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Executives

Wade Walke – Senior Director, Communications and Investor Relations

Dr. Arthur Sands – President and Chief Executive Officer

Dr. Pablo Lapuerta – Senior Vice President, Clinical Development and Chief Medical Officer

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

Analysts

Karen Jay – JPMorgan

Phil Nadeau – Cowen and Company

Alan Carr – Needham & Company

Liana Moussatos – Wedbush Securities

Stephen Willey – Stifel Nicolaus

David Freedman – Morgan Stanley

Lexicon Pharmaceuticals, Inc. (LXRX) Q1 2012 Earnings Conference Call May 3, 2012 11:00 AM ET

Operator

Welcome to the Lexicon Pharmaceuticals' First Quarter 2012 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at Lexicon’s request.

At this time, I would like to introduce your host for today’s call, Wade Walke, Senior Director of Communications and Investor Relations. Please go ahead, Dr. Walke.

Wade Walke – Senior Director, Communications and Investor Relations

Good morning and welcome to the Lexicon Pharmaceuticals' first quarter 2012 conference call. I am Wade Walke and with me today are Dr. Arthur Sands, Lexicon’s President and Chief Executive Officer; Dr. Brian Zambrowicz, Lexicon’s Executive Vice President and Chief Scientific Officer; Dr. Pablo Lapuerta, Lexicon’s Senior Vice President of Clinical Development and Chief Medical 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 who will give an update on the status of our programs; Dr. Lapuerta will then provide additional information on our lead clinical programs; and Mr. Wade will review our financial results for the first quarter of 2012 and discuss our financial guidance for 2012. 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 research and development of LX4211, LX1033, LX2931, LX7101, and telotristat etiprate also known as LX1032 and the potential therapeutic and commercial potential of those drug candidates.

This call may also contain forward-looking statements relating to Lexicon's future operating results, financial arrangements, cash and investments, discovery and development of products, strategic alliances, and intellectual property. Various risks may cause Lexicon’s actual results to differ materially from those expressed or implied in such forward-looking statements, including uncertainties related to the timing of results of clinical trials and preclinical studies of our drug candidates, our dependence 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 a 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.

Dr. Arthur Sands – President and Chief Executive Officer

Thank you Wade and good morning everyone. We are off to a strong start here in Q1 of 2012. And this morning, we'll be updating you as to the progress of our pipeline. On the call, we'll spend most of our time on LX4211 and diabetes. We have had some new news regarding that which we released this morning and additional indication will be setting now in addition to type 2 diabetes will be type 1 diabetes in a proof-of-concept trial which I will discuss, and then we'll move on to discuss telotristat etiprate and carcinoid syndrome and our current thinking regarding the Phase 3 program for that compound.

At the end of the call, I will be summarizing the timing regarding milestones affecting all the drugs in the pipeline and I will be giving very brief updates then on LX1033 for IBS; LX2931 for rheumatoid arthritis; and LX7101 in glaucoma. So, what I can say about all the programs currently as we are here at the end of the first quarter is that they are all on track. In fact, a few are running somewhat ahead of schedule and so we are pleased with the progress of the pipeline in its entirety.

So, with that brief introduction, I'd like to turn to a discussion of a new opportunity we have in front of us in type 1 diabetes or juvenile diabetes. This is the type diabetes, of course, is by definition insulin-dependent diabetes. The cause of type 1 diabetes is loss of functions of the pancreatic beta cells are typically affecting people initially in their use and then establishing itself as a lifelong disease condition.

Now, there is approximately $3 million in the world with type 1 diabetes are estimated $1.3 million in the United States and maintaining control of the blood glucose because of the lack of functioning beta cells. They are entirely insulin-dependent for maintain that control. So, insulin has a low established drug for glycemic control has certain issues that make it challenging for the type 1 diabetic and also the non-compliance with injections can be a problem where 80% of type 1 diabetes are on three or more insulin injections per day, well another 20% in the United States are on insulin pumps. But there is issues regarding serum hypoglycemia, which is one of the most common side effects of the insulin therapy and this can lead to deviations from compliance with the insulin therapy.

