Arena Pharmaceuticals, Inc.

Good day, ladies and gentlemen, and welcome to the Arena Pharmaceuticals second quarter 2021 update. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star, then zero on your touchstone telephone. I would now like to turn the conference over to your host, Patrick Malloy, Vice President of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone, and thank you for joining us today. We hope you had a chance to review the press release we issued this afternoon announcing our Q2 2021 financial results and key program updates. Joining me on today's call are Amit Munshi, President and Chief Executive Officer, Lori Stelzer, our Executive Vice President and Chief Financial Officer, Doug Mannion, our Executive Vice President of Research and Development. And joining us for the Q&A session will be our Executive Vice President and Chief Commercial Officer, Rob Lesicki. Before we begin, I would like to remind you that we'll be making forward-looking statements that involve risks and uncertainties about our goals, expectations, plans, beliefs, timing of events or future results, including those risks and uncertainties related to our pipeline, financial projections, and the COVID-19 pandemic and its potential to impact business. Forward-looking statements involve certain assumptions, risks, and uncertainties, some of which may be beyond our control and could cause actual results to differ materially from these statements. A description of these risks can be found in our earnings press release and our latest SEC disclosure document. All forward-looking statements are based on information currently available to ARENA, and we disclaim any obligation to update these forward-looking statements. Now, I would like to turn the call over to Amit Munshi. Amit?

Thanks, Pat, and thanks, everyone, for jumping on today's call. I presume everyone's had a chance to review the press release we issued this afternoon where we announced some very important updates. I'll provide some initial comments, and then Doug will take you through the program updates in more detail and the advised open-label data set, and then we'll hand out to Lori to walk through the Q2 financial performance. Following the prepared comments, we'll spend the remaining time on Q&A. Before we begin, I'd like to formally introduce our newly appointed Executive Vice President and Head of Research and Development, Dr. Doug Mannion. Doug comes to ARENA with 25 years of executive leadership experience across clinical research and drug development with companies such as DuPont Merck, GlaxoSmithKline, and Bristol-Myers Squibb. Most recently, he was CEO of Clio Pharmaceuticals. Doug's extensive experience, including experience in immunology and in our therapeutic areas, will be instrumental as we continue to transform into a sustainable global organization. Turning to slide three. If you've been following the ARENA story over the course of the past year, you'll know that in early 21, we laid out three strategic principles critical to our long-term growth. First, we plan to selectively and prudently grow our pipeline to support our long-term vision for the business. Second, we will continue to put all the pieces in place to ensure commercial launch success. And third, we continue to advance the build out of our leadership team that will maintain and grow our culture for success. As you can see, we're progressing forward on all three of these principles. Turning now to slide four. Last week, we took an important first step to bolster our mid-stage pipeline within our core therapeutic areas with the announcement of our collaboration and option agreement with Airstate of Therapeutics. We have a high bar for in-licensing and collaboration agreements, and over the course of the past year, we evaluated over 200 potential deals. Very few of these opportunities presented to us met our essential criteria. First, small molecules that were well characterized with chemistry and pharmacology, second, alignment within our current therapeutic area focuses of GI dermatology and cardiology, and three, limited financial exposure prior to program B risking. The deal with Aristea checks all three of these boxes. RISC-4721 is an oral small molecule GPCR CXCR2 antagonist that was originated by AstraZeneca with strong pedigree in chemistry and pharmacology. As you can see from the slide, RISC-4721 enhances our early to mid-stage clinical development pipeline with a Phase IIb-ready asset in pulmonary plantar postulosis, or PPP, and an opportunity to explore RISC-4721's potential in hydradenitis superlativa, or HS, and IBD through a couple of small exploratory trials. What is important to note is that this is a fiscally sound deal structure that includes a nominal upfront investment It grants us the option to acquire Aristea on the library of CXCR2 molecules based on the outcome of the Phase IIb PPP study and other supporting trials. Turning to slide five. In addition to pipeline progress we made through the Aristea acquisition, I'm happy to share some important program updates. As most of you are aware, we are studying a TRASMOD or selective S1P receptor modulator in two global Phase III studies of ulcerative colitis. As we announced in January of this year, we reached full enrollment in our 52-week study, Elevate 52, and that study remains on track for top-line data readout in Q1 of 22. Today, I'm extremely excited to announce that our TRASMOD Elevate 12, the UC12, has reached full enrollment ahead of expectations. And with that, I'll hand it off to Doug to provide additional details on the TRASMOD and the Elevate trial, as well as other programs.

