Welcome to the Lexicon Pharmaceuticals Second Quarter 2010 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. (Operator instructions). At this time, I would like to introduce your host for today’s call, Wade Walke, Senior Director of Communication and Investor Relation. Please go ahead, Dr. Walke.

Good morning. Welcome to Lexicon Pharmaceuticals second quarter 2010 conference call. I am Wade Walke. With me today are; Dr. Arthur Sands, Lexicon’s President and Chief Executive Officer; Dr. Philip Brown, Lexicon’s Senior Vice President of Clinical Development; 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 was distributed this morning. During this call, we will review the information provided in the release, provide an update on our clinical program, and then is a reminder of our time to answer your questions. The call will begin with Dr. Sands who will discuss our key accomplishment for the second quarter. Dr. Brown will discuss the status of our drug development program. Mr. Wade will review of financial results for the second quarter and discuss our financial guidance for 2010. We will then open the call for your questions. If you would like to review the slides for today’s call, please access the lexicon’s website at www.lexpharma.com. You will see link on the homepage for today’s webcast. Before we begin, I’d like to state that we’ll 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, financial arrangements, cash and investment, discovery and development of products, strategic alliances and intellectual property, various risks that may cause Lexicon’s actual results to differ materially from those expressed or implied in such forward-looking statements including uncertainties relating to the timing and results of clinical trails and preclinical studies of our drug candidate are dependent on strategic alliances and ability to enter into additional collaboration and license agreement. The success and productivity of our drug discovery efforts, our ability to obtain patent protection for our discovery, limitations imposed by patents owned or controlled by third-party and the requirements of substantial funding to protect our drug discovery and development activity. For a list and description of the risks and uncertainties that we face, please see the report we have filed Securities and Exchange Commission. I’ll now turn the call over to Dr. Sands.

Thank you, Wade, and good morning everyone. In keeping with Lexicon’s mission to discover breakthrough treatments for human disease, I’m happy to report we’ve made significant progress over the last quarter and the first half of the year with our four drug candidates that are in mid-stage in the clinical trail. Our progress has further reinforced our first-in-class, best-in-class business strategy with respect differentiating our drug candidate and bringing them forward through development. So, let me start by highlighting a few of the significant milestone for the last quarter and we’ve move into a more detailed review of the more significant items. So, first of all, with LX4211 we gained new data from this compound from our initial Phase 2a study which is further substantially the dual mechanism of action of inhibiting both SGLT2 and SGLT1. This important mechanistic data was presented at two international meetings, the Endocrinology meeting or Endo meeting where we had both an oral presentation and a poster presentation on the data, and then also the American Diabetes Association International Conference where we presented A poster on the subject. So Dr. Phil Brown will spend some time reviewing this data and actually some elements of the actual presentations that were given at those two meetings, for those who may not have seen those. For LX1031, we have made very good progress in the new formulation which is progressing and we look forward to, in 2011, testing that in human studies as that progresses. For LX1032, both trials in the United States and Europe have advanced with respect to enrolment and those are on track for readouts around year-end. Similarly, for LX2931, where there we have completed our enrolment, it’s a fully enrolled trial now, the Phase 2a trial, greater than 200 patients. So, we are on track for obtaining results around year end as well. So very important steady progress on the two lead programs as they move into their Phase 2 key development and then the next program to read out from the proof of concept studies. In addition on the business front, we achieved I think some rather significant progress. First, the most recent one being successful reacquisition of all the Symphony programs and so and as Jeff Wade review that agreement again. Obviously, that was an agreement which took some in the second quarter to negotiate and we have brought it to completion shortly after the close of the second quarter. When you combine that with our accomplishment in the first quarter of the new financing approximately $181 million in new capital that was active we have done I think a significant amount of work on the financial front to further solidify Lexicon's position. So, with that introduction, I will now turn the call over to Phil.

