Wade Walke - Senior Director of Communications and IR Arthur Sands - President & CEO Brian Zambrowicz - EVP and CSO Pablo Lapuerta - SVP of Clinical Development and CMO Jeff Wade - EVP, Corporate Development and CFO

Liana Moussatos - Wedbush Securities Matt Lowe - JPMorgan Alan Carr - Needham & Company Nicholas Bishop - Cowen & Company Stephen Willey - Stifel Nicolaus Sara Slifka - Morgan Stanley

Welcome to Lexicon Pharmaceuticals Second quarter 2011 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 taped 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.

Good morning, and welcome to Lexicon Pharmaceuticals second quarter 2011 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; 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 last night along with the copy of our press release this morning announcing the top-line is oust from our US Phase II study of LX 1032 in Carcinoid syndrome patients. During this call, we will review the information provided in these releases, provide an update on our LX1032 and LX1033 clinical programs, and then use reminder of our time to answer your questions. The call will begin with Dr. Sands who will discuss our key accomplishments for the second quarter. Dr. Zambrowicz will update on our LX1033 program; Dr. Lapuerta will then review the recent 1032 Phase 2 data; and Mr. Wade will review our financial results for the second quarter and discuss our financial guidance for 2011. 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 home page for today’s webcast. Before we begin, I would like to state that we would be making forward-looking statements, including statements relating to Lexicon’s research and development of LX1031, LX1032, LX1033, LX2931, and LX4211, 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, financing arrangements of 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 the uncertainties related to the timing and 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.

Thank you, Wade, and good morning everyone. It is an exciting time. It is our first opportunity here on this call to discuss data from two recently completed studies from an entirely new class of agents, that Serotonin Synthesis Inhibitor or SSI as we call them. This class of agents are active in the gastrointestinal tract and have, we believe, some important medical applications which will be discussing today. Before we dive into those agents, I would like to take a look at the entire pipeline slide and note two advancements on the slide which is LX1033, with its successful completion of Phase 1 program, now advancing to Phase 2, and LX1032 with its successful completion of the Phase 2 program. Again, most of the presentation will be centered on these serotonin programs and we look forward to discussing the data with you. I would like to mention before we go into those two programs though, the critical milestones and goals that we have achieved so far in other two clinical programs, most notably LX4211 for type-2 diabetes. We have successfully launched the Phase 2b study last quarter. We have now screened over 100 patients and I am happy to report that enrollment is on track for that important study. In addition, LX2931, we are currently planning the dose-escalation phase of that development program in rheumatoid arthritis patients, and that should take place this quarter. So, those two programs continue to advance. Now, let’s turn to the discussion today on tryptophan hydroxylase, the serotonin synthesis inhibitors. Just by way of background, on slide number 6, I would like to remind everyone of where this program started and of course all sort of with knockout mice where we deleted the tryptophan hydroxylase gene, which is encoding the rate limiting enzyme that produces serotonin. Serotonin is a neuro transmitter with multiple signaling functions in the central nervous system and in the periphery. We observed due to the knockouts that this was a safe target and the knockout mice had phenotypes consistent with gastrointestinal applications. We move forward then with TPH as a drug target and developed two classes of compounds from our chemistry team. So, I would like you to think it each of these classes as distinct because they are of course different chemical entities and they act differently. LX1031 and LX1033 which we are developing for IVS, are locally acting compound that inhibit TPH primarily in the epithelial lining of the gastrointestinal tract. Whereas by comparison LX1032 is a compound that is systematically bio-available. It enters the blood stream, but importantly does not cause the blood vein barriers. Therefore, affecting serotonin production in the periphery. So, again, this is a description then of the locally acting compound LX1031 and LX 1033, and then the peripherally acting compound LX1032. With that, I will now turn the call over to Brian Zambrowicz to discuss the locally acting serotonin synthesis inhibitors. Brian?

