Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) Q4 2019 Results Earnings Conference Call February 26, 2020 5:00 PM ET
Kevin Lind – Chief Financial Officer
Amit Munshi – Chief Executive Officer
Preston Klassen – Executive Vice President and Chief Medical Officer
Conference Call Participants
Jason Butler – JMP Securities
Jason Gerberry – Bank of America
Jessica Fye – JP Morgan
Joseph Schwartz – SVB Leerink
Joel Beatty – Citi
Alan Carr – Needham and Company
Patrick Trucchio – Berenberg Capital
Good day, everyone. And welcome to the Arena Pharmaceuticals’ Financial Results and Corporate Update Conference Call. This call is being recorded. At this time, all participants are in a listen-only mode. Following the prepared remarks, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.
I will now turn the call over to Kevin Lind, Chief Financial Officer of Arena. Please go ahead.
Good afternoon. Before we begin, I’d like to remind everyone that we’ll make forward-looking statements that involve risks and uncertainties, including statements about our objectives, plan, goals, strategy, expectations, beliefs, focus, regulatory activities, R&D programs, products candidates and operations and those of our collaborators and licensees and other statements that are not historical facts.
These statements are made in the context of the risks and uncertainties that are discussed in our filings with the U. S. Securities and Exchange Commission, which can be found on the SEC Web site at www.sec.gov and include risks related to timing of preclinical and clinical studies, including patient recruitment for clinical trials, which is competitive and challenging and may take longer than we project, preclinical and clinical study results and the timing of such results, which may not be as expected or sufficient for further development, regulatory approval or commercialization, timing and outcomes of regulatory interactions and decisions, collaboration and licensing activities and the amount and allocation and projected use of our available financial and other resources. Our actual results may differ materially from our forward looking statements.
Now, I’d like to turn the call over to Amit.
Thanks Kevin. Hi everyone and thanks for joining our call today. Today, I’ll go through a corporate and management overview and then Preston will provide pipeline updates and we’ll conclude with a financial review of the fourth quarter and full year 2019. In 2019, we’ve made exceptionally strong progress across all fronts in the company, and we’ve importantly maintained that cadence into 2020. Critically, we remained on track with our near and mid-term operational objectives, including delivering the eight major data readouts between 2020 and ’21.
Last month, we reviewed our strategic plan that sets the foundation for the future of Arena as we enter the next stage of the evolution of the company. We outlined two specific and distinct areas of opportunity; first, expanding the value of the etrasimod into a different indication; and second, further unlocking the value of the historical Arena G-protein coupled receptor of GPCR research platform. Our new strategic footprint, ongoing programs and new initiatives made for a catalyst, which provides then for the company.
On expanding the value of etrasimod, we continue to believe that a once daily oral agent with etrasimod’s profile offers tremendous promise in the treatment of a broad range of immune mediated inflammatory diseases. To that end, we are initiating two new programs, both in the area of current therapeutic focus in GI, a Phase 2b program in eosinophilic esophagitis or EOE and in dermatology, our Phase 2 program in alopecia areata or AA. We expect to initiate both these trials this year and Preston will provide more details in each of these programs later on this call.
To unlock additional value, we turn our focus to harvesting the broad and diverse set of technologies available to us as a result of historical two decades of world-class GPCR discovery research at Arena. With the expansion of Beacon Discovery collaboration, known as project Cabrillo and the establishment and advancement of Arena Neuroscience. Project Cabrillo with Beacon Discovery represents the next generation of all compounds, which may transform the way autoimmune diseases approach and treated. Project Cabrillo includes both novel and validated targets and compound and represents the foundation of the long-term growth of our pipeline.
Arena Neuroscience represents an opportunity to replicate the strategy we brought at Arena three and half years ago. Three and half years ago, we rebuilt the community in our series of potential first and best-in-class compounds. We reset the financial framework for the company with pivotal transactions, and have since continued to make substantial progress across all of our objectives. And now, we get to do this again in neuroscience. On the back of multiple clinical and preclinical compounds and an emerging platform in microglial inflammation, we are close to progress important medicines and uncover important value for our shareholders.
In that context, I’m incredibly excited that Kevin Lind has agreed to lead our subsidiary, Arena Neuroscience, Inc. as its President and Chief Executive Officer. As all of you know, Kevin has served as EVP and CFO since June of 2016 and has been an integral part of the turnaround of Arena. His insights and creative solutions in challenging times have uniquely positioned us for the future. We believe leveraging Kevin’s skills to advance Arena Neuroscience will unlock the value we believe sits within this platform. I’d like to personally take this opportunity to thank Kevin, for both his historical contribution as well as taking this leadership role at Arena Neuroscience.
Joining us as Executive Vice President and CFO is Laurie Stelzer. Laurie is an accomplished executive with significant financial expertise, and will be an exceptional addition to our team. Laurie brings with her 20 years of experience in biopharmaceutical management, including leading teams and finance, treasury investor relations, business development and emerging markets. Prior to Arena, Laurie held management level positions at several life science companies, including Halozyme and Amgen. Having previously worked with Laurie in the original build of Amgen’s immunology business, I’m confident in her leadership as we continue to scale the company, while being prudent in our management and resources. We are thrilled to welcome Laurie to the Arena team.
With that, I’ll turn the call over to Preston to provide more details and updates on our pipeline. Preston?
Thanks, Amit. Our most advanced program is the Global Phase 3 ELEVATE UC registrational program, which consists of two key trials, ELEVATE UC 52 and ELEVATE UC 12, evaluating etrasimod with two milligram in subjects with moderately to severely active ulcerative colitis. Enrollment in ELEVATE UC 52 is on track and we plan to begin enrollment in ELEVATE UC 12 later this year. We look forward to sharing the Phase 3 data set in 2021. We are pleased to announce that the Phase 2 OASIS trial data was recently published in the prestigious journal, Gastroenterology. We believe these data support etrasimod’s highly favorable profile compared to other existing and developing therapies in UC.
Turning now to our second GI indication, Crohn’s disease. Earlier this year, we initiated a Phase 2/3 program and enrollment is progressing. This program consists of a Phase 2 dose ranging trial CULTIVATE with an operationally seamless transition into the Phase 3 portion of the program. We’re choosing to focus on an operationally seamless Phase 2/3 program to afford Arena the opportunity to examine the data from CULTIVATE, make a real time decision on dose for the pivotal portion of the program, publicly release those results as a data catalyst around mid-year 2021 and still realize the operational synergy inherent to a seamless transition into the pivotal portion of the program.
