Acceleron Pharma Inc.
Q3 2017 Earnings Call Transcript

Published: 7 Nov 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Acceleron Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded. I’d now like to turn the call over to Todd James, Vice President, Investor Relations and Corporate Communication at Acceleron. Please go ahead.

[Todd James:]

Thanks, and welcome everyone to our third quarter 2017 earnings call. The press release reporting our financial results, in addition to the presentation for today’s webcast, are available on the investors and media page of the corporate website at www.acceleronpharma.com. Joining me for the call today are Habib Dable, our Chief Executive Officer; Matthew Sherman, our Chief Medical Officer; Kevin McLaughlin, our Chief Financial Officer; John Quisel, our Head of Corporate Development; and Chris Rovaldi, our Head of Operations and Program Management. Our goal this afternoon is to provide an overview of the quarter, review updated financial results and outline our upcoming key priorities. After that, we look forward to answering your questions. As a reminder, we will be making forward-looking statements regarding our financial outlook in addition to the regulatory and product development plans and research activities. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 10-K on file with the SEC. I would now like to turn call over to Habib Dable, our Chief Executive Officer.

[Habib Dable:]

Thank you, Todd and good morning everyone. And thank you for joining us today. This past quarter we made significant progress in the advancement of our long-term vision and strategy and there were many key corporate events that took place. At our September R&D Day, we discussed the completion of an in-depth review of our science within multiple disease areas of high unmet medical need, which led us to our core focus in treat the disease areas, hematology, neuromuscular and pulmonary disease. We talked a lot about our strategy to build therapeutic area leadership and to develop first and best-in-class therapeutics with the potential to transform patients’ lives. Specifically with our new focus in pulmonary, we highlighted our robust preclinical data package and announced that we gained rights to develop and commercialize sotatercept in pulmonary arterial hypertension. We also made a commitment to efficiently move programs through the clinic as we work to execute upon our corporate goal to have three programs in Phase 3 trials within three years or by the end of 2020. On the heels of laying out our long-term strategy and vision, we were able to successfully complete a follow on public offering of common stock in which we raised $215.8 million in net proceeds, including the full exercise of the underwriters’ over-allotment option in October. These were all important events for the future of our company and I am very proud of our team’s ability to execute. Turning now to individual program achievements for the quarter. In hematology, we continue to advance our lead program luspatercept. Results from our Phase 2 trial in Myelodysplastic Syndromes or MDS were published in the Lancet Oncology. At R&D Day, we highlighted to commence Phase 3 trial in first line lower-risk MDS and it will include patients regardless of ring sideroblast status. We look forward to providing you with additional trial details before planned initiation in the first half of 2018. The MEDALIST and BELIEVE Phase 3 trials and MDS and Beta-Thalassemia are now fully enrolled with top line results expected in mid-2018. And our team is focused on driving key initiatives and analysis as well as supporting solving Celgene as we continue to advance the program in these indications as well as to prepare for potential commercialization in 2019. We also expect to initiate the beyond Phase 2 trial in non-transfusion-dependent beta-thalassemia patients as well as those are first patients in the Phase 2 trial in myelofibrosis later this year. Luspatercept is our number one priority and we believe the program’s success will allow us to drive further innovation in our neuromuscular and pulmonary franchises. We continue to build our neuromuscular franchise with ACE-083, our locally acting muscle agent designed to maximize muscle strength and mass selectively in patients suffering from diseases with local muscle mass. We continue to enroll and treat patients in our ongoing two-part Phase 2 trials in FSHD and CMT. As a reminder, the key objective of Part 1 is to evaluate safety and changes in muscle volume and to identify those levels to take forward into Part 2. For Part 2, the key objectives will be to evaluate changes not only in muscle volume but also muscle strength and function and we look forward to providing the safety dose cohort one preliminary results in FSHD in January 2018. With our recently announced focus in pulmonary disease, we will nationally be focused on pulmonary arterial hypertension or PAH with sotatercept. As many of you know PAH is a rare and life-threatening illness for which there are no disease modifying treatments available to patients. People diagnosed with PAH are generally young and even with multiple drugs approved over the last 10 years, median survival remains at five to seven years. This is a serious and life threatening disease and we believe that a therapeutic approach to the TGF-beta protein superfamily could have a meaningful impact for patients. And under the amended sotatercept agreement with Celgene, Acceleron has now gained rights to fund, develop and commercialize sotatercept in PAH. No upfront payments were required and per the agreement we are not responsible for any milestone payments to the Celgene. Upon global net sales of sotatercept in PAH, Celgene will be eligible to receive royalties in the low 20% range. We were thrilled to be able to achieve this exceptional outcome from sotatercept in PAH, based on robust preclinical package in which sotatercept significantly outperformed standards-of-care therapies. We believe that sotatercept has a potential to be a first-in-class disease modifying treatment option for PAH. With that, I will now turn the call over to Kevin McLaughlin, our Chief Financial Officer to run through the financials for the quarter.

