Arena Pharmaceuticals (NASDAQ:ARNA) reported positive phase 2 trial results for etrasimod, an S1P modulating drug being studied for use in ulcerative colitis. The results show that 2 mg of etrasimod successfully outperformed placebo in helping ulcerative colitis patients. The data positions the company competitively to vie for market share in this blockbuster indication. More importantly, the data also suggests that etrasimod could match up favorably to Celgene's promising clinical-stage drug ozanimod.

What's the news

After its obesity drug Belviq flopped, Arena Pharmaceuticals rebooted its R&D program to focus on other drugs, including etrasimod, a drug that's being studied for use in ulcerative colitis patients.

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Etrasimod is an S1P modulator that sequesters lymphocytes so that they don't respond to inflammation. The company evaluated a 2 mg and 1 mg dose in its trials, and while the 1 mg dose didn't achieve statistical superiority to placebo, the 2 mg version did. Patients receiving the 2 mg formulation saw statistically relevant improvements in lymphocyte counts, clinical remission rates, and disease activity as measured by the Mayo Clinic's three-component score, which is the FDA's preferred score in these patients.

Specifically, patients who were given the 2 mg dose saw a 2.49 decline in the three-component Mayo score, compared to a drop of 1.5 for the placebo arm of the study. Mucosal healing was observed in 41.8% of patients versus 17.8% in the placebo group, and lymphocytes fell by 57% at the 12-week mark. The clinical remission rate at 12 weeks was 33% based on the three-component score, compared to 8.1% for the placebo arm of the study, with a p-value of 0.001.

Etrasimod's ability to successfully reduce lymphocytes and help patients control their disease isn't too surprising given that Gilenya, the first S1P modulator to win FDA approval, has been on the market for multiple sclerosis since 2010 and ozanimod, Celgene's S1P modulator, has already demonstrated enough efficacy in its phase 2 trials to advance into phase 3 studies.

While etrasimod isn't the first S1P modulator to enter clinical trials, the trial data suggests it may offer best-in-class safety.

Gilenya has been associated with a variety of safety risks, including a drop-off in heart rate, macular edema, and unwelcome impacts on liver function. Those safety concerns could be due to its non-specificity. The body has five S1P receptors, and Arena Pharmaceuticals has previously presented data suggesting that cardiac and pulmonary safety risks could be due to interacting with S1PR2 and S1PR3. Gilenya interacts with both of those receptors, and ozanimod interacts with S1PR2.

Etrasimod doesn't interact with either of those receptors; perhaps that's why no patients experienced a serious adverse event in etrasimod's 2 mg dose cohort. There weren't any significant changes in heart rate or any cases of macular edema, either. Two patients did experience AV block, an impairment to heart pace that's been observed with this class of drugs, but in both cases, it was transient.

What's on deck

The only potential concern with the trial that I can see is that patients in the 2 mg dose cohort were arguably younger with more exposure to corticosteroids than those in the placebo group. Nevertheless, the baseline patient Mayo Clinic scores were similar across all three cohorts, and generally, I view the efficacy and safety performance as being quite strong relative to other ulcerative colitis drug options, including anti-TNFs.

Now that it has positive data in hand, Arena Pharmaceuticals' next steps include exploring etrasimod's potential in IBD and Crohn's disease and ironing out the details for a larger phase 3 study in ulcerative colitis. Ultimately, if etrasimod's phase 3 results read out as well as those of phase 2, then I think this drug has nine-figure-per-year potential.

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