Arena Pharmaceuticals, Inc.
Q4 2017 Earnings Call Transcript

Published: 14 Mar 2018

[Operator:]

Good day everyone, and welcome to the Arena Pharmaceuticals' Fourth Quarter and Full Year 2017 Financial Results and Corporate Update Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session, instructions will be provided at that time for you to queue up for questions. I would now turn the call over to Kevin Lind, Chief Financial Officer of Arena. Please go ahead.

[Kevin Lind:]

Good morning everyone. Thank you for joining us today. We hope you had a chance to review the news release we issued earlier this afternoon announcing our fourth quarter and full year 2017 financial results. Joining me on today's call are Amit Munshi, our President, Chief Executive Officer and Dr. Preston Klassen, our Chief Medical Officer. Before we begin, I'd like to remind you that we'll make forward-looking statements that involve risks and uncertainties, including statements about our focus, plans, goals, strategy, expectations, clinical programs, R&D, regulatory activities, operations and plans, transactions and other statements that are not historical facts. These statements are made in the context of the risks and uncertainties that are discussed in our filings with the U.S. Securities and Exchange Commission, which can be found on the SEC website at www.sec.gov and include risks related to the amount and allocation of our available financial and other resources, regulatory decisions and discussions, patient recruitment for our trials is competitive and challenging and may take longer than we project, data related to drugs and drug candidates and the timing of that data may not be as expected or sufficient for further development, regulatory approval or commercialization, and the collaborative and transaction activities. Our actual results may differ materially from our forward-looking statements. Now I'd like to turn the call over to Amit.

[Amit Munshi:]

Thanks, Kevin. Good morning everyone, and thanks for joining our call this morning. During my comments today, I will provide pipeline and corporate updates as we continue to advance our most promising product development programs. Preston will provide additional detail on what we believe to be a game changing, comprehensive Phase 3 program for ralinepag. Following this, Kevin will provide a financial review of the fourth quarter and full year 2017 results and we will as always conclude by taking questions. We are very proud of the progress we made in 2017, but importantly we remain focused on the work ahead and are enthusiastic about the opportunity to execute on our pipeline in 2018. We have an exciting year ahead with significant catalyst starting with our Phase 2 clinical data readout for etrasimod in ulcerative colitis coming this month. Our Phase 2 readout for APD371 for pain associated with Crohn's disease in Q2 and initiating the Phase 3 clinical program for ralinepag and importantly, expanding our pipeline in the second half of 2018. So let’s about ralinepag, last year we delivered what we believe to be unprecedented positive topline results from our Phase 2 study for the treatment of WHO Group 1 pulmonary arterial hypertension or PAH in the population with the significant majority of patients who are on dual background therapy. With the strong belief that ralinepag is the potential best-in-disease product, our Phase 3 program is designed to elucidate the benefits of ralinepag in a broad patient population and importantly raise the bar for the treatment of PAH. So with that, let me turn it over to Preston to review the details of our plans. Preston?

[Preston Klassen:]

