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Edited Transcript of ARNA earnings conference call or presentation 7-May-20 8:30pm GMT

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Q1 2020 Arena Pharmaceuticals Inc Earnings Call San Diego Jun 8, 2020 (Thomson StreetEvents) -- Edited Transcript of Arena Pharmaceuticals Inc earnings conference call or presentation Thursday, May 7, 2020 at 8:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Amit D. Munshi Arena Pharmaceuticals, Inc. - President, CEO & Director * Laurie D. Stelzer Arena Pharmaceuticals, Inc. - Executive VP & CFO * Preston S. Klassen Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development ================================================================================ Conference Call Participants ================================================================================ * Alan Carr Needham & Company, LLC, Research Division - Senior Analyst * Alethia Rene Young Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research * Chi Meng Fong BofA Merrill Lynch, Research Division - Research Analyst * James William Birchenough Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst * Joel Lawrence Beatty Citigroup Inc, Research Division - VP & Analyst * Joseph Patrick Schwartz SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst * Kennen B. MacKay RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research * Thomas Avery Deal Crédit Suisse AG, Research Division - Research Analyst * Yatin Suneja Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- So good day, everyone, and welcome to Arena Pharmaceuticals Corporate Conference Call. This call is being recorded. I will now turn the call over to Laurie Stelzer, Chief Financial Officer of Arena. Please go ahead. -------------------------------------------------------------------------------- Laurie D. Stelzer, Arena Pharmaceuticals, Inc. - Executive VP & CFO [2] -------------------------------------------------------------------------------- Good afternoon, everyone, and thank you for joining us on our call. We hope you had a chance to review the new release we issued today announcing our first quarter 2020 financial results. As the quarter was relatively straightforward... (technical difficulty) -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- This is Amit. Laurie, do you want to keep going? -------------------------------------------------------------------------------- Laurie D. Stelzer, Arena Pharmaceuticals, Inc. - Executive VP & CFO [4] -------------------------------------------------------------------------------- Sure. As the quarter was relatively straightforward, on today's call, we will go directly into a question-and-answer session. Joining me on the call is Amit Munshi, our President and Chief Executive Officer; and Dr. Preston Klassen, our Head of Research and Development. Before we begin, I would like to remind you that we'll be making forward-looking statements that involve risks and uncertainties about our goals, expectations, beliefs, timing of events or future results, including those risks and uncertainties related to the COVID-19 pandemic and its potential impact on our business. Forward-looking statements about plans and expectations related to our pipeline, financial projections and 2020 financial guidance 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 will turn the call over to the operator to begin the Q&A session. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We have our first question from the line of Jim Birchenough, Wells Fargo. -------------------------------------------------------------------------------- James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [2] -------------------------------------------------------------------------------- I guess the first thing is just on the COVID-19 environment. Could you maybe talk through the logistics of monitoring things like Mayo Scores remotely and what adjustments you have to make for the protocol, just to make sure you're capturing data, and if any interactions you've had with the FDA and other regulators on the adequacy of any adjustments you've made? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Sure. Yes. Jim, this is Amit. Let me hand it off to Preston to comment. -------------------------------------------------------------------------------- Preston S. Klassen, Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [4] -------------------------------------------------------------------------------- Yes. As of right now, we haven't had to make major adjustments. Our focus is really on making sure that: number one, patients enrolled in the trial have access to drug. We've been successful in that front. Number two, that patients, when they need to get in for a clinic visit, are able to do so. Again, we've been successful on that front. And so just net-net, overall, we haven't needed to make major adjustments, not for -- in terms of the Mayo Score. Obviously, the endoscopic finding is something that is required on site. And then for the patient-reported outcomes as stool frequency and rectal bleeding, we, of course, provide electronic methodologies for the patients to be entering that on a very frequent basis, so that's not an issue. So we have not needed to enter into specific discussion with the FDA about how we're conducting the trial or what we need to do. Anything specific from the COVID perspective, we're simply executing the trial as we normally would. Now again, we're -- what we really are spending a lot of time doing, understanding the impact of COVID, is on things like site activation, drug supply and making sure that patients, when they need to, can get to the sites for the appropriate business. -------------------------------------------------------------------------------- James William Birchenough, Wells Fargo Securities, LLC, Research Division - MD and Senior Biotechnology Analyst [5] -------------------------------------------------------------------------------- That's very helpful, Preston. And then just more broadly, could you just talk about life cycle management with etrasimod and any efforts you have going with alternate formulations, extended release, this sort of thing? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Yes, this is Amit. Let me start. We announced earlier the CR formulation, which is designed to take what we believe is a best-in-class compound with best-in-class profile and make it even better, and we've got really from the point of view of life cycle management. So Preston, do you want to quickly talk about the CR program and how we're approaching it, and how we'll bridge it into future trials? -------------------------------------------------------------------------------- Preston S. Klassen, Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [7] -------------------------------------------------------------------------------- Sure. So what we've done is we've taken an initial work -- Phase I work with essentially looking at a variety of controlled-release delivery profiles to make sure that we could see what we thought we needed to see in terms of what an actual controlled-release formulation might look like, and that was the subject of our press release and call a number of weeks ago. And in doing this, the entire goal was to smooth out, so to speak, the overall delivery of 24-hour period of time of the drug and see if we could take what was already, we believe, best-in-class impact in terms of cardiac conduction -- that first-dose cardiac conduction that is inherent to the S1P class. We believe that etrasimod has the lowest intrinsic potential of all the S1Ps being developed today. We could take that and make it even less of an impact. And so one of the things we talked about was, for example, in our clinic studies, OASIS is the largest clinical trial we've conducted to date. We saw high single-digit delta from the baseline in terms of impact on heart rate. We've taken that with the controlled-release delivery profile down to single -- low single digit now. And it's a small absolute change from high single digits to low single digits that just kind of speaks to the point that we didn't have far to go. But from a relative perspective, it's actually a 75% reduction in the overall heart rate effect over that first 4 to 6 hours, which is really the important part (technical difficulty) risk of an AV block actually is greatest. So we're really pleased with the delivered profiles, and now the next step is to turn that into an actual formulation and then get that formulation into our clinical program -- clinical trial program. We believe that we can do that in time for Phase III across all of our indications with the exception of UC, which, of course, is underway right now. And so we would anticipate finishing UC with the IR -- immediate release product, launching that and then at the appropriate time, doing a market switch over to the controlled release. So that's kind of a high level of where that is -- we view it as a fairly aggressive early on life cycle management play that we think is important in terms of even further diminishing any aspects of first dose conduction effect that could be attributed to S1P class. We think with etrasimod, it will be close to nil. And then potentially expanding or extending our patent franchise. -------------------------------------------------------------------------------- Operator [8] -------------------------------------------------------------------------------- Next question is from the line of Kennen MacKay, RBC Capital Markets. -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [9] -------------------------------------------------------------------------------- Wondering if you could maybe just put into context how sort of the enrollment into ELEVATE sort of looked throughout Q1? If you did see any changes in sort of the pace, obviously, not relating to any specifics around the trial due to COVID? Just trying to really firm up senses around how COVID has impacted enrollment there? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [10] -------------------------------------------------------------------------------- Sure. So again, as we mentioned in our press release, as of today, and I really emphasize today, we remain on track. None of this has been easy for anybody involved in the clinical trials across the board. We were well ahead of enrollment when the slowdown started. We were affected like others in terms of sites going offline, slowdown in site activation, slowdown in enrollment. The good news for us was not only where we ahead, but we also have a global study with lots of -- dozens of countries, hundreds of sites. And as some geographies slowed down, others came back online and continue to come back online. So that's really been fortunate for us. But again, I think just like everybody else, we did experience and continue to experience slowdowns in site activations, screenings and enrollment. Again, the broad base of the trial really comes into play here. The other thing that really comes into play is that the bulk of our sites in the U.S. are community based. So we've just not seen or experienced the same impact as hospital-based sites. And then finally, having an oral agent here as opposed to an infused agent or an injected