Doug? Thank you, Amit, and hi, everybody. With regards to the UC12 study, we anticipate the biologic naive to biologic exposed participant ratio will be 60 to 40, which is consistent with the split we saw in the OASIS Phase II UC study. As many of you will do math on the timelines, you will note that the UC12 data will complete ahead of UC52. With that in mind, we have developed a plan with our CRO, IQVIA, to keep the database unlocked sequestered, and the data blinded until both databases can be locked, unblinded, and analyzed concurrently as specified in our statistical analysis plan. I would like to thank the study participants, the clinical investigators, and the entire ARENA team for their extraordinary efforts that resulted in this study enrolling faster than anticipated. As we said previously, we'll read out UC12 and UC52 datasets contemporaneously during the first quarter of 2022. As many of you know, we're also investigating atrazumab in the ongoing Phase 2-3 Cultivate study in Crohn's disease. While we previously guided for a readout of sub-study A by the end of this year, we've made the decision to increase the sample size from 50 to 70 participants in order to enhance the veracity of this trial and these data. We believe this additional data will provide a pooled data set that will be commensurate with other open-label trials conducted with competing products. Importantly, this enhanced data may allow us to make sub-study one into a registrational study and reduce the overall timeline for this program. Additionally, today we announced entering into a collaboration with Second Genome to identify microbiome biomarkers within the Cultivate program. Crohn's disease is marked by substantial heterogeneity, so the potential to identify biomarkers associated with clinical response may be important to the ongoing design of the CULTIVATE program. With our target enrollment moving from 50 to 70 participants and the potential of impact from the COVID-19 Delta variant spreading across multiple countries in Europe, we are projecting that the top-line data for sub-study A will read out in Q2 of 2022. Now, turning our attention to the atrazimab dermatology programs, in 2020, we began a small phase two exploratory study in alopecia areata, investigating two milligrams of atrazimab in participants with moderate to severe disease. Today, we announced that we're broadening the participation, the participant population in the study to include a more moderate patient population and adding a three milligram treatment arm with the aim of detecting a dose response in study participants. We believe that by taking the opportunity to execute this amendment now, and should the data be positive, we'll put ourselves in position to move directly to phase three. With this protocol amendment, we now expect to read out top line data in the second half of 2022. And finally, I am very excited to present a recent data cut from the open label extension of our phase two advise study investigating atrazumab in atopic dermatitis. Can we turn to slide six, please? The data I'll be walking you through in a moment provide us with even greater confidence in the promise of atrazomab for patients suffering from atopic dermatitis. The open label extension program followed the completion of the 12-week placebo-controlled advised study period and a four-week washout period. At that point, all of the participants who opted into the OLE, which was 85% of the advised study participants who completed the 12-week study, received two milligrams of atrazomab. When looking at the 16-week data in the OLE, we were pleased to see a consistent clinical improvement across key efficacy measures with no new safety signals to date through 56 weeks of follow-up. Let's move on to slide seven. I'd like to point out that within each chart, you'll notice the dashed lines across the bottom, which represents placebo rates at week 12 of the ADVISE study. We have extended these placebo rates for the sake of taking a conservative view of the OLE data. Also, we've taken an additional conservative approach when estimating the delta at the 16-week time point of the OLE as we've applied a non-responder imputation shown by the blue line. As you look across the VIGA, EZ75, and peak pruritus NRS, you'll note the consistent clinical improvement across each efficacy measure at week 16. Further, at week 16 of the OLE, we observed a VIGA improvement of 47%. As a reminder, VIGA is the FDA registrational endpoint for Phase III studies in atopic dermatitis. When looking at EZ75, we observed an improvement of 72% and a peak pruritus change of 61%. As you will note, and with the appropriate caveats about cross-study comparisons, the data is in the range of approved biologics NAD, as are the relative deltas with placebo rates extrapolated from the initial 12-week period. As you can imagine, we are very enthusiastic about these data. While we're still in discussions with regulatory authorities around the world to establish the final phase three study design and protocol, based on the OLE data presented today, along with the review of the full data set, we've made the decision to anchor our phase three program to a two milligram dose. With regards to timing, we anticipate commencing phase three study activities in Q4 of 2021. Now I'll turn it back to Amit to highlight our upcoming catalyst. Amit?

