Vitae Pharmaceuticals' (VTAE) CEO Jeffrey Hatfield on Q2 2016 Results - Earnings Call Transcript

| About: Vitae Pharmaceuticals (VTAE)

Vitae Pharmaceuticals (NASDAQ:VTAE)

Q2 2016 Earnings Conference Call

August 3, 2016 4:30 P.M. ET

Executives

John Woolford - Managing Director, Life Sciences Team, Westwicke Partners

Jeffrey Hatfield - President and Chief Executive Officer

Rich Morris - Chief Financial Officer

Analysts

Leanna Mistasos - Wedbush Securities

Ted Tenthoff - Piper Jaffray

Jim Birchenough - Wells Fargo

Matthew Luchini - BMO Capital

Mike King - JMP Securities

Alex Schwartz - Stifel

Operator

Good afternoon and welcome to the Vitae Pharmaceuticals Second Quarter 2016 Financial Results and Operating Highlights conference call.

For opening remarks and introductions, I would like to turn the call over to John Woolford from Westwicke Partners, please go ahead.

John Woolford

Thank you, operator, and good afternoon, everyone. The earnings release announcing Vitae's second quarter 2106 financial and operation highlights was issued this afternoon. For those of you who have not yet seen it, you will find it posted in the Investor section of our website at www.vitaepharma.com.

Joining me for the call today are Jeffrey Hatfield, President and Chief Executive Officer; Rich Morris, Chief Financial Officer; Carole Sable, Chief Medical Officer; and Dick Gregg, Chief Scientific Officer.

Before we begin our prepared remarks, I would like to remind you that various statements we make during this call about the company's future results of operations and financial position, business strategy and plans and objectives for Vitae's future operations are considered forward-looking statements within the meaning of the Federal Securities laws.

Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. These risks are described in the risk factors and management's discussion and analysis of financial conditions and results of operations sections of Vitae's Form 10-K for the year ended December 31, 2015 and Form 10-Q for the quarter ended March 31, 2016, which are on file with the SEC and available on the SEC's and Vitae's website.

Additional factors will be described in those sections and the quarterly report on Form 10-Q for the quarter end of June 30, 2016 to be filed with the SEC in the third quarter of 2016. We encourage all investors to read these reports and our other SEC filings. All the information we provide on this conference call is provided only as of today, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise.

Please be advised that today's call is being recorded and webcast. Please note that presentation slides are also available via the webcast link. A link to the webcast is posted in the Investor section of our website.

I'll now turn the call over to Jeff. Jeff?

Jeffrey Hatfield

Thank you, John. Good afternoon and welcome to Vitae's second quarter 2016 conference call. I'm pleased to be speaking with you today. During today's call, we will use slides to support our discussion of a number of update items. The slides are available on the webcast link, which is available on our IR site.

Starting with slide 3 and beginning with second quarter highlights to be discussed during the call, we continue on track with our ongoing Phase 2 proof of concept study for VTP-38543, our wholly-owned first in class LXR beta agonist, being developed for atopic dermatitis and we expect to report top line data next quarter.

Given that timing, today, we plan to provide background comments on the disease, the design of the trial and expectations for top line results. We are also on track for the initiation of the next Phase 2 trial with our wholly-owned first in class ROR gamma t inhibitor, VTP-43742, which has the potential to be developed for the oral treatment of a broad variety of autoimmune disorders.

Previously in the first quarter of this year, 742 demonstrated proof of concept results in moderate to severe psoriasis patients that both clinically validated ROR gamma t as a therapeutic target and enhance the potential for 742 to progress as a paradigm changing therapeutic. Today, we'll provide an update on our plans regarding the next trial, which we expect to initiate in the fourth quarter of this year.

Finally, I'll provide brief updates on additional Vitae programs developed using contour, our proprietary discovery engine. I believe the depth and breadth of our expanding pipeline has Vitae well-positioned the future. With greater opportunity to grow shareholder value, that I believe we've experienced previously. After the pipeline update I'll pass it over to Rich Morris, Vitae's CFO to review the company's financial position and performance. Then I'll conclude the call by highlighting Vitae's most important milestone events expected in the remainder of 2016.

