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Arena Pharmaceuticals Inc (NASDAQ:ARNA)
Q4 2019 Earnings Call
Feb 26, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to Arena Pharmaceuticals Financial Results and Corporate Update Conference call.

[Operator Instructions] I will now turn the call over to Kevin Lind, Chief Financial Officer of Arena. Please go ahead.

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

Good afternoon. 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 objectives, plans, goals, strategy, expectations, beliefs focus, regulatory activities, R&D programs, product candidates and operations and those of our collaborators and licensees and other statements that are not historical facts. These statements are made in the context of the risks and uncertainties that are discussed in our filings with the U.S. Securities and Exchange Commission, which can be found on the SEC website at www.sec.gov and include risks related to timing of preclinical and clinical studies, including patient recruitment for clinical trials, which is competitive and challenging and may take longer than we project. Preclinical and clinical study results and the timing of such results, which may not be as expected or sufficient for further development, regulatory approval or commercialization, timing and outcomes of regulatory interactions and decisions collaboration and licensing activities and the amount allocation and projected use of our NOL financial and other resources. Our actual results may differ materially from our forward-looking statements.

Now I'd like to turn the call over to Amit.

Amit D. Munshi -- President and Chief Executive Officer

Thanks, Kevin. Hi, everyone, and thanks for joining our call today. Today, I'll go through a corporate and management overview and then Preston will provide pipeline updates, and we'll conclude with a financial review of the fourth quarter and full year 2019. In 2019, we made exceptionally strong progress across all fronts in the company, and we importantly maintained that cadence into 2020. Critically, we remain on track with our near and midterm operational objectives including delivering up to eight major data readouts between 2020 and 2021. Last month, we reviewed our strategic plan that sets the foundation for the future of Arena, as we enter the next stage of the evolution of the company. We outlined two specific and distinct areas of opportunity. First, expanding the value of the etrasimod into additional indications; and second, further unlocking the value of the historical Arena G protein coupled receptor, or GPCR research platform. Our new strategic footprint, ongoing programs and new initiatives made for catalyst which horizon for the company. I'm expanding the value of etrasimod. We continue to believe that a once-daily oral agent with etrasimod's profile offers tremendous promise in the treatment of a broad range of immune-mediated inflammatory diseases. To that end, we are initiating two new programs, both in the area of current therapeutic focus. In GI, a Phase IIb program in eosinophilic esophagitis or EOE and in dermatology, a Phase II program in alopecia areata or AA. We expect to initiate both these trials this year, and Preston will provide more details on each of these programs later on this call.

To unlock additional value, we turn our focus to harvesting the broad and diverse technologies available to us as a result of the historical two decades of world-class TPCO discovery research at Arena. With the expansion of the Beacon discovery collaboration through this project Cabrio and the establishment and advancement of Arena Neuroscience. Project Cabrio with Beacon discovery represents the next-generation of oral compounds, which may transform the way autoimmune disease are approached and treated. Project Cabrio includes both novel and validated targets and compounds, and represents the foundation of the long-term growth of our pipeline. Arena Neuroscience represents an opportunity to replicate the strategy we brought to Arena 3.5 years ago. 3.5 years ago, we rebuilt the company in the potential first and best-in-class compounds. We reset the financial framework for the company with pivotal transactions and have since continued to make substantial progress across all of our objectives, and now we get to do this again in neuroscience. On the back of multiple clinical and preclinical compounds and an emerging platform in microglial inflammation, we are placed to progress important medicines and uncover important value for our shareholders. In that context, I'm incredibly excited that Kevin Lind has agreed to lead our subsidiary, Arena Neuroscience, Inc. as its President and Chief Executive Officer. As all of you know, Kevin has served as our EVP and CFO since June of 2016 and has been an integral part of the turnaround of arena.

His insights and creative solutions in challenging times and uniquely positioned us for the future. We believe leveraging Kevin skills to advance and lead the Arena Neuroscience unlock the value we believe sits within this platform. I'd like to personally take this opportunity to thank Kevin for both his historical contributions as well as taking this leadership role at Arena neuroscience. Joining us as Executive Vice President and CFO, is Laurie Stelter. Laurie is an accomplished executive with significant financial expertise and will be an exceptional addition to our team. Laurie brings with her 20 years of experience in biopharmaceutical management, including leading teams in finance, treasury, Investor Relations, business development and emerging markets. Prior to Arena, Laurie had management level positions at several life science companies, including Halozyme and Amgen. Having previously worked with Laurie in the original build of immunology business, I'm confident in her leadership as we continue to scale the company while being prudent in our management of resources. We are thrilled to welcome Laurie to the Arena team.

With that, I'll turn the call over to Preston to provide more details and updates on our pipeline. Preston?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Thanks, Amit. Our most advanced program is the global Phase III elevate UC registrational program, which consists of two key trials, Elevate UC 52 and Elevate UC 12. Evaluating etrasimod 2-milligram in subjects with moderate to severely active ulcerative colitis. Enrollment in Elevate UC 52 is on track, and we plan to begin enrollment in Elevate UC 12 later this year. We look forward to sharing the Phase III data sets in 2021. We are pleased to announce that the Phase II OASIS trial data were recently published in the prestigious journal, gastroenterology, we believe these data support etrasimod's highly favorable profile compared to other existing and developing therapies in UC. Turning now to our second GI Indication Crohn's disease earlier this year, we initiated a Phase II/III program and enrollment is progressing. This program consists of a Phase II dose-ranging trial cultivate with an operationally seamless transition into the Phase III portion of the program. We are choosing to focus on an operationally seamless Phase II/III program to afford arena, the opportunity to examine the data from cultivate, make a real-time decision on dose for the pivotal portion of the program, publicly released those results as a data catalyst around midyear 2021 and still realize the operational synergy inherent to a seamless transition into the pivotal portion of this program. Our third GI indication is in development is to evaluate etrasimod in eosinophilic esophagitis. EOE is a chronic lifelong condition characterized by erosive inflammatory lesions in the esophagus, causing persistent heartburn like chest pain and difficulty swallowing that can lead to fibrosis, stenosis and food impaction in the esophagus. Importantly, there is high patient need and physician demand for a safe and effective non-steroid oral therapy for this disease. There are no approved therapies for EOE in the U.S. and those available ex-U.S. are limited and suboptimal for most patients.