Thanks, Amit. The ralinepag Phase 3 program is designed to be comprehensive, consisting of two global registrational studies, each of which is designed to stand alone for a registrational filing, and a third non-registrational trial to provide evidence of differentiation for healthcare providers. We believe this program will create a comprehensive package to elucidate the benefits and appropriate use of ralinepag. The Phase 3 program starts with the fundamental motion that we believe ralinepag is the best-in-disease drug candidate as a result of its improved receptor potency and extended pharmacokinetics enabling the profile closer to the IV prostacyclins than any other oral prostacyclin analog. We believe that patients across the treatment continuum can benefit from this important medication and the Phase 3 program is designed to enable greater access to patients, including first line therapy through to add-on therapy in refractory patients. To accomplish our objectives, we intend to run independent registrational trials in both newly diagnosed patients first line or Incident patients, and in Prevalent patients who are already receiving therapy for example, an ERA and oral PDE5. Our registrational study covering first line treatments of newly diagnosed patients will utilize ralinepag compared to placebo in combination with both, a PDE5 and an ERA, which represents upfront triple combination therapy. In this study, we will focus on exercised capacity improvements, which we had confirmed with FDA can support our registrational filing and we will be looking at exercised capacity using both cardiopulmonary exercise testing or CPET along with six minute walk distance. We believe that CPET is a more informative and sensitive measure of exercise capacity and includes key endpoints such as [Indiscernible] and the VE over VCO2 slope. As we finalize the protocol, we will provide greater detail regarding specific primary and secondary endpoints, statistical power and assumptions and keep timeline milestones for the trial. I will say that we anticipate enrolling around 250 patients, and we plan to initiate this study in the second half of this year. Our second registrational trial is a robust time to clinical events or outcome study, in a prevalent patient population, patients who are on either single or dual background therapies, requiring additional intervention. We believe this study will give us a broad label, and importantly provide, extensive global physician experience with ralinepag. This time the clinical event study will compare ralinepag against placebo on top of standard of care, which again is either single or dual agent background therapy. Similar to prior time to clinical event trials, we will employ composite end point that includes mortality, hospitalization for PAH, PAH disease progression and unsatisfactory response to therapy. And similar to our first line trial we will provide specific detail on endpoint definitions, statistical powering assumptions and timeline milestones for the trial as we finalize the protocol. We anticipate enrolling around 700 patients and we plan to initiate the study very close to the first line therapy trial. I want to emphasize that each of these two trials will be designed and powered to support separate registrational filings as single pivotal trials. While we will share more about time lines in the coming months, we know that an exercise capacity trial will have a fixed treatment duration, while the time to clinical event trial continues treatment and requisite number of events is collected. Conventional wisdom therefore would suggest that exercise capacity will read out first and assuming appropriate results we would file the initial NDA with this and then file a supplemental NDA when the outcomes trial reads out. We also know that the time to clinical event trial will have one or more interim analyses built in, and there is therefore always a possibility for an early readout which could theoretically enable the time to clinical event filing to come first or perhaps allow both exercise capacity and time to clinical event to be filed simultaneously. Because each trial is designed as a standalone, we will have greater flexibility in progressing to one or more filings. Lastly, I would like to touch briefly on a comparative study which we think will provide supportive information at registration and we hope will provide doctors and patients more confidence of the differentiation of ralinepag against the other therapy options mainly of the oral prostacyclin receptor agonist. We will be looking at a range of hemodynamic measures against other oral prostacyclin agonist and we will keep details of this trial confidential until later in the year for competitive reasons. We are taking a much more rigorous and comprehensive approach to ralinepag Phase 3 program than others have in PAH. And we take this approach because we believe ralinepag is a best-in-class and best-in-disease therapy. The three studies I’ve outlined combined, equal what we believe will be a winning game plan for ralinepag and our corporate for the broad range of patients we believe can benefit from this therapy. We look forward to providing further details on our Phase 3 program mid-year as we finalize the protocols and initiate this study. I will now turn the call back over to Amit.

[Amit Munshi:]

Thanks, Preston. Now, I’d like to turn my attention to Etrasimod. We believe this compelling drug candidate has the potential to be the best-in-class S1P modulator than expanded clinical utility to optimize S1P receptor subtype activity if we include PKPD and its potential best-in-class safety profile. We are incredibly excited about the promise of the next-generation S1P class. Given the charisma to optimize receptor pharmacology in ideal pharmacodynamics, we believe the compound has the promise to deliver broad clinical utility in numerous auto immune conditions. As you may recall, we completed enrolment of the Phase 2 trial with 157 patients in November of last year, and we expect to have Phase 2 data for Ulcerative colitis this month. As a reminder, this is a randomized double-blind placebo control parallel group dose ranging study to determine safety and tolerability that is being conducted at a number of sites globally and enroll patients with moderate to severe ulcerative colitis, including specifically a three point component Mayo score of four to nine and includes endoscopic score greater than two and a rectal bleeding score of greater than one. Efficacy endpoints include improvement in the Mayo score, clinical score in total, partial, response remission mucosal healing versus placebo and dose response. We look forward to sharing these Phase 2 data with you soon. Moving onto other indications, we continue to enroll patients in the Primary biliary cholangitis or PBC study. As a reminder, PBC is a chronic liver disease where T Lymphoctes accumulate in liver resulting in destruction of the bile ducts. We view this disease as having significant unmet need and believe that S1P mediated reduction of lymphocyte levels has the potential with sort of a cornerstone treatment for PBC. And finally, the Pyoderma gangrenosum or PG trial is ongoing and currently enrolled in patients. Moving onto to APD371, our peripherally restricted, highly selective full agonist and CB2 receptor. As discussed previously, we believe there is significant unmet need in the treatment of visceral pain as highlighted by the Opioid Public Health Emergency. Approximately one in eight patients with IBD is currently treated with opioids. APD371 with an initial focus on pain associated with Crohn’s disease may be an important therapeutic in this area. The trial is continuing to enroll and we intend to deliver topline data in Q2, 2018. So with that, I’d like to turn the call over to Kevin for a corporate update and our financial review. Kevin?