Thanks, Arthur. I am going to begin with some of our experience with LX1031. The clip will give us some perspective for the LX1033 data. LX1031, as Arthur already mentioned, is our first in class locally acting serotonin synthesis inhibitor. It is able to inhibit serotonin synthesis within the lumen and the gastrointestinal tract because the enterochromaffin cells which make 95% of the body’s serotonin sit at the lumen. LX1031 was designed and thus produced very low systematic exposure. What little compound gets in the systemic exposure cannot cross the blood vein barriers. Our next slide, in our Phase 1b study with LX 1031, we were very eager to look at the effect on the biomarker urinary 5-HIAA. This biomarker is a breakdown product of serotonin and gives some idea of the total amount of the serotonin that is being synthesized by the body. This is a 24-hour collection of urine and measurement and it is a challenging measure. Because of that, even when done in a sequestered setting like this study. We had a study in healthy volunteers who we dosed for two weeks and what you can see if you focus on the bottom-line of this graph in purple is that with the highest dose of 1000 mg given four times daily, we achieved maximum effect on the biomarker reduction, which was about a 45% reduction in urinary 5-HIAA. You can also see this reduction was also achieved by the fifth day of dosing, which was our first time point where we measured at the beginning of our LX1031 dosing. On the next slide, we move based on that data into our Phase 2a study with LX1031. This graph on the top is a measure of our primary endpoint, which was the aggregate release of IBS pain and discomfort. What we observed was that we had in the brown relative to placebo in green, we had an improvement that week one already in accurate relief of symptoms, and that was sustained and improved over the four weeks of dosing and then a tail off. It was just 17% on average reduction in adequate relief relative of placebo with the significance that week one and also significance over the four-week dosing period as measured by AUC relative to placebo. Perhaps one of the more interesting parts of the study is shown in the bottom part and that is the biomarker effect. We did this part of the study, (inaudible) study where about 50% of the patients agreed to collect urinary 5-HIAA. We did the measures at time zero, which was before dosing began. We measured again after four weeks of dosing and at the two-week follow-up period. What you can see is that we had a maximal reduction in the biomarker with the high dose group of 35%. In blue, the low dose group did not achieve 15% reduction and there really was not a reduction in the biomarker in the placebo arm. What was very interesting was that when you looked at the reduction of those patients who had the greatest reduction in the biomarker at four weeks, there was a statistically significant correlation between that and achievement of adequate release at week four. Because of that correlation then we were very interested in exploring the biomarker correlation with clinical benefit further. So, what we did is an ad hoc analysis, which is also indicated on the bottom of this graph. What we did is we took the high dose group and we booked them into biomarker responders and non-responders and we showed that cut-off 15% reduction or greater in the biomarker. The reason we chose that 15% was because the low dose group did not, on average, achieve a 15% reduction and they also did not exhibit clinical benefits. Then based on that cut in the data, if you move forward, next slide please, we then looked at the data what we have here in brown and green, it is the total population again, high-dose in brown and placebo in green. Then in blue and orange are the high-dose biomarker responders and the high dose biomarker non-responders respectively. What we observed in the high-dose biomarker responder was the very impressive 73% response as far as adequate relief IBS pain and discomfort. This was compared to roughly 10% response in the high-dose biomarker non-responders. I should say that in this sub-study, 63% approximately of those in the high-dose group were biomarker responders. So this was a pretty healthy chunk of that group. We were very encouraged by this because it suggested to us the biomarker may allow us to identify high responders as we move forward in clinical development to maximize the benefits observed over the placebo. It may also provide a paradigm for treating patients ultimately in the future with our Serotonin synthesis inhibitors. : Finally, on the next slide, when we look across all primary and secondary endpoints of the study what we observed is that the biomarker responders in blue achieved a greater balance that than the biomarker non-responders in orange across all measures with the exception of frequency. So, if you go on to the next slide, what we believe we achieved with LX1031 was proof of concept mechanism of action in the inhibition of serotonin synthesis for IBS. We observed that LX1031 was safe and well tolerated. It demonstrated improvements in IBF symptoms and importantly these symptoms' improvements correlated with the 5-HIAA biomarker reduction. We believe this is really the first time an objective biomarker measure has been used and correlated with clinical benefits in this patient population. This work has been published recently in fact in this month’s Gastroenterology, and I believe especially this biomarker correlation was very well received. One of the challenges with LX1031 was that it did require high doses, a gram, given four times daily and so this was challenging. We wanted to achieve a better dosing regimen. So, we did some reformulation work that was challenging. The other challenging thing to-date has been the urinary biomarker. As I mentioned, again this is a 24-hour collection and it is logistically very challenging especially in an outpatient and clinical setting. LX1033 is our follow-on compound