Starting with our atopic dermatitis program, moving to slide 4, as I previously mentioned, the next key data milestone for Vitae will be the announcement of top line results from our ongoing Phase 2a proof of concept trial with VTP-38543 and atopic dermatitis. As this is a first in class, first in human clinical trial, we are focused on generating a broad data set of efficacy, safety, tolerability, and biomarker measures to collectively use in assessing the potential for VTP-38543 to provide benefit to atopic dermatitis patients. An evaluation based on the totality of the data will determine next steps for this program.

Our enrollment progress remains on target, and we expect to announce top line results in the fourth quarter. First, a few comments about the disease itself. As shown on slide 5, atopic dermatitis is the most common inflammatory disease. There are approximately 32 million patients in the U.S. alone. It's estimated to occur in 15% to 25% of children and 4% to 7% of adults, where it's commonly known as eczema.

The disease is visually characterized by dry inflamed skin seen in the photos. While at first glance, this disease may be thought of as only a rash, which itself is undesirable and potentially stigmatizing. The effects on a patient's life are much deeper, as the flares of intense itching that accompany the rash can disrupt many aspects of life, particularly sleeping and emotional health.

In fact, the negative quality-of-life impact of atopic dermatitis can exceed that experience by a patient with asthma or epilepsy is comparable to that of having kidney disease or cystic fibrosis. This is an important disease with real unmet medical need.

Moving to slide 6, we see that atopic dermatitis is a disease driven by two separate but intertwining mechanisms with either serving as the initiating factor. In up to 50% of atopic dermatitis patients, genetic skin barrier defects are present that allow environmental irritants and allergens enhanced access into the deeper layers of skin. This invasion naturally triggers an immune inflammatory response in what is known as an outside in disease response.

Alternatively, in other cases, it's clear that a lesional over expression of cytokines is present, triggering itching and scratching, which results in physical damage and compromise of the skins barrier function. This is the inside out disease dynamic. Importantly, which ever starts the disease process both of these pathologies are present in the disease and both exacerbate the other in a vicious cycle. Therapeutically addressing both of these disease drivers may lead to an improved outcome for patients.

In our preclinical development of VTP-38543 and historically in multiple academic research labs, the potential benefits of an LXR agonist on epidermal homeostasis have been demonstrated. Regarding inflammation, 543 has demonstrated the ability preclinical to decrease inflammation at a level comparable with that of a high potency corticosteroid.

Regarding the skins barrier function, LXR agonists have demonstrated the ability to up regulate the genes responsible for skin homeostasis, including corneocytes maturation and development of the surrounding lipid matrix structure. That is the bricks and the mortar of the skins barrier function.

Now moving to slide 7. In the ongoing proof of concept trial, we'll be looking at data focused in three key areas. Physician assessment of disease improvement, patient assessment of disease improvement and hard biomarker evidence of biologic activity. We will of course be looking at overall measures of efficacy and safety tolerability, and we will be looking for biomarker evidence of 543's anti-inflammatory and barrier function defects at the gene transcription and cell histology levels.

In terms of physician assessment, efficacy will be evaluated using multiple standardized rating instruments, including IGA, SCORAD and EASI. IGA is the current scoring system basis for approval in the U.S. IGA uses only a scale of zero to four in assessing the patient and as such typically requires trials numbering in the hundreds of patients to demonstrate a clear statistically significant result.

So, to supplement IGA, two other more comprehensive and systematized scales are being used in this trial, including SCORAD, which is the registrational basis for approval in the E.U and EASI, which is gaining a popularity in the U.S. SCORAD uses a measurement scale ranging from 0 to 103 points, while EASI uses a scale ranging from 0 to 72 points. We expect these scales to provide a more sensitive indication of 543's advocacy.

Moving to patient assessment, we are gathering reported outcomes data on the frequency and intensity of itching and on sleep disruption. In addition to these qualitative data sets, more quantitative biomarker analysis and skin biopsy samples will also be important in interpreting the effects of 543.

Biomarkers are being used to assess 543's barrier function effects, include SREBP1c, a measure of lipid synthesis and ABCG1, a measure of lipid secretion. In addition, keratin 16 and filaggrin both of which are associated with the maturation of keratinocytes in the corneocytes are also being assessed. Pro-inflammatory cytokines will also be measured including IL-6.