[Kevin Lind:]

Thank you, Amit. I’d like to start with a brief discussion of our Swiss manufacturing operations. On Monday, we announced the deal to sell our manufacturing plant in Zofingen, Switzerland, to Siegfried. We did this for two reasons; first, managing the plant was a management distraction at a time when we are focused on our clinical pipeline and operating at the commercial manufacturing outsource not part of our long-term strategy. Second, the plant was expected to loose significant amounts of money without the support payment from Eisai, which are expected to go away in the future. Now, I’ll provide a brief review of our fourth quarter and full year 2017 financial results here and more detailed results are discussed in our press release. For the fourth quarter, revenues were $15.4 million consisting of $14.2 million in collaboration revenue and $1.2 million in royalty revenue from Eisai, included in the collaboration revenue is $12 million of upfront fees we receive from Everest in connection with the development and commercialization partnership which we entered into in the fourth quarter. For the full year, revenues totaled $21.3 million consisting of $19.6 million in collaboration revenue and $1.7 million in royalty revenue from Eisai including the upfront payment from Everest and approximately $7.3 million of revenue associated with upfront payments from Boehringer Ingelheim and Axovant collaborations. In terms of cost, research and development expenses totaled $20.7 million in Q4 and $71 million for the year. G&A expenses totaled $8.3 million in Q4 and $30.3 million for the full year. We had a litigation settlement expense net which was recorded in the previous quarter related to the tentative settlement of the 2010 securities class action litigation which totaled $12 million. Discontinued operations income of $3.1 million includes all revenues and expenses associated with our manufacturing operations that are classified as held-for-sale as a result of our planned divestiture resulting in facility. Net loss for the quarter was $13.7 million or $0.35 per share. Net loss for the full year was $91.4 million or $2.77 per share. At December 31, 2017 cash and cash equivalents and investments balance was 271.3 million and approximately 39.3 million shares of Arena common stock were outstanding. With that, I’ll turn it back over to Amit.

[Amit Munshi:]

Thanks, Kevin. In summary, our focus remains to deliver these important potentially transformational medicines to patients for this grievous condition. We remain focused on executing a successful Phase 3 program for ralinepag, delivering Phase 2 results for etrasimod in ulcerative colitis this month and delivering on the promise of APD371. We believe these compounds with their optimized receptor pharmacology and broad clinical utility all have the potential with best-in-class or best-in-disease agents. We look forward to a busy 2018 ahead of us with multiple value creating opportunities. With that, I’ll turn the call over to the operator to begin the Q&A session. Operator?

[Operator:]

Thank you.[Operator Instructions] And our first question comes from Joel Beatty with Citi. Your line is now open.

[Joel Beatty:]

Hi, thanks for taking the questions. The first one is on ralinepag and the Phase 3 trial design for the accelerated approval setting, how can you be confident in the CPET endpoint, now even though it’s different from what was accessed in Phase 2? Thanks.

[Amit Munshi:]

Okay, hi Joel, this is Amit. Let me ask Preston to comment on that.

[Preston Klassen:]

Yes sure. Just -- probably an important clarification. It's not accelerated approval, it's a standalone registrational study. It’s a typical program that would result in approval of the data are supportive. So exercise capacity is a valid measurement upon which to establish approval for an agent in pulmonary arterial hypertension the FDA has made that clear, and it’s also clear that cardiopulmonary exercise testing is a valid methodology to measure exercise capacity. In fact, the read through measured by PBR are more directly co-related with some of the endpoints that you see in CPET compared to for example six minute walk. So we will be testing six minute walk in this study, but we fundamentally believe that cardiopulmonary exercise testing is a more informative and sensitive measure meaning that it’s important in an incident patient population it will be also receiving essentially best standard of care dual background therapy and then ralinepag or placebo on top of that and we’re confident in our ability to execute this across multiple sites, in multiple countries in an efficient and effective manner to get the readout we need

[Joel Beatty:]

Great. And then a question on etrasimod. Can you talk a little bit about how much data will be shared when you announce topline results, will it be just the primary endpoint of Mayo or did you have other criteria like remission or the breakdown on each of partial Mayo categories?