We're excited to be kicking off the Phase II dose-ranging trial later this year, which we expect to be Phase III enabling, and we believe recent precedent exists for compounds in this development space receiving orphan designation, which could allow a streamlined Phase III programs. We look forward to updating you on the status is program as we initiate our Phase II work. Moving now to etrasimod in dermatologic diseases. We are currently pursuing development programs in atopic dermatitis and alopecia areata. We believe that etrasimod has great potential in dermatologic conditions that are T-cell mediated. Because both indications are de novo clinical programs, I will point out some key reasons why we believe etrasimod has the potential to disrupt the immune-based inflammatory hypophysiologic process to modify the progression of these conditions and improve patient symptoms and outcomes. Let's start first with atopic dermatitis. AD is a chronic inflammatory time disease associated with cutaneous hyperreactivity to environmental triggers and is often the first step in the progression of systemic allergic disease that can include asthma and allergic rintis. The clinical phenotype that characterizes atopic dermatitis is a product of interactions between the environment, susceptibility genes, effective skin barrier function and, of course, immunologic responses. Exposure to environmental allergen is recognized by dendritic cells in the epidermis that then traffic to lymphnodes, present antigen and activate CD four and CD8-positive T cells, which then traffic back to the skin and drive inflammatory tissue injury, via cytokine expression and recruitment of other immune cells. Etrasimod has impact on each step in this pathologic disease process. Specifically, dendritic cell traffic into lymph nodes is reduced, which reduces the presentation of antigen to T cells, resulting in reduced activation of those CD4 and CD8 positive cells. Activated T cell traffic is also directly reduced. So fewer T cells reach the target tissue site of injury. And along the way, cytokine expression by T helper cells is reduced. Thus, the Th2 and Th1 profile common to atopic dermatitis is lowered and we see reduced expression of the associated cytokines such as IL four and 5.

And downstream of that, we also note that recruitment of other immune effector cells are reduced, such as eosinophils. All of this has been documented in preclinical assessments with etrasimod and we are confident in the scientific rationale for etrasimod, and we are also on track with the ongoing Phase IIb ADVISE trial in atopic dermatitis, which is testing 1-milligram and 2-milligram etrasimod compared to placebo, among patients with moderate to severe AD and inadequate response to possible steroids. We look forward to sharing these first clinical results in a later this year. I will now turn to our second dermatology program, alopecia areata. AA is a chronic autoimmune disorder, which activated CD4 and CD8-positive T cells attack hair follicles destroying growing hair. AA is a common disorder affecting one to two per thousand in the population, and causing hair loss in some or even all areas of the body, causing major psychosocial stress, including a clear reduction in quality of life intensive well-being, social phobia, anxiety and depression. Current treatment for alopecia is suboptimal and there is no single therapy that is sufficient for the majority of patients. Now similar to what I described above, etrasimod reduces the activation of the CD4 and CD positive T cells and their traffic into the hair follicle. Reduction of CD4 and CD positive T cells is one of the most widely recognized aspects of the mechanism of action for S1P modulators.

This year, we will initiate a Phase II proof-of-concept trial in AA. It will be a randomized, double-blind, placebo-controlled trial evaluating 2-milligram etrasimod once-daily in subjects quite moderate to severe alopecia areata, as assessed by the severity of alopecia 201 or SALT one scale with a score of 50 or higher. We will enroll approximately 35 patients in the U.S. and Canada. We believe that initial positive data from this trial may translate into breakthrough designation with the FDA, allowing an accelerated Phase II/III program with attractive development time lines, similar to recent precedent. We look forward to providing additional detail on study design and program development in terms of these plans over the next few months. Finishing up now with the rest of the pipeline. For olorinab, we are pleased with our enrollment progress and look forward to delivering Phase IIb top line data in the second half of the year in IBS. And finally, with regard to our cardiovascular asset, APD418 which is targeting acute heart failure, we have initiated Phase I and have been granted fast track designation from the FDA. We expect Phase I data later this year, which will be followed by a Phase II proof-of-concept trial that we'll read out in 2021.

With that, I'd like to turn the call over to Kevin to review our financial results. Kevin?

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

Thanks, Preston. I'll now provide a brief review of our fourth quarter and full year 2019 financial results here. While more detailed results are discussed in our press release from earlier today and in our 10-K, which will be filed this week. For the fourth quarter of 2019, revenue totaled $3 million primarily consisting of $5 million of development milestone revenue from Everest, offset by a reduction of estimated future royalties from Belviq sales. In terms of costs, research and development expenses totaled $74.6 million in Q4, including $7 million related to noncash share-based compensation. G&A expenses totaled $22.2 million, of which $6.3 million was share based comp. Net loss for the quarter was $88.3 million or $1.76 per share on a basic per share basis. For the full year 2019 results, revenues totaled $806 million, primarily consisting of $800 million of revenue from the United Therapeutics upfront payment. In terms of costs, research and development expenses totaled $231.5 million, including $27 million related to noncash share-based compensation. G&A expenses totaled $77.6 million, of which $25.7 million was share based comp. Income tax provision was $110.3 million as a result of utilizing the deferred tax assets that were recorded in the fourth quarter of 2018. Net income for the year was $397.6 million or $7.99 per share on a basic per share basis. At December 31, 2019, cash, cash equivalents and investments was approximately $1.1 billion and approximately 50.2 million shares of Arena common stock were outstanding. In terms of guidance, we had approximately $70 million of cash burn in the fourth quarter of 2019, excluding onetime items. We anticipate Q1 2020 burn excluding onetime items, to be approximately $95 million and increasing thereafter, quarter-by-quarter in the high single digits to low double digits as we continue to ramp up enrollment and scale manufacturing, clinpharm and nonclinical toward a potential NDA and bring online additional clinical trials as outlined by prospects. Finally, I'd like to thank the entire Arena team and broader ecosystem supporting the company, including our shareholders, who I have had the privilege of working with over the past three years. It's been a phenomenally rewarding experience.

And as Amit pointed out, I look forward to running the Arena playbook a second time. Going forward, I'm enthusiastic about the opportunity to continue to build value for patients, the community and our shareholders. Amit?

Amit D. Munshi -- President and Chief Executive Officer

Thanks, Kevin. As we continue on our path to deliver important medicines to patients. We remain focused on making significant progress across all aspects of the company and delivering across all the major deliverables as we build a world-class company. Our emphasis on execution in terms remain on track of all the major catalysts for the company, and we look forward to sharing our exciting milestones in 2020 and beyond, including the upcoming initiations of the EOE and AA studies, the ELEVATE UC 12 study and delivering important Phase IIb data later in the year for etrasimod in atopic derm and the and IBS. As a final note, I want to take the opportunity to thank Kevin for his continued leadership and welcome Laurie to the Arena family. Over the next several quarters, we're excited to share more on our progress on arena neuroscience.

I will now turn the call over to the operator to begin the Q&A session. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jason Butler of JMP Securities. Your line is open.

Jason Butler -- JMP Securities -- Analyst

Hi, thanks for taking questions. Just a couple on the dermatologic indications. Can you just, first of all, talk about how you think about the commercial infrastructure and how you would build out the commercial infrastructure-focused on derm and then can you talk briefly about how you think about the payer landscape for alopecia?

