Arena Pharmaceuticals' (ARNA) Presents at Jefferies 2014 Global Healthcare Conference (Transcript)

Jun. 3.14 | About: Arena Pharmaceuticals, (ARNA)

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)

Jefferies 2014 Global Healthcare Conference

June 3, 2014 11:30 AM ET

Executives

Craig Audet - SVP of Operations and Head of Global Regulatory Affairs

Analysts

Thomas Wei - Jefferies

Thomas Wei - Jefferies

I’m going to get the next session started. Welcome everybody. My name is Thomas Wei, I’m one of the senior research analyst on the biotech team at Jefferies. And it's my pleasure to introduce our next presenting company Arena Pharmaceuticals. Here to give the presentation is Craig Audet, the Senior Vice President of Operations in Global Regulatory Affairs. We also have Cindy McGee, who is now the Global Alliance Manager, out in Switzerland and Robert Hoffman the Chief Financial Officer to answer your questions afterwards in the breakout session which will be downstairs in the Julliard room.

Craig Audet

Thank you Tom and good morning everyone. Great to be back here at Jefferies, to talk to you a little bit about Arena pharmaceuticals and some of the value drivers we have for this year. Before I get started I do want to let you know that I will be making forward-looking statements today, and results may differ, so I urge you to check our risk factors on file with the SEC.

At Arena we embraced the challenge of improving health by bringing innovative medicines that target G protein-coupled receptors to patients. There are three main value drivers for 2014 that I want to talk to you about today. And I typically start with BELVIQ for chronic weight management, and then moving to the other two building blocks, but I’m going to mix it up a little bit today and start with our GPCR pipeline. So here’s a snapshot of our clinical stage novel drug candidates. I’m going to talk a little bit about each of these and give you some background of where we are currently in terms of their status.

Let’s start with APD811 for pulmonary arterial hypertension. PAH progressive, life-threatening disease that global prevalence is around 360,000 patients, and this is a really significant statistic, the estimated five-year survival rate is 57% from diagnosis, and that’s with treatment. So there is really is a need for new and better medicines to treat this disease. And there lies APD811, a novel oral prostacyclin receptor agonist. It is a non-prostanoid prostacyclin receptor agonist, stable, good oral bioavailability, about a 20 hour to 26 hour half life on this drug. So we see really good improved receptor coverage given that long half-life; and that gives us a potential for once-a-day dosing.

What we found in our Phase 1 program is signs of pharmacology in healthy patients. So you start to see the flushing in the (jaw) [ph] pain at higher doses. That tells us that something is going on. It tells us that we’re hitting that receptor in some way, shape or form. So we’re planning to initiate our Phase 2 trial around midyear this year. We are very excited about moving this program forward and getting some proof-of-concept.

Our next product APD334, is being developed to treat autoimmune diseases. So in autoimmune diseases what you get are antibodies and immune cells that targets the healthy tissues in your body. And that triggers an inflammatory response. So the idea is to keep those antibodies and immune cells away from those healthy tissues. So therein lies 334, a novel oral S1P1 agonist. The idea behind it, the concept is to reduce the immune response by keeping lymphocytes in the lymph nodes, so they can’t attack those healthy tissues. We've announced this morning that we're starting a Phase 1B trial for this. We begin dosing in that study. We are very-very excited to move this program forward as well.

In our Phase 1A program we saw about 35 hour half-life and we did see a dose responsive reduction in blood lymphocytes. So that also tells us there is something going on there. We also have Temanogrel for thrombotic diseases. So the prothrombotic effects of serotonin can affect platelets and affect the blood vessels through the serotonin 2A receptor. So Temanogrel has a dual mechanism of action. We’re looking at inhibiting the serotonin-mediated platelet aggregation as well as reversing or inhibiting the serotonin-mediated vasoconstriction you get. So you see a potential to improve blood flow by those two mechanisms. You don’t get the platelets blocking the artery and the arteries open up.

