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Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)

Q4 2013 Earnings Conference Call

February 28, 2014 11:00 ET

Executives

Chas Schultz - Investor Relations

Arthur Sands - President and Chief Executive Officer

Pablo Lapuerta - Executive Vice President and Chief Medical Officer

Brian Zambrowicz - Executive Vice President and Chief Scientific Officer

Jeff Wade - Executive Vice President, Corporate Development and Chief Financial Officer

Analysts

Matt Lowe - JPMorgan

Colin Bristow - Bank of America

Thomas Wei - Jefferies

Liana Moussatos - Wedbush Securities

Phil Nadeau - Cowen and Company

Kevin Kedra - Gabelli

Operator

Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to the Lexicon Pharmaceuticals’ Earnings Conference Call. (Operator Instructions)

Thank you. I would now like to turn the conference over to Chas Schultz. Please go ahead sir.

Chas Schultz - Investor Relations

Good morning, and welcome to the Lexicon Pharmaceuticals fourth quarter and year end 2013 conference call. I am Chas Schultz and with me today are Dr. Arthur Sands, Lexicon’s President and Chief Executive Officer; Dr. Pablo Lapuerta, Lexicon’s Executive 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. Lapuerta, who will provide an update of our clinical programs; and by Jeff Wade, who will review our financial results for the fourth quarter and full year 2013 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 state that we will be making forward-looking statements, including statements relating to Lexicon’s clinical development of LX4211, telotristat etiprate also referred to as LX1032 and LX1033, including characterizations of the results of and projected timing of clinical trials of such compounds and the potential therapeutic and commercial potential of such drug candidates. 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, including uncertainties related to the timing and results of clinical trials and pre-clinical studies of our drug candidates, our dependence upon strategic alliances and ability to enter into additional collaboration and licensing agreements, the success and productivity of our drug discovery efforts, our ability to obtain patent protection from 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 - President and Chief Executive Officer

Thank you, Chas. And I would like to welcome everyone to the call. We will spend today this morning briefly reviewing our two lead programs, LX4211 for diabetes and then telotristat etiprate for carcinoid syndrome giving an update on their clinical progress. Looking at the first slide as a reminder, LX4211 is a unique first-in-class dual inhibitor of SGLT1 and SGLT2. And as we will discuss, because of this unique mechanism of action, we have spent considerable time elucidating the clinical impact of this and preparing this compound for Phase 3 and Type 2 diabetes. And I think we are now at that stage of being Phase 3 ready in Type 2 diabetes.

In addition, the dual mechanism has opened the door for Type 1 diabetes and we are eagerly awaiting the results of that proof-of-concept study, which we now believe will be early April to have those results. So, on the next slide, the landscape, the competitive landscape for these SGLT2, SGLT compounds more broadly speaking is pictured here. As you can see and as we know most of the companies have focused on SGLT2 highly selective compounds and our advantage and clinical differentiation derives from being a dual inhibitor of both SGLT1 and SGLT2. And as will describe the Phase 3 ready status of LX4211 makes it a very attractive asset at this stage.

On the next slide, the strategy going forward is to take full advantage of our dual mechanism of action and make sure that is leads to clinical differentiation and opens up of certain medical marketplaces for us that other compounds have not – where other compounds have not been successful. Specifically not only of course the broad Type 2 indication in combination with many potential items, but specifically those diabetic patients that suffer from renal impairment. And we have been very encouraged by our findings in this category of patients which is a significant patient population up to 30% to 40% of patients with diabetes or in this category of renal impairment. And the SGLT1 mechanism of action gives us the unique advantage there in addition to our SGLT2 mechanism. So that’s part of our core strategy in Phase 3 is to amplify that differentiation. And in addition pending the results in our current Type 1 study that is also part of our core strategy of clinical differentiates for those compounds to ultimately seek potential approval in Type 1 diabetes which would be a real first.