Thanks, Doug. If we go to slide eight, please. With the updates we presented today, you can see the next 12 to 18 months will be both busy and exciting. And looking at Q1-22, we'll have data from UC-12 and UC-52 contemporaneously, followed by the enhanced and expanded CULTIVATE sub-study A in Q2. In the back half of 2022, our plan is to submit our NDA for a crowded model of colitis, pending positive data. We continue to work diligently across the organization in support of our NDA, including ongoing work in areas such as clinical pharmacology, CMC, quality, and regulatory. Also, in the second half of 22, we will turn over several important data readouts, including a TRASMOD and alopecia areata with two and three milligrams and the expanded patient population, eosinophilic esophagitis, or EOE, and data from APD418 to MANGRL and their respective cardiovascular indications. Now I'll hand the call over to Lori, who will take you through the Q2 financial performance. Lori?

Thank you, Ahmed. Turning to slide nine for key financial measures. Research and development expenses for the second quarter totaled $112.5 million compared to $64.9 million in the same period in 2020. This increase was primarily driven by advancement of our clinical trial programs, as well as an increase in personnel expenses as we staff to support our program growth. Selling, general, and administrative expenses for the second quarter totaled $31.9 million, compared to $22.9 million in the same period in 2020. Net loss for the second quarter was $146.1 million, compared to a net loss of $84.9 million for the same period in the prior year. Basic and diluted net loss per share for the second quarter was $2.40, compared to basic and diluted net loss per share of $1.61 for the same period in 2020. Operating cash burn in the second quarter was $93.8 million compared to $77.8 million in the same period in the prior year. And as of June 30, 2021, cash, cash equivalents, and marketable securities were approximately $1.0 billion compared to $1.1 billion at March 31, 2021. And now I'll turn the call back over to Amit, who will make some concluding remarks before opening the call to the Q&A session. Amit Bhandari Thanks, Lori.

We'll go to slide 10, please. In looking at Q2 performance, you can see we make continuous, we continue to make significant progress across our entire portfolio, and that now we have a direct line of sight to our Phase III Elevate data readout. Overall, for the portfolio, we continue to evaluate the market. competitive, and regulatory environment, and where necessary, adapt our approaches to give our science the best chance of providing a clear clinical signal. On atopic dermatitis, we continue to make strong progress, and the open-label data extension that we presented today gives us confidence in entering our phase three program. And of course, finally, we continue to maintain a strong cash position. I'd like to take this opportunity to thank the entire ARENA team for the hard work and dedication as we continue to build toward the future of the company. With that operator, let's move to Q&A.

Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press the star and then the number of one key on your touchstone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question is from the line of Alethea Young from Cantor Fitzgerald. Your line is open.

Hey, guys. Thanks for taking my question, and congrats on the progress with enrollment. Just two for me. One, on the alopecia areata study, I just wondered if you saw anything in the two-mig that kind of is informing your decision to kind of move into the three-mig, so any color there would be helpful. And then as you think about the completion of the enrollment of the UC study, you know, are there things and considerations since Charles has been kind of enrolling during COVID that you guys have proactively been doing, especially in light of some of the learning maybe from a topic? I just wanted to get some color on that. Thank you.

Sure. Let me start, and if I miss anything, Doug, please jump in. On the AA study, we're blinded to the data, so it's not a reflection of two milligrams. As you know, in atopic derm, we did not get a chance to explore the three milligram in a phase two study, so we thought this was the right place and time to take a look at three milligrams. Importantly, and just as important as the two to three milligrams, is expanding the patient population in the study. And then the final point, which I'll echo what Doug said in his prepared remarks, is that by increasing the study and making it more robust, we're moving this study from a proof of concept study to a study that could potentially take us directly to phase three. So the overall program timeline gets potentially diminished by doing that. So that's really the purpose of the change to that study. In terms of enrollment on atrazomod and ulcerative colitis, As you know, we've maintained a very high degree of touch in the trial. We continue to evaluate every patient, every day, every data entry to ensure that we have the strongest possible integrity of the trial. As I pointed out previously, discontinuation rates, and other interruptions of dosing, et cetera, are well below our preplanned statistical expectations for the UC study. So we continue to be very positive about where that trial is heading, both in terms of the timelines as well as in terms of data integrity. That's great. Thank you very much. Thank you.

Your next question is from the line of Nina with RetailGuard from Citibank. Your line is open.

Hi, this is Dina Ahn for NENA. I just have a quick question about the Elevate UC12 study. How long will it take for the analysis from the Elevate UC12? Will it take a full eight weeks post the last patient visit to report that pipeline data? Thank you.

Yeah, so as Doug pointed out, as folks will do the math, and the trial timing may look earlier than UC52, the data are intended to be analyzed together. So the end of the study, we'd expect a normal time period in terms of analysis, but also important to remember that the last patient out is really dependent on whether patients enroll in the OLE or not. So we'll know more about exactly how tight the timing is between two studies as we get toward the end of patient exposure and we get the last patient out on the study. So stay tuned. We're excited about where we're at with this and really pleased that the teams were able to to execute on UC12 in the middle of a COVID pandemic. Thanks for your question.

