Q3 2021 Arena Pharmaceuticals Inc Earnings Call
Good day, and thank you for standing by.
Welcome to the Arena Pharmaceuticals third quarter, 2021 upbeat conference call.
At this time all participants are in a listen only mode. After just speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone attached if.
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I'd now like to hand, the conference over to your first Speaker, Dizzy Vice President of Investor Relations and corporate Communications Patrick Malloy. Thank you. Please go ahead Sir.
Great. Thank you Nick and good afternoon, everyone. Thank you for joining us today.
Hope you had a chance to review the press release, we issued this afternoon announcing our Q3 2021 financial results and key program updates.
With me today on the call are Amit Munshi, our president and Chief Executive Officer, along with Laurie Stelzer, Our executive Vice President and Chief Financial Officer with regards to the format today for today's call.
Just a moment I will hand, the call over to Amit who will make some opening comments and then we will open up the call to a Q&A session. Before we begin I would like to remind you that we'll be making some forward looking statements that involve risks and uncertainties about our goals expectations plans beliefs timing of events or future results, including those risks and uncertainties.
Lady to our pipeline financial projections and the COVID-19 pandemic.
Forward looking statements involve certain assumptions risks some of which may be beyond our control.
All forward looking statements are based on information currently available to arena and we disclaim any obligation to update. These forward looking statements. A description of these risks can be found on our earnings and our earnings press release, and our latest SEC disclosure documents now I'd like to turn the call over to Amit Munshi Amit.
Thanks, Pat and I hope, everyone got a chance to.
To view the press release and thanks for everyone being on the call today, So, let's let's jump right into Q&A.
Okay.
As a reminder to ask a question you will need to press star one on your telephone Billy Joel. Your question are you asking a question has been answered Preston.
Your first question comes from the line of Neena <unk> Garg from Citi. Your line is now open.
Hi, Thanks, guys for taking.
Taking my question. This is neena on for Neenah.
And our first question and maybe we can squeeze in a second.
B can you just share any additional details on the baseline characteristics for the eastern studies in terms of how they compare to oasis.
Particular, the commentary on baseline disease severity.
You know anti androgen use and versus versus always says that would be very helpful.
Great. Thank you.
So two quick comments on two things we've disclosed publicly.
Number one the overall characteristics very similar to Oasis.
One exception in the Oasis study you had 60% of.
Patients who are not even 40% pre treated.
Elevate 52 is running about 70 30 and you.
Do you see folks running about 60 40. So there are there both in the range, but will be naturally won't be exactly the same so so.
That's the only.
Notable differences we have more.
Naive patients in the elevate 52 trial, although other than that everything as well.
Your next question comes from the line of Alicia Young from Cantor Fitzgerald. Your line is now open.
This was a millennium for Lithia and thanks for taking my question I was just curious about your thoughts on the read through from the elevate UC study is an <unk> two it does come out positive without kind of increase here.
It's going into the Crohn's data read out in the second quarter and I guess, just any thoughts around that thank you.
Sure I mean look there are two separate diseases.
And there are two separate study designs one's a large scale clinical large scale phase III trial.
Ah.
Robust in size and naturally from a disease mechanism mechanism of action perspective, it increases our confidence that confidence that you see will be you'll be successful.
But again keeping in mind all the caveats of the Crohn's study is a 70 patient.
Two dose no placebo control.
So with the caveat that the trial differences, we would naturally expect our confidence to go up.
Okay. Your next question comes from the line of <unk> <unk> from Guggenheim Partners. Your line is now open.
Hey, guys. Thank you for taking my question I Love the format.
Maybe just to go into the Q&A.
So two for me one is so you are using a treat through design.
Which obviously facilitates the comparison with the gold standard Remicade guide, but how does this affect the comparison.
From Johnny Mod. So that's first question. The second is regarding the placebo rate.
