Arena Pharmaceuticals, Inc. (ARNA) CEO Amit Munshi on Q1 2021 Results - Earnings Call Transcript

Arena Pharmaceuticals, Inc. (ARNA) Q1 2021 Earnings Conference Call May 5, 2021 4:30 PM ET

Company Participants

Patrick Malloy - VP, IR & Corporate Communications

Amit Munshi - President, CEO & Director

Laurie Stelzer - EVP & CFO

Conference Call Participants

Kennen MacKay - RBC Capital Markets

Chi Meng Fong - Bank of America Merrill Lynch

Jessica Fye - JPMorgan Chase & Co.

Joseph Schwartz - SVB Leerink

Neena Bitritto-Garg - Citigroup

Patrick Trucchio - H.C. Wainwright & Co.

Yatin Suneja - Guggenheim Securities

Roger Song - Jefferies

Joseph Stringer - Needham & Company

Prakhar Agrawal - JonesTrading

David Hoang - SMBC

Operator

Good day, everyone, and welcome to Arena Pharmaceuticals Corporate Conference Call. This call is being recorded. I will now turn the call over to Mr. Patrick Malloy, Vice President, Investor Relations at Arena Pharmaceuticals. Please go ahead, sir.

Patrick Malloy

Great. Thank you, Delfin, and good afternoon, everyone. Thanks for joining us today, and we hope you had a chance to review the press release we issued this afternoon announcing our first quarter 2021 financial results. Joining me on today's call are Amit Munshi, our President and Chief Executive Officer; and Laurie Stelzer, our Chief Financial Officer.

Before we begin, I'd like to remind you that we'll be making forward-looking statements that involve risks and uncertainties about our goals, expectations, plans, beliefs, timing of events or future results, including those risks and uncertainties related to our pipeline, financial projections, 2021 financial guidance and the COVID-19 pandemic and its potential impact on our business. Forward-looking statements involve certain assumptions, risks and uncertainties that may be beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in our earnings press release and our latest SEC disclosure documents. All forward-looking statements are based on information currently available to Arena, and we disclaim any obligation to update these forward-looking statements.

Now I'd like to turn the call over to Amit Munshi. Amit?

Amit Munshi

Thanks, Pat, and thanks, everyone, for joining the call today. And again, as Pat mentioned, I hope you had a chance to review the press release outlining our strong progress during the last quarter. As we did last quarter, we're going to move directly to Q&A and have -- and we're going to jump right to that and be able to spend more time there. So with that, I'm going to hand it back to the operator to open the Q&A portion.

Question-and-Answer Session

Operator

[Operator Instructions]. And our first question coming Alethia Young from Cantor Fitzgerald.

Unidentified Analyst

This is Nina [ph] on for Alethia. So we are wondering as you continue to monitor the ELEVATE studies in UC, we just wanted to get your perspective on how you're navigating the COVID environment while running this trial. And have there been any items fine-tuned in light of that?

Amit Munshi

We've been monitoring it from Day 1. Some of you may heard me talk before about how we took our trials off of automatic and put them on to manual. We've had a team monitoring every patient every day, every site across 40-plus countries and over 400 sites. And we've been monitoring for both patient safety, always our primary concern. And we've been monitoring for study conduct, study integrity, data integrity. So we continue to monitor that. We were able to complete the enrollment in UC 52. We are on track on UC 12. And as we have for the last, I assume last 12, 14 months now, we continue to measure or monitor it at a very, very patient level and site level. And that just ensures that any impact that COVID could potentially have is mitigated real time. So we haven't encountered the type of COVID impact simply -- not because COVID hasn't impacted trial. It's simply because we've been able to manage through the complexities over the last 15 months.

Operator

And our next question is coming from Kennen MacKay from RBC.

Kennen MacKay

Two questions, actually, and it's more around sort of the evolving competitive landscape in terms of both UC and atopic derm. And in UC, I was just wondering what kind of perspectives you had on sort of the potential impact of ozanimod and an ozanimod label could have on sort of future approval, even the S1P space. Is there any risk of a black box warning there, do you think? And again, very different properties, at least from where I'm sitting. Efficacy doesn't quite look anywhere as good as what we've seen previously from etrasimod. Just wondering if there is any worry that could color physician opinions. And then separately in derm, very similar questions, but much more so around the TYK2 and JAK inhibitors in the AD space and whether there are any read-throughs there to kedazil and P class?