Our third GI indication in development is to evaluate etrasimod in eosinophilic esophagitis. EOE is a chronic lifelong condition characterized by erosive inflammatory lesions in the esophagus causing persistent heartburn like chest pain and difficulty swallowing that can lead to fibrosis, cyanosis and food impaction in the esophagus. Importantly, there’s high patient need and physician demand for a safe and effective non-steroid oral therapy for this disease. There are no approved therapies for EOE in the U. S., and those available ex-U. S. are limited and suboptimal for most patients.
We’re excited to be kicking off the Phase 2 dose ranging trial later this year, which expect to be Phase 3 enabling and we believe recent precedent exists for compound in this development space receiving orphan drug designation, which could allow a streamlined Phase 2 progress. We look forward to updating you on the status of this program as we initiate our Phase 2 work.
Moving now to etrasimod in dermatologic diseases. We are currently pursuing development programs in atopic dermatitis and alopecia areata. We believe that etrasimod has great potential in dermatologic conditions that are T-cell mediated. Because both indications are de novo clinical programs, I will point out some key reasons why we believe etrasimod has the potential to disrupt the immune-based inflammatory pathophysiologic process to modify disease progression of these conditions and improve patient symptoms and outcomes.
Let’s start first with atopic dermatitis. AD is a chronic inflammatory skin disease associated with cutaneous hyper reactivity to environmental triggers, as often the first step in a progression of systemic allergic disease that can include asthma and allergic rhinitis. The clinical phenotype that characterizes atopic dermatitis is the product with interactions between the environment, susceptibility genes, defective skin barrier function and of course immunologic responses. Exposure to environmental allergen is recognized by dendritic cells in the epidermis, but then traffic to lymph nodes presents antigen and activate CD4 and CD8 positive T-cells, which then traffics back to the skin and drive inflammatory tissue injury via cytokine expression and recruitment of other immune cells. Etrasimod has impact on each step in this pathologic disease process. Specifically, dendritic cell trafficking to lymph nodes is reduced, which reduces the presentation of antigen to T-cells, resulting in reduced activation of those CD4 and CD8 positive cells.
Activated T-cell trafficking is also directly reduced, so if your T-cells reach the target tissue site of injury and along the way cytokine expression by T helper cells is reduced. Thus the TH2 and TH1 profile common to atopic dermatitis is lowered and with reduced expression of the associated cytokines, such as IL 4 and 5. And downstream with that, we also note that recruitment of other immune effector cells are reduced, such as eosinophils. All of this has been documented in preclinical assessments with etrasimod and we are confident in the scientific rationale for etrasimod and we are also on track with the ongoing phase 2b ADVISE trial in atopic dermatitis, which is testing 1 milligram and 2 milligram etrasimod compared to placebo among patients with moderate to severe AD and inadequate response to topical steroids. We look forward to sharing these first clinical results in AD later this year.
I will now turn to our second dermatology program, alopecia areata. AA is a chronic autoimmune disorder in which activated CD4 and CD8 positive T-cells attack hair follicles destroying growing hair. AA is a common disorder affecting one to two per thousand in the population and causing hair loss in some or even all areas of the body, causing major psychosocial stress, including a clear reduction in quality of life and sense of wellbeing, social phobia, anxiety and depression. Current treatments for alopecia are suboptimal and there is no single therapy that is sufficient for the majority of patients.
Now similar to what I described above, etrasimod reduces the activation of the CD4 and CD8 positive T cells and their trafficking to the hair follicles. Reduction of CD4 and CD8 positive T cells is one of the most widely recognized aspects of the mechanism of action for S1P modulators. This year, we will initiate a Phase w proof of concept trial in AA, it will be a randomized double blind placebo controlled trial, evaluating 2 milligram etrasimod once daily in subjects with moderate to severe alopecia areata as assessed by the severity of alopecia 201 or SALT 1 scale with a score of 50 or higher.
We will enroll approximately 35 patients in U. S. and Canada. We believe that initial positive data from this trial may translate into breakthrough designation with the FDA, allowing an accelerated Phase 2/3 program with attractive development timelines similar to recent precedent. We look forward to providing additional detail on study design and program development in terms of these plans over the next few months.
Finishing up now with the rest of the pipeline, for olorinab, we are pleased with our enrollment progress and look forward to delivering Phase 2b top line data in the second half of the year in IBS pain. And finally with regards to our cardiovascular asset, APD418, which is targeting acute heart failure, we have initiated Phase 1 and have been granted fast-track designation from the FDA. We expect Phase 1 data later this year, which will be followed by Phase 2 proof of concept trial that will readout in 2021.
And with that, I’d like to turn the call over to Kevin to review our financial results. Kevin?
Thanks Pretson. I’ll now provide a brief review of our fourth quarter and full year 2019 financial results here, while more detailed results are discussed in our press release from earlier today and in our 10-K, which will be filed this week.
For the fourth quarter 2019, revenues totaled $3 million, primarily consisting of $5 million of development milestone revenue from Everest, offset by reduction of estimated future royalties from BELVIQ sale. In terms of costs, research and development expenses totaled of $74.6 million in Q4, including $7 million related to non-cash share-based compensation. G&A expenses totaled $22.2 million of which $6.3 million was share-based comp. Net loss for the quarter was $88.3 million or $1.76 per share on a basic per share basis.
For the whole year of 2019 result, revenues totaled of $806 million, primarily consisting of $800 million of revenue from the United Therapeutics upfront payment in terms of costs, research and development expenses totaled $231.5 million, including $27 million related to non-cash share-based compensation. G&A expenses totaled $77.6 million, of which $25.7 million were share-based comp. Income tax provision was $110.3 million as a result of utilizing the deferred tax assets that were recorded in the fourth quarter of 2018.
Net income for the year was $397.6 million or $7.99 per share on a basic per share basis. At December 31 2019, cash, cash equivalents and investments, was approximately $1.1 billion and approximately $50.2 million shares of Arena common stock were outstanding. In terms of guidance, we had approximately $70 million of cash burn in the fourth quarter of 2019, excluding one-time items. We anticipate Q1 2020 burn excluding one-time items to be approximately $95 million and increasing there after quarter-by-quarter in the high single-digits to low double-digits as we continue to ramp up enrollment and scale manufacturing, clean pharm and nonclinical towards a potential NDA and bring online additional clinical trials as outlined by Preston.
Finally, I’d like to thank the entire Arena team and broader ecosystem supporting the company, including our shareholders who I have had the privilege of working with over the past three years. It’s been a phenomenally rewarding experience and Amit pointed out, I look forward to running the Arena playbook a second time. Going forward, I’m enthusiastic about the opportunity to continue to build value for patients, the community and our shareholders. Amit?