[Amit Munshi:]

Thanks, Joel. So as you know there’s always a bit of a balancing act between providing data to The Street and being able to retain that information for future publications. And so we’ll be providing of course safety tolerability, lymphocyte reductions which are important biomarkers and then of course the primary endpoint and a few select secondary endpoints and we haven’t disclosed which ones yet, we’ll provide few and we’ll do what we did on the PAH data world and give you enough information to be able to make a comparability assessment versus other products in the category. So we’ll do our best to get as much out as we can while keeping in mind that we have to be mindful of keeping this important balance.

[Joel Beatty:]

Okay, great. Thank you.

[Amit Munshi:]

Thanks, Joel.

[Operator:]

Thank you. And our next question comes from Jason Butler, JMP Securities. Your line is now open.

[Jason Butler:]

Hi, thanks for taking the questions. Just a couple on ralinepag, can you talk about the inclusion of newly diagnosed patients in the Phase 3 plan, any assumptions on how this population could respond similarly or different to the prevalent population you tested in the Phase 2 trial and how you think about the ease of enrolment or speed of enrolment for this kind of patient population? Thanks.

[Preston Klassen:]

Yes, sure this is Preston, I’ll take that. We’ve looked at both the literature and then had extensive conversations with our key opinion leaders who are clinical and scientific experts in the field and believe that the ability to demonstrate a delta from placebo is certainly maintained and potentially even greater in the incident patient population compared to the prevalent population. So this could go lots of different ways that you think about how this comes together, but there’s nothing in our discussions with again our advisors or our read through on our literature that suggests that we would have a diminished ability to detect a difference in terms of ralinepag compared to placebo. What is important is making sure that we are using the proper methodology and using that methodology correctly to measure exercise capacity which is one of the reasons why we’ve added a cardiopulmonary exercise testing to six minute walk to get the best kind of 360 view of exercise capacity. And then so did that answer all the questions that was there in that enrolment there.

[Jason Butler:]

Yes, just on how you think about enrolment of this population given the existing therapies that are out there today?

[Amit Munshi:]

Yes, sure actually I think it’s a benefit in terms of enrolment, because essentially what we are providing any incident patient who wishes to come into the study is best in – best standard of care regardless to which country you’re in the form of dual background combo therapy and then providing in addition, the study drug which is either a new investigation agent, ralinepag, or placebo. So particularly, well, its really across all countries I would imagine that this is an attractive option for physicians. We do know at least one other incidence at triple combo therapy in the space, its non-registrational program, but it is in a space and it is – [Indiscernible] enrolled briskly. And so we’re confident in our ability to execute the study in a timely manner. But again we'll talk more about overall timeline milestones for the study more specific around the study design and statistical powering assumption etcetera once we walk things down and we’ll roll that outcome on our mid-year.

[Jason Butler:]

Great. Thanks for taking the questions and looking forward to the etrasimod in this 371 data soon. Thanks.

[Amit Munshi:]

Thanks, Jason.

[Operator:]

Thank you. And our next question comes from Jim Birchenough of Wells Fargo Securities. Your line is now open.

[Jim Birchenough:]

Hi, guys. Congrats on the progress and thanks for all the details. So just on ralinepag, just trying to understand the patients in the incident population study, were these patients beyond a stable background for some period of time or they just in standard of care before adding ralinepag? Or would you be starting all three at the same time? Just trying to understand how that plays out? And then also, Preston, you mentioned relationship between PVR and exercise capacity improvement and six minute walk improvement. Can you maybe go into bit more detail there? What level of PVR improvement translate into improvement in exercise capacity? Thanks. And then I have a follow-up.

[Amit Munshi:]

Sure. I’ll start with – so can you repeat the first part of that question again?

[Jim Birchenough:]

Yes. Just trying to understand in the incident patient population study, patients to be started on all three at once or would they have to be on dual background therapy for some period of time and stable and then add ralinepag? Just trying to understand logistics to that?