Amit D. Munshi -- President and Chief Executive Officer

Sure. Thanks, Jason. We in selecting this your question actually goes back to actually why we select specific indications and how we select them. And it really starts with following the biology in exclusive detail. And then we proceed to build a whole slew of animal models, and work with world experts in the state to make sure we're heading down the right path in each one of these indications. And then the third part, we really think about it as the commercial aspects that you're talking about today. They're all kind of working on the concentric circles. On the commercial side, we're extremely excited about dermatology, like GI, a specialty indication where a company in Arena's position can, over time, build the requisite infrastructure to commercialize. We know that these areas are going to become increasingly competitive, but we think that's actually a real positive. There's a tremendous unmet need. And these products give patients lots and lots of access to drugs. When we think about the payer landscape, it's difficult to think about the payer landscape with a single indication in isolation. Payers will routinely reimburse products across multitude of indications and, in fact, the broad range of indications provides a strategic advantage for Arena in getting payer access compared to competitive products. So we think that's going to be really critical. And as you see in the anti-TNF space, for example, again having a broad range of indications, plays a very substantial in getting payer access. And we think that's one of the advantages to the strategy that we're pushing on.

Jason Butler -- JMP Securities -- Analyst

Okay, great. Very helpful. And let me just add my congratulations to both Kevin and Laurie on their new roles.

Amit D. Munshi -- President and Chief Executive Officer

Thanks.

Jason Butler -- JMP Securities -- Analyst

Thank you.

Operator

Our next question comes from Alethia Young of Cantor Fitzgerald. Your line is open.

Anna -- Cantor Fitzgerald -- Analyst

Hi, This is Anna on for Alethia Olivia. Just wondering if you could provide any additional color on the rationale behind carving out the work in neuroscience now kind of at this early stage and what strategic flexibility that separation gives you? And then just given the history of S1P as a target in MS. Is there any interest in that disease area, specifically or any existing work that you feel you can leverage more broadly in neuro?

Amit D. Munshi -- President and Chief Executive Officer

Sure. So let me take a part of this, and I'll have Kevin comment on additional. The entire idea of carving this off into a separate entity is actually multiple components. One is we're still a growing and evolving company, coming off a pretty massive reset of the company back in 2016. So with all the Phase III and Phase II programs we have ongoing, it's important that if we're going to pursue these important products in the neuroscience space, that we want to have some focus on it. And no better way to create focus and to put a senior leadership team around the compound. So that's sort of point number one. Point number two is, while in the near-term as we progress these compounds, Arena got the financial wherewithal to progress them. There will be a point in time which additional capital will be required. And this allows us to bringing capital into the neuroscience portfolio, and then potentially eventually spin it out and the complete stand-alone enterprise. So it creates a tremendous amount of flexibility for the company over time. And I think that's really important. But that's secondary to really this idea of creating incredible focus on these compounds.

It's really fascinating if you kind of rewind back to 2016, we had a couple of compounds that had come out of Phase I. That was sort of early Phase II, and we were able to really build around us. And this is a very similar situation. We've got three compounds that either clinical or preclinical stage. We've got an underlying platform in microglial inflammation. And it doesn't look too dissimilar than to Arena kind of mid-2016. And I think that's one of the reasons I think Kevin is a perfect person to run this enterprise. On the MS question, we're not going to get into a lot of detail on indications yet, because there's a lot of work to be done on these compounds. I will tell you that we have shied away historically from the MS space. Simply because of the competitive landscape in MS as well as the pending and expertise of multiple compounds in this space. So let me pause on, Kevin has anything additional pad?

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

Yes, I think, Amit, you said it very well. I would just say, if you look at the indications currently for the S1P, the vast majority are in the neuro space. And so we're excited about the potential of an S1P going and being focused on that as part of Europe.

Anna -- Cantor Fitzgerald -- Analyst

Great. Thanks and my congratulations as well.

Operator

Our next question comes from Martin Auster of Credit Suisse. Your line is open.

Thomas -- Credit Suisse -- Analyst

Yeah. Hi, this is Thomas on for Marty. I wanted to quickly touch on the Phase II readouts expected in the back half of the year. So olorinab in IBS pain and etrasimod in atopic derm. Can you guys kind of frame what a positive result would look like on primary endpoints in these trials? And then I'm curious if you've set a specific bar for what you would need to see to move these programs for the Phase III?

Amit D. Munshi -- President and Chief Executive Officer

Sure. So it's always important to remember that the bars for a lot of things are not just efficacy, everyone focused on the simple efficacy endpoints, but is the risk-benefit of the compounds as well. So you have to take that and the overall convenience of the compound in the place. So all of these things kind of work together in terms of having a competitive commercially viable product. I'll provide some top level and then Preston can dive into a little bit more detail. Let me start with the olorinab in the IBS space. As you know, on a placebo-adjusted correction on the AAPS scale, most products have about a one point change. You'll recall from our Phase IIa study with all the caveat for the small open-label how we saw about four exceeding a 4.5 point change on the AAPS scale. So we're well north of that one point delta that you'd see in a placebo-adjusted situation. And so we'd be looking to be well north of that one point placebo-adjusted, we think that creates a compound that work across IBS C&D and has a safe and tolerable profile, assuming that's what happens out of the study, and we think that's a commercially viable product. So we have to look at the totality of the data. We've done a tremendous amount of market research in-house, and we have a good sense of how these markets evolve. I will point out one other important thing. All the other IBS paying programs that are out there, programs that have pain on label or being developed are all in the IBS-C category. And recall, we're enrolling both IBS C & D patients. So there's also some broader clinical liquidity to olorinab. So let me pause there and see if Preston has anything to add, and then I'll discuss the topic?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes, maybe just two quick points. In addition to the 4.6% change from baseline, which again was not perceivable corrected. But the additional endpoint or way of looking at the results that gives us a lot of confidence even though we're small and not placebo control is that the categorical endpoint of clinical response, which is the FDA defines as at least a 30% reduction in pain score from baseline was met by 100% of patients. All patients at week eight met that definition. And so to us, that while I can't tell you today what the placebo-corrected delta is likely to be because we don't have the placebo from that study. It's highly unlikely that the majority of our result even is due to a placebo response, given the categorical change we've seen in other placebo controlled studies, a placebo in pain studies tends to be around 30% of that kind of categorical response. And so to see 100% in this, albeit small data set was really encouraging. And then just secondly, I'll say, is very clear that there is a high level of unmet need in this space with patients on really desiring, and in some cases, desperate for pain relief. And so as long as we can demonstrate that there is something here in terms of efficacy and that it's safe and tolerated product, which we fully believe it is. I would think there's something really attractive here.

Amit D. Munshi -- President and Chief Executive Officer

So switching gears to the atopic derm question. As you know, there's a broad range of placebo-corrected deltas on EC 75. Across all compounds, both biological oral that we use atopic derm. There's a lot of patient heterogeneity. And I think this is one area, where we'd advise, no pun intended, serious caution on comparing across trial just because of the the patient populations just tend to be more heterogeneic. There's more heterogeneity than, say, for example, I having said that, we think we can deliver if we can deliver a product in the range of the existing deltas, and we're doing that with a once a day oral. With the safety profile that we've seen in, that's the output that we're seeing. I think we have not only a competitive program, but I think we have a program here that can make a substantial substantial difference in the atopic derm as the market landscape evolves. Note that the some of the other competing products that are being developed, including JAK inhibitors have serious liabilities, including black box warnings for malignancy. And I'm sure as you talk to dermatologists, they'll tell you, those are very difficult for dermatologists to get their head around. Those are not liabilities namely expected with the S1P category. So we think there's a real competitive profile here, both in efficacy and potential safety. Preston?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes. I think the only thing I'll add is that, just to highlight again that the efficacy bar for an oral compared to biologic may well be different. We know, for example, does quite well. And does not have the efficacy response in psoriasis, as seen by some of the biologics. So that's still a very viable compound. So we'll see what we get. We're very excited about the how the pathophysiology of atopic dermatitis lines up with the mechanism of action of etrasimod. And we've run through a litany preclinical results that are positive in terms of directionally giving us some confidence and some indirect clinical evidence through other programs that we have initiated in the past gangrenosum and qualitative anecdotal examples of skin manifestations related to UC and as program, all of which, while not a direct clinical evidence in the atopic dermatitis, gives us a high degree of confidence in what this drug can do in that disease state.