and we chose to move forward aggressively because it was significantly more potent than LX1031 in both in-vitro and in-vivo measures. So, we filed the IND for LX1033 in December 2010 and we did not accelerated Phase 1 program where we had overlapping Phase 1a and 1b programs. Of course, we were extremely interested in looking at urinary biomarker effect in the Phase 1b study to see if we could achieve a level of biomarker reduction the same as we had observed with LX1031 at a gram four times daily. We were also, for the first time, wanted to explore another biomarker measure, which is plasma 5-HIAA, hoping to identify more viable biomarkers moving forward. So, our Phase 1 clinical program consisted of a single ascending-dose study, which was done in normal healthy volunteers. It was randomized double-blind, placebo-controlled study in healthy volunteers. There were 40 healthy volunteers in the Phase 1a, and we explored the single doses from 250 mg up to 3,000 mg. In the Phase 1b study, it was a multiple ascending-dose study, again randomized placebo-controlled in healthy volunteers. Not only were we interested in the safety and tolerability, but in the 1b we were especially interested in the biomarker effect, both urinary and plasma 5-HIAA. We dosed over 14 days, same as when we did our LX1031 Phase 1b study, and we explored doses including 250 mg, 500 mg, and 750 mg each given three times daily, or 1,000 milligrams given twice a day. LX1033 exhibited a very favorable safety profile, single-doses up to 3,000 mg and multiple doses up to 750 mg given three times daily were well tolerated. In Phase 1a, what we did observed at 3,000 mg, were five out of six of the subjects had mild diarrhea. It did resolve within 24-hours. We were actually encouraged by this data because we believed it was consistent with the pharmacology of inhibiting serotonin dramatically and suddenly. We have observed similar effects with our most potent serotonin synthesis inhibitor LX1032 in similar ascending-dose studies, when we got the high doses. We believe it is indicative of what happens when we suddenly pushed the serotonin signaling access. It also corresponds with what we have seen in other agents that suddenly adjust to serotonin signaling access. For example, serotonin SSRIs, which are give for depression, the most common side effects when they are first initiated, when they are suddenly stopped are GI side-effects, which include nausea and diarrhea. In the Phase 1b study, we did have one subject in the 250 mg TID. group that discontinued due to a four-fold elevation in the liver enzyme ALT. However, there were abdominal ultrasounds that revealed gallstones and fatty infiltration of the liver, which could explain those elevations. There was one discontinuation that was not treatment related due to a family emergency, and one serious adverse event in the placebo group that had happened after the end of the study. If we move on then, as I mentioned, we are very eager to look at the urinary 5-HIAA measures, and we are eager to see we could achieve a 45% reduction as we had observed with four times one gram dosing of LX 1031. so, we were encouraged that doses of 500 mg of TID dose in brown and the 1,000 mg BID dose in light blue we achieved a rapid 45% reduction in the biomarker. You can also see that we had less than maximal effects with the 250 mg of TID dose. You can also see that there was, as we said, this is a challenging measure, that there was some noise in the beta, and you can see that especially in the placebo group in green, as well as the 750 mg TID dose in purple, especially for that dose between day six and day 14 where the measurements are really bouncing around. We would not expect a 750 TID to perform worse than 500 mg TID, and I think this does speak to some of challenge of this biomarker. However, again, we were highly encouraged that we are able to achieve this 45% reduction. If you go to the next slide, this is now plasma 5-HIAA measure. This is a one-time morning [fasting] plasma measure, and we are very encouraged to see that we got very nice and cleaner measures with the plasma. You can see that the 250 milligram TID dose again gave a less than maximal effect, but the three higher doses have all achieved similar maximal reductions in the biomarker. Here I will just point out that the 750 milligram TID dose performed as well as the 500 milligram TID dose. Clearly, there is less noise in the data. You can see that especially when looking at the placebo and 750 milligram TID dosing. So, we think this is a really viable and promising new biomarker for moving forward in clinical development and ultimately for the patient treatment. On the next slide then, to summarize the LX1033 Phase 1 results, we believe that the results provide a clear path forward in the IBS indication. LX1033 produced reductions in the urinary 5-HIAA biomarker that were similar to those observed with LX1031 and were associated with improvements in IBS symptoms in our LX1031 Phase 3 clinical trial. Importantly, these biomarker reductions were achieved at TID and BID doses rather than QID doses, and they were achieved at one-third to one-half daily doses that were required for clinical benefit with LX1031. Additionally, LX1033 is clearly also a locally acting agent. In fact, it produces even less systemic exposure than LX1031 and we believe that bodes well for its safety. It was well tolerated and all doses tested and we have both capsule and tablet formulations developed. Importantly, there was a very good correlation between the fasting plasma measure of urinary 5-HIAA biomarker and the 24-hour urine 5-HIAA measure. This, as I mentioned, is a single fasting blood draw in the morning. Based on the data we have seen, this plasma measure is more reliably collected and demonstrate less variability. So, we do anticipate moving LX1033 forward into a Phase 2 study in IBS-d around year end. With that, I am going to turn it over to Dr. Pablo Lapuerta to report on LX1032 results.

