Thank you for holding. Welcome to the Lexicon Pharmaceuticals’ Third Quarter 2012 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session to follow. Please be advised that this call is being recorded at Lexicon’s request. At this time, I would like to introduce your host for today’s call, Alex Abuin, Vice President, Communications and Alliance Management. Please go ahead Doctor Abuin.

Good morning and welcome to the Lexicon Pharmaceuticals’ third quarter 2012 conference call. I am Alex Abuin, and with me today are Dr. Arthur Sands, Lexicon’s President and Chief Executive Officer; Dr. Pablo Lapuerta, Senior Vice President and Chief Medical 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 copies of the press releases that were distributed this morning regarding our third quarter earnings and the presentation of additional LX4211 Phase 2b results at the American Heart Association Annual Conference. During this call, we will review the information provided in the releases, 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, followed by Dr. Zambrowicz and Lapuerta who will provide an update of our clinical programs, and by Mr. Wade who will review our financial results for the third quarter and discuss our financial guidance. We will then open the call to your questions. If you would like to view the slides for today’s call, please access the Lexicon website at www.lexpharma.com. You will see a link on the homepage for today’s webcast. Before we begin, I would like to state that we will be making forward-looking statements, including statements relating to Lexicon’s research and development of LX4211, LX1031, LX1033, LX2931, LX7101, and telotristat etiprate, also known as LX1032, and the therapeutic and commercial potential of those drug candidates. This call may also contain forward-looking statements relating to Lexicon's future operating results, financial arrangements, cash and investments, discovery and development of products, strategic alliances, and intellectual property. Various risks may cause Lexicon’s actual results to differ materially from those expressed or implied in such forward-looking statements, including uncertainties related to the timing and result 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 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 Alex and good morning everyone. We would like to spend most of this call discussing two important new sets of data relating to our lead programs, LX4211 in diabetes and telotristat etiprate in carcinoid syndrome. So the first part will be focused on LX4211 and a detailed analysis of the very recent presentation of our data at the American Heart Association Annual Conference, which was today. For that discussion, I will turn Brian Zambrowicz and lets go ahead and begin with that. Brian?

Thank you Arthur and just to remind everyone, LX4211 is a first-in-class dual inhibitor of two glucose transporters, SGLT1 and SGLT2; and SGLT2 is the major transporter involved in glucose re-absorption in the kidney. SGLT1 is the major transporter involved in glucose uptake in the gastrointestinal tract after a meal. And it is SGLT1 component of the mechanism of action of LX4211 that differentiates from the selective SGLT2 inhibitors. Next slide. I would like to remind you again that design of the Phase 2b study was done in patients with uncontrolled diabetes on metformin monotherapy. There were 299 patients enrolled and there were five arms, placebo and four different doses of LX4211 were explored; 75 milligrams once a day, 200 milligrams once a day, 200 milligrams twice a day and 400 milligrams once a day and it was a 12 week dosing period with the primary endpoints being changed from baseline in HbA1c at week 12. Next slide. These are few slides to remind you the topline data, first of all, the effect of LX4211 on hemoglobin A1c overtime. We are going to focus in these slides specifically on the 200 milligram dose group in blue and the 400 milligrams once daily dose group in black. We are very pleased to see a robust effect on hemoglobin A1c particularly with the high dose group in black where we have 0.95% reduction relative to a minus 0.09% reduction in green for placebo. We saw a minus 0.52% reduction in the 200 milligrams once daily dose group in blue and we are really struck by this large improvement in HbA1c between the 200 and 400 milligrams once daily dosing groups and an additional 0.43% reduction in hemoglobin A1c. If we go to the next slide, we saw a very similar pattern for…

