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Receptos, Inc. (NASDAQ:RCPT)

Q2 2014 Results Earnings Conference Call

August 12, 2014, 08:00 AM ET

Executives

Faheem Hasnain - President and CEO

Graham Cooper - CFO

Sheila Gujrathi - Chief Medical Officer

Analysts

Koon Ching - Credit Suisse

Joseph Schwartz - Leerink Partners

Jim Birchenough - BMO Capital Markets

Operator

Good day, ladies and gentlemen, and welcome to the Receptos Second Quarter 2014 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 follow at that time. (Operator Instructions). As a reminder this conference call maybe recorded.

I would now like to introduce your host for today's conference, Faheem Hasnain, Chief Executive Officer. Please go ahead.

Faheem Hasnain

Good morning, thank you for joining us for the Receptos second quarter 2014 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 will be available for replay until August 26th.

Before we begin I'll ask Graham to handle the forward-looking statement disclaimer. I’ll then provide a business update and Sheila will review our clinical development programs and then Graham will walk you through our financial results. I will summarize by outlining the opportunity for Receptos and our strategy to maximize the value of our assets. And after that of course we'll be happy to take any questions that you may have. Graham?

Graham Cooper

Thanks, Faheem. Please note that except for statements of historical facts, the statements in this conference call are forward-looking statements under the Safe Harbor provisions of the 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 on the company's earnings press release issued today, as well as the risk factors in the company's SEC filings.

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 law Receptos disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances.

Faheem Hasnain

Thanks Graham. The second quarter of 2014 was a transformative quarter for Receptos. We reported positive results from the Phase 2 portion of the RADIANCE trial in relapsing multiple sclerosis in June setting the stage for an extremely successful equity offering and giving us even greater confidence as we drive forward with our Phase 3 program.

Furthermore, I am pleased to report today two new key pieces of information. First, with regard to the Phase 2 trial of RPC1063 in ulcerative colitis, we have completed enrollment in that trial. As you will recall the primary endpoint to the trial is the induction of clinical remission after eight weeks of therapy. So we are clearly on track to announce the results of that trial in the fourth quarter consistent with current guidance. The trial was designed to enroll 180 patients and based on strong interest among clinicians and patients we ended up over enrolling the trail by about 10%.

Second, we were recently notified that we have been granted a late breaking oral platform presentation at MS Boston 2014 which is a joint ACTRIMS/ECTRIMS meeting this year. We understand that there were over 1500 regular abstracts and approximately 150 late breaking abstract submitted for presentation. So we were very gratified to find that we had made the cut in this exclusive group. The presentation is scheduled for Saturday, September 13.

In addition to the top line data that we have disclosed already we plan to go into greater detail for the primary and secondary efficacy endpoints as well as safety and tolerability data. Also as a reminder we mentioned in a recent press release that Receptos announced the additions of Mary Szela and Richard Heyman to our Board of Directors. Mary is the CEO and Chairperson of Melinta Therapeutics and was previously Senior Vice President of Global Strategic Marketing at Abbott Laboratories. Rich Heyman was recently Chief Executive Officer at two private companies, Seragon Pharmaceuticals, which recently got acquired by Roche for up to $1.7 billion in transaction value. We are very pleased to have both Mary and Rich join our Board.

I will now hand the call over to Sheila to review the key aspects of our Phase II data and the implications for our differentiation platform. She will also provide an update on the Phase 3 program in relapsing MS as well as the Eosiniphilic Esophagitis and GLP-1 programs.

Sheila Gujrathi

Thank you Faheem. As most of the top line Phase 2 data has already been disclosed I won’t plan to go into great detail but I do want to review the data particularly as it pertains to differentiation profile that continues to emerge for RPC1063. As Faheem mentioned the data will be presented in detail during our Oral Podium presentation at the MS Boston meeting on September 13.

