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Arena Pharmaceuticals (NASDAQ:ARNA)
Q4 2017 Earnings Conference Call
March 14, 2018 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Arena Pharmaceuticals Fourth-Quarter and Full-Year 2017 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 would now turn the call over to Kevin Lind, the chief financial officer of Arena. Please go ahead.

Kevin R. Lind -- Executive Vice President and Chief Financial Officer

Good morning, everyone. Thank you for joining us today. We hope you had a chance to review the news release we issued earlier this afternoon announcing our fourth-quarter and full year 2017 financial results. Joining me on today's call are Amit Munshi, our president, chief executive officer, and Dr.

Preston Klassen, our chief medical officer. Before we begin, I'd like to remind you that we'll make forward-looking statements that involve risks and uncertainties, including statements about our focus, plans, goals, strategy, expectations, clinical programs, R&D, regulatory activities, operations and plans, transactions, 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 website at www.sec.gov and include risks related to the amount and allocation of our available financial and other resources; regulatory decisions and discussions; patient recruitment for our trials is competitive and challenging and may take longer than we project; data related to drugs and drug candidates and the timing of that data may not be as expected or sufficient for further development; regulatory approval or commercialization; and the collaborative and transaction activities.

Our actual results may differ materially from our forward-looking statements.Now I'd like to turn the call over to Amit.

Amit Munshi -- Director, President, and Chief Executive Officer

Thanks, Kevin. Good morning everyone, and thanks for joining our call this morning. During my comments today, I will provide pipeline and corporate updates as we continue to advance our most promising product-development programs. Preston will provide additional detail on what we believe to be a game-changing, comprehensive Phase 3 program for ralinepag.

Following this, Kevin will provide a financial review of the fourth-quarter and full-year 2017 results and we will, as always, conclude by taking questions. We are very proud of the progress we made in 2017, but importantly we remain focused on the work ahead and are enthusiastic about the opportunity to execute on our pipeline in 2018. We have an exciting year ahead with significant catalysts, starting with our Phase 2 clinical data readout for etrasimod in ulcerative colitis coming this month, our Phase 2 readout for APD371 for pain associated with Crohn's disease in Q2 and initiating the Phase 3 clinical program for ralinepag, and, importantly, expanding our pipeline in the second half of 2018.So let's talk about ralinepag. Last year we delivered what we believe to be unprecedented positive top-line results from our Phase 2 study for the treatment of WHO Group 1 pulmonary arterial hypertension or PAH in a population with a significant majority of patients who are on dual background therapy.

With the strong belief that ralinepag is the potential best-in-disease product, our Phase 3 program is designed to elucidate the benefits of ralinepag in a broad patient population and importantly raise the bar for the treatment of PAH.So with that, let me turn it over to Preston to review the details of our plans. Preston?

Preston Klassen -- Executive Vice President and Chief Medical Officer

Thanks, Amit. The ralinepag Phase 3 program is designed to be comprehensive, consisting of two global registrational studies, each of which is designed to stand alone for a registrational filing, and a third non-registrational trial to provide evidence of differentiation for healthcare providers. We believe this program will create a comprehensive package to elucidate the benefits and appropriate use of ralinepag. The Phase 3 program starts with the fundamental notion that we believe ralinepag is the best-in-disease drug candidate as a result of its improved receptor potency and extended pharmacokinetics, enabling a profile closer to the IV prostacyclins than any other oral prostacyclin analog.

We believe that patients across the treatment continuum can benefit from this important medication and the Phase 3 program is designed to enable greater access to patients, including first-line therapy through to add-on therapy in refractory patients.To accomplish our objectives, we intend to run independent registrational trials in both newly diagnosed patients, first-line or incident patients, and in prevalent patients who are already receiving therapy, for example, in ERA and/or PDE5. Our registrational study covering first-line treatment of newly diagnosed patients will utilize ralinepag compared to placebo in combination with both a PDE5 and an ERA, which represents upfront triple combination therapy. In this study, we will focus on exercise-capacity improvements, which we have confirmed with FDA can support our registrational filing, and we will be looking at exercise capacity using both cardiopulmonary exercise testing, or CPET, along with six-minute-walk distance. We believe that CPET is a more informative and sensitive measure of exercise capacity and includes key endpoints such as Peak V02 and the VE over VC02 slope.

As we finalize the protocol, we will provide greater detail regarding specific primary and secondary endpoints, statistical powering assumptions, and key timeline milestones for the trial. I will say that we anticipate enrolling around 250 patients, and we plan to initiate this study in the second half of this year.Our second registrational trial is a robust time-to-clinical event, or outcome, study, in a prevalent patient population, patients who are on either single- or dual-background therapies, requiring additional intervention. We believe this study will give us a broad label, and importantly provide extensive global physician experience with ralinepag. This time-to-clinical-event study will compare ralinepag against placebo on top of standard of care, which, again, is either single- or dual-agent background therapy.