[Kevin McLaughlin:]

Thanks Habib and good morning everyone. Our cash, cash equivalents and investments as of September 30, 2017 were $366.6 million compared to $234.4 million as of December 31, 2016. This includes the net proceeds from our very successful follow-on offering in September. The underwriters exercised the overallotment option in October which resulted in an additional net proceeds of $28.2 million. We believe that our existing cash, cash equivalents and investments, including the net proceeds from the entire offering will be sufficient to fund our projected operating requirements into 2021. Collaboration revenue for the third quarter was $3 million. The revenue was entirely from our Celgene partnership and is primarily due to the cost-sharing revenue of $2.9 million related to expenses incurred by the company in support of our partnered programs. Total costs and expenses for the [second] quarter were $28.6 million. This includes R&D expenses of $21.1 million and G&A expenses of $7.5 million. The company posted a net loss for the third quarter ended September 30, 2017 of $25.5 million. I will now turn the presentation back over to Habib for final comments.

[Habib Dable:]

Thanks Kevin. I’d now like to quickly summarize our priorities for the remainder of this year and beyond. So regarding luspatercept with full enrollment achieved in both Phase 3 trials earlier this year and continued advancement, we are now on track to report top-line results for the MEDALIST and BELIEVE trials in mid-2018. Along with Celgene, we plan to initiate the COMMANDS Phase 3 trial in first-line, lower-risk MDS in the first half of 2018. And we also plan to enroll our first patient in the Phase 2 myelofibrosis trial and initiate the BEYOND Phase 2 trial in non-transfusion-dependent beta-thalassemia by the end of 2017. Looking at ACE-083, we anticipate initial data from the Part 1 dose-escalation arm of the Phase 2 FSHD trial in January 2018. And this update will include results from the dose cohort 1. We expect data from all dose cohorts in 2018. We continue to advance the Phase 2 CMT trial with Part 1 dose-escalation results expected by year-end 2018. And we also plan to initiate a Phase 1 trial with ACE-2494, our systemic neuromuscular program by the end of this year. Finally, we plan to present new preclinical results and an oral presentation with sotatercept in PAH at the American Heart Association Annual Conference next week in Anaheim. Also we look forward to hosting an educational webinar where we will discuss the design of the planned Phase 2 trial before its initiation in the first half of 2018. We are committed to establishing robust clinical programs and moving them into late stage development and we continue to advance toward our goal of having three programs in Phase 3 within three years which we believe will drive significant value as we work to deliver upon each of these important milestones. Our focus in these three distinct disease areas combined with our late stage development goals has challenged us to evaluate how we want our business to grow and to evolve over time. Our long term vision begins with luspatercept and hematology where we plan to be a leader in chronic anemia. We believe we have the right team to fully leverage this multibillion dollar luspatercept opportunity including a robust life cycle management strategy. In turn this will help us drive our innovative pipeline as we build therapeutic area leadership in our neuromuscular and pulmonary franchises and work every day to accelerate drug discovery and development to deliver transformative therapeutic options for the patients with the highest unmet need. And with that I will open the call to questions, operator.