Amit Munshi

Sure. On the impact of ozanimod label, we haven't seen their full label in ulcerative colitis. They don't have approval yet. So, difficult to comment on what it could be. The risk of black box is an interesting question. The S1Ps don't have a black box across the board, even the first generation compounds. So I think -- ozanimod does not have a black box relative to the MS label. So I find it difficult to believe that we would expect a black box in ulcerative colitis. Nothing untoward happened in UC that hadn't previously seen with -- in the MS setting. So across the board, the S1P modulators have a cleaner label than the JAK inhibitors. That's certainly true that we've seen so far, and we expect that to continue being true. We've also seen no differences in first-dose monitoring labels. Both ozanimod and siponimod did not have first-dose monitoring requirements, despite having a pretty dramatic first-dose heart rate effects as well as AV conduction abnormality. So we're encouraged by the way the agencies have viewed the S1P modulators relative to the JAK classes.

And that bleeds really into your derm question, which is what are we seeing with the JAK inhibitors, and broadly, whether it's JAK1, JAK3, TYK2, all the various pathways within the JAK class. What we're seeing is a continued side effect profile that has discouraged physicians from large uptake in the ulcerative colitis and IBD space, despite the initial strong progress in the rheumatoid arthritis space. We know the dermatology community is very sensitized to safety profiles. So we were -- we'll see what those look like once they're -- once those indications are up and running in those markets and we'll see what those labels look like. But across the board, as you're well aware, the risk of malignancies, the black box warnings on VTEs, malignancies, serious infectious events, those are pretty dramatic across the entire JAK class. And that includes JAK1, JAK2, 3, the TYK2s, they all fall in that same category. So again, we're waiting to see how the agencies work through those issues in terms of labeling, and we'll be able to provide more color once we have more clarity.

Kennen MacKay

Yes. Sounds good where we're at. It sounds like we're all thinking the same thing. Thanks, Amit. Great to hear from you. Thanks for doing this.

Amit Munshi

Thanks, Kennen. We really appreciate it.

Operator

And our next question is coming from Jason Gerberry from Bank of America.

Chi Meng Fong

This is Chi on for Jason. Maybe just a couple on the support A of the Crohn's readout coming out later this year. I guess the first question is on the primary endpoint, can you confirm you're looking at both the endoscopic response as well as the clinical remission CDAI score and whether we can expect both set of data and the top line release, or maybe it's a little too early to tell? If that's the case, which of the 2 endpoints do you feel is more important from a regulatory approval perspective, and separately, from a commercial perspective? I guess the second question on the same study is that based on the mix of the clinical trial sites for the trial so far, what would you expect the patient mix to be between biologic naive and biologic refractory at baseline? Would you expect that patient mix to be similar to 50-50 observed with Phase II study of ozanimod in Crohn's?

Amit Munshi

On the primary endpoint, we are looking at both a CDAI and endoscopic improvement. We'll be reading both of those out. As far as which one's more important from a regulatory or commercial point of view, I think that's probably the wrong question as it relates to a Phase II study. The right question in the Phase II is which gives us confidence to move to that next stage of development. And in this case, it's really both. And we'll be looking at that relative to other agents in the class, vedolizumab. We'll be looking at this relative to the ozanimod data. And most important for us is the fact that we're taking 2 doses forward into Crohn's, and so we're going to be looking for dose response across both of those indications. So again, the purpose of a Phase II study, especially a Phase II study as is defined as our substudy A, is really to help inform and guide the next stage of development for the study. As far as patient breakout, it's tough to tell. It's too early. The sites are relatively uniform. So we'll see what percentage of patients are naive and what percentage of patients are pretreated, but it's a bit too early for us to be able to comment on that.

Operator

And our next question is coming from Ms. Jessica Fye from JPMorgan.