In addition, long-term poor glycemic control can produce kidney disease and retinal damage and long-term cardiovascular disease as well. So, we see the opportunity for LX4211 here a very unique of course, it's all oral agents, which is unique in the sales as there are no currently approved oral therapies for type 1 diabetes. And what we know about LX4211 mechanism has led us to believe that we can enhance glycemic control significantly while reducing insulin needs and we think this will address a significant unmet medical need in the population.

We have seen LX4211 performed well and animal models of type 1 diabetes and the potential benefits and could not only more consistent glycemic control and addition to insulin therapy – in combination with insulin therapy of course, but also there are benefits by reducing the potential dose of insulin, which would include less hypoglycemia, a greater ability to reach hemoglobin A1c target and therefore reduced the long-term consequences of toxic levels of glucose. And then there is a lifestyle factor also we'd like to consider here which is the elimination potentially a one or more insulin doses in some patients.

And then finally insulin use itself is also associated with weight gain and we think that by reducing the dose of – total dose of insulin used that can reduce our side effect of course, we've also seen a favorable effects on body weight with LX4211 therapy. So, I'd like to describe briefly now the type 1 diabetes proof-of-concept study that we have outlined and received funding for. We'll begin this program with multi-center, randomized, placebo-controlled study, double-blind study and patients with an adequately controlled type 1 diabetes. That will be in subjects that are 18 or 55 years of age with established type 1 diabetes and they can be either on the continuous subcutaneous insulin infusion, which is the insulin pump or on multiple dose injection, which should be some combination of short-acting insulin at mealtime with long-acting insulin for the basal dose.

We anticipate approximately 25 subjects overall. We think we can achieve a proof-of-concept goal within a four-week treatment period. So, this is a fairly short treatment period and which time we can derive a significant amount of information. The dose we are targeting here is a 600 milligrams total daily dose of LX4211, the initial dosing being 400 milligrams just before breakfast where we are seeing excellent control in both healthy normal and type 2 diabetics over a postprandial glucose at breakfast to lunch and then 200 milligrams just before dinner and of course it will be all compared to placebo.

The end points will be looking at in the study are listed on this slide. The primary objective and I think the most qualitative endpoint for the short-term study is the reduction in the total daily amount of (exhaustion) as insulin required. Our patients are also on LX4211. So, we anticipate there being a reduction in insulin required once LX4211 is added and of course we'll compare that to the placebo group. There are secondary objectives as well, which are very important and the first one there is to further define LX4211's effects in terms of reducing the dose of insulin required between the mealtime insulin or the bolus insulin requirements and the basal insulin, which is the longer acting as one of the baseline requirements that they have. So, these will be studied independently as a secondary endpoint.

In addition to this, then there are endpoints we can measure in the short-term study that revolve around improvements in glycemic control and the one of the most qualitative one will be the effects on the fasting plasma glucose overtime and postprandial glucose again what we've seen significant effects in previous studies with LX4211. And then we'll also be measuring through our continuous glucose monitor, which gives us a measure of glucose – blood glucose concentration essentially every five minutes through a device.

We'll do measuring the time spent in the normal glucose range or new glycemic range and this will speak to ability of LX4211 to enhance glucose control overall and also importantly reduced the amount of time spent either hypoglycemic that was with low blood sugar or hyperglycemic that is with high blood sugar.

Now longer term studies are possible after this and in those kind of studies we'd anticipate end points including hemoglobin A1c, a long-term measure that glycemic control, which we would hope would improved. So, that's a brief outline of our study in type 1 diabetes. We think again it offers a new opportunity for the drive to expand its potential indication in addition to our type 2 effort, which we will be updating you on now as I turned the call over to Pablo Lapuerta. Pablo?

Dr. Pablo Lapuerta – Senior Vice President, Clinical Development and Chief Medical Officer

Thank you, Arthur. In type 2 diabetes, one of the updates that we have is that we have initiated a study in renal impairment. The study of renal impairment in type 2 diabetes is attractive for something even. One is that the population is very large up to 40% of patients with type 2 diabetes eventually will suffer from some degree of renal failure. Another is that the population has a high unmet need. Metformin is contraindicated in this population by (indiscernible) are contraindicated, many of the so-called ureas are contraindicated. Using insulin can be difficult in this population, so we have a very unmet need.

