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Array BioPharma, Inc. (NASDAQ:ARRY)

F4Q08 (Qtr End 06/30/08) Earnings Call Transcript

November 4, 2008 9:00 am ET


Tricia Haugeto -- Manager, Communications

Bob Conway -- CEO

Mike Carruthers -- CFO

Kevin Koch -- President and Chief Scientific Officer

David Snitman -- COO and VP, Business Development


Jim Birchenough – Barclays Capital

Ian Somaiya – Thomas Weisel Partners

Derek Jellinek - SIG

Yun Yang – Jeffries and Company

Mona Ashiya – JP Morgan

Chris Raymond – Robert Baird and Company


Good day everyone and welcome to today's Array BioPharma first quarter fiscal 2009 financial results conference call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the call over to Tricia Haugeto. Please go ahead.

Tricia Haugeto

Thank you, Deanna. Good morning and welcome once again to Array BioPharma's conference call to discuss our financial results for the first quarter of fiscal 2009. You can listen to this conference call on Array's web site at In addition, a replay of the conference call will be available via telephone for the next seven days and via the Internet.

I'd like to introduce Array's Chief Executive Officer, Bob Conway and our Chief Financial Officer, Mike Carruthers, who will lead the call today. I'd also like to introduce Kevin Koch, our President and Chief Scientific Officer, who will provide an update on our proprietary drug program and David Snitman, our Chief Operating Officer and Vice President of Business Development, who will be available to answer questions as needed.

But before I hand over the call to Bob, I would like to read the following Safe Harbor statement. The matters we're discussing today include projections or other forward-looking statements about the future results, research and development goals of Array and its collaborators, and future financial performance of Array.

These statements are estimates based on management's current expectations and involve risks and uncertainties that could cause them to differ materially from actual results. We refer you to risk factors discussed in our filings with the SEC, including our Annual Report filed on Form 10-K, for the year ended June 30th, 2008, and in other filings Array makes with the SEC. These filings identify important risk factors that could cause actual results to differ materially from those in our projections or forward-looking statements.

Now I would like to turn over to Array's CEO, Bob Conway.

Bob Conway

Thanks, Tricia. Good morning, everybody. Thanks for joining the call. I hope everybody got a chance to review last night's press release. As you can see, we're off to a good start to our fiscal year with both our proprietary and partner pipelines.

During the quarter, we announced our newest development candidate, ARRY-403 glucokinase activator that has now successfully completed GLP tox and we should initiate clinical trials in the first quarter of '09 on that drug. The great thing here is how quickly you can get to proof of concept in diabetic patients with this drug.

It's a huge market opportunity with 24 million type-2 diabetic patients in the U.S. It reminds me in some ways of ITMN-191. That's the HCD drug we invented for InterMune. Huge market opportunity, early proof of concept, and as a result, InterMune was able to do one of the richest preclinical deals that I'm aware of with Roche.

We also announced positive phase-2 results on ARRY-797, our P38 inhibitor in acute inflammatory dental pain, presented last weekend at the ACR meeting in San Francisco. These positive analgesic and anti-inflammatory results continue to support advancing the drug for both pain and chronic inflammatory disease. We're initiating 170 phase-2 trial and AS, which should take advantage of both the analgesic and anti-inflammatory properties of the drug.

In addition, we plan to increase the dose in additional multiple ascending dose trials from 600 to 800 milligrams and potentially up to 1200 milligrams. We’re currently evaluating appropriate subchronic pain opportunities as well. Kevin Koch will go into more details on these two programs in just a minute.

2009 will be an important year for Array as we deliver proof of concept results on at least four additional trials, any one of which could create tremendous value for Array and potential partners.

As you know, an important element of Array's strategy involves partnering our clinical programs at proof of concept for late-stage development in worldwide distribution while retaining as much U.S. rights as we can to each program. Partnering our development programs will be a major source of funding beginning in calendar 2009. And as you may recall, since the inception of Array, we've raised over $330 million from partnering and this has been the primary vehicle that we've used to fund the company.