There are other mechanistic synergies that we plan to continue to explore including combination therapy with DPP-4 inhibitors. Where we think there is unique synergy with our dual mechanism, great potential for that. And then and very importantly the potential for cardiovascular benefits which derives we think from several mechanisms working perhaps one of the most impressive of which is the favorable blood pressure affects that we have been saying. With LX4211 in diabetes in a variety of settings and blood pressure being one of the most telling risk factors for cardiovascular risk. So that will certainly be a centerpiece of Phase 3 plan.

So with that introduction we will give – we will turn it over to Pablo to give us the update on the clinical programs. Pablo?

Pablo Lapuerta - Executive Vice President and Chief Medical Officer

Thank you, Arthur. I would like to talk a little bit about our work in the renal impairment with LX4211. Renal impairment in Type 2 diabetes is an area of high unmet need for two reasons. One is that it’s very common, but another it that so many medications in this area are contraindicated for one safety issue or another. And this is an area where LX4211 has potential. The SGLT1 inhibition that it offers in the gastrointestinal track could provide benefit, whereas other drugs have failed in this area. We see this as a good opportunity for LX4211 position in it – positioning it in an area of unmet medical need, differentiating against relatively selected SGLT2 inhibitors and giving as a perspective on how important clinically that SGLT1 effect of LX4211 may be.

On Slide 6, we have recently concluded our study of LX4211 in patients with renal impairment. The study was successful and met its primary endpoints LX4211 significantly improved glycemic control in subjects with Type 2 diabetes and renal impairment. The postprandial glucose reductions were robust and the benefits were clear and those with the most advanced renal impairments with no evidence of any kind of any waning of effect. We also saw GLP-1 elevations and this is part of the signature of SGLT1 inhibition in the gastrointestinal tract. We see a strong postprandial glucose reduction and significant elevations in GLP-1, which we believe are beneficial. And as we have seen the final data, we confirm that these benefits were obtained with low urinary glucose excretion highlighting that this is a good study of clinically relevant SGLT1 effect. We have also – we see the safety and pharmacokinetic data, they support our selection of LX4211 400 milligrams as dose of study in Phase 3. So we believe we have a significant opportunity there and a renal impairment study that will be an important part of our program.

On Slide 7, I have updates on two other recently completed clinical trials. One is the definitive Q2 study. This is a study that’s required by the FDA and for them it forms part of the cardiovascular safety profile of any new medical entity. We conducted a study with 64 healthy volunteers that were randomized to single doses of LX4211 at either 400 milligrams or 2000 milligrams of placebo. We included this high 2000 milligram dose of LX4211 because we wanted a proper safety margin. And we also included as a positive control moxifloxacin which does elevate the QT interval and can let us know that we are getting quality precise measurements in this study.

These study results have come in and are final and they met FDA guidance for supporting cardiovascular safety, the results were well within that guidance. We also conducted an additional multiple ascending dose study. There had been one conducted in Phase 1 before proceeding to Phase 2. However, the highest dose and that early experience was only 400 milligrams. Being prepared to give the 400 milligram dose to a large population in the Phase 3, we wanted additional data on 800 milligrams. This is also about supporting a safety margin. So we randomized 25 subjects to 10 days of treatment with LX4211 400 milligrams, 800 milligrams or placebo and the study results showed us adequate safety and pharmacokinetic data that supports the use of LX4211 400 milligrams in our Phase 3 program. In other words if there is a question that exposure is variable and giving the 400 milligram dose and some outliers may give them relatively high exposures. We do have now more evidence that a higher dose can be and higher exposure can tolerated with LX4211.

On Slide 8, I will review that Type 1 diabetes for us, we see this as an area of high unmet medical need. The incidence rate is increasing annually it’s a disease that is diagnosed at young age and has a different mechanism, but it’s where LX4211 may also benefit within insulin independent mechanism. Essentially the only treatment for Type 1 diabetes is insulin and that leads to many issues.

On Slide 9, a little bit more of the rationale for LX4211 in this area. Insulin will be the main stay of the treatment of Type 1 diabetes but the majority of patients even with advanced insulin therapy are remaining above their hemoglobin A1c goals with Type 1 diabetes. Part of that is severe hyperglycemia which is such an issue with insulin whose therapeutic index is now and postprandial glucose elevations are too high in these patient population. We see an opportunity for Lx4211 as an add-on therapy to patients to insulin for patients with Type 1 diabetes, an opportunity to prevent weight gain to enhance weight loss. Reduce hyperglycemia and improve the time spent in the new glycemic range. For the patients there are additional benefits lowering the mealtime insulin dose, reducing the variability in blood glucose, simplifying the insulin regimen and other potential benefits.