Thank you Brian. (inaudible) is a serotonin synthesis inhibitor. To understand, added (inaudible) the Tryptophan hydroxylase enzyme that produces serotonin. It’s absorbing to the peripheral circulation but does not cross the blood brain barrier. And that gives the opportunity for Tryptophan hydroxylase to be used in the treatment of carcinoid syndrome. This syndrome resulting from metastatic carcinoid tumors that’s a life threatening tumors that produce large amounts of serotonin causing diarrhea and flushing pain and cardiac vascular disease. So let's just elaborate it as Fast Track and Orphan Status from the FDA, as Orphan status from the European Medicines Agency. We also have a (inaudible) on going with telotristat etiprate and ulcerative colitis. Recently, we presented at the North American Neuroendocrine Tumor Society results of the open-label Phase 2 study in patients with carcinoid syndrome. This was a 12 week open-label dose escalation studies, patients started on a 150 milligrams three times a day and over the course of the trial increased to 500 milligrams two times daily and spent the last six weeks of the study on the 500 milligrams two times daily dose. The patients have been offered an open-label extension. 15 patients are studied; these are patients of carcinoid syndrome and a minimum of (inaudible) per day. On the next slide, I have the results for bowel movement frequency and the new bowel movement frequency in the patient population was around 6,000 units per day. There were some benefits that were statistically significant even in the first one to two weeks with telotristat etiprate but over time as patients continued on therapy and as the dose escalated, the bowel movement reductions increased an increase in magnitude until we reach a point where the bowel movements reductions goes over 40% patients starting with about 6,000 units per day…

Thank you Pablo. I will provide a brief financial update. As indicated in our press release today, we had revenues for the three months ended September 30, 2012 of $0.4 million consistent with the prior year period. Our revenues of $0.9 million for the nine months ended September 30, 2012 reflected a 42% decrease from $1.5 million for the prior year period. Our research and development expenses for the 2012 third quarter decreased 2% to $19.2 million from $19.7 million in the prior year period. The decrease was primarily attributable to decreases in lab supply personnel and preclinical costs, partially offset by an increase in clinical development costs. Our R&D expenses at $61.6 million for the nine months ended September 30, 2012, reflected a 3% decrease from $63.7 million for the prior year period. A connection with our acquisition at Symphony Icon we made an initial estimate of the fair value of our liability for base and contingent payments. Changes in this liability based on the development of the programs and the time until the payments are expected to be made are recorded in our consolidated statements of operations. During the third quarter, we exercised our option to pay the full $35 million balance of the Symphony Icon base payment in shares of Lexicon stock. As you may recall, we have the obligation to pay this amount on or before July 30, 2013, and we have the right to make a payment a 100% in stock through July 30, 2012. After that time, we would have been obligated to make at least half the payment in cash. The stock price used to calculate the number of shares issued $2.644 cents was the average of the closing prices of our stock over the 20-training day period ending immediately preceding the second…

Thank you, Jeff and we can now take questions.

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

Matt Lowe, in for Cory today. Just a couple of questions. The first one is just around the partnering talks of 4211; I am just wondering how those talks are coming along; any specifics you can share with us in terms of what you might be looking for from a partner, timing or anything like that? And then secondly, if you could just outline the market opportunity for carcinoid syndrome that would be great? Thank you.

Thank you Matt. I will just lead off by saying that the whole process is proceeding very, very well. It’s a robust process and I think for some of the more color and detail we can turn to Jeff who is actually leading the process on our behalf. Jeff?

So as Arthur mentioned, we've been very pleased with the process overall and with it’s progression. And it continues to be our objective and expectation to complete a partnership before Phase 3 launch and we are continuing to work towards Phase 3 launch in the first half of 2013 from that perspective.

There was also a question about structure and…

Yeah, we are talking with companies about, we are still talking to companies about different types of structures at this point and so our key is to progress the program forward. We are obviously expecting a partnership to be a big driver in terms of funding that development program going forward.

And then the next part was on carcinoid syndrome.

So carcinoid syndrome is a disease that affects approximately 10,000 patients in the US and it’s proportionately similar in Europe. There are a sizeable proportion of those are refractory to existing therapy which is a octreotride therapy and our trials have been designed to address that refractory population. So we are going in on top of octreotride therapy. Typically, we are told that people who have carcinoid syndrome get some relief initially usually from octreotride therapy and then with then 12 to 24 months on average they cease to get relief from that and it’s a long disease that people suffer with for a long time and they continue on octreotride therapy for a number of years and we will be going on top of that in the patient population that is not achieving adequate relief. So we think it’s a meaningful and substantial market opportunity for Lexicon and one that we can address on our own and which is why we are taking it forward in Phase 3.

Your next question comes from the line of David Friedman with Morgan Stanley.

(Inaudible) Just a follow-up on the last question regarding your partnership for 4211, it sounds like you guys are planning to go forward into Phase 3 no matter what, is that correct, and if that's the case do you feel like securing a partner while the Phase 3 is ongoing is a possibility or if we don't see a partnership before that Phase 3 starts are we then going to wait for the Phase 3 data to potentially see a partnership. Thanks.