But another reason is that we believe that LX4211 can differentiate in renal impairment and this is a good opportunity for us. SGLT2 selective inhibitors have been shown to be less effective in patients with renal impairment. But LX4211 provides an addition to SGLT2 inhibition, the SGLT1 inhibition in the gastrointestinal tract and that could provide benefit by reducing glucose absorption and enhancing a GLP-1 and PYY. So, with that in mind, we put together a small study. We plan to enroll 20 patients that will give us some initial data in the setting of renal impairments. These patients have type 2 diabetes and moderate-to-severe renal impairments will be treated with LX4211 at the 400 mg dose of placebo for seven days and we'll have assessments of postprandial glucose at the end of the (indiscernible). We expect to have results in the second half of 2012 and results in 2012 will help us prepare for a large renal impairment study that we anticipate would be part of our Phase 3 program.

One of the update relates to our ongoing study, our Phase 2b study, and type 2 diabetes. We've mentioned the study at several calls. At this call, we can update that we completed randomizing all 299 patients. We've also completed dosing for all of those patients. We have good participation in the study approximately 90% of patients completed the study with no serious adverse events related to the study drug. The overall safety is blinded, but we are seeing a pattern that’s consistent with the non-tolerability profile of LX4211.

So, in June 2012, we expect to have data on the study with information on reductions in hemoglobin A1c as we top our primary endpoints. But we also have other data on achievement of hemoglobin A1c less than 7% fasting plasma glucose, weight, blood pressure and triglycerides that this kind of profile of LX4211. So, in addition to nearing completion with its Phase 2b study, we are busy preparing for Phase 3 and one of the activities that we undertook in the past few months is to meet with several European Union regulatory agencies. We met with agencies in Germany, Austria and United Kingdom in order to get feedback on our proposed Phase 3 program. We are very aware of the importance of moving forward into Phase 3 effectively and that’s why we've been proactive in seeking regulatory input.

With regard to telotristat etiprate, we’ve undergone our Phase 3 planning and that’s been marked by another Phase 2 meeting that was completed with the Food and Drug Administration and was a positive interaction and has led to our current Phase 3 plan. We believe we can move forward with a single pivotal study for an indication in carcinoid syndrome for telotristat etiprate. That single pivotal study will have 12 weeks of blinded treatment period that's placebo controlled.

We are trying to move forward with two doses 250 milligrams three times daily, 500 milligrams three times daily, and placebo. The sample size will be approximately 100 patients and our focus will be on the reduction in the number of bowel movement frequency in carcinoid syndrome patients with diarrhea. We’re also proceeding with European Medicines Agency and seeking protocol assistance, that's scientific advice on our proposed Phase 3 program and its scientific advice for an orphan drug. We are on track to initiate this study in the second half of 2012.

I also have an update on the telotristat etiprate Phase 2 study and ulcerative colitis. This is a proof-of-concept study and it also be providing important safety information for patients with ulcerative colitis and they have the potential to expand the target population for telotristat etiprate. The name of the study is called (indiscernible), it's a Phase 2 study of the relationship between serotonin and efficacy in ulcerative colitis. We hope to have about 60 patients with mild-to-moderate ulcerative colitis, randomized to placebo on two different doses on telotristat etiprate to an 8-week study with efficacy measures that are common in ulcerative colitis studies. So, we initiated the study effectively. Enrollment is progressing. Randomization is a bit ahead of schedule. Those are the key updates. And with that, I would like to 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 three months ended March 31, 2012 at $0.3 million, a decrease of 50% from $0.6 million in the prior year period.

Our research and development expenses for the 2012 first quarter decreased 4% to $23 million from $23.9 million in the prior year period. The decrease was primarily attributable to decreases in facility and personnel cost partially offset by an increase in external manufacturing clinical research and development costs. 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 the payments are expected to be made are recorded in our consolidated statements of operations. The associated increase in fair value of Symphony Icon purchase liability was $2.1 million in the three months ended March 31, 2012.

