Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)
Jefferies 2017 Global Healthcare Conference
June 09, 2017 11:30 A.M. ET
Kevin R. Lind – EVP and CFO
Unidentified Analyst – Jefferies
Hi everyone and welcome to the 2017 Jefferies Global Healthcare Conference. My name is Marcus [ph] and I am pleased to introduce Kevin Lind, CFO of Arena Pharmaceuticals. Please note that immediately after the presentation we will be holding a breakout session downstairs in Julliard. Please keep questions in the breakout session. Thank you.
Kevin R. Lind
Thank you Marcus and thank you Jefferies for having us here today. Just a reminder, we will be making forward-looking statements, please refer to our SEC filings for the full set of disclosures around our risk factors. It’s been a busy year for Arena and for me. Next week will be my one year anniversary at the company and in the past year the company has spent a significant amount of time right sizing and time and effort right sizing and focusing the organization on our three most advanced programs Etrasimod, Ralinepag, and APD371.
We think that these three encumbered Phase 2 programs are potentially first or best in class compounds that treat significant unmet medical needs in the market. And we’re looking forward to their upcoming data readouts later this year. As a reminder Arena has a strong history of optimized receptor pharmacology and chemistry against some very interesting targets. The compounds which we will go through in a little bit of detail have broad clinical utility which we think could generate value for shareholders and more importantly utility for patients.
Our first data readout this year will be for Ralinepag. Ralinepag is an oral potent IP receptor agonist for the treatment of pulmonary arterial hypertension, PAH. We expect the Phase 2 data in July. We then have Etrasimod, an oral next generation S1P receptor modulator in a Phase 2 clinical trial for ulcerative colitis as well as in a few exploratory trials in EIM, PG and PBC. We also have APD371 which is a highly selective peripherally restrictive CB2 receptor agonist and a Phase 2 trial for the treatment of pain associated with Crohn’s disease.
In the past year we’ve restructured the management team such that approximately 90% of management is new and we’re pleased with the team that has been recruited based on the opportunity they see for Arena going forward. So let’s dive into Ralinepag our oral potent IP Receptor Agonist for the treatment of PAH.
We recently hosted a KLL event in which we discussed the PAH market. There’s a large market with a significant unmet medical need. We know that prostacyclin is one of the three pathways involved in treating PAH and that IV prostacyclin is the gold standard of care having been the only therapy to show mortality benefit. However the issue of IV and inhale prostacyclin is that its use is limited due to the inconvenience and safety concerns.
The oral prostacyclin, Selexipag, and Troposinal [ph] have been gaining traction in the market despite what appears to be suboptimal clinical profile due to intermittent exposure and poor tolerability. We think Ralinepag has a chance to change that due to its improved potency and pharmacokinetics which we believe should translate to better efficacy and tolerability. SO now I’ll walk you through the data.
With G protein coupled receptors the IP receptor binding results in cyclic AMP activation. This cyclic AMP activation translates into cellular and tissue responses which should translate to therapeutic responses and clinical outcomes. With Ralinepag we are a strong partial agonist compared to MRE-269 which is the active metabolite of Selexipag or Uptravi which is a pro drug. In terms of cyclic AMP activation we’re significantly more potent and efficacious and the strong partial agonist we believe results in a series of improvements in basal relaxation assays in addition to smooth muscle cell proliferation assays and finally platelet aggregation assays. So we think those are the three hallmarks of PAH and we’ll show in a moment why we believe we have an improved version with this program.
Starting with laser relaxation in small pulmonary arteries from PAH patients Ralinepag had a large shift from Selexipag or MRE-269 in terms of basal relaxation. Similarly we see a tenfold shift in proliferation of pulmonary artery smooth muscle cells from PAH patients. Finally we see an eightfold improvement and shift to the curve suggesting Ralinepag is superior to MRE-269 in platelet inhibition. So that’s the potency side of the value proposition.
Now moving on to the pharmacokinetics part of the value proposition, does the drug have adequate plasma concentrations to enable receptor engagements throughout the dosing interval? We think it’s pretty clear from the experience in the clinic with other drugs in this class all across the cyclines and receptor agonist like Veraprost and Troposinal [ph] that they have the pharmacology, they hit the IP receptor but they are not selective for IP. They hit others in prosnoid family. They also have a short half life, Veraprost has a two hour half life and Troposinal [ph] has a four hour half life. So they are stimulating the receptor but if you’re not continuously hitting it like an IV infusion you lose efficacy and that’s demonstrated in the graphic on the left.