Great, thanks very much, Arthur. Well, as Arthur mentioned, we had a great reception of 4211 program at first ADA and then their meeting. We truly believe that 4211 represents a first in class product relative to the other competing entities in this class. The reason for that is the dual inhibition that we achieved with SGLT2 which is the current state of the class, but 4211 also influencing SGLT1 as additional benefits to the program that I think we observed in our clinical data and we now have greater insight into the importance of this mechanism. In the 2a study of course we achieved rapid and significant improvements in the glycemic parameters that we also saw these very nice trends emerge on a number of metabolic parameters. We will review those briefly today and then again considering the dual inhibition mechanism, we will spend a little bit more time on. So, this next slide is a little bit detail in terms of data and if I may just orient you to it, SGLT2 of course is the transporter in the kidney that’s responsible for uptake in the glucose, reabsorption in the kidney of the glucose where the numerous agents now are targeting this particular enzyme. SGLT1 is the transporter in the small intestine which is responsible for absorbing glucose into the body. In the chart below, what we have done is taken published data, the citation on the bottom there, of the representative agents in development and compared them to 4211. In the first row you will note that its inhibition against SGLT2 and I should say the lower the number the more potent the particular compound is to the transporter. You see that each of these agents is highly potent for the SGLT to transporter and have a…

Thank you, Phil. I will provide a brief financial update. As indicated in our press release today, we had revenues from the 2010 second quarter of $1.2 million, a decrease of 59% from $3 million for the prior year period. The decrease was primarily due to reduced revenues under our drug discovery alliances with N.V. Organon and Bristol-Myers Squibb. For the six months ended June 30, 2010, our revenues decreased 60% to $2.9 million from $7.2 million for the prior year period. Our research and development expenses for the 2010 second quarter were $20.2 million which is consistent with the prior year period and for the six months ended June 30, 2010, our R&D expenses decreased 4% from $41.3 million from $43.1 million for the prior year period. Our general and administrative expenses for the 2010 second quarter were $5.1 million, a decrease of 9% from $5.6 million for the prior year period. The decrease was primarily attributable to lower patent related legal costs. For the six months ended June 30, 2010, our G&A expenses increased 2% to $10.6 million from $10.4 million for the prior year period. Our net loss for the three months ended June 30, 2010 was $25.2 million of $0.07 per share compared to a net loss of $20.1 million or $0.15 per share in the prior year period. Net loss for the six months ended June 30, 2010 was $51.3 million or $0.19 per share, compared to a net loss of $41.6 million or $0.03 per share for the corresponding period in 2009. For the three and six months ended June 30, 2010, our net loss included non-cash stock-based compensation expense of $1.3 million and $2.6 million respectively. For the three and six months ended June 30, 2009, net loss included non-cash of stock-based compensation…

Thank you, Jeff, and so we can now take questions.

(Operator instructions). So our first question comes from the line of Phil Nadeau with Cowen & Co. Phil Nadeau - Cowen & Co: First on the upcoming carcinoid data, can you remind us of the primary end points of the US and European studies, I believe that there is safety, but that you are also looking at some efficacy measures like bowel movements. Is there any more detail you can provide?

Sure, so as you mentioned first and foremost safety and tolerability is the key consideration for both of these studies. Importantly, based on the fact that they have the regulatory status they do, it’s unmet medical need we are, closely following a number of clinically meaningful end points that we believe would be important from a regulatory standpoint. That includes a number of bowel movements as well as a number of flushing episodes that these patients are experiencing. We have also integrated into these studies a number of subjective symptom parameters such as global endpoints, similar to the way IBS studies are evaluated. In addition to that, we are following the biomarkers of interest of course. Phil Nadeau - Cowen & Co: Second question actually on the financials. I know you said that you're still evaluating the impact of the Symphony on the accounting. Can you give us some rough idea of what's going to happen to the R&D and SG&A line items following the close of this transaction? Are they likely to go up meaningfully or is it more likely to be a small movement in any direction?

So in terms of our spending on the programs, which I think it's the key element of this, we don’t expect there to be any significant difference for the balance of this year in our expenses. We will have to account for the acquisition itself and that’s what we are still looking in the accounting. In terms of operations of the company and how much we expect to invest in these programs over the balance of the year, we don’t expect the acquisition to have a meaningful impact on that.