Our general and administrative expenses for the 2012 first quarter were $4.6 million, a decrease of 4% from $4.8 million in the prior year period. The decrease was primarily attributable to decreases in personnel and facility costs.

Our net loss for the 2012 first quarter was $29.9 million or $0.06 per share compared to a net loss of $29.6 million or $0.09 per share in the prior year period. For the three months ended March 31, 2012. Our net loss included non-cash, stock-based compensation expense of $1.7 million, compared to $1.5 million in the corresponding period in 2011.

Let me now turn to our cash and investments. As of March 31, 2012, we had $253.7 million in cash and investments as compared to $281.7 million as of December 31, 2011. Now, let's look to our forward-looking guidance for 2012. We expect contractual revenues from existing agreements in 2012 of around $1 million. Consistent with our past practice while we are in conversations with pharmaceutical companies about potential collaborations and alliances, we are not including forecasted revenue from these potential arrangements in our guidance. That said we believe our productive pipeline will provide Lexicon with attractive opportunities for future alliances.

We expect operating expenses in 2012 to be in the range of $110 million to $120 million, which is unchanged from our prior forecast. Non-cash expenses are expected to be approximately $19 million of that total; including $9 million of increase in fair value of Symphony Icon purchase liability, $6 million in stock-based compensation and $4 million in depreciation and amortization. Taking into account, cash received under existing contractual relationships only, we expect our 2012 net cash used and operations to be in the range of $93 million to $98 million, which is consistent with our previous guidance.

I will now turn the call back to, Arthur.

Dr. Arthur Sands – President and Chief Executive Officer

Thank you, Jeff. And as we look over the next 12 months, you can see on this slide we have a number of key milestones coming up all involving reporting of important results from a number of programs? And then on the bottom of the timeline you can see our anticipated timing of launching of our Phase 3 effort in carcinoid syndrome in 2012 and then look before to the 2013, the proximal timing of our launch of LX4211. So, if we look at the key results coming up just in front of us, Pablo updated you with respect to LX4211 and the Phase 2b results which is on track. Then shortly thereafter, in early Q3, we expect to have results from LX2931, our S1P lyase inhibitor, which is currently being studied in the dose escalation protocol in patients with rheumatoid arthritis. That has preceded well through the various dose levels and so we look forward to those results.

Later that quarter, our trial in glaucoma with our new agent LX7101 is actually progressing ahead of schedule and so we see results for that hopefully in the – nearing the end of the third quarter. Enrollments going well and to remind you that is a new kinase inhibitor that we have developed within the eye drop formulations is being tested in approximately 60 patients with glaucoma. The endpoints of there being not only safety but also intraocular pressure, which is of course the most important endpoint.

And then as we go into Q4, we – in the end of Q3 or beginning of Q4, we are anticipating getting results from our European open-label study and carcinoid syndrome. That study is important, because that is the study on which we've had a treatment period of 12 weeks. And as you recall, the US-placebo controlled study was a four-week treatment period, so we'll be looking at an extended treatment period with that result. And so that again will be anticipated around the early Q4.

Moving into 2013, LX1033 results in IBS that is the trial that is also enrolling very well, somewhat ahead of schedule. That’s a trial of our locally acting tryptophan hydroxylase inhibitor and 360 patients with IBSD, and then shortly thereafter, our results from telotristat etiprate and ulcerative colitis. So, very dense 12 months coming up here with respect to clinical results and we’ll be keeping you updated. So, I’m sure by now you may have formulated some questions and I'd like to open it up to Q&A.

Question-and-Answer Session

Operator

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

Karen Jay – JPMorgan

Hi, this is actually Karen Jay for Cory Kasimov. Thanks for taking our questions. I just have a few. The first is we like to hear your thoughts on the recent HMB decision for DAPA and what do you think is driving the different views from the FDA and any potentially read through for 4211?

Arthur Sands

Pablo, you recently returned from Europe, would you like to take that question?