So I think our expectation and our plan is to have a partner in place before we launch Phase 3. It’s an expensive development program and that's our plan and that's our expectation, and we will expect to have that in place before we actually launch the studies.

Your next question comes from the line Liana Moussatos with Wedbush.

Can you give us an idea when we would expect data from the Phase 2 LX4211 in renal impaired and the Type 1 diabetes Phase 2, and then also, I know it's longer-term but the Phase 3 for carcinoid and the Phase 3 for diabetes, would that be more of end of 2014 or 2015?

Okay, So Pablo I know you that your remote location there at the AHA meeting, would you care to comment on the first part of that regarding the 4211 results and renal impaired and type 1?

Yes. For real impairment, we're actively recruiting several size, it's up and running, and we hope that we can recruit within the next four months and so patients are treated for only about a week. So we would have results for you in the first half of 2013. The same thing with LX4211 and type 1 diabetes. We recently initiated a study, we got several sites up and running and it's a study of a similar size to that in renal impairment and hope we can have results in the (inaudible) timeframe. So sometime in the spring of 2013.

Excellent. And then the second part of the question was regarding the completion, the enrollment period for carcinoid syndrome, we're forecasting 18-months of enrollment period from initiation, which would make the total study time to completion approximately two years from now. And then the 4211 Phase 3 plan Pablo in terms of that’s a farther out to forecast, but you want to comment on the planning with regard to timing and the completion of that study of 4211.

Yeah these Phase 3 programs in type 2 diabetes have generally taken around 3.5 years, and we’ve looked at our program which is a similar size to others and these really can be done in a similar time frame. And so that means that we will have a filing sometime in 2016.

Any new products coming in the clinic next year?

Brian do you want to comment on those (inaudible).

Sure. We believe we will have one; we have a diabetes programs that’s come along it’s an SGLT1 inhibitor that remains in the gastrointestinal track produces virtually no systemic exposure and new urine glucose excretion. And we think it may be a particularly a [peeling] agent for the renal impaired where since I can’t benefit really from the SGLT2 inhibition there is no sense in bringing drug on board. And then in addition we think that there may be patients who don’t tolerate the SGLT2 inhibition due to increased infection susceptibility. So that compounds working really good. We have currently IND enabling studies.

Do you have an LX number for that.

Yes, it’s LX2761.

Your next question comes from the line of Alan Carr with Needham & Company. Alan Carr - Needham & Company: A couple of them; one of them in your discussions with pharma. I am wondering, if you can give us a sense of where their priorities are in terms of get around a doubled SGLT2, SGLT1 inhibitor, are there certain parameters where you’ve realized your HbA1c that ranked higher than others. And then also I am wondering in your longer term extension for Telotristat and carcinoid syndrome and extension trail their, can you comment on any of the efficacy trends in the longer term and did they flattened out or are there continued improvement since some of those parameters?

Okay, Brian. We want to take the first of that.

Sure I can comment. I think that in our discussions with pharma, I think that at this point quite convinced of the meaningful affective SGLT1 edition and obviously I think they are pleased with the robust effects we get with LX4211 on glycemic control. Obviously they consider the blood pressure and [late] affects of peeling as well. But I think what stands out is that we have multiple opportunities for differentiation, that there is clearly the opportunity to straight up differentiate based on overall glycemic control on HbA1c effect. There is an opportunity to differentiate on safety and I have given you the mechanics of reasons why on any adverse events way to here in glucose excretion should be less with LX4211 and with the selective SGLT2 inhibitor. And then we have these other opportunities in the renal impaired that can back [safe] from SGLT2 in addition in type 1s with the two and mechanism of LX4211 and it’s the unique synergy with DPP forum. And I think, so overall it’s a very appealing package and I would even argue that not only do we have multiple opportunities to differentiate, but I think we have a very strong possibility on differentiating on every one of those.

And I think the second part of the question was on the durability of the activity of telotristat etiprate in carcinoid syndrome at least as we see it currently in 12 weeks which is the same treatment period for our Phase 3 program. Pablo do you want to comment on what you see in the trends.

