Seeking Alpha

Arena Pharmaceuticals' (ARNA) CEO Amit Munshi Presents at 38th Annual J.P. Morgan Healthcare Conference (Transcript)

|
About: Arena Pharmaceuticals, Inc. (ARNA)
by: SA Transcripts
Subscribers Only
Earning Call Audio

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) 38th Annual J.P. Morgan Healthcare Conference January 16, 2020 1:00 PM ET

Company Participants

Amit Munshi - President and Chief Executive Officer

Conference Call Participants

Yuko Oku - J.P. Morgan

Yuko Oku

Hi, I’m Yuko Oku, one of the associates on the biotech team. It’s a pleasure today to introduce Arena Pharmaceuticals. And quick note before getting started with the presentation, we’ll be hosting a Q&A session right in the Yorkshire Room.

And with that, I’ll turn it over to CEO, Amit Munshi.

Amit Munshi

Thank you and thanks to J.P. Morgan for inviting us back this year. It’s been an amazing year for us as a company and I’m looking forward to sharing with you some of our progress and more interesting and more exciting some of the things that are ahead for the company. As always our forward-looking statements and we will be making forward-looking statements throughout the presentation. We ask that you consult our most recent regulatory filings, our SEC filings for a full list of disclosures.

As some of you know, it’s been a really amazing 3.5 years for us as a company, coming in, in 2016, beginning to rebuild, reset the enterprise, resetting the shareholder base, turning over five consecutive positive Phase 2 and open-label extension trials and then culminating 2018 and 2019 with the United Therapeutics deal on one of our compounds ralinepag, and thereby bolstering our cash position currently at approximately $1.1 billion. We spent 2019 scaling the enterprise, building critical infrastructure to be able to execute on the clinical trials, and we’ll spend a little bit of time on some of those programs throughout the next 20 minutes.

Exciting for us, we are looking at eight Phase 2 and Phase 3 readouts between 2020 and 2021. And as we continue to unlock value from the historical GPCR platform, we’ll be looking at a minimum of one IND per year for the next five years. As we think about the overall pipeline four clinical stage assets and eight disease areas, four preclinical compounds, again, one IND per year in three therapeutic areas. We’ve made tremendous progress as we continue to build the company, execute on the potential best-in-class etrasimod program across multiple Phase 2s and 3s, progress olorinab, and again bring APD418 forward, most recently announcing Fast Track designation for that compound.

Just another way of looking at the next two and a half years for the company in terms of catalyst rich horizon, this year we anticipate completing the enrollment of the UC 52 trial that will initiate the UC 12 component of the program. Olorinab and the CAPTIVATE IBS pain program in both IBS-C and IBS-D will readout the back part of the year, again Phase 2b data on a randomized double-blind controlled trial.

Etrasimod will readout in the ADVISE atopic derm trial, again a placebo control randomized double-blind placebo controlled trial, multiple doses and that reads out in the back part of the year as well. We begin 2021 with the CULTIVATE Crohn’s disease Phase 2 data, which seamlessly moves into a Phase 3, the Alopecia Areata, we’ll talk a little bit about that today. And then finally, [commenting] [ph] the back part of the next year with the UC 12 and UC 52 Phase 3 data readouts, as well as Eosinophilic Esophagitis and APD418 Phase 2a data in acute decompensated heart failure, so a really busy next 18 to 24 months for us as a company.

Importantly, as we continue to unlock value from the historical GPCR platform at Arena, we’re excited to announce two new initiatives, the first one being the formation of Arena Neuroscience. We have multiple compounds that are moving rapidly toward the clinic, we’re in the process of shoring up some critical intellectual property and behind that building a long-term sustainable pipeline in the area of microglial neuroinflammation. We think this is another critical leg of the stool for the company long-term. We are putting this into a subsidiary Arena Neuroscience Inc and that will enable us to have lots of options in terms of how we progress this and how we finance this over time.

The second kind of critical part of our unlocking the value proposition is the expansion of our collaboration with Beacon Discovery. As you will recall, back in 2016, we spun out Arena’s historical GPCR enterprise, GPCR discovery research engine into a new group called Beacon Discovery, a standalone enterprise. Beacon has subsequently continued to grow. They have multiple collaborations with other large pharmaceutical companies and we’re excited to announce a multi-product, multi-year collaboration with Beacon to really expand our I&I portfolio over time.

These are the same scientists, who built drugs like ralinepag and etrasimod and olorinab and has historically been known to have really one of the best in the world GPCR chemistry library. So again, we’re really excited about this and we look forward to sharing this more about this with you as we file INDs for the next several years.

So starting with etrasimod in terms of our ongoing activity. Again etrasimod is a investigational oral next-generation S1P modulator with optimize activity being studied for multiple immune mediated conditions. Etrasimod has an extremely exciting intrinsic features, it’s got a highly specific receptor pharmacology touching on 1, 4 and 5 specifically with no evidence of off-target activity or deleterious barrier function due to S1P2 activity and then S1P3 activity.