Jessica Fye

Can you give us a better sense of when in the back half of the year we should expect the substudy A Crohn's data? I'm trying to get a sense of how much time there will be between that update and the Phase III ELEVATE readouts. And then on the ELEVATE studies, can you remind us whether we should expect both Phase IIIs to be released together, or if they'll sort of inevitably get read out at slightly different times from one another?

Amit Munshi

Thanks, Jess. We said before the end of the year simply because we're just -- we don't know how the enrollment kind of evolves. But as soon as we complete enrollment in that trial, we'll announce that as we have historically, and that will start to clock toward the substudy A data readout. So all we've guided to right now is the end of the year, and that's probably the prudent thing to do. And then the -- we expect to read out both 52 and 12 at the same time in aggregate and separately and with all the details that we've spoken about before. But yes, we'll be announcing all of that together.

Operator

And our next question is coming from Mr. Joseph Schwartz from SVB Leerink.

Joseph Schwartz

I really like this call format focusing entirely on Q&A. Once again, you're innovating in so many important ways, guys. So maybe a couple of questions on your ongoing alopecia areata study. Could you start by talking a little bit about this study and how you're thinking about the different patient types and how you'll be analyzing the data in order to determine who's the best to include in Phase III?

Amit Munshi

Yes. Thanks, Joe, and thanks for the complement on the format. We figured you guys are all completely able to actually read a press release. So we didn't need to have an entire script which basically reiterates the press release. The AA study is a proof-of-concept study. Right now it's 36 patients. It's a single dose. We will be having both alopecia areata totalis and universalis patients, actually all 3 subsets of patients in that. But it's a small study at 36 patients. Even with a randomization scheme that puts more patients in the treated arm, you're not going to have a lot of patients you need. So I think it's important to remember that in almost every one of these cases, it's the first time this class of drugs is going into these patients. So we want to make sure that there's a signal. We want to make sure that there's a patient benefit.

And these patients do react very differently in these trials. Alopecia areata patients with SALT scores let's say in the 75% range versus in the 90% to 95% or higher as totalis and universalis all react very differently. We've also heard experts in the field talk about how these might actually be slightly different diseases with different phenotypes underneath. So again, when you're taking a new -- a drug that's never been taken into a disease area into an exploratory Phase IIa study, it's directional. So I just want to set that expectation with a 36-patient trial in terms of what we'll be able to see out of that. But to your point, if we start seeing effect across all groups versus effect after one group, that will begin to inform where we take our Phase III study.

Joseph Schwartz

Okay. That's helpful, as we were wondering some of these things, too. So if I could just ask one more on this program. I was curious, to what extent is the SALT score a subjective measure that might be -- that might just introduce some potential for natural variability due to different physician interpretations? Or are you doing anything to control for that potential confounder or anything else that you've identified going into the study or during the study that you might be able to control for?

Amit Munshi

Sure. So I think physicians that are used to doing the AA studies are used to doing SALT scores and understanding how to actually calculate percentage of body area that has -- is subject to alopecia in whichever form. So we're less worried about that. And the bigger worry is if you push too far down on the scale, meaning more mild patients, for example, in the alopecia areata setting, you do get a lot of spontaneous remissions. You get -- there's more variability in that population. It's very -- it's much more difficult to manage a placebo signal in that population. So that's why we've stayed to the more severe alopecia areata patients and then the universalis and totalis patients, which are of course the most severe. So by doing that, you get a very good sense of whether the drug is active or not. And I think that's the right thing to do for a Phase IIa proof-of-concept study.

Operator

And our next question is coming from Neena Bitritto-Garg from Citi.

Neena Bitritto-Garg

So I'm just curious if you could talk a little bit about kind of the next steps for the controlled release formulation of etrasimod and when we could see kind of some next steps with that program.