Your next question is from the line of Chris Howerton from Jefferies. Your line is open.

Fantastic. Thanks so much for taking the questions and super excited for the UC data too. So I guess maybe, you know, the question for me primarily is around What is the design of the CULTIVATE study? I'm feeling a little confused around the sub-study A, what sub-study one is, and kind of how you see that becoming potentially registrational. And if you're willing to take a follow-up question from me, I'm also curious what the status is of the extended release formulation is for atrazumab. You know, you have more clinical programs going on and more dose selection work going on. How does that layer into your thinking? Thanks.

Yeah, thanks for the question. The design of the CULTIVATE study starts with sub-study A. As you know, that's a study that does not have a placebo control. It's at this point two and three milligrams. By expanding that study to 70 patients, we're able to get a pooled data set that's comparable to competitive products. We've done open-label studies and moved directly onto registrational trials. So it really gives us the same size data set and the robustness. And on top of that, we've got this collaboration on the biomarker side, which will help inform the overall program in time. The sub-study one was designed as a dose-finding study between two and three milligrams in a placebo-controlled setting. At this point, should the sub-study A read out in line with our expectations, we would be in a position to power sub-study 1 to be the first of two pivotal trials. So previously we had contemplated sub-study 1 being a dose-finding study and then moving to two large phase 3 trials. In this case, we'd be able to power up the sub-study 1, if that makes sense.

That does. Thanks, Ahmed.

Yep. And then the second question on the ER formulation, we continue to make good progress across the extended release. As you know, we've done some initial work on liquid formulations to really try to pinpoint the exact curve we wanted to generate. And now what we're doing is we're looking across two and three milligrams and looking at a broad range of potential formulations to begin to mimic that initial curve. So that work is ongoing, and it's a narrative process, and we look at multiple different formulation methods. And there's a consensus circle between being able to really identify the right formulation and developing new intellectual property. So as we've said before, the role of extended release is to both extend and expand the role of atrazumab extend the intellectual property life and be able to expand into new indications. And so that work is ongoing and consistent with what we've said before. We hope to bridge that into the dermatology programs over time. Okay. That's cool. Thanks, Amit. Thank you.

Your next question is from the line of Jessica Fai from JP Morgan. Your line is open. Hey, guys. Good afternoon.

Thanks for taking my question. I guess first, given what's become a bit of an extended timeline for Sub-Study A, can you comment on where enrollment stands in the study, just to give us kind of a little progress update? How close are you to the originally planned 50 patients?

Sure. So we don't comment on details of any studies enrollment. We are spot on where we expect to be on that study. But with Doug's arrival and taking a look at the competitive set, evaluating our regulatory potential paths forward, we've made this change so that we can begin to move the overall program faster forward. So that's really the objective here.

Okay. So was it Doug's arrival that's the reason why it's just happening now that you're deciding to enroll 70 patients and this wasn't a call you were able to make earlier?

No, we were working on this earlier and working through regulatory implications. As you know, working through regulatory implications isn't the fastest process in the world. So we were already working through this prior to Doug's arrival. And Doug's judgment here, extremely important with his broad range of expertise, really gave us confidence that we were making the right decision here.

Great. And just last one for me. Do you see pooled, you know, safety data from sub-study A on an ongoing basis, maybe on a blinded basis? And given that the three milligram is, you know, would be part of that pooled data, anything you can comment on, on, you know, safety so far?

Sure. So the safety is evaluated in a blinded fashion by external parties and DSMBs, and we haven't seen anything that would make us question our decision to go from two to three milligrams at this point.

Great. Thank you.

Thanks, Jess.

Your next question is from the line of Chris Shibutani from Goldman Sachs. Your line is open.

Great. Thank you very much. Two questions, one on the Crohn's Cultivate study. Could you help us a little bit understand the patient characteristics background in the way that you have helped us to understand the UC programs and to get a sense whether any of the modification in the enrollment from 50 to 70 patients there is taking any features of patients' exposure to biologics into account?

Yeah, hey, Chris, thanks. Yeah, there's no real difference in the additional 20 or so patients that we'll be adding to the study from the original 50. As you know, we're looking at moderate to severe Crohn's. There's some very clear defined guidelines in terms of the patients we want in. in that study, and it's consistent with what everyone else has studied. And I think this is the challenge in Crohn's broadly, which is it's a narrow subset. Crohn's, as you know, has a lot of heterogeneity, as Doug pointed out. And these studies are all designed to evaluate a very narrow subset of patients consistent with what other competitive products have seen. So, Doug, Rob, anything to add to that?

