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Receptos, Inc. (NASDAQ:RCPT)

Q2 2013 Earnings Conference Call

August 7, 2013 17:00 ET

Executives

Faheem Hasnain - Chief Executive Officer

Graham Cooper - Chief Financial Officer

Sheila Gujrathi - Chief Medical Officer

Analysts

Ravi Mehrotra - Credit Suisse

Marko Kozul - Leerink Swann

Liana Moussatos - Wedbush Securities

Operator

Good day ladies and gentlemen. And thank you for standing by and welcome to the Receptos Second Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will follow at that time (Operator Instructions) As a reminder, today’s conference may be recorded.

It’s now my pleasure to turn the floor over to Chief Executive Officer, Faheem Hasnain. Please go ahead, sir.

Faheem Hasnain - Chief Executive Officer

Good morning and thank you for joining us for Receptos second quarter 2013 earnings call. With me today are Graham Cooper, our Chief Financial Officer and Sheila Gujrathi, our Chief Medical Officer. Today’s call is also being webcast live on our website and it will be available for replay until August 21.

Before we begin I'm going to ask Graham to handle the forward-looking statement disclaimer and Graham will walk you through our financial results followed by an update on our clinical development program that Sheila and I will cover and after that we’ll of course be happy to take any questions you may have. Graham?

Graham Cooper - Chief Financial Officer

Thanks Faheem. Please note that Receptos statements of historical facts, the statements in this conference call are forward-looking statements under the Safe Harbor provisions of Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statement disclaimer and the company’s earnings press release issued after the dated the close of market today, as well as the risk factors in the SEC filings including our IPO perspective stated May 8, and our Form 10-Q for the second quarter that will be filed shortly. Undue reliance should not be placed on forward-looking statements which speak only as of the date they are made and the facts and assumptions underlying these forward-looking statements may change. Except as required by a law Receptos disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances.

Let me turn now to the financial results for the second quarter. For the three months ended June 30, 2013, Receptos reported a net loss of $9.9 million or $0.98 per share as compared to a net loss of $3.3 million or $2.67 per share for the second quarter of 2012. total revenues for the second quarter of 2013 were $1.2 million, compared to $1.7 million for the second quarter of 2012. Total operating expenses for the second quarter of 2013 were $11 million compared to $5 million for the second quarter of 2012.

R&D expenses were $9.4 million for the second quarter compared to $4.3 million for the second quarter of 2012. The increase in R&D expenses primarily related to commencement of the Phase 2 portion of our Phase 2/3 trial of RPC1063 in Relapsing MS, commencement of the Phase 2 trial of RPC1063 in ulcerative colitis and preparation for the Phase 3 portion of our Phase 2/3 trial of RPC1063 in Relapsing MS.

G&A expenses were $1.6 million for the second quarter of 2013, compared to $0.8 million for the second quarter of 2012. This increase in G&A primarily relates to an increase in personnel costs, additional stock comp expenses and additional expenditures on outside services. As of June 30, 2013, Receptos had $91.1 million in cash and equivalents, debt with a principal balance of $5 million and approximately $18.3 million shares of common stock outstanding, we also have $25 million inventory debt that remains available to us into our credit arrangement with MidCap financial. We believe that between the cash and the balance sheet and the availability of venture debt we have sufficient resources to provide cash runway until the second quarter of 2015.

I will now hand the call back over to Faheem.

Faheem Hasnain - Chief Executive Officer

Thanks Graham. There are three primary things that I want to convey on this call. First, we’re on track with our Phase 2 trials of our S1P1 receptor modulator called RPC1063, with data expected in both Relapsing MS and Ulcerative Colitis next year. Second, having completed our IPO in the second quarter, we’re now well capitalized to execute through these data points. And finally, the recent launch of Tecfidera and the performance of GILENYA and the context of that Tecfidera launch support our view of the strong trend towards oral therapy and the treatment of MS and the great opportunity for an oral therapy that’s meaningfully differentiated from the other products on the market or and development.

Now as you know, this is our first earnings call as a public company, and as such I wanted to just take a moment to orient to you with regard to our development programs. As you’re aware, Receptos was founded on three elements of technology, a structural biology platform focused on G Protein-Coupled Receptors and Oral GLP-1 Receptor Allosteric Modulator Program which was developed from that platform and an Oral S1P1 Receptor Modulator Program which we are directing to autoimmune indications.