Slide 8 provides an overview of the design of this ongoing Phase 2a trial. This is a first in human trial with a first in class agent. The trial is a randomized double-blind and placebo controlled trial involving approximately 100 adult patients with mild to moderate atopic dermatitis. Three different strengths of VTP-38543 are being evaluated in a cream formulation applied twice daily. These strengths 0.05%, 0.15% and 1.0% represents a 20 fold difference to maximize the opportunity to see an effect in this trial.

Enrollment for the trial is in a dose escalating format. For the 1.0% formulation, it was necessary to add a solubilizer. Therefore there are two corresponding vehicle groups. One is vehicle only and one as vehicle plus solubilizer. It should be noted that in topical dermatologic trials, the vehicle does convey a measurable therapeutic benefit on the very dry skin of atopic dermatitis patients. This effect will be factored into our assessment of the data. We look forward to reporting the top line data from this proof of concept trial in the fourth quarter of this year.

In summary, we believe that these data have the potential to validate LXR as a therapeutic target for atopic dermatitis. Looking at 543's ability to decrease inflammation and improve the skin's barrier function to break the cycle of these intertwining pathologies in this high unmet medical need disease.

I'll now move to VTP-43742, our novel wholly-owned first in class ROR gamma t inhibitor for autoimmune disorders with a lead indication in psoriasis. Earlier in 2016, we detailed the encouraging Phase 2a results from our proof of concept study of 742 in psoriasis patients.

So, I'll just provide a summary today as shown on slide 10. The qualitative proof of concept trial evaluated the clinical efficacy, safety, tolerability, pharmacokinetics and pharmacodynamics of multiple doses of VTP-43742 in psoriasis patients, ranging over a four-week dosing period.

With the goal of developing a vast oral agent for the treatment of multiple autoimmune disorders, we observed in this trial, a clear and consistent four-week signal of efficacy from PASI score changes in both the 350 mg and 700 mg dose cohorts. These clinical efficacy results were supported by biomarker analyses, including statistically significant inhibitory effects on IL-17 levels in the blood and lesional skin. Further the AE profile for the 350 mg dose was comparable to that of placebo. The 700 mg dose cohort did demonstrate instances of elevated transaminase levels. While transaminitis is not uncommon in psoriasis trials, we are working to better understand this phenomenon in the future.

Moving to slide 11, as we look to the next trial with VTP-3742, expected to initiate in the fourth quarter of this year, we look to fulfill the following objectives. One, establish the full 16-week efficacy of VTP-43742. We know from the proof of concept trial results that there was a significant acceleration of clinical PASI score improvement in weeks three and four of the trial, which implies the potential for greater efficacy with continued dosing. This next trial will be a full 16-week trial in moderate to severe psoriasis patients.

Two, further elaborate on the safety and tolerability profile of 742. The 350 mg dose was comparable to placebo in the proof of concept trial, providing at this early stage of development, the potential for a transformative, effective, safe, well tolerated once a day therapy for psoriasis patients. We will seek to further profile 742 in this next trial.

And lastly, we look to as efficiently and effectively as we can set the stage for initiation of a pivotal trial after if his Phase 2 trial is successful. We are still finalizing the details of the next trial at this time and we're confident that the next study will be able to achieve all three of these objectives with top line data from the trial expected to be announced in the second half of 2017.

Next, I want to update you on additional opportunities within the rest of our pipeline. Moving to slide 13, following the successful clinical validation of ROR gamma t as an attractive target for autoimmune disorders with first-in-class VPT-43742 and considering our current world-leading position in the science of ROR gamma t inhibitors. We've decided to expand our presence in this space by advancing an additional chemically distinct ROR gamma t inhibitor into the clinic.

This quarter, we expect to initiate Phase 1 clinical testing of VPT-45489, our second ROR gamma t inhibitor. This trial will be in normal, healthy volunteers and will be a single ascending dose double-blind placebo-controlled trial.