To this end we have conducted a Type 1 diabetes proof of concept study. On Slide 10, we want to establish a safety and mechanism of action of LX4211 in this setting. We have previously shared the results of an open label pioneer group where subjects had initial experience with LX4211, reducing their insulin doses and with glycemic control. What we have done more recently is, we have completed enrollment in the double blind expansion group that consisted of about 30 subjects treated for 28 days randomized to LX4211 or placebo. Our primary end point relates to the total mealtime bolus insulin which we believe will be reduced by the use of LX4211. Secondary objectives address other glycemic parameters and other aspects of insulin use. We are now in position to produce top line results early in the second quarter of 2014, early in April.

On Slide 11 overall the LX4211 program is supporting a differentiated profile of potent sustained SGLT SGLT1 inhibition, characterized by postprandial glucose reductions GLP-1 and PYY elevations. Giving us strong hemoglobin A1c reductions and an opportunity to differentiate against other agents with less urinary glucose excretion for LX4211. We are seeing progress and our understanding of the opportunity of LX4211 and populations with high unmet need including Type 1 diabetes and diabetes with renal impairment.

On Slide 12, I have a summary of telotristat etiprate and its mechanism of action. Telotristat etiprate is a peripherally acting serotonin synthesis inhibitor. It is absorbed into the peripheral circulation but does not cross the blood brain barrier. This is important because serotonin is a key mediator of gastrointestinal motility and pain, and serotonin, above all is implicated in Carcinoid heart disease and cardiac valve damage and then symptomatic diarrhea, flushing, and abdominal pain in patients with carcinoid syndrome.

On Slide 13, we have done some market research to further evaluate and understand our market opportunity for telotristat etiprate in the United States. And we believe that approximately 6,000 patients in the United States have carcinoid syndrome and are receiving octreotide for it, but are not adequately controlled and need additional therapy. We believe this is the destiny of most patients with carcinoid syndrome when they initiate octreotide. Octreotide was very effective, but over the course of three years, our market research indicates that physicians believe approximately 80% of patients will not be controlled on octreotide and will need additional therapy. There are no other therapeutic options for patients that are not adequately controlled and we believe this is an important opportunity for telotristat etiprate.

To achieve approval of telotristat etiprate, we are conducting the TELESTAR study on Slide 15. This is a Phase 3 randomized placebo controlled double blind study. And we will have at east 105 subjects treated for 12 weeks on treatment versus placebo and then 36 weeks in open label follow up. The primary objective will be to evaluate telotristat etiprate and its ability to reduce the frequency of bowel movements and patients who are inadequately controlled on Somatostatin Analog Therapy.

Other objectives include an examination of 5-HIAA reduction that’s our biomarker serotonin synthesis to reduce flushing episodes and to reduce abdominal pain. This study progress is well underway, we are randomizing patients effectively and believe that we can complete randomization in 2014. We ’have also initiated TELECAST companion study to TELESTAR. TELECAST is for patients with carcinoid syndrome we do not qualify for the TELESTAR study. Conducting a companion study like this can support the safety to telotristat etiprate, can provide additional efficacy information.

Increasing overall patient exposure and promoting enrollments. Promoting enrollment because when positions on screen patients for TELESTAR, they know that is a do not qualify, they will still have a clinical trial option which will be TELECAST. TELECAST will focus on the reduction of 5-HIA as its primary efficacy measure. And the inclusion criteria will be slightly different accepting patients who screen TELESTAR because they don’t have exactly four bowel movements a day or more and accepting patients who are not on – back on Somatostatin Analog Therapy.