Pablo Lapuerta

Absolutely, we see it as very positive news. We see it as very positive then the sense that the (indiscernible) that half of those will be approved in Europe and that people will be more comfortable with SGLT2 inhibition and the benefits that provides and that will pave the way for another drug like LX4211. In terms of why it was approved in Europe and not yet in the US? I think some of that may have to do with the concept as to whether you can study safety post-marketing or you need additional pre-marketing studies to study safety? And what we thought was that Bristol-Myers Squibb has announced that they are going to look at safety in the launch cardiovascular outcome study. And I think that’s a good path for us.

Karen Jay – JPMorgan

And do those differing decision in US when you influence it all or help with partnership negotiations if at all?

Pablo Lapuerta

I think it does help just because it does sort of clear up some of the questions. In some ways it’s validation that the drug should be approved in Europe and I get to this confidence that we should be able to do that and we think eventually you don't get approved to the United States as well. So, it looks to be more of the delay than a – than a instrumental borrower.

Karen Jay – JPMorgan

Okay. And just one another question on the 4211 data coming in the year in addition to the efficacy endpoints you mentioned in your prepared comments, well we have any insight into dynamics of the hormone levels (indiscernible)?

Arthur Sands

Brian, do you have any answer?

Brian Zambrowicz

Those are not endpoints that we are tracking in this study, we have done multiple additional studies now in both patients with type 2 diabetes and healthy subjects, while we have confirmed and built upon the SGLT1 mechanism of action in greater detail will be publishing those as papers and scientific journals. The focus of this study is to see how the dual inhibition can potentially differentiate and enhance the benefits over what has been observed with SGLT2 selective compounds. Though the key is looking at the HbA1c glycemic control in the metabolic and cardiovascular benefits and how dual inhibition could further enhance those?

Karen Jay – JPMorgan

Okay thank you.

Brian Zambrowicz

Thank you.

Operator

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

Phil Nadeau – Cowen and Company

Good morning. Thanks for taking my questions. First one on telotristat, could you update us on your picking strategically there are you still looking for partner or you are committed taking that forward?

Arthur Sands

Our plan is, as I think we have talked about previously, we are planning on taking that forward on our own. We had been talking to people about potential for partnerships ex-U.S. that our base line plan is to take that forward on our own, that continues to be our objective.

Phil Nadeau – Cowen and Company

Okay. And eventually in the Phase 2 meeting with the FDA, I think in the past, you said that in the Phase 2 meeting with EMEA would follow after, have you – have that meeting it or is that over-the-counter?

Arthur Sands

Pablo?

Pablo Lapuerta

The meeting is on the calendar for the end of June.

Phil Nadeau – Cowen and Company

Okay. And then on LX4211 in your milestone slide, there is a note that, that's going to move into Phase 3 contingent out of results from the relevant studies. Could you give us maybe a little bit more of an idea of kind of what the hurdle was to moving that into Phase 3? What you need to see in the ongoing Phase 2 as well as the renal or type 1 study to move that forward versus (when we trip) of the program?

Arthur Sands

That’s a big question. Pablo, would you like to try to answer that first?

Pablo Lapuerta

Yeah, I think that Phase 2 study is going to help us most with dose selection for Phase 3. So, we are studying four different doses in Phase 2 and we want to select one of them to move forward. And so we are looking for hemoglobin A1c lowering and we are looking for a support of the profile that we have seen today with LX4211, where we are seeing some data on blood pressure reduction and weight reduction and triglyceride reduction. So, we'd like to see that profile come together at a dose that we can take forward into Phase 3. And in terms of safety, we want to see a safety profile that’s consistent with what we've seen before and that’s a safety profile we don’t have serious adverse events related to study drug and well we have overall good tolerability with patients staying on therapy. So, that’s what we are looking for. And we think the Phase 2b study will be sufficient to provide that information to make that choice. And so that Phase 3 can start in 2013 somewhere between the first and second quarter.

Arthur Sands

And Brian, would you like to add anything to that answer?

