Arena Pharmaceuticals, Inc.
Q4 2016 Earnings Call Transcript

Published: 15 Mar 2017

[Operator:]

Good day everyone, and welcome to Arena Pharmaceuticals Fourth Quarter and Full-Year 2016 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 presentation, we will conduct a question-and-answer session, instructions will be provided at that time for you to queue up for questions. I will now turn the call over to Kevin Lind, Chief Financial Officer of Arena. Please go ahead.

[Kevin Lind:]

Good afternoon everyone, and thank you for joining us today. We hope you had a chance to review the news release we issued earlier this afternoon announcing our financial results for the fourth quarter and full-year 2016. Joining me on today's call is Amit Munshi, our President and Chief Executive Officer. Before we begin, I'd like to remind you that we will make forward-looking statements involving risks and uncertainties, including statements about our focus, plans, goals, strategy, expectations, clinical programs including the timing of results regarding ongoing trials and planned new trials, R&D, regulatory activities 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 & 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, patient recruitment for our Phase 2 trials as competitive and challenging, and may take longer than we project, regulatory decisions, data related to drug and drug candidate may not be as expected or sufficient for further development, regulatory approval or commercialization, collaborative activities and recruiting, and maintaining key personnel. 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 afternoon everyone, and thanks for joining our call. So for today, I'd like to provide an update on our ongoing development of the company, the team, our pipeline really in continuity of the work we started in 2016. And then I'll hand it out to Kevin to provide a financial review of the fourth quarter and full-year 2016, then we'll finish up the call by opening it up to questions. So 2017 is going to be a significant year for Arena as we continue the transformation in critically deliver important clinical data on our pipeline products. Each of our pipeline products has had optimized receptor pharmacology, as we’ll continue to talk about throughout the year as designed for broad clinical utility. I’ll spend more time on each of the clinical programs in a minute, but first like to take a second just to recap last year. 2016 was a transition year and a critical transition year for Arena. We are very pleased with the progress as we are efficiently and effectively transitioning the Company to a product development focused organization. In the last nine months since the arrival of the new management team, we've taken a hard look at our Phase 2 programs, strengthened our board, added key personnel and team to support our strategy, implemented important cost reduction measures, renegotiated our agreement with Eisai, all of these with a goal toward maximizing the value of our assets going forward. So let me start off a little bit of the organization and the team. As we announced last month, we added three new members to our board; Doctors Jayson Dallas, Oliver Fetzer and Garry Neil. Each individual has relevant contemporary experience centered on product development and will add value in steering our clinical and regulatory strategy, commercial planning and corporate development endeavors. I'm thrilled to have their experience on our board. Shifting to the pipeline, we've made significant progress on our pipeline since our last call and I'll start off by talking a little bit about Ralinepag, our oral next generation selective IP receptor agonist targeting the prostacyclin pathway currently in development for the treatment of pulmonary arterial hypertension or PAH. In December, we completed enrollment of the Ralinepag Phase 2. The trial is a 22-week trial which has enrolled approximately 60 patients globally, so the last patient visit should occur in May. We expect to quickly collect, clean and analyze the data and we expect topline results to be available by mid-year 2017. We continue to monitor the PAH competitive landscape including the recent J&J transaction with Actelion. We aim to fulfill the promise of Ralinepag as a potentially best in class oral prostacyclin agonist. And to that end we have initiated an additional trial. This trial is a pharmacokinetic pharmacogenomics trial comparing our existing twice daily formulation of Ralinepag currently being used in our ongoing Phase 2 trial to a new once daily formulation of Ralinepag in healthy volunteers. Our goal is to confirm that our once daily formulation maintains a pharmacokinetics and pharmacodynamic integrity that we believe could provide an additional advantage versus the competition. We expect data from this trial also around mid-year around the time of the Ralinepag Phase 2 trial readout. We continue to believe that Ralinepag is a best in class profile with its high intrinsic potency and activity on human IP receptor and long half life which may give it a potential to be used across a broad range of patients. We're looking forward to sharing the Phase 2 data with you midyear. So I’d like now turn our attention to the strategy for Etrasimod, which we believe has a potential to be a best in class S1P modulator with expanded clinical utility due to its high specificity for the S1P receptor subtypes 1,4, and 5, and steering clear of subtypes 2 and 3 that appear to confer unwanted potential side effects in other compounds. Earlier this year I indicated our new management team was taking a broader view of Etrasimod long-term development and our evaluation would include both reassessing the Etrasimod Phase 2 trial in ulcerative colitis and spontaneously initiating work on important multiple new indications. For the ulcerative colitis trial our objective remains to ensure that the results would be in congruence with the most contemporary perspective of disease treatment and that the end points meet standards for a Phase 2 investigation. It is also critical to bring this program in on plan and on budget. Following our assessment in consultation with regulators, investigators and third-party experts, we've elected to make three important protocol updates to the program that maintain study conduct, integrity, and patient safety and further the probability of a successful trial and a data read out in 2017. Etrasimod Phase 2 ulcerative colitis trial both the 003 placebo controlled phase and the 005 extension phase together branded OASIS were designed in 2012 with certain assumptions suggesting that powering to a sample size of up to 240 patients was appropriate. At that time, the company believed a trial of this size and design had a chance to serve as a registrational study. Given our analysis of the current ulcerative colitis landscape, our position is that this trial is a conventional Phase 2 trial. As such the goal is to assess two important outcomes. First, therapeutic effect versus placebo and second, a