U.S. Markets open in 7 hrs 42 mins

Edited Transcript of ARNA earnings conference call or presentation 7-Nov-18 9:30pm GMT

Q3 2018 Arena Pharmaceuticals Inc Earnings Call

San Diego Nov 17, 2018 (Thomson StreetEvents) -- Edited Transcript of Arena Pharmaceuticals Inc earnings conference call or presentation Wednesday, November 7, 2018 at 9:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Amit D. Munshi

Arena Pharmaceuticals, Inc. - CEO, President and Director

* Kevin R. Lind

Arena Pharmaceuticals, Inc. - CFO & Executive VP

================================================================================

Conference Call Participants

================================================================================

* Alan Carr

Needham & Company, LLC, Research Division - Senior Analyst

* Jessica Macomber Fye

JP Morgan Chase & Co, Research Division - Analyst

* Joel Lawrence Beatty

Citigroup Inc, Research Division - VP & Analyst

* Joseph Patrick Schwartz

Leerink Partners LLC, Research Division - MD, Biotechnology

* Kennen B. MacKay

RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research

* William Tanner

Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, everyone, and welcome to Arena Pharmaceuticals Third Quarter 2018 Financial Results and Corporate Update Conference call. This call is being recorded. (Operator Instructions)

I will now turn the call over to Kevin Lind, Chief Financial Officer of Arena. Please go ahead.

--------------------------------------------------------------------------------

Kevin R. Lind, Arena Pharmaceuticals, Inc. - CFO & Executive VP [2]

--------------------------------------------------------------------------------

Good afternoon, everyone, and thank you for joining us today. We hope you had a chance to review the news release we issued earlier today announcing our third quarter 2018 financial results. Joining me on today's call is Amit Munshi, our President and Chief Executive Officer.

Before we begin, I'd like to remind you that we'll make forward-looking statements that involve risks and uncertainties, including statements about our focus, plans, goals, strategy, expectations, clinical and preclinical programs, R&D, regulatory activities and operations and other statements that are not historical facts.

These statements are made in the context of the risks and uncertainties that are discussed in our filings with the U.S. Securities and Exchange Commission, which can be found on the SEC website at www.sec.gov and include risks related to the amount and allocation of our available financial and other resources, timing and outcomes of regulatory decisions and discussions, timing of the initiation of our trials and patient recruitment for our trials, which is competitive and challenging and may take longer than we project, preclinical and clinical data related to drugs and drug candidates and the timing of that data which may not be as expected or sufficient for further development, regulatory approval, or commercialization, and collaboration and licensing activities. Our actual results may differ materially from our forward-looking statements.

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

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [3]

--------------------------------------------------------------------------------

Thanks, Kevin. Good afternoon, everyone, and thanks again for joining our call today. As a reminder, we hosted a broad R&D Day in October, providing several key corporate and pipeline updates. Thank you for those of you that attended the meeting live and those -- and as well as to those who listened to the webcast.

During my comments on today's call, I will refer to several of those updates and provide additional color as we continue to advance our promising product development programs, then Kevin will provide a financial review of the third quarter 2018, and then as always, we'll conclude by taking questions.

So looking forward, we continue to expect a significant number of potential catalysts over the next 12 to 24 months of the business. In the near term, we are focused on progressing the Phase III study for ralinepag and rapidly advancing etrasimod in the Phase III program in ulcerative colitis and Crohn's disease. In addition, we're planning the development path forward for olorinab following the exciting Phase II data that we delivered on this last quarter.

So let's start with etrasimod. As a reminder, etrasimod is a thoroughly characterized in-house developed once-a-day oral S1P modulator, with what we believe to be best-in-class receptor selectivity and pharmacodynamics. We believe it is the only next-generation S1P modulator and has the broad potential to be the preferred oral option for patients suffering from a broad range of T-lymphocyte-mediated immune and inflammatory disorders, such as IBD.