[Amit Munshi:]

Yes. So I’ll answer it at a high-level again, we’re going to go through to the details of mid-year in terms of the specifics around exactly how patients will come in, more details on the protocol, endpoint definitions, that kind of thing. But suffices to say its closer to newly diagnosed patients coming into the study and being placed on the dual background therapy agents and ralinepag or placebowork in a fairly contemporaneous fashion, so we’ll – some of those drugs including ralinepag, need to be titrated and so we’re working at the details of exactly how we layer on for these, but it would not be the case that they would be on stable background therapy for a lengthy period of time because then they would not be incident patients, they would be prevalent patients. Did I answer the part first?

[Jim Birchenough:]

Yes. I guess, just to want to understand in terms of when you start these background therapies as a period of time to derive a benefit, and so just seems like you got a moving part of your starting those therapies and at the same time starting ralinepag. So I guess how do you balance that? I understand that at some point they become a prevalent population patient, but how do you balance the moving target of their own background therapy still being optimized before adding ralinepag?

[Amit Munshi:]

Yes. I think what we’ve seen with other trials and incremental or additional add on to therapy is no -- the diminution of the ability to detect and improvement of one addition over some other kind of combination, I'll just point t point to the AMBITION trial as a good example of that in terms of incident patients and I think two drugs compared to one drug. So we’re essentially just taking it to the next step. We’re testing three drugs compared to two drugs. And we believe that you’ll be able to see that kind of incremental benefit in a similar fashion. And we’ll again provide more detail midyear about the kinds of patients we’re bring into the study, obviously they had to have a certain amount of disability so to speak or disease so that you can be kind of confident that you can detect that difference as you’re adding on three compared to two. So, more detail to follow in terms of specifics around the study design and how patients kind of going to study. And then with regard to your second question on the correlation, I was speaking broadly to a correlation across to continuous variables as you speak, across spectrum as you correlate changes in PVR to changes to the endpoints of six minute walk, you do see that direct correlation and that’s been documented in literature in terms of looking specifically at Peak VO2 and in particularly the slope, VO2 and correlating that with PVR.

[Jim Birchenough:]

And then maybe just one more on etrasimod and maybe for Amit, just maybe that the expectations that you would for the the etrasimod data and what’s the best benchmark for efficacy when we think about things like ozanimod. And then in terms of avoiding class labeling on the heart rate affects, do you think we need to see an absolute absence of heart rate effects or just something less than what we've seen with ozanimod? Thanks.

[Amit Munshi:]

Sure. What we’ve talked about in terms of this study, is fairly straightforward is the Phase 2 study. We’re looking for really three things, safety and tolerability in these patients and I’ll back to the heart rate issue in the moment. The second part we’ll be looking for dose-dependent lymphocyte reduction is a key biomarker for activity of this drug in patient. And then number three we’ll be looking for strong clinical signal across the partial Mayo Score we selected which we think is a robust measure of activity. There’ll be a component of this which we’ll be able to compare head-to-head against ozanimod. I’ll recall that ozanimod made [Indiscernible] on the remission by a single patient. So there’ll be areas you can look at and try to compare, but patient population is different. The studies were not done in a contemporary kind fashion, so couple of years apart two of them; one the studies we’ve done, so there are some differences in terms of thinking about the study. So with all those caveats in the backdrop we’ll provide enough information that you’ll be able to take a look at things cross-trial. The last part of the question around heart rate effects, we’ll see what the data says in terms of what the heart rate effects are. I think as you know, ozanimod uses the titration schedule to bypass heart rates sort of mitigate heart rate effects. We don’t have a titration schedule, so we’ll see what that results in. But we think the heart rate effect is a class are an on-target affect. And we’ll see to the extent that we didn’t see substantial heart rate effect in the Phase 1 study, how they translate into the safety study with patients. And again these are on-target activities for the S1P category and with no titration schedule we’re looking at our non-titrated schedule versus titrated schedule. And I think you can make a judgment whether it’s meaningful or not when we have the data out.

[Operator:]

Thank you. And our next question comes from Jessica Fye with JPMorgan. Your line is open.

[Jessica Fye:]

Thanks for taking my questions. With the ralinepag Phase 3 program now set, what’s your expectation for the cost of the overall program? And when should we expect the first Phase 3 readout? I know you mentioned finalizing the protocols too, can you elaborate on what it is that you’re finalizing with those Phase 3 study designs?

