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Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)

Q4 2012 Earnings Call

February 21, 2013 11:00 AM ET

Executives

Alex Abuin – VP, Communications

Arthur Sands – President and CEO

Brian Zambrowicz – EVP and Chief Scientific Officer

Pablo Lapuerta – SVP and Chief Medical Officer

Jeff Wade – EVP, Corporate Development and CFO

Analysts

Cory Kasimov – JPMorgan

Liana Moussatos – Wedbush Securities

David Friedman – Morgan Stanley

Mark Monane – Needham

Phil Nadeau – Cowen & Company

Steve Willey – Stifel

Operator

Thank you for holding. Welcome to the Lexicon Pharmaceuticals Fourth Quarter and Year-End 2012 Conference Call. (Operator Instructions)

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.

Alex Abuin

Good morning, and welcome to the Lexicon Pharmaceuticals fourth quarter and year-end 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 and Chief 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 a copy of our earnings press release that was distributed this morning. During this call, we will review the information provided in the release, provide an update on our clinical programs and then use the remainder of our time to answer your questions.

The call will begin with Dr. Sands, followed by Dr. Zambrowicz and Lapuerta, who will provide an update of our clinical programs and by Mr. Wade, who will review our financial results for the fourth quarter and full year 2012 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 homepage for today’s webcast.

Before we begin, I would like to say that we’ll 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 therapeutic and commercial potential of those drug candidates.

This call may also contain forward-looking statements relating to Lexicon’s future operating results, financing arrangements, cash and investments, discovery and development of products, strategic alliances and intellectual property.

Various risks may cause Lexicon’s actual results to differ materially from those expressed or implied in such forward-looking statements, including uncertainties related to the timing and results of clinical trials and preclinical studies of our drug candidates, our dependents upon strategic alliances and ability to enter into additional collaboration and license agreements, the success and productivity of our drug discovery efforts, our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties and the requirements of substantial funding to conduct our drug discovery and development activities.

For a list and 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.

Arthur Sands

Thank you, Alex, and thank you everyone for joining us this morning.

We’ll turn to our pipeline slide and I’d just like to make a few introductory comments regarding 2012 as this is the year-end call. It was a very successful year for Lexicon and a very important year in terms of our progress of our most advanced programs.

Looking back at the year just briefly, I think it was dominated by the results from our Phase 2b trial of LX4211 in type 2 diabetes, which we had in July in mid-year. And, of course, those were very positive results. I will be highlighting just a few of those again today and providing some context on some of what we’ve learned since obtaining those results.

In addition, in 2012, we initiated our first Phase 3 program with telotristat etiprate in carcinoid syndrome that was a real milestone for the company. That trial is enrolling and we’ll provide an update with regard to telotristat etiprate, so our first move into Phase 3.

And then I think, lastly, with regard to our advanced pipeline, LX1033 began its major Phase 2 trial, which we believe will be its only Phase 2 trial given what we know about the mechanism in irritable bowel syndrome (IBS-d). That’s a 360-patient trial which is also enrolling and we’ll be providing an update on that today as well.

So it was a very important year moving to Phase 3 2012. We’re even more excited about 2013. And at the end of this call, I’ll provide a little bit of guidance with regard to some of the major results milestones we expect in 2013.

So, let’s move now on to some of the more specific topics for today. This call will be focused on really some updates and some perspectives on our key programs as we have progressed them.

And so with that, I’ll turn it over to Brian to highlight some items regarding LX4211. Brian?

Brian Zambrowicz

Thank you, Arthur.

Although we’ve discussed in the past, I do want to remind everyone some of the key differentiating characteristic to LX4211, our agent for type 2 diabetes. It is a first-in-class dual inhibitor of SGLT1 and SGLT2 sodium dependent glucose transporters. And, of course, what makes its mechanism of action unique is the SGLT1 component. Since SGLT1 is the transporter involved in taking up virtually all of the glucose from the diet, one of the primary effects of SGLT1 inhibition is to reduce postprandial glucose levels due to this reduced uptake of glucose from the gastrointestinal tract. And the other effect of SGLT1 inhibition is it triggers the elevated release of beneficial gastrointestinal peptides including GLP-1 and PYY.