We continue to make substantial progress on the etrasimod programs since we delivered outstanding Phase II data from the OASIS trial. As you will recall, the study met primary and secondary endpoints with statistical significance for patients receiving 2-milligram dose of etrasimod for 12 weeks. Approximately 1/3 of patients achieved clinical remission on the 3-domain Mayo score at week 12 in a patient population where upwards of 40% of patients have previously failed in integrin or an anti-TNF.

We are in active dialogue with regulatory agencies to confirm the details of our registrational program, which will enable us to finalize the Phase III protocols to initiate the trials in ulcerative colitis in Q2 of 2019. Critically, we have confirmed the appropriateness of the treat through this design strategy that was presented at our R&D Day. We look forward to updating you on additional program details as practical.

Moving on to other indications for etrasimod. In light of the positive Phase II data in ulcerative colitis, we're also looking to an aggressive development path in Crohn's disease, and again, we're in active dialogue with regulatory agencies.

The primary biliary cholangitis, or PBC, study remains ongoing. As a result, PBC is a chronic liver disease with T-lymphocyte accumulate in the liver resulting in the destruction of bile ducts. We continue to expect this data readout in 2019.

Finally, on the back of limited to compelling efficacy data we saw in several ulcerative colitis patients with dermatologic manifestations, we recently announced that we're planning a path forward in atopic dermatitis. Current therapies have efficacy in a limited set of patients and range from simple emollients to new injectable biologics and other topical therapies. We believe there is a significant market opportunity to move this field forward to a once-a-day oral regimen that may not impact not only the dermatological manifestations but potentially the systemic implications of this disease as well.

We're excited to further evaluate etrasimod in multiple indications going forward and believe that the only true next-generation S1P modulator with vastly improved pharmacology and pharmacodynamics and potentially improved safety and efficacy offers tremendous promise in the treatment of a broad range of autoimmune and inflammatory conditions.

Moving on to ralinepag. Ralinepag has a potential, will be the first once-daily oral IP receptor agonist that provides continuous receptor engagement and drives improved exercise capacity and clinical outcomes in PAH patients. As a reminder, last year, we delivered unprecedented positive top line results from our Phase II study for the treatment of WHO Group 1 pulmonary arterial hypertension, or PAH, in a population where the majority of the patients were on dual background therapy.

In October, we reported positive long-term data from the ongoing open-label extension of the Phase II trial evaluating ralinepag for the treatment of PAH. Ralinepag demonstrates durable, long-term improvements in both pulmonary vascular resistance, or PVR, and 6-minute walk distance. We also saw a favorable long-term tolerability profile. To date, it is the only oral IP receptor agonist that has shown durable, long-term improvements in hemodynamics and functional measures.

Patients considering ralinepag from the original study clearly maintained improvements in PVR and 6-minute walk distance. And those patient switching from placebo to ralinepag in succession trials demonstrated a similar magnitude of effect on both PVR and 6-minute walk distance. Although the smaller sample size has limited some of the statistical comparisons. These data reinforce our belief that PAH patients can truly benefit from ralinepag's improved receptor potency and extended pharmacokinetics. We look forward to updating you as we continue to make progress on our ralinepag ADVANCE program.

Moving on to olorinab. Our peripherally restricted, highly selective, full agonist to the CB2 receptor. We believe that this product has the potential to be a significant advancement in the treatment of visceral pain. In September, we delivered positive Phase II results for olorinab, demonstrated a statistically significant improvement in abdominal pain over 8 weeks of treatment. All patients with valuable data at week 8 exhibited a predefined clinical response of getting 30% change from baseline in the Average Abdominal Pain Score, or the AAPS. Treatment effects were demonstrated early and were consistent across the retreatment period. Olorinab appeared safe and generally well tolerated. We intend to advance olorinab clinical program targeting gastrointestinal pain and look forward to updating you on the clinical path forward as we progress our planning.

In October, we also introduced to you an exciting new preclinical asset, APD418, a first-in-class calcium-independent myofilament derepressor, or CMD, for the treatment of decompensated heart failure. APD418 targets a novel mechanism that improves contractility without adverse hemodynamic changes. A significant unmet need exist for the treatment of decompensated heart failure, the most common hospital diagnosis for patients over the age of 65. And this progress -- the disease progresses with the increase in the aging population. We believe the APD418 has a future potential to improve -- to provide a new therapeutic option by enhancing cardiac contractility of avoiding the grievous adverse events commonly associated with the current standard of care.

