Arena Pharmaceuticals, Inc.’s (ARNA) CEO Amit Munshi at H.C. Wainwright Virtual Global Investment Conference Transcript

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) H.C. Wainwright Virtual Global Investment Conference September 14, 2020 10:00 AM ET

Company Participants

Amit Munshi – Director, President, Chief Executive Officer

Conference Call Participants

Patrick Trucchio – H.C. Wainwright & Co.

Patrick Trucchio

Good morning everyone, my name is Patrick Trucchio and I am a Senior Biopharma Analyst at H.C. Wainwright. It is my pleasure to provide you the next presenter at the conference, Amit Munshi with Arena Pharmaceuticals which is a biopharmaceutical company focused on gastrointestinal and dermatological diseases among other areas with particular expertise in GCPR biology. So first just to start I would like to begin with the lead compound Etrasimod. Amit if you could please provide us some background on Etrasimod, this was developed internally at Arena, when did the research begin, how is the compound been optimized, and what is the status of the controlled release formulation and will this be the formulation evaluated in future trials?

Amit Munshi

Sure Patrick, thanks again for having us here today. As far as Arena and history of Arena, Arena has a 25 year, almost 25-year history of GPCR discovery biology and chemistry, have deorphaned [ph] dozens and dozens of GPCR targets over the years and Arena is really a function of over a decade of work and several $100 millions of activity that happened in Arena prior to us arriving in 2016. So the credit really for the quality of these compounds, the depth and breadth of the science, and the entire library of compounds that we have really goes to the scientists. So the research is really a couple of decades old and the wonderful part about that is unlike lot of our competitive products that were largely tool compounds at a small academic labs or naturally or derivations of naturally derived compounds, this is a formal medicinal chemistry program that again spanned close to a decade.

So now we have Etrasimod, we have got entire libraries of compounds in the S1P1 category and we have probably done more work on the SAR in this area than anybody else on the planet. So we feel very confident of the profile of Etrasimod and as we start thinking about it, because these are homegrown products we understand a lot about the pharmacokinetics and pharmacodynamics. So not only does Etrasimod have the fastest on rate, the fastest off rate, more specific profile on pharma — on receptor pharmacology but critically has the lowest first dose heart rate effect, the lowest intrinsic first dose heart rate effect with no titration. And again because we have a — because these are homegrown compounds we have been able to further modify the pharmacology and pharmacokinetics specifically of the compound to take that first dose heart rate now down to a low single-digit heart rate effect with the CR formulations. So we like to think about the CR formulation as an extend and expand. Extends the intellectual property life and expands the breadth of indications we can go after and our game plan right now is to really have the CR ready to go the bridge into the dermatologic indications should the Phase 2 trials prove successful.

Question-and-Answer Session

Q – Patrick Trucchio

That’s helpful and then just Etrasimod, what we think of it is its pipeline in a pipeline potential, at least five indications are being investigated presently. We have the next day release which is the Phase 2b trial in atopic dermatitis. The top line data is expected by the end of the year. So first, can you discuss the data that’s been generated in preclinical studies that gave Arena confidence to move forward in AD, what is it about a read through from the ponesimod data in psoriasis that you believe is relevant to Etrasimod in AD? And then in ADVISE which is the Phase 2b trial in atopic dermatitis, the primary endpoints, the percent change in easy from baseline in week 12, what percent change is Arena expecting in placebo progestin and then I have some follow-ups?

Amit Munshi

Great, thanks Patrick. So I think it’s sort of the biology of atopic derm and other associated diseases like eosinophilic esophagitis for example. In all these cases, you’ve got barrier disruption, you’ve got some sort of insult coming in, you’ve got the pick of APCs or antigen presenting cells, specifically dendritic cells. The dendritic cells trigger T lymphocytes, the recruit helper cells, and then you get the cascade of cytokines. And it’s interesting because there’s a lot of focus on THt cytokines as part of atopic derm, but it is fairly well understood now that THt cytokines are grossly elevated in the acute phase of the disease and you get more of TH1 and TH17 response in the more chronic phase of the disease.