clear dose response versus placebo low dose and high dose. Ultimately, we want to know if Etrasimod is safe in ulcerative colitis patients if there's a clear signal suggesting the drug has efficacy justifying continued development. In terms of the changes, first, we are restructuring the primary analysis, which reduces the overall study size to 160 patients. The efficacy readouts will include total male score clinical remission and clinical response both as a composite metric as well as standalone measures. We are very confident that this amended design is well powered to provide us with a critical information required consistent with the study aims. The secondary endpoint including endoscopic improvement, mucosal healing as well as safety measures all remain unchanged. Second, we're allowing inclusion of patients who have failed vedolizumab particularly those who have failed due to adverse events or due to antibody formation. As you know from the vedolizumab clinical data greater than 50% of patients fail to have an adequate response. This will increase the pool of patients that can meet the inclusion criteria of our ongoing trial, which is important in this competitive area of drug development. It also further aligns the needs of patients and today's current standards with the drug’s utility. Third, we’ve modified the maintenance phase of the trial to be an open-label trial. Open-label is the current standard for today's extension trials and as such allows us to make it easier to gain real-time insight into a longer duration of drug exposure and long-term safety. We expect to post the full details of these study design changes on clintrials.gov as soon as practical. In summary, we're taking these actions to align the statistical and study plan with the primary goals of the study, established a clearer dose response and statistically significant improvement over placebo. Further we are making changes as the disease treatment and regulatory landscape have evolved over the last five years. We expect to report out data on the ulcerative colitis Phase 2 trial by the end of this year. In taking a broader view of Etrasimod’s development, I’ll now shift focus to the additional Phase 2 exploratory trials we have ongoing. As we have extensive experience with the Etrasimod and our strategies to progress the assay taking advantage of its optimized receptor pharmacology to deliver on its broad clinical utility across multiple opportunities, we have planned multiple Phase 2 exploratory trials which we disclosed earlier in the year. These Phase 2 trials include dermatologic extraintestinal manifestations in patients with inflammatory bowel disease, pyoderma gangrenosum and primary biliary cholangitis. Today, we are pleased to announce that we have initiated the trials for the dermatologic EIMs as well as the pyoderma gangrenosum trial. As a reminder, dermatologic EIMs and inflammatory bowel disease are common in both ulcerative colitis and Crohn's disease. Cutaneous disorder is associated with IBD occurring up to 15% of patients and the most common skin manifestations of IBD, erythema nodosum, pyoderma gangrenosum and psoriasis, effect up to 11% the IBD population. There are no treatments currently approved specifically for the treatment of IBD mediated dermatologic manifestations. In March, we negotiated a Phase 2a proof-of-concept open-label study evaluating the efficacy and safety of Etrasimod in IBD patients with active dermatologic extraintestinal manifestations. The objective is to determine the treatment effect on the clinical improvement of these extraintestinal manifestations and to determine the safety profile and tolerability of Etrasimod over a 12-week period. The study will include up to 20 patients with IBD experiencing active dermatologic extraintestinal manifestations and may include psoriasis, erythema nodosum and pyoderma gangrenosum. Separately we've initiated a study in pyoderma gangrenosum. Pyoderma gangrenosum is a rare inflammatory skin disease characterized by painful recurrent alterations. Lesions may occur either in the absence of any apparent underlying disorder in association with other conditions such as IBD. Treatment is challenging for these patients and the prognosis remains unpredictable. In March, we initiated a Phase 2a proof-of-concept open-label study to determine the efficacy and safety of Etrasimod in patients with PG. The object is to evaluate the efficacy, safety, tolerability of Etrasimod and up to ten patients with PG over a 12-week treatment period. We're still working on the trial design for the third of our Phase 2a exploratory trials, Phase 2 trial in primary biliary cholangitis and expect to initiate the study later this year. We will announce initiation study when we initiate it. These trials and future other indications which we may explore important strategic investments to leverage the unique profile of Etrasimod to provide therapeutic benefit to patients and potentially accelerate our kind to the market. To the combination of the ongoing Etrasimod Phase 2 ulcerative colitis trial and our multiple Phase 2 exploratory trials, we expect to amass a robust portfolio of data. That when combined with ongoing market assessments will guide the future development of Etrasimod. Moving on to APD371, our peripherally restricted, highly selective full agonist to the CB2 receptor. We're finalizing the clinical study protocol design and selecting sites for our Phase 2 study in pain associated with Crohn's disease. As we discussed before visceral pain is a brand new area and specifically pain associated with Crohn's disease is a subset of visceral pain. Given that this is a groundbreaking trial we want to make sure we have the right trial design before initiating the study. We will announce when we have achieved first patient first visit and our goal remains to generate topline data by the end of 2017. We’ve previously talked extensively about a medical affair strategy and being able to develop and publish significant amount of publications on our pipeline. I'm pleased to report that we have developed a strong medical affairs capability with a team in place, we're actively developing relationships of patients, patient groups, physicians, and clinical investigative community as we continue to focus on developing our compounds. During the past six months, we have presented data at several major medical meetings and published data in multiple medical journals. The data are now available on our website. Going forward, we will continue to work diligently to publish additional data on Etrasimod, Ralinepag and APD371 globally. In terms of our partnerships, we are pleased to announce that our partner Axovant announced preliminary results from the planned interim analysis of the first 11 patients to complete its Phase 2 study of nelotanserin in Lewy body dementia patients. They've also stated that they expect to initiate a Phase 3 in the second half of this year. So with that I’d like to turn it over to Kevin for our financial review.

