study, and that's the 206 study, again going to the subgroup of patients with hypertension, again we saw a 14-millimeter drop in systolic pressure.

We have to be a bit cautious because these were small studies, studies with analysis on the order of 30 to 40 patients. We really look forward to seeing these data in a larger study where we pre-specify blood pressure analysis in this subgroup, patients with systolic blood pressure of at least 130 millimeters of mercury. We feel that we will have enough patients in Type 1 and inTandem1 and inTandem2 to have meaningful readouts and defined well the potential for sotagliflozin to treat patients with hypertension, and we are cautiously excited about having those data unblinded.

In terms of time and range, that is something that could be different as well, from selective the SGLT2 inhibitors. We have not seen good data in terms of time and range from selective SGLT2 inhibitors, but we have been encouraged with our drug, with our experience that we had in our 203 study in Type 1 diabetes that we saw time and range improved on the order of an hour to two hours over the course of 24 hours. We do believe that this relates to SGLT1 inhibition, not SGLT2 inhibition, because we've reduced the peaks of glucose after meals. That is something that could be differentiating and I think an important readout with inTandem1 and inTandem2 continuous glucose monitoring data pooled.

Thanks very much. That's very helpful for context.

Alan Carr, Needham & Company.

Thanks for taking my questions. A couple of them.

One of them: any updates on EMEA review timing and expectations for when that might be done? Then the other one is, you're bringing this compound with, or formerly with, BMS forward. I'm wondering if you could comment what that means, bigger picture, for Lexicon, where you intend to take the Company? Some long-term strategy thoughts. Thanks.

I will take the second question first. The compound that -- it was out of an alliance that we had with Bristol-Myers Squibb that we jointly -- we discovered targets in a neuroscience alliance that we established some time ago. We worked together with them to develop compounds to address novel targets identified in that, and this is an extremely promising program that we are really excited about. It is something that we also had a very significant part in creating. There is some interesting overlap between areas that this could be used in, and areas we are already working in. For example, one of the most significant areas in neuropathic pain is in diabetic neuropathy. So it's a program that we contributed to and we are very enthusiastic about. Hopefully that will provide some color as to the way that we are thinking about that program.

I'm trying to remember --

EMEA.

EMEA. The filing was made with the EMEA this past summer. That continues to be in the review process of EMEA and we are expecting it to take the normal amount of time that, that process takes, which is on the order of a year or so. That continues to be moving along.

Okay. Coming back to strategy, can we expect more compounds to move up behind the, I forgot the number, for the that one you developed with -- 9211? Are there more within the Lexicon pipeline in discovery or preclinical stage that you might bring up behind that, that would fit into the specialty organization that you're building? Thanks.

Great question, Alan.

It's something that Dr. Tyle is working on with our team, to look at all of our science and do a [federal] review of it, and try to figure out what has good chemistry put to it that we can continue to put into one of these two areas, either the neuroendocrine tumor area or certainly the diabetes space. To Jeff's point, with the remarkable success we've had with sotagliflozin, we certainly expect that we will have some success as well with LX2761, with the SGLT1 component by itself, where Sanofi already has the opt-out opportunity to participate. Then the third leg of that stool now, in getting the rights to LX9211, we have the possibility of exploring certainly not just neuropathic pain in its general nature, but more specifically diabetic neuropathy, which fits into that category.

We will continue to do our work. A lot of this is [pressure] testing a lot of pieces and making sure that we have proper characterization before we certainly talk about it beyond the work we are doing inside the Company.

I guess it might help set perspective here is, how high a priority is it to add to the pipeline behind 9211 and 2761? Or do you feel like you have enough to keep you busy as it is?

Yes, I think we have to be very cautious, is something that I try not to get myself to terribly excited everyday on finding new things, because for a Company of our size, I think we have quite a few priorities already. We are a science-based company so we do have a team that is continuing to look at our early science and the implications it may have to the areas that we are now finding maybe most important to us: the metastatic net market as well as the diabetes market. We are doing work, Alan, in that area but it is not biggest priority. Our biggest priority is to continue to move the assets that we have forward toward commercialization and get into revenue generation mode, as we have done now with XERMELO.