Thank you, Brian. I am pleased to present top line results of telotristat etiprate from our Phase 2 study of carcinoid syndrome. Whereas LX1033 is locally acting, LX1032 is peripherally acting. Telotristat etiprate is an inhibitor of serotonin synthesis that is absorbed into the peripheral circulation. This is ideal for treatment of a tumor that secretes serotonin, carcinoid tumors. It has Fast Track status granted by the FDA for carcinoid syndrome and Orphan designation from the European Medicines Agency for the treatment of carcinoid tumors. Next slide, as a reminder, carcinoid syndrome reflects the existence of carcinoid tumors that secretes serotonin. These are newer endocrine tumors. They arise usually from the gastrointestinal tracks, although they can arise from the other sites as well. The excess secretion of serotonin causes diarrhea and other symptoms in patients with carcinoid syndrome. There are about 100,000 patients with carcinoid tumors, about 10,000 patients with carcinoid syndrome in the United States. Next slide, to review the telotristat etiprate Phase 2 study design, it had an initial treatment period for 28 days that had four different doses, four cohorts and four patients per cohort. After the 150, 250, 350 and 500 mg doses were evaluated, the 500 mg TID dose was selected for further study and in expansion cohort that had seven more patients, six on telotristat etiprate, one on placebo at 500 mg also for 28 days. We will be reviewing the results for this 28-day study. There are some patients that have continued into an extension phase. At the interest of patients and physicians we put this together, an open label long term extension. We put it in place after one of the cohorts was completed. So, we were only able to invite 19 patients into that open label long term extension, all 19 accepted and are continuing to be treated. For the 28-day analysis, we looked at the reduction in bowel movements, but also at reductions in serotonin synthesis and reports of adequate relief by patients. Next slide, the patient population was one with biopsy proven metastatic carcinoid tumors. They were refractory to ongoing maximum octreotide therapy. This is a cohort of patients that is extremely difficult to treat. They have exhausted all other treatment options. They continue on the octreotide and they continue on the anti-diarrheals that are available to them, but they need more; and on top of that, telotristat is added or placebo is added. This patient population had a mean of six bowel movements per day with a range of between 4 and 10 and at about 8 range. Next slide, telotristat etiprate showed favorable safety over the 28-day study period with adverse events generally balanced between the dosing groups. There was one serious adverse event in the study. That serious adverse event was potentially related to study drugs. It was in a patient who had nausea and vomiting. The patient had experienced such episodes in the past, but this one seemed more severe. She was hospitalized briefly for IV fluids, for the nausea and vomiting to settle down. The physician felt it could be related to telotristat etiprate and the patient later withdrew consent. There were no deaths during the study. Next slide, the analysis of efficacy focused on the identification of patients responding to treatments with several cut points. There was a cut point for complete biochemical response, and that cut point was chosen to select a large degree of reduction in urinary 5-HIAA that could not be achieved with placebo alone. Similarly, there was a clinical response threshold that was chosen for analysis, and that was a 30% reduction in bowel movements for at least two weeks during the four-week treatment period, with a feeling that would be relevant to patients but also would be of a magnitude that cannot be observed on placebo alone. We also evaluated reports of adequate relief. So, the construct here was that we wanted to see that telotristat etiprate was reducing bowel movement frequency; that it was doing it in association with a reduction of serotonin synthesis; and that the degree of reduction in bowel movement frequency was noticeable by patients and they are reporting adequate relief. We also examined the distribution of change in bowel movement frequency comparing telotristat etiprate to placebo across the entire range of observed bowel movement changes in the study. Slide 28 has our top line efficacy data. Telotristat etiprate demonstrated positive response in all the measures. On biochemical response, there were nine responses from telotristat etiprate versus zero on placebo. Having at least a 30% reduction for at least two of the four weeks, there were five responders on telotristat etiprate versus zero on placebo. Reporting adequate relief at week four, there were six responders on telotristat etiprate and zero on placebo. We also saw internal consistency in the data, people reporting adequate relief with people who were having reduction in bowel movement frequency. Next slide, telotristat etiprate showed superior cumulative response. Here the Y-axis is the percent of patients above a cut point, and on the X-axis is the range of cut points. So, at the far left, what you have is cut points of such large reductions in bowel movements that no patient achieved them on either telotristat or placebo. At the far right, you have increases in bowel movement frequency worsening that was at such a degree that all patients on telotristat or placebo did better than present with type of [issue]. So, let me review some of the key cut-off points. What was on the previous slide was at least 30% reduction for two weeks, whereas five patients on telotristat versus zero on placebo. If you look at, at least 20% reduction for two weeks, you have more patients on telotristat but still no patients on placebo. If you look at, at least no increase in bowel movement frequency for two weeks, you have almost 80% of patients on telotristat, but only 20% of patients on placebo. What this shows across a range of cut-off measures is that telotristat were consistently getting reductions in bowel movement frequency whereas placebo patients were having increases in bowel movement frequency. This provides a perspective on the mean data shown on the next slide. Placebo patients had a net increase in bowel movement frequency whereas telotristat patients, at all doses, had mean reductions in bowel movement frequency. The difference from placebo in terms of change in bowel movements frequency ranged from 1.6 to 2.9 bowel movements per day. That is on a daily horizon 1.6 to 2.9. Projecting out to a one month of treatment, that is in the ballpark of 50 to 100 bowel movements on the order of one month. So, we feel those are clinically relevant. They are consistent with what we were seeing in our European open label study. Next slide, we have a small European open label study that has a different design. Here, rather than different cohorts and rather than having a placebo group, we take patients and we progress them through different doses. They get titrated up over time to a maximum of 500 mg. All patients reach 500 mg. The open label assessment looks at reduction in the number of bowel movements from baseline, reductions in 5-HIAA and global assessment of the relief symptoms. Patients can continue beyond the study timeframe shown here and in the interest of patients and physicians we also have extended access with this study. The next slide shows preliminary results that we are seeing in this European open label study. We had six patients that have results between 4 and 16-week follow-up. The short-term results were similar to the US study. Two out of six patients had sustained reductions of at least 30% in bowel movements, so about a third of patients. With the longer term treatment, we have seen five out of six patients experience such reductions, and of those six patients that have gone up to 16 weeks of follow-up, three have shown repeat assessments where they have had at least 50% reduction in bowel movements from baseline. Next slide, our overall summary of the telotristat etiprate top line data is that telotristat etiprate was well tolerated at all doses and displayed a favorable safety profile. We believe these results achieved proof-of-concept for our Phase 2 study because clinical responses, biochemical responses, and patient reported adequate relief were detected only on treatments. We were seeing reductions in bowel movement and frequency. They were seen in the settings and the setting of inhibition of serotonin synthesis and they were at the magnitude that patients reported benefit. All eligible patients elected to continue treatment on the extension protocol. We also see consistency between and the US and European results were in Europe five of six patients have responded with longer-term treatments of up to 16 weeks of therapy. So, overall, these program results support further clinical development. We will be planning to review these results with the Food and Drug Administration and we will be completing enrollment of the European study. So, I will now turn the call over to Jeff.