What’s exciting for us with Etrasimod is we’ve shown activity at every step of that equation. We know S1P1 has a role in barrier function in keratinocyte mobility for example, it has activity on dendritic side and dendritic cell migration demonstrated that. And then, of course, the primary mode of action, which is the migration of T lymphocytes to the injury sites. Following from there was an activity on all the TH2 and TH1 and TH17 cytokines. So we’re working a little bit upstream of some of the biologics such as [indiscernible] and as a consequence, we can work through the acute phase and the chronic phase of the disease. And again we show an activity across not only the T lymphocytes, the dendritic cells, the barrier function, but across the broad range of cytokines. So — and of course, the eosinophilic and mass cells. So we’ve seen a more clear atopic activity, but without broad immunosuppression like you’d see, for example, with the JAKs.

There’s a couple of other key important pieces and you pointed out ponesimod. Ponesimod, its activity in psoriasis is definitely another reason to believe that we have activity in dermatologic indications. There’s also the bi-directionality of atopic derm and ulcerative colitis. Patients with ulcerative colitis develop spontaneously atopic derm and so that gives us a clue that there’s some shared biology between the two conditions. It’s really important to understand these are all systemic diseases with primary organ manifestations. So much gets made of topical agents in dermatology or gut specific this or gut specific that in the GI space but again, what we know is that these are systemic diseases with primary organ manifestations and in some cases secondary organ manifestation. So this bi-directionality between UC and atopic derm is also very, very important in terms of a critical clue.

And then finally, we’ve actually got in our own hands some initial evidence in a couple of dermatological areas with Etrasimod, specifically Pyoderma Gangrenosum, and we’ve shown activity in a handful of patients. So we’ve got activity in our own hands. We’ve seen activity in the literature. We see a nice fit on top of the biology from the literature perspective. And then, of course, we’ve interrogated the whole slew of animal models to begin to show the activity across the entire cascade. So walking into this dataset we think we have a really good sound rationale to go conduct that important Phase 2b experiment. And in that experiment again which will have data later in the year, in that experiment, the primary endpoint is a change from baseline on EC compared to placebo. And if you look at the literature across the JAK inhibitors and up to IBD [ph], and you look at the kind of medium doses and the low doses and high doses of that entire spread, you see kind of the low end is right around the high teens and the top of the range is well into the 40s. And we think that anything in that range, given that we’re a once a day agent without any of the baggage of the JAK inhibitors and with the CR formulation bringing that first dose effect down to single — low single digits, we think we have a homerun situation. So we’re excited to see the data and we’ll get there before the end of the year.

Patrick Trucchio

Can you talk about on the safety and tolerability side, I mean, what essentially we should be looking for a profile, I would think, similar to what we’ve seen in UC and some of the other trials, but if you could just speak to, we’ve seen with several of the JAK inhibitors, they have this effect on the platelets, this is in the lab work, it’s there. So how will Etrasimod also kind of differentiate or separate from biologics and from the JAK and other oral therapies JAK inhibitors, etcetera?

Amit Munshi

Sure. So both the biologics and the JAK inhibitors have some baggage here that we have to keep in mind. And then Etrasimod has its own specific set profile. We expect the safety profile to look similar to the UC where we’ve exposed close to a thousand patients now over time and the safety profile is maintained. The same things that we consistently see and in our case it’s really that. First off it was heart rate effect, which is single-digits and without a titration schedule. So again, the consistency is fantastic and we’re not seeing any of the baggage that the JAK inhibitors have in terms of VTE risk, the malignancies, herpes zoster, TB reactivation, serious upper respiratory infections. We don’t see any of that baggage with the S1P1 class compared to the JAK inhibitors and specifically with the Etrasimod. So it’s is really heartening to see a profile that we think will have — we hope to have great receptivity with the dermatologist.

The other thing I think is important to remember that about a quarter of the patients with IBD do develop conjunctivitis. In some cases it is quite serious conjunctivitis. So there is a IBD, even though it’s biologic, it’s highly targeted. It is not without its own set of safety adverse events. So when we compare the fact that this is a simple to use once a day oral alternative, and if we’re able to see the efficacy in the range we just mentioned, I think we have a product here that’s potentially, again, a market leading effort in atopic derm similar to what we saw going back to the UC data.

Patrick Trucchio

Yeah, that makes sense. And then just in ADVISE on the secondary endpoints that EC 75 in IGA, is this study going to be able to provide some read through to those measures for a larger capital program or I guess what are you looking for on those measures?

Amit Munshi

Yeah, the study is not powered for any of those, but we are looking at EC 75, the IGA, and of course the pruritis, which is really important as well for these patients. So we’ll be looking at all of that as part of our top line readout.