Amit Munshi

So the CR program, as you recall, was designed to further improve upon our best-in-class cardiac effect. As you saw from the atopic derm study, our heart rate effect placebo-adjusted in that trial is just under 7 beats mean change without a titration schedule. So we're already in a very good position. The original premise or the continued premise of this is that we can diminish that first-dose heart rate effect even further without changing the overall PK/PD and the pharmaco effect of the drug. And we originally did the work with -- so it was a liquid formulation. The next step in the process was to develop a whole slew of different solid dose formulations. And for patent reasons, we don't discuss all our various strategies in terms of how we're doing that. Those trials are ongoing, and as soon as we have a game plan coming out of this trial --. We're looking at multiple dose configurations, release formulations. Just there's -- the exploratory group here is quite substantial in terms of the number of variables that we're looking at. So we're doing that to make sure that, A, there's some meaningful benefit and, B, that it's something that we definitely want to spend money and go forward on. Everything to date has been incredibly encouraging, and we look forward to sharing more data as these multiple experiments conclude.

Operator

And our next question is coming from Mr. Jason Butler from JMP Securities.

Unidentified Analyst

This is Warner [ph] for Jason. I just had a few on eosinophilic esophagitis. Just for the VOYAGE trial, if you could give us any updates on the patient enrollment status. And then more broadly, any sense of a mechanistic rationale for etrasimod in EoE predictive preclinical models? And then what's the market opportunity, in your view?

Amit Munshi

Sure. So a couple of things. Let me start with the enrollment. We don't provide enrollment updates as a general rule. It's just -- it's a slippery slope, as you guys know. So that study is moving forward and enrolling in the EoE setting. The reason we picked the EoE early on is really the same rationale as to why we picked atopic derm as potential indications. And again, in both of these cases, to the previous question I was asked, is the first time an S1P modulator has been taken into these settings. And it was really borne out of a couple of key observations. One was the bidirectionality between atopic derm and ulcerative colitis. AD patients at a higher risk to develop UC, and UC patients at a higher risk to develop atopic derm.

So there was some clear by directionality. And as we went and ran a whole series of experiments, we realized that the cell types that we were looking at and the cell types that we were -- the biology we were perturbing, whether it was looking at IL-4 or IL-5, eosinophils, mast cells were very common to both atopic derm and EoE. And in both cases, these are diseases of degraded barrier function. We see the same type of barrier function degradation. You see some type of antigen challenge. In the case of EoE, food. In the case of atopic derm, probably a bacterial insult. UC, dendritic cell uptake and dendritic cell migration. And we've shown dendritic cell migration reduction in both types of settings. You see the activation of T lymphocytes, CD4, CD8. Then you see the activation of Th1 and Th2 cells, and as a consequence, all the subsequent cytokines. And whether they're Th2 or Th1, the pathology of both the diseases are actually strikingly similar.

And the animal models showed reduction across all these very specific cytokines as well as a set of activity on eosinophils and mast cells. So we've also tried etrasimod -- a derivative of etrasimod in an asthma model. We've disclosed that previously. I believe that's been published. And that compound showed activity, again, against all the Th2 cytokines, the eosinophils and mast cell. So in all of these diseases that have this overlapping set of pathology, we've seen the same effect over and over and over. So it was provocative enough for us to kind of move in this direction.

Today, there's about approximately 150,000 patients in the United States, probably 300,000 to 400,000 in addressable markets globally with EoE. We think the incidence of that will continue to grow as the disease is better understood. We know that a disproportionate amount of derm patients are recalcitrant and are no longer responsive to high-dose PPIs. And we think over time, a larger subset of those patients are likely to be EoE patients. And so, again, as the disease is better understood, as diagnostics and diagnosis becomes better, I think you'll see more recalcitrant GERD patients actually have an autoimmune basis. And in many of those cases, we'll see something that fits the definition of EoE. So we're incredibly excited about it. There are several biologics being studied in the space. And of course, with a once-a-day oral, we think we'll have a significant leg up there.

Operator

And our next question is coming from Mr. Patrick Trucchio from H.C. Wainwright.

Patrick Trucchio

Just actually a couple of follow-up questions on EoE. So I'm just wondering in the VOYAGE study, is there a particular level of knockdown of eosinophils that you'd be looking for? Because in the context of we've seen with other mechanisms and biologics where we see the knockdown of eosinophils, but we actually don't see much of a benefit in some cases on symptoms. And then secondly, just on the DSQ score endpoint, is the study powered to show a certain level of improvement on symptoms? Or what would you be looking for in terms of symptoms to give you confidence to advance to a Phase III trial?