[Amit Munshi:]

Sure. Let’s take those in a two separate parts. I’ll let Kevin to comment on the cost and how we think about that in terms of our – way we financed it. And then I’ll comment on the timing.

[Kevin Lind:]

Yes. So in terms of the cost we haven’t given complete guidance around that, but what we said was that the financing in July of last year should provide us with sufficient capital to get to Phase 3 data and we’re still at that point.

[Amit Munshi:]

Thanks. And then, the second part of the question, Jess, in terms of what we expect on timing, we haven’t disclosed any timing. We’ll do that mid-years when we wrap the protocol. You ask what are we still waiting on the protocol. We’re just kind of pressure testing our own assumptions, running stimulation, making sure that we get this right out of the gate. So, its one of the situations where we definitely want to make sure we’ve got all the all the i's dotted and t’s crossed before we start talking about the details on the protocol.

[Jessica Fye:]

Okay. Got it. And just a couple of more on etrasimod, when should we expect the PBC and PG data and where does enrollment stand in those studies? And then sort of separately assuming positive data and you see – can you just share you latest strategic thinking around that asset and your interest in partnering it versus developing independently in UC? And would you want to see more PBC or PG data before making a call on how to advance the assets. Or does the positive data in UC mean that that's where you'll take it forward?

[Amit Munshi:]

Sure. PG, PBC we haven’t provide any details on timing or enrollment. We’ll continue to enroll those trials as rapidly as we can and we’ll come back to you with details as we get closer to wrapping up enrollment. In terms of the strategic implications on ulcerative colitis and etrasimod, as we – if we’re fortunate that positive data on ulcerative colitis with etrasimod, our current game plan is we will take this forward ourselves in the major markets. As you know we completed a deal in China last year. We’ll be looking at few of the markets where it probably doesn’t makes sense to enter ourselves, but our current game plan is to retain the assets and take it forward in ulcerative colitis, and again, the successful that would be independent of the PBC and PG readout. So that’s the current thinking and again we’ll see what the data looks like and what the market conditions look like. There’s a lot of variables here, but given everything else being equal I think we would lean toward taking this forward ourselves.

[Jessica Fye:]

Okay. Thank you.

[Amit Munshi:]

Thanks Jess.

[Operator:]

Thank you. And our next question comes from Alan Carr with Needham & Company. Your line is now open.

[Alan Carr:]

Thanks for taking my questions. One, around burn; what your expectations for cash burn in 2018? And then with respect to ralinepag, have you completed all your discussions with the FDA? Are there no other questions that need to be resolved with them? And I take it there okay with either the exercise capacity or the event trial either one of those on their own is being adequate for registration?

[Amit Munshi:]

Yes. So, Alan, hi, this is Amit. Let me take the second part that first and then hands up to Kevin to talk about the burn. We don’t disclose as a matter of rule, our ongoing conversations with the agency whether they are single static conversations, meetings or back-in-forth or written communication we – as you know some of these things can be more dynamic than static. So, we have what we need to design our clinical program and when we’re not going to comment you further on regulatory interactions, U.S. or ex-U.S. beyond that. We do believe that both studies independently are registration worthy. So, with that let me ask Kevin to talk about the burn.

[Kevin Lind:]

Yes. Thanks Alan. At this point we’re not really willing to give guidance on 2018 burn, given we’re so close to etrasimod data and that will have a significant impact on the burn as we look at the year going forward. But we still like to give guidance. We expect to give some guidance after we see etrasimod data.

[Alan Carr:]

Okay. And then, I guess, one more thing on etrasimod, you mentioned that you’re assuming a positive outcome, trying to bring it forward and you see on your own and with the U.S., you mentioned that, I believe you’re going to look at some other indications later this year. What are your thoughts on and how many indications you plan to explore in parallel for this drug?

[Amit Munshi:]

Sure. Yes, so I appreciate the question. The way we think about this is, as we previously mentioned we did have a very exhaustive analysis last year looking at 21,000 autoimmune conditions and looking at S1P modulation. And we identified approximately 80 conditions which we think are very interesting for S1P modulation and etrasimod over time. Overlay on top of that some really specific kind of a backdrop around therapeutic area focus, so if ulcerative colitis is successful we’re moving forward. We’ve got PBC in the Hep [ph] space. We’ve got a couple of potential anchors in the G.I. Hep space, so we’ve been looking at additional indications there first before we start expanding beyond that other therapeutic areas. So, we’re trying to maintain some therapeutic focus. And that’s relates really on to the first part of your question which is, if we’re planning to take this forward ourselves its important to maintain some kind of more narrow therapeutic focus as a company. So, when you start thinking about the company forming around a cardiopulmonary franchise and then around a GI hep franchise. So that’s kind of how we think about it and we’ll continue to think about it to the back end of the 2018.