Thanks Kevin. As we continue on our path to deliver important medicines to patients, we remain focused on making significant progress across all aspects of the company and delivering across all the major deliverables as we build a world-class company. Our emphasis on execution ensures that we remain on track of all the major catalysts for the company, and we look forward to sharing our exciting milestones in 2020 and beyond, including the upcoming initiation of EOE and AA studies, the ELEVATE UC 12 study and delivering important Phase 2b data later in the year for etrasimod in atopic derm and olorinab in IBS pain.
As a final note, I want to take the opportunity to thank Kevin for his continued leadership and welcome Laurie to the Arena family. Over the next couple of quarters, we’re excited to share more on our progress on Arena Neuroscience. I will now turn the call over to the operator to begin the Q&A session. Operator?
[Operator Instructions] First question comes from Jason Butler of JMP Securities. Your line is open.
Just a couple on the dermatologic indications. Can you just, first of all, talk about how you think about the commercial infrastructure and how you would build out the commercial infrastructure focused on derm? And then can you talk briefly about how you think about the payer landscape for alopecia? Thanks.
In selecting this, your question actually goes back to actually why we select specific indications and how we select them. And it really starts with following the biology and exquisite detail and then we proceed to build a whole slew of animal model and work with world experts in the space to make sure we’re heading down the right path in each one of these indications. And then third part we really think about is the commercial aspects you’re talking about today, they’re all kind of working on the change of concentric circles. On the commercial side, we’re extremely excited about dermatology, like GI, a special indication where a company — Arena’s position can over time build, they look within infrastructure to commercialize.
We know that these areas are going to become increasingly competitive and we think that’s actually a real positive, there’s a tremendous unmet need and these products give patients lots and lots of access to drugs. When we think about the payer landscape, it’s difficult to think about the payer landscape with a single indication in isolation. Payers will routinely reimburse products across multiple indications. And in fact the broad range of indications provides a strategic advantage for Arena in getting payer access compared to competitive products. So we think that’s going to be really critical. As you’ve seen in the anti-CMS space, for example, again having a broad range of indication plays a very substantial role in getting care access. And we think that’s one of the advantages to the strategy that we’re pushing on.
Okay, very helpful. And let me just add my congratulations to both Kevin and Laurie on their new roles. Thanks.
Our next question comes from Alethia Young of Cantor Fitzgerald. Your line is open.
This is Ana on for Alethia. Just wondering if you could provide any additional color on the rationale behind carving out the work in neuroscience, now kind of at this early stage and what strategic flexibility that separation gives you. And then just given the history of S1P as a target in MS, is there any interest in that disease area specifically or any existing work that you feel you can leverage more broadly in neuro?
So let me take a part of this and I’ll have Kevin comment on additional and add some thoughts on. The entire idea of carving this off into a separate entity is actually has multiple components. One is we’re still a growing and evolving company coming off a pretty massive reset of the company back in 2016. So with all the Phase 3 and Phase 2 programs we have ongoing, it’s important that if we’re going to pursue these important products in neuroscience space that we want to have some focus on it and no better way to create focus and to put a seasoned leadership team around the compound. So that’s sort of point number one.
Point number two is, why in the near term as we progress these compounds, Arena set the financial wherewithal to progress them, there will be a point in time which additional capital will be required and this allows us to win new capital into the neuroscience portfolio and then potentially even eventually spin it out as a complete standalone enterprise. So it creates a tremendous amount of flexibility for the company overtime, and I think that that’s really important. But that’s secondary to really this idea of creating incredible focus on these compounds.
It’s really fascinating. If you kind of rewind back to 2016, we had a couple of compounds that come out of Phase 1, there was early Phase 2 and we were able to really build around those. And this is a very similar situation. We’ve got three compounds that are clinical or late preclinical stage. We’ve got an underlying platform in microglial inflammation and it doesn’t look too dissimilar to Arena kind of mid 2016, and I think that’s one of the reasons I think Kevin is a perfect person to run this enterprise.
On the MS question, we’re not going to get into a lot of detail on indications yet. There’s a lot of work to be done on these compounds. I will tell you that we have shied away historically from the MS space simply because of the competitive landscape in MS, as well as the pending expertise of multiple compounds in the space. So let me pause and see if Kevin has anything additional to add?
I think Amit you said it very well. I would just say if you look at the indications currently for S1P, the vast majority are in neuro space. And so we’re excited about the potential of an S1P going and being focused on that as part of neuro.
Our next question comes from Martin Auster of Credit Suisse. Your line is open.
This is Thomas on for Martin. I wanted to quickly touch on this Phase 2 readouts expected in the back half of the year, so olorinab IBS pain and etrasimod and atopic derm. Can you guys kind of frame what a positive result would look like on primary endpoints in these trials? And then I’m curious if you’ve set a specific bar for what you would need to see to move these programs forward to Phase 3? Thanks.
So it’s always important to remember that the bars for a lot of things are not just efficacy, everyone focus on the simple efficacy end points but it’s risk benefit of the compounds as well. So you have to take that into the overall convenience of the compounds in the place, so all of these things kind of work together in terms of having a competitive commercially viable product. I’ll provide some top level and then Preston can dive into a little bit more detail. Let me start with olorinab in the IBS space.
As you know, on a placebo objected correction in the AAPS scale, most products have about a one point change. If you recall from our Phase 2a study with all the caveats of a small open label, we saw exceeding 4.5 point change on the AAPS scale. So we’re well north of that one point delta that you’d seen a placebo adjusted situation. And so we have been looking to be well north of that one point to placebo collection, we think that creates a compound that can work across IBS-C and D, and has a safety call the profile, assuming that’s what happens out of the study and we think that’s a commercially viable product.
So we have to look at the totality of the data, we’ve done a tremendous amount of market research in house and we have a good sense of how these markets evolve. I will point out one other important thing. All the other IBS pain programs that are out there, programs that have pain on label or being developed are all in the IBS-C category and recall we are enrolling both IBC-C and D patient. So there’s also some broader clinical utility to olorinab. So let me pause there on olorinab and see if Preston has anything to add and then I’ll discuss the atopic derm.
Yes, maybe just two quick points. In addition to the 4.6 change from baseline, which again was off placebo corrected but the additional endpoint or way of looking at the results that gives us a lot of confidence even though with small and it’s not placebo controlled is that the categorical endpoint of clinical response, which the FDA defines as at least 30% reduction in pain score from baseline was met by 100% of patients. All patients at week eight met that definition. And so to us that it, while I can’t tell you today what the placebo corrected adulthood is likely to be, because we don’t have the placebo from that study, it’s highly unlikely that the majority of our result even is due to a placebo response given the categorical change we’ve seen in other placebo controlled studies tends to be around 30% for that kind of categorical response and so we see 100% in this, albeit small data, is really encouraging.