[Amit Munshi:]

Thank you, Amit. Our detailed financial results are discussed in the press release. I'll provide a brief review of our fourth quarter and full-year 2016 results. Please note our financials will look a bit unusual from a quarter-over-quarter and year-over-year comparison due to the impact of the Eisai transaction which closed in December. As a reminder, we previously disclosed the cash portion of the Eisai transaction. We received 20 million in 2016, in the fourth quarter, and we expect to receive 13 million over the next two years. I recommend reading our full disclosure for further details. Revenues include a significant amount of noncash items particularly accelerated upfront fees from our lorcaserin arrangement that were deferred and revenues for product sales that were previously required to be deferred upon accounting guidance. Additionally, cost of products sales, R&D expenses and impairment of long-lived assets were impacted by the Eisai transaction. So starting at the top of the financial tables, net product sales were 15.2 million in Q4 and 26.3 million in full year. This includes certain products sales that were previously deferred for both Eisai and Ildong. Other Eisai collaboration revenue was 61.5 million in Q4 and 79.7 million for the full year. This includes some portion of the accelerated upfront fees from our lorcaserin arrangement with Eisai as well as the milestone payments associated with the approval of XR, Brazil and Mexico. Other collaboration revenue was 7.7 million in Q4 and 13.8 million for the full year. This included some portion of the accelerated upfront fees from Ildong, CYB and Teva as well as other revenue from our partners. In total, 66.1 million in Q4 and 72.1 million in 2016 came from the recognition of upfront fees associated with lorcaserin. In terms of costs, our costs of product sales were 5.1 million in Q4 and 9.3 million for the year. This includes 2.6 million associated with the lorcaserin arrangement. R&D was 11.9 million in Q4 and 66.4 million for the year and G&A was 7.3 million in Q4 and 31.2 million for the year. We took an impairment on our assets of 21.8 million with regards to the Zofingen facility which resulted from the Eisai agreement. To sum up, the resulting net income was positive 38.3 million in Q4 and a loss of 22.9 million for the year. EPS was positive $0.16 in Q4 and a loss of $0.09 for the year. At December 31, 2016, cash and cash equivalents totaled 90.7 million and approximately 243 million shares of Arena common stock were outstanding. For the full-year 2017, we expect to have cash burn of approximately 20 to 25 million per quarter or a total of 80 to 100 million for the year. With that I'll turn it back on Amit.

