Welcome to the Lexicon Pharmaceuticals Third Quarter 2010 Conference Call. (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 third quarter 2010 conference call. I am Wade Walke. 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; 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 programs, and then use the remainder of our time to answer your questions. The call will begin with Dr. Sands, who will discuss our key accomplishment for the third quarter. Dr. Zambrowicz will then discuss the status of our drug development programs, and Mr. Wade will review of financial results for the third quarter and discuss our financial guidance for 2010. We will then open the call to 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 investments, 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 trials and preclinical studies of our drug candidates 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 will now turn the call over to Dr. Sands.

Thank you, Wade, and thank you everyone for joining us this morning. Over the past quarter, we have continued to advance our strategy and our pipeline. Our strategy, of course, to discover and develop drug to the [inaudible] of novel mechanisms of action. Looking at our pipeline then, we’ll spend most of our time on the leading edge of our pipeline, these four programs. The first tier ones, LX4211 for Diabetes and LX1031 for Irritable Bowel Syndrome, we have achieved of course peripheral concept and they vetted our next stage of development, a very important stage where we are working to prepare for latent stage development, working on form and formulation and other important studies that will preface the next step for those two programs. So, we’ll be discussing those. Also, the next two programs that are up for proof of concept results, a very important Phase here, LX1032 for Carcinoid Syndrome and LX2931for Rheumatoid Arthritis. So, these being the next major events, I think major milestones for the company, we’ll start with those and review the data we expect and the timing for those milestones. So, with that brief introduction, I will turn it over to Brian Zambrowicz to discuss first LX2931.

Thank you, Arthur. I’m going to start with LX2931 because it’s a program for which we’ll be painting our next major clinical readout. LX2931 is a first in class sphingosine-1-phosphate lyase inhibitor for autoimmune disorders. It’s part of the pathway that’s become increased interest especially with the recent approval of FTY720 or Gilenya from Novartis for Multiple Sclerosis. Gilenya is S1P receptor agonist. I want to make it clear that we had a different plan in the pathway. We had an intracellular target called the S1T lyase, which functions as to irreversibly degrade the endogenous second messenger S1P. The importance of getting this point in the pathway is both our pre-clinic and clinical data so far suggest that there’s a lymphoid [inaudible] when hitting the lyase that may provide a potential safety benefit. 2931 is an oral agent and we have preclinical data that there’s potential for this agent not only in arthritis, but also in other autoimmune disorders such as multiple sclerosis and transplantation. In addition, it’s generally thought that if you can show a benefit in patients with Rheumatoid Arthritis that suggest that there may be benefits in other autoimmune indication. For 2931, one of the models, animal models that we really like was rat arthritis model that we ran. We like the model because we think it is very similar to the Phase 2A trial, where the Phase 2A trial is going into patients who are failing on methotrexate. And in our arthritis model in rats, on the left you can see that with methotrexate alone, when we began treatment after the animals had reached the half maximal inflammatory response, methotrexate alone was not able to block the further inflammatory response. However, on the right, when methotrexate was given in combination with LX2931, it blocked the further…

Thank you, Brian. I will provide a brief financial update. As indicated in our press release today, we had revenues from the 2010 third quarter of $0.8 million, a decrease of 63% from $2.1 million for the prior year period. The decrease was primarily due to reduced revenues under our alliances with Taconic Farms and Bristol-Myers Squibb. For the nine months ended September 30th, 2010, our revenues decreased 61% to $3 million from $9 million for the prior year period. Our research and development expenses for the 2010 third quarter increased slightly by 4% to $20.1 million from $19.3 million for prior year period. With the nine months ended September 30th, 2010, our R&D expenses decreased slightly by 2% to $61.4 million from $62.4 million for the prior year period. Our general and administrative expenses for the 2010 third quarter were $4.9 million, an increase of 8% from $4.6 million for the prior year period, primarily attributable to higher salaries and benefit. For the nine months ended September 30th, 2010, our G&A expenses increased 4% to $15.5 million from $15 million for the prior year period. Our net loss for the three months ended September 30th, 2010, was $27.5 million of $0.08 per share compared to a net loss of $19.1 million or $0.14 per share in the prior year period. Net loss for the nine months ended September 30th, 2010, was $78.8 million or $0.27 per share, compared to a net loss of $60.8 million or $0.44 per share for the prior year period. For the three and nine months ended September 30th, 2010, net loss included non-cash stock-based compensation expense of $1.3 million and $4 million respectively. For the three and nine months ended September 30th, 2009, that net loss included non-cash of stock-based compensation expense of $1.3…