On Slide 17, I would like to summarize our program. We are advancing Lexicon’s late stage pipeline telotristat etiprate or carcinoid syndrome as the TELESTAR program enrolling well. The companion study TELECAST has been initiated and our commercial preparations are underway. With LX4211 for diabetes, we are now Phase 3 ready. All studies that were required before Phase 3 are completed. And we continue to anticipate progression into Phase 3 with a corporate partner. Our Phase 2 study in diabetes has completed enrollment and treatment of all patients. And we are expecting data early in April 2014. In that context, we are already anticipating potential regulatory interactions with the FDA and European Medicines Agency and we are planning ongoing development in Type 1 diabetes, including a Phase 3 program.

I will now turn the call over to Jeff Wade.

Jeff Wade - Executive Vice President, Corporate Development and Chief Financial Officer

Thank you, Pablo. I will provide a brief financial update. As indicated in our press release today, we had revenues for the 2013 fourth quarter of $1.4 million, an increase of 547% from the $0.2 million in the prior year period. The increase was primarily due to revenues recognized from a collaboration with a non-profit institute supporting the Phase 2 development of LX4211 and Type 1 diabetes. For the year, revenues increased to 104% to $2.2 million from $1.1 million in 2012.

Our research and development expenses for the 2013 fourth quarter decreased to 3% to $20.3 million from $21 million in the prior year period. For the year, our R&D expenses increased 9% to $89.7 million from $82.6 million in 2012. 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 such payments were expected to be made are recorded in our consolidated statements of operations. The associated decrease in fair value of Symphony Icon purchase liability was $5.3 million in the fourth quarter and $2.2 million for the year end. The decrease was primarily attributable to a reduction in the liability associated with Lexicon’s LX1033 development program in diarrhea predominant irritable bowel syndrome.

Our general and administrative expenses for the 2013 fourth quarter were $3.4 million, a decrease of 13% from $3.9 million in the prior year period. For the year, our G&A expenses increased slightly to $17.1 million from $17 million in 2012. Our net loss for the 2013 fourth quarter was $17.4 million, or $0.03 per share compared to the net loss of $24.9 million, or $0.05 per share in the prior year period. Our net loss for the year was $104.1 million or $0.20 per share compared to the net loss of $110.2 million or $0.23 per share in 2012.

For the three months and year ended December 31, 2013, our net loss included non-cash stock-based compensation expense of $1.7 million and $7.4 million respectively. For the three months and year ended December 31, 2012, our net loss included non-cash stock-based compensation expense of $1.6 million and $6.5 million respectively. Finally, as of December 31, 2013, we had $129.1 million in cash and investments, as compared to $151.2 million as of September 30, 2013 and compared to $223.2 million as of December 31, 2012.

Now, let’s turn to our forward-looking financial guidance for 2014. We expect contractual revenues from existing agreements in 2014 of around $0.5 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 2014 to be in the range of $105 million to $110 million. Non-cash expenses are expected to be approximately $13 million of this total, including $6 million in stock-based compensation, $4 million, an increase in fair value of Symphony Icon purchase liability, and $3 million in depreciation and amortization.

Taking into account, cash received under existing contractual relationships only, we expect our 2014 net cash used in operations to be in the range of $87 million to $92 million. I should note that these operating expenses and net cash used expectations reflect cost of preparations we are making for Phase 3 development of LX4211 as well as certain supportive non-clinical and clinical activities, but they do not reflect the cost of full scale of Phase 3 clinical trials to that program given our expecting of a partnership around those activities. These expectations for 2014 also reflect the impact of our recently announced focusing on financial resources on our late stage and development programs, particularly LX4211 for diabetes and telotristat etiprate for carcinoid syndrome and on preparations for commercialization.

I will now turn the call back to Arthur.

Arthur Sands - President and Chief Executive Officer

Thank you, Jeff. We can open the call for questions. Is the operator on the line? We can open the call for questions.

Question-and-Answer Session

Operator

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

Matt Lowe - JPMorgan

Hi there. It’s actually Matt Lowe in for Cory today. Just to start with I just want to confirm the QT study and the multiple ascending dose study up to 800 milligrams. Are they new studies that you just completed or just done and how do they feed into the partnership discussions? And I guess just to end like what gives you confidence, so the deal is in the work, so obviously it’s been around 18 months now, I think since the Phase 2 data came out. I am just wondering if there is anything you can tell us as to why you remain confident that a deal can still happen? Thank you.