First, with regard to our primary efficacy endpoint, we saw a reduction in MRI base lesion count at 86% for both dose group compared to placebo. This result was highly significant with a p value well below 0.0001. The efficacy result is in line with the efficacy that had been seen with other S1P receptor modulators in Phase 2 and Phase 3 trials. We also showed improvements for patients in RPC1063 in the MRI base key secondary endpoints with p values that were less than 0.0001. And on annualized relapse rate another pre-specified key secondary endpoint we showed favorable trends for the RPC1063 treatment groups over placebo, notwithstanding the fact that we did not power the study to detect differences from placebo on ARR with statistical significance and recognizing that there are low rates of relapses in a 24 week trial. We’ll plan to explain this more fully when we disclose the detailed results next month.

Overall the efficacy of RPC1063 in this Phase 2 trial is very consistent with what has been seen with other S1P receptor modulators in RMS on all the different efficacy parameters studied and gives us confidence to continue our program in Phase 3.

With regard to the cardiovascular profile we continue to demonstrate a favorable profile with our Phase 2 RMS dataset which builds upon and is consistent with the findings of our earlier thorough QT study.

The first is changes in heart rate in patients with [inaudible] 1063 were modest with a maximum mean reduction of less than two beats per minute compared to baseline and no patients dropping below 45 beats per minute during the first six hours after administration. Also consistent with our TQT study the [inaudible] result was not a substantial drop in heart rate from the morning baseline but rather a blunting of the rise heart rate that normally occurs during the day with a circadian rhythm.

In addition we did not have any difference in cardiac adverse events or cardiac finding between the treatment groups. And there were no clinically relevant cardiac adverse events reported. So the cardiovascular profile is looking benign and would appear to support a [difference] [ph] to the label vis-à-vis Gilenya assuming this profile holds up in Phase 3 and given our prior lack of QT [effects] [ph] shown in the TQT study.

With regard to liver enzyme elevations we also saw favorable results. Rates of liver transaminase elevations –observed to date in patients receiving RPC1063 are lower than the rates observed with other agents in this class and does support a favorable hepatic safety profile. RPC1063 was generally well tolerated and the incidence of adverse events across the active treatment group in placebo appeared to be similar. Most adverse events were either mild or moderate in nature and we had a very high completion rate in this trial which was approximately 98% which speaks to the tolerability of the drug and the willingness of patients to stay on through at least 24 weeks of treatment. The majority of patients switched into a long-term extension phase of the trial and continued to receive RPC1063 treatment in the extension.

So those are the highlights. The data continues to support our fundamental thesis for RPC1063 in RMS that includes efficacy on par with Gilenya and a better overall safety and tolerability profile with clear improvement in the cardiovascular and hepatic profile.

And finally the half-life of RPC1063 is substantially -- potentially shorter than Gilenya, aligned for a more rapid washout and return of lymphocyte count. This provides a potential to improve treatment outcomes for patients who experience an MS flare, develop opportunistic to infection or who have pregnancy concerns. We believe that this profile has the potential not only to be preferred against Gilenya but to directly compete head to head against Tecfidera.

In terms of the status of our Phase 3 program we initiated the first of two Phase 3 trials late in 2013 based on our interim Phase 2 data. This trial is expected to enroll 1,200 patients with relapsing MS and is designed as a head-to-head superiority study against Avonex. The primary endpoint for this trial will be a reduction in analyzed relapsed rate after two years of treatment.

We will also be looking at a number of secondary endpoints, including disability and brain volume loss. With the completion of Phase 2 we are also preparing to launch a second Phase 3 trial. This trial is similar in design to the first except the primary endpoint will be measured after one year treatment. We expect that we will initiate the trial in late 2014 or early 2015. Because this trial is shorter in duration than the first we expect that both will be completed at about the same time which is in the 2017 timeframe. Both Phase 3 trials are being conducted under SPA agreement with the FDA and we have also received favorable European regulatory guidance on our Phase 3 registrational program for MS.

In terms of the UC trial as Faheem mentioned we have completed enrollment and are on track to announce results of the ongoing TOUCHSTONE Phase 2 trial in the fourth quarter. The primary objective of this trial is to compare the efficacy of 1063 for the induction of clinical remission in patients after eight weeks of treatment. Other agents including vedolizumab most recently have shown differences in placebo of 7% to 12%. After the eight week induction endpoint patients who are deemed to have clinical improvement may progress into the maintenance phase of the trial. The maintenance endpoint will be measured at week 32 or approximately six months after the induction measurement point. Induction data will inform our decision whether to advance the program forward into Phase 3 and to initiate a Phase 2 program in Crohn's Disease.