The differentiation based on this dual inhibition, we believe, was supported (inaudible) data from our Phase 2b study. It was a study done in 299 patients failing stable dose metformin and there were four treatment arms of LX4211 and a placebo arm with a 12-week dosing study. The primary endpoint was hemoglobin A1c at week 12 with multiple secondary endpoints.

To remind you then, we carefully measured the effects of LX4211 on SGLT2, here once again showing the glucose to creatinine ratio which was measured based on a spot-check of the urine in all patients who took part in the trial. Green is placebo. Of course, there was very low – there was a very low ratio of urine glucose to creatinine as was there was a very low level and low ratio in the gold in the low dose.

What we did see though is maximized affect where we saw about 39 for the glucose to creatinine ratio in blue with 200 milligram dose. And as we pushed the dose in red or black to 200 milligram BID or 400 milligrams once a day, there was no increase in the SGLT2 effect, no increase in the glucose to creatinine ratio.

We measured the effects on SGLT2 also in a sub-study, where we collected urine over 24 hours and we measured the total grams of glucose excreted in the urine. And what you see with this data is entirely consistent with the data I just showed you for the spot-check glucose to creatinine ratio. If you look either in gray or in burgundy for the absolute grams of glucose released in the urine on day one of dosing in gray or at week-12 in burgundy, what you can see here once again is that we maximized our effect on SGLT2 at the 200 milligram dose. And as we pushed the dose, there was no elevation in the SGLT2 benefit in spite of a dose-dependent increase in systemic PK of LX4211.

And going to the primary endpoint, the effect of LX4211 on hemoglobin A1c shown here over the course of the 12 weeks of treatment, green being placebo, blue is the 200 milligram dose arm and black is the 400 milligram once a day arm. And we were very pleased to see that in spite of no increase in SGLT2 benefits going from the 200 milligram to the 400 milligram dose, we got a very nice boost in our HbA1c effect going from 0.52% reduction at 200 milligrams once daily in blue to 0.95% reduction in hemoglobin A1c with a 400-milligram once-daily dose.

We’re very encouraged by this because, for the first time, we believe it provided compelling evidence that the SGLT1 component of LX4211’s mechanism of action provides a clinically meaningful benefit for patients with type 2 diabetes. Of course, this 0.95% reduction in hemoglobin A1c also compares very favorably with any anti-diabetic agent.

We also did see a significant and nice reductions in body weight. At week 12 with the three high-dose arms in blue, red, and black, we’re seeing between about 1.5 kilograms and 2 kilograms, placebo subtracted, in weight reduction.

We also saw a very nice dose response for the effect of LX4211 on systolic blood pressure with maximal affect at the 400-milligram once-daily dose with 60 millimeter reduction.

To summarize that data again, we believe that LX4211 produced a very nice hemoglobin A1c reduction in patients poorly controlled on metformin background therapy – that this hemoglobin A1c and other effects were achieved with very low urine glucose excretion, which provides, I think, an opportunity to differentiate in many ways from SGLT2 selective compounds, but particularly with respect to safety potentially.

We also saw significant reductions in body weight and blood pressure, and we had a very favorable safety profile to this point, similar to placebo.

With that, I’d like to turn it over to Pablo Lapuerta to continue the discussions of our drug development program.

Pablo Lapuerta

Thank you, Brian. I’m happy to provide an update of our ongoing and planned studies.

For our LX4211, we have a study ongoing in renal impairment. This is a good opportunity for us because renal impairment is so common in type 2 diabetes, and there’s so few treatment options for patients with this condition.

Furthermore, it’s an area where the selective SGLT2 inhibitors have shown that their benefits are limited in patients with compromised renal function. And yet, the SGLT1 inhibition in the gastrointestinal tract of LX4211 could provide significant benefit.