The structural biology platform has been useful to us because through collaborations with Lilly, J&J and Ono we’ve been able to upwards of $20 million on the lit of capital to fund our therapeutics development effort. And additionally, we have been successful in bringing in an asset from the outside and anti-IL-13 antibody from an orphan indication called eosinophilic esophagitis that we in-licensed from AbbVie several months ago.

So we’ve got a lot going on for company of our size. Now investors are clearly focused on our S1P1 Receptor Modulator Program in Relapsing Multiple Sclerosis given the fact that it’s the furthest along in development and given the opportunity here it represents, but I want to remind you that beyond S1P1 in MS we have the S1P1 Receptor Modulator Program also in IBD, inflammatory bowel disease.

In addition, the anti-IL-13 antibody we in-licensed from AbbVie is a Phase 2 ready asset that we’re taking into eosinophilic esophagitis and our small molecule oral GLP-1 Receptor Allosteric Modulator Program shows great promise in the preclinical testing that we’ve conducted today.

So now let’s turn our attention to our S1P1 Receptor Modulator for the treatment of Relapsing MS and Colitis. Now as you’re aware, the MS treatment landscape has been evolving rapidly over the past couple of years particularly with the advent of new oral therapies. Now, Novartis was that first introduced in oral therapy GILENYA which was launched in late 2010. GILENYA which is a less-specific S1P receptor modulator has met with substantial commercial success having achieved over $1 billion in sales in 2012 and produced almost $900 million in worldwide sales through the first half of this year 2013. Biogen Idec recently introduced Tecfidera in a widely anticipated launch and it has been welcomed into the marketplace is another important oral therapy in the fight against Relapsing MS. Analysts are expecting both drugs to become major say million dollar blockbusters.

Now RPC1063, is an oral S1P1 receptor modulator that sequesters autoreactive lymphocytes thereby preventing them from traveling to sites of information and causing damage. Now unlike GILENYA, RPC1063 is highly specific to the S1P1 subtype receptor with minimal activity on S1P3, SIP4, SIP5. We believe that the intrinsic pharmaceutic properties of RPC1063 including a specificity for the S1P1 receptor may result in a number of advantages that will allow to be positioned as a best-in-class therapy for the treatment of relapsing MS. Now these include advantages related to a more favorable cardiovascular profile, reduced patatoxicity and a shorter half life with faster lymphocyte recovery. The cardiovascular profile in particular will be the subject of a poster that has been accepted by ECTRIMS that’s a large MS Meeting for presentation at their Annual Meeting in Copenhagen in early October. This poster presentation will focus specifically on the result of our Phase 1 Thorough QT Study.

Now we’re also optimistic about the prospect for RPC1063 to have an impact on inflammatory bowel disease. Current therapies can be used to treat inflammation in the intestine however the long-term use of these types of anti-inflammatory agents which by the way includes injectable and infused biologics is associated with limited durable efficacy and significant side effects. As a result, that remains a significant unmet need for effective and well tolerated new oral therapies particularly in the maintenance setting. Those represents the substantial market opportunity and let me just remind you that the ulcerative colitis market in terms of the number of patients is actually substantially larger than the multiple sclerosis market with approximately 1.1 million patients in the U.S. and approximately 700,000 patients in other major markets.

Based on the mechanism of action of RPC1063 and the precedent of other agents that inhibit lymphocyte trafficking that have all shown efficacy in these indications in the test we believe that we have a potential to be first-in-class and best-in-class for the treatment of ulcerative colitis. And as you would anticipate, if we show efficacy in UC it would be natural for us to pursue the program in Crohn's disease as well. Now Crohn's market represents another million or so patients world wide.

So, just to summarize on RPC1063 we see this program is having blockbuster potential in both relapsing MS and inflammatory valve disease. We have near term data read outs that Sheila will comment about more and we own 100% of this asset and we have strong IP running until 2029 without adding time for data exclusivity.

Now we’re also excited about RPC4046 our Anti-IL 13 Antibody and its potential to have an impact in eosinophilic esophagitis. This is an emerging indication with significant unmet need that has only been recently diagnosed in last 10 to 15 years. Now while that’s still an orphan indication with about 160,000 patients in the U.S. in a similar number in Europe its been growing in prevalence’s awareness has increased. Patients with eosinophilic esophagitis or EoE as we call it could have a range of symptoms including food impaction, difficulties swallowing and result in weight loss or failure to thrive.