Thomas -- Credit Suisse -- Analyst

Great, thanks and Congrats.

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Thank you.

Operator

Your next question comes from Kennen Mackay from RBC Capital Markets. Your line is open.

Lian lu -- RBC Capital Markets -- Analyst

Hi, This is Lian lu for Kennen. First, I'd like to add our congrats to both Kevin and Laurie on the new appointments. So our first question is, can you help us understand how you and the team are thinking about the outcome of the truenorth trial, which now has a top line due meet this year as a potential risk through to etrasimod trial. It would also be interesting what you and the team are focused on within that trial beyond the top line success or failure?

Amit D. Munshi -- President and Chief Executive Officer

Great question and happy to go through that. One of the challenges is, I think everybody is aware, is if you look at the Touchstone study for ozanimod and the subsequent publications, posters, abstracts, etc. We've never seen the reanalysis of that data onto three domain Mayo score with repleading into 0. And as you know, that is the FDA defined endpoint and it is the true endpoint in their Phase III trial. So one of the things that's very difficult in answering that question is, we don't have clarity from their Phase II to Phase III. Now smaller companies don't get a pass like that, we've actually show them the Phase III data I'm sorry, the Phase II data with the three domain Mayo score, we've shown a 25 26-point delta, 31% of patients in remission at week 12 on the three domain Mayo score. So in terms of read through, I think the better question is lots to read through from our Phase II to Phase III. And there, we've got absolute clarity. We understand effect size. We know our data inside and out. We know that the more quantitative you get, the better etrasimod looks. And that's a really great place for us to be as a company. Coming back to truenorth, there's a couple of key variables outside of the three domain versus four domain. And again, we've not seen their three domains. So difficult to understand powering assumptions. But from any perspective, if you were to run the math. You'd see that the study, their study is overpowered. It's very well powered on, I'll say. And so we know we have plenty of power to detect a very small difference in the three domain.

I think that's indicative of what they might have seen in the three main post talking assets, again, we haven't seen it, but just making that guess. Secondarily, we know that they are looking for a disproportionate amount of patients who have not received the biologics of na've patients, again, to create more effect size. So the combination of those two things, I think, are important to keep in mind. We're addressing it completely different. We know that from our Phase II study in patients where 40% of the patients failed in anti-TNF and Integra which is essentially a very contemporary patient population in key markets where we will choose to commercialize over time. We demonstrated a very robust effect size on four domain and a very robust effect size on three domain. I think that's really important to keep in mind as we think about the from truenorth to anything in the future. So as far as we're concerned, I think our eye is more on etrasimod and the read-through from our Phase II to Phase III, and we're optimistic that the drug will perform. Difficult to tell where they are simply because just have not been as disclosive with their clinical data.

Lian lu -- RBC Capital Markets -- Analyst

Okay, great. So our next question is atopic derm. So several publications suggest the preclinical FITC induced models for atopic derm may accurately replicate their historical additions, but leave some differences in immunologic responses like CD4 and CD8, versus human. Can you talk at all about sales, the other preclinical work that you're down around etrasimod in atopic derm ahead of the life data like later this year?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes, this is Preston. So we've conducted a variety of dermatitis models across a variety of species, focusing on different aspects of that immunologic cycle that I described. So and look, there are a lot of similarities related to these immune-based inflammatory responses. So ulcerative colitis, atopic dermatitis, EOE, and they're not identical, for sure, but they have general similarities in terms of something triggers the immune response that is an antigen. It could be an autoantigen. It could be an environmental antigen. In the case of UC and AD, for example, it felt that a breakdown in epithelial barrier function, either the GI tract or the skin, respectively, leads to the introduction of some form of antigen. That has to get picked up by antigen-presenting cell and presented to lymph nodes to activate the appropriate immune cells. And in this case, we're talking about for AD, it's T cells, CD4 and because in T cell. So the skin the dendritic skin cells, which also called Langerhans cells, are that initial agent that begins and then continues to propagate the immune response. And so they have to pick up that antigen and traffic to lymph nodes. We've demonstrated in these preclinical models, very directly examining dendritic cells, that there is a reduction in the cell trafficking of these to the lymph nodes. So there's less antigen to be presented because the dendrites are not getting there. That means that there's less activation of T cells in the lymph node, we've also demonstrated that directly.

And then for any T cell that might be activated, it is less likely to get out of the lymph node and traffic back to the tissue site where the antigen was encountered where the injury is based. That's also been demonstrated. In fact, that component the T cell traffic in some lymph tissue to the tissue of origin or injury, that's been the most well documented, I would say, mechanistic aspect to S1P modulators, generally. But again, dendritic cells, cytokine expression, activation within the lymph node itself are all impacted by S1P signaling. In addition, just kind of a final point on this. There's even aspects that don't have to do with cell trafficking or cytokine expression that S1P, our receptors have a role in intracellular inside the cell signaling of the S1P1 receptor subtype facilitate cell-to-cell junction at the epithelial level and the endothelial level. And that's a good thing. And the fact that etrasimod only hits S1P one and does not hit S1P 2, as an example, which does the opposite. It actually widened cell-to-cell or loosens cell-to-cell junction, is a good thing and we think it helps to maintain a tighter cell-to-cell junction at the skin and at the endothelial beds, which can beneficially impact efficacy and safety, respectively.

Lian lu -- RBC Capital Markets -- Analyst

Thank you a lot for other science details here. So our last question is about Arena Neuroscience. The leading scientific community seems somewhat mixed with the some sound suggesting S1P may be more involved in thematic bringing jury well, others may be more involved with Alzheimer's disease. So how is the team thinking about this, do you have any plans to more directly partitioning, any of those newer indications?

Amit D. Munshi -- President and Chief Executive Officer

Yes, it's a bit early for us to discuss specific compounds and indications. We're in the process of showing up critical pieces of animal information as well as intellectual property and we'll be doing so on a future earnings call, and Kevin will be building up his organization, has been a critical piece of intellectual property needs to get filed. Some animal work needs to get completed. And then we'll come back and talk to you about this specifically, where as you're pointing out, there's a tremendous amount of interest in GPCR targets broadly in the neuroscience space. And having both clinical and preclinical compounds and an underlying platform really gives us gives us a portfolio that's commensurate or comparable to companies in $1 billion to $2 billion market cap space that are already public. And that's a really exciting place for us. And we're looking forward to sharing that information with you at a future point in time.