Arthur Sands

Okay. So Matt, first off, our new studies, they are very recently completed studies. They are of course part of the required package if you will to proceed in the Phase 3. So I do think that in some ways those studies have been gating for progression of the program. So we are very pleased with the results. With respect to the second part of your question perhaps I could turn over to Jeff Wade, who is directly handling these discussions.

Jeff Wade

Sure. So we have been making good progress. Obviously, taking risk out of the program is helpful in progressing those discussions and these having completed these studies with favorable results helps us tick off the box for a couple of additional things that needed to be done before we went into Phase 3. We are still engaged in active discussions and those discussions are going well and we feel confident that they are progressing towards a conclusion.

Arthur Sands

And then I think the only thing I’d add to that is that being the first move on new mechanism of action forward into a potentially very major Phase 3 program is a high bar and it has required significant amount of data to demonstrate not only the unique dual mechanism is operating as we predicted, but also to forecast the medical markets that that could open up. And so that’s been part of the whole process. And again, it is a high bar to be the first mover with the dual mechanism. Thank you.

Matt Lowe - JPMorgan

Okay, thank you.

Operator

Your next question comes from the line of Colin Bristow with Bank of America.

Colin Bristow - Bank of America

Hi, this is Colin with Bank of America. Thanks for taking the questions. On 4211, as in line with the QT steady and the fact that this is a novel mechanism as we think about the later stages of the regulatory process, can you talk about any additional scrutiny you see 4211 phasing and given the SGLT1 is expressed in other tissues such as the heart and what steps you have or will need to take to address this additional scrutiny? Also on Novartis’ LIK066, can you comment on how you see this compound stacking up versus 4211 and any early indications or differentiations between the two? Thanks a lot.

Arthur Sands

Okay. So, there is two parts of that. I think the first part on the regulatory aspects of those dual mechanism, Pablo, would you care to comment on that first. And I think the second part will turn to Brian for the comments regarding the Novartis compound. Pablo?

Pablo Lapuerta

Yes, with the dual mechanism of action, we do not anticipate any additional safety hurdles or any unique safety hurdles. And the reason is because the systemic absorption of LX4211 is not sufficient for meaningful SGLT1 inhibition in the heart or other tissues. LX4211 still has relative selectivity for SGLT2 over SGLT1. And so it has systemic exposure that’s sufficient for renal SGLT2 inhibition but not renal SGLT1 inhibition or inhibition of SGLT1 in other tissues. And our discussions with regulatory agencies have progressed well. We will have a program that’s large like other Type 2 programs. It will have the cardiovascular outcome study like other Type 2 programs. And we have a systematic adjudication of events. And in our discussions with regulatory authorities the key attention is really been to the types of events that have been seen in mechanical flows and (indiscernible) programs.

Arthur Sands

Okay. And then second part of your question was regarding Novartis. Brian you want to talk about that?

Brian Zambrowicz

One more thing may be on the first part is that, I think it’s very important as Pablo mentioned that we don’t achieve systemic levels of 4211 to inhibit SGLT1, but it’s important to note that many targeted drugs are stress broadly that doesn’t mean that those types of expressions are meaningful just further affirm patients with complete loss of function of SGLT1 are reporting to have no cardiovascular disease and long-term cogs using tremendous multiples of exposure of 4211 relative to what we are achieving in the clinic we see no cardiovascular effects and most importantly and most recently in our third study we saw no effects of LX4211. With that we brought up the dual inhibitor LIK066 from Novartis. We know that has completed Phase 1 and although they’ve registered for Phase 2, with clinical trials start quite some time ago. I think it’s notable that they have not initiated that study yet. I think the big challenge with any two inhibitor there is two huge challenges, one is that it’s very difficult in two targets to get the right – hit the right point in dose response curves with an agent for both targets not hitting one or the other two hard or too little. I think we have been very fortunate in hitting those points in the dose response curve very effectively in 4211, particularly challenging we can tell you based on our experience and our studies with multiple agents is being able to sustain the inhibition of SGLT in gastrointestinal tract overtime and throughout the day in which we clearly demonstrated. That would be a huge challenge with other agents. We feel very confident that we will remain first and best in class as a dual inhibitor of SGLT1 and SGLT2.