[Operator:]

Thank you [Operator Instructions]. Our first question comes from the line of Carter Gould of UBS. Your line is now open.

[Carter Gould:]

Great, good morning guys, thanks for taking the questions. Two for Matt, first I'd like to get your thoughts on the updated luspatercept IST they do at ASH specifically some of the commentary around treatment holidays can you help put this in any rebrew to the luspatercept program and MS in context, is there a reason to think the hemoglobin corrections that are seen you've been seeing it in MS will be longer lasting then an MDS in [indiscernible] and then just on the front line COMMAND study I know you were still working through some of the design criteria. Have you finalized it as yet and can we expect details by year end, thank you.

[Matt Sherman:]

Hi Carter this is Matt so thanks for the questions, so in regard to the three initiated trials was luspatercept and anemab , now we normally have an extension now the hemoglobin responses would lead to any difference in those scheduling in that patient population, again that's a single sensor study still with the low patient numbers and the data while still very robust you know is still in the early days, so we're very clear about the initiation of our Phase 2 study with luspatercept in mild fibrosis as we mentioned we expect to have the first patient in our trial this year. Moving on to you second question terms of frontline luspatercept in the lower risk MDA population commenced study. We are planning to give everyone an update on that study and the actual specifics of the study design when we get closer to initiating that trial so I guess stay tuned for that.

[Operator:]

Thank you. Our next question comes from the line of Robyn Karnauskas of Citigroup. Your line is now open.

[Unidentified Analyst:]

Hey guys this is Kripa on for Robyn, she's a bit sick, she apologizes she cannot be on the call. So for the ACE-083 should we expect you to press release the data or would you be presenting the data at a medical meeting anytime in early 2018, and also another question beta thal non-transfusion dependent study that you're initiating, was just wondering if you can talk a little bit about how the market opportunity stands when you include this population. Thank you.

[Todd James:]

Hey Kripa it’s Todd, I'll take the first one and then I'll pass over to Matt to talk about MTD population, as far the ACE-083 communication goes, given that we’d now planned to release the data in January, there are no muscle conferences in January. So you could – that to be press released and then additional data at an upcoming muscle conference in the first half of the year, but the pulmonary results will be given in the press release.

[Unidentified Analyst:]

Great, thanks.

[Todd James:]

And Matt, do you want to talk about the patient population with the NTD group?

[Matt Sherman:]

Sure. So, again, thanks for the question. And as we presented before the Beta-Thalassemia patients group devided into two major populations, the transfusion-dependent population and the non-transfusion-dependent population. In the United States and Europe it’s about 50-50% of each of those groups of patients, but certainly there’s many more outside those regions. The non-transfusion-dependent patients it come from misnomer because when you think of those of being non-transfusion-dependent maybe being less severely affected, but actually they tend to be more severely affected in the patients who are transfusion-dependent. By avoiding transfusions they actually suffer more of the complications of the disease. So they have lower hemoglobin, certainly they have some of the secondary complications of the endocrinopathies, the bone disease associated with 01

[Operator:]

Thank you. Our next question comes from the line of Geoffrey Porges of Leerink. Your line is now open.

[Geoffrey Porges:]

On ACE-083 and FSHD again, I know the timing slipped slightly to January 2018. Can you remind us what will be disclosed in January and what a good result will look like in that small cohort? And now that you’re in the indication, can you describe the demand from patients for participating in the study? Is it the situation we have to go and find patients or they find in you? Thanks.