With regard to our anti-IL 13 program for eosinophilic esophagitis we have initiated study start up activity for our Phase 2 trial. Eight to ten sites will be open and actively screening patients by the end of August and first patient in is anticipated to be late September or early October. I can tell you that based upon the successful investigator meeting that was held in Chicago in June there was a high level of enthusiasm on investor’s part given the potential new therapy and a rare and difficult to treat disease area. This Phase 2 trial will be a randomized double blind study in 90 patients with two subcutaneous doses of RPC4046 against placebo. The primary objective will be to demonstrate whether treatment with our molecules is efficacious as determined by histological improvement of the eosinophil count at 12 weeks. We expect that we will have results in this trial in the first half of 2016.

And finally while our oral small molecule GLP1 receptor Allosteric Modulator Program is still early we are excited about the novel mechanistic approach and the sizable opportunity that this innovative program represents. Orally administered lead compounds have shown single agent glucose lowering and weight loss effect in a diabetic disease model as well as activity that is synergistic with Metformin in combination study. We plan to identify elite candidates in Q4 2014 with the expectation of subsequently initiating IND enabling study.

With that I will hand the call over to Graham for a financial review of the quarter. Graham?

Graham Cooper

Thanks, Sheila. The three months ended June 30, 2014 Receptos reported a net loss of $23.2 million or $1.04 per share as compared to a net loss of $9.9 million or $0.98 per share for the second quarter of 2013. Net loss included stock-based compensation expense of $2.8 million. Total revenues for the second quarter of 2014 were $1.1 million compared to $1.2 million for the second quarter of 2013. Total operating expenses for the second quarter of 2014 were $24.2 million compared to $11 million for the second quarter of 2013.

R&D expenses were $20.4 million for the second quarter compared to $9.4 million for the second quarter of 2013. The increase in R&D cost is primarily related to the increased Phase 2 trial activity and Phase 3 start-up costs for our Phase 2/3 trial of RPC1063 in RMS and increased activity related to the Phase 2 trial of RPC1063 in ulcerative colitis.

G&A expenses were $3.8 million for the second quarter of 2014 compared to $1.6 million for the second quarter of 2013. The increase in G&A expenses was primarily related to the expansion of our operating activities and costs associated with being a publicly traded company.

As of June 2014, Receptos had $333.4 million in cash and equivalents and debt with a principal balance of $5 million. The increased cash balance was the result of an equity offering that we completed in June 2014 which provided gross proceeds of approximately $205 million and substantially strengthened the financial position of the company. We now have approximately 28 million shares outstanding on a fully diluted basis. Faheem?

Faheem Hasnain

Thanks Graham. So as you just heard Receptos is in a solid financial position and the program in relapsing MS is moving along at a rapid pace and due to continued positive development we need to expand our internal resources to make the work load associated with increased activity. We do plan to move into a new facility around the end of the year which will allow us for the necessary increase in headcount and R&D space.

Coming back to commercial implications, as you know the opportunity for novel therapies in the MS continues to expand. Overall the market for MS therapies has grown to $16 billion worldwide. Oral therapies as a class now exceed 30% of total scripts in the U.S. and continue to grow every quarter.

This shift in market share is coming at the expenses of the legacy and injectable therapy all of which have seen market share declines in the past 12 months. Gilenya, which is the only currently approved S1P receptor modulator produced over $600 million in the sales in the second quarter and its market share in the U.S. has increased even in the face of the launch of TECFIDERA last year.

So clearly there continues to be a need for next generation oral therapies especially those that approve upon the existing standard of care. While the current oral therapies do offer improved efficacy and convenience they have a number of safety and tolerability issues which limit their offtake. In the case of TECFIDERA we are hearing more and more about the tolerability issues associated with that drug, particularly in terms of GI effects and flush in the case of Gilenya, there has been and continues to be a negative perception associated with its safety profile. Unfortunately there is no cure for patients afflicted with MS, patients start on drug and generally continue until they relapse prompting a switch.

