Thank you for holding. Welcome to the Lexicon Pharmaceuticals third quarter 2009 earnings 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, Jason Ray, Manager of Corporate Communications and Investor Relations. Please go ahead Mr. Ray.

Good morning. I just like to apologize quickly for the extended wait time. We were experiencing some technical difficulties with the call, but I’d like to welcome you to Lexicon Pharmaceuticals third quarter 2009 earnings conference call. I’m Jason Ray, and with me today are Dr. Arthur Sands, Lexicon’s President and Chief Executive Officer; Dr. Brian Zambrowicz, Executive Vice President and Chief Scientific Officer; Dr. Philip Brown, Senior Vice President of Clinical Development; and Ajay Bansal, 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 and then use the remainder of our time to answer your questions. The call will begin with Dr. Sands, who will discuss our key accomplishments for the third quarter. Dr. Zambrowicz and Dr. Brown will then discuss the status of our drug development programs, and Mr. Bansal will review our financial results for the third quarter and discuss our financial guidance for the reminder of the year. We will then open the call to your questions. If you would like to view the slides for today’s call, please access Lexicon website at www.lexpharma.com. You will see a link on the home page 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 LX1031, LX1032, LX2931 and LX4211. This call may also contain forward-looking statements relating to Lexicon’s future operating results, financing arrangements, cash and investments, discovery and development of products, strategic alliances and intellectual property. Various risks may cause Lexicon’s actual results to differ materially from those expressed or implied in such forward-looking statements, including uncertainties related to the timing and results of clinical trials and preclinical studies of our drug candidates, our dependence upon strategic alliances and ability to enter into additional collaborations and license agreements, the success and productivity of our drug discovery efforts, our ability to obtain patent protection for our discoveries, limitations imposed by patents owned or controlled by third parties, and the requirements of substantial funding to conduct our drug discovery and development activities. For a list and description of the risks and uncertainties that we face, please see the reports we have filed with the Securities and Exchange Commission. I will now turn the call over to Dr. Sands.

Thank you Jason and I’d like to thank everyone for participating today. We’ve had a very busy quarter here in the third quarter and I think much was accomplished. Some of the highlights that we’ll discuss today include LX1031, our drug candidate for irritable bowel syndrome having completed the enrollment for the Phase 2a trial, and that was completed significantly ahead of schedule, and we will be discussing the timeline for that. It includes an expectation of our top line data in November, so next month. The second point, during the quarter it was very exciting to initiate a new Phase 2 trial of rheumatoid arthritis, LX2931 and this was initiated first in the United States. I was happy to be able to participate in the investigator meeting that took place in August. I think there is real enthusiasm for that program and we’ll be discussing the progress of that today. Then third, we completed our Phase 1 trial of LX4211, and also initiated the Phase 2a trial in patients with type 2 diabetes, so two important initiations in the third quarter. Then lastly most recently in October, we completed a public offering of stock of following offering, which resulted in net proceeds of $55.2 million invested in the company. That was a very important event. I think a significant step in our financing strategy, and it really allowed me and our management team to branch out and meet with new investors. We have significant new investors involved in the financing, as well as very significant current investors that have an ongoing strategy by investing in Lexicon. It did allow us to share our mission and strategy more broadly, and of course we were very fortunate to find investors who wanted to participate in bringing new mechanisms of the action…