Arena completed a Phase 1 program with this product. We now have an arrangement with Ildong Pharmaceuticals. They’re going to do 1C program in South Korean patients and then a 2A program for proof-of-concept and then hand that product back to us. We will retain the worldwide rights and they have rights to South Korea through that arrangement.

And last, but not least we have APD371, and we’re looking at the treatment of pain with this right now, although we’re looking at some other areas as well. So what you typically have right now for pain, your opioids which have strong efficacy but you have that potential for dependence for abuse and the GI side effects associated with it, and then you have your NSAIDs which include the Coxibs; modest efficacy, increased risk of GI bleeding, renal toxicity and CV events.

So 371 is an oral agonist in the cannabinoid 2 receptor, in Phase 1 now, which should be able to give you that pain relief without the side-effects of the liabilities of opioids and NSAIDs. Now we have done some preclinical studies in chronic pain with this, and we see really good pain lowering, comparable to morphine but without the tolerance you get over five days of dosing.

Now I would like to move to lorcaserin life-cycle opportunities. When I look at the pipeline that I just told you about and lorcaserin life-cycle opportunities are tend to referred to as a dual track we’ve got really two pipelines here in the Company. And our expanded deal with Eisai enhances our ability to develop this portion of our pipeline. It gives us a really good framework to collaborate with their development expertise as well as funding. And you can see some of the examples on the slide of the some of the funding that we get. We’ve got $60 million payment in November of last year. We're eligible to receive greater than 176 million in regulatory and development milestone. Eisai purchases their product from us that’s starting at 31.5% of net product sales. We’re eligible to receive 1.5 billion in payments based on sales performance. And we share expenses for programs that we prioritized so far.

Here you see a snapshot of the lorcaserin programs that we’ve prioritized with Eisai to drive long-term value creation for the brand and I’ll talk a little bit about each of these. First a very exciting program in smoking cessation with lorcaserin. There is a need for new effective treatments in this disease state. Smoking ranks as the number one greatest public health catastrophes of the century. Tobacco has killed more than 20 million people since 1964 that’s a staggering figure. And the smoking attributable costs are greater than 300 billion a year.

Now, surprisingly in 2012, approximately 42 million people in the United States still smoked, that’s a quite a few, it’s about 18% to 19% of the population. But when the NIH did a survey, they found that about 70% of U.S. smokers want to completely quit smoking. Many of them have tried and failed in the past. So we’re looking at lorcaserin for smoking cessation. We started and actually we announced today that we completed dosing in a Phase 2 proof-of-concept study. Now what led us to that proof-of-concept study are two independent studies that were done in preclinical models that showed a reduction in nicotine self-administration in that animal model, one done by the University of Toronto, the other done by Duke University.

So as I said, we have a Phase 2 trial on-going we completed dosing in that study recently and announced that at this morning. It’s a randomized double-blind 12-week study in 600 patients and we share the development expenses equally with Eisai in this program.

Another program we’re looking at is the co-administration of lorcaserin and phentermine for weight management. We have a pilot study on-going and we announced a little ago that enrolment in that study has been completed as well, again a 12-week study in this case about 225 overweight and obese patients. And in this case, Eisai is actually responsible for conducting and funding this pilot study. So this study mainly looks at safety. It has a secondary end point for weight, but really we’re looking at the safety of the combination and this study will inform our development opportunities moving forward.

We’re also working on a once daily formulation of lorcaserin, 20 mg extended release tablet. We’ve done some initial pharmacokinetic work in order to choose that formulation and we plan to initiate studies with that formulation in the second half of this year. We expect the results of that in the second quarter of next year. And this is another program where we share development expenses equally with Eisai. And you can see the model release profile in green of that extended release formulation. It stays very nicely within the C-mean and C-max of release.

Last but not least, we have our cardiovascular outcomes trail called Camellia. This is a study that Eisai is conducting. We’re going to enrol about 12,000 patients and this trial should last up to about five years and we’re looking at three primary end points here. The first one is the FDA mandated post-approval study to look at MACE, major adverse cardiovascular events. But what we thought about with Eisia was while we’re doing this study for a very little incremental cost, we could look at some other end points. So we’re looking at whether lorcaserin reduces the conversion to type 2 diabetes in this study, and our BLOOM and BLOSSOM program Phase 3 program, we saw about a 39% reduction in progression of type 2 diabetes statistically significant and we found that intriguing. So we’re going to tease that out in this study as well and we’re also going to look at the incidents of the MACE plus.