Your next question comes from the line of Steven Willy of Stifel Nicolaus.

With respect to the amendment on the carcinoid trial so presumably now you do have patients that have gone through their four-week extension program post the dose escalation?

Yeah. It's a double-blind treatment by the way. So, it’s a serial dose escalation in cohort. So, as cohorts finish we escalate to the next dose level. We have now completed several of those cohorts and individuals have completed the four-week double-blind treatment period.

Then you will obviously urinary-5HIAA here again as a biomarker, considering you're offsetting DPH1. just wondering if you envision that having as much utility as it appears to have in IBS right now?

Again it’s a very different construct in the setting of carcinoid as well as IBS. IBS of course is a functional disorder where nobody fully understands the pathophysiology that’s creating the symptom. So, the importance of the biomarker there is profound in terms of its essential utility. In carcinoid syndrome, urinary-5HIAA is the diagnostic marker that’s utilized in identifying these patients. Going back to literature with pCPA, where they recorded a nice improvement symptom control but it didn’t normalization of 5HIAA. So, we're of course tracking that as a pharmacokinetic biomarker. We believe that we will be impacting urinary-5HIAA but most importantly we need to control symptoms in this station. So, that’s the key to the study. We will continue to of course follow the biomarkers and really as the symptoms begin to emerge as the most important parameter in carcinoid.

With respect to looking beyond the Phase 1, 2 data we're going to see here by year-end, where do you think the company, I guess, needs to be from both a clinical perspective and what kind of regulatory guidance do you think you are going to need in order to maybe to leverage this data into a Phase 2 program potentially in 2011?

Well, the way it is that we have met with the EMEA to obtain our orphan status as well as the FDA where we brought the compound into the clinic. We outlined at that point in time a projected development pathway for the compound. I think it's going to be important as we get this data to revisit with both of these regulatory authorities in terms of obtaining guidance and then refreshing or updating them with the status of the program. As you may know, in the US while they want a first compound for this and it's not clear that there is a standard development pathway in place to impact symptom. So, I think there is a great opportunity here as we get our data and show improvement with an oral agent that we should have a relatively straightforward pathway to further development of the compound but that’s going to require some dialog with the FDA, as well EMEA once we have the European study completed.

(Operator instructions). At this time, there are no further questions.

Thank you. So, if I could just review on one slide some of the upcoming milestones to look forward to over the next year. I think bridge program LX4211 we're going to see progress on the bioequivalent study which should be completed in this next half of this year. That should provide the company with visibility with respect to the solid oral dose formulation to use in the 2b as well as then refine our plans to the 2b which we anticipate initiating in the first half of 2011. So that bioequivalent study I think will be an interesting step forward for the program. Again that should be the upcoming half year. For LX1031, we would like to see the same thing happen, see bioequivalent study performed on the new formulation. We've accumulated some data preclinically on that and that will enable us design the next step for that program as well having a handle on the results by the end of the year from the preclinical side. Then the next two programs, as you've heard from Phil, there are at a very exciting because there are on deck to have proof of concept read out from both of these programs. I think for carcinoid syndrome around year-end, if we are fortunate enough to have both studies read out that would of course be tremendous but either study have the capacity to give us results that we would need to make future decisions. LX2931, having completed the enrolment, that is a very significant step forward and a very large at this stage of development, 208 patients. Given that that enrolment is complete we can really, I think, definitively map out getting results at the end of the year. So, that will be a very important event for us. Finally, on the business front, the Symphony transaction being renegotiated into the form that you've heard described by Jeff Wade is really an excellent event for the company, an accomplishment. It has been an alliance that has been very productive for us. The Symphony team has been a significant positive in terms of working with the company in our development pathway not just for the financial dedication to the program but also the developmental expertise that they brought to bear. We've enjoyed working Symphony. It's been a productive alliance, and I think now we are ready for the next phase of developmental programs with Lexicon having regained complete control of the program. So, with that, I'd like to thank everyone for participating and we look forward to keeping you updated in the future, bye-bye.

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