Over time the tissue in the esophagitis may undergo remodeling including formation of scriptures. Now while there are no proved therapies to-date the majority of patients are treated with swallowed steroids which are associated with a number of side-effects and limited duration of efficacy. Now this program is Phase II ready and we expect that our next step will be initiate a randomized trail in an EoE patient population that Sheila will comment about more.

And finally while the oral small molecule GLP-1 Receptor Allosteric Modulator Program is still early we are excited about the novel mechanistic approach and the sizable opportunity that this innovative program represents early administrative – administered lead compounds have shown single agent efficacy in a diabetic disease model as well as activity that we’ve now been able to show is synergistic with metformin and combination studies receptors expects to conduct IND enabling studies in 2014.

So that’s the thumbnail sketch of our current development programs. I’d now like to ask Sheila to give you an update on some of the specifics in terms of our on going trials. Sheila?

Sheila Gujrathi - Chief Medical Officer

Thanks Faheem. Let me begin with providing an overview of our Phase 2/3 S1P1 Receptor Modulator Program in relapsing MS and then I will cover the Phase 2 Ulcerative Colitis Program and I’ll finish with an update on our Anti-IL 13 Antibody Program and eosinophilic esophagitis.

As you may know we are currently involving the Phase 2 portion of our Phase 2/3 program in relapsing multiple sclerosis. This program has been designed to accelerate the overall development timeline by eliminating the time or so called white space that typically exist between the completion of Phase 2 and the initiation of Phase 3 studies. We’re able to do this recent evaluation of this mechanism with GILENYA and the existence of a robust pharmacodynamics marker in the form of lymphocyte count reduction which historically has correlated with efficacy indication across multiple S1P1 receptor modulators.

The current Phase 2 trial which we call RADIANCE is designed to enroll 210 patients with relapsing MS across trial sites primarily in Europe as well as in the United States. This trial began really in late 2012 and is testing two doses of RPC1063 0.5 milligram and 1 milligram against placebo. The primary objective for this trial is to demonstrate superior clinical efficacy of RPC1063 compared to placebo by showing a reduction in accumulative number of total gadolinium-enhancing lesions count by MRI from week 12 to week 24 of study treatment. We expect to complete the moment in this trial in the fourth quarter of 2013 and to announce top line results of the Phase 2 trial in mid 2014.

We also plan to conduct an interim analysis of this trial in the fourth quarter of 2013 which will inform our decision to move into Phase 3. This interim analysis will focus mainly on the safety features of RPC1063 in comparison to placebo including its cardiovascular profile hepatic effects any impact on other major organ systems as well as the tolerability profile.

Let me remind you that we are using a does titration regimen in the study starting at 0.25 milligrams up to 0.5 milligram and then up to 1 milligram for the patients on the higher does. The purpose of the titration regimen is to attenuate the first does heart rate effects and this approach has been very effective in our Thorough QT study as well as in our Phase 1 normal healthy volunteer study. We are collecting a robust data set in our program in order to be able to support our case for RPC1063 having a more benign cardiovascular profile. And depending on the idea to set we may be able to potentially limit or eliminate the cardiac monitoring requirements associated with GILENYA.

Assuming that the results of this interim review appear to be consistent with our prior experience with RPC1063 the first of the Phase 3 trials will commence. The Phase 3 program will include two trials both of which have received special protocol assessment approval from the FDA. The first trial design has a head-to-head superiority study with two doses of RPC1063 versus Avonex. These are the same two doses 0.5 milligram and one milligram that we are studying in the Phase 2 trial and their primary end point for this trial will be reduction in annualized relapse rate after two years of therapy.

The second trial which is designed as a one year trial does not to be very limiting would start after we obtain the top line results of the current Phase 2 trials. Again we do have a special protocol assessment in place for this study as well and because this trial will be shorter in duration than the first we expect that we’ll be able to complete both trials at about the same time in order to optimize our overall development time line in relapsing Multiple Sclerosis.

So that covers the clinical update on the relapsing MS program and just to reiterate the RADIANCE trial continues to involve PACE we intent to conduct an interim CT analysis in the fourth quarter with top line results available on mid 2014 and based on the results of that interim review we will determine whether to move forward into Phase 3 in late 2013 or early 2014.