[Habib Dable:]

I’ll take the first part and I’ll hand it over to Matt to tell a little bit more about what he is seeing with respect to the patients and the enrollment. But, yes, you’re right. We have announced that we’re going to now disclose the first dosing cohort in January. We were previously looking at the end of the year, but when you look at the data being clocked, cleaning of the data et cetera, it was really going to take us right to the tail end of December, which really didn't make much sense and the goal is now to percent that in January. Everything’s on track, patient enrollment that we continue to be pleased with the patient enrollment in that study. And again, what we do plan to disclose is in the first part of the study, the focus is really on looking at a identifying the right dose by looking at MRI guided muscle mass, and obviously, we’ll continue to look at safety. And we will get a read on strengthened function but the numbers are small and we won’t be drawn any conclusions from strengthened function. And so with that, Matt, do you want to add a little bit more color in terms of what we, exactly will be looking at in the enrollment?

[Matt Sherman:]

So, as Habib said, we are very pleased with the enrollment. And actually it’s going very well. As we talked about this being a two part study, the first part is the dose escalation study in successive cohorts of patients for testing six patients per muscle groups both in the bicep muscle and in the 03

[Todd James:]

And add to that, just a little bit to that. As far as what we are looking for as we think at least an increase in 5% in the muscle volume, treat muscle is needed to show increases in strength and function we are also very interested in looking at changes in fat fraction. We think if we are able to reduce the intramuscular fat or and/or fibrosis within the muscle compartment that will lead overall [indiscernible] muscle. And as far as what you can plan on seeing we take patients are on dose for up to five cycles for three months and then we take an MRI three weeks after the last dose and that will be the data that we are providing in January.

[Matt Sherman:]

And just one more comment to Todd’s comment this is Matt again, yes I mean as we get muscles, there’s just not one muscle tissues and the conversion of the tissue are very important. So when you are talking about muscle function we’re talking about different components, the contract of the muscle versus the traction as Todd indicated in terms of balance between these two that leads to better functional muscle. So as muscle atrophies and muscle part themselves are locked that volume is replaced by [indiscernible] obviously that has nothing to do with the functional muscle, so it’s that talent and that will be an important analysis that we will be able to discuss with you at future time.

[Operator:]

Thank you. Our next question comes from the line of Paul Choi of Barclays. Your line is now open.

[Paul Choi:]

My first question is on sotatercept with regard to the abstract at the American Heart Association. Could you may be frame for us what we should look for in terms of the preclinical data and properties there that you think are a good leading indicator for the trial that you are starting next year? And any -- anything particular in the data that you want to call out for us to look at?

[Habib Dable:]

So I think before I hand it over to Matt but I guess the first thing I would say is that R&D date we are pretty excited that we had the first opportunity to share with you some of the preclinical data both from in-home -- in-house researchers as well as from some of the experts from [indiscernible] and what you are going to see at American Heart and again we are pretty excited of the fact that accepted to have that opportunity to once again share a little bit about what you thought R&D date and in terms of what’s guiding us and informing us in terms of moving forward from the Phase 2 from a preclinical model and you'll see a little bit more color on that is well, from obviously the presentation but also with the opportunity for us to be able to be there and to answer some more questions with [indiscernible] from the [indiscernible] presenting and Matt do you have a little more that you want to shed on that.

[Matt Sherman:]

Yes, we have John Quisle here so he's going to actually dive deeper into that pre-clinical abstract that we're presenting at the American Heart Association.

[John Quisle:]

Sure things Matt, Paul at the HA we had a great collaboration with Paul Hugh at the [indiscernible] as Habib mentioned and I think there is a whole pretty full suites of data from pre-clinical models standing both decision [indiscernible] which is generally viewed as the gold standard in the field as well as mono totaling, two ways of looking at this disease in animals and then in terms of endpoints you see across those models as measure the pulmonary vasculature measure the right heart failure, where to look at the remodeling of the pulmonary vasculature, so similar types of data but in greater detail and in a greater diversity of models than we showed at R&D day. And I think you it comes through loud and clear we're very excited about all the data we're seeing with Paul an excellent collaboration.