I'd also like to update you on our base program for the treatment of Alzheimer's. Given the current focus on our first-in-class and wholly-owned ROR and LXR clinical programs and has potentially landmark data for base inhibition may be available in the relatively near term for Merck's ongoing Phase 3 outcomes trial with their base inhibitor. We have made the decision not to make additional investments in our program at this time. We plan to revisit our decision on VPT-36951 following Merck's announcement of data currently anticipated in the summer of 2017.

Finally, I would like to provide an update on a discovery engine contour as shown on slide 14. As discussed before, we focus our proprietary discovery platform on targets that fit the following criteria, known relatively well validated biology to increase the odds of achieving efficacy if we are successful at drugging the target; high unmet medical need to increase the odds that patients will significantly benefit from our work, if we're successful; specialty therapeutic category to ensure a reasonable biotech scale path to develop our work all the way to commercialization, if were successful; and known and highly significant discovery hurdles leading to a difficult-to-drug profile to provide us the ability to achieve a first-in-class competitive position.

We believe this formula has worked well for us, but ROR and LXR. Though in early stages, we are pleased to announce today that we achieved animal proof-of-concept with a new target, and that an initial lead candidate has been selected for preclinical development. For competitive reasons, the target is undisclosed at this time. While we are not disclosing any additional information, I want to highlight that the program hits all the key characteristics I outlined a moment ago.

At this point, I'll turn the call over to Rich Morris to present a financial overview of the quarter. Rich?

Rich Morris

Thank you, Jeff, and good afternoon, everyone. I'll focus my comments today on our financial results for the second quarter and our balance sheet as of the end of June 2016. The summary of our financials is provided on slide 15.

First, I'd like to review the company operating expenses for the quarter. Total operating expenses in the second quarter of 2016 were $10.5 million, compared with $10 million in the second quarter 2015. For the second quarter 2016, this included non-cash stock-based compensation expense of approximately $800,000. R&D expenses were $7.9 million in the second quarter 2016, compared with $7.8 million for the second quarter of 2015.

The slight increase was largely attributable to expenses related to preclinical programs, the atopic dermatitis program, discovery efforts, stock-based compensation, and compensation expense, partially offset by reduced manufacturing expenses resulting from the timing of development activities for the ROR gamma t program.

G&A expenses were $2.7 million in the second quarter of 2016, compared with $2.3 million for the same period in 2015. The increase was primarily due to increased legal fees, patent-related expenses, stock-based compensation and compensation expense. Vitae reported a net loss of $10.4 million or $0.36 per diluted share for the second quarter of 2016, compared with a net loss of $9.8 million or $0.45 per diluted share in the second quarter of 2015. The increase in net loss was primarily due to the increase in G&A expenses.

Finally, our balance sheet. As of June 30, 2016, we had $77.4 million in cash, cash equivalents and marketable securities compared to $59.4 million as of December 31, 2015. The increase in cash position was primarily the result of the completion of follow-on offering in the first quarter of 2016, partially offset by cash outflows used in operating activities.

We believe that current cash levels will enable us to operate into the second half of 2018 based on our current business plan. We expect this to allow us to advance our proprietary pipeline beyond multiple milestones, including proof-of-concept in our atopic dermatitis program and the announcement of top line data from the expected 16 week trial for VTP-43742.

And now, I'll turn the call back to Jeff for concluding remarks before we go to Q&A. Jeff?

Jeffrey Hatfield

Thanks, Rich. So to conclude the call, I’d like to summarize the most important milestones expected for our company looking forward to the remainder of this year. As shown on slide 16, we expect the following; for VPT-38543 being developed for atopic dermatitis patients, announcement of top line Phase 2 proof-of-concept trial results in the fourth quarter; for VPT-43742 being developed for psoriasis and potentially other autoimmune disorders, initiation of a 16-week Phase 2 trial in the fourth quarter; for VPT-45489 also being developed for autoimmune disorders, initiation of a Phase 1 single-ascending dose trial in this quarter; and for our new discovery program, initiation of preclinical development in this quarter.

We continue to be excited about the future for Vitae. Thank you for your interest and your anticipation in today's call. And now we'll take any questions. Operator, if you would please open up our line.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from line of Leanna Mistasos with Wedbush Securities. Your line is now open.