Now turning to the Ulcerative Colitis Program we are also conducting a Phase 2 trial of RPC1063 called TOUCHSTONE and patients with ulcerative colitis. This trial is designed to involve 180 patients randomize the same two doses or RPC1063 that we studying in the MS trial this is 0.5 milligram and 1 milligram or to the placebo group. The primary objective of TOUCHSTONE is to compare the efficacy or RPC1063 for the induction of clinical remission and patients with moderately to severely active ulcerative colitis. We continue to expect that we will obtain and report the results of this trial in mid 2014.

Now the FDA has indicated that the results of the study this Phase 2 study are statistically and clinically persuasive TOUCHSTONE could count as one of our Phase 3 trials. And as Faheem mentioned if we are successful in Phase 2 and ulcerative colitis the probability of success of RPC1063 working in Crohn's disease significantly increases and that would be only natural for us to consider broadening the program into the Crohn's disease patient population.

So let me turn now to RPC4046 our anti-interleukin antibody for the treatment of eosinophilic esophagitis or EoE as we refer to this indication. And as Faheem mentioned this is an orphan indication where treatment options are limited there is strong scientific rational from a preclinical and clinical basis to support a directed Anti-IL-13 therapy and EoE including esophagitis over expression of the anti of IL-13 cytokine itself. The ability of IL-13 to induce expression of (indiscernible) which have a most highly expressed portions in EoE disease area as well as the ability of IL-13 to promote both inflammation and fibrosis in the esophagitis.

I want to also remind you that there appears to be validation of this mechanism in other allergy mediated disease areas specifically IL-13 antagonist have demonstrated efficacy and preclinical models of allergy and recently have shown clinical efficacy in asthma patients. In terms of our clinical development plan we intend to conduct a Phase 2 EoE trial as a randomized double blind placebo control study and patients with active eosiniphilic esophagitis we plan to enroll approximately 90 patients to assess two subcutaneous doses of RPC 4046 compared to placebo. The primary objective of the Phase 2 trial will be to determine whether treatment with our molecule is efficacious as determined by histologic improvement of eosiniphilic counts at 12 weeks.

We also plan to explore potential predictive diagnostic biomarkers for efficacy in this proof-of-concept study. Prior to initiating this trial we do need to file an IND with the GI division of the FDA we intend to have a pre-IND meeting later this year and to file the IND in the first half of 2013 after which time we will initiate the Phase 2 study. That covers the update on our clinical program and I will now turn the call back to Faheem.

Faheem Hasnain - Chief Executive Officer

Thanks Sheila. So as I mentioned at the start of the call we believe that the programs were pursuing represent tremendous potential value. We have conviction around all of these programs and believe that we can add meaningfully to the treatment option in relapsing MS inflammatory valve disease eosiniphilic esophagitis and type 2 diabetes and coming back to the main themes that I started with a recap as follows. We’re executing on our clinical development plans with data on both Phase 2 trials of our RPC1063 expected next year and with our monoclonal antibody for the treatment of EOE poised to begin Phase 2 clinical testing next year.

As a result of a successful IPO in the second quarter we now have sufficient capital to see us through the key Phase 2 inflection points for RPC1063 and finally, recent product launches in the MS marketplace suggest that our thesis relating to the trend towards oral therapy continues to play out. We are more bullish than ever about the opportunity with a product candidate that we believe is meaningfully differentiated from the other products in the market or in development.

And with that we’ll be happy to answer your questions.

Question-and-Answer Session

Operator

Thank you sir (Operator Instructions) One moment for questionnaires to queue. Our first question will come from Ravi Mehrotra with Credit Suisse. Please go ahead. Your line is open.

Ravi Mehrotra - Credit Suisse

Hi, thank you for taking my question. Good afternoon guys. Perhaps three questions to kick off with. Sheila you talked a ton about CB differentiation of the RPC1063 in MS against the incommoding GILENYA. Perhaps can you remind us about the other differentiation profiles of the product particularly that itself what you saw in Phase 1 and then probably question for Faheem I'm just going to ask this straight upfront, just take us with your thought process on partnering RPC1063 how you split MS, IVD and the time points for that and also mentioned IBD you talked about the commercial opportunity being very significant and probably underappreciated can you give us a little bit more granularity on how big you think the commercial opportunity for RPC1063s and IBD? Thank you

Sheila Gujrathi

Great thanks Ravi. I’ll – yeah I’ll start with your first part of your question. And this is true that RPC1063 has the potential for differentiation and a clinically meaningful manner against GILENYA and other compounds in this class on multiple dimensions, cardiovascular being one of them the other being hepatotoxicity and then the favorable pharmacokinetic and pharmacodynamic profile leading to fragile inside recovery but specifically on the hepatotoxicity front and may of you may know that there are several compounds in this class have shown elevated rates of hepatotoxicity defined as signifcnat elevation in liver function test and transaminators.