Colin Bristow - Bank of America

Great, thank you.

Arthur Sands

Thanks.

Operator

Your next question comes from the line of Thomas Wei with Jefferies.

Thomas Wei - Jefferies

Hi, thanks. Just in terms of the partnership in contingency plans if you don’t line up a partnership how are you thinking about that scenario? Would you just do Type 1 on your own, would you run some critical Type 2 studies in that Type 1 program in parallel, I would love to get a sense of that? And then also just in the preparation work here, when exactly would you be ready to actually start enrolling Phase 3 trials in Type 2 and then the same question in Type 1 partnership notwithstanding?

Arthur Sands

Jeff, would you like to lead off on that?

Jeff Wade

Sure. So I think there are different possibilities here that we could consider a percentage. Again, we expect that we should be able to do a partnership and so that’s our baseline expectation. Clearly there are options in Type 1 development like that might be positive – that might be more doable from a cost perspective than the full scale Type 2 diabetes programs. And so we do have things we start about in terms of different approaches that we could take. Again, our expectation is partnership this likely is in most probable way for. In terms of timing where we basically done the work to be ready to launch very quickly, there is a gap between the time that you pull the trigger for full-scale activities and the time that you enroll the first patient. But we’ve minimized that gap as much as we could and would still be able to start in the second half of this year with enrollment based on what we’ve done so far.

Thomas Wei - Jefferies

And then…

Arthur Sands

For both Type 1 and Type 2 it’s conceivable that start in the second half.

Thomas Wei - Jefferies

And just a question on the Type 1 data in April, a reminder of what you want to see out of that on the primary endpoint to consider that a good outcome and I have forgotten a little bit here, how aggressively those patients in that trial are being treated with their basal-bolus regimen and how aggressive they treat to target regimen are they on?

Arthur Sands

Okay. So it’s – that’s a 28-day study and so in that time period the most sensitive and I think important indicator is the use of insulin and that is the primary endpoint. And the most proximal piece of insulin dosing, most proximal to our mechanism is the bolus insulin dosing that’s the mealtime insulin dosing. So that’s going to the focal point of and is the primary endpoint of the study. And then looking at the other aspects of insulin use which include the basal insulin use and total insulin use.

So the second part of your question the patients are basically instructed to treat the target as you would expect in a study of this kind with attention to safety that is not to over-treat themselves so as to avoid hypoglycemia because we do know that this agent when administered with insulin will lead to a – we think significant reduction and the need for insulin. So with certain safety advisory sort of topics that we’ve given the patients it is basically treat the target that would be their standard approach before the treatment period started. So there is a baseline period and then we go to the treatment period and the patients and the physicians have to make adjustment calls about the insulin dose adjustments based on their blood sugar ratings.

Thomas Wei - Jefferies

But just back on that earlier question I understand the mealtime insulin measurement to the primary endpoint, but there were – there was a whole range of different outcomes looking at insulin use from the early pioneer cohort. What do you think across these number of patients, what should we be looking for in terms of I mean actual like numerical reduction in insulin use? What would you consider as success?

Arthur Sands

Well in terms of bolus insulin use I think based on what we’ve seen in the pioneer group anywhere from a 30% to 60% reduction for these individuals I mean that may not mean out of around 30% or 25% reduction, that would be a meaningful reduction clinically we believe in bolus insulin use. The basal we think that there is 10% or 15% that may be something to look for, but we’re really – those are just approximations at this point. So it is a proof-of-concept study Thomas and it will tell us what those reductions are.

Thomas Wei - Jefferies

Great. Thanks. That’s very helpful.

Arthur Sands

Thank you.

Operator

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

Liana Moussatos - Wedbush Securities

Thank you for taking my questions. Is LX-2761 still active in development and could just repeat the Q4 stock-based compensation expense in the 2014 guidance?

Arthur Sands

(indiscernible).