So our study is ongoing with 20 patients of type 2 diabetes and moderate renal impairment. We’re treating them with 400 milligrams of LX4211 versus placebo. And we’re on track to have results in the first half of 2013, and the study is progressing well.

On slide 12, we’re also initiating our study in type 1 diabetes. Patients with type 1 diabetes have difficulty achieving their glycemic targets. And yet with LX4211 in combination with insulin, they could enhance glycemic control and potentially reduce their insulin needs.

There is an especially good opportunity for LX4211 here because, in addition to enhancing glucose excretion, it reduces gastrointestinal glucose absorption and elevates GLP-1. This can help patients reach their hemoglobin A1c targets with less hyperglycemia and less insulin and less weight gain.

The study we’re initiating will have 33 patients with type 1 diabetes. They’ll be treated with LX4211 or a placebo. We are looking at a reduction in total insulin use. Also, various measures of glycemic control. And we’re now in the enrollment phase of the trial, and we’re very pleased.

We’re also finalizing our late-stage development and commercialization strategy on slide 13. We’ve completed our discussions with the FDA and EMA and we feel that our design for the Phase 3 program is robust, and we’ll get labeling for treatment of a broad diabetic population.

The program will evaluate LX4211 alone and in combination with other agents. It will include studies in the renal impairment, and our late-stage development will include work in type 1 diabetes. We will also continue with our plans to show mechanistically synergy with DPP-4 Inhibitors, and that will give us some insight into the potential of combining LX4211 with a DPP-4 inhibitor in actual practice.

These leverage the unique dual mechanism of action with the SGLT1 and SGLT2 inhibition of LX4211. And the program does include a large cardiovascular outcome study because we’re focusing as well on the potential to demonstrate cardiovascular benefit given the glucose reduction, weight reduction and blood pressure reduction. We feel we’re well on track to initiate Phase 3 with a corporate partner in 2013.

Let me give you an update on telotristat etiprate as well. Telotristat etiprate is a peripherally-acting serotonin synthesis inhibitor. It inhibits the enzyme tryptophan hydroxylase that’s involved in serotonin production.

Telotristat etiprate is absorbed into the peripheral circulation, but does not cross the blood-brain barrier. This action on serotonin is very relevant to carcinoid syndrome, where the hyper secretion of serotonin is contributing to diarrhea and other symptoms like flushing, pain, valvular disease and pulmonary hypertension in these patients.

Telotristat etiprate has Fast Track and Orphan Drug status from the FDA and Orphan designation from the EMA for the treatment of symptoms related to carcinoid syndrome. We’ve initiated our Phase 3 trial in carcinoid syndrome and we’re continuing with the Phase 2 proof-of-concept study in inflammatory valve disease.

We announced late last year the final results from our Phase 2 program. Telotristat etiprate was evaluated at several doses, was well tolerated at all doses studied. We saw meaningful improvements in clinical symptoms in carcinoid syndrome. We saw reductions in urinary 5-HIAA, our biomarker for inhibition of serotonin synthesis.

We saw this positive data in two studies; placebo-controlled study done in the U.S. and a 12-week open-label study done in the Europe. Patients are continuing in the long-term extensions for those studies. And the drug is well tolerated in those long-term extensions. We’ve seen in two studies, the U.S. and the EU, replication of a favorable benefit/risk profile and a good body of evidence supporting our advancement into Phase 3.

On slide 16, we review the design of a Phase 3 trial. It’s a single pivotal study with 12 weeks of placebo control. And then after that, we have patients in open-label extension. We are evaluating placebo 250 milligrams three-times daily of telotristat etiprate and 500 milligrams three-times daily of telotristat etiprate. We hope to randomize approximately 105 patients and demonstrate a significant reduction in bowel movement frequency. So, we will be looking as well at stool consistency and urinary 5-HIAA, our marker of serotonin synthesis.