New preclinical data will be presented at the upcoming American Heart Association Scientific Sessions in Chicago this week. We look forward to sharing data as available and bringing this compound into clinic next year.

On the collaboration side, in October 2018, Everest Medicines received Chinese Food and Drug Administration, or the CFDA, Investigational New Drug approval for ralinepag. Everest IND submissions to the CFDA demonstrate an important milestone in the continued advancement of etrasimod and ralinepag and further solidifies our confidence in their expertise and capabilities to navigate the regulatory environment in this important and rapidly growing market.

Further, as we discussed on R&D Day, we remain broadly open to select partnership opportunities, which allow us to optimize the delivery of these important medicines to patients, have a strong long-term strategic rationale for the business and enhance shareholder value. We will continue to provide updates as we move forward.

Moving on to the team. In August, we appointed Suzanne Zoumaras as our Executive Vice President and Chief Human Resources Officer, responsible for our global people strategy. Suzanne is an accomplished business executive with 20-plus years of experience, leading scaling and elevating human capital practices and capabilities for companies ranging from large public multinationals to early stage smaller enterprises. Prior to Arena, Suzanne held executive management roles with several public and private technology and life science companies. Her vision and ability to create a road map for execution in scaling and enterprise will be instrumental as we adapt to our business growth.

So with that, I'd like to turn the call over to Kevin for a corporate update and the financial review.

--------------------------------------------------------------------------------

Kevin R. Lind, Arena Pharmaceuticals, Inc. - CFO & Executive VP [4]

--------------------------------------------------------------------------------

Thank you, Amit. I'll provide a brief review of our third quarter 2018 financial results here, while more detailed results are discussed in our press release and in our 10-Q.

For the third quarter, revenues were $3.6 million, consisting of $0.4 million in collaboration revenue and $3.2 million in royalty revenue. Included in the $3.2 million in royalty revenue for the third quarter is a $2.5 million nonrecurring, noncash accounting adjustment related to increase in estimated future royalty payments for certain foreign markets. In terms of cost, research and development expenses totaled $28.8 million in Q3, general and administrative expenses totaled $10.8 million and we burned approximately $31 million in cash this quarter, excluding onetime items.

Net loss for the quarter was $35.0 million or approximately $0.70 per share. At September 30, 2018, cash and cash equivalents and investment balance was $561.6 million and approximately 49.4 million shares of Arena common stock were outstanding. Amit?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [5]

--------------------------------------------------------------------------------

Thanks, Kevin. In summary, our focus remains on working toward delivering our transformational medicines to patients and, importantly, scaling Arena to continue our ability to execute on our Phase III trials and time lines.

We're excited about the progress and the milestones ahead for the company in 2019. For etrasimod, in the first half of the year, we anticipate initiating the Phase III program in ulcerative colitis, reporting important long-term data from the Phase II program in UC and, of course, making important progress towards initiating the program in Crohn's disease and other indications.

We continue to progress ralinepag's Phase III ADVANCE program globally, and we will be disclosive in more details for the olorinab development program throughout the first part of 2019. We ask that you review our slides from our R&D Day for a robust listing of the catalysts and milestones ahead for our business.

We look forward to continue to update you on a robust, potentially best-in-class pipeline, as we continue to make progress and look forward to a extremely busy 2019 ahead.

So with that, I'm going to turn the call over to Q&A, and so I'll hand it off to the operator.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Kennen MacKay from RBC Capital Markets.

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [2]

--------------------------------------------------------------------------------

Congrats on the operational progress over the last couple of quarters. Amit, I was just wondering if you could maybe elaborate a little bit on some of the data to come at Chicago and sort of where we should be focusing in this update to look for some incremental signs of efficacy here?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [3]

--------------------------------------------------------------------------------

Ken, you just cut out there at the last part of the question. You want to talk a little bit about the data for APD418 in Chicago? And I didn't get the second part of that question.