Amit Munshi

We haven't disclosed the powering assumptions around that study, so I'm going to steer clear of that one. But we are going to be looking at symptomatic scores. At the end of the day, I think it's far less important whether eosinophils are present and far more important whether you're having symptomatic relief in these patients. And I think that's been the general consensus of experts in the field. Recall that eosinophils are thought to be one of the last cell types that are present into the space, and the nature of the TGF-beta cascade, which then results in the fibrosis that occurs in the disease. But well ahead of that, you've got a cascade that looks, again, very similar to the atopic derm cascade where you've got some insults, you've got antigen presenting cells, dendritic cells specifically.

You've got the impact of T cells and then Th1/Th2 cytokines. All of that happens upstream of the eosinophils. And it's interesting; the disease called eosinophilic esophagitis because you -- on histology, you look for eosinophils, and it's the diagnostic marker and the definitive marker. You literally count the number of eosinophils. But what's much more important is the symptomatic relief. And if all of these other cell types are involved, and etrasimod has an opportunity to work across all these other cell types, then it's our hypothesis going into the study that we'll be much more focused on symptom relief rather than just counting one specific type of cell type. And just because it's in the name of the disease doesn't mean it's the thing that's causing all of the upstream and downstream implications for the condition. I think you really have to take a much more holistic view. When you look at histology, you see CD4, CD8 T lymphocytes, you see macrophages, you see other types of cells beyond just eosinophils in this specific disease. So we think there's much more going on in this condition, and we think that'll play to etrasimod's strengths in terms of its mechanism of action.

Patrick Trucchio

Got it. That's really helpful. And then just a follow-up on etrasimod in UC and in Crohn's. Looking ahead a few years here, I'm wondering if you can just discuss the commercial launch plans, specifically in UC as this could be the first potential indication on the label. And just remind us again the intention to -- is to launch this on your own, or would you look to partner?

Amit Munshi

Yes. So the intention and the game plan has been and will continue to be launch this on our own, U.S. and Europe. And we're working through Japan plans now in terms of what our -- whether we need a strategic partner in Japan or a joint venture or whether we go it alone in Japan. These are open questions for Japan. But for the U.S. and Europe, we've stated previously that we intend to go it alone. And it's been part of our game plan for quite a few years now. We've had a commercial team and a medical affairs team on the ground for upwards of 3 years now. I think it's important for companies who intend to do what we do, which is to build a company over a long period of time, to be able to build commercial infrastructure and launch.

And what that means is that you have to start early. And we've had the luxury because of our cash balance sheet to invest early. We've had 50 MSLs on the ground for almost a little over 2 years now across U.S., Europe and Asia. We've had literally thousands of interactions with clinical sites, clinical investigators, experts in the field, helping them understand the role of etrasimod S1P modulation broadly, etrasimod specifically. We've used that MSL organization to help enroll our clinical trials, get people excited about etrasimod and why studying this in this context is important for the future of IBD. And we've had tremendous success in just being able to engage the market and engage the market at a very local level. And we think -- we made that investment early, alongside building the commercial, parts of the commercial organization, getting deep insights into the market, which led to the building of the GLADIATOR program, for example, as a peri-approval study.

Those are examples of investments in long-term commercial success that most small companies don't have the luxury of doing, and we've had the luxury of doing it. And it's really critical. It's absolutely critical. We see so many small companies that really won't hire or begin to hire commercial infrastructure until post Phase III, and it's really too late. The success or failure of a launch happens years before the product actually gets to the market. We've had dozens of payer interactions. We're working with multiple payer groups around the country and academic organizations using artificial intelligence systems to build value-based systems and understand how we would launch from a value perspective in the marketplace. Again, those aren't things you can just turn switches on and turn switches off. They take years to build those relationships. So I'm really pleased as to our market prep, and we look forward to sharing lots of details around what we're doing as we get closer to launch.

Operator

And our next question is coming from Yatin Suneja of Guggenheim Partners.