If we are successful getting our RPC1063 approved we expected that when it arrives on the market there will be a substantial group of patients in need of a new oral therapy with an enhanced profile versus the other approved drugs.

Finally, a word on our partnering process as we have said in the past we believe that our best opportunity to maximize the value of RPC1063 is in partnership with a larger partner with the commercial resources to drive penetration into the MS and potentially inflammatory valve disease markets.

We are continuing to dialog with a number of partners on the Phase 2 data in MS. We also expect that if the data is positive in UC there may be other parties that become interested based on their positions in the IBD marketplace. So we continue to believe it is prudent to wait for UC data. With regard to timing as you now partnerships take time to negotiate and based on our high aspirations for this drug any partnership we do will be a significant transaction even for a large pharma.

With our strong balance sheet we are in position to take the time necessary to drive the favorable terms. We believe our RPC1063 program is of great value and we will seek terms commensurate with the considerable potential it can offer a partner. In closing, I’ll remind you of the overarching objective here which is build a sustainable enterprise that does not rely on the success of any one product candidate. To that end we continue to be enthusiastic about our pipeline product including our anti-IL-13 program, RPC4046 and our novel oral positive allosteric modulation program against the GLP-1 receptor target.

Broadly speaking from a corporate standpoint Receptos is in a strong position. Having raised over $300 million in additional capital in 2014 we are well funded through our next major milestones. This will provide us with the strength and flexibility in whatever we chose to do, whether it be negotiating favorable partnership terms or taking our programs to further into the clinic independent.

As you have seen we have recently made some additions to our Board of Directors that add key skillsets appropriate for next phase of growth. With that we'd be happy to answer your questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question will be coming from the line of Ravi Mehrotra from Credit Suisse. Your line is now open.

Koon Ching - Credit Suisse

Hi, thanks for taking the question. This is actually Koon asking a question on behalf of Ravi. My question is on 1063 in UC, I just want to know what you guys were thinking in terms of the efficacy hurdle that you'll be looking forward to give the go ahead trial -- to give the go ahead for a Phase 3 trial in UC as well as to do Phase 2 trial in Crohn's disease.

And then as another follow up, a question on 4046, I just want to know if you guys would be exploring any of the biomarker or diagnostic aspects of the strategy or the disease in your Phase 2 trial. Thanks.

Sheila Gujrathi

Great, thanks for the question. Yes, for ulcerative colitis we do have an idea of the type of efficacy we would like to see, looking at the induction of clinical remission endpoint. So as I mentioned there the other approved therapies, recently approved therapies, in ulcerative colitis, specifically the biologics including anti-TNF therapy of Humira and golimumab and also vedolizumab as I mentioned have shown improvements over placebo in that 7% to 12% range.

And so that's a treatment effect that they've seen, looking at clinical remission. And to keep it in the mind that clinical remission is a what we consider a high hurdle efficacy endpoint. You are looking at substantial improvements in clinical signs and symptoms as well as substantial improvements in the mucosa and the colon for ulcerative colitis patients and they come in quite active when you look at the endoscopic images and understand where they're coming from.

So we're really looking for a significant improvement during an eight week course of therapy. So that does -- that’s why the rates are low but they are considered very clinically meaningful and [not] [ph] all those therapies did get approved with that type of treatment rate.

So we'll be very pleased that we saw treatment deltas in that range especially as a once a day oral, that's very well tolerated and considered safer than those biologic therapies and has that added convenience. We had very good receptive feedback from the investigators we're working with and with our key opinion leaders. This will be a nice favorable profile with that type of efficacy result and combined with our other advantages.

So that's where we're going to be looking for and if we see that type of treatment delta we will think, consider very strongly moving forward into Phase 3 for ulcerative colitis as well as initiating Crohn's disease because looking at lymphocyte trafficking inhibitors we do think that if the proof-of concept in UC will increase the probability of success in the Crohn's disease setting, in that this biology for that disease area will be similar and that we should be able to show good efficacy in Crohn's patients as well. So that's ulcerative colitis and the bar that we're looking to meet in the fourth quarter.