If you have a short half life you have a high peak and low trough exposure. So when your plasma concentrations are below the therapeutic range you lose efficacy. This is why we conclude that Veraprost and Troposinal in part lose efficacy. Our goal in the beginning was to develop a compound that has a low peak to trough ratio since side effects are more associated with the Cmax and you want to minimize trough levels of drugs such that exposure can still be in that therapeutic range and continue to occupy the receptor consistently between doses.
Here’s some data supporting our approach and detailed observations with our pharmacokinetics. The chart on the left is Ralinepag’s concentration time profile from Phase 1 data compared to the active metabolite of Selexipag following an oral dose of Selexipag. So you can see the high peak and low trough for MRE-269 compared to Ralinepag’s low peak to trough ratio. The peak to trough ratio is critically important because as I said before high peaks or high Cmax will trigger the side effects associated with all the drugs in this class i.e. the headaches, the jaw pain, the nausea which will limit your dosing levels.
If you’re limited by Cmax that will obviously mean that your trough levels will be lower if you can’t push the dose higher. Therefore the argument that with a weaker agonist you can just dose it higher doesn’t work well because you cannot dose high enough because your Cmax will block you from getting to doses high enough so that your troughs stay within the therapeutic range, that’s the concept. On the right we have PK modeling studies that we did based on the Phase 1 data. Ralinepag plasma concentrations are at or above what is required for inhibition of proliferation of smooth muscle cells while MRE-269 plasma concentrations are below the IC50.
We are very pleased with what we have on our prototype compound, our immediate release Ralinepag compound in our Phase 2 study. But as I said our goal is to get as close to a pump and a pill as possible. So we thought that we could take our immediate release formulation and make it even better by reformulating it and making an extended release formulation. That is shown here on the left. As you can see in the light blue you have Ralinepag XR tracing our Cmax and further optimizing our peak to trough ratios. We are running a trial comparing the PK of XR to IR in healthy volunteers and look forward to sharing that data with you later this month.
Finally on Ralinepag you can see the clinical trial design for the Phase 2 expected to read out in July. It’s an approximately 60 patient randomized, double blind placebo controlled trial comparing Ralinepag to placebo at 22 weeks. The protocol states that both PVR and six minute walk are primary endpoint but the statistical plan allocates all alpha to PVR. The first test is for PVR and if positive constitutes a positive trial regardless of six minute walk results. The situation is more one of the primary endpoint PVR with a secondary key endpoint of six minute walk followed by other secondary endpoints.
As a reminder the goal of this trial is to establish safety and an efficacy signal to move to Phase 3 and so based on expert advice we would consider a 15% to 20% change from baseline PVR to be clinically meaningful. We know comparing results of drugs from different studies is inherently problematic and for folks that will seek to put our data head to head against Selexipag Phase 2 data comparing trial results could be very challenging.
A comparative analysis would not be an appropriate apples to apples comparison for various reasons including the following; first, the Selexipag Phase 2 data had a placebo group imbalance or the placebo arm had almost a 2X increase in functional class three patients over the active arm. Second, the treatment paradigm has changed since Selexipag trial was run. Their trial had approximately one third on dual background therapy but our study has been run post the ambition trial and we would expect approximately 60% to 65% to be on dual background therapy. Third, we may have a less severe patient population with baseline PVR of 250 as inclusion criteria versus the Selexipag study which was 400. In conclusion we’re excited about the potential of Ralinepag and look forward to seeing the data and sharing it with you in July.
Moving on to Etrasimod, our next generation S1P receptor modulator which is currently in multiple Phase 2 trials for autoimmune conditions. The first generation S1P compounds like Gilenia and Ponesimod are pan S1P modulators which hit a broad range of receptor subtypes. Whereas the next generation S1P modulator like Etrasimod and Evanamod [ph] have a far more selective profile. The story for Etrasimod really starts with the receptor pharmacology as it does with most of our compounds. We hit the S1P1, P4, and P5 receptor and we avoid the P2 and P3 receptors.
This is important for a couple different reasons. One, this classes of drugs has been hamstrung by the side effect profiles and two, most of the competitor compounds have had limited activity against the P4 receptor and we think that the P4 receptor gives us a unique advantage in going after a series of indications long-term for the compound. As anyone talks about hitting the S1P1 and P5 but with regards to S1P2 in our hands using amino fluorescent microscopy assays to quantify receptor internalization where we saw in the right hand panel is that both Ozanimod as well as the Mitsubishi Tanabe compound MT-1303 and its predecessor Gilenia at Novartis all internalize the P2 receptor whereas we do not. And the P2 receptor is important as it’s understood to have activity in the lung.