Unidentified Company Speaker

Sure. Alex 2761 continues per estimates on the enabling studies with an opportunity for initiating clinical studies probably in the second half this year sometime.

Arthur Sands

And then Jeff.

Jeff Wade

So the stock-based compensation in Q4 and for the full year for 2013 was $1.7 million in the fourth quarter and $7.4 million for the year. I think that was what you had asked about. And then on the financial guidance expectations we’re expecting contractual revenues of about $0.5 million in 2014, operating expenses in the range of $105 million to $110 million of which non-cash would be about $13 million of the total, $6 million of which would be stock-based comp, $4 million Symphony Icon purchase liability increase and $3 million in depreciation and amortization. And cash used in operations in the range of $87 to $92 million. So hope we’ve captured what you’re asking in your question.

Liana Moussatos - Wedbush Securities

Thank you very much.

Arthur Sands

Thank you.

Operator

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

Phil Nadeau - Cowen and Company

Good morning. Thanks for taking my question. First one question on the dose trial. Can you give us some more information about what you found at the end of milligram dose? Was there any increase in side-effects at that dose in a non-linear pharmacokinetics and or it was only a 10 day study. So I’m not sure what efficacy measures you took but any signs of additional efficacy?

Arthur Sands

Okay. Pablo, would you like to address the 800 milligram dose the safety event?

Pablo Lapuerta

Yes. The pharmacokinetics were linear so that the overall exposure to patients at the 800 milligram dose was approximately the whole that of the 100 milligram dose. The 800 milligram dose is well tolerated in the sense that there were no discontinuation to do that verse events and the serious adverse events. There seem to be a slight increase in the gastrointestinal adverse events, but it was slight and with the small sample size, that’s not conclusive.

Phil Nadeau - Cowen and Company

Okay. And did you have any again over 10 days of measure, but what you can measure, but did you have any efficacy measures in the trial?

Pablo Lapuerta

No, this was an healthy volunteer and we do not do detailed assessment of glucose profile.

Phil Nadeau - Cowen and Company

Okay, great. My second question is on the TELECAST study. Can you remind us how that fix into your regulatory plan for telotristat?

Arthur Sands

Pablo.

Pablo Lapuerta

The main – yes the main way that it helps us is in providing additional safety data. The – even though this is an orphan drug and we don’t need to have the safety database of drugs for other areas. That it is helpful to us we believe to have more exposure to telotristat etiprate and the TELECAST trial is one way of achieving that. It was not requested by regulatory authorities, it was our belief that this was a way to help patients who are interested in receiving the drug and for us to learn more about it, safety and support of an approval package.

Phil Nadeau - Cowen and Company

Okay. Will that be completed at the time of the file?

Pablo Lapuerta

No, we will have safety data that will contribute to the filing but there may still be patients who are ongoing in the study.

Phil Nadeau - Cowen and Company

Okay. And then last question is just on expenses, long-term expenses. As you’ve disclosed Lexicon has gone through a bit of a transition this year. How should we think about modeling expenses after 2014? Is there a – do you anticipate a further decline in expenses or will there be kind of re-growth following this (indiscernible)?

Jeff Wade

Well I think you’ll see us shift in a way that the mix of our expenses. So in 2014 we’re right in the heart of the telotristat etiprate Phase 3 development program, that will start to wind down in 2015. So that will also end-up having some additional expenses relating to launch preparations assuming that the Phase 3 data want NDA filing as we’re hoping will be cash. And then the other element involved in this is the diabetes program. And again we’re not modeling expenses associated with that because of the expectation that, that will be within a partnership but that – if that – if there were expenses associated with that, they could – they can vary from the outline that we presented here.

Phil Nadeau - Cowen and Company

Okay. Thanks for taking my questions.

Arthur Sands

Thank you.

Operator

Thank you. Your next question comes from the line of Kevin Kedra with Gabelli.

Kevin Kedra - Gabelli

Hi. (Technical Difficulty) plans and additional…

Arthur Sands

I’m sorry, Kevin we missed the first part of that, could you repeat, start repeating the question.