And then just second thing I’ll say is it’s very clear that there is a high level of unmet need in this space with patients needed desiring and in some cases desperate for pain relief. And so as long as we can demonstrate that there’s something here in terms of efficacy and that it’s a safe and tolerated product, which we fully believed it is, we think there’s something really attractive here.
So switching gears to the atopic derm question. As you know, there’s a broad range of placebo corrected deltas on EC 75 across all the compounds, both biological and oral than use an atopic derm. There’s a lot of patient heterogeneity and I think this is one area where we devise no pun intended through is caution on comparing cross trial just because of the patient populations just tend to be more heterogenic. There’s more heterogeneity things than say for example, IVD.
Having said that, we think we can deliver — if we can deliver a product in the range of the existing deltas and we’re doing that with a once a day oral with the safety profile, so we’ve seen that the trial with data that the output that we’re seeing, I think we have not only a competitive program but I think we have a program here that can make a substantial difference in atopic derm market as the market landscape involves. Note that some of the other competing products that are being developed including JAK inhibitors have serious liabilities, including black box warnings for malignancy. And I’m sure as you talk to dermatologists, I’ll tell you those are very difficult for dermatologists to get their head around. Those are not my abilities normally expected with the S1P category. So we think there’s a real competitive profile here, both in efficacy and potential safety. Preston?
Yes, I think the only thing I’ll add is that just to highlight again that the efficacy bar for an oral compared to a biologic may well be different. We know otezla, for example, does quite well and does not have the efficacy response in psoriasis as it’s seen by some of the biologics. So that’s still a very viable compound. And so we’ll see what we get in there. We’re very excited about how the path of physiology of atopic dermatitis aligns up with the mechanism of action of etrasimod, and we’ve run through a litany of preclinical results that are a positive in terms of directionally giving us the confidence and some indirect clinical evidence through other programs that we have initiated in the past pyoderma gangrenosum and qualitative anecdotal examples of skin manifestations related to UC in our waste program, all of which while not a direct clinical evidence in atopic dermatitis, gives us high degree of confidence in what this drug can do in that disease state.
Our next question comes from Kennen MacKay of RBC Capital Markets. Your line is open.
This is [Kim] on for Kennen. First, I’d like to add congrats to both Kevin and Laurie on the new appointments. So our first question is can you help us understand how you and the team are thinking about the outcome of the True North trial, which now has a top line due this year as a potential risk to etrasimod OASIS 3 trial? We’d also be interesting what you and the team are focused on within that trial beyond the top-line success or failure?
One of the challenges as I think everybody is aware and if you look at the Touchstone study for ozanimod and the subsequent publications, posters, abstracts, et cetera, we’ve never seen the re-analysis of that data onto three-domain Mayo Score with rectal bleeding into zero. And as you know, that is the FDA-defined endpoint and it is the true north end point in Phase 3 trial. So one of the things that’s very difficult in answering that question is we don’t have clarity from their Phase 2 to Phase 3. Now smaller companies don’t get a pass like that, we’ve actually shown the Phase data with the three-domain Mayo Score. We’ve shown 25, 26 point delta, 31% of patients in remission at week 12 on the three-domain Mayo Score.
So in terms of read through, I think the better question is what’s the read through from our Phase 2 to our Phase 3, and there we’ve got absolute clarity, we understand effect size, our data inside and out, we know that the more quantitative you get the better etrasimod look and that’s a really great place for us to be as a company.
Coming back to True North, there’s a couple of key variables outside of the three-domain versus four-domain and again, we’ve not seen their three-domains, so difficult to understand powering assumptions. But from any perspective, if you were to run the math you see that the study, this study is overpowered. It’s very well powered, I’d say. And so you know they have plenty of power to detect a very small difference in the three-domain. I think that’s indicative of what they might have seen in the three-domain, post that analysis. Again, we haven’t seen it but just making that guess.
Secondarily, we know that they are looking for a disproportionate amount of patients who have not received the biologics of naive patients again to create more effect size. So the combination of those two things I think are important to keep in mind. We’re addressing it completely different. We know that from our Phase 2 study in patients where 40% of patients failed and anti–TNF and Integra, which is essentially very contemporary patient population in key markets where we will choose to commercialize overtime, we demonstrated a very robust effect size on four-domain and a very robust effects size on three-domain.
I think that’s really important to keep in mind as we think about the read through from True North to anything in the future. And so as far as we’re concerned, I think our eyes are more on etrasimod and the read through from Phase 2 and Phase 3, and we’re optimistic that the drug will perform, difficult to tell where they are simply because they just have not been this close with their clinical data.
So our next question is on atopic derm, so several publications suggests the preclinical FITC induced models for atopic derm may accurately replicate the historical additions, at least some differences in your knowledge and responses like CD4 and CD8 versus human. Can you talk at all about some of the other preclinical work that you have done around etrasimod and atopic derm ahead of the live data like later this year? Thank you.
So we have conducted a variety of dermatitis models across a variety of species, focusing on different aspects of that immunologic cycle that I described. And look there are a lot of similarities related to these immune based inflammatory responses. So ulcerative colitis, atopic dermatitis, EOE and they’re not identical for sure, but they have general similarities in terms of something triggers in the immune response that is an antigen, it could be an auto antigen, it could be environmental antigen.
In the case of UC and AD, for example, it felt that a breakdown in epithelial barrier function, either the GI tract or the skin respectively, reads through introduction of some form of an antigen that has to get picked up by the antigen presenting cell and presented to lymph nodes to activate the appropriate immune cells. And in this case where we’re talking about for AD, it’s T-cell, CD4, CD8 positive T-cells. So the skin the dendritic skin cell, which are also called Langerhans cells, are that initial agent that begins and then continues to propagate the immune response. And so they have to pick up that antigen and traffic to lymph nodes.
We’ve demonstrated in these preclinical models very directly examining dendritic cells that there is a reduction in the cell trafficking of these to the lymph node. So there’s less antigen to be presented, because the dendritic cells are not getting there. That means that there’s less activation of T-cells in the lymph node and we’ve also demonstrated that directly.
And then for any piece of it might be activated, it is less likely to get out of the lymph node and traffic back to the tissue site where the antigen was encountered, where the injury is based. That’s also been demonstrated by that component, the T-cell trafficking from lymph tissue to the tissue of origin or injury. That’s been the most well-documented, I would say, mechanistic aspect to S1P modulators generally. But again, dendritic cells, cytokine expression, activation within the lymph node itself, are all impacted by S1P signaling.