Thank you, Arthur. I’m on the slide entitled LX1031, a new drug candidate for irritable bowel syndrome. LX1031 is an inhibitor of tryptophan hydroxylase, the rate limiting enzyme in serotonin synthesis. Most of the body’s serotonin is produced by enterochromaffin cells that are dispersed along the lumen of the GI tract or EC cells as you can see in the diagram to the right. One of the unique characteristics of the LX1031 compound is that, it was designed to be locally acting on the GI tract, where it can hit the EC cells and inhibit serotonin synthesis without giving systematic exposure. This was important we thought to maximize the safety of the compound in this indication, and that safety has been supported by both our pre clinical and clinical data today. The function of serotonin in the GI tract is both to increase the motility, as well as to signal feelings of GI’s comfort to the brain, and so by decreasing serotonin one would expect both deceased motility as well as decreased feelings of GI comfort. On the next slide, there is growing evidence that abnormal serotonin signaling may play a role in the irritable bowel syndrome. This graph was taken from a paper by acting cyanidol, and in this study what they did is, they measured serotonin levels in the blood on the Y axis after a meal, and they did their study in IBS-D patients in the closed circles, and helping normal in the open and triangles and in IBS-C patients in closed. What you see is, after a meal IBS-D or diarrhea predominant IBS patients had elevated levels of serotonin relative to healthy normals, while IBS-C or constipation predominant IBS patients have lower levels than the health normals. This suggests abnormal signaling, but it also suggests that…

Thanks very much Brian. Well, clearly IBS represents a very common disorder. Some estimates suggest that up to 20% of the US population is affected or experiencing symptoms consistent with IBS. As Brian just described, LX1031 really represents a novel approach to influencing a number of the symptoms that these patients experienced, and it’s first in class compound, and we believe that by reducing serotonin we have the opportunity to influence motility and/or the subjective aspects of the disorder, all of these being very important in the symptom complex of these patients expedience. IBS really represents an unmet medical need. There are two emerging therapies that are gaining some evidence of utility in both the diarrhea and/or the constipated predominant forms of IBS rifaximin and linaclotide. Interestingly these are completely different mechanisms or actions for 1031, but they also act locally which underscores, I think the necessity safety profile that’s required to develop drugs in this area. So again, the development goal around 1031 has been to focus on this localized activity of reducing serotonin. If you move to the next slide, the Phase 2 study which Arthur has just mentioned, completed enrollment ahead of scheduled focused on patients with non-constipating forms of IBS. So it would be either diarrhea predominant or mixed form of IBS. We randomized 150 patients, in a one-to-one-to-one fashion to placebo, exploring two dose levels of LX1031, 250 mg or 1000 mg given four times daily over a 28 day treatment period, and we are following a number of the symptoms associated with IBS to determine how the drug maybe affecting these parameters. If you move to the next slide, the overall outline of the analysis which we’re currently involved with, obviously the primary objective is to confirm the safety and tolerability profile of the…

Thank you. I am on the slide entitled LX1032, a new drug candidate for carcinoid syndrome. A little bit on carcinoid syndrome; it’s a result of neuroendocrine tumors. These tumors typically start in the GI tract, and therefore they contain these enterochromaffin cells which are making large amount of serotonin. Once they metastasize to the liver, the serotonin is able to reach the GI tract where it causes very severe GI symptoms, as you might imagine, of diarrhea and cramping and discomfort. Now LX1032 is an inhibitor of tryptophan hydroxylase, however it’s a unique chemical entity from LX1031, and it’s also unique from 1031 and that it does gives systemic exposure, which is critical in order to reach the tumors that are typically in the lever. So this is an interesting program, and serotonin is clearly the driver of the symptoms in carcinoid syndrome, and for unique opportunity to hit its emphasis in the periphery without getting into the brain. We do have fast track status from the FDA, an orphan designation from the EMEA. On the next slide, is the unique case where there is actually a proof of concept for this target and this mechanism of action for carcinoid syndrome. This is the New England Journal of Medicine Article from 1967, and in this study and in other studies by these authors, they tested a compound called pCPA, parachlorophenylalanine, which is an inhibitor of tryptophan hydroxylas in 16 patients with carcinoid syndrome, and this was effective on 13 of the 16 patients in both decreasing abdominal cramps and pain, as well as decreasing bowel movements. So it had a good, excellent response. Now the problem with this compound was that it caused depletion of brain serotonin, because it crossed the blood line barrier and so it wasn’t progressed.…