We’re in the process of getting sites up and running. We’ve already randomized as well. We’ve had our investigator meetings in the U.S. and in Europe, and most recently in Australia. So, we’re in the process of really getting a lot of sites on board and we’ll look forward to ramping up the study in 2013.

Slide 17 covers our study in ulcerative colitis. We hope this small study in ulcerative colitis will give us proof-of-concept data to support moving forward in a development program for the indication. The study is called PARSEC, a Phase 2 assessment of the relationship between serotonin and efficacy in ulcerative colitis.

At the Phase 2 study, we plan to enroll 60 patients with mild to moderate ulcerative colitis. And we’ll be randomizing people to placebo 500 milligrams once a day or 500 milligrams three times a day of telotristat etiprate. They are being treated for eight weeks on top of mesalamine. We’re looking at a variety of efficacy measures that are standard for ulcerative colitis clinical trials including clinical assessments that come into the MAYO score, colonoscopy, biopsies with histology and a biomarker of colonic inflammation, which is fecal calprotectin. Enrollment is progressing. We’re getting near the end of enrollment and we anticipate completion in the second quarter of 2013.

Let me provide as well an update of LX1033. That’s our treatment for irritable bowel syndrome, which is diarrhea-predominant. It’s also a serotonin synthesis inhibitor, targeting the same enzyme tryptophan hydroxylase. This is designed to act locally in the gastrointestinal tract with very minimal absorption into the bloodstream, providing a reduction in peripheral serotonin levels. Our Phase 2 study is ongoing and we have Fast Track status from the FDA.

In the Phase 2 trial is described on slide 19. It was designed as a result of the FDA meeting in 2011, in order to solidify the elements of our patient reported outcome strategy and to find the specifics of our biomarker plan. Enrollment is ongoing where more than two-thirds of the way through. We anticipate our trial completion in the third quarter of 2013.

We will be looking at changes in stool consistency. Other measures will include pay and patient reported outcomes, bloating and urgency. And we have a comprehensive analysis plan that will look at our biomarker here which is serum 5-HIAA, genotype and patient reported outcomes, and the relationships among them in order to prepare best for a comprehensive Phase 3 program.

With that, I will now turn the call over to Arthur.

Arthur Sands

Thank you, Pablo.

So as you’ve heard in the summary, we have several programs now advancing into Phase 3. So those are very significant transition for Lexicon, one which we see progressing in 2013.

If we progresses to the timeline slide, which is slide 21, we’ll give you some visibility with respect to the series of results we can expect over the next four quarters or so. So I’ll walk through this, first on the top line there, the results section, above the timeline. And this is, of course, dependent on the actual rates of enrollment as we move towards completion of these trials, as well as some of the logistics with respect to data analysis to bring forward the top line results.

But our current view of this is that we should be seeing the results from telotristat etiprate in ulcerative colitis sometime at the end of the second quarter or first part of the third quarter as indicated in the brackets there.

At similar timeframe, we think perhaps early Q3 or into Q3 would be then results from the renal impairment studies that is the proven concept study that Pablo summarized, which is ongoing. And that will – that’s designed to provide us information to better plan the Phase 3 study in the renal impaired populations.

Next, we believe, towards the end of Q3, perhaps early Q4, we should conclude and see top line results from the IBS-d study, the Phase 2 study, the 360-patient study. So that’s obviously going to be quite a significant amount of information. And as Pablo indicated, we’ve got a number of parameters, biomarkers, etcetera that we’ll be studying there. So that will be I think a very interesting from a data standpoint and also is designed to enable us to progress into Phase 3 of the next step of that program.

And then lastly, towards the end of the year, or perhaps the early Q4, we would expect to see the results from our proof-of-concept study in type 1 diabetes. And then, again, that’s a 28-day study with sufficient patient numbers, we think, to potentially progress that into either another Phase 2 late stage two study, dose-ranging study, or perhaps a Phase 3 study depending on results.