This is Doug, only to say that we've kept the inclusion criteria as is. We've just expanded the sample size so we have more veracity with the data set on which we're basing our decisions. But the hope would be that we can be bullish in terms of the next phase of human experimentation.

Got it. And then the follow-up would be on advice in atopic dermatitis. You gave us a snapshot of a look that you did in July. I think previously you said that you would be doing a more fuller presentation of the data sometime in the back half of this year. Should we still anticipate that and roughly when? And that would be helpful to get insight.

Yeah, so the data that we presented today is a relatively fulsome set. We'll continue to evaluate the open-label data over time. We expect to present this data at an upcoming medical conference, and we're working through that now. So this will get presented in a forum. But as I think you can see from the data, it just gives us additional confidence that the outcomes that we're seeing here, even with the elevated data, placebo rates we saw in the first 12 weeks are actually quite robust and in line with other agents. So, again, consistent with the safety profile of the TRASMOD being a once-a-day oral, not having the liabilities of the JAK inhibitors, and being able to deliver efficacy that's in the range of the approved biologics, we're incredibly excited about where this is heading, and we think there's a substantial market opportunity in front of us.

And just to be clear, the word anchor on two milligrams, does that mean that three milligrams is not part of the go-forward AD plan, or is it predominant? It is not.

Yeah, so it's not part of the phase three plan. That is correct.

Great. Thank you.

Thank you.

Your next question is from the line of Joseph Swarge from SVB Lyrinc. Your line is open.

Thanks very much. Maybe I'll ask about your new collaboration with Second Genome to analyze patient responses and cultivate techniques. What's the null hypothesis there? Is it that patients who are more dysbiotic have worse responses to atrazomod or need higher doses? And what do you do with the findings that you uncover? Will you report them along with the top-line cultivate data? Would you expect to enrich enrollment in Phase 3? Can you just talk a little bit more about your plans there?

Sure, Justin. Let me start and then hand it off to Doug. The reason to do this is really the heterogeneity that Doug pointed out, and to the extent we can begin to really understand the impact of atrazomide. We've talked extensively before about atrazomide's role beyond just the migration of T lymphocytes. We've talked about activity on cell-cell junctional proteins. We've talked about activity on the innate immune system. And so we're really excited to see where these biomarkers come out. Doug, do you want to lend some more color on that?

Yeah, just to say that we all know that dysbiosis is an important feature here. I think there is not a lot of literature on the quantification of dysbiosis. So we're not going in with an a priori notion of of what that's going to turn up, other than we'll do exploratory studies to see if there is a cut point in terms of response rates that might predispose us then to stratify or enrich in the Phase III program. And having done work in the crone space a lot, it is an extremely difficult population to homogenize. So if we can find any biomarker that could help to predict who's going to respond better, I think it's going to significantly enhance the likelihood of success in Phase III.

Okay, thanks. And then can I just ask about your dose selection and how you're thinking about dose selection for phase three and atopic derm? It sounds like you're settling on two mix as the high dose. Is that right? And can you give us, you know, some of your thoughts around, you know, where is two, does two really seem like that's top end of the dose response curve. It seems like at first you thought that and then you were considering going higher. So if you could just give us an update on your latest thoughts there, that would be great.

Sure. So let me answer that question by handing off to Rob to talk about the data we presented today and how it stacks up competitively and why we're excited to anchor the Phase II program on 2mg. Rob, can you shed a little bit of color on what these numbers look like relative to the competitive set?

Yeah, thanks, Amit. I'll be happy to. Good afternoon, everyone. It's a pleasure to join you. When we looked at the open label extension data, we were able to compare that to all of the approved drugs and the drugs that are currently in Phase II, Phase III. When you look at that data, you see a response across all domains and all endpoints that is in line with what you would see with Dupuixin, right? Cross-trial comparisons, different time points, all those caveats. But when you look at the response, it's in line with what's actually being seen with JAK inhibitors. Given that the response is so robust and continues to improve over time, and there's no safety signals that have been observed through 56 weeks of exposure, we're confident that two milligrams is a sufficient dose for this particular TA based on the profile of the molecule and the responses that we've seen. Thank you.

Your next question is from the line of Jason Gerberry from Bank of America. Your line is open.

Hey, this is Cheon for Jason. Thanks for checking our questions. Maybe first one, just a quick follow-up on the enrollment of size for the subsidy A. Can you confirm whether the 20 additional patients are they evenly split between the 2 milligram and the 3 milligram?