Moving onto eosinophilic esophagitis and our program there with anti-IL-13, yes we have a very active biomarker and diagnostic program with that molecule. So it's actually why we're very excited about the program not only to look at treatment effects IL-13 directed therapy with an eosinophilic esophagitis and to remind you we do think that IL-13 is a very essential cytokine in that disease area, not only [up regulating] [ph] eosinophilic information and other (inaudible) effect it has in the esophageal mucosa but also some of the fibrotic changes that occur in these patients because IL-13 is known to drive several fibrotic pathways.

So in addition to that we've also seen in the asthma population that periostin can be a potential diagnostic biomarker, looking at another IL-13 directed antibody in asthmatics and it turns out that periostin is a very highly expressed protein in EoE patients, very prevalent as well as eotaxin 3 and several other proteins that are all IL-13 driven.

So we do think that we could potentially identify very relevant biomarkers which we would hope to translate then into a diagnostic which could predict patients who have a higher efficacy response and really help us segment that population further. And because it’s highly prevalent we think we would capture a significant majority of active EoE patients using that diagnostic.

We also have some pretty innovative secondary endpoints looking at clinical improvement as well as endoscopic improvements similar to what we do in inflammatory bowel disease these. And lastly looking at functional esophageal scores which is probably the most relevant looking at esophagus function in addition to the histology. So all of that is again novel and that will probably the one of the first studies to report out on some of those end points.

Koon Ching - Credit Suisse

Thank you very much.

Operator

Thank you. Our next question comes from the line of Joseph Schwartz from Leerink Partners. Your line is now open.

Joseph Schwartz - Leerink Partners

Thank you. Good morning and congratulations on the progress. I was wondering if first of all we could talk a little bit more about the ulcerative colitis program and if you could tell us is anything required to be seen in terms of responsiveness or other criteria for patients to be moved into the maintenance phase after the first eight weeks of induction therapy?

Sheila Gujrathi

So the way the trial is designed is that patients who have shown clinical improvement which typically is clinical response and that's seen by the investigator, so they are treating their patients, they are seeing clinical improvement they may elect to continue that patient on into the maintenance period of the study, which is that additional 24 week treatment period and in that maintenance phase patients will continue to receive RPC1063 at their assigned dose level or placebo. So they continue to receive their assigned treatment for that additional six months.

If patients do not show clinical improvement or response after eight weeks then the investigator can elect to put that patient into the open label extension where they will be guaranteed to receive drugs. So there is a little bit of a disincentive for patients to actually progress forward into the maintenance period because they could actually get drug or be guaranteed to get drug in open label extension.

But we really encourage our investigators to try to keep patients into the maintenance period and continue getting data in that patient population. So that's the way the study is designed.

Joseph Schwartz - Leerink Partners

Okay, interesting. Thank you and then on the MS program for 1063, I was wondering if you could give us your sense of what you think is the key threshold for key cardiac events such as average and outlier heart rate and ECG effects under which you might be able to [inaudible] six hour first dose monitoring requirement on the label for 1063, is there a threshold that you have in mind?

Sheila Gujrathi

Yeah, there is no specific or absolute threshold in the sense that I think we will be looking at the overall profile and discussions with health authority, they also haven't given us absolutely specific guidance in terms of the threshold as you can imagine but what I can guide you to what we generally have been looking to and what we think we've been achieving to date in a substantial data set with robust monitoring, which is not only ECG and observational monitoring but this is also with Holter monitoring so you get a really detailed view of the 24 hour profile on the first day.

We really look to see -- I think what's the most important to the health authorities are really number one, adverse events, right making sure that patients who are having significant adverse events which really typically are patients who have symptomatic adverse events and also patients who really do require further monitoring and who may require some temporary sustenance with either medical or intervention for conduction abnormality to significant beta cardiac, including potentially needing temporary pace making.

So those are obviously very concerning and really any beta cardiac or what we consider these conduction abnormality that are clinically significant are concerning and we haven't seen those in our program, especially during the first six hours of administration and the few that we've seen in the night time period are equally balanced between the placebo and treatment group and very benign. This is what you normally see in patients and in people when they sleep and are very transient and not requiring any type of intervention at all. So that's critical. It's really continuing to have a very favorable adverse event profile meaning we don't have clinically relevant adverse event.