Similar to prior time-to-clinical-event trials, we will employ a composite endpoint that includes mortality, hospitalization for PAH, PAH disease progression, and unsatisfactory response to therapy. And similar to our first-line trial we will provide specific detail on endpoint definitions, statistical powering assumptions, and timeline milestones for the trial as we finalize the protocol. We anticipate enrolling around 700 patients and we plan to initiate the study very close to the first-line therapy trial.I want to emphasize that each of these two trials will be designed and powered to support separate registrational filings as single pivotal trials. While we will share more about timelines in the coming months, we know that an exercise capacity trial will have a fixed treatment duration, while the time-to-clinical-event trial continues treatment until the requisite number of events is collected.

Conventional wisdom, therefore, would suggest that exercise capacity will read out first and, assuming appropriate results, we would file the initial NDA with this and then file a supplemental NDA when the outcomes trial reads out. We also know that the time-to-clinical-event trial will have one or more interim analyses built in, and there is therefore always a possibility for an early readout, which could theoretically enable the time-to-clinical-event filing to come first or perhaps allow both exercise capacity and time-to-clinical-event to be filed simultaneously. Because each trial is designed as a stand-alone, we will have greater flexibility in progressing to one or more filings. Lastly, I would like to touch briefly on a comparative study which we think will provide supportive information at registration and we hope will provide doctors and patients more confidence of the differentiation of ralinepag against the other therapy options, mainly of the oral prostacyclin receptor agonist.

We will be looking at a range of hemodynamic measures against other oral prostacyclin agonists and we will keep details of this trial confidential until later in the year for competitive reasons. We are taking a much more rigorous and comprehensive approach to ralinepag Phase 3 program than others have in PAH. And we take this approach because we believe ralinepag is a best-in-class and best-in-disease therapy. The three studies I've outlined combined equal what we believe will be a winning game plan for ralinepag and are appropriate for the broad range of patients we believe can benefit from this therapy.

We look forward to providing further details on our Phase 3 program mid-year as we finalize the protocols and initiate this study.I will now turn the call back over to Amit.

Amit Munshi -- Director, President, and Chief Executive Officer

Thanks, Preston. Now, I'd like to turn my attention to etrasimod. We believe this compelling drug candidate has the potential to be the best-in-class S1P modulator, with expanded clinical utility [Inaudible] optimize S1P receptor-subtype activity, its improved PKPD, and its potential best-in-class safety profile. We're incredibly excited about the promise of the next-generation S1P class.

Given etrasimod's optimized receptor pharmacology in ideal pharmacodynamics, we believe the compound has the promise to deliver broad clinical utility in numerous autoimmune conditions. As you may recall, we completed enrollment of the Phase 2 trial with 157 patients in November of last year, and we expect to have Phase 2 data for ulcerative colitis this month. As a reminder, this is a randomized double-blind placebo controlled, parallel group, dose-ranging study to determine safety and tolerability that is being conducted at a number of sites globally. We enroll patients with moderate to severe ulcerative colitis, including specifically a three-point [Inaudible] Mayo score of 4 to 9 that includes endoscopic score greater than 2 and a rectal bleeding score greater than none.

Efficacy endpoints include improvement in the Mayo score, clinical score in total, partial, response-remission, mucosal healing versus placebo, and dose response. We look forward to sharing these Phase 2 data with you soon.Moving on to other indications, we continue to enroll patients in the primary biliary cholangitis, or PBC, study. As a reminder, PBC is a chronic liver disease where T Lymphocytes accumulate in the liver, resulting in destruction of the bile ducts. We view this disease as having significant unmet need and believe that S1P mediated reduction of lymphocyte levels has the potential to serve as a cornerstone treatment for PBC.

And finally, the pyoderma gangrenosum, or PG, trial is ongoing and currently enrolling patients.Moving on to to APD371, our peripherally restricted, highly selective full agonist of the CB2 receptor, as discussed previously, we believe there is significant unmet need in the treatment of visceral pain, as highlighted by the opioid public health emergency. Approximately one in eight patients with IBD is currently treated with opioids. APD371, with an initial focus on pain associated with Crohn's disease, may be an important therapeutic in this area. The trial is continuing to enroll and we intend to deliver top-line data in Q2 2018.So with that, I'd like to turn the call over to Kevin for a corporate update and our financial review. Kevin?