We enter 2009 in a very strong position with six 100% owned Array drugs and clinical development in our glucokinase activator entering phase-1 next quarter. There is significant partnering interest in these programs and we are currently in discussion with a number of companies on several development aspects.

Our job is to make sure that we have multiple parties interested in each program to maximize their value. Our pet partner evaluation includes both near-term economic terms as well as determining who's the best long-term partner to maximize the overall value of the drug.

For the next few years, we plan to size Array's development capability for proof of concept studies on a finite number of programs. Today, we have six, soon to be seven, programs in development and we think this is about the right size for Array. Before we advance any new programs in development, we need to partner one or more of the existing programs.

We are currently evaluating all of our programs to assure we are making the right investment decisions. We're allocating resources to those programs which have the highest increase in value at proof of concept and we'll report results in the next year or so. As we partner development programs, that spend goes from us over to the partner, which is great for our P&L.

Our discovery efforts continue to be very productive. Given that we already have six programs in development and one more on the way, we need to be selective about which new programs we independently move into clinical development. Therefore, we're seeking to establish the value of several discovery programs by initiating partnering discussions. As things stand now in development, we may need to partner several programs in our discussions on four different programs today.

If we do partner and discovery, we'd receive an upfront payment, milestones and royalties and the partner would continue to fund research and development by Array, which would be recognized as revenue. We anticipate completing one or two discovery deals in 2009 as well.

Let me report on our other proprietary development programs now. ARRY-162, our MEK inhibitor for inflammation, continued a worldwide 200 patient, 12 week phase-2 trial in combination with methotrexate. We anticipate this study completing enrollment early in 2009. ARRY-614, our p38/Tie2 inhibitor completed enrollment of a phase-1 SAD and MAD trial. We are evaluating options for this drug going forward, potentially in hematological cancers.

ARRY-543, our ErbB-2 EGFR inhibitor continued to phase-1 expansion trial in about 30 patients, half of which are herceptant failed ErbB-2 positive metastatic breast cancer patients and the other half are patients that have other ErbB family-driven cancers.

We continue to phase-1 B2 trial of ARRY-543 in combination with Xeloda as well. ARRY-520, our KSP inhibitor, continued to phase-1, the expansion trial, to evaluate safety tolerability and preliminary efficacy at its maximum tolerated dose.

We also continue to phase-2 trial with live-20 in patients with AML and we're just about to initiate a phase-2 trial in multiple myloma with this drug as well. Finally, ARRY-380, our selective ErbB-2 inhibitor continued phase-1 clinical trials in a rising dose tolerance study.

In partnered research, Genentech added a new program and extended our discovery collaboration through 2011. This new program provides a one-time license fee, research funding and potential milestones and royalty payments. Array and Genentech are currently working on five different programs in research and development.

Let me pass it over now to Mike Carruthers, our CFO to drill down in financials. Mike?

Mike Carruthers

Thank you, Bob. Array's revenue for the first quarter of just under $6 million is in line with our expectations. Our loss per share for the quarter of $0.71 includes an $0.08 charge to adjust the carrying value of our auction rate securities to estimated market value. These auction rate securities now have a book value of $27 million and are included on our balance sheet in long-term marketable securities.

Our R&D spending for the quarter of $25 million declined several million from the prior sequential quarter. As of September 30th, Array's cash equivalents and marketable securities totaled $101 million. This does not include the remaining $40 million that is available to us on the Deerfield credit facility. So on a pro forma basis, we have available $140 million. We are comfortable with this cash position given we only used $23 million during the quarter.

I provided guidance for the full fiscal year during our last call in August. We do not have any changes to that guidance other than taking into account the activity in the quarter just ended in which our R&D spending and cash use were lower than the guidance we had provided.

And with that, I'll turn it back to Bob.

Bob Conway

Thanks, Mike. Kevin, do you want to drill down on a couple of the clinical programs, 797 and 403 for us?

Kevin Koch

Sure, Bob. Good morning. I'm pleased to provide you with an update on the progression of the clinical development pipeline at Array.

Top line is that all six of our wholly-owned clinical development drugs are progressing well. Bob has already discussed the status of several of our programs and I will discuss data that was released in the past quarter.