So that is, I think, one of our more exciting trails and that we know – we’ll know much about that patient population until we see those results and then we’ll be able to plan from there.

So then, of course, on the bottom then, you see some of our major initiations. I have only really indicated the Phase 3 initiations there. We have, of course, initiated telotristat etiprate here within the past Q4, 2012. Then in the second half of this year, we’d anticipate initiation of Phase 3 for LX4211.

Now, not indicated here, of course, is a number of other activities related to Phase 1 and Phase 2 trials that all build into the 4211, a major Phase 3 program. In addition, we have not had time to detail our preclinical pipeline, but that has also been progressing. And towards the end of the year in 2013, we’ll probably be looking for a date for a very thorough research day to really discuss more in depth all of these programs. So, as you can imagine, it’s turned into quite a – quite an agenda we think for that day. But we’ll be keeping you updated as to when that will occur.

So, with that summary, we’ll turn to Jeff Wade and discussions of 2012 financial results.

Jeff Wade

Thank you, Arthur.

I will provide a brief financial update. As indicated in our press release today, we had revenues for the 2012 fourth quarter of $0.2 million, a decrease of 36% from $0.3 million in the prior year period. For the year, revenues decreased 41% to $1.1 million from $1.8 million in 2011.

Our research and development expenses for the 2012 fourth quarter decreased 25% to $21 million from $28.1 million in the prior year period. The decrease was primarily attributable to decreases in external manufacturing and clinical research and development costs. For the year, our R&D expenses decreased 10% to $82.6 million from $91.8 million in 2011.

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 be made are recorded in our consolidated statements of operations. The associated change in fair value at Symphony Icon purchase liability was negative $0.2 million in the fourth quarter and $9.9 million for the year.

Our general and administrative expenses for the 2012 fourth quarter were $3.9 million, a decrease of 2% from $4.0 million in the prior year period. For the year, our G&A expenses decreased 2% to $17 million from $17.4 million in 2011.

Our net loss for the 2012 fourth quarter was $24.9 million, or $0.05 per share, compared to a net loss of $33.8 million, or $0.10 per share in the prior year period. Our net loss for the year was $110.2 million or $0.23 per share compared to a net loss of $116.2 million or $0.34 per share in 2011.

For the 2012 fourth quarter, our net loss included non-cash stock-based compensation expense at $1.6 million, compared to $1.4 million in the corresponding period of 2011. For the year, our net loss included non-cash stock-based compensation expense of $6.5 million compared to $5.7 million in 2011.

Let me now turn to our cash and investments. As of December 31, 2012, we had $223.2 million in cash and investments as compared to $206.8 million as of September 30, 2012, and compared to $281.7 million as of December 31, 2011.

Now, let’s turn to our forward-looking financial guidance for 2013. We expect contractual revenues from existing agreements in 2013 of around $1 million. We are engaged in partnership discussions for LX4211 as you know, and are also in conversations about other potential collaborations and alliances. Consistent with our past practice, however, we are not including forecasted revenue from potential new collaborations and alliances in our guidance.

We expect operating expenses in 2013 to be in the range of $110 million to $120 million. Non-cash expenses were expected to be approximately $16 million of this total, including $7 million in increase in fair value of Symphony Icon purchase liability, $6 million in stock-based compensation, and $3 million in depreciation and amortization. Taking into account cash received under existing contractual relationships only, we expect our 2013 net cash used in operations to be in the range of $92 million to $97 million.

I should note that these operating expense and net cash use expectations reflect cost of preparations that we are making for Phase 3 development of LX4221, as well as certain supportive non-clinical and clinical activities. But they did not reflect the total cost of full scale Phase 3 clinical trials for that program given our expectation of a partnership around those activities. I will now turn the call back to Arthur.

Arthur Sands

Thank you, Jeff, and we can now open the call to questions.

Question-and-Answer Session

Operator

(Operator instructions) your first question comes from the line of Cory Kasimov with JPMorgan.