[Amit Munshi:]

Thanks Kevin. So in summary, our single minded focus remains to rebuild Arena into a strong product development company and drive shareholder value. To accomplish this we remain tightly focused on developing our proprietary pipeline in the time and cost conscious manner with a focus on moving our compounds forward. We remain on track to announce data on Ralinepag midyear 2017 with APD371 and Etrasimod data by the end of the year. We believe these compounds with their optimized receptor pharmacology and broad clinical utility have the potential to be first or best in class agents. We look forward to providing you with more detailed updates as these milestones are achieved. So with that I’ll turn it over to the operator to begin the Q&A session. Operator?

[Operator:]

[Operator Instructions] And our first question comes from Alan Carr of Needham & Company. Your line is now open.

[Danielle Brill:]

Hi. This is Danielle on for Alan. Thanks for taking my questions. I first was wondering if you could give us the breakdown of your 4Q revenues, what’s cash versus non-cash.

[Kevin Lind:]

Sure. So as we've moved from the accounting around the Eisai transaction, 4.5 million was under the sell through method, 8.7 million was an acceleration of deferred revenue and 2.0 was a sales price adjustment from Eisai for sales sold from Eisai to distributors from April through the close of the deal, which would have otherwise been due from us to Eisai under the prior agreement.

[Danielle Brill:]

Okay. Great. Thanks. And then with Etrasimod, the new trials that you're running. Do you have timing on when you expect readouts for those and how the findings will impact your strategy moving forward?

[Amit Munshi:]

Sure. Hi, this is Amit. We are in the process of getting those up and running. The timing will depend on enrollment. Our objective is to move this forward as fast as we possibly can and we're very sensitive to timing. So I don't want to provide detailed timing today, but I will tell you that we are going to move as expeditiously as possible. Our objective here is to be able to take a look at the full set of data, including ulcerative colitis, some of the other trials that were up and running and take a look at all the data in its totality before we determine our development plan for the compound going forward. So it's important for us to bring the data in a timely fashion, but from a strategic point of view, the idea is to turn multiple cards over, take a look at the data and ascertain what's our best path to market and where we can have the greatest patients benefit.

[Operator:]

Thank you. And our next question comes from Jessica Fye of JP Morgan. Your line is now open.

[Ryan Brinkman:]

Hey, guys. This is Ryan on for Jess. Appreciate taking our questions. Maybe sticking with Etrasimod, you outlined a number of modifications to the ulcerative colitis studies. Can you discuss how these changes will impact your expectation for success with the trial?

[Amit Munshi:]

Sure. So we’ve built this -- we looked at this very carefully. I mentioned earlier in the year, we were taking a hard look at the trial. As I mentioned, the trial was originally designed back in 2012. And then stayed on the shelf for a while. So this is a situation where we just need to bring the trial more in line with its actual study aim. So we don't anticipate any change to the data readout or data readout timing or the integrity of the data, it’s just moving this trial to become a more conventional Phase 2 trial. Back in 2012, well ahead of the [indiscernible] data, well ahead of other key data readouts and before there were some clear regulatory precedence, this was contemplated by the previous management team to be a registrational trial. So -- and we know that a 240-patient trial with this structure is probably not going to achieve that aim. So our objective has always been to make as robust and timely a decision around the Phase 2 trial as we could and these changes bring the trial more in line with more contemporary practices.

[Ryan Brinkman:]

I guess given the fact that you’re accelerating these other indications and you’re moving them forward so quickly, is there a potential that you don't move forward in ulcerative colitis and rather ultimately Etrasimod would go forward in these other indications?

[Amit Munshi:]

And we would have to let the data kind of talk to us on that. So, it’s true we’re exploring these other indications, we're moving them forward quickly. As I mentioned, we want to turn all these cards over and then make a decision about where to go and as you know, ulcerative colitis is a crowded space. We want to make sure we've got to differentiated molecule and it’s important to understand that some of these new indications actually do read on ulcerative colitis. So for example, patients with IBD probably develop these extraintestinal manifestations. They develop pyoderma gangrenosum and there’s even some overlap with some PBC and IBD. So in some ways, these trials also read on a broad set of autoimmune disorder. So we’re going to turn these cards over and take a hard look at it. But the idea is to accelerate timing of all of these so that we can make these robust decisions in a timely fashion. And just one other point I want to make on that, I think this was kind of where you might have been going, which is the objective here is to take a look at all of this and figure out how we accelerate our time to market and figure out where we have the greatest patient benefits. I don't want to let those two key points get lost in the broader discussion.