Now in this study for the FDA mandated portion, we’re responsible for 10% of that program. For the two secondary end points or two second and third end point I should say that we’re looking, we equally share expenses with Eisai up to 80 million and then after that they’re responsible for the rest. So here is a snapshot of where we are today and where we expect to be by the end of the year. We have some very aggressive timelines here but we’re really working hard to move these programs along.

And lastly I’d like to talk about BELVIQ one of the most significant value drivers we have in the Company for 2014 and beyond. We have collaborations that cover most of the world. We have CY Biotech in Taiwan, Ildong Pharmaceutical in South Korea, and then Eisai has the remainder of the globe with the exception of Israel, Australia, and New Zealand. And we’re currently looking for partners in those areas.

Now, let’s talk a little bit about BELVIQ in the US with Eisai, they’re trying to build a strong foundation for this product and you can see that the three building blocks of that foundation, physician awareness and education, broad reimbursement coverage and then patient support and awareness as well. These are all very important to increasing prescriptions for this drug and making sure that we keep those three building blocks in line with each other in terms of the amount of emphasis we put on each. There’s a very fine balance in there. So let’s talk about some of the recent successes we’ve had in each of these areas.

In terms of physician awareness and education Eisai recently announced that they’re going to increase their sales force from 400 to 600 representatives. This will nearly quadruple physician coverage since launch of the product. It increases their reach from about 65,000 to about 90,000 physicians and this is in addition to the 200 reps they put on at the end of last year. So, so far, far to date we’ve seen about 33,000 health care practitioners write over 27,000 prescriptions, that’s a pretty good number. In terms of reimbursement coverage Eisai recently announced that they now have reimbursement coverage greater than 60% of commercially issued life. You may recall that when we launched the product it was around 30%, so a doubling of a bad coverage. And we think that’s fantastic, they’re now targeting 70% coverage by the end of that fiscal year which is March 2015.

And patient support and awareness Eisai launched a national direct to consumer television advertising campaign in mid-April and the advertisement is designed to get patients to be aware of BELVIQ as a treatment option, get them to start a dialogue with their physician about their weight and have a discussion about whether BELVIQ is right for them. Eisai also continues to invest in the print advertisements, in magazines such as Oprah, Cooking Lite, Sports Illustrated, People magazine. And they’ve also recently announced separate from their brand campaign, a non-branded campaign, called My Healthy, which focuses on health gains through weight loss. So I want to emphasize, this is not a BELVIQ program but this is a disease state educational program, and the idea behind it is to talk about health gains through weight loss and get patients to feel comfortable talking to their doctor about losing weight, about making healthy food choices and being more active.

And so I mentioned these three pillars and the steady prescription growth we’d like to see based on these, you can see quarter over quarter we see really nice growth, fourth quarter of last year to first quarter this year, 31% increase in prescriptions. We’re very happy with that.

So we believe that BELVIQ is uniquely positioned for long term success, it’s a new chemical entity, it was the first one at its time approved by the FDA for 13 years for weight loss. We’ve got collaborations with three very accomplished marketing organizations, we have established manufacturing infrastructure in Switzerland where we manufacture the product and sell it to our collaborators. And we have global patent coverage right now up to 2023, we filed for US extension into 2026 and we potentially could get into 2027 and beyond.

So some key milestones to look for this year, the initiation of the Phase 2 trial for APD811 and temanogrel, completing our Phase 1 development in APD334 and 371, completing the Phase 2 smoking cessation trial and lorcaserin and phentermine co administration pilot study. Increasing reimbursement coverage for BELVIQ. Expanding our direct to consumer awareness and that includes both the TV commercials and with the print advertisements and of course achieving additional BELVIQ approvals around the globe.