Cory Kasimov – JPMorgan

Hey, Good morning guys. Thanks for taking the questions. I have three of them for you. So, first of all on 4211, wondering if you can provide us with a little bit more granularity on the progress of your partnership discussions. Maybe, I’m reading a little too much into this, but timelines for the start of Phase 3 have gone from first half of 2013 to mid-year to now it sounds like second half of the year. And you also seem to be making your strongest comment yet that you don’t plan to start Phase 3 – you are not willing to start Phase 3 on your own.

So, if I’m on the right track here, I guess, I’m wondering if there’re any specific areas of concern from prospective partner standpoint given that the deal is not yet done? Are they waiting to see the renal impairment data or is there something else that you can give us here?

And the second question is on 1033 and with the Phase 2 data coming up relative near-term, I’m wondering if you can just frame expectations a little bit there in terms of what you think would constitute a successful outcome? If the results are in line with what you saw with your prior formulation, is that good enough to move into Phase 3?

And then lastly, your press release mentioned you’ve data for 2931 and 7101. You didn’t mention them in your comments, so I’m just wondering if those are being advanced or terminated. Thanks a lot.

Arthur Sands

Okay. Thank you, Cory. So, let’s start off with comments on the partnership timing. Jeff, do you want to start there?

Jeff Wade

Sure. So, we’re continuing to make good progress in our partnership discussions for LX4211. We’re pleased with the progress. There is not anything that we’re waiting on in particular for that. And we are continuing to plan for the advancement of LX4211 into Phase 3 this year with a partnership in place. So that continues to be our expectation.

Arthur Sands

So, the only thing that I’d add there, Cory, is that you also asked if there were any particular issues or problems identified and there are not. So we’re very pleased with all the diligence proceedings as they’ve gone forward. It’s a very thorough process and it takes time. But we do think we’re on a good track there.

Turning to your next question then on 1033, the Phase 2 results, what would be successful, what are we thinking, I’ll start with Brian, please.

Brian Zambrowicz

Sure. So, I think we’re very pleased, obviously, with our proof-of-concept data with LX1031, the predecessor compound, and particularly when we reanalyzed the data, the published data, with new FDA guidelines for both entry criteria and the dual endpoint of pain and stool consistency improvement. And when we reanalyzed using the new FDA entry criteria and dual efficacy endpoint, we had a 52% response on our active and about 14% on placebo. I think that bodes well for anywhere in the ballpark of that kind of benefit relative to placebo. It would be a tremendous success and we’d be moving forward to Phase 3 aggressively.

Arthur Sands

Pablo, do you have anything to add with regard to IBS-d?

Pablo Lapuerta

Our primary endpoint is stool consistency and we think we’re very well powered to demonstrate that benefit. And it looks as well that we’ll be able to have a good estimate for the – for a combined endpoint that integrates stool consistency, abdominal pain and to compare that for LX1032 to placebo.

Arthur Sands

Okay, thank you. And then, Cory, your last your was with respect to 2931 and 7101. We did have results from those studies, those proof-of-concept studies in 2012.

With 2931, we are currently discussing what the next steps might be, if any, for that drug. And, actually, it did produce indications of positive results in rheumatoid arthritis in a very small study that we did in dose escalation. But the key there is if we move forward in RA or select a different indication for the mechanism.

So we’re brainstorming on potential alternative indications that might actually make more sense for this mechanism. And the competitive landscape of RA has changed, and we may find a more advantageous avenue for that in the area of autoimmune disease. So there’s still is a path – a potential path forward, but it’s one that requires, I think, some recalculation.

With regards to 7101, we did see positive results in lowering of intraocular pressure. This is a glaucoma agent. And it does require the reformulation, we think, to improve its efficacy. So we’re discussing that, and we’re making plans around reformulating that compound, which would then be accompanied by appropriate preclinical testing.

So each of those, I think, programs are at a hiatus right now, while we face those respective decisions that I outlined.