It’s got best-in-class potential pharmacodynamics with rapid on-rate, important for patients and rapid off-rate, absolutely critical for clinicians. So strong durable remission rates that we’ve demonstrated so far, give the physician a level of control in terms of the compound and in terms of treating these patients. And the drug has been generally well tolerated with no titration requirements. We’ve not seen any evidence of elevated LFTs, abnormal PFTs or macular edema in several hundred patients treated today.

Just to remind everyone, this is a once a day oral pill and we expect minimal monitoring requirements as it relates to first dose heart rate effects. We’re looking at etrasimod in three gastrointestinal conditions, ulcerative colitis where we’ve read out the OASIS Phase 2 induction study as well as the long-term open-label study. We’ve initiated in Crohn’s and we anticipate initiating in eosinophilic esophagitis this year.

These indications together combined with the dermatology applications represent approximately $50 billion of market opportunity. Again, just to give you a quick reminder of the magnitude of response that we saw with etrasimod, the four domain conventional Mayo score that has been historically used. We demonstrated 18.7 delta. Recall that 40% of these patients had previously been treated with an anti-TNF or an integrin.

Importantly, on the three domain score, which was the FDA guidance from 2016 in terms of Phase 3 endpoint, we demonstrated a 25.6 delta. This is a more quantitative metric. It eliminates the physician's global assessment domain and importantly, sets rectal bleeding to zero. So again a much more stringent measure and the more stringent we get on measurement, the better the drug seems to look.

We recently announced some important information from the OASIS study in terms of onset of action. We previously discussed onset of action in terms of lymphocyte reduction and being substantially faster than competing products. We're happy to discuss now that we're starting to see that in terms of symptomatic relief, and we’re seeing separation on rectal bleeding and stool frequency as early as two weeks with a pretty substantial effect by four weeks. And this is really critical as patients really only come into change modality when they're in a flare situation, so rapid onset of action, absolutely critical.

The second part that's really important is durability of response. And Etrasimod has demonstrated unprecedented durability response out to close to a year. Patients who were in remission to the first 12 weeks, 75% of those patients maintain remission. Those are at clinical response, 93% maintained clinical response. And importantly, those that had showed endoscopic improvement 77 maintain – 77% maintained endoscopic improvement of the year. Again, we're doing this with a once a day oral. And for those of you, that are familiar with the space, you'll notice that these numbers are substantially better than the biologics, historically.

Importantly, the safety profile of the compound continues to demonstrate the type of profile we believe we had, when we originally got involved with the company, adverse events have been mild and moderate, no increase in adverse events through the open-label extension after week-46.

We've not seen the abnormal PFT changes seen with other S1P modulators or sinoatrial arrest cases again seen with other S1P modulators. And importantly, this class of drugs has none of the JAK like liabilities, the VTE risk or the malignancy risk. So – or none had been seen to date. So we feel very good about where this compound is going and this class of drugs is going long-term.

One of the challenges with this class of drugs has been first those heart rate effects. And I'll remind you that we've seen single digit heart rate effects with the no titration required schedule. And we saw no SAEs in our Phase 2 trials related to heart rate changes or AV block.

I’ll quickly touch on some market research. We spent a lot of time in the market over the last year just trying to understand where the opportunity is. On face value, it seems like the ulcerative colitis market might be a very crowded market, but it's important to understand that almost two out of three patients with ulcerative colitis and about 60% of patients with Crohn’s disease, who have moderate to severe disease have never received a biologic. And this is despite the biologics has been on the market for about two decades. And of the ones that have about half are not in remission. So about 80% of the moderate to severe population, remains either untreated with biologics or undertreated in terms of remission.

The oral market continues to increase. We've seen this in other autoimmune conditions. In a blinded analysis S1P receptors are routinely selected over the JAKs predominantly due to their safety profile. And etrasimod is routinely selected over our next closest competitor Ozanimod, again, due to the overall profile of the compound, the receptor selectivity, the on rate, the off rate as well as the broader safety profile.

We announced last week that we’re moving forward in a new disease area, eosinophilic esophagitis. This disease condition is probably better referred to as autoimmune esophogitis. Like all the other conditions we’re working in, including ulcerative colitis, you see barrier dysfunction, you see dendritic cell activity against an in cell – an antigen – as an antigen-presenting cell, you see T cell migration and T cell trafficking in Th2, Th1 and Th2 cytokine responses. Specifically for EoE, we’re looking at a Th2 cytokine response IL-4, IL-15 – excuse me, IL-13 and IL-5, which then will recruit eosinophils over time. This just gives you a quick histology of all the different cell types involved with this condition, again, a preponderance of T cells, dendritic cells, mast cells on top of the eosinophils.

Critically, we’ve demonstrated activity with etrasimod in multiple animal models, both in the skin, as well as in other areas like the lung where we’ve demonstrated activity against dendritic cells, T cells, eosinophils, and IL-4 and IL-5 cytokine milieu. So, across the entire cascade in this condition we’ve demonstrated in preclinical models, activity against the various cell types. We’re really excited about this opportunity ahead of us.