[Ryan Brinkman:]

Okay. And I just kind of want to clarify a little bit on my first question. I think you said it would impact the odds [ph] positive data by year-end. So is that only related to timing or is that also odds of success?

[Amit Munshi:]

No. It’s really related to timing, quality of data. So if you look at the changes we made in totality, again, the idea is to align it closer to today's market conditions. So the idea is to be able to bring the data in on time and on budget.

[Operator:]

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

[Jason Butler:]

Hi. Thanks for taking the question. Just one more follow-up on Etrasimod. Can you -- just thinking about the trial design modifications, is it fair to say that you wouldn't solely judge success in the Phase 2 trial by achieving statistical significance and there are other things, trends, dose dependency, et cetera that will inform the path forward?

[Amit Munshi:]

Yeah. So there's really three variables in a traditional Phase 2 trial like this. Number one is it's a dose finding study. We're looking for a clear dose response. Number two, we are looking for statistical significance from placebo and number three, we're looking for safety and the aggregate of all of that will determine our path forward.

[Jason Butler:]

Okay. Great. And then just a question on Ralinepag, with the data coming fairly soon enough, can you just give us maybe an overview or a reiteration of what you're looking for to define success in this trial and specifically what you would need to maintain your view that this drug has best-in-class potential?

[Amit Munshi:]

Sure. So recall as we discussed today, we have two trials up and running. The first trial which was previously disclosed is the ongoing Phase 2 trial. The endpoint there is PVR, looking at vascular resistance and we have a secondary endpoint on six minute walk, an exploratory endpoint. So the combination of those two data points will give us a, relative to the competitive set up there, will give us a good idea of whether this is a competitive product in the marketplace, where we feel very good with the potency of the molecule being substantially better than selexipag as well as an extended half-life, again substantially better than selexipag and we at least have a reasonable shot on goal to create a best-in-class product. The second study that we announced today is we're going to be doing a head-to-head study, looking at our current BID dosing with a newly developed once a day dosing and by doing that, we believe we’ll continue to differentiate our compound compared to the competition. So we’ll look at all of that data in aggregate, again, the two trials and determine a path forward for the compound, but we're extremely excited to get this data mid-year and we remain hopeful that our biologic hypothesis is played out in the clinic.

[Jason Butler:]

Great. And then just a real quick follow-up for Kevin, just on the G&A expenses for 4Q, was there anything in there for BELVIQ or the Eisai partnership that won’t be in run rate going forward, specifically for G&A?

[Kevin Lind:]

No. I think the G&A is completely Arena only, not BELVIQ focused. It maintains a little bit, we will spend a little bit less time on patents and things like that, but not significant.

[Operator:]

Thank you. And our next question comes from Ted Tenthoff of Piper Jaffray. Your line is now open.

[Ted Tenthoff:]

Great. Thank you very much for the update. This is really helpful. A lot of good detail in here. I guess my first question has to do with the change for Etrasimod. Is there the risk that these refractory patients, while the ability to access a larger patient population, is there the chance that these patients may be in more severe condition and thus, I'm thinking more fibrotic than inflammatory in nature and disease. Is that a risk with second line patients as well?

[Amit Munshi:]

Sure. So I think there's probably two components to that question Ted. One is, there really isn't a fibrotic set of conditions in ulcerative colitis patients. So we're not particularly worried about that, but our concerned is that vedolizumab or ENTYVIO does work in a very similar mechanism of action to Etrasimod. So if a patient has failed Etrasimod, failed vedolizumab, would Etrasimod work and are we setting ourselves up for failure. So we’re really going to be focusing on those patients who have failed for adverse events and for antibody formation. So we're going to be cautious in terms of how those patients flow through the system. So we don't set ourselves up for failure.

[Ted Tenthoff:]

That makes a lot of sense. And I guess my question has to do with just long term and I guess you see it with biologics more, if they are failing in UC, there is the tissue damage from long term inflammatory assault, so that, it was kind of more along those lines, but I think you answered the question. When it comes to the go forward revenues, are there any additional acceleration revenues or acceleration of recognition of revenues from either Eisai or any of the other partners for BELVIQ or has that all been sort of factored in to the fourth quarter result?