Lian lu -- RBC Capital Markets -- Analyst

Okay, thank you.

Operator

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

Chion -- Bank of America -- Analyst

Oh, Hi, good afternoon and good evening everyone. This is Chion for Jason. I guess, first one, maybe for Preston or maybe Amit, and really doing pretty well in the UC space. Just curious on your thought of given that S1P and Integran has some sort of overlapping functioning Mu cell trafficking. How important you think it is to demonstrate etrasimod efficacy in patients pretreated with ENTYVIO? And I have a couple of follow-ups on top of that.

Amit D. Munshi -- President and Chief Executive Officer

Sure. So we had some of those patients in our Phase II study. We are excluding Intevo pretreated patients in our Phase III. And all we said publicly is we did see an effect in patients who were pretreated with Intevo. It's important to understand Intevo is very slow to act. And we've demonstrated separation in both rectal bleeding and stool frequency as early as two weeks. So etrasimod does seem to have activity beyond just T cell migration, as Preston talked about dendritic cell activity and cell-to-cell junction. This is not just simply at cell story. So I think that's important to remember. The second important part to remember is that we think about these diseases in compartments because training in our medical landscape is an organ based training. But all of these autoimmune diseases have tremendous overlap. Atopic Derma overlaps with alopecia aearata, atopic derm overlaps with ulcerative colitis. And so where you're really talking about our systemic autoimmune conditions with some shared biology with primary organ manifestations and drugs that are gut specific actually can't address the systemic manifestations. So I think that's also sort of important over 65% of IBD patients have extra intestinal manifestation. And Intevo is not likely to do a heck of a lot for those patients. So Preston, do you want to add?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

No, I think you covered it.

Chion -- Bank of America -- Analyst

Awesome. So I guess, Stage 2, when I look at sort of the enrollment baseline, it looks like they'll be roughly 10%, give or take on Intevo orCiti, I think, right now, is about maybe 30% plus of the market share in the U.S. right now. Just it doesn't sound like that the potential, maybe a different mix of versus TNF in a Phase III is going to have any it's going to be a factor as we sort of think about how Phase II efficacy is translate over to Phase III?

Amit D. Munshi -- President and Chief Executive Officer

Yes, I think you have that completely misunderstood. So 22% of the market share. So don't confuse market share with patient opportunity and what patients are getting into trials. Market share as a percentage of patients were treated with certain products, right? You would not compare market share to steroids. You'd say, steroids have a 90% market share in IBD. So using market share to figure out what the actual underlying baseline rates for clinical trials is completely erroneous. What you really need to look at as a percentage of patients and how they fit between biologic treated and untreated. And if you look at all the epidemiology and you look at all the extensive market leases that we share with you, what you'll see is that approximately 60% of moderate to severe patients in the United States, have never been treated with a biologic. And of those that have 50% are not seeing remission. That's a more important metric. That gives you a really good sense of how that flows. And of that group that's been treated with the biologics, you could say, "Oh, 22% on. That's actually a very small number. So 22% or 40% and some percentage of those are not in remission. So that's a much better way to apply that market share number. It's a role to apply that across a full inclusion criteria. That's probably not how it actually works.

Preston S. Klassen -- Executive Vice President and Head of Research and Development

And this is Preston. And I'll just follow-up. I think another part of your question was just around what are our expectations in terms of Phase III compared to Phase II in terms of background therapy or history of therapy, biologic failures, for example. And I think what I'd say is we are not we're not really concerned about the different types of TNF versus incivo, for example, in terms of biologic failure coming into our study. And we take a good amount of confidence from the fact that our Phase II proportions are likely to be pretty similar to what we see in Phase III, at least with respect to prior biologic failure versus naive. So in our Phase II OASIS trial, we had 40% of patients with prior biologic exposure. So 60%, not we're naive had not seen prior biologic, and that's actually right in line with what Amit just said in terms of the market, we see the patients with moderate to severe disease. You see today, 60% of them have not seen a biologic. And so we don't anticipate a large difference in terms of what we've already experienced in Phase II compared to Phase III. And I would say that other programs if they had a much lower biologic exposure in Phase II, you would expect things to be different for them in Phase III because Phase III always tends to more accurately reflect the market.

Amit D. Munshi -- President and Chief Executive Officer

So again, just I'll summarize, I think, be extremely cautious making the leap from market share, which is averaging 22% to patient inclusion because that's actually not how the market breaks out. When people talk about market share, it's market share relative to just the Biologics segment, not relative to the entirety of the marketplace.

Chion -- Bank of America -- Analyst

Got it. And maybe one last question from me on Crohn's. Can you elaborate or maybe walk us through the seamless transition from the Phase IIb and to the Phase III trial. Maybe it would help if you can walk us through, OK, you follow the patients through 14 weeks in the Phase IIB. There's going to be data unblinding. There is going to be a time gap time that you need to analyze the data. Are you talking about that potentially you can transition patients from Phase II to Phase III from the induction straight to maintenance? Or how might or might not be unblinding and the time of data analysis may or may not affect that process?

Amit D. Munshi -- President and Chief Executive Officer

Yes, I think you're misunderstanding the concept of seamless, maybe I let Preston talk about that.

Preston S. Klassen -- Executive Vice President and Head of Research and Development

So what we're talking about is operational seamless versus in seamless. So in seamless, what often people mean by a Phase II/III program is that patients in Phase II actually can serve as part of the pivotal for Phase III. We're not doing that. If we were to do that, we would not sponsors typically don't have access to that information. And for example, those decisions would be made usually by an independent committee. And we're electing not to do that because we want to see the data, have access, make our own decision on dose and then move forward. And that also enables us to actually publish the Phase II data, which we think is a nice catalyst in 2021. What we are meaning by this is we will keep enrolling patients into a program, while we have locked while we are locking the amount of data, the amount of patient data that's required to make the dose decision, make the dose decision rapidly, we can do that. And then put the switch so that subsequent patients are enrolled into the Phase III program with the appropriate dose. And so we'll talk more as we I mean, this is clearly going to happen as we get closer to seeing a database lock for the Phase II portion. And so as we get closer to that, we're just at the beginning stages of Phase II now, in burns disease will be more disclosed to publicly about exactly how we're doing this, but the entire premise is don't shut sites off. Because there's always an S shaped curve ramp-up period to get sites activated, get them up and running we would like that machinery to stay hot, so to speak, stay active, keep enrolling. And so we'll talk more about those plans as we move forward.

Chion -- Bank of America -- Analyst

Thank you.

Operator

Our next question comes from Jessica Fye, Jpmorgan. Your line is open.

Jessica Fye -- Jpmorgan -- Analyst

Hey guys, good afternoon. Thanks for taking my question. As it relates to atopic derm, what have dermatologists expressed to you in terms of the bar, they want to see for safety in that setting, both in adults and in the adolescent and pediatric setting?