If you look at the mission rich, especially particularly in the induction phase to placebo they tend to be low but for naive patients. We have seen placebo rate in the 15% to 16% range and given that you have 60% to 70% of patients that are naive how should we think about the placebo rate.
For both studies and then what is actually embedded in these studies could reduce the risk of higher placebo responses. Thank you.
Yeah. Thanks, Jeff So let me take the second question person and we'll come back to the.
The first part.
Placebo rates are in a pretty narrow band across holding comparative trials.
And Youre right the placebo rates are higher in the naive lower in the.
In the pre treated patients.
And that's consistent between our Oasis trials consistent across most of the trials that are out there. So we don't anticipate placebo rates being dramatically different than what's been seen historically.
If you recall the autonomous trial was I think about that.
70 30 split.
Ours is a 70 30 split.
Between 73% and 60, 40, youre not going to see a huge a huge variation.
At least based on historical historical evidence.
As far as the treat through design Youre correct. It gives us a.
A much clear point of view.
Between both.
The two main products used in ulcerative colitis, Remicade and Humira and we think that's really the actually the important discussion to have.
We also chose that that design for a couple of other reasons, which we've discussed historically, but most importantly, it's a real life example of how the drugs will work and in the room. When you look at the re randomized just your responders.
And importantly, there are some ways to do some cross trial comparisons there are some published methodologies and we'll be doing some of that work.
When we disclosed the data so that you as the analyst community as well as the Investor community.
Can begin to take a look at.
<unk> so what we'll do some we'll do some arithmetic to kind of help people out with all the caveats of cross trial comparisons.
But we really think that the <unk> study design is a superior design simply because it mimics real world real world treatment.
Your next question comes from the line of Jason <unk> from Bank of America. Your line is now open.
Hi, Good afternoon. This is key on for Jason Thanks for taking our questions I guess two from me. This afternoon, I guess first one on clinical trial progression.
Given COVID-19 has remained somewhat of a fluid situation with the new bearing and whatnot curious if you can provide any commentary on overall kind of a trial for question is everything on track in terms of enrollment and data collection and I guess, if you can confirm there isn't any new repeat it.
New signal alarming.
Lymphopenia or any protocol violation like what you've seen with the atopic derm phase II study that will be helpful.
I guess my second question is curious if management has any thoughts.
Commentary on the early commercial launch of <unk> and you see where do you see there is any read across you can draw two E trough.
Whether it is physicians appetite or mass market opportunity for the S. One P cost. Thank you.
Thanks, Keith So in terms of the study conduct.
No change from the commentary we've had over the last couple of quarters everything remains on track our discontinuation rates.
Dose interruptions or all of that is well below our pre planned statistical expectations. So we're very pleased with the study conduct across the board.
As far as autonomous concern.
It's still early days, we have a couple of data points, suggesting that.
Things are looking pretty good and there was good appetite for a once a day oral.
Without the warnings that the JAK inhibitors, clearly have and.
So we're pleased with the.
Early read but again, it's very very early and I caution anybody into reading too much into this juncture I'll also remind everybody that it was unmatched priced at a significant premium to other products in the category.
And but materially early data seems encouraging.
But again with all the caveat Super early I think couple of quarters from now we'll have some.
More data points.
We'll be able to understand exactly what's going on it's also early in the reimbursement cycle.
As you know it takes a while to.
Get broad coverage of compounds and make sure that they are available to patients.
And so again, we'll be monitoring and tracking all of that will continue to provide additional commentary on this as more data points become available.
Your next question comes from the line of Chris <unk> from Goldman Sachs. Your line is now open.
Great. Thank you very much.
Couple of questions over the past quarter, we've seen some other mechanisms and drugs have various <unk>.
Experiences from a data as well as inventory standpoint, Amit you referenced the issue that the FDA has for the Jack I'm curious to know what your perceptions are of that and nuanced views in terms of how that Mike.
Guide, how youre thinking about your own regulatory approach.
And then the TIK two data from Bristol was at the lower dose the surprising disappointment curious to know your take there in my first question, perhaps you could address that.