Thanks Brian. So 1032 really represents the unique opportunity in the setting of carcinoid. As Brian just described, serotonin’s a primary mediator of the symptom complex that is experienced in carcinoid syndrome. This novel approach will allow a reduction of serotonin in the periphery, which is completed different from current standard of care. The current standard of care, the metastatic analogs which are injectable proteins, that also influence symptoms but patients develop, they become refractory to this therapy over time, so their symptoms begin to reoccur despite this therapy. Therefore, LX1032 we believe will meet a nice need that’s currently unmet for these patients in helping to moderate their symptoms that reoccur after they develop resistance to this metastatic analogs. As Brian mentioned, we have recently gained orphan designation by the EMEA, and that has opened Europe as an opportunity for us to take advantage of. So we’re currently evaluating opportunities within Europe, and determining if and how we might be able to further continue the development of 1032 in that study. As Brian also mentioned, there is an evolving literature base suggesting that serotonin plays a significant role in a variety off disease settings, which we believe may represent opportunities for 1032 as we gain additional information about its utility in the clinical study. If we go to the next slide, these are data from our normal healthy volunteer studies. Utilizing the biomarker of urinary 5-HIAA, the primary metabolite of serotonin. What we noticed in that study was at the mid dose level of 500 milligrams given once daily, up to the maximum dose we explored 500 mg three times daily, we saw a very similar reduction of urinary 5-HIAA over the 14 day treatment period. So this is a nice suggestion of what the potential of the drug does in terms of its pharmacodynamic activity, and importantly the mid dose level, and above, all achieved the same degree of reduction, about a 50% to 60% decline of serotonin production, relative to what is observed in placebo randomized subjects. So that’s in the basis for which we’ve identified the dosing going forward into our carcinoid proof of concept study. This is the double blind randomized placebo controlled study in patients were symptomatic carcinoid syndrome, who have become refractory to the standard of care. The study design is a serial dose escalation in which we’ll asses for both, safety tolerability as well as effectiveness of the compound on a variety of the symptoms these patients experience. Once that optimal or maximum dose is identified, then we’ll expand the cohort, and each of these dose levels is being explored over a 28 day treatment period. We are currently enrolling patients and the study is progressing at present. Brian, back to you for 2931.

Alright. Then on the slide entitled LX2931, drug committed for autoimmune disorders. Our LX2931 is an inhibitor of an enzyme called sphingosine-1-phosphate lyase, and to give you a feel for the past where I’ll referred to the cartoon on the right. This is the cell and this pathway, S1P pathway has become I think a pathway of very high interest of weight, especially due to the progress of FTY720 or single limit in multiple sclerosis. FTY720 is an S1P receptor agonists. Now we had a different plan with the pathway, the lyase as I already mentioned. The lyase’s function is usually to breakdown the endogenous second messenger sphingosine-1-phosphate. So by blocking the lyase function, one would increase the naturally occurring second messenger. By hitting this point in the pathway, we think we kind fire our unique sensitivity of action relative to receptor agonists, and we believe that may translates into an improved safety profile. There is clearly an affect of modulating the lyase by trafficking, but there is growing data that suggests that increased S1P levels have affect on the information that go beyond the trafficking effort. If we go to the next slide, this is an animal model of autoimmune disease caused in mice, and well you can see on the left is, we are measuring the response in this model by the slowing of the ankle or the change in the ankle thickness. In the treated animals and animals treated with LX2931 you can see that our compound is able to block inflammatory response in this model. What’s very important is, if you look on the right, that’s the lymphocyte counts in animals in the study. What’s I think very important to note is that, in spite of a very modest reduction in circulating blood lymphocytes, we have…