Amit D. Munshi -- President and Chief Executive Officer

Yes. Let me comment on what we've seen in market research, presents been participant in a lot of the advisory boards, how I'll do the playback play do the color here. What we see from market research and the bar is definitely higher for safety in atopic derm than it is in IBD. Dermatologists are just more cautious across the board. The first dose monitoring component is a little bit bigger of a barrier for dermatologists in this for IBD patients. However, when you put that in the contrast of the JAK inhibitors, the etrasimod profile tends to do much better. So if you do a stand-alone profile for etrasimod, it lifts us a certain set of responses. If you put it side-by-side, you get some Jackson, they've had more time to sort of acclimate intellectually to the idea of JAK inhibitors in atopic derm. And then you put it side by side to the JAK and then they tend to, oh, well, wait a minute, you don't have all this other stuff and tend to be more receptive to a couple of hours in the office in terms of having to monitor patients. Again, that's a kind of a worst-case scenario that we present in the market research. But having a patient sit in the chair for a couple of hours and monitor vitals when you describe it in the right way, doesn't turn out to be a huge hurdle. And then when you describe it in the context of JAK inhibitors actually looks better. So that's from a market research perspective. Do you want to make some comment?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes, just wanted to comment to say that, as you mentioned, monitoring with first dose, which we know is a topic in terms of S1P modulators. We're encouraged. And we talked about this before. We're encouraged that the FDA has clearly signaled that it's not a class label. That they take each individual compound at its face value in terms of the data that are shown. And that's why you see siponimod as an example, has a label that does not have first dose monitoring for the majority of patients as long as they don't have pre-existing cardiac conditions that would lead to a greater need for monitoring. And so that's obviously what we are in the direction that we're design program to address, and we know that etrasimod modulators has the lowest intrinsic potential to cause first delayed heart rate for AV conduction delay. And we know this because of our Phase I and Phase II data and the fact that, that has led us to the ability to not have to titrate. So I'll get programs out there, compounds out there, titrate in development of animation, in, etc. And the etrasimod does not need to because it has the lowest intraepithelial. So we are working to translate that known difference and make sure that our label reflects our compound and not class raglan.

Jessica Fye -- Jpmorgan -- Analyst

Okay, great. And to confirm, are are you establishing that by doing first is monitoring in your clinical trials?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes, we are in all of our trials, we've been first as monitoring and then demonstrating why that would not be needed in the commercial setting in the marketplace setting, but you have to collect the data to be able to show that.

Jessica Fye -- Jpmorgan -- Analyst

Okay, great. And second question kind of related to the Phase II atopic derm update later this year. Curious if you're planning to measure any biomarkers in that study on the effect of etrasimod on the underlying immune cells? And what, if any read-through we could expect to learn from that type of biomarker information as it relates to efficacy in other settings, including the GI settings?

Amit D. Munshi -- President and Chief Executive Officer

Jess, are you are there specific things you're thinking about here? Are you looking at, for example, tissue biopsies and looking at histology or something else?

Jessica Fye -- Jpmorgan -- Analyst

Yes, exactly.

Amit D. Munshi -- President and Chief Executive Officer

Okay. So you think about tissue biopsies and histology.

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes. Well, in terms of the overall development, we'll have a plan to do that, obviously, and we take a look at this. We've done a bit of that in our UC program, we tend to do great intended do more of that. In Phase III in subset analyses, etc. So the short answer is yes, but we don't necessarily I would say, for this disease, specifically, have a there's not a clear there's still a lot of understanding that's evolving around the pathophysiology and which biomarkers are best let's take EOES. Specifically, as an example, well, people tend to focus on the eosinophils. Why? Because that's the name of it. But why is that? That's because patients who had who were thought to have refractory GERD, didn't respond to PPIS, eventually got scoped and on histology, the pathologist sees eosinophils, that's great, but there's also a lot of T cells, CD4 CD positive T cells, there's dendritic cells, there's mast cells and so there's a whole cell milieu, in addition to the eosinophils, it isn't just the sinovel that are causing the damage. And so particularly for EOE, the information that's leading us to understanding what biomarkers are the best to look at is still, I would say, an evolving field.

Jessica Fye -- Jpmorgan -- Analyst

Thank you.

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Thank you.

Operator

Our next question comes from Joseph Schwartz of SVB Leerink. Your line is open.

Joseph Schwartz -- SVB Leerink -- Analyst

Great. Thanks very much and congratulations on all the progress as well. First of all, on the Phase III C program, I was wondering if I know you're not going to be entertaining any real-time enrollment updates, but just qualitatively, given your experience that went well in Phase II. What kinds of things are you doing in order to ensure that the execution is smooth and as rapid as possible in order to make sure that the network produces timely and high-quality data?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Sure. Are you just specifically talking about the ongoing UC program?

Joseph Schwartz -- SVB Leerink -- Analyst

Yes, exactly. Obviously, competitive space. I'm just wondering what kinds of things you do in and out of house?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes. Yes, it's really clear. Users, a very competitive space. And so it's not uncommon to have sponsors announced 12 month to six-month delay, etc. We are very pleased that we are on track. And so again, as you pointed out, we don't give weekly enrollment updates. One of the key factors of key triggers that will give people a good degree of clarity is, when we start talking about enrollment in UC 12, which we anticipate to be later this year because we're using the same global network of 450 to 500 sites for both EC 52 and 12. And obviously, because 52 is a longer study, we want to complete or at least majority complete that enrollment prior to kicking off UC 12. So we'll talk about that more over time, but that will be a key indicator. In terms of the types of things we're doing, here is the short answer. We're treating the launch of a trial like a launch of a drug. It's a cross-functional endeavor where sites are your customers. We are establishing a field team, clinically trained individuals, both one team that interacts with physician investigators PIs and another team that interacts with study coordinators, nurses and additional staff to make sure that the sponsor Arena owns the relationship with the site and make sure that we're doing everything we can to have things be fluid and productive and listen to them as much as we're asking them to do things. Another factor is focusing on referrals. As Amit mentioned, 60% of patients with moderate to severe crone UC for IBD, have not seen a biologic. So that means a lot of patients, who have moderate to severe disease are not currently on a biologic. If you go to trial sites, they'll often say, hey, all of our patients are enrolled in studies.

Well, why is that? Because those sites are typically used and they where they draw patients from their own clinic roster, and that, of course, is limited. Maybe they do some advertising, but that's generally about it. But within 100 miles of those sites, how many clinics are there that are not trial sites that have these patients. And why are those patients not enrolling? Well, they don't know about the study. They and there may be issues related to physicians being concerned about sending their patient elsewhere. And so there's ways to deal with that, and we're actually putting forth additional field teams that go and develop relationships with outline clinics to let people know, raise awareness of the study, etc. So I just listed two things there. I'll say we have a whole host of them. We actually have a separate team that brings cross-functional folks together. It's not just about clinical development or clinical operations, we also involve medical affairs, and we take a lot of commercial insights as well. Into the table to think about this in a cross-functional way. We understand the pressure and we think creatively, and many people on the team have a history of doing this in other endeavors. And again, I'm just very pleased to be able to say that we are on track.