And these programs had detected those signals quite early in the development program both in the preclinical setting to their toxicology studies well as in their short-term Phase 1 studies and in their Phase 2 and 3 program. And so, what we can say with our program to-date is we have not seen hepatotoxicity in the preclinical setting and then in the Phase 1 program. So we are very encouraged by our hepatic profile to-date. We think that is may be related to the different chemo type of the compound as well being a shorter half-life therapy and we’re continuing to monitor our programs very carefully, but it does appear to be playing around in terms of having a more favorable and reduced rate of hepatotoxicity.

Faheem Hasnain

In terms of the second part of your question Ravi, partnering so it is our intention to establish a partnership around RPC1063. Main reason for that is of course that we are operating in blockbuster markets and competing and will eventually be competing with the likes of Novartis and Teva and Biogen Idec. And so to be able to establish a partnership with a significant player who has, who brings significant commercial wait to the table is of course part of our long-term plan in this context of RPC1063. We would not intent to split indications typically I think that’s usually doesn’t play out very well. So we would establish a partnership across both MS and inflammatory bowel disease.

In that partnership we would expect to receive significant recognition of what we believe we’ll be a substantive value increasing it after our Phase 2 data plays out. So the expectation is that the any deal that we do would have to recognize the blockbuster potential of this asset, the significant Phase 2 value inflection that we expect to see mid next year and also ensure that we’ve retained substantive strategic value for our program. So, that’s how we’re thinking about partnering. We certainly given the markets that we play in, there has been a lot of interest generated from pharma companies but as I said it is our intention to partner on that Phase 2 data inflection.

In terms of how big is the IBD opportunity, well the market is substantive and growing. We expect this market the UC market to go to about $3.7 billion in 2021. it is driven again the growth of this market will be driven primarily by the new therapies coming out. And there is a significant unmet need in both ulcerative colitis and Crohn’s disease and certainly in UC this market is mark today by products like 5-ASAs and biologics specifically TNFs.

So an oral profile that has a for those of you who follow this market have seen the significant efficacy that other trafficking agents like Veltuzumab have demonstrated we think an oral compound like RPC1063 has the potential to compete across multiple segments of the ulcerative colitis market thus giving us the potential for blockbuster opportunity. And of course that doesn’t even speak to the opportunity in – Crohn’s disease. And as Sheila said, if we see proof-of-concept in UC, we think our probability of success is substantial as well in Crohn’s.

So, we certainly have a sizable opportunity in MS but we think that with the number of patients available in the IBD segment and the substantive growth that new oral effective therapeutics represent tolerable and safer therapeutics represent we think that this market will grow and we think that we have significant opportunity there as well.

Ravi Mehrotra - Credit Suisse

That’s very great. Thank you.

Operator

Thank you sir. Our next question will come from the line of Marko Kozul with Leerink Swann. Please go ahead. Your line is open.

Marko Kozul - Leerink Swann

Hey, good afternoon and looking forward to your progress this year and next. I wanted to ask a question actually two of them related to your RPC1063 that in turn are related to Tysabri and (indiscernible). For Tysabri, how do you think a potential negative Phase 3 AFFIRM trial in secondary progress with MS patients in 2013 might impact use of S1P Receptor Modulators including RPC1063 and then for (indiscernible) I wanted to ask how positive result in 2016 with Phase 3 secondary progressive EXPAND trial might impact use of RPC1063 down the lines during the approval and the currently extracted clinical profile? Thanks

Sheila Gujrathi

Okay, thanks Marko. I’d be happy to take that question. So, it’s very interesting as many of you know, for multiple sclerosis the RPC1063 patient segment is the relapsing, remitting secondary progressive MS population then primary progressive and while we had validation of GILENYA in relapsing, remitting as well as relapsing forms of MS, I think the question is still out on whether an SIP Receptor Modulator works in progressive MS form such as secondary progressive without relapses or primary progressive that represents the more new degenerative state. However, there hasn’t very interesting emerging data looking at really brain atrophy or brain volume loss over time. And what’s been very compelling coming out of the GILENYA long-term studies that have been conducted is that GILENYA does appear to significantly reduce brain atrophy or brain volume loss by 30% or greater compared to placebo patients and their controlled clinical trial and that continues to be consistent over the long-term.