Yeah, so the overall trend that we saw upto 12 weeks is an improvement in efficacy over time as patients went up in dose and took the drug along the (inaudible). We do have some experience now with long term extensions and there is one patient who has even taken telotristat etiprate for over two years it’s a long term extension, and from that we are comfortable with the profile that we are seeing and it seems that patients are maintaining benefits. Alan Carr - Needham & Company: So from 12 weeks and beyond you see the same benefit maintained.

Yes.

Your next question comes from the line of Nicholas Bishop with Cowen and Company.

I have a question around the telotristat phase 3 trial design and that is I am not sure that I see an example in your Phase 2 experience of challenging patients immediately with 500 milligram dose and so I am wondering what elements of the trial there are that gives patients the ability to switch arms perhaps or dose deescalate if they have difficulty tolerating the 500 milligrams and just what elements of the trial are on the (inaudible) issue.

Pablo would you like to clarify some of the design points in the trial and regarding dose.

Yes. In the 500 milligram arm patients spend a week first at 250 milligram. It was not fairly necessary, but we chose to do that because we have such good experience of titrated medication in the open label study. In the placebo controlled study, we thought there might be some nausea with an issue being just at the 500 milligram dose and we really didn't see much nausea in the titration regime. So as patients continue on the 500 milligram dose, in the Phase 3 trial we will give the option to [anti] titrate based our discussions with the medical monitor and consideration of issues with tolerability. With the European experience there was only 1 patient that was titrated down from 500 milligrams out of 15. So we feel most patients would be staying at 500 milligrams two times daily.

And then just one follow-up, regarding the glaucoma data that you reported in August. Just curios as to whether in your view this rises the level of proof of concept, should we expect to see more data from this compound in the future.

Brian, you want to comment on that.

Sure. First of all we are really pleased as far as the mechanism of action working. So as we went in based on the macro data, we of course have hypothesized that LX7101 would lower intraocular pressure and it did and it significantly lowered intraocular pressure. And secondly our hypothesis based on the genetics was that it would be safer as far as tolerability and than the low kinase inhibitors. And we in fact saw an extremely favorable safety profile. So I think again I think its another example of the (inaudible) predicting what the small molecule inhibitor would do. So we think there is still room to work on the magnitude of the effect. Because of this nice safety window and we will be talking to potential partners and considering what might be the best way to proceed.

Your next question comes from the line of Kevin Kedra with Gabelli & Company. Kevin Kedra - Gabelli & Company: I have a question around partnership talks. Given that, it sounds like it's going to be more of a first [effect] of 2013 event if you guys try to partnership, is the upcoming FDA decision on (inaudible) playing any role there or company’s waiting to maybe read out how the FDA is looking at that product before they instead of making an investment in another drug in the SGLT class?

Yeah, I don’t really think so. I think that the data that they presented so far is not really totally relevant because we're operating on to different mechanism with the dual mechanism but I think that and so I think that progression of discussions don’t really, are not really affected by the timing of the J&J, but we don’t expect them to be affected by the timing of the J&J regulatory process.

I want to say that from our discussions, I would say in there is general an acceptance of the fact that the SGLT-2 class is coming and it's inevitable and there is, we never really gotten into a discussion that those sort of events would getting, for what we're talking LX4211? Kevin Kedra - Gabelli & Company: Okay, and in regards to the recent cash raises, I was wondering if you could just give a little bit more clarity I want know what your motivation was for that, was there specific upcoming trials that you were thinking about or was this just sort of an opportunistic raise? And perhaps along that line when you think about LX1033 I know that we are going to get the read on the Phase II next year but if that data come in positive and you like what you see is that a program that you would consider taking to Phase III yourself or would that be partnered out?

So I think I can address both those questions. So, one of the reasons for doing this capital raise was to allow us to pursue a more robust Phase III program for carcinoid and to continue to have a good cash position post the Phase III data for that program. So that was one of our motivating factors in proceeding with those offering. The other thing that it allows us to do is to progress with Phase III preparations for 1033 during the period after we get the data and in parallel with partnership discussions but without delaying the progress to Phase III. I think that our expectation at this point anyway would be that we would partner that program. Ultimately, I think that it is an indication where partnership makes a lot of sense and I think our current expectation would be that we have partner that before we get fully into the Phase III program, but this does allow us to make those preparations without having to delay while we are having those partnership discussions.

Thank you for your question. Are there any other questions?