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [4]

--------------------------------------------------------------------------------

Yes. And any particular sort of preclinical endpoints we should be paying attention to get a grasp of potential clinical signs of efficacy here?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [5]

--------------------------------------------------------------------------------

Great, perfect. The presentation in Chicago is really one of the first opportunity for us to talk about the selected beta-3 receptor antagonist as a class and specifically APD418. And again, to remind you, we have positive inotropic activity in various animal models. And in this case, we'll be talking about instrumented -- chronically instrumented dogs. These animals have a pacemaker induced heart failure, and we'll be looking at pressure volume loops as a way of talking about being able to improve contractility. So those pressure volume loops and pressure volume analysis is really the way this contractility is measured and that would be the endpoint that we'd be looking at here.

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [6]

--------------------------------------------------------------------------------

And then maybe just turning to sort of the much lighter side of the developmental programs as it relates to the Phase III planning for ulcerative colitis here, wondering -- just from sort of an analyst or an investors seat, sort of what we should be looking at to maybe get some additional comfort that the time lines relating to your clinical development here could actually extensively be much shorter than what we've seen for some of the other agents in development in ulcerative colitis? Or if this is really just going to be sort of a watch and wait type approach as we get enrollment updates into that trial theoretically next year?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [7]

--------------------------------------------------------------------------------

Yes. Ken, we're really optimistic about how we're thinking about the program, and I think there is a couple of reasons why. Number one, the things that are in our control around the treat through study design, many of the ulcerative colitis trials historically have used a re-randomization scheme that adds significant time, complexity and cost in the overall program. We think because of our effect size and our -- and we've had this conversation with various agencies, we feel comfortable moving forward here, and we'll be doing a direct treat through design, and that does diminish a significant amount of time on the overall study. In terms of the overall powering assumptions, they're really driven by our bigger effect size. So the larger effect size allows us to be more prudent in terms of the overall study size. Naturally, we still need a broader safety database, but as you know, there is different ways to get that broader safety database. There is 3 other things that we're putting into place or already have in place that we think give us reasons to be optimistic. We've been working through coming out of the Phase II study what we believe is the proprietary methodology for site selection and patient referral. So we spend a lot of time evaluating our Phase II work, evaluating all the other ongoing trials, and we think we've got some really interesting methodologies for understanding where these patients are and how they map on to the various sites. And then the final part of that is we have put our own field base team into place. One of the things we learned coming out of the Phase II, and if you recall, we inherited the Phase II program, it was barely enrolling, it was probably at the most difficult part of the market enrollment cycle, there were a lot of studies ongoing, including the biosimilars. And we were able to enroll that study extremely quickly, and we were able to do that with a really high-touch program that we put into place. And now we're expanding that to a full field base team in the U.S. and in Europe designed to work with the clinical sites, identify patients and make sure that the sites are -- that the key barriers to any sort of enrollment are being handled on the ground by actual Arena personnel. So both from the operational side in terms of people on the ground, in terms of strategically mapping sites and patients to this methodology we've developed as well as just to deem the attributes to the products and large effect size and the expedited trial design, we think we are in a much better position than other products historically.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

And our next question comes from Joel Beatty from Citi.

--------------------------------------------------------------------------------

Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [9]

--------------------------------------------------------------------------------

For the open-label extension study of the ongoing ulcerative colitis trial, could you discuss what type of changes would be expected over time? And what type of findings we might learn in those patients?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [10]

--------------------------------------------------------------------------------

We'll be looking at, of course, safety and tolerability, Joel, and we'll be looking at ongoing activity from a endoscopic improvement perspective. So I don't want to speculate on where we're going to see or not going to see, we'll see it when we see it. We don't have any insight into what that data looks like today. But we're looking at all the remission scores, stool frequency and, of course, any further endoscopic improvement. And it's a thorough assessment at this time point. And so we will be hoping to come back to you guys with a pretty thorough and exhaustive view of how these patients continue to improve. We do know that in this category, patients do continue to improve. We've seen that in the etrasimod trial. As you recall, we saw our data 12 weeks was better than their 32 weeks data, and we're really looking forward to seeing that type of continued improvement add to be open-label data.