Sure Chris.
Yes, I mean look there's there's multiple modalities in clinical development.
Both biologics and then other other versions of the JAK inhibitors, including the two numbers.
Arne real take is there's a tremendous market need for a once a day oral without a black box that is kind of safe durable effect.
One that does not take tremendous monitoring and ongoing.
Monitoring of patients over time.
Without black box for malignancies.
Embolic events and all the other things that we've seen to date. So we remain confident the profile of <unk> has.
Is it positioned to be potentially.
The gold standard in terms of where it could end up in the treatment paradigm. So again, it's a once a day oral and I emphasize the world because we get a lot of questions around many of the other.
Biologic type approaches that are being developed and single cytokines, Netherlands for example, and we'll remind everybody that the diseases is more complex than a single cytokine.
And being able to affect the disease pathology at the right point in it.
And it's physiology is really really important and we think we.
We're kind of navigating the sweet spot here with the trends in mind, So we remain confident that.
We've got the right profile coming out of phase two and hope to replicate that in phase III.
Sorry, what was the second part of the question.
Amit I think.
Yeah.
Yes.
Yes.
We've said for quite some time that.
The TIK two eight.
<unk> agents are still working on the JAK stat pathway and.
As they increase the dose they'll continue to see a side effect profile that we think will be consistent with the JAK inhibitors.
As you guys know well we've been talking about this for going on three years, three and a half years now and.
Our prognostications in terms of what's going on with the biology.
It had been fairly spot on I think and.
And seeing using a very low dose jack or using a low dose agent in the JAK stat pathway.
Whether it's a Jack one Jackman 3123, whatever specificity you talk about.
Or even the TIK two we're seeing so we're going to see some of the same the same profile. So.
Again, we come back to the fact that a once a day.
Oral agent without the liabilities JAK inhibitors has the opportunity to be very significant in terms of the treatment of the disease.
Okay. Your next question comes from the line of Chris Howerton from Jefferies. Your line is now open.
Yes.
Great. Thank you very much for taking the question I guess minus pretty simple obviously, you have <unk> 8 billion of cash on the balance sheet now but.
Pretty significant burn as you finalize the clinical trials so.
Do you anticipate having sufficient cash to commercialize the <unk> assuming success.
Well, let me hand that off to our CFO Lawrie who's on the call.
Yes, hi, there so our cash burn has been about 120 $125 million a quarter.
And we haven't given forward guidance as to cash burn, but we can expect that with the UC phase III.
Rolling off some decline in costs, there and that would be offset by the start of the phase three and some of the early commercial build so we feel very good about the cash position with a little over 800 million.
Hopefully with the Finalization of the budget and a positive <unk> data will be able to give him some forward cash guidance at that time.
Okay cool, thanks, Laura and Amit if I may for the.
I just don't remember seeing this before for the Commando Grill.
<unk> two for Raynaud's phenomenon could you tell us a little bit more about that opportunity what is that exactly.
Sure so.
As you know.
Our agents have.
Multiple potential indications, even our two cardiovascular agents have.
Quite a few different places they can go in terms of.
Disease pathologies.
No.
Biology quite conserved across various disease states. So you can follow some of that biology in this case.
We believe that serotonin plays a major role.
In this condition, specifically, we're not secondary to systemic sclerosis.
It's really quite striking there.
There is quite a significant prevalence of these patients almost 200000 patients.
With systemic with were not secondary to systemic sclerosis. So.
Given that the disease pathology.
Bottom line.
Given that you can actually look at an outcome measure that's quantitative in nature in this case, we're using.
Infrared thermography.
We think there's a really interesting opportunity here at explore the compound thats already in house annuity.
Looking at another phase two indication are already progressing in another phase two indications.
Again continue to expand our.
The broad utility of these fantastic compounds that we have so we're excited about it and we're excited to get that study up and running.