In addition, just kind of a final point on this. There’s even aspects that don’t have to do with cell trafficking or cytokine expression that S1P receptors have a role in, intracellular, inside the cell signaling of the S1P1 receptor subtype facilitates cell to cell junction at the epithelial level and the endothelial level and that’s a good thing. And the fact that etrasimod only hits S1P1 and does not hit S1P2 as an example, which is the opposite, it actually widens cell to cell or lesions cell to cell junction, is a good thing and we think helps to maintain a tighter cell to cell junction at the skin and at the endothelial beds, which can beneficially impact efficacy and safety perspective.
So our last question is about Arena Neuroscience. So the literature at scientific community I assume someone mixed with the, some suggesting S1P maybe more involved in traumatic brain injury where etrasimod more involved with Alzheimer’s disease. So how the team think about this? Do you have any plans to more directly target partitioning any of those newer indications? Thank you.
Yes, it’s bit early for us to discuss specific compounds and indications. We’re in the process of showing up critical piece of animal inflammation, as well as intellectual property. And we’ll be doing so on a future earnings call and Kevin will be building up his organizations team. Clinical piece of intellectual property needs to get filed. And then the work needs to get completed and then we’ll come back and talk to you about this specifically where, as you’re pointing out, there’s a tremendous amount of interest in GPCR targets broadly in the neuroscience space. And having both clinical and preclinical compounds and an underlying platform really gives us a portfolio that’s commemorator or comparable to companies in $1 billion to $2 billion market cap space that are already public, and that’s a really exciting place for us. And we’re looking forward to sharing that information with you at a future point in time.
Our next question comes from Jason Gerberry of Bank of America. Your line is open.
This is [Xi] on for Jason. Thanks for taking our questions. I guess first one maybe for Preston or maybe Amit, and it is really doing pretty well in the UC space. Just curious on your thought of given that S1P and Integran and has some sort of overlapping functioning immune cell trafficking. How important you think it is to demonstrate etrasimod efficacy in patients pretreated and with Entyvio? Thanks. And I have a couple of follow up after that.
So we have some of those patients in our Phase 2 study. We are not excluding Entyvio pretreated indications in our Phase 3 and always said publicly, we did see an effect in patients who are pretreated with Entyvio. It’s important to understand Entyvio is very slow to act, and we’ve demonstrated separation in both rectal bleeding, stool frequency, as early as two weeks. So etrasimod does seem to have activity beyond just T-cell migration, as Preston talked about, dendetric cell activity and cell to cell junction, this is not just simply a T-cell story. So I think that’s important to remember.
The second important part to remember is that when you think about these diseases in compartments, because training in our medical landscape is an organ-based training but all of these autoimmune disease have tremendous overlap. Atopic derm overlaps with alopecia areata, atopic derm overlaps with ulcerative colitis. And so what you are really talking about are systemic autoimmune conditions with some shared biology with primary organ manifestations and drugs that are gut specific actually can’t address the systemic manifestations. So I think that’s also sort of important to remember, 65% of IBD patients have extra intestinal manifestations and antabio is not likely do a heck of a lot. So Preston, anything you want to add?
No. I think you’ve covered it.
So I guess Phase 2, when I look at sort of the enrollment baseline, looks like they’ve been roughly 10% give or take on Entyvio or Integra. And Entyvio I think right now is about maybe 30% plus of the market share in the U. S. right now. This just sounds like that the potential or maybe a different mix of Entyvio versus TNF in a Phase 3 is going to have any — is going to be effect or sort of think about how Phase 2 efficacy is translated both to Phase 3?
Yes, I think you have that completely misunderstood. So 22% of the market share, so don’t confuse market share with patient opportunities and what patients are getting into trials. Market share is percentage of patients who are treated with certain products. You would not compare market share to steroids. You’d say steroids have 90% market share in IBD. So using market share to figure out what the actual underlying baseline rates are for clinical trials is completely erroneous. What you really need to look at is the percentage of patients and how they fit between biologic treated and untreated.
And if you look at all the epidemiology and you look at all the extensive market research that we share with you, what you’ll see is that approximately 60% of moderate to severe patients in the United States have never been treated with a biologic. And of those that have, 50% are not in remission, that’s the more important metric. That gives you a really good sense of how that flows. And of that group that’s been treated with the biologics, you could say 22% are on Entyvio, that’s actually a very small number. So 22% or 40% and some percentage of those are not in remission. So that’s a much better way to apply that market share number, it’s erroneous to apply that across a full inclusion criteria that’s probably not how it actually works.
And this is Preston, I’ll just follow up. I think another part of your question was just around what our expectations in terms of Phase 3 compared to Phase 2 in terms of background therapy or history of therapy, biologic failures, for example. And I think what I’d say is we’re not really concerned about the different types of TNF versus Entyvio for example, in terms of biologic failure coming into our study. And we take a good amount of confidence from the fact that our Phase 2 proportions are likely to be pretty similar to what we see in Phase 3, at least with respect to prior biologic failure versus naive.
So in our Phase 2 OASIS trial, we had 40% of patients with prior biologic exposure. So 60% not innate or naive, had not seen a prior biologic. And that’s actually right in line with what Amit just said in terms of the market and you see the patients with moderate to severe disease, you see today 60% of them have not seen a biologic. And so we don’t anticipate a large difference in terms of what we’ve already experienced in Phase 2 compared to Phase 3. And I would say that other programs, if they had a much lower biologic exposure in Phase 2, you would expect things to be different for them in Phase 3, because Phase 3 always tends to more accurately reflect the market.
So again I’ll summarize by saying we’re extremely cautious making the lead from market share, which is now we’re at 22% to patient inclusion, because that’s actually not how the market breaks out, when people talk about market share, its market share relative to just the biologic segment, not relative to the entirety of the marketplace.
And maybe one last question from me on Crohn’s. Can you elaborate or maybe walk us through the seamless transition from the Phase 2b and to the Phase 3 trials? Maybe it would help, if you can walk us through, okay, you follow the patients through 14 weeks in the Phase 2b, there’s going to data un-blinding. There’s going to be a gap time that you need to analyze the data. Are you talking about that potentially you can transition patients from Phase 2 to Phase 3 from the induction straight to maintenance or how might or might not the un-blinding and the time of data analysis may or may not affect that process? Thanks.
I think you’re misunderstanding the concept of seamless. Let me ask Preston talk about that.