Thank you, Jeff. We can now take questions. Question-and-Answer Session

(Operator instructions). Your first question comes from the line of Cory Kasimov with JP Morgan. Matthew Lowe – JP Morgan: Hi, there. It’s actually for Matt Lower in for Cory today. Just a couple of things. Firstly, just wondering if you could just update us on your thoughts from the potential tying of partnership for 4211 and you may be thinking the four, the stuff for the Phase 2B trial once the study is underway or perhaps waiting until you have the Phase 2B data, and then I have a quick follow-up.

So, while we are continuing to talk to potential partners on this program, we are proceeding with plans to initiate the Phase 2B study. And based on the unique dual mechanism inhibition of SGLT1 and SGLT2 and the additional mechanistic data, we have a great deal of confidence that we can build on that Phase 2A data especially as it relates to HgA1c, which is the primary end point for diabetes trial. So, we think it believes that this program warrants that we do what’s necessary to maximize the value for this program which will involve progressing along with the planned program as well as considering potential partnership discussions along the way. Matthew Lowe – JP Morgan: Okay. And then my follow-up question is just for the bridging work for 4211. Will you, in January, when we hear about the results of that study, will you be prepared to talk about the [inaudible] findings at that time or will we need to wait for that?

I think one of the things we’re trying to do is continue to build on the differentiation in mechanism. So, not only as I mentioned we’re measuring GLP-1. But this time, we’ll be measuring both total and active GLP-1. Also, one of the things what we’re doing in the study is we included a high glycemic index diet and we’re tracking post-prandial glucose control and glucagons as well as insulin. So, this can allow us to again obtain additional mechanistic data because GLP-1 effect would be expected to improve post-prandial and post-senile [ph] glucose control.

So, we are currently planning to report on that in January. Matthew Lowe – JP Morgan: Okay. That’s great, thank you.

Your next question comes from the line of Phil Nadeau with Cowen & Company. Phil Nadeau – Cowen & Co.: Good morning. Thanks for taking my questions. My first question is on LX1032. I’m sorry if you mentioned this in your prepared remarks, I missed it. But after you get the data from both the U.S. and European Phase 2 studies; is the plan to still move right into a pivotal trial?

Yes, Phil, that is the plan. So that will require, of course, a discussion with the FDA and European authorities. But that was what we outlined at our pre-IND meeting with them and we’re going to foresee it along those lines. Phil Nadeau – Cowen & Co.: Thank you.

And I think actually the discussion could take place really after we have the results of the U.S. trial, at least in the United States. We’re very [inaudible] asked about that opportunity. By the way, we had a good interaction with investigators at the recent North American Neuroendocrine Tumor Society Meeting or NANETS in the United States and there, we did we highlight both trials for investigators and since the – I’d say good investigator enthusiasm for the mechanism on the compound. Phil Nadeau – Cowen & Co.: And what has to happen now in the beginning of enrollment of the expansion cohort. Is it something [ph] that has to happen or is it just kind of logistic details.

It’s really logistical at this point. We have completed the enrollment on the dose escalation cohort, the last one and we started aligning patients for the expansion phase.

And one of the nice things is that we have set ourselves up with long-term talks, so that we – we’re pretty well setup to be able to move in to those type of studies. Phil Nadeau – Cowen & Co.: Okay, great. Thanks for taking my questions.

Sure.