As you recall at the American Pain Society meeting in May of this year, we released results from a phase-2 dental pain study showing substantial analgesic efficacy of ARRY-797 in management of pain resulting from the extraction of impacted third molars.

As a consequence of the positive data from that study, we have completed and reported data at the recent ACR meeting on a 250-patient follow-on dental pain study in which we compared three doses of ARRY-797; 200, 400, and 600 milligrams, both a placebo and with an active comparator, Celecoxib, at its maximum proof single dose for acute pain of 400 milligrams.

In this study, we met our primary endpoint of significant analgesic effect as measured by Topar-6 (ph) versus placebo. Importantly, both the 400-miligram and 600-miligram doses of ARRY-797 were as good as or better than Celecoxib on onset of pain relief and pain intensity score.

Additionally, we reported fiscally significant inhibition of CRP, an important biomarker of systemic inflammation from our first dental pain study. Given these positive results and a good tolerability profile we observed at the 400 milligram QD dose in normal, healthy volunteers in our MAD study and in this study, we are planning an additional dose escalation study up to 1,200 milligrams daily for seven days to ascertain the maximum tolerated dose of 797 in a sub-acute setting to set the stage for additional trials with a focus on post-surgical orthopedic pain relief or sub-chronic pain indications.

In addition to our strategy to treat pain, we remain on track and in a parallel path to begin patient recruitment this quarter on our 12 week study of 797 in ankylosing spondylitis. This study will enroll 170 patients and is planned to provide efficacy data first quarter 2009.

We also disclosed this quarter on a new program on a novel small molecule glucokinase activator, GKA, ARRY-403 for the treatment of type-2 diabetes. Glucokinase activators reduce glucose levels via a dual mechanism of action, working in both the pancreas and the liver.

Glucokinase is an enzyme that sense glucose in the pancreatic beta cell, stimulating insulin release in a glucose-dependent manner. Glucokinase also regulates glucose uptake and glucose production in the liver.

In diabetic patients, there’s a reduction of glucokinase activity in the pancreas and the liver. The activation of glucokinase lowers glucose levels by enhancing the ability of pancreatic beta cells to sense glucose, in turn, increasing the level of insulin that is produced by the pancreas.

Simultaneously, GKA’s also increase the uptake of glucose in the liver while reducing the amount of glucose produced by the liver. These combined actions of GKA resulted in improved beta cell function and increased insulin sensitivity in the liver.

Our data showed that in multiple well-established (inaudible) models of type-2 diabetes, ARRY- 403 was highly efficacious in controlling both fasting and non-fasting glucose with rapid onset of effect and maximal efficacy within five to eight days.

In combination with existing standard care drugs, for instance, metformin, dpp4 inhibitors, and p-par agonist, ARRY-403 provided additional glucose control with maximal steady-state effects seen after five to seven of oral daily dosing.

ARRY-403 showed no adverse increases in body weight, plasma triglisrides or total cholesterol whether used as monotherapy or in combination. Based on these and other results, Array plans to advance 403 into human clinical studies in the first quarter of 2009; hand it back over to Bob.

Bob Conway

Thanks, Kevin. Let me review with you, just quickly the milestones we had for calendar 2008 and as you remember, we’re on a June 30 fiscal year-end, but we do the milestones on a calendar year basis. We had six milestones for 2008, all related to our proprietary development pipeline.

The first is ARRY-79, our p38 inhibitor, where we said we’d complete the phase two dental pain study and report study results, and also initiate an ankylosing spondylitis study and we’re on track for both of those.

ARRY-162, our MEK inhibitor, we said we’d complete the majority of enrollment on the phase two RA study and we should be on track for that.

ARRY-543, our ErbB-2/EGFR inhibitor, we said we’d complete the phase one expansion. We plan to report on that in the first quarter in April of 2009 and would initiate one or more phase 1B2 studies in combination with sedatoxic agents.

ARRY-520, our KSP inhibitor, we said we’d complete the phase one expansion and also initiate phase two studies in hemogolical cancers and we’re on track for that. We have the AML study ongoing. We’re just about to start the myeloma study.