So what we’re talking about is operational things versus intrinsic seamless. So in intrinsic seamless what often people mean by a Phase 2b program is that patients in Phase 2 actually conserve as part of the pivotal for Phase 3, we’re not doing that. If we were to do that, we would not — sponsors typically don’t have access to that information. And for example, those decisions would be made usually by an independent committee and we’re electing not to do that because we want to see the data, have access, make our own decision on dose and then move forward. And that also enabled us to actually publish the Phase 2 data, which we think is a nice catalyst in 2021.
What we are meaning by this is we will keep enrolling patients into a program, while we have locked — while we are locking the amount of data, the amount of patient data that’s required to make the dose decision, make the dose decision rapidly we can do that and then flip the switch so that such of patients are enrolled into the Phase 3 program with the appropriate dose. And so we’ll talk more as we — I mean, this is clearly going to happen as we get closer to seeing our database lock for the Phase 2 portion.
And so as we get closer to that, we’re just at the beginning stages of Phase 2 now in Crohn’s disease we will be more disclose it publicly about exactly how we’re doing this. But the entire premise is, don’t shut sites off, because there’s always an S-shaped curve, a ramp up period to get sites activated, get them up and running. We would like that machinery to stay hot, so to speak, staying active, keep enrolling. And so I will be — we’ll talk more about those plans as we move forward.
Our next question comes from Jessica Fye with JP Morgan. Your line is open.
As it relates to atopic derm, what has dermatologists expressed to you in terms of the bar they want to see for safety in that setting, both in adults and in the adolescent in pediatric setting?
Let me comment on what we’ve seen in market research. Preston has been participant in a lot of the advisory boards. I’ll do the play by play and then hand the call over. What we see for market researchers is the bar is definitely higher for safety in atopic derm than it is in IBD. Dermatologists are just more cautious across the board. The first dose monitoring component is a little big bigger of a barrier for dermatologists than it is for IBD patients. However, when you put that in the context of the JAK inhibitors, the etrasimod profile tends to do much better.
So if you do a standalone profile for etrasimod and look certain set of responses, if you put it side-by-side against the JAKs and they’ve had more time to sort of acclimate intellectually to the idea of JAK inhibitors in atopic derm and then you put it side by side for the JAKs and then they tend to go, oh, well wait a minute, you don’t have all this other stuff and tend to be more receptive to couple of hours in the office in terms of having to monitor patients. So again, that’s kind of a worse case scenario that we present in the market research.
Having the patient sit in the chair for a couple of hour and moniker vitals and you describe it in the right way doesn’t turn out to be a huge hurdle and then when you describe it in the context of JAK inhibitors actually looks better. So that’s from a market research perspective. Do you want to make some comment there?
Yes, just to comment to say that, as you mentioned, monitoring with first dose, which we know is a topic in terms of S1P modulators. We’re encouraged and we talked about this before. We’re encouraged that the FDA has clearly signaled that it’s not a class label that they take each individual compound at its face value in terms of the data that are shown, and that’s why you see siponimod, as an example, has label that does not have first dose monitoring for the majority of patients as long as they don’t have pre-existing cardiac conditions that would lead to a greater need for monitoring.
And so that’s obviously what we’re in the direction that we’re designing the program to address and we know that etrasimod of the S1P modulators has lowest intrinsic potential to cause first dose delay in heart rate or AD conduction delay. And we know this because of our Phase 1 and Phase 2 data, and the fact that led up to the ability to not have to type in all the other programs out there compounds out that titrate in development ozanimod, siponimod and there’s lot et cetera. And etrasimod does not need to because it has a lower potential. So we are working to translate that known difference and make sure that our label reflects our compound and not class labeling.
And to confirm, are you establishing that by doing first dose monitoring in your clinical trials?
Yes, in all of our trials we’re doing first dose monitoring and then demonstrating why that would not be needed in a commercial setting and the marketplace setting, but you have to collect the data to be able to show that.
And second question kind of related to the Phase 2 atopic derm update later this year. Are you planning to measure any biomarkers in that study on the effect of etrasimod on the underlying immune cells? And what if any read through we could expect to learn from that type of biomarker information as it relates to efficacy in other settings, including the GI settings?
There are specific things you’re thinking about here. Are you looking at for example, tissue biopsies and looking at histology, or something else?
Okay, tissue biopsies and histology …
We’ll, in terms of the overall development, we’ll have a plan to do that obviously and when you take a look at this, we’ve done a bit of that in our UC program. We tend to do grades intending you to more of that in Phase 3 in subset analyses et cetera. So the short answer is yes, but we don’t necessarily, I would say for this disease specifically, have — there’s not a clear — there’s still lot of understanding at the molding around the pathophysiology and which biomarkers are best. Let’s take EOV specifically as an example.
Well, people tend to focus on the eosinophils. Why, because that’s the way — that’s the name of it. But why is that, that’s because patients who had — who were thought to have refractory GERD didn’t respond to PPIs eventually got scoped. And on histology, the pathologists do in the eosinophils, that’s great. But there’s also a lot of T-cells, CD4, CD8 positive T-cells, there is dendritic cells, there’s MAT cells. And so there is a whole cell view in addition to the eosinophils. It isn’t just the eosinophils that are causing the damage. And so particularly for EOE, the information that’s leading us to understanding what biomarkers are the best to look at is still, I would say, an evolving field.
Our next question comes from Joseph Schwartz of SVB Leerink. Your line is open.
Thanks very much, and congratulations on all the progress as well. First of all, on the Phase 3 UC program. I was wondering if — I know you’re not going to be entertaining any real time enrollment updates, but just qualitatively given your experience that went well in Phase 2, what kinds of things are you doing in order to ensure that the execution is as smooth and as rapid as possible in order to make sure that the network produces timely and high quality data?
Are you specifically talking about the ongoing UC program?
Yes, exactly. Obviously competitive space, and just wondering what kinds of things you do in and out of the house.
Yes. it’s really clear UC and Crohn’s are very competitive space. And so it’s not uncommon because they have sponsors announce 12 months, six months delay, et cetera. We are very pleased that we are on track. And so again as you pointed out, we don’t give weekly enrollment updates. One of the key factors or key triggers that will get people good clarity is when we start talking about enrollment in UC 12, which we anticipate to do later this year, because we’re using the same global network of 450 to 500 sites for both of 52 and 12, and obviously because 52 is a longer study. We want to complete or at least majority complete that enrollment prior to kicking off UC 12. So we’ll talk about that more overtime, but that will be a key indicator.
In terms of the types of things we’re doing, here’s the short answer. We’re treating the launch of a trial like a launch of a drug. It’s a cross functional endeavor where sites are your customers. We are establishing field teams, clinically trained individuals, both one team that interacts with physician investigators PIs and another team that interacts with study coordinators, nurses and additional staff, to make sure that the sponsor Arena owns the relationship at the site and make sure that we’re doing everything we can to have things be fluid and productive, and listen to them as much as we’re asking them to do things.