--------------------------------------------------------------------------------

Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [11]

--------------------------------------------------------------------------------

Great. One other question for ralinepag. Could you discuss enrollment in the Phase III program and provide an update on the number of sites coming online or the number of patients in the trial?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [12]

--------------------------------------------------------------------------------

Yes. Joel, we're probably not going to provide that level of detail on sites. It's literally changing day-by-day, but we're in a broad global program. Sites are coming online. Countries are coming online. And it's happening in a manner you'd expect which is a kind of a sharp curve up. So we're going to continue to press on that. We're probably not going to provide a lot of detail until we're further into the program.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

And our next question comes from Jessica Fye from JPMorgan.

--------------------------------------------------------------------------------

Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [14]

--------------------------------------------------------------------------------

Great. Can you just -- as we think about the differentiation trial relative to UPTRAVI for ralinepag, can you talk about what would be considered a meaningful difference in PVR that would establish ralinepag as the agent of choice over UPTRAVI and eventual generics?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [15]

--------------------------------------------------------------------------------

Jess, are you trying to hone in sort of a magnitude of effect?

--------------------------------------------------------------------------------

Jessica Macomber Fye, JP Morgan Chase & Co, Research Division - Analyst [16]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [17]

--------------------------------------------------------------------------------

Yes. I think I understand that PVR, you really have to go back to the pharmacology and the pharmacokinetics for the 2 drugs. If you recall that the effect size in tissue from PAH patients and looking at cyclic AMP up-regulation showed about a 6.5 fold improvement over UPTRAVI. So we're 6.5-fold more potent on the actual receptor. And then importantly, we lack that peak-to-trough noise, so what's going to be important is to understand and the reason within the hemodynamic study in the switch type -- in that switch type model is to really understand the issue with selexipag is twofold. One is they're not very potent on the actual receptor. You can't -- and it's not a dosing issue. You can saturate the receptor, but you just can't get enough up-regulation of cyclic AMP. And then on top of that, you got this peak-to-trough noise. So the idea is that patients on selexipag, while they may be on a stable dose, are most likely going to have incomplete responses from where you would want them to be. And so moving them on that scale should be -- should feel pretty good. We're not going to comment on the exact magnitude of PVR, but we will say that if you look at PVR at peak and PVR at trough, you should be able to demonstrate a fairly sizable difference in PVR magnitude just given the fact that selexipag has a relatively short half life around 8 hours and is dosed via IV. So their troughs are pretty deep. And PVR at trough is definitely a problem for selexipag.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

And our next question comes from Alan Carr from Needham & Company.

--------------------------------------------------------------------------------

Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [19]

--------------------------------------------------------------------------------

Big picture one. I wonder if you can give us your updated thoughts on the cash burn in the long term, how long you expect that to last? And what's your thoughts are in terms of continued expansion of the pipeline? Are you content with the 3 that you have, plus the heart failure one that you're going to be advancing? Are those the 4 that you're going to be working with for the foreseeable future? Or do you plan to bring others into the clinic?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [20]

--------------------------------------------------------------------------------

Yes. Thanks, Alan. I think we're -- we have our hands full at this point. We got sort of 2 products in our cardiopulmonary franchise. We've got 2 products heading into our GI autoimmune franchise. So in terms of pipeline expansion, I think we are in very good shape. We've got a nice balance between early-stage ideas like APD418. We've got some Phase II things happening with etrasimod and things like atopic dermatitis and PBC as well as olorinab in Phase II to give us a nice basket of Phase II readouts over the next 12 to 18 months. And then, of course, we've got the Phase III program. So those are really nice kind of balanced portfolio approach. So given our -- it's not as much a cash burn issue, but it's an execution focus issue. I think -- at this point, I think we have our hands full. So let me hand it up to Kevin to talk about cash burn.