Brian Zambrowicz

Sure. We've really been doing our homework as far as building a story of differentiation for LX4211, particularly with respect to the selective SGLT2 inhibitors such as (indiscernible). We think we have an opportunity to show enhancements and benefit, that would come out of our Phase 2b studies, but I would just remind you that we have additional data that we have already obtained or is it coming to further that differentiation story and that includes the sitagliptin in DPP-4 inhibitor combination with LX4211, where clearly the ability to cause an enhanced release of these beneficial GI peptides after a meal in combination with DPP-4 inhibitor that prevents the breakdown of GLP-1, that’s an enhanced benefit we demonstrated improving or further elevating active GLP-1 levels and improving glycemic control with less insulin required. That’s not an affect of evaluating active GLP-1that you could anticipate with the selective SGLT2 compound.

We discussed today, the renal impairment study, that’s a very important study we believe that the SGLT1 mechanism of action will benefit those patients and that’s a population that doesn’t – can achieve much benefit with selective SGLT2 inhibitions. And finally I think we are continuing to build the differentiation story, because of the type 1 studies that we'll be initiating, where the 2 is non-insulin dependent mechanisms of action of LX4211 both increasing urinary glucose excretion and reducing intestinal glucose absorption we believe can benefit those patients. So, again, multiple opportunities for differentiation.

Phil Nadeau – Cowen and Company

Great, that’s very helpful. Thanks for taking my questions.

Arthur Sands

Thank you.

Operator

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

Alan Carr – Needham & Company

Hi. Thanks for taking my questions. Why don't you get tell us more about who is the non-profit behind this type 1 diabetes trial and as well as the cost and timelines around it in terms results and that sort of thing?

Arthur Sands

So, as we indicated in the press release the funding is coming from a independent non-profit organization. Its founder has an established interest in funding that these another medical research. They are going to be funding the cost of the proof-of-concept trial that we talked about earlier in the call. There is also a framework in place that allows or simply want to request funding for a Phase 2b trial, although hat additional funding is not committed. The funding that we are receiving should gave it across to the trials, however. The arrangement is just for a little bit of detail on this, it's not unlike other pending arrangements by disease that is non-profit to net, if we achieve success measured in this case by filing an NDA and getting approval in the type 1 diabetes indication. We will return capital to the non-profit in form of that kept payments for them to redeploy in other research in the field. So, that’s a little bit of information about growth in the – and nature of that structure.

Alan Carr – Needham & Company

And timelines for starting into results.

Arthur Sands

I think the start it's in – I'll let Pablo answer that question.

Pablo Lapuerta

Well, I think we'll start this quarter and well, I have to gauge enrollment, but I would anticipate being done by the end of the year.

Alan Carr – Needham & Company

Thanks. And then any updated thoughts on the SGLT1 and SGLT2 landscape there, obviously talked a bit earlier about the positive opinion from CHMP, but broader sense other compounds that we should be looking out for datacenter around those compounds that we should be looking for in the next few months?

Arthur Sands

Brian, would you like to comment on that?

Brian Zambrowicz

Sure. We of course have been continuing to pursue from a medicinal chemistry standpoint, the SGLT1 mechanism of action focusing on discovering locally acting compounds, let's say in the gastrointestinal tract producing very, very low systematic exposure and virtually no urinary glucose excretion. We believe that these could be particularly appealing agents by reducing glucose absorption by the small intestine and enhancing the GI response after meals of the beneficial peptides, including GLP-1 and PYY. While maximizing safety, there is no need to get on border to systemic exposure is the (indiscernible) facility don't have that GLP-1 and we are getting very closed to putting a compound in a formal preclinical development. We are very excited. We think this would be an interesting class of agents and if you consider particularly the renal impaired, if they can benefit from SGLT2 inhibition, this could be an attractive type of agent. I would also say that there was a recent publication just came out at the end of the last month describing an SGLT1 highly selective compound from (indiscernible) Pharmaceuticals, they are partnered with GSK on the SGLT1 selective compound which has gotten through Phase 1 and again that data as well as data that GSK has publicly shown really support everything we’ve been describing for SGLT1 in addition with our 4211.