Another factor is focusing on referrals. As Amit mentioned, 60% of patients with moderate to severe Crohn’s — UC or IBD, have not seen a biologic. So that means a lot of patients who have moderate to severe disease have not currently on a biologic. If you go to trial sites, they’ll often say, hey, all of our patients are enrolled in study, why is that? Because those sites are typically used and they — what do they draw patients from their own clinic roster, and that of course is limited. Maybe they do some advertising but that’s generally about it, but we’ve done a hundred miles of those sites.
How many clinics are there that are not trial sites that have these patients, and why are those patients not enrolling? Well, they don’t know about the study. And there may be issues related to physicians being concerned about sending their patient elsewhere. And so there’s ways to deal with that, and we’re actually putting forth additional field teams that go and develop relationships with outlying clinics to let people know, raise awareness of the study, et cetera. So I just listed two things there. I’ll say we have a whole host of them. We actually have a separate team that brings cross functional folks together.
It’s not just about clinical development or clinical operations, we also involve medical affairs and we take a lot of commercial insights as well. I think there’s table to think about this in a cross functional way. We understand the pressure and we think creatively and many people on the team have a history of doing this in other endeavors. And again, I’m just very pleased to be able to say that we are on track.
Thank you. And then maybe one on olorinab, in addition to being perhaps a better agent, it seems like selecting the right kind of pain was key to success in Phase 2a. So I was wondering, what have you done to get comfortable that IBS pain etiology is analogous to IBD pain when you made that pivot?
Pre-clinically the way you develop an animal model of I S, which is essentially hypersensitive colon, you basically introduce an inflammatory insult to initiate IBD as it were and then remove the inflammatory insult and wait for the inflammation to die down and you’re left with a hypersensitive colon. And specifically in our Phase 2a proof of concept trial, we didn’t take active acute flare Crohn’s, we took quiescent Crohn’s. They specifically did not have a lot of macro inflammation. Their disease was they’re the quiet and yet they had daily abdominal pain, so they had hyper sensitive colon. And so that mix of what we did clinically with what we know about the preclinical, the way you develop the animal models in addition to the fact that the literature is clear that CB2 receptors are up regulated in both IBD and IBS and that inflammation exist at tissue level in IBS, which I think is important in terms of up-regulating the CB2 receptor and making it very important in terms of sensory apheric nerve fiber firing, so all of that leaves us to have confidence in the IBS approach. And another kind of additional helpful aspect to this is the clear met need in the space and there’s lots of patients out there. And so again, enrollment is clearly on track.
Our next question comes from Joel Beatty with Citi. Your line is open.
First one is on olorinab. Can you talk about the trial design comparing the previous Phase 2 and the ongoing Phase 2b, any similarities or differences to help put into context how likely the previously strong efficacy results are likely to be replicated in the ongoing trial?
Yes, so the most important difference and which was just the topic of the last question is that the 2a proof of concept study was in a different disease state. It was quiescent Crohns’ in patients who still had daily abdominal pain. And so that is, I just want to be really clear that’s than IBS. Now I just gave all of the reasons why we think the pathophysiology and the development of a hypersensitive colon is actually similar between that quiescent Crohns’ and IBS state and the documented up-regulation of the receptor and role that it plays in reducing the pain fibers from fire essentially, particularly when you’ve got some inflammation in the system and we know that IBS at the tissue level does have that inflammation. So with all of those caveats, I’ll also say that the overall design is the same. It’s a 12 week treatment period. And the only difference is we’ve got placebo, which is important of course and we have three doses, so it’s a full on 2b dose ranging study that should be Phase 3 enabling.
And one other question, any thoughts on Belviq being pulled from the market recently, any implications for Arena beyond the small amount of royalty revenues that you’ve been receiving from that?
So let me take the first part, which is just the royalties. We’re expecting to see lower royalty revenue going forward, and we had an offset to our revenue in Q4, which had to do with the estimated value of the potential royalties in the ex-U. S. jurisdictions. We had to recognize the future value of that when we sold certain IP and rights to Belviq outside of the U. S. and our renegotiated agreement with ESAI in 2016. So we’ve now reduced that projected sales value to zero outside of the U. S. and we’ll see what the sales look like going forward and their impact on the royalties. Joel, which products you are talking about again…
Our next question comes from Alan Carr of Needham and Company. Your line is open.
So almost done with Belviq I guess, but not quite. So I wanted to ask you about 418. Can you give us an update on your long term strategy there and what you hope to accomplish in Phase 2 assuming Phase 1 is clean? And then Kevin, can you go over burn again for 2020? I assume that’s mostly etrasimod, but with the big critical program. But to what extent is any of these derived from the new entity Arena Neuroscience? Thanks.
Let me take the broader strategic question on 418. So in addition to 418, we actually do have some additional clinical stage cardiovascular compounds and then we’ll be closing those overtime. The way we were thinking about this right now is just, let’s just make sure that our hypothesis that this compound can improve cardiac output without changing the dynamics in these patient and begin to address this incredible unmet need out there for these patients and once we can prove that, we’ll figure out what the strategy is. And a lot of the strategies are cardiovascular disease that we’ve talked about this before, is really going to relate to where the rest of the company is at that time, where’s etrasimod at that time, what did the capital markets look like at the time, where was cornona virus at that time.
So there’s so many variables that are sort of — some are in our control and most outside our control that have been determined whether we do something creative with the cardiovascular portfolio or whether we choose to continue develop that. I will tell you we’re incredibly excited about the programs specifically 418 and the ability of that program to make that. Preston, can you talk a little bit more about the undisclosed Phase 2 study design in a lot of detail at this point? There’s some specific you want to talk about there to the extent that we’ve made it public we’re happy to talk about it.
Yes, and I’ll just say that what we’d be looking for clearly would be mechanistic information. So typically in de-compensated heart failure that would have to do with cardiac output and those kinds of measures, so not an outcomes based assessment necessarily. I’ll also say that in terms of longer development, so pivotal Phase 3 programs, these are not 10,000 or 20,000 patient outcome studies looking at endpoints over years. And it could be compensated heart failure it’s very often a 30 day assessment. There are a variety of ways to go about this.
The FDA is very willing to sit down and discuss with a sponsor in the space, because of the tremendous unmet need, the lack of appropriate medical therapies at this time. And so it’s a nice setup to be able to bring a completely novel MOA forward as a beta three antagonist, it’s such a great story around why it can work. And so we’re excited about it but to Amit’s point, we’ll have to see how the landscape evolves and what we end up wanting to do with it as we understand its true potential when we conduct a Phase 2 trial.