Patrick Trucchio

And then so the full enrollment was achieved on May 26, that is 12-week endpoint, so assuming some time to analyze the data, etcetera, is the implication we could have the data by the end of this month or would it be the next month, or if you can give us an idea on the timing? And then if there’s a positive outcome, would we be able to move into the pivotal program by sometime in the first half of 2021?

Amit Munshi

So it’s actually a 16-week study, so it’s a 12-week endpoint with a 4-week washout and then there’s a safety read of 16. So it’s the full 16 of the 12 in terms of timing. And then because of COVID it just takes a little longer to clean the data, etcetera. So we’ve guided to before the end of the year just to be conservative here and so we’re not going to provide any more finite guidance between here and there. The — once we get through the Phase 2, we’ll be able to power up the Phase 3, get the protocols ready, get a package ready for the FDA, and really the division timing is going to dictate when and how quickly we get up and running in Phase 3. So we’ll get our machinery ready, we’ll get our operations teams ready, and then we’ll be waiting for — waiting through to get to the proper end of Phase 2 meeting to just get absolutely crystal clear on what we’re going to do in Phase 3. But we’ll cross that bridge when we get to it. First, the data.

Patrick Trucchio

Great, sure. Okay, so moving on to IBD. So, in ulcerative colitis we’ve already had the positive Phase 2 data that to us appears highly competitive with biologics and other oral therapies that are in development and on the market. So in the pivotal program in UC, elevated UC is enrolling that includes two studies, the 52-week study and a 12-week study. So just on the 52-week treatment study of the 50% patients exposed to prior treatments, what proportion of those patients do you anticipate will be treated with the anti TMS versus anti [indiscernible] versus JAK inhibitors and the reason, I guess I’m asking about this is just wondering how the baseline characteristics will impact the efficacy outcome versus placebo and how this compares to historical Phase 3 trials in UC but then also kind of the previous studies that you’ve conducted? And then the same questions on the 12-week induction study?

Amit Munshi

Sure, so both those studies were aiming for what we said, approximately a 50:50. So the study is not designed to get to an exact 50:50, it is designed to enroll and we’re trying to try to get those as close to a market state as we can. We know that at least in United States it is sort of a 60:40 split with 40% of patients being exposed to the previous biologics. The JAKs have had very limited penetration in UC so we really don’t see a lot of activity there. We do expect to see a good percentage of patients who’ve been exposed to biologics and even with the integrands, despite the financial success that they’ve had, the actual penetration in the moderate severe population is relatively low. And so we would expect just a few patients coming off of those. There’s also global study so we’re up and running in 400 sites in approximately 40 countries. So you’ll see a lot of integrands aren’t really widely used in Western Europe yet compared to, say, the U.S. So you’ll see a little bit of balance there as well.

So we’re again, the aim is to have a more contemporary patient population and again, we’re aiming for that 60:40, 50:50 type of split. But we’ll see where the numbers finally come out. We’re not trying to force a 50:50 split into the thing, we’re going to look for — the idea is to have a contemporary patient population is what I’m trying to say here. So we’ll kind of let it play out. But again, we don’t expect a ton of integrand failures just because the utilization is not as broad around the world. And we do expect to have a significant — failures. And as we showed in our Phase 2 study, we had a 60:40 split there and we still had almost 27% of patients on placebo adjusted basis in the three domain Mayo score remission with rectal bleeding at zero. So a very stringent measure hitting a very high threshold and in a percentage — in a population where 40% of patients had failed the biologic. So we feel very good about walking into the Phase 3 study, that really helped us design and power that Phase 3 study. And the 12 and 52 were the same. There’s really no difference between 12 and 52 except one is a read through all the way to 52, it is powered for the 52-week end point, it has got go co-primaries at 12 and 52. And again, just to remind everybody we’re up and running in 52, we have to complete enrollment by the end of the year, and the sign for the investor community that we’re on track will be the initiation of the UC 12. So we want to start UC 12 as 52 is really well on track with enrollment on time.

Patrick Trucchio

Alright, and then so I guess to a certain extent that’s going to depend on COVID and kind of the pandemic and then I guess just in terms of getting sites up and running next year. So are we still on track for data by the end of 2021?