Thank you, Pablo. I will provide a brief financial update. As indicated in our press release today we had second quarter revenues of $0.6 million, a decrease of 55% from $1.2 million for the prior year period. The decrease was primarily attributable to reduced revenues under our alliance with Taconic Farms. Our revenues of $1.2 million for the first half of 2011 reflected 60% decrease from $2.9 million for the prior year period. Our research and development expenses for the 2011 second quarter were $20.1 million, a slight decrease from $20.2 million in the prior year period. Our R&D expense at $44.1 million for the first half of 2011 reflected a 7% increase from $41.3 million for the prior year period. In connection with our acquisition of Symphony Icon, we made an initial estimate of the fair value of our liability for the base and contingent payments, and changes in that 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 $1.8 million in the second quarter and $2.9 million for the first six months of 2011. Our general and administrative expenses for the 2011 second quarter were $4.5 million, a decrease of 11% from $5.1 million in the prior year period. The decrease was primarily attributable to decreased salary and benefit expense and consulting fees. Our G&A expenses of $9.3 million for the first half of 2011 reflected a 12% decrease from $10.6 million for the prior year period. Our net loss for the 2011 second quarter was $26.6 million or $0.08 per share compared to a net loss of $25.2 million or $0.07 per share in the prior year period. Our net loss for the first half of 2011 was $56.3 million or $0.17 per share compared to a net loss of $51.3 million or $0.19 per share for the corresponding period in 2010. For the three and six months ended June 30, 2011, our net loss included non-cash, stock-based compensation expense of $1.5 million and $2.9 million respectively. For the three and six months ended June 30, 2010, net loss included non-cash, stock-based compensation expense of $1.3 million and $2.6 million respectively. Let me now turn to our cash and investments. As of June 30, 2011, we had $164.8 million in cash and investment as compared to $188.9 million as of March 31, 2011, and $211.1 million as of December 31, 2010. Now, let us turn to our forward-looking guidance for 2011. We expect contractual revenues from existing agreements in 2011 of between $1.5 million to $2 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 those potential arrangements in our guidance. That said, we believe our productive pipeline will provide us with attractive opportunities for future alliances. We continue to expect operating expenses in 2011 to be in the range of $110 million to $120 million. Non-cash expenses are expected to comprise approximately $18 million of this total, including $7 million, in increase in fair value of Symphony Icon purchase liability, $5 million in stock-based compensation and $6 million in depreciation and amortization. Our operating expense expectations for 2011 take into account recent headcount and cost reduction measures in research, administration and overhead areas as we continue to devote a greater proportion of our R&D and overall spending toward development stage programs. Taking into account cash received under existing contractual relationships only, we expect our 2011 net cash used in operations to be in the range of $92 million to $97 million. I will now turn the call back to Arthur.

