Lexicon Pharmaceuticals Earnings Call Nuggets: Partnership Talks Update and Carcinoid Enrollment

Lexicon Pharmaceuticals (NASDAQ:LXRX) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Partnership Talks Update

Matthew Lowe – JPMorgan Securities: It’s actually Matt Lowe in for Cory today. Just firstly on 4211, if you could update us on the partnership talks, the level of confidence you have that a partner will be in place before Phase III and maybe the potential timing of Phase III initiation. And then, secondly on the importance of the Type 1 diabetes data, I guess how meaningful is that data towards ongoing negotiations?

Arthur T. Sands, M.D., Ph.D. – President and CEO: Jeff, you want to start off with that.

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Jeffrey L. Wade, J.D. – EVP of Corporate Development and CFO: So I’ll take the first part of that question. We’re continuing to make progress in our partnership discussions and our objective remains to move into Phase III with a partner this year.

Arthur T. Sands, M.D., Ph.D. – President and CEO: And the second part of the question was regarding Type 1. Pablo, would you like to address that piece regarding the importance of the data?

Pablo Lapuerta, M.D. – SVP of Clinical Development and Chief Medical Officer: Yeah. We recognize that this is only a few patients, but for us it’s really helped us develop a vision for the product profile in Type 1 diabetes and we’re excited about that profile, and we believe that LX4211 could offer improved glycemic control, reduced and sometimes on regimens and have patients spend less time in hypoglycemia. And we think that’s relevant to people who are in development of agents for Type 1 diabetes.

Arthur T. Sands, M.D., Ph.D. – President and CEO: And then I think just the last half of that question Matt, with regard to the implication for partnership, we have viewed Type 1 diabetes as an opportunity for Lexicon to take the lead role in a highly specialized indication, and so I think this is important in that regard because it does allow us to outline a path forward that having seen the initial safety and initial efficacy (indiscernible) patients, we’re able to move our program forward. So I do think it does have some important implications for our partnership opportunities and our ultimate commercial opportunities…

Pablo Lapuerta, M.D. – SVP of Clinical Development and Chief Medical Officer: I’d like to say one last thing it’s that the Type 1 is very well suited for LX4211 because of the SGLT1 mechanism. Even though both mechanisms are insulin independent and both could offer value to Type 1 patients, in particular by inhibiting SGLT1 in the GI tract you reduce the absorption of glucose, and therefore you have a reduction in postprandial glucose, and that we believe has an ability to reduce the needs for basal – I’m sorry, for bolus insulin in patients with type I diabetes, allowing lower dosing. And I think that’s a unique opportunity where LX4211 has a special fit.

Matthew Lowe – JPMorgan Securities: And then just a quick follow-up for the Phase II data for both UC and IBS, maybe if you could just briefly outline what you’re looking to see in those readouts to consider the trial as a success and for the drugs to represent differentiated products in those two indications?

Pablo Lapuerta, M.D. – SVP of Clinical Development and Chief Medical Officer: For telotristat-etiprate in ulcerative colitis, one thing we have to keep in mind is that this is a proof-of-concept study of 60 patients, 25 on a high dose of telotristat etiprate, 25 on a lower dose, and only 10 on placebo. And as a result, we don’t expect a significant difference in formal comparison of treatment groups. What we want to see is we want to see a usable grade of clinical improvement in remission on telotristat etiprate with a high dose, we want to see it get to 60, and we want to see overall a relationship between 5-HIAA reduction that telotristat etiprate provides an clinical improvement. Your other question was about IBS I believe?

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Matthew Lowe – JPMorgan Securities: Yes.

Pablo Lapuerta, M.D. – SVP of Clinical Development and Chief Medical Officer: Yes for LX1033 in IBS, we have a primary end-point of reduction in stool consistency and that’s based on our experience with this class. We believe that our data will be robust in order to test that. And we want to see as well, though, a clear path forward for our biomarker. We’ve talked about the use of a biomarker in this setting, and we want to be able to make a decision for Phase III in (fiscal ’14) and treating all subjects with the improvements in stool consistency and other patient reported outcomes or do we do this while we use a biomarker perhaps to evaluate continuity of treatment or to adjust this.

Carcinoid Enrollment

Phil Nadeau – Cowen and Company: First, could you give us an update on the carcinoid enrollment, specifically because it still seem like the data are on-track with 2014 in the Phase III trial?

Pablo Lapuerta, M.D. – SVP of Clinical Development and Chief Medical Officer: Yes we believe we are on track to a complete enrolment in 2014 for Phase II in carcinoid syndrome. We’re still in the – part of that is site startup, and at the last earnings call I had described a recent investigator meeting in Europe. Now we’re seeing a (big bolus) and European sites getting onboard.

Phil Nadeau – Cowen and Company: Then second on the Phase II in Type 1 diabetes. Could you give us some sense of what change in insulin would be meaningful in your eyes and also are you – second related question, are you handling basal and short-acting insulin the same in the primary end point or is there differential way put on the two different types.

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Arthur T. Sands, M.D., Ph.D. – President and CEO: I’ll handle that one. The primary end point is total insulin, but with respect to the significance given with – on bolus versus basal, I think given the unique mechanism of LX4211, as Pablo pointed out, on the postprandial glucose effect, I think we would anticipate bolus insulin will be more effective, which could have very positive implications for the lifestyle of the Type 1 diabetic as they navigate their day. Now with respect to what’s significant, we’re really not getting into predictions about the numbers yet with regard to insulin use and what would be considered significant, because that of course has to be considered in context of what happens with the blood glucose control. And so it’s really both parameters that we’ll need to look at in order to gain confidence about significant impact I’d say on the disease. And then the last point being safety. This is a fairly fragile population with respect to insulin controls, and so that also will be taken into account in determining overall significance. But I can tell you we’re encouraged by the first three patients we’ve seen and you can learn a lot from those case studies, and I think we have…

Phil Nadeau – Cowen and Company: Could you give us some sense of what reduction in insulin those three patients had?

Arthur T. Sands, M.D., Ph.D. – President and CEO: Again, we’re not going to be quantifying it because it’s only three patients, and we do think this trial will complete in really short order overall, and then we will be able to give you a better feel, and especially since the three patients were open label and baseline controlled versus real placebo-controlled, so we really can’t give you a quantification until we have that placebo group. But we needed to do the open label to establish safety so that we could run a placebo group side-by-side effectively.

Phil Nadeau – Cowen and Company: And one last question for me, thanks for the update on the SGLT partnership. Did you learn anything from the recent SGLT-2 partnership that was signed and do feel like the landscape has changed at all either because that partnership was signed or because of the advances in development that you noted in the SGLT2 field since the last call?

Arthur T. Sands, M.D., Ph.D. – President and CEO: (NASDAQ:BEST), do you want to lead off on what we learned from the Merck-Pfizer?

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Unidentified Company Speaker: Yeah, I think that that’s demonstrated greater acceptance of SGLT2 mechanism. It does add another competitor to the selective SGLT2 space. Although it appears that their focus is largely on third-line combination therapy and I would say that based on the data that we’ve seen the profile of that compound looks very similar to the profile of the other selective SGLT2 inhibitors. But I think clearly our compound with the SGLT1 mechanism of action has a quite different profile and although we share that SGLT2 mechanism, the effects of that SGLT2 mechanism with 4211 in the fundamentally different class.

Arthur T. Sands, M.D., Ph.D. – President and CEO: I think the only thing I’d add to that is that, this new deal has no direct impact on our partnership process, although it most likely will have an indirect positive impact on our process.

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