Kevin R. Lind -- Executive Vice President and Chief Financial Officer

Thank you, Amit. I'd like to start with a brief discussion of our Swiss manufacturing operations. On Monday, we announced the deal to sell our manufacturing plant in Zofingen, Switzerland, to Siegfried. We did this for two reasons.

First, managing the plant was a management distraction at a time when we are focused on our clinical pipeline, and operating as a commercial-manufacturing outsourcer is not part of our long-term strategy. Second, the plant was expected to lose significant amounts of money without the support payments from Eisai, which are expected to go away in the future. Now, I'll provide a brief review of our fourth-quarter and full-year 2017 financial results here and more detailed results are discussed in our press release.For the fourth quarter, revenues were $15.4 million, consisting of $14.2 million in collaboration revenue and $1.2 million in royalty revenue from Eisai. Included in the collaboration revenue is $12 million of upfront fees we receive from Everest in connection with the development and commercialization partnership which we entered into in the fourth quarter.

For the full year, revenues totaled $21.3 million, consisting of $19.6 million in collaboration revenue and $1.7 million in royalty revenue from Eisai, including the upfront payment from Everest and approximately $7.3 million of revenue associated with upfront payments from Boehringer Ingelheim and Axovant collaborations.In terms of cost, research and development expenses totaled $20.7 million in Q4 and $71 million for the year. G&A expenses totaled $8.3 million in Q4 and $30.3 million for the full year. We had a litigation settlement expense net, which was recorded in the previous quarter, related to the tentative settlement of the 2010 securities class action litigation, which totaled $12 million. Discontinued operations income of $3.1 million includes all revenues and expenses associated with our manufacturing operations that are classified as held-for-sale as a result of our planned divestiture of the Zofingen facility.Net loss for the quarter was $13.7 million, or $0.35 per share.

Net loss for the full year was $91.4 million, or $2.77 per share. At December 31, 2017, cash and cash-equivalents and investments balance was 271.3 million, and approximately 39.3 million shares of Arena common stock were outstanding.With that, I'll turn it back over to Amit.

Amit Munshi -- Director, President, and Chief Executive Officer

Thanks, Kevin. In summary, our focus remains to deliver these important, potentially transformational medicines to patients for these grievous conditions. We remain focused on executing a successful Phase 3 program for ralinepag, delivering Phase 2 results for etrasimod in ulcerative colitis this month, and delivering on the promise of APD371. We believe these compounds with their optimized receptor pharmacology and broad clinical utility all have the potential to be best-in-class or best-in-disease agents.

We look forward to a busy 2018 ahead of us with multiple value-creating opportunities.With that, I'll turn the call over to the operator to begin the Q&A session. Operator?

Questions and Answers:

Operator

Thank you.[Operator instructions]. And our first question comes from Joel Beatty with Citi. Your line is now open.

Joel Beatty -- Citi -- Analyst

Hi. Thanks for taking my questions. The first one is on ralinepag and the Phase 3 trial design for the accelerated approval setting. How can you be confident in the CPET endpoint, even though it's different from what was assessed in Phase 2? Thanks.

Amit Munshi -- Director, President, and Chief Executive Officer

Hi, Joel. this is Amit. Let me ask Preston to comment on that.

Preston Klassen -- Executive Vice President and Chief Medical Officer

Yes sure. Probably an important clarification. It's not accelerated approval. It's a stand-alone registrational study.

It's a typical program that would result in approval if the data are supportive. So exercise capacity is a valid measurement upon which to establish approval for an agent in pulmonary arterial hypertension -- the FDA has made that clear -- and it's also clear that cardiopulmonary exercise testing is a valid methodology to measure exercise capacity. In fact, the read-through measured by PBR is more directly correlated with some of the endpoints that you see in CPET compared to, for example, six-minute walk. So we will be testing six-minute walk in this study, but we fundamentally believe that cardiopulmonary exercise testing is a more informative and sensitive measure.

We think that's important in an incident patient population that will be also receiving essentially best standard of care dual-background therapy and then ralinepag or placebo on top of that, and we're confident in our ability to execute this across multiple sites, in multiple countries, in an efficient and effective manner to get the readout we need

Joel Beatty -- Citi -- Analyst

OK. And then a question on etrasimod. Can you talk a little bit about how much data will be shared when you announce the top-line results? Will it be just the primary endpoint of Mayo or could you have other criteria like remission or the breakdown on each of partial Mayo categories?