[Habib Dable:]

And then to add to that what we expect in the clinic is to be able to show that we have a drug that has the potential to be disease modifying, as we all know within US the 14 drugs that have approved for the treatment of pulmonary [indiscernible] all of them are in [indiscernible] dilated so what is less therapeutic options, none of them really upset the macro issues of disease and sadly as we've indicated earlier the five year survival for these patients is somewhere between five to seven years. So with the drugs that can be you know added on to background therapy you know we have the potential for being disease modifying actually having the first major impact on this disease that sadly hasn't really moved the needle it's in decline the last 10 or 15 years.

[Paul Choi:]

Great, thanks for that and on the Phase 2 itself can you maybe remind us do the patients being enrolled have to have failed [indiscernible] and [indiscernible] or can they be currently on therapy with those therapies as well.

[Habib Dable:]

Well we, certainly we'll go into details with the actual say design of the trial in the first half of next year and we couldn't get to have a webinar to provide a little bit more of a background of treatment and the current therapies but you can imagine that generally decisions would [indiscernible] at the end of the care therapy, and this will be inefficient to the extent of care therapy those standard of care quest includes the PCE-5 inhibitor and the [indiscernible] plus tricyline as well. And we'll just, just to give more detail once we have pushed the study to discuss next year.

[Operator:]

Thank you. Our next question comes from the line of Christopher Marai of Nomura. Your line is now open.

[Christopher Marai:]

First maybe on 083 I was wondering if you know sort of the time quarters under which you might expect to see functional benefits given muscle mass increases and is that something that's really realistic to see in your next update and then I've a follow up if possible.

[Habib Dable:]

Chris it’s Habib, thanks for your question so again just to remind everyone the ACE-083 study both in CMT and FSHD is divided into two parts. Part 1 of the study is really looking at dose finding. And again, we’re going to do that primarily by looking at muscle mass. We will take a look at strength and function, but again the study is not designed to draw any conclusions in Part 1 on strength and function. So in terms of timing what our goal is to be able to, for example, in the FSHD study, our goal is to initiate Part 2 of that study in the second half of next year. And in that particular study, you will be now – we will be recruiting 40 patients and we will be looking at that in a placebo controlled randomized fashion where we will specifically be looking at functional endpoints in terms of guiding us forward.

[Christopher Marai:]

And then I’m just thinking about that time course how to see those functional benefits, right. Obviously, you see an increase in muscle mass potentially relatively rapidly. But how long do you think that takes to translate potentially into functional benefits that you can measure in that trial?

[Habib Dable:]

So we haven’t actually guided to that. I don’t know Matt, if you have any thoughts that you want to share, but to date, we haven’t really guided much in terms of making any or speculated to that yet?

[MattSherman:]

So, yes, thinking about this one proxy for this might be considering the effects of exercise in increasing muscle strength and function. And there’s actually some pretty good studies that you can start to see very sniffing increases within six to twelve weeks after beginning an exercise program. So we believe that with this only three although we haven’t been specific in terms of specific timing is that part and time range that one might imagine we could start to see an increase in strength and function benefit in patients.

[Christopher Marai:]

And then just with respect to luspatercept in the non-transfusion-dependent patients given that they are more bone diseased sort of what’s the likelihood or what’s your thought with respect to luspatercept to sort of improves patient’s outcome given that sort of 02

[Matt Sherman:]

Yes, we’re terming one of the endpoints that we’re monitoring in our ongoing studies. So we will be able to present data once we have results from those studies in terms of bone disease?

[Christopher Marai:]

But I mean, will luspatercept impaired by the fact that these patients have more bone disease than the transfusion-dependent patients?