Your next question comes from the line of Joseph Schwartz from <unk> Leerink. Your line is now open.
Hi, Thanks, very much I was wondering if you can give us any insight into how the geographical distribution of patients who've been enrolled and elevate 12 and 52 compares to each other and also other studies in UC and if this could skew the results in any direction based on different.
And the way clinicians or patients.
Dave or account for disease activity.
Sure.
Answer it two different ways, Joe first is.
It's really the same clinical sites.
That moved from one study to the other so.
If we were able ever able to get a detailed breakdown of clinical sites for <unk>. For example, and then our $12 52, and we drove Venn diagram, you would see.
Very substantial overlap on clinical sites.
Only there's only so many.
Cynical side that can work in this area that's number one number two.
Endoscopies essentially rent and.
That helps with the heterogeneity way back in the day.
A decade ago, two decades ago, a lot of the Endoscopies works, where red locally and.
That created a lot of noise in the data center.
Standardized again, just going back a decade plus debt.
Good move to centralized endoscopy readings to eliminate a lot of that geographic variability.
Your next question comes from the line of Jessica Fye from Jpmorgan. Your line is now open.
Hey, guys. Thanks for taking my question two I was hoping if you could just talk about specifically what is thought to make <unk> more efficacious than <unk>.
The differentiated safety is more clear, but can you just remind us what the.
Just basically how you think you were able to show such a stronger efficacy result in phase two and the second question is thinking ahead to what you can learn from that study in Crohns, how clear of an indication do you expect to get from this study on which dose to move forward with or maybe put differently, how how likely do you think it is.
Does it end up looking truly different from each other.
Yes so.
On the first part.
I think it goes back to the history of the compounds.
<unk>.
To refresh everyone's memory. It was not a tool compound at Scripps does not go through a formal medicinal chemistry program in the same way that it drives my data over a decade.
I'll remind everyone. We don't just have a trust mark we've got libraries of S&P modulators and.
Some of the most important work that was done on the receptor on these compounds was done at arena. So we're the beneficiaries of the fantastic chemistry that we've done historically.
The implications of that are.
Multiple fold number one is not only do we not have the titration schedule we've got.
<unk> intrinsic heart rate effect, but from an efficacy perspective the ability to.
No family affecting <unk> sales for example, we think plays the role of the <unk>, one and <unk> access.
And we think those are the kinds of things that really begin to.
To differentiate on efficacy.
Last point I'll make on efficacy is something that were exploring in even more detail and we'll continue to do this over time it has to do with barrier function and.
All of the diseases, we're talking about whether its UC crohn's or atopic derma barrier dysfunction conditions, and we know from the literature.
Now let me characterize over.
Over a long period of time that <unk> plays a role in closing the junction proteins involved in these diseases and.
And really closing these barriers.
We know that <unk> actually does the opposite actually opened those various functions and in our hands and we published this data.
There is an indication that it was not about hits the <unk> access and that would again work against itself.
So we think the combination of the fact that it's us.
It's just a cleaner better compound.
That come through some very rigorous medicinal chemistry over over a decade that arena.
The activity on the dendritic cells. We think there is a major contributor and will continue to do a lot of work.
Lucid hit that even further and as I mentioned, we're doing a significant amount of work on barrier function, we think thats going to be an important thesis.
The scientific community is very intrigued with.
And it has to do with this.
This activity on us when Q1 closing social junction proteins in S. One P too as far as.
Looking at three milligrams versus two milligrams and Hassan.
<unk>.
Phase III study.
Sure.
Study in Crohn's disease.
We really don't know its early days, we havent really explored three milligrams into patient population.
We know that three milligram comprises about 15%.
Increase in.
Mean lymphocyte reduction.
Compared to two milligrams. So it's not a it's not a linear step. So for example, two milligrams drives about a 50% increase over one milligram <unk> zero and three milligrams about 15%. So we don't know how thats going to translate in the clinic in Crohn's and Thats, what were hoping to find find out here.