Leanna Mistasos

Thank you for taking my questions and congratulations on your progress. Can you tell us a little bit more detail about how 45489 is different than 43742? And why you decided to go after a second ROR gamma t inhibitor instead of just further developing 742 and when will you give us more detail about the new target?

Jeffrey Hatfield

Good question, Leanna. I appreciate the enthusiasm and let me try and tick those off. Hopefully I captured these. So the first question, I believe, was differentiation. What I can tell you is that 45489 is a unique chemotype among ROR gamma t inhibitors. For competitive reasons, we're not providing any additional information beyond that, although I guess I would just say in the preclinical development, we saw that 489 was very effective in the animal models. It was safe, well tolerated, had a once-a-day peak -- pharmacokinetic profile that would indicate once-a-day dosing in humans, and we're very excited to progress that as well.

For the second question, in terms of why to do this, we were very pleased obviously as a company to see that with 742, we were able to validate ROR clinically as what we believe is a very attractive target for autoimmune disorders. These are distinct compounds, and we decided to leverage, what we believe in, our world leading position in understanding the science of ROR inhibitors and move both of these forward.

So your question about trade-offs. There is no trade-off to this. We are advancing both. We believe that this market ROR target will provide significant opportunity within the autoimmune disorder space, and we're going to continue to move both of these forward and let the science drive where they ultimately end up.

As it relates to new target, we are spending money on discovery. We've made exciting progress. The men and women, the scientists here at Vitae are very excited about this early work with the target and given that we're advancing it into the clinic we wanted to let everyone know about that fact because we'll be issuing a press release when we actually kick the trial off this quarter. Because this is a very interesting target, for competitive reasons, we're not disclosing it at this time, but this is something that we'll continue to evaluate as we move forward and make decisions appropriate to where we are in the future.

Leanna Mistasos

That sounds like 2017 you'll tell us what it is.

Jeffrey Hatfield

In the future, we will. I don't have any better guidance, I don't have any different view of it so I can't tell you anything beyond that, Leanna, but I would just tell you that we're excited about it.

Leanna Mistasos

All right. Thank you very much.

Jeffrey Hatfield

Thank you, Leanna.

Operator

Our next questions come from the line of Ted Tenthoff with Piper Jaffray. Your line is now open.

Ted Tenthoff

Great, thank you very much, and I appreciate the updates across the board including on the new programs. Look forward to hearing more. My question really has to do with the atopic dermatitis did in 4Q. How should we expect release of this top line will be similar to what we saw with respect to the psoriasis release last year? Also, is there a conference where you're going to be reporting the 742 psoriasis data?

Jeffrey Hatfield

Thanks, Ted, thanks for joining us on this call today. So, the expectations for the announcement of the 543 trial, we are moving forward with this trial, we're on track with enrollment, so we would expect to have data from the complete study. This would be top line data, until we get all of the data, I can't tell you the exact data sets or slides that we'll use. But we'll represent the totality of the data, the efficacy, the safety, tolerability data, pharmacokinetics, and we do expect to have a robust set of biomarkers from the entire trial to be able to make preliminary observations about as well. So we expect it to be a top line, but pretty robust and full data set at that time.

Ted Tenthoff

That's helpful. And just in terms of reporting 742?

Jeffrey Hatfield

742, yes. As I'm sure you know, it takes about six months to get in queue for scientific conferences, and we reported the top line data for 742 mid-to-late - well, definitely the late first quarter of this year. So we have been analyzing data, pulling it together, we still, of course, are working toward final study reports. But we do expect, we've made some submissions of data, we're going to continue to do that and as soon as we have a specific meeting with specific data, we'll press release that to let everybody know about it.

Ted Tenthoff

Okay, helpful, thank you very much.

Jeffrey Hatfield

Thanks Ted.

Operator

And our next question comes from the line of Jim Birchenough with Wells Fargo. Your line is now open.

Jim Birchenough

Hey guys. Thanks for the update and congrats on the progress. A couple of questions. I guess, first, any chance that you could provide some context for what you would expect to see for vehicle by itself and perhaps maybe some efficacy context for steroids in each of those measures of IGA, EASI, and SCORAD just for context?