So to close, I’d like to point out that we believe that Arena is well capitalized and well positioned to address global health challenges. At March 31 of this year we had cash, cash equivalence and short term investments that totaled about 256 million, we have our pipeline that we talked a little bit about. The clinical stage pipeline of internally discovered novel compounds, but behind that we have a development and a non-clinical stage portfolio that looks just as exciting. We’re also pursuing new indications, combinations and formulations with our lorcaserin lifecycle management program, we see that strong quarter over quarter prescription growth for BELVIQ and last but not least we have an experienced team that are committed to bringing new and better medicines to patients.

Thank you very much.

Question-and-Answer Session

Thomas Wei – Jefferies

We’re actually a little bit early, so we have time for some questions here in the room if anybody wants to, if anyone wants to ask the Arena team some stuff. In the back there.

Unidentified Analyst

[Question Inaudible]

Craig Audet

That’s a good question Bob, right now there’s some discussion with the FDA, in terms of that one year of DEA scheduling and whether we’ll get that back, so remains to be seen when that will get settled, so I can’t give you a specific date at this point.

Unidentified Analyst

[Question Inaudible]

Craig Audet

Right now there was a citizens' petition filed that Eisai filed and it was declined by the FDA at this point. So they’re working on talking to the FDA to see what they can do to try to get that year back.

Unidentified Analyst

I guess on that front does this sustained release formulation offer you any additional protection, was it an off the shelf technology that will be difficult to get new IP around?

Craig Audet

I think when we looked at this sustained release what we found was the BELVIQ patent in of itself is actually longer than what we might get from a sustained release or combination product at this point.

Unidentified Analyst

I had another question on the pipeline side, when we look through all of these earlier stage programs smoking cessation aside since that’s a real proof of concept study, when do you think we’re going to get data readouts for your proprietary pipeline that are going to be like real interpretable end points for investors to be able to say it, doesn’t work in that indication.

Craig Audet

So for the proprietary pipeline we’re starting that Phase 2 study around midyear for 811, remains to be seen how long that will take to enrol but we’re hoping to have some information perhaps end of next year remains to be seen. In terms of the other two they are a little bit earlier in the development cycle, so we’ll probably have some results potentially at the end of this year or the beginning of next year for those Phase 1 programs.

Unidentified Analyst

And maybe I’ll ask on the smoking cessation program. What is the end point of that trial and from a market perspective why has that market not become the gigantic blockbuster market that you think that smoking cessation would lead to?

Craig Audet

So the end point for the smoking cessation the primary end point is what’s known as the continuous quit rate. So what you do is you dose patients for 12 weeks, they’re supposed to stop smoking around the second week of treatment and then you look at abstinence between week nine and week 12. It’s pretty standard way that most of the smoking cessation studies have been done in the past.

In terms of why that market hasn’t taken off? It’s a good question, the global market for smoking cessation in 2014, 2015 is about $2.5 billion and we gave you some of the figures for smoking in the United States. I think what doctors are looking for is an effective and safe treatment that really works for patients remains to be seen whether BELVIQ will be an effective treatment for smoking cessation? But we hold our hope based on the animal studies that we’ve seen so far.

Unidentified Analyst

And the animal studies do they lead you to believe that they’re going to be advantages on efficacy or safety relative to other prescriptions smoking cessation drugs that have been developed before?

Craig Audet

Yes, it’s really hard to extrapolate from the animal studies and it’s really hard without head to head studies to look at how we would compare to [indiscernible]. But one of the advantages we feel we may have going for us is if we can do the smoking cessation in a weight neutral fashion, the market research that we’ve seen so far tells us that most people don’t stop smoking or don’t try to quit smoking because they’re concerned about that 15 pounds to 20 pounds of weight they’re going to gain. So if we can do that in a weight neutral fashion, we feel we could have an advantage over other products.

Thomas Wei - Jefferies

Maybe we’ll stop there and head down to the breakout session which is downstairs in the Julliard room for anybody who has additional thoughts or questions. Thank you.

Craig Audet

Thanks Tom.

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