Thank you, Jeff. We can now take questions from the callers.

(Operator Instructions). Your first question comes from the line of Liana Moussatos with Wedbush Securities. Liana Moussatos - Wedbush Securities: When do you think that the end of Phase 2 meeting would be for the carcinoid trial and would you be able to start a Phase 3 by year end or is that more likely in 2012? And how long would a Phase 3 trial take?

Pablo, would you like to answer that question for Liana?

Yes. We believe that for interaction with the Food and Drug Administration we will need at least three to four months, and for interaction with European Medicines Agency, we’re interested in that as well. And initiation of Phase 3 will have to be in 2012 and right now, I think we’re looking at around the middle to second half of 2012. Liana Moussatos - Wedbush Securities: How long do you think the Phase 3 would take?

Some of that will depend on the eventual sample size and so -- because that affects recruitment time. so, it’s hard to predict, but I would say on the order of two years. Liana Moussatos - Wedbush Securities: Okay. What are the remaining 2011 milestones, not just for carcinoid syndrome but overall?

Yes. For remaining 2011, this quarter we want to initiate our LX2931 dose escalation study and then in the fourth quarter we'll be busy to initiate the IBS study for LX1033.

Your next question comes from the line of Cory Kasimov with JPMorgan Matt Lowe - JPMorgan: Hi, there. It’s actually Matt Lowe in for Cory today. Some of my questions were actually just answered, but I guess a couple of them was a leftover just maybe, would there be any benefit of conducting an additional Phase 2 study before Phase 3, maybe if you could just talk about that dynamic? And then maybe in terms of the market opportunity in carcinoid syndrome, I guess what percentage of maybe this 10,000 patients in the US with carcinoid syndrome kind of fall into the refractory bucket? Thanks.

Could you clarify the first part of your question was that with respect to 1033, an additional Phase 2 study or 1032? Matt Lowe - JPMorgan: Yeah, maybe just the thoughts behind going straight into Phase 3 versus perhaps doing an additional Phase 2 study, why you feel an additional Phase 2 study is not necessary at all.

Okay. So with our initial interactions with the FDA with respect to this program, we had indications that the results on this order would be considered clinically meaningful and sufficient to go forward into a registrational trial. In addition, the trial sizes that are required in this indication are relatively small. So, we’d anticipate a Phase 3 program of the order of 100 to 150 patients, and we just completed 23 patients from the US and then more in Europe. So, we have quite a significant I think sampling to go forward with Phase 3 for this indication. And I don’t think we’ve gained significantly more information with regard to designing the plan the trial. In addition, I think we’ve explored a very good dose range that is appropriate for Phase 3. Now, in Phase 3, there may be certain other things to explore in carcinoid syndrome which might include carcinoid heart disease, which has been shown to be directly related to a high level of serotonin production. But that’s something that we could explore perhaps as part of for Phase 3 program and might be a subsector of the population. So, that’s why we believe we can go forward here into Phase 3 directly.

I can address the market opportunity question. So, there is a certain population of individuals who have carcinoid syndrome who don’t respond to octreotide and so that is perhaps 15% of the overall population. But over time, even those who do respond to octreotide therapy began to lose their responses as the tumor overcomes the ability of octreotide controlled symptoms. And there are probably around 60% or so of the overall population is not obtaining adequate relief from octreotide. So we think a pretty significant majority of the overall carcinoid population is potentially a candidate for this therapy.

They have no alternatives at that point.

Your next question comes from the line of Alan Carr with Needham & Company. Alan Carr - Needham & Company: I wonder if you could comment on dose response for the 1032 trial, and then also what the FDA’s thoughts are on endpoints for Phase 3?

Brian, if you would like to respond to that?

Yes, it turns out there was no dose response observed for octreotide in the same patient population in its Phase 3 clinical trial, and that might not be soon expected given the kind of originated patient population, both with respect to tumor burden as well as the amount of serotonin that’s been pumped out by these tumors.

Pablo, do you have anything to add?

The US and European studies kind of complement each other. Whereas there is no clear dose response in the US study, it’s a small study with two or three patients per treatment group. So, I don’t that’s really a study where you could expect much of the dose response. The important thing there was the dose response in terms of safety, and it seems that the highest dose was well tolerated. So, the European study is giving good results with the titration regimen. So that’s something that we could discuss with regulatory authorities whether we could start with a lower dose because lower doses have given some patients relief and then titrate up to a higher dose if needed. Alan Carr - Needham & Company: Regarding endpoints that the FDA is interested for this indication for Phase 3? Would they be the same?

Yes, it seems that this is a population that needs reduction in bowel movement frequency, and reductions in bowel movement frequency on the order of 30% clinically relevant. And we feel that there will be good endpoints for Phase 3. Alan Carr - Needham & Company: How about the role of 5-HIAA as a biomarker? You highlighted that for 1033 and 1031. What’s the role going to be in 1032, do you think?

Brian, you want to address that?

Yes. What we’ve seen is that roughly half the patients have very elevated 5-HIAA and about half the patients have a relatively normal range. There have been small studies at this point, like Pablo said, but we have seen our patients in both populations, both low beginning and 5-HIAA and elevated 5-HIAA that respond to LX1032.

Your next question comes from the line of Nicholas Bishop with Cowen & Company. Nicholas Bishop - Cowen & Company: I had one question initially about the efficacy of LX1032 and that is, to what extent does the time requirement in the 30% reduction efficacy endpoint play a role here? I mean, what I mean is, did you see patients who showed signs of efficacy but it wasn’t sustained for two weeks and they failed for that reason?

Pablo, would you like to address that?

Yes. We do believe that requiring that you see a reduction in bowel movement so quickly from initiation of therapy and for half of your assessments because we required two weeks out of four, therapy was a high hurdle. And one of the thing that we tried to communicate on the slide that had the cumulative distribution of responses with telotristat etiprate versus placebo, there were several patients who with telotristat etiprate were getting at least 20% reduction for two weeks but not on placebo. The difference between placebo is even greater if you looked at patients who at least had some reduction with telotristat etiprate, and that was almost 80% of patient with telotristat etiprate having some reduction in bowel movements versus only 20% on placebo. So, as we look across the data, across the types of reductions that patient had, we saw a clear separation between telotristat etiprate and placebo. And the European experience suggests that as therapy evolves over time, that we may have some additional responders. Nicholas Bishop - Cowen & Company: Okay, thanks. And then you mentioned a couple of times that in your interaction with the FDA has suggested that a 30% reduction in bowel movements would be considered clinically meaningful. Given that you have seen potentially some benefit with longer treatment in the EU trial, and that it seems that this drug is to be positioned as potentially a chronic treatment. How do you think about treatment duration in the Phase 3, and how long do you think you need to sustain that level of benefit for it to be considered clinically relevant?