agent seems to have really helped. Having said all of that and as we've continued to caveat, this is an extremely difficult situation for everybody involved, the clinical sites as well as our teams and other companies in the same position we are. We're actively monitoring every site, every country, every patient every day. And we'll keep updating The Street in terms of our progress and how the study is progressing as we go forward in time. But yes, we were fortunate in terms of getting lots of sites activated before the slowdown. We were very fortunate being well ahead of all of our metrics. And while we've experienced slowdowns, we've been able to absorb some of that and also being able to see some of the sites coming back online in some of the countries coming back online. -------------------------------------------------------------------------------- Kennen B. MacKay, RBC Capital Markets, Research Division - MD & Co-Head of US Biotechnology Research [11] -------------------------------------------------------------------------------- Awesome. And maybe just a similar question on your Phase IIb ADVISE trial in atopic dermatitis. Obviously, you have a lot of clinical catalysts coming up later this year. I'm just trying to get a sense, again, of whether there's any COVID impact there? Or if there's anything even sort of tangentially, you can tell us to help put into perspective how the rate of enrollment has changed there? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [12] -------------------------------------------------------------------------------- Thanks, Ken. Really appreciate it. The -- I'd say almost the exact same situation. We were well ahead on screening and enrollment. We continue to guide toward data before the end of the year on ADVISE, and we think we're in a good position. So we've been able to really navigate through this. And like I said, none of it's been easy. The teams have been doing just an amazing job. And it helps to be -- it helps to have been well ahead of where we needed to be and be able to absorb some of the delays associated with COVID. Similar to the ELEVATE trials, again, it's a broad-based trial, plenty of sites. So while some states were coming offline, other states were still open. When those states closed, other states opened up. So again, having a balance and have a broad-ranging number of clinical sites has been really useful. So we'll continue to guide toward having the atopic derm data before the end of the year. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Next in line is Alethia Young from Cantor. -------------------------------------------------------------------------------- Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [14] -------------------------------------------------------------------------------- I just wanted to kind of continue on -- does -- kind of -- you have kind of a massive riches here of $1 billion and a lot of different pipeline programs, I guess, with the earlier stage programs. Do your priorities shift or change as it relates to like the cardiovascular program or the pain program in light of what's going on with COVID? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [15] -------------------------------------------------------------------------------- Yes. So the pain program, the CAPTIVATE study continues to enroll, and we still guide towards the end of the year. So nothing really changes there. Definitely on some of the early preclinical things or things we can slow down. There's levers we can push. As we mentioned in our press release, we've really spent time thinking through activities in terms of market shaping, market development, keeping leader development, kind of the market development things that you would normally do and being able to take a 1- or 2-quarter delay in those things to be able to kind of fine-tune some of the spending is really, really important, and we've been able to do that. And really get a tighter handle on our overall spend through the year really driven not by the clinical catalysts, but the things that were sort of more in the G&A buckets, commercial and medical affairs and then also spending time thinking through some of the early programs and begin to prioritize there. So it is definitely important at this juncture for everybody involved to continue to do things like slowdown hiring and reduce spend in nonclinical areas. But we definitely want to stay highly focused on our clinical objectives and not really impact the long-term value of the company and the long-term delivery of the critical milestone. So that's kind of how we've approached it. -------------------------------------------------------------------------------- Alethia Rene Young, Cantor Fitzgerald & Co., Research Division - Head of Healthcare Research [16] -------------------------------------------------------------------------------- And does it affect anything that you might do with your cash, the $1 billion? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [17] -------------------------------------------------------------------------------- No. We're going to hold our cash. We have to get through our milestones. And we find ourselves in an incredibly fortunate position to have the balance sheet we do. And unlike a lot of other companies who are going to be actively looking to raise capital this year, we don't have a need to do that. And it really allows us to weather the storm, so to speak. So nothing else to do with the cash other than to manage through our milestones. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Next question is from the line of Joe Schwartz, SVB Leerink. -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- Joe? Operator, we can't hear Joe Schwartz. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Okay. One second, sir. Mr. Joe Schwartz? Hello, sir? (technical difficulty) Next in line is Jason Gerberry from Bank of America. -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [21] -------------------------------------------------------------------------------- Jason, this is Amit. Can you hear me? (technical difficulty) -------------------------------------------------------------------------------- Chi Meng Fong, BofA Merrill Lynch, Research Division - Research Analyst [22] -------------------------------------------------------------------------------- This is Chi. Looks like both Joe and I are on now. He was the first one on the queue, so I'll let Joe ask first, and then I'll follow-up. -------------------------------------------------------------------------------- Joseph Patrick Schwartz, SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Research Analyst [23] -------------------------------------------------------------------------------- I was just wondering if you could give us any insight in your ability to capture endoscopy data lately. Have you found it challenging? And how are you thinking about things going forward? Are you planning? Or do you have any thoughts on if we do get A second wave, if you're going to be able to navigate it? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- Sure. Let me hand it back to Preston on trial conduct. -------------------------------------------------------------------------------- Preston S. Klassen, Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [25] -------------------------------------------------------------------------------- Yes. And I'll just say that we've navigated the first wave. It's not necessarily over, and it's not necessarily easy. But it's really a testament to sites and the site staff. It's a testament to our internal team that's really on top of everything along with our vendors, CRO, et cetera. And it's a testament to the patients and the significant unmet need that exists, right? This is not -- we talk about the GI society that said, let's avoid elective procedures. It's not really an elective procedure. You get into the study because you're having an acute flare and it's absolutely critical then to get the follow-up at 12 weeks and then again at 52 weeks for our UC 52 study. And patients and staff know that. This is an important illness for them, for their lives. They're looking for things that have added benefit for them from a clinical perspective. And so everyone's trying hard to make sure we can get these things done. We do have to stay on top of the logistics and making sure we can get patients into the sites at the right time that is more difficult today than it was 6 months ago, no question. But so far, we've been able to manage that, navigate it. And I'd say to the FDA's credit, they're also recognizing and have, in fact, put out guidance around how sponsors are supposed to try to deal with this as best as possible. So I think moving forward, as we come out of this. And we may, you're right, experience additional waves of this. It's going to be industry working with FDA together to make sure that we don't have a problem with not being able to utilize well-collected data in an area where you need to have made some adjustments. So I think everybody's thinking the right way, FDA, industry, our staff sites and our patients. So we're -- we've been very fortunate to date. And as Amit said, as of right now today, and it's important to caveat that this is today's guidance, we do remain on track with our clinical programs. -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [26] -------------------------------------------------------------------------------- So let me ask Chi if you're still on, if you had a question? (technical difficulty) -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- We have our next question from Yatin Suneja from Guggenheim Partners. -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [28] -------------------------------------------------------------------------------- Operator, I don't think any of these lines are working really well here. Is there anything you can do on your side? (technical difficulty) -------------------------------------------------------------------------------- Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst [29] -------------------------------------------------------------------------------- Can you hear me? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [30] -------------------------------------------------------------------------------- Yes, Yatin. -------------------------------------------------------------------------------- Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst [31] -------------------------------------------------------------------------------- I think other people are also -- other companies are also having similar issues. All right. So the first question I have is on a competitor because I think Bristol today announced that ozanimod data are coming in Q3. So could you maybe talk about your expectations from the readout and it's direct -- relatively to etrasimod, what we should be looking at from your perspective that could help us guide to the product differentiation that you have talked about relative to ozanimod? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [32] -------------------------------------------------------------------------------- Sure. So I think a good part of the story of the differentiation has already been written, and it's -- because it's about the intrinsic features of the compound. As we've discussed before, we have a faster on-rate with no titration. That's important for both patients and clinicians. A faster off-rate really important for the clinician community in terms of being able to maintain control. We've demonstrated a very low cardiac conduction issues and heart rate with -- again, with no titration. None of the LFT, PFT type abnormalities seen with ozanimod. And then on top of the safety advantages, we recognize that etrasimod is a very clean compound with no active metabolites, no drug-drug interaction issues as compared to ozanimod, which we all know is an accidental prodrug. And so we see this as sort of the intrinsic features of the compounds are very, very different. And a lot of that story has already been written in terms of seeing their safety label from the MS side. What's exciting here is as we head into the efficacy, looking at the efficacy picture, we know that their magnitude of signal from Phase II was significantly smaller, approximately half of what we saw with etrasimod. We know they've had to overpower their Phase III trial. So we expect to see a compound that's active. We expect to see an efficacy signal, but we firmly believe that we've got a compound here that is both potentially safer and potentially has the ability to deliver a better efficacy signal in terms of our -- comparing our compound to ozanimod. So Preston, anything else you'd like to add relative to their Phase III? -------------------------------------------------------------------------------- Preston S. Klassen, Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [33] -------------------------------------------------------------------------------- No. I think you've covered it. -------------------------------------------------------------------------------- Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst [34] -------------------------------------------------------------------------------- Maybe just 1 more follow-up there on the size of the trial because obviously, the ozanimod trials are much bigger, close to 1,000 patients. What gives you confidence that given that you are enrolling a much smaller trial design that it is sufficiently powered to detect the signal that you want? Because I do remember that I think ozanimod trial had to be upsized. So just help us understand the differences and your confidence in the powering. -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [35] -------------------------------------------------------------------------------- Sure. So not knowing the details of their trial, we -- their data is their data. We don't get to see it at a patient level. So it's difficult to ascertain exactly why they upsized the trial. We do know that the -- our 3-domain Mayo Score delta was approximately 26. Their 3-domain Mayo Score delta is about 16. So adjusting for effect size has a big part to do with their overall study size. So that's a big piece of it. Again, not knowing where they did the studies -- for example, if they were hunting the world for looking for patients who are TNF or biologic naive, for example, that would have taken longer. They may have seen more heterogeneity in that patient population. They may have had to go to countries far field, India, China, et cetera, to build that patient database. And again, when you move to those countries, you get larger standard deviations, which require larger sample sizes. So we hypothesized that some of that has to do with the fact they have been looking for TNF or biologic naive patients. And some of that is just simply a function of the effect size that they're still coming out of their Phase II. So again, this is just a hypothesis. We'll see the full dataset when it comes out. But those would be 2 logical reasons why they would have had to potentially upsize their trial. -------------------------------------------------------------------------------- Preston S. Klassen, Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [36] -------------------------------------------------------------------------------- And -- sorry, this is Preston. I just want to jump in here. I want to point out something specific, though. As we talked about in the past, our program is a more efficient streamlined program, certainly efficient in terms of utilization of patients. So previous programs, and in particular, the ozanimod program had 2 induction trials, and then the clinical responders at the end of the induction period are rerandomized into the maintenance period for the rest of the 1 year. And that's fine, that's the way it's been done in the past. But that means that you have to over-enroll or overpower, if you will, the -- those 2 induction trials in order to have enough clinical responders to power the maintenance study. So that is a less efficient use of patients. We have a program where we are conducting 1 52-week study with a co-primary endpoint at week 12 and week 52, and then a second week-12 study. So there's no rerandomization of clinical responders. And so we don't have to upsize that induction part just to enable powering of a maintenance period. And we discussed that with the FDA. It makes absolute sense because the whole idea of an induction period versus a maintenance period with a once-a-day oral, where the dose doesn't change, starts to make less sense. So we view it as early response and later a continuation of response. And so that in and of itself saves us several hundred patients just from a powering perspective even if all other assumptions are the same. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- Next question is from the line of Jason Butler from JPM Securities (sic) [JMP Securities]. (technical difficulty) Next in line is Alan Carr. -------------------------------------------------------------------------------- Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [38] -------------------------------------------------------------------------------- Can you hear me? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [39] -------------------------------------------------------------------------------- Yes, Alan. -------------------------------------------------------------------------------- Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [40] -------------------------------------------------------------------------------- I wasn't sure that was going to fly. So a couple for you. I didn't see this explicitly in the press release, and I don't think I heard it on the call, but you're still planning to have the Crohn's and UC, etrasimod [day] in the second half of '21. Is that right? And then the other thing is around some of the other programs, you said that you might conserve some cash in this environment. But how does that impact 418? And then, can you give us an update on that one? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [41] -------------------------------------------------------------------------------- Sure. So all the ongoing trials remain on track. The studies that haven't started yet, we're still hoping to start those this year, like EoE and AA. But -- again, that's going to depend on what the rest of the year looks like. And the ability to start trials, again, is very different in this environment than the studies that are already ongoing, especially studies that share clinical sites. As far as 418 is concerned, as you know, it's a Phase I study. A lot of Phase I sites, including ours, are on temporary hold. We still expect to get that done this year and be able to move to a Phase II. But again, that's going to really be dependent on the excellent environment there. That's a little bit out of our control in terms of Phase 1 site. -------------------------------------------------------------------------------- Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [42] -------------------------------------------------------------------------------- And what's your thinking -- I understand that Phase II timing might be a bit up in the year, but what you're current thinking on design, and what you're hoping to accomplish with Phase II for 418? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [43] -------------------------------------------------------------------------------- We haven't disclosed anything around the Phase II design. So as soon as we get through Phase I and we're able to successfully initiate Phase II, assuming things continue to improve in the macro environment, we'll come out and talk a little bit about the Phase II design. -------------------------------------------------------------------------------- Operator [44] -------------------------------------------------------------------------------- We have our next question from the line of Joel Beatty from Citi. -------------------------------------------------------------------------------- Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [45] -------------------------------------------------------------------------------- I guess the first one, I'll ask a follow-up to 418. And how about the ongoing Phase I trial, what do you expect to see from that? Anything beyond just safety and... -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [46] -------------------------------------------------------------------------------- Sure. Preston, do you want to take that 418 Phase I? -------------------------------------------------------------------------------- Preston S. Klassen, Arena Pharmaceuticals, Inc. - Executive VP and Head of Research & Development [47] -------------------------------------------------------------------------------- Yes, 418 Phase I. So as you said, it's just predominantly safety. And one of the things we talked about in the past is that the beta 3 receptor is actually not highly expressed in the normal state. And so you wouldn't necessarily expect to see a lot. And so you just need to make sure that there isn't something that's at a high level and from a safety perspective. And then we can move as rapidly as possible into Phase II. And the focus there is clearly going to be on mechanism of action, proof-of-concepts? And we -- are we doing what we think we can do as opposed to, for example, looking at lengthy clinical outcomes. But as Amit said, we will be talking about that more as we get through the Phase I, take a look at the data, and then we'll talk more specifically about what we have planned for Phase 2. But that's a compound we're really excited about, and we should be able to, in a pretty rapid fashion, get to that mechanistic kind of data. -------------------------------------------------------------------------------- Joel Lawrence Beatty, Citigroup Inc, Research Division - VP & Analyst [48] -------------------------------------------------------------------------------- Great. And then maybe one other question. Any update on Arena Neuroscience or Beacon Discovery collaboration? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [49] -------------------------------------------------------------------------------- Sure. So Arena Neuroscience continues to do its work. As we've mentioned, we'll be coming out of stealth mode around midyear, and that's still on track. A lot of the work that's been ongoing now is just completing some pre-IND work, wrapping up some intellectual property that has to get wrapped up, and then we'll be out talking about it kind of in the midyear time frame. So excited about that, and the work continues to pace. The Beacon collaboration, Beacon, of course, having lab-based services and having a functioning lab has experienced some slowdowns as one might expect. They're also starting to come back online, and we'll continue to provide updates on both of those as we get through the middle of the year. And the better visibility into Q3 and Q4 will allow us to provide better updates on those 2. -------------------------------------------------------------------------------- Operator [50] -------------------------------------------------------------------------------- Next in line is Martin Auster from Crédit Suisse. -------------------------------------------------------------------------------- Thomas Avery Deal, Crédit Suisse AG, Research Division - Research Analyst [51] -------------------------------------------------------------------------------- This is Thomas on for Marty. Can you hear me okay? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [52] -------------------------------------------------------------------------------- We can hear you, Thomas. -------------------------------------------------------------------------------- Thomas Avery Deal, Crédit Suisse AG, Research Division - Research Analyst [53] -------------------------------------------------------------------------------- Great. I guess just a quick one for me, maybe on cash burn. Curious if you can give us any more details on how to think about burn rate going forward. I think you said in the press release today, you plan on judiciously managing cash during these COVID-19 uncertainties. Can you maybe just discuss what specifically you're doing to keep that burn down and then any color on how to think about that going forward, obviously, with the caveat that we've got these ongoing certainties? -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [54] -------------------------------------------------------------------------------- Sure. So -- yes. So let me put the color -- a little bit of color and then hand off to Laurie. The whole idea here is, the balancing act is, how do you ensure a long-term catalyst, a long-term milestones, the continuation of the programs, and at the same time, be judicious about cash burn. And so what we've really done is slow down hiring in certain parts of the company, push things out a couple of quarters and then be able to reassess later in the year. There's spend in some nonclinical areas, things that we wanted to get done for the long-term growth of the company systems, market development, those things we can put on hold for a couple of quarters and kind of reassess again at the end of the year. We think that's the prudent way of handling this. You don't want to pick the company off the rails. You want to -- as we discussed internally, you want to react but not overreact. So we want to make sure that we can still deliver the key catalyst for the company while being able to manage around the edges. And that has a fairly substantial impact for on burn. So Laurie, do you want to just touch on that? -------------------------------------------------------------------------------- Laurie D. Stelzer, Arena Pharmaceuticals, Inc. - Executive VP & CFO [55] -------------------------------------------------------------------------------- Absolutely. So Thomas, we did guide to a new cash burn -- operating cash burn level of $400 million to $430 million. So it's down from the previous guidance for all the reasons that Amit laid out. And I will point out, on the last earnings call, we did guide to $95 million burn in Q1, and we're about at $94 million. So we hit that, but we've reduced the last 3 quarters of the year to get us into that full year $400 million to $430 million range. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- At this time, I would like to turn it back to Mr. Amit Munshi, President and CEO, for closing remarks. -------------------------------------------------------------------------------- Amit D. Munshi, Arena Pharmaceuticals, Inc. - President, CEO & Director [57] -------------------------------------------------------------------------------- Thanks, everyone, for joining us today. We apologize for the technical issues. I think it's been sort of par for the course of today. But again, thanks for your patience. As we continue to build toward bringing these important medicines to patients and building the company, we're tightening our focus on the execution of the ongoing clinical programs, the key time lines, the key milestones, and we continue to explore ways to reduce spend in nonclinical areas. We're excited that the ongoing clinical trials remain on track. And we'll continue to monitor the potential impacts of COVID-19 as we get to the next quarter, and we'll provide timely updates, so everyone is aware of what's going on. I just want to take this opportunity to thank everyone for the ongoing support and really thank the Arena team for their unwavering relentless work during this time period. As Preston pointed out and I pointed out, this has not been easy for anybody. Making sure patient safety, employee safety is paramount, and then simultaneously balancing that with progress across our multiple opportunities. So thank you again, and stay safe everybody. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Thank you, presenters. Ladies and gentlemen, I do apologize as well for the technical issue encountered. This concludes today's conference call. Thank you all for participating. You may now disconnect. Have a great day.