ARRY-380, our ErbB-2 inhibitor, will continue to phase 1b study to its maximum tolerated dose. And finally, ARRY-614, our p38 type-2 inhibitor, we’d conduct phase one FAD/MAD studies and then devise a phase two development plan.

So, it looks like we’re in pretty good shape all across all of the milestones that we laid out in January of 2008.

Deanna, I’m going to pass it back over to you and see if we have any questions this morning.

Question-and-Answer Session


Thank you, sir. (Operator Instructions). We’ll take our first question from Jim Birchenough with Barkley’s Capital.

Jim Birchenough Barclays Capital

Hi guys, congratulations on the progress this year.

Bob Conway

Thank you.

Jim Birchenough Barclays Capital

Just had a question -- coming out of ACR on 797, while we saw some great benefits on the acute pain setting, there were some questions around the JNJ compound, 469 and some disappointing data in RA and I believed the investigator suggested that there’s was a waning of efficacy that occurred pretty quickly with that p36 MAP kinase inhibitor and some suggestion that it might be a class effect, that you might not get a durable on effect on either bio markers or pain scores, so just wanted to get a sense of what your thoughts were on that JNJ data and whether you have any concerns around 797 in terms of durability of effect.

Michael Carruthers

Yeah, it’s very interesting, so we’ve been trying to look at -- of course, we’re looking at the JNJ and trying to understand what level of sydokine (ph) and pg2 inhibition they achieved. From what we’ve seen and from the PK data they’ve shown and what we know about the compound, the compound is a relatively weak inhibitor of psydochines in human whole blood, meaning that they would needed to have achieved a several microgram per milliliter level to have good inhibition of psydochines continuously.

What’s unique about 797 is that we achieve an EC 99.9 for about four hours and if you notice in our dp2 study, there was a pretty significant drop-off of activity between the 400 and 200 milligram dose. We think that’s actually really significant in that we may have the only compound that’s been tested that has the efficacy and potency to actually have complete inhibition of psydochines and pg2 for a relatively short period of time.

This would drive us to look at the higher doses of our drug and actually try to utilize that information we have to both demonstrate efficacy in the pain studies, but also I think in, perhaps, rheumatoid arthritis studies, have a different profile than what the psyo-compound saw.

I think I’d also go back to Vertex and Vertex reported on some data where the CRP kind of laxed and waned as well. Interestingly, the bone marker CTX did not go down over time and so, we actually knew that back in March and April and ankylosing spondylitis -- and one of the reasons we chose ankylosing spondylitis because ankylosing spondylitis has a significant pain component, which is different than rheumatoid arthritis.

Ankylosing spondylitis does not respond well to methatrexate, whereas, of course, rheumatoid arthritis does and ankylosing spondylitis has a significant remodeling effect in the bone and the spine, which leads to the curvature of the spine and the damage in ankylosing spondylitis.

So, for all those reasons, psyo’s not testing a hypothesis, 797 have a unique pharmaco dynamic profile, and ankylosing spondylitis being a different disease than rheumatoid arthritis, I think the trial run with 797 has a good chance of working.

Jim Birchenough Barclays Capital

Can I just follow up on that if that’s okay? So, I think the suggestion by Mark Genevieves at the meeting, at least his suggestion was because you saw still sustained blood levels of 469, but within a week you CRP go down and you say pain scores rebound, his suggestion was that the alpha sub-type, the isoenzyme, may lend itself to some contensitory mechanisms and so, I guess what I’m wondering is have you looked into that question as to whether when you inhibit the alpha isoenzyme, do you get contensitory mechanism kicking in?

Michael Carruthers

We had not observed that nor have other people that I know of and we’ve discussed this -- relatively extensively, as you might imagine -- whether there’s an increase in the beta iso-form or the gamma iso-form, we have not observed that. We actually did go back and look at a lot of the longer-term animal studies that have been reported in the literature and we’re actually carrying out some of those ourselves and certainly in models like the MRR/LPR mouse, which is a lupus disease model that did not occur.