Joseph Schwartz -- SVB Leerink -- Analyst

That's very helpful. And then maybe one on olorinab in addition to being perhaps a better agent. It seems like selecting the right kind of pain was key to success in Phase II. So I was wondering, what have you done to get comfortable that IBS pain etiology is analogous to IBD pain when you made that pivot?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes, it's a great question. Preclinically, the way you develop an animal model of IBS, which is essentially hypersensitive colon, you basically introduce an inflammatory insult to initiate IBD as it were. And then remove the inflammatory insult and wait for the information to die down and you're left with a hypersensitive colon. And specifically in our Phase IIa proof-of-concept trial. We didn't take active acute flare Crohn's. We took quiescent Crohn's. They specifically did not have a lot of macro inflammation. Their disease was quiet. And yet they had daily abdominal pain. So they had hypersensitive colon. And so that mix of what we did clinically with what we know about the preclinical, the way you develop the animal models, in addition to the fact that literature is clear that CB two receptors are upregulated in both IBD and IBS and that inflammation exists at a tissue level in IBS, which I think is important in terms of upregulating the CB2 receptor and making it very important in terms of diminishing sensory apheric nerve fiber firing. So all of that leads us to have confidence in the IBS approach. And another kind of additional helpful aspect to this is a clear unmet need in this space, and there's lots of patients out there. And so again, clearly on track.

Joseph Schwartz -- SVB Leerink -- Analyst

That makes sense. Thanks for all this color.

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Thank you.

Operator

Our next question comes from Joel Beatty with Citi. Your line is open.

Joel Beatty -- Citi -- Analyst

Hi, thanks for taking the questions. The first one is on olorinab. Can you talk about the trial design comparing the previous Phase II and the ongoing Phase IIB, any similarities or differences that help put into context how likely the previously strong efficacy results are likely to be replicated in the ongoing trial?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes. So the most important difference, and which was just the topic of the last question, is that the IIa proof-of-concept study was in a different disease state. It was quiescent Crohn's in patients who still had daily abdominal pain. And so that is, that's when we really could have different than IBS. Now I just gave all of the reasons why we think that pathophysiology and the development of a hypersensitive colon is actually similar between that quiescent Crohn's and IBS state. And the document upregulation to the receptor and role that it plays in reducing the pain fibers from fire, essentially, particularly when you've got some inflammation in the system, and we know that IBS at a tissue level does have that inflammation. So with all of those caveats, I'll also say that the overall design is the same. It's a 12-week treatment period. And the only difference is we've got placebo, which is important, of course, and we have three doses. So we're it's a full-on IIB dose-ranging study that should be Phase III enabling.

Joel Beatty -- Citi -- Analyst

Great. And one other question. Any thoughts on being pulled from the market recently. Any implications for Arena beyond the small amount of royalty revenue that you've been receiving from that?

Amit D. Munshi -- President and Chief Executive Officer

Yes. So let me take the first part, which is just the royalties. We're expecting to see lower royalty revenue going forward. And we had an offset to our revenue in Q4, which had to do with the estimated value of the potential royalties in the ex-U.S. jurisdictions. We had to recognize the future value of that when we sold certain IP and rights to Belviq outside of the U.S. in our renegotiated agreement with ESAI in 2016. So we've now reduced that projected sales value to 0 outside of the U.S., and we'll see what the sales look like going forward and their impact on the royalty.

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

Joe, just on the which product are you talking about again. Just kidding. Did we answer your questions all? Or do you have another part to that question?

Joel Beatty -- Citi -- Analyst

That's good. Thank you.

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

Thank you.

Operator

Our next question comes from Alan Carr of Needham & Company. Your line is open.

Alan Carr -- Needham & Company -- Analyst

Hi, thanks for taking my questions. So almost done with Belviq, I guess, but not quite. All right. So I wanted to ask you about 418. What can you give us an update on the on your long-term strategy there? And what you hope to accomplish in Phase II, assuming Phase one is clean. And then, Kevin, can you go over burn again for 2020, I assume that's mostly etrasimod, but with the the big clinical program. But to what extent is any of this derived from the new entity Arena Neuroscience.

Amit D. Munshi -- President and Chief Executive Officer

Sure. This is Amit. Let me take the broader strategic question on 418. So in addition to 480, you have some additional clinical stage cardiovascular compound, and we'll be disclosing those over time. The way we're thinking about this right now is let's just make sure that our hypothesis that this compound can improve cardiac output without changing hemodynamics in those patients and begin to address this incredible unmet need out there for these patients. And once we can prove that, we'll figure out what the strategy is. And a lot of the strategy of our cardiovascular business, and we've talked about this before, is really going to relate to where the rest of the company is at that time. Where is the etrasimod at that time, what does the capital markets look like at that time, where is Coronavirus at that time. So there's so many variables that are sort of some in our control and most outside our control, that are going to determine whether we do something creative with the cardiovascular portfolio or whether we choose to continue developing. I will tell you, we're incredibly excited about the programs, specifically 418 and the ability of that program to make effect on patients. Chris can talk a little bit more about the we haven't disclosed Phase II study design in a lot of detail in this, but is there something specific you want to talk about there. We can to the extent that we've made public, we're happy to talk about it.

Christopher H. Cabell -- Senior Vice President and Chief Medical Officer

Yes. And I'll just say that what we would be looking for clearly would be mechanistic information. So typically, in decompensated heart failure that would have to do with cardiac output and those kinds of measures. So not an outcomes-based assessment necessarily. I'll also say that in terms of longer development of pivotal Phase III programs. These are not 10,000 or 20,000 patient outcome studies, looking at MACE endpoints over years. And to keep you compensated heart failure, it's very often a 30-day assessment. There are a variety of ways to go about this. The FDA is very willing to sit down and discuss with the sponsor in the space because of the tremendous unmet need, the lack of appropriate medical therapies at this time. And so it's a nice setup to be able to bring a completely novel MLA forward as a beta three antagonist it's just got a great story around why it can work. And so we're excited about it. But to Amit's point, we'll have to see how the landscape evolves and what we end up wanting to do with this as we understand its true potential when we conduct the Phase II trial.

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

And then, Alan, I think you had a question around burn going forward. When we file the 10-K later this week, you'll see that the vast majority of our external pool, clinical and preclinical spend, which is disclosed in the K was around etrasimod. And our anticipation is that, that will be the case in 2020 as well. It will be the vast majority of the spend will be around etrasimod, not around other things like neuro or CD or some of the other programs.