--------------------------------------------------------------------------------

Kevin R. Lind, Arena Pharmaceuticals, Inc. - CFO & Executive VP [21]

--------------------------------------------------------------------------------

Yes. In terms of cash burn, what we did see was we saw a slight creep up in cash burn this quarter, up to $31 million, and that's kind of consistent with what we told folks, which is, it's going to start picking up as we initiate these Phase III studies. We're not giving guidance around how long the cash flow lasts just because -- or the burn for 2019 just because we want to make sure we get to the agency and finalize our discussions around etrasimod and have that fully baked before we come back to you folks and discuss it. But we feel like we're in a very strong position with over $560 million in cash. And we have tremendous opportunity ahead of us due to the fact that we own our own products in all the major market, which gives us a lot of flexibility.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

And our next question comes from Joseph Schwartz from Leerink Partners.

--------------------------------------------------------------------------------

Joseph Patrick Schwartz, Leerink Partners LLC, Research Division - MD, Biotechnology [23]

--------------------------------------------------------------------------------

It's good to hear that you were able to confirm the 3Q strategy for the Phase III for etrasimod with the FDA. Were you able to gain any clarity on what we need to demonstrate for reviewing etrasimod first dose heart rate monitoring requirement as well?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [24]

--------------------------------------------------------------------------------

Joe, so as a matter of record, we're not going to get into detail of ongoing conversations with the agencies. I can confirm that we're having a conversation with the agency. Given that our heart rate effects were substantially lower than competing products and so, for example, no evidence of sinoatrial arrest. We didn't have the broad second-degree AV blocks that our competitors have had. So we continue to have the dialogue with the agency. And rather than give you sort of point in time here, I think we'll come back with more detail as we finalize the protocol. But we are having those conversations and we're excited about getting you guys all those data as we lock that up.

--------------------------------------------------------------------------------

Joseph Patrick Schwartz, Leerink Partners LLC, Research Division - MD, Biotechnology [25]

--------------------------------------------------------------------------------

Okay. And I don't know if you might have the same answer for this question, but how do you expect the co-primary endpoints of clinical remission and endoscopic remission to work in the Phase III Crohn's study? Is this something that's been established with the FDA yet?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [26]

--------------------------------------------------------------------------------

Yes. So, for Crohn's, we're a little bit behind ulcerative colitis in terms of our broader set of interactions. So again, we'll get through the agency, we'll lock up the study designs and then promise to come back and give you guys all the details in terms of how we're thinking about this. There are moving parts in terms of both patient definition as well as endpoints in both UC and Crohn's, and we've had a very productive and, frankly, a very useful dialogue with the agency in terms of being able to shape where this really goes. We're very pleased with the progress so far. But just give us a little bit of time to finalize all those conversations, and we'll come back and give you all the details.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

And our next question comes from Bill Tanner from Cantor Fitzgerald.

--------------------------------------------------------------------------------

William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [28]

--------------------------------------------------------------------------------

I'm going to head one for you on etrasimod, and I was just curious about any S1P analogs with comparable pharmacology to etrasimod. I'm sure you have those in your cupboard. And wondering about if there is any -- been any contemplation about advancing any of them in some fashion? And I guess, reason being, I was thinking about the atopic dermatitis indication, wondering about whether you're waiting maybe in the water where you're going to have differential pricing for some of the other etrasimod indications? And then a little bit on the atopic derm, how you might think about commercializing across the broad indications and whether or not another analog might give you some flexibility to partner an analog and not have to do anything with etrasimod?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [29]

--------------------------------------------------------------------------------

Absolutely, Bill. Those are great questions. So things we thought about internally. We do have a, as you mentioned, a cupboard full of other S1P modulators with all of slightly different profiles, all again sort of next-generation compound. We've chosen to take etrasimod forward. We think there is a strong business rationale, and we think we can get to a -- an eventual pricing place that makes a lot of sense across, both derm and G.I. There are other potential diseases, however, independent of both G.I. and derm, where pulling a backup compound might make sense, and we'll continue to evaluate that. So we've got a team actively working on looking at our backup compounds, looking at where within the 84 high potential indications we previously identified, we may choose to go. We continue to aggressively look at other delivery methods for the compounds and to hit different target organs. So I don't want to get into too many details today, but we are actively looking at where else we should go long term with this, and as we get more animal work done, as we get more formulation work done, we're excited to come back and talk about those things.