So I think that covers your three primary questions, and...

Cory Kasimov – JPMorgan

Yes, it does. Thanks a lot. That’s helpful.

Arthur Sands

Sure. Thank you.

Operator

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

Liana Moussatos – Wedbush Securities

Thank you. Congratulations on a good quarter and year. And I was wondering if you could say for your partnership discussions for LX4211, are you talking to a couple of companies now or still multiple companies?

And then can Brian repeat the reanalyzed LX1031 data – what percent benefit versus placebo?

Arthur Sands

Yeah. So, Liana, we’re talking to multiple parties. And so that’s part of the process.

And then turning back to 1031?

Brian Zambrowicz

Yeah. Again, this was a post-hoc reanalysis of our data based on the new FDA guidelines for entrance criteria, and the dual endpoint of pain and stool consistency improvement.

And what we saw was a 52% benefit on high-dose of 1031 and a 14% benefit with that dual endpoint on placebo. A tremendous separation between the two, really providing additional encouragement that the new FDA guidelines fit well with our mechanism of action.

Liana Moussatos – Wedbush Securities

Are you going to publish those – that reanalysis?

Brian Zambrowicz

We’ve been discussing that. We may very well – are likely to present it in an upcoming meeting. Yes.

Liana Moussatos – Wedbush Securities

Okay, thank you.

Arthur Sands

Thank you.

Operator

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

David Friedman – Morgan Stanley

Hi. Thanks for taking my question. Just two.

First is can you talk a little bit about the type of partnership you are looking for out of 4211? And whether there is any amount of cost sharing that you would be looking to do, in order to try to get better economics, either through development or cost sharing commercially.

And then the second question is can you just clarify what your fully diluted share count is?

Jeff Wade

So I’ll answer the question on the partnership front.

So we are looking for a partnership where we think we can fund the program out of the partnership. And so that’s something that we – that is one of the objectives that we’re seeking. And we do want to have a significant level of involvement in the program, as well. But that’s – those are some of the objectives that we have for that partnership process.

In terms of the shares outstanding, we have a little over 512 million shares outstanding in aggregate. Options are anti-dilutive at this point, given the fact that we are not profitable.

David Friedman – Morgan Stanley

Okay, and so does that number you said include the options or exclude?

Jeff Wade

That does not include the option.

David Friedman – Morgan Stanley

And just what would the sort of pro-forma diluted share count be, if you did include them?

Jeff Wade

So, in aggregate, we have options outstanding – about 21.5 million shares subject to the outstanding options.

David Friedman – Morgan Stanley

Okay, great. Thank you.

Arthur Sands

Thank you.

Operator

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

Mark Monane – Needham

Hi, this is actually Mark on for Alan, thanks for taking for my question. I was wondering if you guys had any insights that you could share with us after the canagliflozin (inaudible) recently.

Arthur Sands

That’s a very good question. I think we do. Why don’t we start with Pablo on that? Pablo, cana?

Pablo Lapuerta

So, overall, we were pleased with the advisory panel supporting the approval of canagliflozin. We think we benefit as the SGLT2 market takes shape.

We still see opportunity for differentiation. And we saw that with the data that canagliflozin provided in renal impairment. We feel that we can have a stronger efficacy in renal impairment because of our dual mechanism of action.

We’ve noticed there was a lot of attention to cardiovascular data. And we think the strategy of having a large cardiovascular outcomes trial as part of Phase 3 is a good strategy. And we’re prepared to do that, as well.

And we’ve all seen from that that submission of that interim data is very helpful, in terms of giving information on the benefit/risk profile. And we’re planning to be able to submit fairly robust cardiovascular data at the time of our initial filing. Therefore, the cardiovascular outcomes study will be one of the first that we initiate.

So those are some of the lessons. We think we do have a window to differentiate in renal impairment. And I would say, as well, in terms of safety, we saw canagliflozin has a lot of urinary glucose excretion, and we have potentially less glucose excretion with potentially less adverse events – not just the general infections, but potentially hypovolemia as well.