Amit Munshi -- Director, President, and Chief Executive Officer

Thanks, Joel. So, as you know, there's always a bit of a balancing act between providing data to The Street and being able to retain enough information for future publications. And so we'll be providing, of course, safety tolerability, lymphocyte reductions, which are important biomarkers, and then. of course.

the primary endpoint and a few select secondary endpoints and we haven't disclosed which ones yet. We'll provide few and we'll do what we did on the PAH data [Inaudible] give you enough information to be able to make a comparability assessment versus other products in the category. So we'll do our best to get as much out as we can while keeping in mind that we have to be mindful of keeping this important balance.

Joel Beatty -- Citi -- Analyst

OK, great. Thank you.

Operator

Thank you. And our next question comes from Jason Butler of JMP Securities. Your line is now open.

Jason Butler -- JMP Securities -- Vice President

Hi. Thanks for taking the questions. Just a couple on ralinepag. Can you talk about the inclusion of newly diagnosed patients in the Phase 3 plan? Any assumptions on how this population could respond similarly or different to the prevalent population you tested in the Phase 2 trial and how you think about the ease of enrollment or speed of enrollment for this kind of patient population? Thanks.

Preston Klassen -- Executive Vice President and Chief Medical Officer

Yes, sure. This is Preston. I'll take that. We've looked at both the literature and then had extensive conversations with our key opinion leaders who are clinical and scientific experts in the field and believe that the ability to demonstrate a delta from placebo is certainly maintained and potentially even greater in the incident-patient population compared to the prevalent population.

So this could go lots of different ways if you think about how this comes together, but there's nothing in our discussions with, again, our advisors or our read-through on the literature that suggests that we would have a diminished ability to detect a difference in terms of ralinepag compared to placebo. What is important is making sure that we are using the proper methodology and using that methodology correctly to measure exercise capacity, which is one of the reasons why we've added a cardiopulmonary exercise testing to six-minute walk to get the best kind of 360-view of exercise capacity. And then, so did that answer all the questions or was there another one there?

Jason Butler -- JMP Securities -- Vice President

Yes, just on how you think about enrollment of this population given the existing therapies that are out there today?

Amit Munshi -- Director, President, and Chief Executive Officer

Yes, sure. Actually, I think it's a benefit in terms of enrollment, because essentially what we are providing any incident patient who wishes to come into the study is best standard of care regardless of which country you're in in the form of dual-background combo therapy, and then providing in addition, the study drug, which is either a new investigation agent, ralinepag, or a placebo. So particularly, well, it's really across all countries I would imagine that this is an attractive option for physicians. We do know of at least one other incidence of [Inaudible] triple-combo therapy in the space, it's a non-registrational program but it is in a space, and it is [Inaudible] enrolled briskly.

And so we're confident in our ability to execute the study in a timely manner. But, again, we'll talk more about overall timeline milestones for the study more specifics around the study design and statistical powering assumptions, etc. once we lock things down and we'll roll that out around mid-year.

Jason Butler -- JMP Securities -- Vice President

Great. Thanks for taking the questions and looking forward to the etrasimod and the 371 data soon. Thanks.

Operator

Thank you. And our next question comes from Jim Birchenough of Wells Fargo Securities. Your line is now open.

Jim Birchenough -- Wells Fargo Securities -- Managing Director

Hi, guys. Congrats on the progress and thanks for all the details. So just on ralinepag, just trying to understand the patients in the incident-population study. Would these patients be on a stable background for some period of time? Are they just in standard of care before adding ralinepag? Or would you be starting all three at the same time? Just trying to understand how that plays out.

And then also, Preston, you mentioned relationship between PVR and exercise-capacity improvement and six-minute walk improvement. Can you maybe go into bit more detail there? What level of PVR improvement translates into an improvement in exercise capacity? Thanks. And then I have a follow-up.

Preston Klassen -- Executive Vice President and Chief Medical Officer

Sure. I'll start with -- sorry, can you repeat the first part of that question again?

Jim Birchenough -- Wells Fargo Securities -- Managing Director

Yes. Just trying to understand in the incident-patient population study, will patients be started on all three at once or would they have to be on dual-background therapy for some period of time and stable and then add ralinepag? Just trying to understand the logistics of that.

Preston Klassen -- Executive Vice President and Chief Medical Officer

Yes. So I'll answer it at a highlevel, again, we're going to go through to the details of mid-year in terms of the specifics around exactly how patients will come in, more details on the protocol, endpoint definitions, that kind of thing. But suffice it to say it's closer to a newly diagnosed patient coming into the study and being placed on the dual-background therapy agents and then ralinepag or placebo work in a fairly contemporaneous fashion. So some of those drugs, including ralinepag, need to be titrated and so we're working at the details of exactly how we layer on for these, but it would not be the case that they would be on stable background therapy for a lengthy period of time because then they would not be incident patients, they would be prevalent patients.