We had that discussion at our Pre-IND meeting with the FDA as well. We’ve discussed both four and six month potential end points. I think that they were probably leaned more towards the six month end point to show sustainability of effect, but I think that will be part of our discussions when we meet with them next.

And I am sure those discussions will incorporate a view towards establishing safety as well? Nicholas Bishop - Cowen & Company: Right, okay. Just two other quick ones if I could; one is on LX1032, could you remind us when you plan to initiate the ulcerative colitis trial? And then second one is, just to be clear, is the reformulation of LX1031 not being moved forward, at this point you are focusing on 1033 in IBD?

Yes, IBD study for 1032 is right in the end Q3, early Q4 timeframe. And the second question was? Nicholas Bishop - Cowen & Company: Is the reformulation effort of 1031 for IBS still ongoing or is that being --

We are not reformulating any more. Our goal is to do a Phase 2 study based on the promising results we’ve seen with biomarker, and we think we can build off with the Phase 2a case study with 1031, move 1033 into a Phase 2 study that can project us into a Phase 3 study for the program. Nicholas Bishop - Cowen & Company: Okay, but you’re only moving forward with 1033 though? Is that right?

All our formulation work proved to be pretty technically difficult, and when we tested those formulations in animal experiments we didn’t achieve the effects we had hoped for. Those were clearly achieved with 1033.

Your next question comes from the line of Stephen Willey with Stifel Nicolaus. Stephen Willey - Stifel Nicolaus: I was wondering if you could provide some color around the disconnect in those patients who achieved biochemical responses, but then were not responders clinically nor from a symptomatic perspective as well. And if you could maybe just talk about the baseline serotonin levels of those patients, and if they were for some reason abnormally high and maybe you’re just cutting them by 50% didn’t get you down to a biological point where you start to see efficacy?

Pablo, could you comment on that?

Yes, as we look at the data carefully one by one that we do see that biochemical response and clinical response are related. And I think what you see here with slightly different numbers is that we had presented the data according to these clinically relevant cut-offs, but if you look at the continuity of the data, you see a closer response. So, for example, you may have had a patient with a biochemical response that was very nice, and the patient didn’t quite have a 30% reduction in bowel movements but maybe had a 20% reduction in bowel movements. So, I think as you look at the overall data we do see an association between the inhibition of serotonin synthesis and the reduction of bowel movements and the adequate relief assistance of symptoms. We see some internal consistency in the data that support the proof-of-concepts. There are -- within that, we do appreciate some variability and, as Brian said earlier, there are some patients with a low baseline 5-HIAA who still responded to therapy and had a good reduction in bowel patients, and there were some patients with very high baseline 5-HIAA that still had responses with a good reduction in bowel movements and a good reduction in serotonin synthesis. Stephen Willey - Stifel Nicolaus: I know at the R&D Day you showed some Chromagranin A data was well. Was there any kind of correlation that you saw in the US data there as well?

Yes, we had a look at the Chromagranin A data and there are no real conclusions that we could derive from that except that I would say patients weren’t worsening in Chromagranin A, but we had too few assessments to draw our conclusions. In particular, there are patients responding across doses with or without elevated Chromagranin A as baseline. Stephen Willey - Stifel Nicolaus: And then I know you mentioned that there was one serious -- there may have been drug related due to hospitalization for nausea and vomiting. Did you mention the incidence of grade 1, 2 nausea and vomiting within the trial?

No, I didn’t mention the incident. Overall, the gastrointestinal adverse events were well balanced between drugs. For example, the diarrhea was logically the most commonly reported gastrointestinal adverse event and is similar between placebo and telotristat, maybe slightly low on telotristat. In terms of vomiting, we haven’t looked at it by grading assessment, but I believe we had a few cases of nausea, not vomiting with telotristat, perhaps a few more than placebo. So, roughly the picture of overall balance, and maybe there has been some nausea with telotristat. The overall profile is one of a good tolerability. Stephen Willey - Stifel Nicolaus: And then just one quick question on diabetes. Obviously, the SGLT2 has got a lot of attention last month, and I know it’s a bit of open-ended question, but just wondering kind of where your thoughts are post the DAPA panel? And just kind of wondering if you took anything out of that panel that was either surprising to you or kind of caught you off guard or what?

Pablo, would you like to comment?