--------------------------------------------------------------------------------

William Tanner, Cantor Fitzgerald & Co., Research Division - MD and Senior Research Analyst [30]

--------------------------------------------------------------------------------

And then as it relates to the PBC program, I mean, I guess, the data will tell you a lot, but I'm just curious if there is -- I'm assuming there is going to be some bar at or above which relative to other PBC experimental therapies you're going to want to hit or would the contemplation then be -- well, it's going to -- it's a different mechanism of action versus some of the others and it might find a place as part of just polytherapy.

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [31]

--------------------------------------------------------------------------------

Yes. I think this is -- I think you hit the nail on the head here. This is all going to be part of a cocktail of polytherapy approach in PBC just simply because we're not focused on the cholestasis, independent of the actual underlying autoimmune trigger. So ideally, wouldn't it be fantastic again, it's one of the reasons we started the study, wouldn't it be fantastic if we could simultaneously brought the ongoing autoimmune insult as well as manage the downstream cholestasis and then the ductopenia, the fibrosis and the eventual cirrhosis. So again, the idea is that these -- because these therapies work across the different parts of the disease continuum, they'd be used in combination. So again, the data will tell us exactly where to go with this, but we think that's really the hope here.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

We have a follow-up from Kennen MacKay from RBC Capital Markets.

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [33]

--------------------------------------------------------------------------------

This is just more of a sort of strategic question on APD418. I was wondering, I mean, if you could maybe elaborate a little bit on sort of where this came from and how this was selected? And sort of internally, how many people you have dedicated to looking back through some of the potential drug candidates within the libraries that you have there could be pushed forward into the clinic? In other words, is there something that we could expect to see more of if some of these additional candidates look like they have strong additional chemistry and sort of apply this biologically?

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [34]

--------------------------------------------------------------------------------

Sure, Ken, all fantastic questions. So this was an in-house developed program, along with the other ones. When we first joined here as a management team in the middle of '16, for the first 6 months, we had various researchers, the research group, the translational medical scientists come present all the things they were working on, and a lot of whom were orphan GPCR targets or targets that weren't far enough along where they were druggable. In this case, you had a receptor that was more characterized. You had a chemical matter that have worked against it. We had a small team working on this in the background that continue to progress until such point as we were confident that we can come out and talk about it. We have some additional things like this that are early stage. And we've got literally just a handful of people kind of working through them and working on some of these options. To the question that was asked previously, I think, for now, we're probably not going to progress anything broadly beyond what we have in our portfolio. We just have -- with the Phase III programs, the multiple Phase II programs, we're heading into, I think, 7 Phase III trials to 3 supportive Phase III trials, 4 to 5 Phase II trials, moving one preclinical compound forward doesn't really stress our system, but I'm not sure we can do much more beyond that. But we'll be prudent about it. We want to make sure that we don't let the clock run on some of the reported intellectual property. In some cases, where it doesn't fit with what we're trying to do. We released on one out-license (inaudible) on a compound that has an application in urology where we wanted to go. So we'll continue to look at those kinds of options. But we're incredibly fortunate here. The scientists at Arena historically did an absolutely amazing job with these compounds. And it's our job to really begin to figure out when and how we stage these programs over the next couple of years. But for now, I think we have our hands full.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

And there are no further questions in queue. That concludes today's question-and-answer session. I would now like to turn the call back to Amit Munshi for closing remarks.

--------------------------------------------------------------------------------

Amit D. Munshi, Arena Pharmaceuticals, Inc. - CEO, President and Director [36]

--------------------------------------------------------------------------------

Okay. Great. So again, thanks, everyone, for being on this call today. Our focus remains on executing across the broad range of programs I just mentioned. It's important that we continue to scale our company in order to execute against these Phase III trials and time lines. And a lot of great questions on some of the protocols coming up and ongoing regulatory interactions. We'll be sure to get back to you with as much detail as we can until as we begin the lock down of protocols. So look forward to continue the dialogue, and thanks again for your time today.

--------------------------------------------------------------------------------

Operator [37]

--------------------------------------------------------------------------------

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