Did I answer the part first?

Jim Birchenough -- Wells Fargo Securities -- Managing Director

Yes. I guess, just to want to understand in terms of when you start these background therapies, there's a period of time to derive a benefit, and so just seems like you got a moving part if you're starting those therapies and at the same time starting ralinepag. So I guess how do you balance that? I understand that at some point they become a prevalent-population patient, but how do you balance the moving target of their own background therapy still being optimized before adding ralinepag?

Preston Klassen -- Executive Vice President and Chief Medical Officer

Yes. I think what we've seen with other trials and incremental or additional add-on to therapy is no diminution of the ability to detect and improvement of one addition over some other kind of combination, I'll just point to the AMBITION trial as a good example of that, in terms of incident patients and testing two drugs compared to one drug. So we're essentially just taking it to the next step. We're testing three drugs compared to two drugs.

And we believe that you'll be able to see that kind of incremental benefit in a similar fashion. And we'll again provide more details mid-year about the kinds of patients we're bringing into the study. Obviously, they had to have a certain amount of disability, so to speak, or disease so that you can be kind of confident that you can detect that difference as you're adding on three compared to two. So more details to follow in terms of specifics around the study design and how patients come into the study.

And then with regard to your second question on the correlation, I was speaking broadly to a correlation across two continuous variables, so to speak, across the spectrum as you correlate changes in PVR to changes to the endpoints of six-minute walk, you do see that direct correlation, and that's been documented in the literature in terms of looking specifically at Peak V02 and in particular the slope, VE/VC02, and correlating that with PVR.

Jim Birchenough -- Wells Fargo Securities -- Managing Director

And then maybe just one more on etrasimod and maybe for Amit, just maybe set the expectations if you would, for the etrasimod data and what's the best benchmark for efficacy when we think about things like ozanimod? And then in terms of avoiding class labeling on the heart-rate effects, do you think we need to see an absolute absence of heart-rate effects or just something less than what we've seen with ozanimod? Thanks.

Amit Munshi -- Director, President, and Chief Executive Officer

Sure. What we've talked about in terms of this study, is fairly straightforward as the Phase 2 study. We're looking for really three things, safety and tolerability in these patients and I'll come back to the heart-rate issue in a moment. The second part we'll be looking for is a dose-dependent lymphocyte reduction is a key biomarker for activity of this drug in patients.

And then No. 3, we'll be looking for a strong clinical signal across the partial Mayo Score we selected, which we think is a robust measure of activity. There'll be components of this which you'll be able to compare head-to-head against ozanimod, although recall that ozanimod made [Inaudible] on the remission by a single patient. So there'll be areas you can look at and try to compare, but patient population is different.

The studies were not done in a contemporary time fashion. So a couple of years apart in terms of when the studies were done, so there are some differences in terms of thinking about the study. So, with all those caveats in the backdrop, we'll provide enough information that you'll be able to take a look at things cross-trial. The last part of the question around heart-rate effects, we'll see what the data says in terms of what the heart-rate effects are.

I think as you know, ozanimod uses the titration schedule to bypass heart rates, or to mitigate heart-rate effects. We don't have a titration schedule, so we'll see what that results in. But we think the heart-rate effects as a class are an on-target effect. And we'll see to the extent that we didn't see substantial heart-rate effects in the Phase 1 study, how they translate into the safety study with patients.

And, again, these are on-target activities for the S1P category and with no titration schedule, we'll be looking at our non-titrated schedule versus their titrated schedule. And I think you can make a judgment whether it's meaningful or not when we have the data out.

Operator

Thank you. And our next question comes from Jessica Fye with J.P.Morgan. Your line is open.

Jessica Fye -- J.P.Morgan -- Analyst

Thanks for taking my questions. With the ralinepag Phase 3 program now set, what's your expectation for the cost of the overall program? And when should we expect the first Phase 3 readout? I know you mentioned finalizing the protocols too. Can you elaborate on what it is that you're finalizing with those Phase 3 study designs?

Amit Munshi -- Director, President, and Chief Executive Officer

Sure. Let's take those in two separate parts. I'll have Kevin comment on the cost and how we think about that in terms of the way we financed it. And then I'll comment on the timing.

Kevin R. Lind -- Executive Vice President and Chief Financial Officer

Yes. So in terms of the cost, we haven't given complete guidance around that, but what we've said was that the financing in July of last year should provide us with sufficient capital to get to Phase 3 data and we're still at that point.

Amit Munshi -- Director, President, and Chief Executive Officer

Thanks. And then the second part of the question, Jess, in terms of what we expect on timing, we haven't disclosed any timing. We'll do that mid-year as we wrap up the protocol. You ask what are we still waiting on on the protocol.