Amit Munshi

Yeah, the team has done an absolutely amazing job of keeping the trials on track. It’s helped to have a global program. We didn’t shut down. We kind of worked through the rolling blackout around the world. So the U.S. were still enrolling when Western Europe was shutting down for example, when Western Europe shut down, Eastern Europe was still enrolling. And when both shut down, Asia came back online. So we’ve kind of ridden the wave a little bit here and having a broad scale study has been — the team’s done an amazing job of keeping things on track. So we remain on track and I think the other really important point is study conduct here. It’s not enough to keep these programs on track. It’s absolutely imperative that we manage the quality of the data. So we’ve had a team looking at every patient, every site, every day monitoring, making sure that patients are getting to the lab visits and the endoscopy, etcetera on time and making sure that we can reroute patients we need to and just being able to manage that study context or the quality of the data on the other side is as pristine as we can possibly make it. And we’re happy that right now all of the parameters are within our pre-COVID specifications on the trial. So we feel very good about where we’re at.

Patrick Trucchio

That all makes sense and I guess just shifting to Crohn’s so, with the Phase 2b trial cultivate that’s also presently enrolling. I’m wondering if you could just discuss how the doses were selected for Crohn’s because they are different and then the inclusion criteria, this includes patients who have inadequate response, lesser response, or intolerance to one or more therapies including genetics and biologics. So here to just again, the proportions, is this I guess, is this going to look like the UC studies? And then I guess what proportion of sales on each of the treatments does that matter and then what is the efficacy bar here to move to the Phase 3? And is that the analysis that will be presented by the end of 2021?

Amit Munshi

Yes, so again, just to remind everyone because of COVID we have suspended all guidance on Crohn’s. We are hustling to make sure that we can make that dose decision, that’s the most important decision we need to make next year. With Crohn’s we started with the 2 milligrams which we knew was effective in the UC study, we added a 3 milligram dose. We’re really lucky we have a broad safety margin with the compound. We’re able to push the dose up and we want to see Crohn’s as a more hydrogenate — there’s more hydrogenating patient population. It’s a more severe condition, it’s more invasive in the mucosa [ph]. So we want to make sure that if there’s any incremental efficacy we can squeeze out of the product, we’d like to be able to do that with the 3 milligrams. And the most important decision we need to make next year to keep the program moving forward is that dose finding decision. And that’s what we’re really shooting for. So again we suspended all timing guidance on Crohn’s because starting a new study in the middle of COVID is very, very difficult as opposed to continuing momentum on the study you already have.

So we’re working through all the potential implications and we’ll come back with a revised timeline, revised estimate of where we’re going to be next year and the year after with Crohn’s. In terms of the population, it’ll be — again we’re shooting for a contemporary patient population. The whole idea here is we’re not trying to enrich any populations to try to introduce the efficacy. We’re looking for contemporary patient population. We think that’s important to be able to power from your Phase 2 to your Phase 3 component to continue to think about the powering consumption. So that’s kind of how we’re looking at it in terms of the Crohn’s program. Again, we’ll come back before the end of the year, most likely with some more details on that.

Patrick Trucchio

That makes sense. And just with the last few minutes here, I do want to ask about alopecia areata, AA because we have the first patient dose in the Phase 2 trial. I’m just curious in the study to the extent that you can share some additional details on it, how is the moderate to severe disease is being defined in the trial, with a certain number of relapses that are necessary before the patients considered moderate to severe, how much does that matter, and then how long will the patients who are enrolled in the trial will have been required to have a diagnosis of moderate to severe to be eligible, are corticosteroids permitted to be used in the study, and then any other — any details you can provide about it and when you expect the data would be helpful?

Amit Munshi

Sure. So in our derm studies in general with corticosteroids or rescue therapies, some patients are not on corticosteroids. We’re looking for patients who have at least 50% percent scalp involvement. We think that’s kind of the target audience here. We’re talking about moderate to severe, leaning toward severe in terms of these patients and what’s great here is that biologically we see S1P1, we see T lymphocytes — around the hair follicle in a series of animal experiments that we’ve done. And so we know we’re kind of barking up the wrong tree biologically. We’ll have the data next year. I think we’re almost out of time here, I’m getting the notice here. So we’ll come back and talk more about it, we’re going to be doing a Derm Day later in the year, come back and talk extensively about the alopecia areata study as well.

Patrick Trucchio

That sounds great. Well, thank you very much Amit for participating in the conference and have a great rest of your conference.

Amit Munshi

Patrick, good seeing you. Thank you again. Take care.

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