Alright. So clearly rheumatoid arthritis represents a very large market opportunity, and we believe the 2931 is uniquely positioned as an oral agent, not only for RA, but for a number of autoimmune or inflammatory conditions, due to its novel immunological inventory types of effects. Being in oral, we believe it has the opportunity to be utilized prior to moving into the more aggressive biologic therapies that currently represent the standard of care. So we recently presented data at the American College of Rheumatology meeting, relative to our drug-drug interaction study of 2931 with methotrexate. These data were presented at a poster by Dr. Roy Fleischmann who’s been our primary investigator in this study, and this is a very important study for us, and that it has allowed us to move into the Phase 2a study. The finding of this is, that there were no clinically significant changes in the pharmackinetics of either methotrexate or 2931, and this underscores the lack of a drug-drug interaction, which was anticipated based on our preclinical studies. In the study 2913 was given over a 14 day treatment period to patients with stable rheumatoid arthritis, who were on incumbent methotrexate. It was well tolerated, they were very mild, events reported including abdominal pain, nausea and headache, but there are really no clinically significant trims observed with regard to AE profile laboratory assessments or vital signs or electro-cardiogram. So this was a very important next step for us to position the compound to go into the proof of concept study. It was a very exciting opportunity for us that this meeting and I think based on the traffic we received a poster, and I think that reflects the novel approach to modulating the inflammatory process in this setting, and really the lack of emerging therapies in this area. Our Phase 2a study is designed as a double-blind randomized placebo controlled study, that’s looking at 2931 in combination with methotrexate. We are anticipating enrolling up to 120 patients. As Arthur mentioned in his introduction, this is being conducted both in the US, as well as Eastern Europe. We are exploring three dose levels of LX2931 70 milligrams, 110 milligrams and 150 milligrams, all given as once daily over a 12 week treatment period. This is a very standard study design at this stage of development with the primary efficacy on point being the ACR20 at week 12. We are evaluating a number of secondary endpoints that include all the ACR assessments, ACR 2050 and 70, as well as the DAF 28 scoring at weeks four, eight and 12. We are anticipating the study being completed in mid-2010. As Author indicated, we’ve had a good initiation of this program, and we believe that it should be able to achieve that sort of timing goal. Now to LX4211.

Thanks Phil. I’m on the slide entitled LX4211, a mid drug candidate for diabetes. I will point out that this is the only program that we are working on, where we are not first and fast either in the clinical pipeline, and I’ll try to explain why that is. We believe this is an extremely compelling mechanism for treating type 2 diabetes. If you refer to the picture on the right, it describes SGLP2’s function. So the kidney normally filter the blood and removes impurities which are then excreted in the urine. Typically glucose passes right through the glamelioila [ph] and it’s the SGLP2’s job as a glucose transporter to re-uptake that glucose so it’s not lost in the urine. So by blocking its function you can excrete excess blood glucose in the urine. Now, I think one of the things that’s very unique about this target is, its function is very specific. Its job is really only to re-uptake that glucose in the blood, and so if you have a compound that’s quite specific, you would imagine a very clean mechanism that it’s working on and its seen effect. That’s supported by the knockout data in mice that we’ve seen, as well as by human mutants who are completely lacking this target. Both mice and humans completely lacking the target are quite healthy, never show hyperglycemia. Then it’s happens to be the one of the strongest anti-diabetic effects we are seeing, having looked at almost a quarter of all protein encoding genes to-date. Now we have a realized biomarkers in the clinic which is glucose, but two of the most appealing aspects of this mechanism are one that unlike all of our mechanisms for treating type 2 diabetes, glucose is being lowered in the blood through a non-insulin dependent mechanism, and what that means then is that you are sparing pancreatic data cells. Ultimately the pancreas would result from type 2 diabetes and they require insulin therapy and as one could imagine, they allow them to function longer without requiring insulin. The second thing that’s very appealing is that, all the other mechanisms for controlling blood glucose in type 2 diabetes, resulted in storage of the glucose, in fact in other tissues, whereas this in fact dumps very large amounts of glucose and provides the opportunity for weight loss. That too have potential benefits for cutting back to metabolic benefits. Phil.