Yatin Suneja

I just wanted to get a sense of where the etrasimod 3 milligram dose -- or how the 3 milligram dose fit into the development strategy. Is that the dose in consideration for the atopic dermatitis study? And what are some of the gating factors for the Phase III AD program, if you can give some color there when could that start?

Amit Munshi

Sure. So we're hopeful to start that study by the end of the year. We're in multiple regulatory discussions around the world. And that's really the gating factor is just concluding those regulatory interactions, gaining alignment on study design, study size, duration. As we've spoken to before, we would like to explore 3 milligrams in the overall program. How we do that is a point of discussion with the regulators around the world. So as soon as we have clarity from all those various moving parts, we'll be in a position to share those details with you guys. I'm really excited about it, and we're -- pending timing of all the regulatory interactions, some of which we can control and some we can't, we still do expect to start the study before the end of the year.

Operator

And our next question is coming from Roger Song of Jefferies.

Roger Song

So I have two. So the first one is, Amit, can you remind us about your CV assets in terms of the [indiscernible] and cMVO?

Amit Munshi

Sure. So as some of you know, Arena had a long-standing history in the cardiovascular research area. It started with ralinepag. And ralinepag was designed to be a once-a-day oral that mimicked intravenous prostacyclin with 3.5-fold the half-life of J&J's selexipag compound, and 6.5 to 10-fold the potency on the IP receptor. That drug had landmark data in their Phase II study. And of course, we found a fantastic partner to move that compound forward in United Therapeutics. That same group has developed multiple other compounds that have applications in other cardiovascular indications. The 2 that we're progressing are APD418 and temanogrel. APD418 is a beta-3 antagonist, and the application is acute decompensated heart failure. Here, we believe we have a compound that at least in animal setting suggests improvement in cardiac function, ejection fraction, cardiac output with no change in hemodynamics, which would be really the holy grail in acute heart failure, should that hold up in humans. So we're very excited about that.

We do have fast-track designation for that compound. The second compound is temanogrel. Temanogrel is a 5-HT2A inverse agonist. By blocking the 5-HT/ 5-HT2A interaction, we believe we can actually blunt vasoconstriction and platelet aggregation distal to the site of a PCI in STEMI and non-STEMI patients. So this drug also has a fast-track designation. Both the compounds are moving into Phase II. We expect data late in 2022 for both the compounds. So we're very excited about this. We think it's foundational for the company long term to continue to progress novel assets in white space areas where there's tremendous unmet medical need. And we think eventually it'll form another leg of the stool for the company. So, early days. We're through the phase Is and building the Phase II programs out, and we'll continue to give everyone an update on them. But we're extremely excited about what this means to the company over the next couple of years.

Roger Song

Awesome. Yes. I'm excited to hear about the additional assets outside of etrasimod. So that's great. And another question which is about the finances. So, understanding you're having the Phase III readouts next year, and of course, you're already prepared a commercialization. Just help us kind of -- or maybe guide us. What are the potential kind of ramp in terms of the commercial and the R&D from next year into the following year?

Amit Munshi

Sure. Laurie is on the call, our CFO. So Laurie, let me hand that to you.

Laurie Stelzer

Sure. We did guide last year and landed on our guidance at about $350 million in cash burn. We haven't given guidance for 2021, but what I can say is we are seeing our programs advance. And so you can imagine that we'll have continued and increased spend as we advance our UC programs. We began our AD Phase III, as Amit said, toward the end of the year. We're seeing progression in our CD, our AA, our EoE and our CV programs, and so that whole portfolio is continuing to progress. So we haven't given guidance yet, but we -- $350 million last year, and we are seeing progression in all our studies.

Roger Song

All right. That's helpful. That's all from me.

Amit Munshi

Thanks, Roger, and thanks for asking the CV questions.

Operator

And our next question is coming from Joseph Stringer from Needham & Company.

Joseph Stringer

Sorry if I missed this. I've got a follow-up on alopecia areata results. In terms of responder rates for the SALT score, would it be a fair comparison in terms of when the data come out compared to some of the JAK data that's been reported?