And then, Alan, I think you had a question around burn going forward. When we filed the 10-K later this week, you’ll see that the vast majority of our external or clinical and preclinical spends, which is disclosed in the Ks, was around etrasimod. And our anticipation is that that will be the case in 2020 as well. It’ll be the vast majority of the spend will be around etrasimod, not around other things like neuro or CD or some of these other programs.
Alan, I think it’s important qualitative to understand where we move programs in the Phase 3 in these larger indications with substantial agency requirements around clean pharm, tox, long-term tox, we start thinking about manufacturing and backup manufacturing. We’ll be going over a year ago thinking about global supply chain while the current corona virus issues and being able to develop backup manufacturing sites and making sure we had stockpiled starting materials, this was just early on our mind. So they’ll just give you a quick smattering of all the different programs that doesn’t really see that are required between now and the time you file an NDA.
And it’s interesting, the only time this issue ever comes up is when there’s a deficiency and there’s a complete response letter. So we’re taking a very aggressive stance in the sense that we want to make sure all the work gets done, we’re extremely optimistic about the compound. There’s a lot of work to be done. We want to make sure we get the work done in a high quality fashion, so that when the patient gets a reads out, there are no gaps to move forward on the NDA filing. And again it’s sort of what you don’t see under the water on etrasimod is really critical, so that’s just something to keep in mind qualitatively.
Kevin, you said high single-digit to low double-digit million increase each quarter. Is that what you just meant?
It’s a percentage increase per quarter.
Percent increase per quarter…
Which translates to about the same amount…
And remember a lot of that is enrollment dependent, so really difficult to just sort of clear light, do a direct line. So the better the enrollment, the faster the burn and that should be a good thing.
Our next question comes from Patrick Trucchio of Berenberg Capital. Your line is open.
Just a few follow ups regarding olorinab, just first can you tell us if we see a positive outcome and that’s been the Phase 2 trial in the second half of the year? Could you move directly into pivotal trials, IBS-C and IBS-D or additional Phase 2 trials be necessary? And then secondly, to what extent would the upcoming Phase 2 data from MD 7246, which is the extended release linaclotide be an inappropriate benchmark for IBS-D? And then finally or separately, can you elaborate further on the unmet need in this area or patients, typically treating with NSAIDs or being prescribed opioids for their visceral pain? And is there a significant difference between the unmet need between the subtypes, IBS-C and D? And then just around the payer piece, I mean what work or can you frame for us what work that you’ve done around this that suggests the payers would reimburse for an additional treatment on top of prescription and medications that are already being used for various IBS-C and D? Thanks.
So let me start with the payer and the unmet need and then Preston can take the clinical question and the question on the extended release changed formulation on linaclotide. If we look at the IBS landscape, all of 80% of patients on independent of the drug they’re on report recurring and continuous abdominal nominal pain and the 27 million IBS patients in the United States between C, D and mix and so third of third of third. And just by contrast, that’s a market size that’s roughly 10x the IBD landscape. So it’s a very large markets from a patient perspective. And the bulk of patients between IBS-C and D are really are over the counter medium.
Over the counter agents do a really good job on relief of either constipation or diarrhea, but they don’t do a great job on the abdominal pain and the abdominal pain and the cramps. So this is just an ongoing conversation around management of pain. In fact, 35% of IBS patients, so just think about that given the size of market I just described on opioids, and that’s a pretty striking number. And you can only imagine some of those are IBS-C patients will then taking opiates for pain, which is absolutely confounding. But it’s that pain that really the nemesis of these patients for a long time and patient focus groups and talk to payers. The management of their pain and the dimension of the use of opioids consistently is a theme that gained a lot of traction.
Naturally, these aren’t products that you would price at oncology type pricing or MX type pricing of products. These are products that are priced to be adjunctive in a broad range of patients on top of their existing products they‘re using for constipation or the diarrhea. So that’s kind of how we think about it from a market opportunity perspective. And we think it’s really wide open space. Do you want to quickly talk about…
So the first question was movement from the Phase 2 study in IBS into Phase 3 for both, or what are the plans IBS and IBD. So it’s pretty clear for IBS, this is the current Phase 2 study and Phase 3 enabling. So we’ll look at the data, how we can make dose selection, discuss with the agency make sure which we are doing on an ongoing basis, make sure our Phase 3 planning is appropriate and go execute that. So that’s the plan there. Now for IBD when we see results that are positive in IBS, we’ll need to go sit down with the FDA and agree on an appropriate way to introduce olorinab or I guess you would call adjunctive therapy in this setting, because as we know it’s not necessarily disease modifying, it’s about pain relief. And so that will require some additional conversation with the agency. There’s not a great history of precedent in this space. And so that’s why we need to take some time to have those conversations with the agency. I anticipate then conducting an inappropriate Phase 2 trial and then moving to Phase 3 if all goes well.
And then I think your other question was just on appetite and the extended release formulation and the work that they’re doing there. So what we’ll need to see, I know that in part the hope is that that compound with the modification could potentially be used more broadly than constipation. We’ll have to see if that’s true or not. But obviously linaclotide itself is isolated to IBS-C. And then in terms of its ability as a pain agent in addition to the motility, what we’ll need to understand that as well is the data that we can see publicly with the original linaclotide and that Amit mentioned it’s earlier in the call, suggest that one point difference placebo controlled difference, the overall change from baseline was 1.9, but 0.9 of that was related to essentially placebo effect.
And so that’s — it at least set some kind of hurdle or bar for us. We saw in our small and controlled study, as I mentioned earlier, that delta of 4.6 without placebo, so you can take that in the consideration. But that leaves me to believe that we have an agent that can have a demonstrable effect, robust effect. We need to confirm that in the placebo controlled study, which we’re doing now. And we’ll just have to see how this plays out. But we’re very confident that we can use olorinab across IBS-C, IBS-D and mixed. And that’s the breakdown there’s about a third, a third and a third of the population, C, D and mix. And so instead of focusing on one segment, we can essentially go across the entire IBS spectrum. And pain is the one unifying aspect in IBS. So people talk a lot about motility and it’s true, as Amit just mentioned, you can often control that with over the counter agents, so one unifying aspect of pain and that’s where the unmet needs really is.
There are no further questions. I’d like to turn the call back over to Amit Munshi for any closing remarks.
Great. Thank you. Thanks everyone for joining us today. We look forward to continue to update you as the year goes on. We’ve got a lot of really important incredible opportunities ahead of us, and we appreciate all your support. Thanks everyone.
Ladies and gentlemen, this does conclude today’s conference. You may now disconnect. Everyone have a great day.