[Alan Carr:]

Thanks very much.

[Amit Munshi:]

Thank you, Alan.

[Operator:]

Thank you. And our next question comes from Joseph Schwartz with Leerink Partners. Your line is now open.

[Joseph Schwartz:]

Great. Thanks for taking my question. I was wondering if you could get your thoughts on the ozanimod RTF and the impact, if you see any on etrasimod. Is there anything that you see the need to do differently now or in addition to what you are already doing for etrasimod in order to address whatever it is you think Celgene have to do for ozanimod now?

[Amit Munshi:]

Yes. Look, we’re – I don’t want to pertain, I know what’s going on inside Celgene and their communications with the agency. I will tell you what we know. We know that we believe we’ve got a far cleaner molecular than ozanimod, as its been well documented in the literature and the European registration documents, European regulatory documents, ozanimod has quite a few active metabolites, some of them stick a lot longer than the parent molecule, and whether or not that’s a cause for concerns for regulators, that we can’t read into that too much. What it does do is begin to diminish the time period and the gap difference between their time to market and our time to market. So I think that’s one important variable for us to consider. And second important variable is that we just fundamentally believe that we’ve got a cleaner compound and we can learn from their experiences as they move forward. But as you know our compound was homegrown and the researchers here at Arena spend a good part of a decade really optimizing these compounds, and so there’s a lot to learn. It’s important to understand that this is a molecule specific, not a class issue. And the information we get from there ongoing discussions with the agencies will of course help us in making sure we can check all the boxes the agencies looking for. So I think it’s fundamentally comes down to the fact that we believe we’ve got a cleaner molecule.

[Joseph Schwartz:]

Thank you. So, on the clinical development for etrasimod you see is obviously become a pretty busy and competitive space in which to execute studies. So, what are the things that you focused on in order to balance expediency with quality [ph] data and what are the things that you think that are in your control versus not in your control in this regard?

[Amit Munshi:]

Sure. Joe, are you talking about backward looking on the Phase 2 study or you’re thinking forward on the Phase 3 study?

[Joseph Schwartz:]

I am just thinking, you know, your current study that will get data on soon, just in terms of execution and the like given enrollment to be challenging. What trade-offs you been willing to make and not make in order to balance expediency with quality data?

[Amit Munshi:]

Yes. So let me talk backward looking. We were not willing to make any trade-off in terms of quality of data. We stuck really tight to a robust quality system in terms of managing the study. In fact if you look back historically, the study took little bit longer than expected to enroll given the broad competitive nature of enrollment in this area. But we did learn along the way that it takes a lot of underground support directly from the company. As you know, the company was relatively smaller about 18 months ago. We put on the ground resources really kind of site by site and in order to study enrolled, but we were willing to compromise in terms of our inclusion criteria whatsoever. What's really promising looking forward in ulcerative colitis is we went through this broad bolus of studies over the last few years and it looks like from all the data we’ve been able to gather our feasibility work that we’re coming off the back end of that. So we’re kind of it’s a tail end of series of a large studies that there where things like biosimilars for example and so the pool of the patient will be coming off of multiple biologics and multiple studies will look a little bit more robust going forward than they have in the last two or three years. So that just sort of them most of these disease to [Indiscernible] and we’re coming up back end of that wave.

[Joseph Schwartz:]

Great. Thank you for taking my questions.

[Amit Munshi:]

Thanks, Joe.

[Operator:]

Thank you. And our next question from Bill Tanner with Cantor Fitzgerald. Your line is now open.

[Bill Tanner:]

Thanks for taking the question. I had a couple of them and maybe for Preston. Obviously with the notion that the company might provide an update in the mid-year timeframe more detail on Ralinepag program. It seem that there has to been some kind of a meeting of the minds between the company and the regulators on the design of the endpoints and just what if you just maybe generally speak to the regulator thoughts on what looks to be a contemporary design for contemporary program. And I guess maybe specifically on CPET certainly would seem that there has been some discussion or debate about that as an endpoint? And then, the second question from the outcome study, I think you made a comment about wanting to increase the physician experience of the drug which makes a lot of sense to us. And just if you could comment little bit on maybe the number of sites or how big of a footprint you think that study could actually create in terms of raising physician awareness with the compound?