So, there are a number of clinicians who are currently using S1P1 Receptor Modulators for our progressive phenotypes of the disease. The other, so there is Tysabri that is being studied in the recent study as you’ve mentioned so I think that’s – those are the two main therapeutic choices Tysabri or GILENYA or another SIP1 Receptor Modulator so that become available for the treatment of for these patients population so you really have no other treatment options and that represents significant unmet needs. So, negative Tysabri study in that timeframe I think would really point more towards the promise of the S1P1 Receptor Modulator being a potential and more effective treatment choice in that setting. So I think that would be interesting if that will be an impact I think for this class of therapy because there does appear to be these mechanistic approaches we do know that S1P1 receptors are expressed in a number of pneumonia cells and could be considering to this reduction of newer degeneration that occurs over time.

So, playing that out further if (indiscernible) were to have favorable efficacy demonstrated through their – sTMS Phase 3 study I think that would be a major benefit for the class of therapy for S1P Receptor Modulators in general. So for us being a more selective and hopefully more favorably tolerated and safe molecule I think we could definitely go into sTMS mechanistically we don’t have any reason to believe that we were acting it differently (indiscernible) so we would take as a very positive sign for RPC1063 to be able to expand not only in Relapsing forms of MS but which by the way does include secondary progressive MS patients who have relapses. So it already includes the subset of sTMS patients but in to sTMS and potentially in the primary progressive MS depending on the data and not indication.

Marko Kozul - Leerink Swann

Sheila thanks for the very thoughtful response.

Operator

Thank you sir. Our next question in queue will come from the line of – (Operator Instructions) Our next question will come from Jim Birchenough with BMO Capital. Please go ahead. Your line is open.

Unidentified Analyst

This is (Nick) in for Jim this afternoon. I have a question for you on the post-marketing experience of GILENYA that you said in your prepared comments that I think drove that’s been out now for over two years and I'm wondering whether the collective post-marketing experience physicians GILENYA more or less favorably than the clinical trial experience? And I have a follow-on as well.

Faheem Hasnain

Hi Nick it’s Faheem. Certainly our sense and we’ve been out doing some market research we fundamentally believe that the efficacy that we saw on the clinical setting I think continues to play out. So I think this agent is continued to be seen as a very efficacious agent. I think post-marketing we’re seeing that actually the tolerability is something that physicians are viewing very favorably of course there is still the added the continued challenge of first state monitoring, but beyond first state monitoring I think physicians and patients most importantly are recognizing that the tolerability of this agent and probably ultimately the class is something that is quite acceptable. So, post-marketing setting I think I don’t think that there is a whole lot of surprises other than the most obvious which was the concerns that came to light I think it was in 2011 around some of the cardiac conduction issues and the brain to cardio that we’re seeing with some patients on GILENYA. I’d ask Sheila if you want to add anything to that.

Sheila Gujrathi

Well, I think there is continued to be obviously there is a lot of marketing required with GILENYA and probably somewhat of a safety perception in terms of the concern around some of the cardiovascular risk and then we have heard that hepatotoxicity continues to be a real issue in the clinical post-marketing setting this was the leading cause of discontinuation in the clinical trials. And then of course when patients there is a significant amount of concern around having a longer half-life therapy of for MS practitioners they always have to be thinking about how to switch therapies – switch patients on to other immunosuppressant therapies should that be the case. So we’re hearing a number of different areas where we think we could improve upon the profile.