Kevin Kedra - Gabelli

Oh sorry sure. Just want if you could update us on the (ambient) succession plan search for new CEO? And then secondly will those plans have any impact on sort of the timing of finding a partner for LX4211?

Arthur Sands

Yes. So the succession plan and search is ongoing and so that’s really all we can comment on there. And then the second part it really should have no impact on the timing with regard to partnership. So that is a process that’s of course been underway for quite sometime. So – thank you.

Operator

Your next question comes from the line of (indiscernible).

Unidentified Analyst

Yes, hi, thank you. Just with respect to the upcoming Type 1 data announcement, can you maybe just better define what’s going to be communicated from a data perspective, presumably we get the reductions in bolus and basal in total insulin utilization, but will you also be providing information just with respect to time kind of in the hypoglycemic ranges and any other secondary endpoint data that you’ll be sharing with us? And then also if you think this data will be eligible for ADA in June?

Arthur Sands

Right. Thanks for your question, Steve. You bring up some god points. So yes in addition to the insulin readout they really will only have real meaning in the context of glycemic control information. And so and that short term study it will be through our continuous glucose monitoring data, the CGM data with the patients are all on. And that will give us a picture as to their glycemic control over this – very granular picture with this time period including time that in hypoglycemic ranges which is blood sugar is below 70 by the CGM measure and then also time and hyperglycemic ranges. So we hope to see improvement in some of those parameters although with the small (indiscernible) in the short time period it is hard to predict and that’s why they’re secondary endpoints. But we should have the CGM data along with the insulin data and the top-line dataset.

Pablo Lapuerta

And then with respect to ADA it looks like we’re just a little late on timing even for late-breaking abstract. So it’s not likely will present anything at ADA from Type 1 study, but we’ll shoot for presenting the information as soon thereafter at a conference as we’re able to.

Unidentified Analyst

Okay. And maybe just to follow-up on a prior question, I know the prior pioneer cohort was fairly heterogeneous I understand it was a small fairly heterogeneous just with respect to time from diagnosed system HbA1C and baseline insulin. And I’m just wondering if you can maybe characterize what is anything you know about the Type 1 population study that you’re running now with respect to what that heterogeneity may look like relative to what we saw in the pioneer cohort?

Arthur Sands

Well we don’t have that information yet in detail. But just as a reminder we were enrolling patients (indiscernible) A1c was between 7 and 9. So these are relatively well-controlled and we wanted to have for this first study patients that we could rely on in terms of compliance. So these are relatively well-controlled patients for Type 1 diabetes and basically they have to have – had the disease at least a year. And so other than that I really – we don’t have the demographics yet on the cohort…

Unidentified Analyst

Okay. And then I know that there was a mention of potentially being able to explore some other collaborative opportunities that were 4211 related. And just wondering if you can maybe provide a little bit of color around how you’re thinking about those opportunities? Thanks. And what those opportunities might be?

Arthur Sands

Jeff.

Jeff Wade

Yes. So right now we’re assessing how – so we’re planning on commercializing telotristat etiprate in the U.S. so that’s a strategy that we’re following and we’re making those preparations. But we’re still assessing how exactly we want to commercialize telotristat etiprate in markets outside of the U.S. And so that’s something that we’re exploring whether that’s something that we can do on our own certain markets or whether there are partnership alternatives that might be more favorable. So that principally that’s the other area that we’re exploring it upon.

Unidentified Analyst

I know that you guys have kind of (triggered me) talked about how you have a lot of other additional programs that are – that have been I guess seemingly shelved over the years due to bandwidth and resource issues. Are those now in the context of the restructuring hoping to monetization at all?

Jeff Wade

Well there are definitely other programs that we’re considering but the partnership and what next steps might be. So with respect to the earlier staged programs those are still things that we’re evaluating. We think that some of those programs have significant opportunities and we are thinking about partnership in about other possible next steps that we might be able to pursue with those programs.

Unidentified Analyst

Okay. Thanks.

Arthur Sands

Thank you.

Operator

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

Arthur Sands - President and Chief Executive Officer

Alright. Well I’d like to thank everyone for participating this morning. Bye-bye.

Operator

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

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