So, it’s not clear that what’s being observed in the clinic can be readily modeled in animal studies and I should point out that the diseases where a p38 compound have been evaluated are all a hyper-proliferative-type disease, which may not lend itself -- the driver of the disease, may not lend itself to a p38 inhibitor, whereas diseases like ankylosing spondylitis, which have clearly a different driver because of the role -- the lack of effect of methotrexate might be a better bet. But I think the entire loss of activity is a difficult end point to get at experimentally.

Jim Birchenough Barclays Capital

Okay. Well, thanks for taking the questions.

Bob Conway

Thanks Joe.


And we’ll move on to Ian Somaiya with Thomas Weisel Partners.

Ian Somaiya – Thomas Weisel Partners

Hi, I just want to get your perspective on the current partnering environment. Has the balance at all shifted from obviously the larger company that's cash versus the companies with products? Just wanted to get your perspective on it.

Bob Conway

Good. That’s a great question. You know, Dave Snitman is out actually talking with partners today. He is in Philadelphia but he’s on the phone who has the commercial area for Array. Dave, are you there?

David Snitman

Yes, I am here. Thanks for that question. And I think that the interest in partnering really has to do with the quality of the assets that you have to partner. I think that there still is tremendous interest from a number of companies in quality assets that can differentiate themselves from existing products either by being first in class or best in class.

I think one example of that is the product that we talked about, the glucokinase activator ARRY-403, which is a novel approach for treating type-2 diabetes. This product really does differentiate itself from the other programs that have entered the clinic in terms of our ability to respond to the higher glucose levels and diminish that response at lower glucose levels. Thus I think we’ve kind of protected ourself against hypoglycemia.

So programs like that and other programs that Array have still continue to have quite a bit of interest from pharmaceutical companies both large pharmaceutical companies and midsize companies in Europe and Japan.

Ian Somaiya – Thomas Weisel Partners

And just as relates the MEK inhibitor and RA obviously at the ACR conference data was presented on multiple products in a small molecules obviously different mechanisms all focused on RA. Has that environment changed at all? Has the appeal or draw of an RA drug changed at all?

David Snitman

Well, I think that having more companies working on this area and our focus is really creating oral drugs for the treatment of inflammatory disease has generated a lot of excitement in terms of finding another mechanism other than lifelong injections with biologics and a few of their problems.

So the biologics really have created a tremendous therapeutic benefit for these patients and now I think people are looking to find opportunities that can come before those biologics that can hopefully delay that injection.

And so a number of companies working on these programs such as Insight, Riegel or Pfizer and Array has created I think a great deal of enthusiasm among companies to try to kind of be at the forefront of getting involved in this oral approach to treating inflammatory disease.

Ian Somaiya – Thomas Weisel Partners

Thank you for sharing your thoughts.

Bob Conway

Thanks Ian.


(Operator Instructions). And we’ll move to Derek Jellinek with SIG.

Derek Jellinek - SIG

Great. Thanks for taking my question. Just a couple if I may. Quickly on 162, there’s been a lot of attention on patient geographies following Riegel’s reporting of our 788 data and RA at ACR. Would you remind us where 162 is as far as the geographies and if you have any kind of color on the balance of patients per country.

Bob Conway

Yes. Let Kevin take that one.

Kevin Koch

Yes. No, we were in both -- we’re in Eastern Europe, South America, and one site in North America.

Bob Conway

And the U.S.

Kevin Koch

And the U.S., yes, and we chose not to go to Russia. There actually are some, I shouldn’t say issues in Russia, but we had heard of different trials that the Russian patient population actually is somewhat different than the Eastern European population.

So we stuck mostly in Eastern Europe, Hungary, Poland, a variety of countries there, and in South America. Mexico also has a lure of having some issues either with the population or having that population be able to roll into a larger trial.

So I think we made some choices where we said we shouldn’t go to certain places because there’s added risk. We think that the sites that have been chosen and the countries that we chose to go into are appropriate for this kind of trial.