Jeffrey Hatfield

So as you point out, Jim, and is well known within the derm space that the skin of an atopic dermatitis patient, part of the pathology is his compromised barrier function of letting water escape from the skin and creates very dry skin. So, any vehicle, whether it be cream, ointment is going to have a moisturizing effect that in and of itself is therapeutic.

Now depending upon the different trials that we look at and the differences there, if we look at, for instance, the Crisaborole data versus vehicle there in the IGA scoring system, which again is a very blunt instrument only having a score from 0 to 4 points and measuring responders. In that trial, I think that was about two times 750 patients. There was about a 7-point difference in the responders between vehicle and Crisaborole in one trial, and I believe it's got 13 points in the other trial.

So in that more blunt instrument assessment, there's not an enormous difference. It takes hundreds of patients as mentioned before. We’re hopeful that with the SCORAD and EASI scoring system given that there are a number of subscales that are rated for each patient, percent body affected, degree of effects, et cetera, that that will tease out a more sensitive response.

There'll be things there that if this is effective, if the target's valid, that we'll be able to see real affects once we get into those - the subscales and the overall more sensitive measures of EASI and SCORAD. So that's our expectation, but clearly vehicle does have an important role. And looking at care charts, in fact, for atopic dermatitis, application of a moisturizing cream or ointment is the first step in every care map that I've seen for the disease.

Jim Birchenough

So is it fair for us to expect some separation from vehicle, but maybe not statistically significant, thanks to those measures moving in the same direction, would that be a fair gauge of success?

Jeffrey Hatfield

Yes, Jim, I think it's absolutely accurate to think about this as a qualitative trial in that there's no way that we would expect to see statistically significant response out of this. I think given the breadth of parameters and subscales that we'll be looking at, clearly, we would expect to see indicators of biologic effect. Across the scales, we'd expect to see some validation of that within the biomarkers, it's going to be the totality of data that guides us to a go/no-go decision from this trial.

Jim Birchenough

Just one final question and I'll get back in the queue, but just so I understand the strategy around the follow on with the ROR gamma t. I think people are going to try and figure out whether they should be excited about the potential incremental opportunities that this provides or whether they should be worried, but maybe you're hedging your bets against 742 because of the liver effects. So how do you address that concern and specifically when you look at fixing a differentiated hemochyme, is it really designed to optimize the efficacy or does it address specifically the liver effects we saw at prior doses with 742?

Jeffrey Hatfield

Yes. So thanks for asking that question, Jim. I fully understand what's behind that question. I can offer these comments and these thoughts. We've been commenting on a continued ROR discovery and preclinical development effort and I don't know if it's been explicit in every queue, but it's been a comment that we've made regularly for at least the past year, year and a half, maybe longer. So this is a continuation of a story that we've been commenting on for quite some time and it's just now advanced to the point where we want to make more explicit mention of it, given that we've advanced through preclinical testing and into the clinic.

So it's important to first start with, this is simply a continuation of a strategy that's been in place for more than, since we originated this program. It's been our practice, as we did in other therapeutic categories and different programs, to bring along multiple high quality development candidates. So that is our practice.

In terms of - there are differences in characteristics between these two compounds that might provide differentiating advantages in different specific indications amongst all the different autoimmune disorders that have potential to respond to ROR gamma t inhibition. We're not detailing what all of those differences are for competitive reasons, but there are differences. And so we think this is an incremental opportunity that leverages our expertise, our leadership position with ROR. So, I think that touched on the elements of your question, anything that I left out?

Jim Birchenough

I just want to clarify, so the advancement of this follow on compound, it sounds like that advancement initiated before you even had the Phase 2a data, is that fair?

Jeffrey Hatfield

Yes, absolutely.

Jim Birchenough

Okay. So it wasn't driven by something you saw in the 742 data, but this has been an ongoing strategy that preceded that trial?

Jeffrey Hatfield

Exactly right, Jim. And again, I'll just highlight, we've mentioned the existence of a - we've talked about it as a backup program, post-validating the ROR target. We've always been advancing this forward to the clinic, that's been our plan all along, and we're there. So, we're announcing it.