Yes. So, a lot of the panels had its focus on the potential for breast or bladder cancer. And so, what struck us is that there was no real mechanism for that. So, it may not be a class effect, if it exists. It maybe a false positive in the sense that large clinical programs have shown false positive safety signals before because you have so many thousands of patients and we do so many different analyses of so many different potential safety signals. Now, in particular, pravastatin showed that in a large study of thousands of patients, there was a significant imbalance in breast cancer. It was highly statistically significant, but in other large pravastatin studies it didn’t bear fruit. It wasn’t repeated. Simvastatin also had that. Again probably because Simvastatin, its clinical development had such large program. So, we also noted that the cancer expert who went through the data very carefully on the panel voted yes in support of approval. So, we think that there is some interesting things to learn from in that experience and that we can build on the experience of dapagliflozin and it will help us design a Phase 3 program. But we’re pretty satisfied with what we have LX4211. And I think many of the members of the panel felt that dapagliflozin would eventually be approved and that SGLT2 inhibition, in general, would eventually be an effective way to treat patients with diabetes.

One other thing I would say is that the panel spent a lot of time on the issue of patients with decreasing kidney function and glomerular filtration rate and dapagliflozin was not effective in those patients. And one of the things we took is that we have an opportunity, I think, with the SGLT1 mechanism to see a benefit in that group of patients. Stephen Willey - Stifel Nicolaus: Is that something that you’re going to be looking at prospectively in the 2b?

Pablo, do you want to speak to that? I don’t know if that’s the right one for me to look at that.

Well the Phase 2b, is your question about bladder or breast cancer in Phase 2b? Stephen Willey - Stifel Nicolaus: No, as a function of whether or not you’re getting equivalent efficacy in those patients with renal dysfunction?

In terms of renal dysfunction, we don’t think we’ll have enough patients in Phase 2b with only 300 to really do a meaningful analysis. Stephen Willey - Stifel Nicolaus: And then just one last quick question. Based around your current estimation on patient enrollment into the 2b, would you anticipate that we would get some of these pivotal Phase 3 data sets out of the way from maybe J&J and BI and Astellas prior to seeing your 2b data?

All indications are that J&J data will likely come out and we should see it, I would expect perhaps at the next ADA. They are supposed to file their NDA sometime in the first half of next year, and all indications are that their study size is twice that of the BMS AV study. So, there will be tremendous amount of data from that study. I think they’ll go in well prepared with their concerns that’s faced by outcome for DAPA, and I think there’s less clarity to when some of the data may come out for the other agents.

Your next question comes from the line of David Friedman with Morgan Stanley. Sara Slifka - Morgan Stanley: Hi. This is Sarah calling in for Dave. Just a couple of questions on the carcinoid data. In the five patients that had the 30% benefit, I know that they have to have the benefit for at least two or more weeks, but if you could give us the average duration of benefit for those patients? And just for the six patients with the adequate relief of symptoms, did those patients include the size that had the clinical response plus one more or are those separate patients?

Pablo, could you comment on that one?

In terms of the length of benefit considering that it was only four weeks, the study, it’s a high hurdle to expect at least two of them. I don’t recall if there were many who had three or four. I would just say I haven’t gone over the data, in general, most of those patients had relief in two weeks. I think it’s a little bit of a high hurdle to expand instantly from the new therapy in such a difficult to treat population that’s exhausted all other options. So, the other question was about association of adequate relief and a reduction of 30% in bowel movement frequency. They were closely associated, and that’s part of the internal consistency that I described. And I believe that approximately four of the five people who had the reduction of 30% in bowel movement frequency reported adequate relief of symptoms. And then a couple of the others reported adequate relief of symptoms, but that didn’t meet that cut point. They still had 20% to 25% reductions in bowel movement frequency. So, the data really suggests, in a nice and consistent manner, that patients who had reductions in bowel movements were noticing it and were reporting it. And therefore, this 30% cut-off is clinically relevant.

And that was correlated really well with the European study where the five patients who had response as far as bowel movements, they were also reporting adequate relief. Sara Slifka - Morgan Stanley: Okay, great. Then you may have already said this, so what was the exact definition of adequate relief? Was that just a subjective measure or…?

Yes. Do you want to speak to that Pablo?

Yes. I don’t have the exact wording, but it was basically based over the past week, have you had adequate relief of your carcinoid syndrome.

There are no further questions at this time.

All right. Well, I would like to thank everyone for participating in this call. It was a more thorough call I think given that we are going over results from two studies focused on our serotonin synthesis inhibitors. Just to summarize briefly, LX1033 has demonstrated a favorable safety profile with a very potent biomarker effects in the Phase 1 program, and we believe demonstrated dosing regimen that’s consistent with a favorable product profile for IBS. In addition, we’ve shown for the first time a very consistent plasma biomarker measure which we will be taking forward in development and our Phase 2 planning is currently underway. Next, telotristat etiprate established proof-of-concept in carcinoid syndrome, specifically a very challenging patient population, those refractory to currently available therapies. We are very encouraged by the results obtained to-date in the US study and in the European study. And we think that this compound has demonstrated its ability to effect severe gastrointestinal disease, and we are further encouraged to initiate our study in ulcerative colitis with this compound as well. So, with that, again, I would like to thank you for your participation, and good bye.

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