This kind of trial has been run in those countries before, and we believe we can get a homogeneous read within those populations and can integrate the data across the various countries we’re in for this particular trial. So I think I’m happy with our choices.

Bob Conway

Yes, and we have 200 patients on trial across all of these countries so I think that gives us –

Kevin Koch

I think you can go back in the literature and certainly Boehringer Ingelheim had a Crohn’s Disease study in Russia where they saw a very different result either in the inclusion of which patients or in perhaps the interpretation of the data. So it’s something you have to consider whenever you run a large multinational trial.

Derek Jellinek - SIG

Yes, I can appreciate that. And as far as the enrollment’s going to complete by the end of this year, where are you guys as far as the balance of patients? Are you getting a sense of where they’re mostly coming from?

Kevin Koch

Derek, we said enrollment would complete in the first quarter of ’09, not this quarter, just to be correct.

David Snitman

Yes and we have a good -- I mean, we’ve just now opened all the sites in South America but we anticipate I don’t know, but I guess I think it’s probably 50/50. I’d have to go talk to my operations folk between South America and Europe. I think that’s where it would end up, but I’m not exactly sure.

Derek Jellinek - SIG

Okay. And then quickly on 403, very interesting compound. Maybe you can compare and contrast for us though how it competes with OSI’s glucokinase activator and maybe your thoughts on the development and partnering strategy for a diabetes drug given that we’re looking from the FDA’s point of view increased time and expense it seems like for a lot of diabetics meds in this space.

Kevin Koch

Yes, we have looked at the data from the OSI compound. They seem to have some issues with hypoglycemia. We have not observed some of those same issues. At least our therapeutic index is significantly larger than their compound. I’ll maybe let David or Bob handle the whole partnering aspect. David?

David Snitman

Yes. So I am just kind of overwhelmed with the enthusiasm that pharmaceutical companies have shown for this product. I think that the P-par inhibitors certainly have shown activity with concerns about safety profile. The DPT 4 antagonists have shown a very good safety profile, but have not been extremely impressive in terms of their ability to control glucose levels.

And so what we’re looking at is a product where I think the issues that have come forward with previous GKAs, mainly the one, the Presidian OSI Lilly compound have been hypoglycemia. So I think as our approach to many programs are is we look to create a competitive advantage and this the competitive advantage that we think we built into 403 is its ability to work at higher glucose levels and to avoid hypoglycemia.

So with this type of profile and the potential market there is great enthusiasm for this program and since our focus has been in oncology and inflammation, we’re really looking to form a partnership on this program earlier than we did on our other programs.

Bob Conway

Yes, Derek this is Bob. We would look most likely to partner this program in phase one or earlier. As we go on to bigger populations, we clearly need a partner around this and I think there’s a lot of alternatives available to us.

David Snitman

I think the other thing is is that there’s a history now in the DPP 4 area of very rapid development in the four to five year timeframe from I&D to NDA and we really want a partner who can run parallel trials with combination meds, combination standard of care, as well as get a big enough safety database together to actually get an NDA filed in less than five years. And, that would be exciting for us because certainly it would provide a lot of value to Array. The faster they can move the faster we get a royalty stream.

Bob Conway

Yes, and I think this is, from our view today, is clearly something we need a big pharma or big cap biotech partner to maximize the value of this drug. So, okay?

Derek Jellinek - SIG

No, sir, I can understand it. Just briefly on (inaudible) that Bobby said. You're looking for a partner in phase one or earlier, so you're looking not for proof of concept, even fasting blood glucose, obviously not A1c, and you're still counting on that a partner will step up that early.

David Snitman

This is David Snitman, and we have published a couple of papers on the preclinical data from 403, and as I said it has been met with great enthusiasm, and we're in discussion of companies now.

Derek Jellinek - SIG

Okay, great. Thanks for taking the questions.


And, we'll move on to Yun Yang with Jeffries and Company.

Yun Yang – Jeffries & Company

Bob, if I heard it correctly, you mentioned earlier that there are about four programs that you are in discussions for partnership opportunities. So, I'm guessing from the discussion today (inaudible) is one and can you actually comment on what the other three are?