Alan Carr – Needham & Company

Okay, great. Thanks and then the last one I wanted to ask about was the 1032 Phase 3 trial it sounds like there is a fair number of similarities of which you are guiding for previously may be on the lower end in terms of the size of the trial. What are your thoughts on when granted, you don't know enrollment rates in that sort of thing, but your best guess in terms of when that trial might be able to ramp-up.

Arthur Sands

Well, I'd say that product a little early to make that forecast Alan, so, I think we probably differ on that once we get this thing up and running. I think we have been anticipating with an outlining 18 months to 24 months of the trial. I think of that – I think that’s realistic, but enrollment could make a big difference. And I think importantly there will be going to the trial now armed with positive results from the Phase 2 program that can be very encouraging for patients and propositions to participate. So, that may make a substantial difference in enrollment rate. So, we have to really see how it goes within the firs t six months of the trial I think before we can make an accurate forecast.

Alan Carr – Needham & Company

That’s helpful. Thanks very much.

Arthur Sands

Thanks.

Operator

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

Liana Moussatos – Wedbush Securities

Hi, I just have a mechanistic question kind of following up on what you’re talking about was still. Can you talk about how inhabiting SGLT1 could lead to decrease excretion of glucose, and how that could decrease – potentially decreased the potential for skin infections?

Arthur Sands

Yes, Brian, you want to address that on the urinary tract?

Brian Zambrowicz

Sure, I’ll give that a shot. One of the things we observed in Phase 2 with LX4211 was a decrease – a nice linear decrease in urinary glucose excretion between day one of dosing and the 28 of dosing. For instance in the high dose form, 300 mg given daily of LX4211, we had roughly 80 grams of glucose in the earn over of the first 24 hours after the first dose. However, by the 28, that have dropped to 65 grams and so we believe that was a result of the enhanced glycemic control with the patients were coming under and that – if that trend continues and there were no signs that it was dropping off. There could be a continued decreased in urinary glucose excretion overtime, which we think would – could correlate with a decrease in risk of general and urinary tract infection.

And I think that does stand in contrast to some of the published data for SGLT2 selective compound, some of which have shown the same amount of urinary glucose excretion two years in the dosing as – on day one of dosing. So, that could provide another potential area of differentiation with SGLT2 selective inhibitors. We really we’ll have to demonstrate that in a clinical studies.

Arthur Sands

Right. And I think the only thing I'd add Liana is that in this current 12-week study, we do have a sub-study of moving participants who are going to be giving us the required the 24-hour urine collection over this 12 weeks. So, we should have built – test our hypothesis with regard to the amount of glucose and the urine over time, but as Brian indicated ultimately it's the adverse event rate that will target – will be most important to the patient.

Liana Moussatos – Wedbush Securities

Thank you. And can you talk about how you can maintain control blood glucose if there is a decrease in glucose excreted.

Arthur Sands

Yeah, I think the best really that SGLT1 component of the mechanism and that's where that added the practice, we think it's probably what is leading not only to the decreased urinary glucose excretion, but you can recall from our Phase 2a data that did not alter the fact that both fasting plasma glucose as well as postprandial glucose was dramatically affected even 28 days in the study insight of the fact that you’re losing urinary glucose excretion. So, that fasting plasma glucose at day 28 was continuing to improve over day 1 and day 13 likewise postprandial and that’s speaks about SGLT1 mechanism of action and we now over the SGLT1 mechanism is particularly profound and its effects on postprandial glucose. And that all read out of course into the pretty robust HbA1c drop that we absorbed in that study.

Liana Moussatos – Wedbush Securities

Thank you very much.

Arthur Sands

Thank you.

Operator

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

Stephen Willey – Stifel Nicolaus

Yeah, hi, good morning, thanks for taking the questions. Just going back I guess to your second half guidance for the initiation of the Phase 3, I think we all pretty much know that pharma BD tends to now move very quickly. So, can you may be just give us a little bit of characterization with respect to kind of where those discussions are at this point in any color I guess on a number of parties that you are kind of holding hands with going into this 2b data we have.