[Preston Klassen:]

Okay. Sure. So let me – I’ll start with the question about regulatory, I guess, bit of acceptance of the CPET in terms of exercise capacity, that’s part of the question. So again, just at a high level, we’re not going to get into the details of the back-and-forth that we have had and will have in the future with the agency, but we try to get as much clarity as we can on the on the general direction, its exceedingly clear that drugs have been approved on exercise capacity. In fact most of the drugs in PAH have been approved on exercise capacity. And it’s also seemingly clear that drugs get approved on time to clinical event or clinical outcomes studies. And so that’s not a big stretch in either way that as I’ve described. We intend to have kind of a dual prong approach if you will. We want to cover both exercise capacity -- we’re really wants to cover incident patients and then the broader prevalent patient populations. So we’re looking to get the program to address a broad range of patients. We believe that for each of those, each is conducive to particular kinds of studies with incident population is more conducive in exercise capacity and that enables us to have a fixed duration of treatment. And we think the prevalent population is better served with time to clinical event study which is something we need for a broadest level possible anyway. So again we’re trying to cover a very comprehensive Phase 3 program. Now, we have provided some guidance in the past communications and I’d reiterated that today in terms of FDA discussion around exercise capacity particularly, we just want to make it clear that exercise capacity even today in the day of outcome studies, exercise capacity remain an approvable measure, approval endpoint or construct for drugs in the PAH setting, FDA has made that abundantly clear and not only in our communications but in other public venues. And then specifically I think you referenced us some possible degree of controversy, I’m not sure exactly what that refers to. With respect to the agencies action on cardiopulmonary exercise testing its fairly consistent. They have accepted cardiopulmonary exercise testing endpoints as primary endpoints in other Phase 3 programs. We’ve had specific discussion with them about the methodology, CPET methodology to measure exercise capacity. And as we’ve stated previously and I reiterated today that is on solid foundation. So again we’re not going to talk much more about those discussions. It's just very clear that you can do a time to clinical event study and that gets drugs approved. You can also do exercise capacity study, that can get drugs approved. We’re taking the push to cover the spectrum. And then in terms of the footprints and physician experience, I'm not go into details about the operational elements. As I said we will be providing that detail midyear just at a high level the time to clinical event studies tend to be larger. We are estimating around 700 patients, so as I mentioned in my scripted comment. And so we will provide more detail in terms of the where we expect to get those patients, the number of sites, the geographic regions and what we know about background therapy in those regions and how that will be important to take into account. So we can provide much more of that detail as we lock in everything and as Amit said, we just want to dot the i’s cross the I’s and make sure that we’re providing all of the information we need to at a timely fashion. So that will start around midyear.

[Bill Tanner:]

Okay. Thanks. That’s helpful. Thanks. And just on the last program, I think you mentioned that comparing ralinepag with other oral or prostacyclin agonists, for competitive reason not wanting to reveal much. I’m assuming then when the IND is filed or when the trial is about to start that’s when people would get a sense to as to the specific compounds, ralinepag would be compared against and maybe the answers pretty obvious. I’m assuming that it’s going against the newer agents with those that may have better attraction in the marketplace?

[Preston Klassen:]

Yes. That information will come out certainly earlier than the filing in the IND we would intent to have that information available at the time of the NDA submission. And as you know whenever you start study its goes on clinicaltrials.gov, and there’s certain amount of information and that kind of thing, so I view that study is part of the Phase 3 program, it’s not a co [ph] registrational study. I wouldn't expect to get an indication statement on the basis of that specifically, but we will provide additional information on studies as we begin to implement them.

[Bill Tanner:]

Got it. Okay, thanks very much.

[Operator:]

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Amit Munshi for any closing remarks.

[Amit Munshi:]

Okay, thank you. So thanks everyone for joining us today. We look forward to updating you on our progress as we continue to execute on the opportunities ahead of us. We are excited about 2018 as it shapes up and we’ll be back to you shortly on the etrasimod data. So thank you again.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. And you may all disconnect. Everyone have a wonderful day.