And the second I think the big area that FDA will be concerned about is looking at patients who go into low levels of heart rate. And so and they guide us to look at the Gilenya label of course here and in the Gilenya label in this first six hours it’s into the guidance that who would require -- monitoring they have indicated that patients who are below 45 beats per minute could potentially require longer monitoring and they have recommended that they be monitored for longer periods of time. That’s why we use that 45 beat per minute threshold just to see who’s falling below that.

Now keep in mind there are patients who come into the trial who are around 50 beats per minute when they get dosed with the drug if it drop below 45, may not be very relevant for them and clinically important but in any case that is the threshold that we are looking at just to get an idea and be able to characterize our data set. So that’s important.

And then thirdly, I think the drop in heart rate is something we do characterize of course but it is not something that they had said specifically that they consider as important as the others, because it’s a relative drop and some patients come in quite high in heart rate especially if they have some anxiety or other related aspects when they are first receiving therapy. But it’s still in this regard we are very pleased with our profile that we are again not seeing that substantial drop in heart rate which we do see as more profound drop in heart rate from the day signs for Gilenya treated patients. But we see more of it a blunting of the rise, the peaking or increase in the heart rate it is not going up as high as they would if they did not receive the drug.

So we continue to see a modest effect on heart rate. So those are different parameters we look at and we are really meeting all of those to continue to develop this data set seeing that will very favorable for us. And I think the other important aspect of this, which is really critical is really not having a QT effect. QT effect here is a compounding risk factor. It is a risk factor in and of itself of course, especially in MS patients who receive other compounding therapies that can affect QT or who could have other events that may improve those to QT effect over time which includes electrolyte imbalances or strenuous physical exertion and things to that effect. But then especially when you look at drugs that do effect heart rate, if you have a QT affect that can be a compounding risk factors. But to not have that really sets us up very well to be able to reduce that monitoring requirement or eliminate it. So that’s the overall approach we are taking.

Joseph Schwartz - Leerink Partners

Excellent, thank you for taking my questions.

Operator

(Operator Instructions). Our next question comes from the line of Jim Birchenough from BMO Capital. Your line is now open.

Jim Birchenough - BMO Capital Markets

Yeah, hi, guys and congrats on all the progress. A couple of questions first just going back to UC, Sheila is there any co-relation between clinical response and induction of clinical remission in terms of one leading to the next and so and then the second part on that question is just when we look at the historical trials and you see they are seeing a wide variance in placebo rates both in terms of response and induction of clinical remission. So maybe you can help us understand what type of placebo rate we should expect here based on type of patients you are enrolling or while file might this look most like. And then I got a follow-up.

Sheila Gujrathi

Okay, thank you. Yes and I haven’t spent a lot of time talking about clinical response, which is a really very important endpoint in the UC trial and it’s a key secondary endpoint for the program and very relevant. And these two endpoints are very related. So clinical response is looking at a certain improvement in the [inaudible] of course which is what we use for these Ulcerative Colitis trials. So we do look at clinical improvement which could be improvement in signs and symptoms as well as discuss its course.

So what we typically see are that patients who do show clinical response, a subset of those will have achieved the clinical remission definitions and meet that endpoint but for those who haven’t achieved clinical remission over time they could also be setting -- will setting them up to achieve clinical remission over time and these therapies do take time to work and we have seen this with the vedolizumabin program both in Crohn’s Disease where we saw substantial improvements overtime looking, at the CAI score improvements as well in ulcerative colitis program looking at the maintenance portion of those studies and looking at the one year outcome in clinical scores overtime.

We do see improvements over time. So we will be looking to see what our clinical response rate in this population because those patients could be achieving clinical remission as I mentioned with continued treatment with RPC1063 and to that effect we will have some maintenance stages that we will be looking at the time of the induction trial readout. Of course we won’t have the maintenance data set. We will get that next year but the goal would be see if we continue to see that improvement over time.

So those end points that are highly related and you want to see consistency between those two. You want to see that you are showing improvements in both clinical remission and clinical response because that would give you greater confidence that you have an effective therapy. And to guide you to again those rates that we're seeing and we're looking for that type of delta of that 7% to 12% remission and we're looking at 15% to 20% deltas for response, looking at the same recently approved therapies. So those are again the delta, the treatment deltas we'll be looking at.