As mentioned earlier, we’re moving for a atopic dermatitis with a readout later this year. This is a pretty substantial market opportunity for us. Again, with a once-a-day oral, we think with safety profile we have, we think there’s a real interesting opportunity. The scientific rational is again, relatively straightforward. Etrasimod works on the trafficking of dendritic cells and T cells, we’re using Th1 and Th2 cytokines and we’ve seen that across multiple animal models as I had shown previously. We’ve also had a handful of patients with dermatologic manifestations, in our previous Phase 2 OASIS trial and those patients saw a significant response.

As we begin to think about dermatology, we recently announced the addition of a second dermatologic indication, alopecia areata. About three million U.S. patients, about 20% of them have severe alopecia areata. This is a devastating psychosocial condition. It is a T-cell mediated autoimmune disease. So again, with our ability to stop the traffic of T-cells, we have a mechanism of action that’s spot on. This market opportunity looks about the size of the rheumatoid arthritis market opportunity and there are currently no approved therapies here.

The pathogenesis of this compound again, looks very similar to others and it looks really spot on to the kinds of things that we know etrasimod does preclinically. We see a CD4 positive CD8 positive T-cell infiltration and what we refer to as a swarm of bees around the hair follicle. The inflammation alters normal hair growth and causes hair to fall out.

The hair follicles structure and importantly, the stem cells are still preserved, suggesting that if you can diminish the autoimmune response, you ought to be able to re-grow hair. So, we think again the biology is very much spot on for us with etrasimod. And again, just looking at CD4CD8 T-cells and seeing the diminishment and again, seeing a swarm of bees on immunohistochemical staining and watching the S1P specific cells coming into the hair follicle.

Following from etrasimod is olorinab. This is a peripherally acting, highly selective, full agonist to CB2. And we’re in development for a broad range of GI pain condition, specifically IBS-C and IBS-D. This program is in a Phase 2b study and again, reads out in 2020. There’s 27 million IBS patients and 78% of them experience continuous abdominal pain. There’s 1.6 million IBD patients that we’ve talked about and a substantial percent of these patients currently take opiates for pain. So we think this is a wide open space. This compound is very unique. It is a full agonist. It is 1,004 more selective for CB2 than CB1 and was designed to be peripherally restricted, peripherally acting and to have no psychoactive adverse events in the brain.

It’s important that olorinab in animal models reduces firing rate of range of colonic pain fibers in both IBD and IBS models. And I won’t spend too much time on these. These slides are available on our website. But it’s important to know that we had substantial preclinical experience with this compound before going to a small Phase 2a trial. With all the caveats of a small Phase 2a open-label trial, we saw – we thought it was a pretty substantial response, on the 10-point AAPS scale, the FDA approved scale for this condition. We saw about a 4.5 point change, a little greater than 4.5 point change. And importantly, 100% of patients met the 30% improvement threshold at week eight. So we hope to replicate this in a placebo-controlled trial. Again, reading out later this year.

Finally, APD418, this is a first-in-class investigational beta-3 antagonist and cardiac myotrope for decompensated heart failure. This is again an Arena discovered compound. And we’re really excited about the incredible unmet need here and the potential to really effect or make a positive effect for these patients. This program received Fast Track designation and we press released that earlier this morning.

There’s about 10 million hospitalizations in the United States by 2025 for acute decompensated heart failure. There’s no really known applications or no known indications, no known drugs for this. Inotropes are used as a last line result, but these inotropes has been well demonstrated, actually increased 30-day mortality. So the Holy Grail has always been here to increase contractility in these patients without in a calcium independent manner. In the case of our compound, we antagonize beta-3. Beta-3 is expressed on cardiac myocytes in a decompensated heart failure setting in a cardiac myocyte and acts as a brake on the heart.

And by antagonizing the brake, we're able to increase contractility in a calcium independent manner. We've demonstrated in multiple animal models, up to some large species that we can improve ejection fraction and cardiac output with no change in hemodynamics.

APD418 compares we believe favorably to cimlanod and importantly suggest that major players in the space continue to be interested in acute heart failure. Cimlanod is a HNO or nitroxyl donor compound and importantly as a broad non-targeted approach, it has broad vasculature effects. And this product was partnered with Bristol-Myers in a deal worth approximately $2 billion. We think we have a mechanism of action that's potentially a little bit more specific and we look forward to getting into the clinic and demonstrating the potential benefits of our compound.

So to summarize, we've made tremendous headway over the next – over the last three years in the company. We moved from a defensive stance, moving to reset the shareholder base, clean-up the company, progress multiple compounds through five Phase 2 trials, divest one of those compounds the United Therapeutics to shore up our balance sheet again about $1.1 billion. And on the back of that, really begin to build the company around etrasimod or olorinab and continue to move forward from the historical GPCR discovery research platform.

So we have an exciting year ahead with eight Phase 2 and 3 readouts between this year and next. And we look forward to sharing more with you this time next year. So thanks for your help and thanks for your support.

Question-and-Answer Session

Q -