Arthur Sands

Okay. So, that you’re talking about the diabetes program?

Stephen Willey – Stifel Nicolaus

Yeah.

Arthur Sands

Yeah. And so, we’re talking to – so we’re talking to that we’re very active on the partnership front. And there is a lot of interesting thing the 2b data and we’re obviously doing a lot of ground work in preparation for that and we’re – we have a relatively broad in that in terms of groups that we’re talking to. We’re doing the work to try to be prepared to go into Phase 3. So, we are doing a lot of the planning. We’re doing with the studies that are required to be able to do that. We – obviously there is going to be sometime to do – to go through partnership discussions. But we are doing everything we can to be in a position to make that transition into Phase 3 as quickly as we can and without a delay and if part of the dialog that we've had with potential partners who is informed our Phase 3 planning too. So, it is something that we are taking into account.

Stephen Willey – Stifel Nicolaus

Thanks, that's helpful. And then just on the Phase 3 carcinoid program, the primary endpoint right now, which you indicated would likely be reduction in above move into frequency. Will that be a responder analysis and I guess if it's not what kind of level of statistical power, are you comfortable with given that's are going to have about 100 patients and kind of one to one to one randomized across couple of doses.

Arthur Sands

Pablo, would you like to address that?

Pablo Lapuerta

Yes, so, we are looking at the primary endpoint as a reduction involvement in the frequency rather than a responder analysis. As a continuous measure, the total number of bowel movements that you have projected over a 12-week period. We believe there is a more sensitive measure and looking at the proportion, we just achieve the certain threshold or necessary in threshold. So, we think that we will have more robust data with continuous measure at the primary endpoint and looking at the data, we have from our two Phase 2 studies. We believe that a sample side of approximately 100 patients who leave us with well over 90% power and the tolerability and the ability to show robust results.

Stephen Willey – Stifel Nicolaus

And then will you have some of kind of running phase, I guess what you try to determined the baseline for all three codes prior to…

Pablo Lapuerta

We'll have a running where we measured bowel movement frequency everyday and so that will led to the power because we will be able to have individual data on changing bowel movement frequency.

Stephen Willey – Stifel Nicolaus

Okay, thank you very much.

Operator

(Operator Instructions) Your next question comes from the David Freedman from Morgan Stanley.

David Freedman – Morgan Stanley

Hi, thanks for taking the question. Just around some of the Phase 3 planning you are doing. Do you guys have a sense as to the cost of the Phase 3 program for 4211 and is that something that in the absence of a partner you would be able to take on.

Arthur Sands

Pablo, do you want to address that as the two-part question, may be you could talk – first speak to the scale of the program and then we'll talk, let's just comment on the partnering aspect.

Pablo Lapuerta

Yeah, we believe that Phase 3 programs in diabetes is actually large in order to achieve the cardiovascular safety information that the FDA requires and so the program that we put together for LX4211 involves 9,000 patients that similar to what other companies have been doing in diabetes and one of the big drivers is a 6,000 patient cardiovascular outcome study that's part of the Phase 3 program. So, it is a big program. We think it's in the right direction and that's why we are proactive about getting regulatory input and as to the specific cost, I think Jeff Wade can answer that.

Jeff Wade

Yeah, I'm not sure. I want to layout this specific cost. So, it's a multi $100 million development plan for Phase 3 and diabetes and I think our plan and our expectation is that we would do that with the partner and so, that’s our – that's all of our planning is based on the expectation that we will do that, which is not similar from a lot of the big pharma companies who were also partnered on this kind of programs.

David Freedman – Morgan Stanley

Thank you.

Arthur Sands

Thank you.

Operator

Thank you. (Operator Instructions) At this time, there are no further questions. I will now turn it back over to Dr. Arthur Sands for closing remarks.

Arthur Sands – President and Chief Executive Officer

Yes, well, I’d like to thank everyone for their questions and participation today. I think next time we meet in this format, there will be a lot less speculation about results and that's what we are talking about results for the 2b trial, so that should be an exciting next meeting? Thank you all.

Operator

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

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