Jim Birchenough

Well, thanks for taking all those questions. I appreciate it.

Operator

And our next question comes from the line of Matthew Luchini with BMO Capital. Your line is now open.

Matthew Luchini

Hi, great. Thank you. Good afternoon, everybody. So first, on the - on 543 for atopic dermatitis, I was just wondering, since you mentioned Anacor, if you could talk to us a little about, that's a Phase 3 study, this is going to be a Phase 2a study. Maybe any key differences between your Phase 2a study design and the early designs from Anacor and how any differences in protocol might affect our ability to look at the results relative to each other? And then if I could one on 742, given what we saw with the 700 mg dose and also with the 350 mg dose, I know you're not going to disclose the Phase 2b trial design right now, but from your point of view, is there a rationale to look at a dose that might be say in between those two previously studied doses? Yes, so thanks.

Jeffrey Hatfield

Okay. Yes, thanks, Matt. So the first question, the first part of that was about comparisons, is there any way to put the studies between Crisaborole and our program VTP-38543 and draw conclusions. For Crisaborole, their initial studies were mostly done in psoriasis in the Phase 2a. There's one trial that we've seen and that trial was strictly a lesion versus lesion comparison within the same patient and they did not do a placebo accounting to the best of my knowledge. I haven't seen data that looked at difference between - sorry, let me restate that. So there's not a big placebo patient group, it's between lesions where placebo was applied or active drug was applied.

And so it's a bit different because the scoring system, which was called, I believe, ADSI, is a lesional scoring system not as a patience scoring system. And so we don't know how to draw any conclusion from that kind of data, nor again, there is not a discreet placebo patient group and active patient group, so we can't do comparisons of patient assessment, et cetera. So, I think it's going to be tough to draw any kinds of conclusions.

I would just reorient to, this is a qualitative, first in class, first in human proof of concept study. And so I think the important part for us will be to look at the full data set and understand what the signals are and what that might mean for a profile that can provide benefit to patients in the future and we'll make the decisions from that.

Matthew Luchini

And on potential dose …

Jeffrey Hatfield

Yes, thanks, Matt. Yes, look, we're still doing the fine details of the protocol. There are pre-study activities including wrapping up the long term tox, API, et cetera. We'll be ready for fourth quarter and we’re on track for that, but we don't need to finalize a protocol at this point in time. We'll be continuing to work on that, refine that, speak with outside experts.

You may recall that Vitae recently hired a chief medical officer, Dr. Carole Sable, who's on this call. Dr. Sable is gaining familiarity very rapidly with the program and adding her expertise and thoughts and strategies into this. And as soon as we are in a final state, then we'll be able to perhaps answer more of these questions, but at this point, we don't have an answer yet. So, I can't provide anything to you.

Matthew Luchini

Okay, thank you.

Operator

[Operator Instructions] And our next question comes from the line of Mike King with JMP Securities. Your line is now open.

Mike King

Good afternoon, guys. I hope you can hear me okay. I apologize if this call - my call is a little bit [indiscernible]. A follow up on 543 [indiscernible] questions, what's the vehicle is [indiscernible]? Thanks.

Jeffrey Hatfield

Mike, I'm sorry, you are breaking up too much for me to be able to pick up your question.

Mike King

Sorry about that. Can you tell me what the vehicle is for 543?

Jeffrey Hatfield

What the - what is for the vehicle, it's a cream vehicle. Is that?

Mike King

Yes, what is it?

Jeffrey Hatfield

So it is a cream formulation, which - and nothing special or wildly advanced. It's a very basic, well tolerated kind of formulation for creams. We know that within topical agents, there are three choices, cream, ointment and gel. For atopic dermatitis sort of in rank order, gel is potentially the least desirable because that is an alcohol-based vehicle and alcohol can be drying, can create a stinging effect on what's already very sensitive skin. Ointments are highly moisturizing, but they remain greasy and tacky. They stick to clothes; they create a shine on patient's skin, if it's exposed, where people can see it. So that tends to be a second choice.

Clearly the preference amongst people that we've talked to, including patients, is for a cream formulation and we believe we’ve got a very nice, elegant, near final to market kind of formulation that's in testing right now.