In early studies we see a robust lymphocyte reduction profile and a strong safety profile for Etrasimod. In the top left panel is a 69% reduction in T lymphocyte counts with a short half life of 35 hours allowing rapid recovery back to baseline. In the top right panel we see no first dose heart rate effects so you’ll recall that Gilenia and Ponesimod and some of the first generation compounds all have the substantial first dose heart rate effects. You may also recall that Ozanimod eliminates this by going through an extensive titration period. Our product we believe has a low first dose heart rate effect without the need for titration at our 2 milligrams dose.
In summary we have good lymphocyte modulations. We see no symptomatic rate of cardiac. We haven’t seen heart blocks at therapeutic doses. To date we haven’t seen any substantial elevations in liver enzymes. We haven’t seen any activity around pulmonary function test as Ozanimod has. So we find ourselves in a situation with a program here whose receptor pharmacology and clinical profile allows us to go after a broad range of conditions.
Moving on to our Phase 2 investigation in ulcerative colitis this data we expect to have in the back end of the year. It’s a double blind randomized placebo controlled trial, three arms, and the primary endpoint is a modified male. Other endpoints include modified total male remission and response both as composite endpoints and as individual endpoints. Of course we’re looking at safety and tolerability and the study will be followed with on with an open label extension.
In addition to the UC study we’re looking at extra intestinal manifestations of ulcerative colitis, EIM. Up to 15% of patients potentially have skin manifestations associated with IBD and we think this is a unique area for the compound given its safety profile and its receptor pharmacology specifically the activity on dendritic cells driven by the P4 modulation. Similarly pyoderma gangrenosum, a rare serious skin condition gives us an opportunity to go after something that’s a bit more narrow. Both of these studies have benefits initiated.
Finally, we’re working on a PBC study. We think there is an interesting — this is interesting as a standalone condition. When you move beyond the core stasis and you move towards the inflammatory segments of the disease its T lymphocyte driven. And again our impact on T lymphocytes makes this an interesting target. That study design is now up on clinicaltrials.gov.
Moving on to APD371, this is a periphery restricted, highly selective, full agonist to the cannabinoid-2 receptor. We think a full agonist is important in this case because partial agonist can cause tachyphalaxis which can rapidly lead to loss of response. APD371 is a potential first in class asset for pain associated with Crohn’s disease and is currently in a Phase 2 study. There is a significant unmet medical need for these patients and patients with this real pain given the challenges in the pain space today.
As we look at where to go with this molecule we looked at receptor localization studies and found that the CB2 receptors are expressed in target tissue neurons and local immune cells in the gut as well as visceral afferent nerves. So we think it really opens up a unique opportunity for us to go after pain associated with Crohn’s disease. Additionally during inflammation we see enhanced expression on the ulcerative margin.
There’s a substantial amount of pre-clinical literature which we were able to dig up. The anti [ph] cannabinoid system is highly deregulated in Crohn’s and there’s multiple animal studies still suggesting that CB2 activation can alleviate abdominal pain. So the combination of looking at where the receptor was on top of the various preclinical literature pointed us to going after IBD pain.
We then turn our attention to the market size and to the market landscape. Unlike the PAH landscape which is well defined in this case the market conditions are involving. It’s important to understand that about 20% of IBD patients experience ongoing symptoms and in fact one out of six patients with Crohn’s is chronically treated with opiods. So it’s a pretty substantial amount of patients who on top of having small bowel structural issues are on chronic opiods, so this gives you a sense of the magnitude of the pain these patients are experiencing. Overtime we anticipate the product may have applications in a broad range of visceral pain conditions, interstitial cystitis, chronic prostatitis, endometriosis being some of them. And this is the clinical trial for the Phase 2 APD371 trial which is now up and running.
So in summary we have a lot going on with Arena right now. In addition to Ralinepag, Etrasimod, and APD371 which should all have data this year, we retain the royalty on BELVIQ and we have a 15% royalty on [indiscernible] with expected readouts for two Phase 2 trials in the second half of 2017. As of the end of Q1 we had approximately 80 million in cash and we raised approximately 75 million in April. We have 60 million of debt on the books that is a sale leaseback on our facilities, not venture debt or a convertible debt. We’re burning approximately 20 to 25 per quarter and we’re looking forward to sharing the upcoming Ralinepag data in July. Thank you for your time.
End of Q&A
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Arena Pharmaceuticals (ARNA) on Jefferies 2017 Global Healthcare Conference Transcript