Great. Thanks very much.

Thank you.

Liana Moussatos, Wedbush.

Thank you for taking my question. Congratulations on your progress with XERMELO, and especially the rapid commercialization right after approval.

My question is actually on sotagliflozin in Type 1. You previously mentioned a plan to meet informally with the FDA in the first half sometime, or maybe Q1, with the idea to get an initial read with existing data on their thoughts about potentially reviewing an NDA for Type 1 separately from Type 2 in 2018. Presuming you are not able to publicly disclose this information after meeting with them, what kind of activities would change if the FDA tells you they are leaning toward a 2018 Type 1 review?

Thank you for the question, Liana.

For us, we are absolutely preparing for success. To be frank, we think we have remarkably good data. We have overcome the biggest hurdle I think the Agency had put in front of us, which was to show that you can provide a patient benefit, more specifically on A1C, above optimized insulin. We haven't done that just once, we have done it twice now in two well-controlled pivotal trials. We are very confident in that data.

I think the question we have to answer for the Agency going forward is, under what care instructions should we change relative to managing the [DK] risk that we have for the drug. I think once we're able to answer those questions, we remain very confident that we can file this drug in the first quarter of 2018. I don't see much changing, other than our preparation and putting together an aggregate package that we can get some feedback from the Agency. If they ask us for some additional information, I think we have such a large program that we have committed to through all of the inTandem programs that we should be in a position to answer any questions for the Agency in the total breadth of that program. It's really to make sure that if there's something that we're missing and we don't understand, we need clarification, in that meeting. From an aligned point of view, both ours as well as Sanofi, it remains our intent to file the compound based on what we see in the data already in the first quarter of 2018.

Thank you very much.

Stephen Willey, Stifel.

Thanks for the follow-up.

Following up on the blood pressure discussion. Is there anything you can say about the Sanofi proposed Type 2 Phase 3 development program and whether or not they would actually intend to seek a blood pressure lowering label specifically as part of the Phase 3 development program? Thanks.

Thanks, Stephen. That's a challenging question.

I will say they are very excited as we are. As Dr. Lapuerta said, we're always cautiously optimistic. I think what direction we go from once we have these data in a larger trial like inTandem1 and inTandem2 and be able to look at the blood pressure data, I think the alliance holds opens any options that we see that we may want to develop the compound to give us strategic advantage. I'll answer the question that way. But never speaking directly on behalf of Sanofi. (Laughter).

It is one of the key areas that we and Sanofi both view the value of sotagliflozin is the expectation that this will provide a benefit in terms of cardiovascular rest to patients with diabetes. That's been consistent as one of the key areas that we think, that we both think, that sotagliflozin can provide value to patients.

Steve, I think that optimism is driven by how remarkable what Dr. Lapuerta said, we not only saw this huge systolic drop using sotagliflozin for Type 1 patients, we saw almost the exact same drop with Type 2 patients. That is quite extraordinary, which made us make sure that in our Phase 3 three program we pre-specified it as a secondary endpoint, so that we can get clear on just exactly what does this mean. Once we have that clarity, I think it informs us as to how we want to continue to develop this compound to ensure that we have all of the advantage that we think we can have as we come to market.

And just to clarify, those reductions in blood pressure were observed on the background of maximal anti-hypertension therapy?

I wouldn't say maximal, in the sense that we didn't have a formal program to review everybody's anti-hypertensive therapy. I would say it was on proper standard of care. That's the best description of our program. Standard of care, rather than maximal, per se.

Understood. Thanks for the follow-up.

Thank you, Stephen.

There are currently no further questions.

I will wrap up this call and just thank everyone for participating. And we look forward to having future conversations with you about XERMELO as well as the progress we continue to make with sotagliflozin. I think we've executed extremely well in the course of 2016 that have put us in the position to be a commercial-stage company in 2017. I fully expect us to continue to execute extremely well on the clinical programs with sotagliflozin. To date, I think everything that we have laid out as catalyst to all of our stakeholders, we had either achieved them or exceeded them. I expect that to be the continuing nature of how we perform in the Company as we go forward.

Look forward to next call, and enjoy the rest your day.

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