We're just kind of pressure-testing our own assumptions, running simulations, making sure that we get this right right out of the gate. So, its one of the situations where we definitely want to make sure we've got all the all i's dotted and t's crossed before we start talking about the details on the protocol.

Jessica Fye -- J.P.Morgan -- Analyst

OK, got it. And just a couple of more on etrasimod. When should we expect the PBC and PG data and where does enrollment stand in those studies? And then sort of separately assuming positive data in UC, can you just share you latest strategic thinking around that asset and your interest in partnering it versus developing independently in UC? And would you want to see more PBC or PG data before making a call on how to advance the asset? Or does the positive data in UC mean that that's where you'll take it forward?

Amit Munshi -- Director, President, and Chief Executive Officer

Sure. PG, PBC we haven't provided any details on timing or enrollment. We'll continue to enroll those trials as rapidly as we can and we'll come back to you with details as we get closer to wrapping up enrollment. In terms of the strategic implications on ulcerative colitis and etrasimod, if we're fortunate enough to have positive data on ulcerative colitis with etrasimod, our current game plan is we would take this forward ourselves in the major markets.

As you know, we completed a deal in China last year. We'll be looking at few other markets where it probably doesn't make sense to enter ourselves, but our current game plan is to retain the asset and take it forward in ulcerative colitis, and again, if we're successful, that would be independent of the PBC and PG readout. So that's the current thinking and, again, we'll see what the data looks like and what the market conditions look like. There's a lot of variables here, but given everything else being equal, I think we would lean toward taking this forward ourselves.

Jessica Fye -- J.P.Morgan -- Analyst

OK. Thank you.

Operator

Thank you. And our next question comes from Alan Carr with Needham & Company. Your line is now open.

Alan Carr -- Needham & Company -- Analyst

Thanks for taking my questions. One, around burn -- what your expectations for cash burn in 2018? And then with respect to ralinepag, have you completed all your discussions with the FDA? Are there no other questions that need to be resolved with them? And I take it they're OK with either the exercise capacity or the event trial, either one of those on their own as being adequate for registration?

Amit Munshi -- Director, President, and Chief Executive Officer

Yes. Alan, hi. This is Amit. Let me take the second part of that first and then hand it off to Kevin to talk about the burn.

We don't disclose as a matter of rule, our ongoing conversations with the agency, whether they are single, static conversations, meetings, or back-in-forth or written communication. As you know, some of these things can be more dynamic than static. So, we have what we need to design our clinical program and we're not going to comment any further on regulatory interactions, U.S. or ex-U.S.

beyond that. We do believe that both studies independently are registration-worthy. So with that let me ask Kevin to talk about the burn.

Kevin R. Lind -- Executive Vice President and Chief Financial Officer

Yes. Thanks, Alan. At this point, we're not really willing to give guidance on 2018 burn, given we're so close to etrasimod data, and that will have a significant impact on the burn as we look at the year going forward. But [Inaudible] we expect to give some guidance after we see the etrasimod data.

Alan Carr -- Needham & Company -- Analyst

OK. And then, I guess, one more thing on etrasimod. You mentioned that, assuming a positive outcome, trying to bring it forward and you see on your own, at least the U.S., you mentioned that, I believe you're going to look at some other indications later this year. What are your thoughts on how many indications you plan to explore in parallel for this drug?

Amit Munshi -- Director, President, and Chief Executive Officer

Sure, yes. I appreciate the question. The way we think about this is, as we previously mentioned, we did have a very exhaustive analysis last year looking at 21,000 autoimmune conditions and looking at S1P modulation. And we identified approximately 80 conditions which we think are very interesting for S1P modulation and etrasimod over time.

Overlay on top of that some really specific kind of a backdrop around therapeutic-area focus. So if ulcerative colitis is successful we're moving forward, we've got PBC in the Hep space, we've got a couple of potential anchors in the G.I. Hep space, so we'd been looking at additional indications there first before we start expanding beyond that to other therapeutic areas. So trying to maintain some therapeutic focus.

And that relates really, Alan, to the first part of your question which is, if we're planning to take this forward ourselves it's important to maintain some kind of more narrow therapeutic focus as a company. So [Inaudible] start thinking about the company forming around a cardiopulmonary franchise and then around a GI Hep franchise. So that's kind of how we think about it and how we'll continue to think about it through the back end of 2018.

Alan Carr -- Needham & Company -- Analyst

Thanks very much.

Operator

Thank you. And our next question comes from Joseph Schwartz with Leerink Partners. Your line is now open.