The heterogeneity of crudes, the severity of Crohn's mix, the right condition to totally explore higher dose.
Your next question comes from the line of Kennan Mackay from RBC capital markets. Your line is now open.
Hi, Thanks for taking the question.
Maybe on the <unk> trials.
Wondering if you can help us contextualize, what kind of impacts we should we should think about from the COVID-19.
So the 19 pandemic as it relates to.
Potential.
Mr patient visits or.
Censoring for each symptom endpoint is there.
Built into the trial to.
Built into the trial to.
Essentially makeup.
Visits or.
Data collection, and then secondarily to that I was wondering if you could comment on some of the commercial work you've been doing somewhat.
Thank you about seats you seek irrelevant.
Wondering if you can.
They're sort of contextualize.
Really what attract modest.
Bringing to the table beyond.
<unk> as it relates to some of your conversations with them with conditions really just trying to again understand how much this can expand the market versus <unk>.
This is what does the end amongst oriented you see thank you.
Sure so coming back to the starting with the phase III elevate trials are.
When you designed these trials as you guys well know.
Preplanned expectations that you work in terms of dose discontinuation or studying.
Study interruptions or patients dropping off and.
We're really pleased that through the pandemic.
Our our very rigorous process in terms of tracking these patients.
It has allowed us to keep those rates below our preplanned statistical expectation. So that's really the metric that we pay attention to which is.
We're seeing things that are.
What we had forecasted at the time and I'm really pleased to say we are not so.
Overall study conduct has continued.
As I've mentioned before publicly.
When the pandemic hit.
We went through a very very hands on manual process. What we track every patient every site every day every visit around the world that every site and if a country and.
To ensure that patients.
Cut their medications.
We're compliant in terms of their diary inputs and were compliant in terms of there.
They're endoscopies, so making sure patients can get to their endoscopy is making sure that the sites were active in terms of being able to perform the endoscopy.
That was all work we put into place right at the beginning of the pandemic and I think that's played.
Dividends in terms of.
The discontinuation dropouts being below our Preplanned statistical expectations in terms of the commercialization of the product.
I think the sort of three ways to think three different levels to think about.
Our commercial readiness number one of course, we think the compound has some intrinsic features that are dramatically different and much faster on rate. The absence of a titration schedule is the lowest first dose heart rate effect.
We haven't seen consistent changes in L. S T.
This was on them that has.
And then most notably and what's the most important for clinicians from all of our quantitative research.
Right when you withdraw the drug 100% of patients are.
That's the baseline lymphocytes within a week.
<unk> label.
You have to wait 90 days to introduce another immuno module Tory agent for after it was one of mine. So we think that makes it very different intrinsically then those are intrinsic features.
Have to do with the physicians, having certain level of control. So so all of that will translate into the eventual label.
As we hope and.
Okay, I'm getting a he outside vendor who can evaluate this data understand the cost structures I understand what it cost reside in these peer groups whether there.
Straight up payers are there any weight delivery systems and help them understand exactly when and how to intercede in the disease pathway with a <unk>. So we think that will pay huge dividends in terms of our ability to get rapid uptake in the payor community. So.
Straight up payers are there any weight delivery systems and help them understand exactly when and how to intercede in the disease pathway with a <unk>. So we think that will pay huge dividends in terms of our ability to get rapid uptake in the payor community. So.
Cause most of you know we became building out commercial infrastructure very early we'd get in building. These platforms cut very early Ah much earlier that companies are size traditionally do and we've had the.
The privilege of having the balance sheet to be able to do that but that's all to work having a line of sight into commercial success. So it's not enough to just have great place. We day, that's not enough to get a drug approved but uhm. None of this matters locations actually receiving the drug has the most important thing for us and so again that work began a couple of years back.
Coming off of.
Precedent really if we think about the Sherri either study we did at two milligrams.
Is a much more difficult to treat disease and a topic term.