Faheem Hasnain

Right the hepatotox is appears to be as we understand it the number one reason for discontinuation of GILENYA but the point that we’ve just laid out should be the big surprises because they’re all pretty consistent with the label the half-life and the washout period that’s required for GILENYA. We did hear that again to our market research that when docs think about the half-life and the need to be able to retreat because inevitably this is a chronic disease where patients will progress in an inevitably failed there are cures here that’s approximately half of the physicians stated that they were concerned about the washout period and that they would wait the required number of months before initiating a new therapy. And the other half well they recognize the risk of doubling up on a minor modulation we’re more concerned about a disease progression and flares and would accept the risk albeit concerning of being immediately. We have also heard regarding pregnancy concerns of course this is a disease that affects women of childbearing age that as women find out that they’re pregnant or attempting to get pregnant again they’ve got to go through that washout period have concerns associated with potential for teratogenicity.

Unidentified Analyst

Thank you a detailed answer and my second question is on the EoE market you mentioned there were 160,000 patients and its obviously a growing market in the U.S. Do you know what proportion of those are taking steroids chronically?

Faheem Hasnain

We don’t have that data I mean Sheila do you have a sense of the percentage?

Sheila Gujrathi

Yeah I think a fair proportion of the patients do go on to what we call swallowed steroids but these are steroid solutions that they create into drinks that these patients have to swallow multiple times a day. But they don’t stay on them chronically so its really a short term therapy to get their disease under control and then has had diminished activity as a maintenance type approach or having adorable or response so they and of course are always are worried about the side-effect profile so they taper off steroids and then there is a fast relapse rate either while on storage or as the come off steroids which contributes to the population. So well we can’t give you an exact percentage a fair majority do go on to swallow steroid especially its symptomatic especially in the adult population but they don’t stay on them chronically.

Faheem Hasnain

Yeah Nick again we don’t have any exact data but through our discussions with key opinion leaders in this area that really appears to be the only course of treatment and so one would expect that certainly as you move toward these the moderate severe segment of this population that probably most of them would at least have tried that therapeutic approach.

Unidentified Analyst

So is that 160,000 then moderate to severe or does that just cover everybody who has a diagnosis?

Faheem Hasnain

That’s 160,000 in the U.S. is the full set from mild to severe.

Unidentified Analyst

And the moderate to severe part of that?

Faheem Hasnain

The moderate to severe part of that recalls it being somewhere around two third, half to two third somewhere in that mix.

Unidentified Analyst

Okay excellent thank you very much.

Faheem Hasnain

Thanks.

Operator

Thank you our next question will come from Liana Moussatos with Wedbush Securities. Please go ahead your line is open.

Liana Moussatos - Wedbush Securities

Thank you for taking my question. Can you talk a little bit about expectations for the IPO and lock up expiration in November do you expect to any selling or most investors, or do you have the impression that most investors are waiting for mid 2014?

Faheem Hasnain

Liana so the lock up expiration is November 4th we know that certainly investors that we’ve spoken to and also the venture investors that have been involved in the company remain very bullish about our opportunity and I think pretty much everybody is focused on that mid 2014 catalyst. Although of course probably the next announcement that you will hear would be if appropriate and if – the data warrants that will move and announce our initiation of Phase 3 hopefully by the back end at the back end of this year. But fundamentally its hard for me to specifically comment on what they will do but the sense that I get is everybody is pretty bullish on our opportunity and our probability of success so I would highly doubt that we’ll see mass selling at that point in time.

Liana Moussatos - Wedbush Securities

And is the first trading day for the expiration the 4th or the 5h?

Faheem Hasnain

Graham do you know?

Graham Cooper

I don’t know whether it’s the 4th of the 5th one of the two but we can come back to you on that.

Liana Moussatos - Wedbush Securities

Alright thank you.

Operator

Thank you we do have a follow up question from Ravi Mehrotra. Please go ahead your line is now open.

Ravi Mehrotra - Credit Suisse

Given that we can see the Phase 1 Q2 study at (indiscernible) Sheila can you just remind us of the setup of that study that doses and if I recall GILENYA did a similar study, what could we see with Thorough QT interval on GILENYA do you recall? Thank you

Sheila Gujrathi

Well thanks for asking that question and we are, we’re fortunate to have our Thorough QT study (indiscernible) accepted it ECTRIMS which will be presenting in the first week of October which is being held in Denmark. The subject of that poster presentation will be to summarize the therapeutic study this was what we call nested crossover design where we studied RPC1063 compared to placebo group as well as to an active control in this study we use the marketing 5% at safe (indiscernible) you give at the single dose and it’s known to have a positive QT effect so we do that just to make sure that we have what we call ASA sensitivity in the study to make sure we can pickup QT changes.