Mike King

If I heard you correctly, you said that the - even the lowest dose is expected to be an active dose?

Jeffrey Hatfield

Yes. We've created a 20-fold range. We believe there's a chance that the lowest concentration may be effective, yes. If we look to the animal data to guide us, there is a basis to believe that lowest dose may have an effect and we'll see. We also wanted to create a very wide range because this is first in class, we just don't know yet what the clinical action is. So to that point…

Mike King

So to that point, I thought you didn't want the FDA - would want to see a no effect dose.

Jeffrey Hatfield

That wasn't the purpose for doing that dose. That may be something that we tackle if this trial is successful and we get the go signal. But really, it's just trying to create a wide range of doses to - and dose concentrations to be able to give the drug best opportunity to generate results and we do believe that this trial accomplishes that. If there is an effect of 543 in creating clinical benefit for atopic dermatitis patients, we believe we'll see it within this trial.

Mike King

Okay, I have other questions, but given the reception, I'll follow of offline. Thanks.

Jeffrey Hatfield

Thanks, Mike.

Operator

And we have a follow-up question from the line of Leanna Mistasos with Wedbush Securities. Your line is now open.

Leanna Mistasos

Thanks for taking my follow-up. Recently, Pfizer made a comment that they expect Crisaborole to reach $2 billion in the first five years of launch. What do you think the market potential is for 543 just in atopic derm?

Jeffrey Hatfield

So, I think that Pfizer's comments, obviously, I'm sure they've done very thorough analysis, the only thing I can say is I do think that that's qualitatively reflective of the tremendous unmet medical need that exists in this disease. We hear that clearly as we're talking with clinicians, practitioners, with patients. People are really enthusiastic and/or anxious to have better options with which to be able to treat this disease. I think until we get a first look at the profile of the agent, it's pretty hard to make any comments about this. What we're hopeful for is we get a go signal so that we can play a role in trying to help those patients with this high unmet medical need.

Leanna Mistasos

If you get a good profile, do you think $2 billion in five years is too high?

Jeffrey Hatfield

Again, I can't comment on that, but I certainly believe that a successful agent that really helps patients will be very well received in the marketplace.

Leanna Mistasos

All right. Thank you.

Jeffrey Hatfield

Thanks, Leanna.

Operator

And our next question comes from the line of Alex Schwartz with Stifel. Your line is now open.

Alex Schwartz

Hi, Jeff and Vitae team. Congrats on the continued progress.

Jeffrey Hatfield

Hey, Alex. Thank you.

Alex Schwartz

Yes. So one last thing I was thinking about, it seems like there's been some more interest in ROR programs from big pharma and biotech recently, couple that with your Phase 2 data, I imagine inbound requests to discuss potential partnership opportunities are high. Can you just talk about your thoughts on a partnership? Is there an inflection point, maybe obtaining a certain number of safety data in patients or another trigger, that would interest you in partnering the program or do you take it - intend to take it to the finish line wholly owned?

Jeffrey Hatfield

Yes. Thanks Alex. So, we have made some mention of this before. We've had partnering interest in this program since four months after we started it, which was in fourth quarter of 2012. So, we started having inquiries actually in first quarter 2013. That has continued, and we've had significant interest even within this year. We have a routine practice of engaging in dialog, but I would call your attention to - and this is something we feel very strongly about, the strategies of this company, in I believe many of our documents, we have made - put forward the corporate strategy, which is to pick targets in specialty therapeutic areas that will enable us to develop these and launch these ourselves, to commercialize these ourselves. We believe that creates the best value - opportunity for value growth for shareholders.

In addition, if there is a partnership that increases the opportunity for shareholders to benefit, than that's something that we would listen to and think about. The first strategy is to keep the program and that's what we intend to do with this ROR program at this time.

Alex Schwartz

Okay, very good. Well, congrats on the continued progress and looking forward to reviewing the 38543 data.

Jeffrey Hatfield

Thanks again, Alex.

Operator

And I am showing no further questions at this time. Ladies and gentlemen, this does conclude the program. Thank you for your participation. You may now disconnect. Everyone, have a great day.

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