Just like Crohn's is a more difficult to treat disease than those are quite us and so we thought the risk benefit at three milligrams Uhm was important there again, we we don't have data from three mailgrams in any patient group only unhealthy and so we'll we'll see the Crows date of first at three milligrams uhm.
I'll be looking for a dose response, there and then similarly be looking for the same thing in the study.
Your next question comes from the line of Jason Butler from J M. E C. K D. Caroline is spelled.
Hi, Thanks for taking my question I might just wondering if you could give us an update on the voyage trial and AOA Annie and also any perspectives on the <unk>.
Halloween treatment landscape given the recent data for do picks and are you also looking to enroll severe patient since the voyage. Thanks.
Yeah. So I think the patient makeup will be similar to what we've seen in other trials, whether it's the simpler paid antibody or can fix it and again, if we're able to accomplish what those agents accomplished but we're able to do the once a day oral we think that's a substantial game changer depicts a fantastic drug.
Has meaningful effect across multiple different ages, we know that.
Most of these diseases are not pure th two reasons, there's th one activity Eth one cytokines are acting in the.
In the chronic phase of diseases and unlike some of these agents were hitting multiple parts of the disease process also just remind everybody that on histology you don't just CES N F. L. U C. C. D. Four C D. H C. D. Four positive C. D. Eight positive T. Let's say T C. A variety of other cell types.
Including dendritic cells.
As well as Marcel so and we've demonstrated activity against all of those cell types in multiple models as.
As well as human histology so.
Let me think we were again.
Following the biology based on.
And everything we know today based on all of the work we've done over the last what's done over the last decade.
And we think you have no once a day all in that population will be could be a significant game changer and location population makeup sir consistent across most of these trials.
So overtime.
We have a very rigorous BD process.
We.
Before getting to your stay with over 200 opportunities over the last three years, we wanted.
<unk> that had novel biology, we thought things that for a therapeutic area are important.
And we really put an emphasis on the quality of the compounds are the quality of the chemistry.
There is just not that many of those things that that are out there, but we continue to scan.
We will continue to.
B as rigorous post elevate data as we are today.
In.
And thinking about how we build out our pipeline over time.
Your next question comes from the line of David Wong from SMB.
It is now open.
Hey, thanks, so much for taking the question.
That's gonna look like Hell.
Having another phase two acid with potentially three indications and a portfolio allows us to continue to build the company. Both in terms of compounds in terms of market opportunity, but also in terms of key data readouts catalysts that will be on the that you that you see data.
Your next question comes from the latest <unk> Agarawala from Jones trading in line is now open.
Hi, Thanks for taking my question Firstly on the tree to design and you see.
<unk> My rant Remicade have produced slightly diverging results and the maintenance phase verses induction.
He might have clinical information on the placebo, just a basis increased slightly and maintenance related to induction, but remicade actually degrees in the maintenance fees. So my question is better <unk> through trial is the right comparator all Remicade trial for you see 52.
And secondly on the phase three us eight am trial.
Do you plan to include Dupixent refractory patients also and where the rescue therapy be allowed in the pastry Martha it'd be trial.
And just out of follow up if you can confirm that the child listed on track for initiation by you and.
Thank you.
Yeah. So so yes.
Have a small proportion of dupixent member to pick him stonily penetrate at about.
4% to 5% of the market. So we wouldn't anticipating a lot of debate depiction refractory patients.
In that study in the study is on track to.
Initiate by the end of the year with for patients in more than the first part of next year coming back to the tree to study design I. I think this is always the challenge of Crossrail comparison, and not just crush or comparisons across comparisons that might be separated by 10 years temporarily so uhm.
You have to take that with a tremendous going to solve the patient demographics and <unk>.
Remicade when it was first developed remember there were no other pilots X a proven space and so they had 100 per cent naive patients Uhm Jamire ahead, a slightly different situation. So thank you know this is always the challenge of customer comparisons, especially when they're separated by upwards of a decade temporarily and so I I caution you in.
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