Yeah, we'll continue to randomize 2 versus 3, correct.

Got it. And I get some curious thoughts as to exploring a microbiome biomarker. A lot of the data so far, at least on microbiome, I'd say treatment modality is mainly on ulcerative colitis. Can you talk about how applicable those data sets are to exploring microbiome biomarkers for Crohn's disease? And, you know, if not, you know, can you compare and contrast, you know, microbiome as a biomarker versus microbiome as a treatment modality for IBD?

Yeah, let me hand that off to Doug. Doug?

So sorry. Thank you for the question. So we're open-minded. So we'll look first and foremost at the impact of our treatment on dysbiosis in the Crohn's disease setting, but also look to see, you know, what their, you know, baseline dysbiosis status was and to see whether or not there's indicators of individuals who actually have better improvement than others in terms of their Crohn's disease symptomatology.

Thank you. I'll just add one more thing, which is... You know, we're not discussing treatments against the microbiome. We're just looking at biomarkers in the microbiome as it relates to S1P modulation. And we think, to Doug's point, if we can create more homogeneity in the patient population, that combined with the larger data set will allow us to be far more expeditious and fiscally prudent in designing the remainder of the programs.

And I'm curious, if you're able to find a trend in terms of what patients respond to your therapy, respond to e-trasm or better, is an opportunity for you to decide a more robust trial, perhaps with a smaller data set because you're enriching certain population that are more likely to respond? Just curious, you know, thinking about maybe later stage trial design and timeline to market, that sort of question.

Sure, yeah, we won't get into the timelines on this, but Doug, if you want to take the first part of that question.

Yeah, and again, thank you for the question. The two-edged sword with enrichment, of course, is if you need some biomarker to stratify, then you would need to validate that biomarker. So we're not hell-bent on the idea that one must do that. We'd still prefer to take an all-comers approach, although if there's a way for us to enrich for individuals who are in greater likelihood of benefiting from our drug, we'll certainly do so. And always our goal here is to try to have the most efficient phase three clinical trials as possible in terms of time and cost and the number of patients necessary to get to a result that could help us convince regulators to approve the drug for that indication. So, you know, we're doing everything that we can to try to expedite the medicinal value of the Trasvab in that setting.

Got it. Maybe just one last question from me on AD. Thanks for the updates with the OLE data and appreciate the trending up of the EC score and also the IGA score. So I'm just curious, is that you have any thoughts as to what is driving the increasing benefits over time? Is it durational therapy? Is it because you no longer have those protocol compliance that may have, you know, interfere with your ability to interpret the efficacy data in the placebo control part, or, you know, do you have any sort of AD next or history cohort that's sort of addressed whether, you know, there might be an evolution of placebo rate over time?

Yeah, I think the most important striking finding that we had from the advised double-blind portion was that there was no plateau of effect. We made that point earlier in the year across. And we've looked at this on a patient-by-patient basis. We continue to see increase from eight weeks to 12 weeks with no plateau of effect. So looking at 16 weeks was an important point for us. Recall that these patients are all washed out for four weeks. before they're re-put back on two milligrams of atrazumab. So from that perspective, it's as clean a way as you can look at in an open-label study to look at the effect size for atrazumab. And at 16 weeks, you can see, again, a very robust response.

Awesome. Thanks so much for all the color. Thank you.

Thanks, Chi. Appreciate it.

Your next question comes from the line of Joseph Stringer from Needham. Your line is open.

Hi, everyone. Thanks for taking our question. Going back to the alopecia trial, you're adding a higher remake dose here. Just curious if you can expand a little bit on sort of the expanded patient population subtype. How should we think about that? Is that based on potentially disease severity and baseline salt scores, and is that expanding into additional subtypes here that stratified across both the two-make and the three-make farms? Thank you.

Yeah, so, yeah, we would stratify for two and three milligrams. The idea here is to get more alopecia areata patients as opposed to totalis and inversalis patients so we could address a broader subset. Recall also that we're treating for 24 weeks in this study, and we're talking about resident T lymphocytes being cytotoxic at the hair follicle. So having sufficient time to be able to – to make an impact here has everything to do with being able to have that 24-week treatment period. So, yes, we're looking at both two and three milligrams and expanding more to alopecia areata as opposed to totalis and universalis patients. So we'll get a broader subset of patients. And based on that, we think the expanded set here will allow us to make a more informed decision about how to move to phase three.

And, Amar, just to add, so we're going down to a SALT score at entry of 25 or more, 25 to 95, up from 50 to 95. And at the end of the day, with the added enrollment, we should have an even split between placebo 2 milligrams and 3 milligrams for approximately 26 or 27 patients per hour.