Well clearly type 2 diabetes represents a very large market with plenty of space we believe for market for the agents that are going to be required to ultimately manage the symptoms that these patients experience, and the outcomes that they experience as a result to their diabetes. If we move to the next slide, as Arthur mentioned, completed our Phase I study. What we observed in this, utilizing the biomarker of urinary glucose, was a dose dependent increase in urinary glucose excretion up to a 300 mg dose level. Importantly, all the dose levels that we explored in normal healthy volunteers were extremely well tolerated. We had no serious adverse events, and there is no evidence of dose limiting toxicity that emerged within this study. The pharmacokinetic and pharmacodynamic data, both support once daily dosing regime, which I shared with you on the next slide, and we believe that this represents a very favorable safety profile and efficacy profile as we continue to produce the compound. If you move to the next slide, these are our urinary biomarker data. If you’ll bear with me as I walk you through it, you’ll note that on the far left of the slide is the individuals randomized placebo, and of course there is no glucose within the normal healthy volunteers, who has a normal blood glucose. So there is obviously no urinary glucose detected in those individuals. You’ll note that as we increase doses from 25 mg, up to the top dose of 500 mg, we see a dose dependant increase in the glucosuria or the urinary glucose which excreted. What I’d also like to note is that, these are cumulative data over 72 hours. So following a single dose of LX4211, we achieved a fairly robust glucosuria response that occurs over…

Thanks Phil. Let me just take a brief moment to provide you some financial update. Lexicon’s revenues for three months ended September 30, 2009 were $2.1 million, a decrease of 72% from $7.5 million for the corresponding quarter in 2008. The decrease was primarily due to reduced revenues under our alliances with Bristol-Myers Squibb, Organon and Genentech, partially offset by increases in revenue under our collaboration with the chronic form. For the nine months ended September 30 2009, revenues decreased 64% to $9.3 million, from $26 million for the corresponding period in 2008. Overall this decrease in revenues reflects the shift in our business model, from drug discovery collaborations, to developing our drug candidates to clinical proof of concepts, before forming new collaboration. Now a brief look at our expenses; R&D expenses for the 2009 third quarter were $19.3 million, a decrease of 29% from $27.3 million for the corresponding period in 2008. The decrease was primarily due to lower external pre-clinical research and development expenses, as well as lower salary and benefit costs. For the nine months ended September 30, 2009, R&D expenses decreased 26% to $62.4 million, from $84.9 million for the corresponding period in 2008. G&A expenses for the 2009 third quarter were $.46 million, a decrease of 8% from $5 million for the corresponding period in 2008. The decrease was due primarily to lower consulting expenses. For the nine months ended September 30, 2009 G&A expenses decreased 10% to $15 million, from $16.7 million for the corresponding period in 2008. Lexicon’s net loss for the three months ended September 30, 2009 was $19.1 million or $0.14 per share, compared to a net loss of $23.5 million or $0.71 per share in the corresponding period in 2008. Net loss for the nine months ended September 30, 2009…

Well, thank you Ajay. We can now take any questions you may have.

(Operator Instruction) You have your first question comes from the line of Allan Corn. Allan Corn – Unidentified Company: On your diabetic drug.

Well I didn’t hear that, something about drugs, the diabetic drug. Okay, go ahead. Allan Corn – Unidentified Company: How soon do you think will be available for use, where you have a large trial.

Well its one step at a time, lets put it that way. I think what we are willing to forecast at this point is that we’ll get results from our first in-patient trial in the first quarter, which is a big step forward for a new entity, and then we’ll make the judgment call based on the data. So that’s about all we can say at this time. I’ll put it in context though, that’s fairly rapid for the phase 2a program, because we did compress it by doing a trial a four way trial in patients, these are patients that are sequestered in the units that we are monitoring everything, and so I think in a very reasonable time frame we’ll get those results. Allan Corn – Unidentified Company: Thank you

Thank you.

(Operator Instruction) And there are no further questions. I would now like to turn the call over to Dr. Sands.

Well thank you. I anticipate over the next twelve months that we’ll have a lot of questions, and I think that’s true because that’s of course the time frame in which we’ll have these results. We are on stage now to evaluate those, and I’m referring to the slides that have the timeline over the next twelve months for these four trials which we spend a fair amount of time now reviving. So we look forward to keeping you updated as the results flow in, and thank you for you participation. Bye-bye.

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