[Kevin Lind:]

Yeah. Unfortunately, the answer is no. We're going to have 30.8 million allocated to -- which was allocated to deferred revenues, which we will recognize as revenue as we manufacture and supply of lorcaserin at Eisai. So 30.8 will kind of flow through the system over the next couple of years. So as we think about revenue going forward, we'll have the royalty revenue from Eisai based on Eisai’s reported net sales. We’ll have the support payments from Eisai, we’ll recognize the manufacturing sales to Eisai of lorcaserin, we’ll have total manufacturing, we’ll have that 30.8 kind of flowing through the system and then we'll recognize other collaborative revenue for VI, accident et cetera.

[Ted Tenthoff:]

Got you. And do you think that will be lumpy or will it be consistent?

[Kevin Lind:]

I said this, the 30.8 is going to be lumpy and it will likely be lumpy to the backend. So probably not a 2017 issue, more of a 2018 thing.

[Operator:]

Thank you. And our next question comes from Rahul Jasuja of FBR. Your line is now open.

[Rahul Jasuja:]

Hi, guys. Couple of questions. One of them on Etrasimod. The fact that we've got a couple, three more clinical trials that are going on and I guess all of them have an acute unmet need, so there's obviously a rationale there. But in terms of these trials, is there a quicker read out, for example, clearly for the part of dermatology aspect, there could be quicker readouts, is that part of the rational as well?

[Amit Munshi:]

Yeah, Rahul. We’re used to do that. Most of these initiations have quantitative or visual readouts that are relatively fast and as I noted in the script, these are open label trials, so we’ll be seeing the data real time. So yeah, the objective here was to ascertain whether we have a signal in these other conditions and do it in a way that allowed us to move a little bit faster than a more complex trial design. So that played into both the design as well as the planned readouts.

[Rahul Jasuja:]

Okay. Got it. And so at the risk of being redundant here with the previous questioner, there's no likelihood that you would progress one of these three smaller indications that may have more easier bar for regulatory approval compared to UC.

[Amit Munshi:]

Yeah. I’m not sure there is a easy bar for any kind of regulatory approval, but yeah, so what we want to do is we want to take a look at all of this data, we want to look at the market landscape, we want to look at the competitive landscape, we're doing a tremendous amount of work now looking at long-term market potential unmet patient need and we want to be able to craft the right strategy for the product going in to Phase 3. So that is indeed the goal and so it is basically all options around the table and we want to make sure that we make the right decision for the compound going forward and again the objective is what's the right patient -- what's the right thing to do for unmet patient need, what's the right way to accelerate time to market and how do we do that in a time and cost efficient manner.

[Rahul Jasuja:]

Okay. Got it. And then my other question is on Ralinepag and sort of how it faces the selexipag. So this may be in the presented abstract or a poster, but just wanted to get some information if you can provide us. The improved potential pharmacokinetics and pharmacodynamics, are there improved PK you see so far and so is that directly related to the potential better efficacy and safety you might see or is there a chemical agent class difference between selexipag and Ralinepag or it’s just the way you model these, do we know that?

[Amit Munshi:]

Yeah. So we do, we're a stronger partial agonist compared to selexipag. So we have a different more potent activity on the actual receptor. That potency manifests itself in, both in vasodilation in different assays that we've tried, it manifests itself in platelet aggregation assays and when you combine that potency with an improved pharmacokinetic profile, you get a compound that potentially has the opportunity to be a best-in-class assay. We have a half-life of 20 to 26 hours. So when you combine that half-life with somewhere between a three and eight-fold improvement in potency, you get a compound that gets at and stays above critical IC50 thresholds in our various assays. So we think the aggregate of all that information allows us to build a best-in-class compound and again that's all pending the data, we need to see the data in the middle of the year. But again, we remain hopeful that the biologic rationale that we have plays out in the clinic.

[Rahul Jasuja:]

And then finally can you give us any color if at all how selexipag is being accepted in a medical community, what’s the uptake been like, any color out there?

[Amit Munshi:]

Yeah. So we only know what's been publicly disclosed and we know physicians are enthusiastic for a new class of agent. They're enthusiastic about this next generation of oral Prostacyclin agonist. Selexipag, I believe, was on track or did complete about 275 million Swiss francs, its first year on the market. So a very robust uptake and again was the anchor compound as part of the J&J $30 billion transaction with Actelion. So the market potential is clearly seen by on the larger players in the space and again we continue to believe that we have the opportunity to build a best-in-class program here.

[Operator:]

Thank you. And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Amit Munshi for any further remarks.

[Amit Munshi:]

Great. I want to thank everyone for joining us today. We look forward to continuing to update you on our progress and we're going to keep our heads down and continue to execute over here in San Diego. So for those of you that are on the East Coast, stay warm and look forward to talking soon. Take care.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.