Your next question comes from the line of Steven Willy with Stifel Nicolaus. David [ph] – Stifel Nicolaus: Hi. This is David. My question, just wondering on the 1033 front with respect to the follow-on IBS, how much of that is related to excitement around this improved potency and how much of it is related to maybe some reformulation challenges on the current molecule side.

I’ll comment on that. I think we all want to necessarily put all our eggs in one basket so to speak. So that in case our formulation changes are not sufficient, we think that 1033 gives us the clear additional potential compound. But it’s just on a physical chemical properties and potency to give us the improvements that we’re looking for. David [ph] – Stifel Nicolaus: Good. And you’re thinking about maybe how this program moves forward with respect to business development perspective, is it safe to assume that probably 1033 and 1031 are attached to hit now?

Yes. I think it’s safe to say that both being locally acting agents in the gastrointestinal tract that that’s likely, will likely the case. David [ph] – Stifel Nicolaus: And then …

And I think – go ahead. David [ph] – Stifel Nicolaus: I’m sorry, go ahead.

I was just going to say I think we’re really eager to identify the right candidate for moving forward because there has been a high level of enthusiasm for the mechanism as well as for the fact that we have this objective biomarker for the first time in the indication. David [ph] – Stifel Nicolaus: And any giving thoughts just to how large a pivotal Carcinoid trial may need to be and maybe just give in some of the challenges around patient enrollment right now. How do you think about internally trying to drum up, I guess, some of the interest around the compound? You obviously said that you were at a medical conference recently and kind of highlight in the program to investigate. But is that something that you plan to really focus on here in the coming year?

Yes, absolutely. There’s a high interest level in the compound among investigators. And it being really the first new small molecule to enter the scene that is directly on mechanism for this tumor type both in terms of symptom control and potentially growth. So, in terms – the first part of your question and terribly half of the conversation with the FDA, we really can’t say, but our guess would be under a 100 as the ballpark. So, this is not a large study that would be required. Of course, again, it’s dependent on the discussion with the FDA and the ultimate determination of what kind of end points we ultimately go after, et cetera and the timing.

I was just going to the same thing as far as size. You can look at other physical trials for Carcinoid agents, even studies for on tumor progression and then a small 89 patient, some of that is going to spend exactly what the FDA or EMEA desire to see. One of the things that I would hope is if and when we get the results of our study, if their positive, they’ll be a lot more incentive for patients to get into the trial because they know they’ll be a getting a benefit. The other thing I’d say is that there may be even more clarity to the need to deal with some of the symptom issues based on the recent Evorolimus data, where Novartis demonstrated an ant-tumor benefit and if these patients are living longer, they’re just going to continue to have to deal with the side effects. In addition, the cardio vascular problems are going to become even more as after data and that’s directly where our agents hits. David [ph] – Stifel Nicolaus: And then just one more question on 2931. You talked about RA being a pretty good surrogate of efficacy and other autoimmune disorders. Can you maybe talk about what other syndications you’re contemplating now and whether or not you would choose to maybe keep those in-house, if you decide to out license the RA program?

Well, there’s several. Inflammatory Bowel Disease and Crohn’s Disease is one we’re looking at closely, number one. We’ve also discuss Psoriasis in the past, where that is typically been an indication that is seen as another important surrogate for other applications later applications, which could also include transplantation. So, now that’s sort of in order, not necessarily in order of difficulty. Transplantation is probably the most difficult. So, those are something that we have actually developed summary [ph] plans around. I think we’re eager to see the results and then decide how to foresee it. Another very rational approach based on results would be just to [inaudible] and totally focus on that and of course; this is part of them that has garnered high partnership interest as a small molecule in RA. So, we have – I think we’ll have a lot of options on the table, of course, that’s all pending the results. David [ph] – Stifel Nicolaus: Great, thanks.

Thank you.

(Operator instructions). There are no further questions at this time.

Well, I’d like to thank everyone for participating given the number of important upcoming program milestones which Brian summarized. I’m sure that we will be updating you on several of these between now and the next conference call. So, again, thank you for participating. Bye bye.

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