[Matt Sherman:]

Maybe I missed your question. So with the activity of luspatercept impaired because I have more bone disease …

[Christopher Marai:]

Correct. Maybe impairing the ability to luspatercept normal on that process given…

[Matt Sherman:]

So the affect is not necessarily, the bone disease not necessarily related to the bone marrow, so the bone marrow function remains similar. The bone disease they have is more in the 3

[Todd James:]

And then Chris, it’s Todd, I would just add. Our most recent update at EHA included just over 30 NTD patients and we had majority of those patients a gram to a gram and a half increase in hemoglobin. So really seeing robust activity with luspatercept in that patient population that we hope confirm in this larger Phase 2 study.

[Operator:]

Thank you. Our next question comes from the line of Kennen MacKay of RBC. Your line is now open.

[Kennen MacKay:]

I just wondered if there is anything you can comment on how you are thinking about design of the COMMANDS trial and specifically sort of covering of that trial dose. A number of different reports for the efficacy and responsiveness of ESA in front-line MDF and given more talking about lower intermediate risk and sort of ultimately patients here. Just wanted to get your perspective on what we should be thinking about for the ESA comparative here as well as for luspatercept?

[Habib Dable:]

Hey Kennen, this is Habib. Thanks for your question. So with respect to COMMANDS we haven’t given specific details yet on the design of the study and obviously as we get closer to that as Matt has mentioned we will start disclosing a little bit more details. Now one of the things that we have said and I think it’s extremely important is that moving forward in the front-line setting right now it’s going to be really important for us to make sure that when we are looking at ESAs that we are looking at them in a way that we will make sure that the value benefit model we are putting forward is going to be one that will be well embraced by all stakeholders including the payers. And I say that because of the fact that as you know in the United States right now we estimate this probably about $500 million to $600 million of off-label ESAs that are being used and reimbursed. And so our initial thinking is that for us to be able to succeed here, we will be looking at an on-label superior asset in this space. And we believe that if we do that and we do that well, we will be able to avoid any type of a step at it from an in-trench therapy which is being used right now off-label. And so we are pretty confident that we will be able to enter into this first line setting by designing a superiority study against ESAs and in doing so we will be able to potentially remove any barriers in getting traction with that.

[Todd James:]

Hey Kennen, it’s Todd. I would just add, based off of either the Phase 3 results that has been presented in 2016 from either Amgen or J&J study or if you look even back further at larger database or the Hellström-Lindberg score that also predicts patient’s ability to strong that Epo they had in the Phase 3 15% to 30% response rates and similar to that scoring scale patients only responded at the lowest Epo levels and if patients had any on-board transfusion burdens even as well as two units per eight weeks it really impacts their ability to respond toe ESAs. So those are still some of the things that we are working out as we finalize the trial and look forward to being able to accelerate by all the details right before the trial initiates in the first half of the year.

[Habib Dable:]

Yes, may be to close on that the only thing I would add Kennen is we announced that R&D in September that for this study that we will be recruiting patients independent of RF status, so both RF positive and RF negative patients will be part of the COMMAND study.

[Matt Sherman:]

One more fine point on that Terence, here this Matt because the two studies you know that Todd referred to a very important studies of both randomized placebo controlled trial, you know the RK study by Amgen using a separate cohorts in a 146 patients but the response rate was only 15% in patients receiving you know the active arm covered dose and all of those responsive to bring patients in [indiscernible] we got less than 100 so very favorable group and a very from a parallel study done by Jansen called the EVELYN study with he puts an alpha again a 145 patients, their response rate was still 30% all patients have responded, I have baseline [indiscernible] in 200 so a very highly favorable sub group of patients and very low response rate so large need here for a better search and this is a first line population.

[Kennen MacKay:]

And then maybe, I guess maybe just a quick follow up on a couple of the responses that you're thinking about, sort of baseline depo in the frontline, could that be mechanism through which you could stratify enrollment given that some of the unmet need in this study obviously in patients with higher depo at baseline.

[Matt Sherman:]

So that's one of the parameters that we'll be able to talk about in more detail as we are able to present the details for the study design.