Amit Munshi

Yes. I think the safety profiles of the JAKs and the S1Ps are so vastly different that I think I would encourage caution in terms of what we think the JAK ability to penetrate that market over the long term will be. Clearly in universalis and totalis patients where there is no other potential option, patients might be willing to take the risk of the malignancies and the VTE risk and the increase in MACE events. That might not be the case broadly for alopecia areata.

So we think there's kind of a different risk-benefit profile with S1P modulators. If we're able to show an effect that's meaningful to patients clinically and that physicians believe is something they would choose to use in clinical practice. That, combined with the safety profile of S1P modulators relative to JAKs, I think create a completely different risk-benefit profile. So again, very early to tell because we're breaking new ground here as we did with atopic derm, and as we are with the EoE, we're breaking new ground in atopic derm. So, early days. I think we'll know more as we move to read out that study and in terms of what that risk-benefit profile looks like. But I'm always leery of being able to just talk about the benefit without talking about the risks, because that's really how physicians and ultimately patients will make decisions. So I think that direct comparison is always a little difficult because the risk-benefit profiles could look very different.

Operator

[Operator Instructions]. And our next question coming from Prakhar Agrawal from JonesTrading.

Prakhar Agrawal

I had a couple. First on temanogrel -- too recently started. So just curious on your thoughts on the key elements of the trial design that we should focus on, relevance of the primary endpoint of change in IMR. And what could the development path look like in this indication? And secondly, as I think about the commercial opportunity for GLADIATOR trial in the moderate UC, what could be the barriers when you're thinking about the launch? Is it predominantly going to be access? Will there be some sort of awareness that needs to be generated? Curious on your thoughts.

Amit Munshi

Great. Great questions. So on temanogrel, the focus is in this initial Phase II study, as you mentioned, look at the index of microcirculatory resistance, or IMR. It's a quantitative measure. We'll be able to understand actual rates of reperfusion in these patients. It by itself is not a regulatory endpoint. And because we're breaking new ground here, I don't want to speculate in terms of what the Phase III and registrational trial will look like. If we see activity here, we will go have a more robust conversation with the agency. They've been incredibly supportive in terms of us moving both our cardiovascular assets forward and allowing the fast-track designation, simply because we're exploring these drugs and indications where there really are very few options for patients.

So, IMR will be the first time we've seen something quantitative here. Recall that an older agent no longer available in the United States, ketanserin, a 5-HT2A antagonist, has been tried post-angioplasty specifically looking at perfusion distal to the site of the injury, and we've seen an improvement in vasoconstriction. So we've seen an improvement using this class or a similar class of drugs, or importantly, maybe saying it a different way, hitting this specific mechanism. So it gives us good reason to go run the experiment. And then from there, we'll go have a series of agency conversations, U.S., Europe, Japan to ascertain what a global Phase III program would look like. In terms of GLADIATOR, flipping back, GLADIATOR addresses about 150,000 patients that are currently unaddressed in the UC space. These are patients who have very active disease, but don't meet the criteria for, we'll call it the more moderate -- the steep end of the moderate to severe range for these patients. These are patients on 5-ASAs for the most part, maybe pulsed with steroids, still experiencing significant disease. They tend to not meet inclusion criteria for existing studies, but they have -- they definitely have very active disease and it very much impacts their life.

So we think there's a real opportunity here with etrasimod, given our risk-benefit profile to address these patients. From a launch and access perspective, we think this actually helps our broader access. And one of the things that we have already been doing is talking to future potential payers about the role of GLADIATOR and how we would help in terms of an overall value story for etrasimod. So that work, as I mentioned early on, talking about commercial preparedness, we've been spending a lot of time in the market talking about GLADIATOR, specifically talking to payers. And we don't think it'll be a barrier. In fact, we think it'll be a potential benefit in terms of treating these patients. These patients cost us a lot of money, and they're currently excluded from the current standards of care that are available. So it expands the pool, and for many payers, specifically folks like integrated delivery networks, it'll actually reduce the overall cost of care for these patients.

Patrick Malloy

Operator, could we move to the next question?

Operator

And our next question is coming from Mr. David Hoang, SMBC.