Great. Thanks for taking our question. Thank you.

Your next question. Your next question comes from the line of Yatin Sunija from Guggenheim Partners. Your line is open.

Hey, guys. Thank you for taking my question, just two for me. First on Cultivate sub-study, did you take a look at or were there any analysis of the data that led you to increase the sample size or you just increased it based on, you know, like without looking at the data? That's the first question.

Yeah, we're blinded to the data. So we made this decision based on having a data set that would allow us to really think about sub-study one as a pivotal study. That was the driver. Again, we're blinded to the data.

Okay. And then with regard to the UC-12, can you talk about how the patient mix might be looking between the biologic naive and exposed patient, and how would that compare to 52-12?

Sure. 52, we announced 70-30 split. This is trimming closer to what we saw in OASIS, which is about a 60-40 split, naive to biologic.

Got it. And just to confirm, you will be analyzing these data sets together, both UC-12, even though that one most likely will be sort of done before 52?

Yeah, Doug, do you want to just expand on that?

Yeah, so they'll be analyzed contemporaneously. So we'll do it at the same time. So the plan would be to actually keep the database unlocked for UC12 until a time more approximate to when we're going to lock the database with UC52 and then run the analyses on each of the studies at the same time and then subsequently do pooled analysis as will be needed for the ISS and the IC of the NDA submission to the US FDA.

Okay, helpful. Just one final question. Maybe on the expenses side, could you give an update on how the expenses are going to ramp up for the second hour for the rest of the year and maybe in 2022? Lori, do you want to take that?

Yes, certainly. We haven't given guidance for 21 or 22 yet on cash burn, but what I can tell you is we did have a $214 million cash burn in the first half of 21, and then obviously we have increasing patient enrollment in all of our studies and advancement in all of our studies, so we would expect some ramp.

Got it. Thank you so much.

Your next question comes from the line of Prakhar Agrawal from Jones Trading. Your line is open.

Hi, thanks for taking my question. My first question is on ADERM phase three trial. Just wanted to clarify if there are any other changes in the phase three trial that we should expect compared to advice to minimize the high placebo effect that you saw in phase two. Secondly, it's more around commercial. You know, our conversations with KL suggest that Ziposia, Bristol-Myers S1P, that recently launched, has been limited to treatment refractory UC patients. I know there is still a long way to go, but just wondering if you had any thoughts on the implications of Ziposia uptake and their pricing in UC to how you are thinking about your commercialization strategy. Thank you.

Sure. So let's start with the commercialization question. Rob, do you want to take that, please?

Yeah, I'm happy to. Thanks, Amit. It's early. Their approval was May 27, so we're looking at just a few weeks of data where they've been in market. Their relative access within the market is pretty limited. So right now, for most payers, they're limited behind other agents. I think another consideration is the price stands out a bit in the UC market. It's $90,000 per year. That's much higher than competitive choices and other therapies. The other piece, too, is that there is one of the key differences between the work that they did and the work that we're doing is to try to generate and demonstrate value for the molecule for payers prior to launch. That's the gladiator study. So my assumption would be is they're engaged with payers right now and they're negotiating, so their access is very limited to a small group of patients, which is why you're likely hearing that from OLs.

I'm sorry, can you repeat the first part of the question again?

Yeah, on the phase three ADEM trial, any other trial design changes compared to advice that we can expect?

Yeah, so what we've said in the phase three program is we had a substantial amount of moderate patients in the phase two study, and we'll be looking for more of a contemporary split between moderate to severe atopic derm patients. Closer to 50-50. If you recall, we were, I think, 83% moderate at baseline. So we're looking for more moderate to severe patients, and so we have much more contemporary split in the moderate to severe population.

Thank you.

Great. Thank you.

Your next question comes from the line of David Wong from SMBC. Your line is open.

Hey, thanks so much for the update and taking my questions. So I just had a couple. Can you talk a little bit about the Gladiator UC study in moderate patients? So, you know, what's the status of that? You know, any relevant updates for that one? And are there, is there a timeline towards top line data?

Sure. For Gladiator, that study's enrolling, and we expect to have top-line data. It's a PERI approval study, so we expect to have top-line data shortly after approval, as Rob pointed out, to really work with the payers on that, with that data set to really drive greater payer access. So it still weighs out, and the study's enrolling now.