Joseph Schwartz -- Leerink Partners -- Managing Director

Great. Thanks for taking my question. I was wondering if we could get your thoughts on the ozanimod RTF and the impact if you see any on etrasimod. Is there anything that you see the need to do differently now or in addition to what you are already doing for etrasimod in order to address whatever it is you think Celgene have to do for ozanimod now?

Amit Munshi -- Director, President, and Chief Executive Officer

Yes. Look, we're, I don't want to pretend I know what's going on inside Celgene in their communications with the agency. I will tell you what we know. We know that we believe we've got a far cleaner molecular than ozanimod, as has been well-documented in the literature and the European registration documents, European regulatory documents, ozanimod has quite a few active metabolites.

Some of them stick around a lot longer than the parent molecule, and whether or not that's a cause for concern for regulators, we can't read into that too much. What it does do is begin to diminish the time period and the gap difference between their time to market and our time to market. So I think that's one important variable for us to consider. And the second important variable is that we just fundamentally believe that we've got a cleaner compound and we can learn from their experiences as they move forward.

But, as you know, our compound was homegrown and the researchers here at Arena spent a good part of a decade really optimizing these compounds, and so there's a lot to learn. It's important to understand that this is a molecule-specific, not a class, issue. And the information we get from their ongoing discussions with the agencies will, of course, help us in making sure we can check all the boxes the agency's looking for. So I think it fundamentally comes down to the fact that we believe we've got a cleaner molecule.

Joseph Schwartz -- Leerink Partners -- Managing Director

Thank you. So, on the clinical-development front for etrasimod, UC has obviously become a pretty busy and competitive space in which to execute studies. So what are the things that you've focused on in order to balance expediency with quality data and what are the things that you think are in your control versus not in your control in this regard?

Amit Munshi -- Director, President, and Chief Executive Officer

Sure. Joe, are you talking about backward-looking on the Phase 2 study or you're thinking forward on the Phase 3 study?

Joseph Schwartz -- Leerink Partners -- Managing Director

I am just thinking your current study that we'll get data on soon, just in terms of execution and the like, given enrollment can be challenging. What trade-offs have you been willing to make and not make in order to balance expediency with quality data?

Amit Munshi -- Director, President, and Chief Executive Officer

Yes. So let me talk backward-looking. We were not willing to make any trade-off in terms of quality of data. We stuck really tight to a robust quality system in terms of managing the study.

In fact, if you look back historically, the study took little bit longer than expected to enroll given the broad competitive nature of enrollment in this area. But we did learn along the way that it takes a lot of on-the-ground support directly from the company. As you know, the company was relatively small about 18 months ago. We've put on the ground resources really kind of site by site and in order to get the study enrolled, but we were willing to compromise in terms of our inclusion criteria whatsoever.

What's really promising looking forward in ulcerative colitis is we went through this broad bolus of studies over the last few years and it looks like from all the data we've been able to gather in our feasibility work, that we're coming off the back end of that. So we're kind of it's a tail end of series of a large studies out there with things like biosimilars, for example, and so the pool of the patients who will be coming off of multiple biologics and multiple studies will look a little bit more robust going forward than they have in the last two or three years. So that's just sort of, most of these diseases go [Inaudible] and we're coming off the back end of that wave.

Joseph Schwartz -- Leerink Partners -- Managing Director

Great. Thank you for taking my questions.

Operator

Thank you. And our next question from Bill Tanner with Cantor Fitzgerald. Your line is now open.

William Tanner -- Cantor Fitzgerald -- Managing Director

Thanks for taking the question. I had a couple of them, maybe for Preston. Obviously with the notion that the company might provide an update in the mid-year time frame, more detail on ralinepag program, it would seem that there has been some kind of a meeting of the minds between the company and the regulators on the design of the endpoints and just if you could just maybe generally speak to the regulator thoughts on what looks to be a contemporary design for a contemporary program. And I guess maybe specifically on CPET certainly would seem that there has been some discussion or debate about that as an endpoint? And then, the second question from the outcome study, I think you made a comment about wanting to increase the physician experience of the drug, which makes a lot of sense to us.

And just if you could comment a little bit on maybe the number of sites or how big of a footprint you think that study could actually create in terms of raising physician awareness with the compound?

Preston Klassen -- Executive Vice President and Chief Medical Officer

OK, sure. So I'll start with the question about regulatory, I guess, bit of acceptance of the CPET in terms of exercise capacity, that's part of the question. So again, just at a high level, we're not going to get into the details of the back-and-forth that we have had and will have in the future with the agency, but we try to give as much clarity as we can on the general direction. It's exceedingly clear that drugs have been approved on exercise capacity.