[Kennen MacKay:]

Got you, and then Habib maybe just a follow up on one of your comments on the commercial opportunity here, as we're thinking about pricing should we be thinking about parity to ease out here obviously acknowledging that users are super dosed in this setting or thinking about potentially discount there or maybe given the value proposition and has to see in depo resistant patients and to insurance priority to depo we could [indiscernible] a little bit of a premium above depo price this year.

[Habib Dable:]

So again, you know the initial thinking Kanan is that we would be able to design a study to prove superiority against DSAs and right now the guidance that we've given on pricing, $50,000 to $100,000 would not change with respect to the COMMAND study.

[Matt Sherman:]

As you suggested in these patients you know they get dosed at 60,000 to 80,000 units per week and that gets well over $50,000 provision if the patient stays on for a year.

[Operator:]

Thank you. Our next question comes from the line of Terence Flynn of Goldman Sachs. Your line is now open.

[Terence Flynn:]

Maybe just on patercept just wondering you referred to disease modifying potential, just wondering how you think about capturing that kind of data in a trial, what are the some of the potential endpoints again I know you don't want to talk too much about it, but maybe just help frame for us how to think about disease modification and the setting of PH, thanks.

[Habib Dable:]

So we're obviously pretty excited in that you know this potentially could be a first in class disease modifying therapy based on the mechanism of action that we've talked about, and there's a number of things that we could be looking at, a number of endpoints again looking at the vascular remodeling etc, but perhaps maybe Matt and perhaps even John you can elaborate a little bit more in terms of some of the things that we're already thinking about.

[John Quisle:]

So this isn’t what Habib was saying. Some of the endpoints are typically measured in these studies were only looked directly at the pulmonary artery pressures. So using a heart catheterization one can measure pulmonary artery pressures as well as the peripheral vascular resistance now will be a direct measure of the functional status of the pulmonary vascular care. I mean, in addition, there is echocardiogram analysis of valvular function in the heart, so something called the TAPSE which looks at the tricuspid regurge tricuspid valve and its function within the heart and also functional measure such as a 6-minute walk so that’s in a pretty standard measure for leaving our functional improvement. Also, there could be some high resolution CT imaging of the lung itself to look at changes in the plexiform lesion. So it's interesting, I mean, this is the non-malignant disease by the way that behaves like a malignancy. There's you know unchecked proliferation of the endothelial cells, smooth muscle cells and leading to fibrosis within pulmonary vascular. So there some ability to get a look at that process could also inform us whether or not this is disease modifying or not.

[Terence Flynn:]

And of those which would you think would be most differentiated versus the current drug because, again, I know the current drug that data for some of those endpoints. But which one do you see being most differentiated?

[John Quisle:]

And I don't think it's really a simple answer that anyone is going to be most differentiated and maybe really more that it’s help to the affect that we see as well as the persistence of the affect overtime. So with continued treatment not losing the affect over time, which we do with these dilated. So even though you can have some improvement in some of these parameters over time the underlying product the particular lesions continue to progress. And so the affect is vast. If we could maintain and it’s like every time perhaps and that could also be associated with disease modifying activity.

[Operator:]

[Operator Instructions] Our next question comes from Michael King with JMP Securities.

[Michael King:]

A lot have been answered. Most of what I want to know was a follow-up to previous questions. Just start to sort at the top patterns have been commenced, I know you guys are being careful about what you’re saying prior to initiation of the study but I just wonder if you're contemplating any kind of quality life questionnaire SF-36 instrument as in part of the study design. Can you say anything about that?

[Habib Dable:]

Matt, do you want to comment?

[Matt Sherman:]

And actually we have done with our although we -- as you are saying we're being careful because really just want to very -- be very clear when we start the studies that have no full update on the site design. As we’ve done in our Phase 2 studies as well too we've been able to incorporate quality of life skills across the different programs. And it's very straightforward with patients who are anemic is variety of different subscales that look at -- related scores. And I can’t say refer you to some of our earlier data in our Phase 2 senior study where we were able to show a correlation of patients who had improvement in their hemoglobin as well as an improvement in their -- quality of life for subscale. So yes bottom line is we will be able to monitor quality of life instruments as well.