Amit D. Munshi -- President and Chief Executive Officer

Alan, I think it's important qualitatively to understand when we move programs in the Phase III in these larger indications with substantial agency requirements around clean farm, tox, long-term tox, we start thinking about manufacturing and backup manufacturing. We began over a year ago, thinking about global supply chain well before the coronavirus issue. And being able to develop backup manufacturing sites and making sure we had stockpiled starting materials. This was early on our mind. So let's just give you a quick mattering of all the different programs that the street doesn't really see that are required between now and the time we file an NDA. And it's the only time this issue ever comes up is when there's a deficiency and this complete response. So we're taking a very aggressive stance in the sense that we want to make sure all the work is done. We're extremely optimistic about the compound. There's a lot of work to be done, and we want to make sure we get the work done in a high-quality fashion. So that when the Phase III data reads out, there are no gaps to move forward on an NDA filing. And again, it's sort of what you don't see under the water on the etrasimod is really critical there. So that's just something to keep in mind qualitatively.

Alan Carr -- Needham & Company -- Analyst

Kevin, you said high single-digit to low double-digit million dollars increase each quarter. Is that what it's a percentage increase per quarter?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

It is the percentage increase per quarter.

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

Which translates to about the same.

Amit D. Munshi -- President and Chief Executive Officer

Yes. And I remember a lot about is enrollment dependent, so maybe difficult to just sort of clearair line the betterment so fast to the burn, and that should be a good thing.

Alan Carr -- Needham & Company -- Analyst

Great. Thanks for taking my questions.

Operator

Our next question comes from Patrick Trucchio of Berenberg Capital. Your line is open.

Patrick Trucchio -- Berenberg Capital -- Analyst

Thanks. Good afternoon. Just a few follow-ups regarding olorinab. Just first, can you tell us if you see a positive outcome in the Phase II trial in the second half of the year. Could you move directly into pivotal trials in IBS-C and IBS-D or additional Phase II trials be necessary? And then to what extent secondly, to what extent would the upcoming Phase II data from MD 7246, which is the extended release linaclotide, the inappropriate benchmark for IBS-D and then finally, or separately, can you elaborate further on the unmet need in this area. Are patients typically treating with NSAIDs or being prescribed opioids for their visceral pain? And is there a significant difference between the unmet need between the subtypes, IBS-C and D? And then just around the payer piece. I mean, what work or can you frame for us what work that you've done around this that suggests the payers would reimburse for an additional treatment on top of prescription and medications that are already being used for various IBS C & D?

Amit D. Munshi -- President and Chief Executive Officer

Sure. So let me start with the payer and the unmet need and then Preston can take the clinical question and the question on the extended-release change for on lenaclotide. If we look at the IBS landscape, almost 80% of patients on independent of growth there on report recurring and continuous abdominal pain. And there's 27 million IBS patients in the United States, between C, D and mix and it's 1/3, 1/3, 1/3. And just by contrast, that's a market size that's roughly 10 times the IBD landscape. So it's a very large market from a patient perspective. And the bulk of cadent is CMV are really an over-the-counter agents over-the-counter agents do a really good job on relief of the constipation with idea, but they don't do a great job on the abdominal pain or the abdominal pain cramps. So this is just an ongoing conversation around the management of pain. In fact, 35% of IBS patients. So just think about that, given the size of the market, I just described, are on opioids. And that's a pretty striking number. And you can only imagine some of those are IBS patients were then taking opiates for pain is absolutely confounding. But it's that pain that's been the the nemesis of these patients for a long time as we need patient-focused crews, and we talk to payers, the management were paying and the division of the use of opioids consistently is a theme that gained a lot of traction. Naturally, these aren't products that you would price at oncology type pricing or NASH type pricing of products. These are products that are priced to be adjunctive in a broad range of patients on top of their existing products that we're using for the for the constipation or the diarrhea. So that's kind of how we think about it from a market opportunity perspective, again, we think it's really wide open space. You want to quickly talk about it?

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Yes, sure. So the first question was movement from this Phase II study in IBS into Phase III for both what are the plans for IBS. So it's pretty clear probes. This is the current Phase II study. It's Phase III enabling. So we'll look at the data, obviously, make dose selection. Discuss with the agency to make sure we're which we are doing on an ongoing basis, make sure our Phase III planning is appropriate and go execute that. So that's the plan there. Now for IBD, when we see results that are positive not in IBS, we'll need to go sit down with the FDA and agree on an appropriate way to introduce olorinab as, I guess, you would call it, adjunctive therapy in this setting because and as we know, it's not necessarily disease modifying. It's about pain relief. And so that will require some additional conversation with the agency. There's not a great history of precedent in this space. And so that's why I will need to take some time to have those conversations with the agency, I would anticipate then conducting an appropriate Phase II trial and then moving to Phase III, if all goes well. And then I think the other question was just on and the extended-release formulation and the work that they're doing there. So what we'll need to see. I know that in part, the hope is that, that compound with the modification could potentially be used more broadly than constipation. We'll have to see if that's true or not. But obviously, linaclotide itself is isolated to IBS-C. And then in terms of its ability as a pain agent in addition to the motility, we'll need to understand that as well. The data that we can see publicly with the original one acute, and then an I mentioned this earlier in the call, suggests a one point difference, placebo-controlled difference, the overall change from baseline was 1.9, but 0.9 of that was related to was essentially placebo effect.

And so that's it at least set some kind of hurdle or bar for us. We saw in our small uncontrolled study, as we mentioned earlier, that delta of 4.6 without placebo. So you take that in the consideration, but that leaves me to believe that we have an agent that can have a demonstrable effect, robust effect, we need to confirm that in a placebo-controlled study, which we're doing now, and we'll just have to see how this plays out. But we're very confident that we can use olorinab across IBS-C, IBS-D, and mix and that's the breakdown there is about 1/3, 1/3 and 1/3 of the population, C, D and mix. And so instead of focusing on one segment, we can essentially go across the entire IBS spectrum. And pain is the one unifying aspect in IBS. So people talk a lot about motility, and it's true, as Amit's mentioned, you can often control that with over-the-counter agents, the one unifying aspect is pain and that's where the unmet need really is.

Patrick Trucchio -- Berenberg Capital -- Analyst

That's helpful. Thank you very much.

Operator

There are no further questions, I'd like to turn the call back over to Amit Munshi for any closing remarks.

Amit D. Munshi -- President and Chief Executive Officer

Great. Thank you. Thanks, everyone, for joining us today. We look forward to continuing to update you as the year goes on. We've got a lot of really important incredible opportunities ahead of us, and we appreciate all your support. Thanks, everyone.

Operator

[Operator Closing Remarks]

Duration: 78 minutes

Call participants:

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

Amit D. Munshi -- President and Chief Executive Officer

Preston S. Klassen -- Executive Vice President and Head of Research and Development

Christopher H. Cabell -- Senior Vice President and Chief Medical Officer

Jason Butler -- JMP Securities -- Analyst

Anna -- Cantor Fitzgerald -- Analyst

Thomas -- Credit Suisse -- Analyst

Lian lu -- RBC Capital Markets -- Analyst

Chion -- Bank of America -- Analyst

Jessica Fye -- Jpmorgan -- Analyst

Joseph Schwartz -- SVB Leerink -- Analyst

Joel Beatty -- Citi -- Analyst

Alan Carr -- Needham & Company -- Analyst

Patrick Trucchio -- Berenberg Capital -- Analyst

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