In fact, most of the drugs in PAH have been approved on exercise capacity. And it's also exceedingly clear that drugs get approved on time-to-clinical-event or clinical outcomes studies. And so that's not a big stretch in either way, and, as I've described, we intend to have kind of a dual-pronged approach, if you will. We want to cover both exercise capacity, -- well, actually, typically, what we really want to do is cover incident patients and then the broader prevalent-patient populations.

So we're looking to get the program to address a broad range of patients. We believe that for each of those, each is conducive to particular kinds of studies. We think the incident population is more conducive to exercise capacity and that enables us to have a fixed duration of treatment. And we think the prevalent population is better-served with time-to-clinical-event study, which is something we need for a broad, the broadest level possible anyway.

So, again, we're trying to cover a very comprehensive Phase 3 program. Now, we have provided some guidance in past communications, and I've reiterated that today, in terms of FDA discussion around exercise capacity particularly, because we just want to make it clear that exercise capacity even today in the day of outcome studies, exercise capacity remains an approvable measure, approval endpoint or construct for drugs in the PAH setting. The FDA has made that abundantly clear and not only in our communications but in other public venues.And then specifically I think you referenced some possible degree of controversy, I'm not sure exactly what that refers to. With respect to the agency's action on cardiopulmonary-exercise testing, it's fairly consistent.

They have accepted cardiopulmonary exercise testing endpoints as primary endpoints in other Phase 3 programs. We've had specific discussion with them about the methodology, CPET methodology to measure exercise capacity. And as we've stated previously and I reiterated today that is on solid foundation. So, again, we're not going to talk much more about those discussions.

It's just very clear that you can do a time-to-clinical-event study and that gets drugs approved. You can also do exercise capacity study. That can get drugs approved. We're taking the push to cover the spectrum.And then in terms of the footprints and physician experience, I'm not going into the details about the operational elements.

As I said, we will be providing that detail mid-year. Just at a high level, the time-to-clinical-event studies tend to be larger. We are estimating around 700 patients, as I mentioned in my scripted comment. And so we will provide more detail in terms of where we expect to get those patients, the number of sites, the geographic regions, and what we know about background therapy in those regions and how that will be important to take into account.

So we can provide much more of that detail as we lock in everything and, as Amit said, we just want to dot the i's cross the t's and make sure that we're providing all of the information we need to at a timely fashion. So that will start around mid-year.

William Tanner -- Cantor Fitzgerald -- Managing Director

OK, thanks. That's helpful, Preston, thanks. And just on the last program, I think you mentioned that comparing ralinepag with other oral or prostacyclin agonists, for competitive reasons not wanting to reveal much. I'm assuming then when the IND is filed or when the trial is about to start that's when people would get a sense to as to the specific compounds, ralinepag would be compared against and maybe the answer's pretty obvious.

I'm assuming that it's going against the newer agents or those that may have better traction in the marketplace?

Preston Klassen -- Executive Vice President and Chief Medical Officer

Yes, that information will come out certainly earlier than the filing of the IND. We would intend to have that information available at the time of the NDA submission. And as you know, whenever you start study goes on clinicaltrials.gov and there's certain amount of information and that kind of thing. So I view that study is part of the Phase 3 program, it's not a co-registrational study.

I wouldn't expect to get an indication statement on the basis of that specifically, but we will provide additional information on studies as we begin to implement them.

William Tanner -- Cantor Fitzgerald -- Managing Director

Got it. OK, thanks very much.

Operator

Thank you. And I am not showing any further questions at this time. I'd now like to turn the call back over to Amit Munshi for any closing remarks.

Amit Munshi -- Director, President, and Chief Executive Officer

OK, thank you. So thanks, everyone, for joining us today. We look forward to updating you on our progress as we continue to execute on the opportunities ahead of us. We are excited about 2018 as it shapes up and we'll be back to you shortly on the etrasimod data.

So thank you again.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a wonderful day.

Duration: 52 minutes

Call Participants:

Kevin R. Lind -- Executive Vice President and Chief Financial Officer

Amit Munshi -- Director, President, and Chief Executive Officer

Preston Klassen -- Executive Vice President and Chief Medical Officer

Joel Beatty -- Citi -- Analyst

Jason Butler -- JMP Securities -- Vice President

Jim Birchenough -- Wells Fargo Securities -- Managing Director

Jessica Fye -- J.P.Morgan -- Analyst

Alan Carr -- Needham & Company -- Analyst

Joseph Schwartz -- Leerink Partners -- Managing Director

William Tanner -- Cantor Fitzgerald -- Managing Director

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