Mark Monane – Needham

Great. Thanks, very much.

Arthur Sands

Thank you.

Operator

(Operator Instructions). Your next question comes from the line of Phil Nadeau with Cowen & Company.

Phil Nadeau – Cowen & Company

Good afternoon. Thanks for taking my questions.

First a question on the cardiovascular outcomes trial that based on your comment that you just made. Those trials tend to take years to do, and are typically done before in a post-approval setting. I’m intrigued that you’re going to have the cardio outcomes data at the time of your initial filing. Can you talk about what that data will be and how it will be ready for your initial filing?

Arthur Sands

Sure. Pablo?

Pablo Lapuerta

Yes. We have been talking to regulatory agencies about pursuing a similar strategy to canagliflozin, where we initiate the study during Phase 3. We provide an interim analysis to support the filing.

But the complete set of data to provide the most robust results comes in really around the time of approval, or certainly after approval, in order to have even more follow-up and more definitive cardiovascular data.

Phil Nadeau – Cowen & Company

Okay, got it. And the second, would you be willing to share with us more details on the Phase 3 program? Such things as how many studies? How many people in total?

Arthur Sands

So, Phil, we’re probably not going to share that at this time. We’re getting very detailed on that part of our discussions with partners. So we probably prefer to hold off on that.

Phil Nadeau – Cowen & Company

Okay. Is it fair to say that that’s perhaps subject to the input of the final partner?

Arthur Sands

Yes, I think that’s definitely true.

Clearly, this is a study that’s on a scale that we’ve seen before with cana and others. So to give you some idea. I don’t mean to be evasive about it. But in terms of details, we probably prefer not to go into it right now.

Phil Nadeau – Cowen & Company

Okay. And my last question is on the carcinoid Phase 3. Could you give us some sense when you anticipate enrollment for that completing? Thanks.

Arthur Sands

Yeah. So our goal is to complete enrollment by Q2 of 2014. And if we’re able to achieve that, then we should have results towards Q3 or Q4 of 2014. That’s an aggressive goal. We think we can do it, and that’s why we’re pushing hard on site initiations and enrollment.

Phil Nadeau – Cowen & Company

That’s helpful, thank you.

Arthur Sands

Thanks.

Operator

(Operator Instructions). Your next question comes from the line of Stephen Willey with Stifel.

Steve Willey – Stifel

Yeah, thanks for taking the question. And forgive me if you guys have already mentioned it. But could you talk about kind of where the SGLT1 selective inhibitor is with respect to moving into the clinic? Is that still kind of a year-end event?

And I guess, second to that, is that asset kind of part of the ongoing partnership discussions? And is that something that you’d be willing to provide a partner access to? Thanks.

Arthur Sands

Thank you, Phil. So, if you’re referring to LX2761, for those maybe not quite as familiar with our pipeline as Phil is, that it’s a program that we’ve selected as a clinical candidate at the end of the year, which is the selective SGLT1 inhibitor locally acting – I should say, SGLT1 inhibitor.

Brian, would you like to comment on the progress of that?

Brian Zambrowicz

Sure. So that’s a locally acting inhibitor, which stays in the GI and inhibits SGLT1. There is virtually no systemic exposure, and no urine glucose excretion produced. So, it’s currently an IND-enabling study we would anticipate sometime early next year, getting that into the clinic.

Arthur Sands

And then Steve, with respect to your question on the partnership, we prefer not to specify exactly how that would be handled since that may be different in different circumstances.

Steve Willey – Stifel

Okay, thanks.

Arthur Sands

Thank you.

Operator

(Operator Instructions). At this time, there are no additional questions.

Arthur Sands

All right. Well, I’d like to thank everyone for participating. And, we look forward to 2013 and as we indicated in our upcoming milestone slide, there is going to be a lot of data events and we anticipate also some significant business events. Thank you.

Operator

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

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