Your next question comes from the line of Stephen Willey with Stifel Nicolaus. Stephen Willey – Stifel Nicolaus: I know you guys are doing some preliminary work in terms of trying to sketch out some at Phase III program for 4211, but I was wondering in your conversations to various potential partners at this point. How much had (inaudible) is there in terms of what people perceive they want to have done in terms of a Phase III program, I guess that is one question and kind of a couple of subparts of that, one, do you get the sense that there are partners that would potentially want to dose escalate beyond 400 mix once daily, just given the fact that you still seem to have decelerating HbA1c and not a facility and kind of dose dependency related [AEs]. And then two, the strategy for exploring a DPP-4 combo, would that be something that would try to be developed using a fixed dose combination or would you imagine that you would be essentially taking two separate pills and maybe lying a quick little bit of bridging study to try to get something fixed dose into the clinic?

Okay, so the three parts. The first part Pablo, if you care to comment on any of the consensus around the Phase III program and our stage, I know you have been directly involved with the EMA discussions and remember coming up on our FDA meetings but go ahead on the overall plans of Phase III first.

Sure, with the Phase III we have seen a lot of agreement among potential partners. And I think part of the reason is because we’ve had so many regulatory interactions. And we started to do this early on in a proactive manner by going to the United Kingdom to Germany and Austria, (inaudible) which questions about the Phase III program and the program that was well outlined, and that gave us a lot of good feedback and it was something that we shared with partners as well. They [start] regulatory minutes, supporting our overall direction including the cardiovascular outcome study in Phase III and since then we've had very recently just two weeks ago are into Phase II meeting with the European Medicines Agency and so we have our own minutes from that and we will be expecting official minutes soon from the European Medicines Agency and we were very satisfied with the interaction and that's something we are sharing with our partners and that's helping both consensus around the program. The interaction with EMA was very favorable in the sense that there were no issues from the bar going forward into Phase III. There was overall acceptance of the program, the dose selection. There were no comments about significant efficacy or safety issues of the 400 milligram dose. So we are waiting for a formal advice and the minutes from the European Medicines Agency but we have a good interaction that helps us go forward in both consensuses with our partners.

The next part of the question was regarding the dose and [outlined] forward with the single dose of 400 milligrams and I think that's actually fairly easy to answer. There really has not been any discussion around that being different and the 400 looks like the logical dose to take forward in the Phase III program. Our partners seem to agree with that and as Pablo indicated so far the regulatory interactions has been consistent there. So that's good I think in the future and later stages of the Phase III program our post filing one could consider exploring other doses but that would be for another day. Then the last part of the question was on the accommodation of DPP-4 and our staging of that in the Phase III, current Phase III plan and any potential plans for fixed dose combinations. Pablo, do you want to talk about the staging of the initial trials?

Yeah in Phase III we do want to have data on we are comparing efficacy and safety versus a DPP-4 inhibitor and so we have that in the program but when we compare ourselves to the DPP-4 inhibitor, we also have a dose sign that will have a combination of LX4211 and the DPP-4 inhibitor. So we hope we’ll able to show synergy as we've done in a smaller mechanistic study that we released last year. And we think that will help us prepare for the eventual development of other fixed dose combination.

In Phase III those would be given as separate agents but certainly given the general dosages of DPP-4 inhibitors and 4211 one could contemplate fixed dose combination in the future. Stephen Willey – Stifel Nicolaus: And I guess along those lines, is it kind of safe to assume that a number of the parties that you are speaking to at this point also have a bit of a budding interest in the DPP-4 space as well?

Yeah, so it’s safe to assume and it’s obviously something that we are navigating as well. So it’s another interesting dimension of the whole set of discussion. So I think you can start to see each of these avenues of opportunities from 4211 when you look at the multiple indications that Type 1 diabetes, renal impairment, the positioning in Type 2 diabetes and then also then the combination of opportunity. It opens up a number of lines of discussions that have to be thought through very carefully and we are progressing those.

(Operator Instructions) Your next question comes from the line of [Zick Bigelow], a Private Investor.

My question was recently answered, I think somebody else asked. I was just trying to get some added color on the capital raise and I think you just talked about it. So thanks.

Okay, listen, thank you all. It's been a very robust question and answer period. A lot of excellent questions. We covered a lot of data today and I think we've taken up a lot of time. So at this point, I think we would like to thank you all and say good bye.

Thank you. This concludes today’s conference. You may now disconnect. Speakers please hold the line.