[Michael King:]

And then with regard to 083, FSHD, well, one minor question, are you also going to be looking at -- I know you talked about a lot of things you’ve been looking at but are you going to be looking at sort of muscle health and sort of blood biomarkers you could case or any other blood measures of muscle health?

[Matt Sherman:]

Yes, so certainly the key endpoints as we’re thinking about in Part 1 of the study is muscle volume by MRI and looking at only at total muscle composition looking or contract pile muscle as well as some stat fraction as different components within the muscle. Blood markers such as CPK are routinely measured. So we can look at those, those tend to be very non-specific and actually in these diseases some really tend to correlate with which is disease activity very well. But we certainly measure those on a routine basis in that trial.

[Michael King:]

And with respect to the dosing, it sounds like -- I don’t want to over interpret but the Part 1 of the Phase 2 sounds more like a study defined a biologically optimal dose rather than sort of a maximum tolerated dose. I am correct in that assumption? And then just I don’t know what you can say about moving forward in the second part for FSHD. But are you contemplating using more than -- considering more than one dose in the second half of that study?

[Matt Sherman:]

Yes, to the question, really the first part relates to the Part 1 and the dosing, yes, so it’s not a typical MTD just keep treating to toxicity, we defined three dose levels based on our Phase 1 experience we were able to show a substantial increase in muscle volume as we’ve talked the 15% in the rectus femoris muscle, the 9% in the TA muscle. So extrapolating some of that data and the size of the muscle that we are treating in the Phase 2 study, we’re able to identify three dose levels that we wanted to test, the 150 milligrams, 200 milligrams and up to 250 milligrams. So yes more of choosing optimal biological dose and to take forward based on the changes that we see in muscle composition.

[Michael King:]

Okay, a quick question on sotatercept. I thought I read that you are going to do another Phase 1, was there -- or did I misread that?

[Matt Sherman:]

No I don’t think that’s correct Mike.

[Michael King:]

I didn’t think it was necessary. And then sort of top of the allocation question with respect to drug supply. As you guys expand your investigation luspatercept into commence and the Phase 2 for MDS -- I am sorry for beta-thal, how are you guys doing on drug supply, are you using outside contractors, do you intend manufacture yourself and if so would you require any kind of investment in manufacturing infrastructure? Thanks.

[Habib Dable:]

Yes, so Mike this is Habib. So I will kick it off and then I am going to hand it over to Chris Rovaldi who is the Head of Program Management and Operations. But the first thing I do want to remind everyone is that with all of the Phase 3 and then subsequently the commercial product, this is all being handled by Celgene and the related vendors from the Celgene side. Two, Celgene funds 100% of all luspatercept costs, including the commercialization and drug supply, manufacturing et cetera. And so but to get into the specifics from the partnership point of view and the related impact perhaps Chris you can shed a little bit of light on [indiscernible].

[Matt Sherman:]

Sure just to reiterate what we mentioned the collaboration that we have with Cellgene leverages the Cellgene's team responsibility for drug substance, drug product and supply chain management for luspatercept so as mentioned it’s a 100% reimbursed, we've had now long standing relationships with our drug substance and drug product vendors to supply both the clinical stage material as well as commercial stage production.

[Operator:]

Thank you. I'm showing no further questions at this time. I'd like to hand the call back over to Habib for any closing remarks.

[Habib Dable:]

Yes. So if there are no further questions I'd like to thank everyone for joining us and very much look forward to seeing everybody either at AHA or ASH in December, so with that thanks and wishing everybody a great day.

[Operator:]

Ladies and gentlemen thank you for participating in today's conference that does conclude today's program, all disconnect. Everyone, have a great day.