Okay. All right. Thanks. And then just quickly, I know, you know, folks have come at it from a few different ways, but I kind of wanted to ask the question in terms of atopic derm phase three, you know, it sounds like you're pretty confident in two milligram dose, but as you, you know, as you see more three milligram data from Crohn's and alopecia, areata, is that, is it possible that that influences your thinking and, you know, you may be open to any type of protocol amendments to include 3-milligram arm? Or, you know, again, is 2 milligrams a dose that, you know, we all really should be looking at here?

Yeah, so for the Phase III program, it's 2 milligrams. We've reserved the right to go back and look at 3 milligrams in a separate set of studies. But 2 milligrams is where we'll go on the Phase III. And as you saw from the data that was presented, The 16-week data, the effect continues to increase. We're seeing a very safe product out to week 56, and we're seeing rates of EZ75, IgA, and the peak ferritascore that are in line with the market leader. And we're doing that with a once-a-day oral, so we feel very good about where that 2 milligram is going. As you can imagine, we spent a lot of time with excellent advisors staring at this open-label data, and it's been very encouraging to hear from experts in the field about this data and how it validates two milligrams. As I pointed out on a previous question, from the advised portion, we saw that acceleration of effect from week eight to 12. And so continuing that lack of plateau really takes us out to 16. And so that delta feels very comfortable for us in terms of being able to think about a phase three program.

Okay, understood. Thanks so much for taking the time.

Thank you.

Your next question is from the line of Jason Butler from JMP Securities. Your line is open.

Hi, thanks for taking the questions. Two from me. Do you have any data for a TRASMOD that looks specifically at a direct impact on microbiome? And I get that you're not trying to show that, but have you ruled out that you don't have a direct impact on the microbiome? And then secondly, looking past the UC study readouts, are there ancillary clinical studies, preclinical work, or CMC work that could become rate limiting to an NDA submission? Thanks.

Yeah, Doug, do you want to take the first part of that and I'll take the second part?

Sorry, could you repeat the first part again?

Sure. Have you ruled out that a trasmod has a direct impact on the microbiome? If you're looking at what the indirect impact on the microbiome of treatment would be, have you just ruled out that you don't have a baseline effect directly in the gut?

So we believe from our preclinical models that we do not, but that's one of the things that we'll be exploring more intently in the human studies with the collaboration that we just announced with Second Genome.

Great.

Okay. And then the second part, looking past the UC studies, there's nothing rate limiting. We've been working for well over a year on making sure that ClinPharm and quality systems necessary as well as the CMC are all in place toward the end. So there's nothing great limiting beyond getting the studies completed.

Okay, great. Thanks for taking the questions.

Your next question is from the line of Ken and McKay from RBC Capital Markets. Your line is open.

Hey, thanks for squeezing me in and great to hear about the UC12 recruitment completion. Big congrats there. Doug, maybe another question on that two milligram dose in AD. Just wondering what the drivers were behind that decision to move forward with that. Did that dose converge versus one milligram over time or really sort of, again, what the driver was there? And separately, just thinking about the three milligram dose in alopecia areata, are there any disease ideologies or biology there that dictate that higher dose? Or is that sort of just a result of following the data? Thanks, and looking forward to that UC data. Thank you.

Thanks, and thanks for the question. So, yeah, we feel very comfortable with the two milligram dose in the larger populations in which we're currently testing it, most importantly. all the work that we're doing in UC, we have margins. We feel there's reason to probe three milligrams in more refractory diseases like Crohn's and alopecia areata. And we'll see what those results show both in terms of efficacy and safety and make the right decision in terms of dosing moving forward for those indications. And as Ahmed already stated, you never say never. So if in fact we see that three milligrams in select indications is safe and more effective, and we think there'd be an ability for us to probe it in diseases like atopic dermatitis. And by the way, the regulatory agencies have a lot to say about that. Then, you know, we'll proceed in consultation with them.

I'm shoving no further questions at this time. I would now like to turn the conference back to Amit Munshi.

Great. Thank you, everybody, for being on the call today. As you see, we continue to make significant progress across the portfolio. Overall, we continue to evaluate market competitive and regulatory environments and, you know, as necessary, adapt our approaches to shorten the overall timelines for programs and give really our science the best chance of providing a clinical signal. That's really important to us, and we think the changes we continue to make on these studies are all designed to really accelerate the overall programs. We're excited about anchoring on 2 milligrams for atopic derm, given the the 16-week data we presented today. And I'd like to just conclude again by thanking the ARENA team for their incredible hard work and dedication across their portfolio, but specifically call out the Elevate team at ARENA for being able to really, in the face of a lot of external and noise around the pandemic, being able to execute these studies in a way that's ahead of schedule as well as maintaining strict data integrity. So thank you again for everyone jumping on the call and look forward to continued conversations.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.