And getting to your question on placebo rates, looking at historical trials yes, they have varied. I would say that more recently the placebo rate have been consistent, more consistent than Crohn's disease for ulcerative colitis. So they've been 10% or lower. Looking at again placebo remission rates and for response rates over time we've seen also more consistency there between 25% to 30% to 35% for placebo response rates, looking at those again recently completed trials.

So and why do I think that is, I think that's because of the type of scoring that we're using that and that we have these purely objective components to the Mayo score where you look at rectal bleeding, you look at endoscopy. And so that really aids the trial design by keeping those remission and response rates consistent and [keeps] the remission rates low. And so when you look at the remission rates over time for the placebo group, those have actually been coming down with the trial that were recently completed. I think that's related to again the scoring that we’re doing but also that pretty sick patients are getting enrolled into these trials.

When we look to monitor severely active UC patients they do have other therapies that are available to them and because these patients are quite sick they do tend to get those other therapies. So you are getting some refractory patients into your program. So those remission rates have been coming down. And so that’s a reason that program for example that was around 5% for the placebo remission rate and for the anti-TNF that ranged from 9% to almost -- from 6% to almost 10% for Humira.

So I think for our -- what we have been thinking again we actually think we will be in those low ranges. And the other aspect to mention here that we are using potential reading and so what that says and what that means is we actually have a sensor reader who gets the endoscopic images sent to him or her and they review those images in an objective manner and determine what type of endoscopic scores they are seeing.

And that really does impact the eligibility criteria. So we actually are really looking at a very sick population and we have increased our (inaudible) rate because we're using sensor reading. So we do think this is a key aspect of our program and with the sensor reading we think are -- your remission rates in the placebo rates could even be lower than what's been recently reported.

So that's the guidance that we're looking at and that's what we are hoping to see in our clinical program.

Jim Birchenough - BMO Capital Markets

And Sheila thanks for that and may be just one follow up question on eosinophilic esophagitis, have you had any discussion with regulators on what an approvable endpoint would be for EoE and how well you are studying now might track with that registration end point?

Sheila Gujrathi

Yes, we have we did conduct a pre-IND meeting with the GI division. And as you know there is still not a validated endpoint, I would say using validated scoring system for clinical improvement. The general guidance that we are well aware of which has also been discussed at the grade meetings, the regulatory meetings that the FDA conducted on EoE and the European health authorities have also participated in. So they will be looking to have a somewhat of co-primary endpoint in EoE. So while they are -- you consider histological improvement very relevant it’s in and of itself not adequate in that they want to see clinical improvement.

Now what that clinical improvement looks like is something that we’re really focused on characterizing in our Phase III trial. So it could be that we'll be looking at improvement in clinical signs and symptoms but we could also be incorporating endoscopic improvements which are quite objective and really considered to be trumping the clinical scoring when you look at ulcerative colitis for example as well as Crohn's disease and where Crohn's disease is moving to where they also likely to have an endoscopic aspect to the endpoint moving forward, as well as the esophageal function of course.

So that's why we're looking at number of different endpoints, secondary end points that are all focused on characterizing that clinical improvement. So we have some flexibility there to kind of characterize and define that and that will be really based on the Phase III data that we get out of this Phase II proof-of-concept study as well continued evolution in the field and looking at potential data from other trials.

I think we'll discuss that at the end of Phase II meeting with the regulators to finalize that Phase II design program and to really get a good final agreement on what would be approvable for a registration endpoint.

Jim Birchenough - BMO Capital Markets

Okay, thanks for taking the questions.

Operator

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

Faheem Hasnain

Thank you. So I just want to take a moment to thank the members of the Receptos' team that have created all the progress that we've seen to-date. We simply couldn't do what we do without our exceptional team; on their effort we succeed.

So thank you all for joining us on this call. We appreciate your support and we look forward to continuing to keep you updated regarding the progress of our development programs. Have a great day everybody.

Operator

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

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Source: Receptos' (RCPT) CEO Faheem Hasnain on Q2 2014 Results - Earnings Call Transcript

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