So the primary objective was to determine whether RPC1063 had a QT effect as measured by a QTc corrected interval and the secondary objective which are demonstrated ASA sensitivity compared to marketing 5% and this was a robust study we had about a 124 patients involved into the study half of whom we see RPC1063 and half of whom got placebos about 62 patients on RPC1063, and the way RPC1063 was administered in that trial was using the similar dose titration after the same dose titration regimen that we’re using in our Phase 2 clinical trial. So all patient start out a 0.25 milligrams just like they do in the Phase 2 study and they titrate up to 0.5 milligram then to 1 milligram and then they go to a super therapeutic dose of 2 milligram and we basically look at QT interval changes at 1 milligram at this therapeutic dose and a 2 milligram the super therapeutic and we’re very fortunate to have a definitively negative study where we didn’t see any relevant effect on QT interval changes with RPC1063 we met all the regulatory thresholds of not showing a QT effect as well as demonstrating their marketing classes and did have an effect in this trial. So that was very favorable for us.

We still are very comfortable and confident in saying that RPC1063 does not have any prolongation of QT interval effect at this time. But as in contrast to GILENYA, they do conduct a Thorough QT study this has been reported in their submission as well as in their label. And they did steady dosage higher than the marketed dose at 1.25 milligram as well as 2.5 milligram, but they did show that they had a QT interval prolongation, their mean increase about 10 milliseconds with the upper band of 14 milliseconds. So this is considered to be clinically relevant and the regulatory threshold to the unit to mete have a negative Thorough QT study is every confidence interval than not just a point estimate but every confidence interval other 90 -- every upper bound of the 95% composite interval over a 24-hour period has to be below 10 milliseconds. So here their mean increase was approximately 10 milliseconds and then their upper bound was really around 14 milliseconds. So they did show some Qt interval prolongation and they did report that they’re with potential concerning limiters with that study but then they also reported out QT prolongation in their Phase 3 program that dropped to 0.5 milligram and the 1.25 milligram approach.

So we are seeing some differences in the clinic on QT interval prolongation between these two programs. We do think that this could be related to S1P3 receptor subtype and we will be disclosing hopefully more data on that shortly where we think S1P3 has expressed on different heart cells really more on the this Purkinje fiber that may be involved with ventricular conduction we see this pre-clinically and the question now is I mean is that true in the human heart as well. But that could be a very important we think that’s a very important differentiator for our compound and as you can imagine it’s something that to be avoided especially in the setting where you could be compounding cardiovascular risk. So this and of itself we know we’ll have differences in the label based on this data set and we hope to continue to further develop that.

Ravi Mehrotra - Credit Suisse

That’s great. Thank you for that (indiscernible).

Operator

Thank you sir. And our next question will come from Marko Kozul with Leerink Swann. Please go ahead. Your line is now open.

Marko Kozul - Leerink Swann

Yeah so thanks for the follow-up. I wanted to ask if the changing dynamics in the MS landscape especially the strong type with their launch are they in any way altered your current plans or considerations for choices in active compared around in your second Phase 3 1063 MS study? Thanks.

Sheila Gujrathi

Yes thanks Marco. We are well we have designed the Phase 3 study design for the second pivotal study and do have a spot approval in place for that. We are always considering other potential active comparator. The current design includes Avonex comparator but we are getting increasingly excited enthusiastic about potentially doing and oral comparator, a comparator so that will be an oral-to-oral head-to-head type of study. And we are considering Tecfidera in that mix as well as potential other orals obviously there is a (indiscernible) that’s also in the marketplace and approved in multiple region so we would be able to use that one as another oral comparator as well and so that’s something that we’re continuing to evaluate.

Marko Kozul - Leerink Swann

Terrific. Thanks for taking the question.

Faheem Hasnain

Thank you.

Operator

Thank you sir (Operator: Instructions) Presenters I am currently showing no additional phone questions. I like to turn the program back over to management for any additional or closing remarks.

Faheem Hasnain - Chief Executive Officer

Well thank you all for joining us on this call and thank you for the questions. We really appreciate your support and look forward to continuing to keep you updated as our development programs progress so. Thanks everybody and you know where to find us. So give us a call if you have any questions. Take care.

Operator

Thank you presenters and thank you ladies and gentlemen again this does conclude today’s call you may now all disconnect and have a wonderful day.

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