David Hoang

Just had a couple. So just in terms of helping to set expectations for the open-label substudy A in Crohn's later this year, with the 3 milligram dose, I was wondering if there's any specific safety events or things that you would see that might lead you -- that would preclude further development of that dose? Is there anything that would be a red flag for essentially wanting to take that dose forward?

Amit Munshi

Sure. Again, it comes back to risk-benefit. So the safety profile of that dose will have to be married with the efficacy that we see in 3 milligrams versus 2 milligrams. If we see higher rates of adverse events in 3 milligrams and no efficacy, then definitely we'll just move forward the 2 milligram. There's a strong argument from a cost and time perspective, take a single dose forward. On the other hand, there's a strong competitive advantage to having multiple doses. Clinicians love the idea to be able to throttle a dose up and throttle a dose down. So it's all going to play out on the risk-benefit side. What we know so far is we see on a mean lymphocyte change count, we see about a 12% to 15% decrease in the -- additional decrease in lymphocytes. Again, these are means from 3 milligram, 2 milligram and it's in healthies.

So as we look to patients, we'll be looking at lymphocyte counts, aggregate lymphocyte counts. We'll be looking at percentage of patients at a Grade 3 lymphopenia. We'll be looking at cardiac, any cardiac issues or serious infectious issues. I will point out that in our healthy volunteer studies, we have to get to 5 milligrams before we see any of the types of cardiac conduction issues that are seen with some of the other S1P modulators out there. So we do have a lot of room to play from 2 milligrams up. We think 3 milligrams is a safe place to go and expose patients. And the question, again, we'll come back to whether we see the right risk-benefit in those patients or not.

David Hoang

Got it. That's great. That's really helpful. And a question that builds off of that a little bit. So we know as a class that with S1P, there's lymphocyte depletion. That's an on-target effect. However, it does not seem to translate to opportunistic infections. And so I think that's been the case consistently through your trials. And even with Grade 3 events in the Phase II AD, you weren't seeing any opportunistic infections and things of that nature. Is there anything in the literature to suggest why that might be something about S1P where it's been more inherently safe than JAKs, for example, where it might affect less immune subsets or spare some of the immune system?

Amit Munshi

Yes. I think that's spot on. The S1P class are not broad immunosuppresses. With the JAKs, you're essentially bringing the whole system to a halt, which results in the malignancies and results in the serious infectious events that we've seen across the entire JAK class. With S1P modulation, you're turning down one very specific area, which are T lymphocytes and all the subsequent downstream cytokines. But you're not shutting everything down. I think the best analogy I've heard on this is we're using a screwdriver where a screwdriver works and not pulling out the hammer where you get a lot of collateral damage. So it's more specific. Immunosurveillance is maintained in these patients. We haven't seen the serious infectious events across the board, and frankly, I think across the entire class has not been an issue for S1P modulator. So again, it's just a more specific class.

And it's interesting to think about etrasimod with its unique features in a class that really hasn't had an optimized compound historically, and where etrasimod could go in terms of its broad clinical utility is really quite astounding. But it comes back to this point, etrasimod can't be used everywhere. But in the subset of diseases where we think etrasimod can be used, we think it's just a better fit for patients. A single once-a-day oral with the opportunity to regulate disease without all of the broad immunosuppression of the JAKs. And there is quite a bit of literature, and offline we're happy to share some references with you, but there's quite a bit of literature suggesting that immune surveillance is maintained with etrasimod specifically.

David Hoang

Okay. I say thank you for providing context. Really, really helpful again. That's it from my end.

Operator

And that is our last question for this Q&A session. And at this point, I would like to turn over the call to Mr. Amit Munshi, the President and CEO, for closing remarks.

Amit Munshi

Great. Thanks, everyone, for jumping on the call today. I hope that was useful moving to the Q&A form again. And we look forward to continuing to provide updates as we continue to make progress across the entire pipeline. So, look forward to chatting next quarter. And hope everyone stays safe and look forward to seeing everyone live soon. Thank you.

Operator

And this concludes today's conference call. Thank you for participating. You may all now disconnect. Thank you so much.