And, also when you are going into deeper discussions for a partnership, what are the kind of things that you're looking for? Is it a worldwide partner, a certain geographic area? Can you actually comment of little on the details of the partnership characteristics? Thanks.

Bob Conway

Sure. Okay. There are really two buckets that we talked about today, Yun. The one where I said we had four programs that we were discussing actually was in discovery ad; those are things we haven't talked publicly about yet. But, there's two points for us that we see as potential for partnering. One is once we get the proof of concept and the other is companies are very interested in discovery assets that we have ongoing.

We haven't done strict discovery deals in the last year or so, but that's clearly on the plate today. Because we can only take, as I said earlier, we can only take so many things into development simultaneously. And, six or so programs in development is the most that we want today. So, that was on the discovery side that I said that.

I would say that we have ongoing discussions on at least four assets in development. And, probably the most advanced concerns are inflammation assets and our glucokinase activator, with some ongoing discussions in cancer as well.

And, basically what we're looking for is obviously significant near term economic deals, but also who is going to maximize the long-term value of this drug, of any of the drugs. And, put the necessary development capabilities against this. What do they have those competing programs inside their own company?

And, we want to make sure whatever partner that we pick for the programs likes each of these drugs as much as we do, and really wants to drive it forward. Because that's the primary reason that we would partner, is to get the maximum lifetime value out of the drug.

Yun Yang – Jeffries & Company

Okay, thanks very much.

Bob Conway

Thank you, Yun.


(Operator Instructions) And, we'll move on to Mona Ashiya with JP Morgan.

Mona Ashiya – JP Morgan

Hi guys, I'm here for Cory Kasimov. Just one question on 797. I wonder if you could clarify a bit the development part for the acute pain indication. I understand that you had moved into (inaudible) escalation with the higher doses in healthy volunteers and, then if you could just speak a bit about what would be the next steps there. And, also do you anticipate based on the (inaudible) findings and the clinical data so far, that you would get greater durability of effect with the higher doses? Given the effect on PGE pill?

Michael Carruthers

So, as you observed in the DP2 study, we think the 400 dose is what is going to provide very good analgesic benefit. So, we're looking to get to a 400milligrams twice a day dose, or TID dose. The pain end points, in pain therapeutic areas we've looked at are in after orthopedic surgeries, so, total knee replacement, total hip replacement, bone fracture.

And, one of the competitive advantages that we can glean there is the NSAIDs are not used as analgesics in those indications, because, those drugs have a propensity to actually slow bone growth, and that is an issue. And, so the only meds that are used in those indications are largely opiates in combination with Tylenol or codeine.

So, what we plan is we're running a study looking at the rate of bone re-growth to ensure ourselves that P38 inhibitors don't have the same effect as the NSAIDs. And, in fact, there's some anecdotal evidence and understanding the role of T&F in bone growth, that T&F actually blocks bone growth.

And, that P38 inhibitors by blocking T&F, we believe, will not have that same effect, which will position ourselves in that particular indication, which, there are several million patients that undergo orthopedic surgery, and we believe it is a significant medical need.

A second indication we're looking at is in spinal pain, lower back pain. And, lower back pain, what's interesting is prior to going to surgery those patients really have no other intervention available.

Bob Conway

Good option.

Michael Carruthers

No other good options. And, even surgical intervention for lower back surgery, disc surgery, does not always have a great outcome. So, what we're looking at is that particular indication.

The biology actually fits quite well for that indication, meaning that there is enhanced I01 T&F and I06, actually at the tissue site. And, there's good evidence that macrophages migrate into that site. You have a reoccurring inflammation at that site and that molecules that would regulate both PEG2 and cytokine, perhaps can have great benefit in that therapeutic indication. But, we believe that we need to get to a 400milligrams BID dose to have efficacy for at least seven days.

Mona Ashiya – JP Morgan

Okay. Thanks. Thanks a lot.


And, we'll move on to Chris Raymond with Robert Baird & Company.

Chris Raymond – Robert Baird & Company

Thanks. You know, just sort of a strategy question, stepping back. Can you guys, maybe, describe how your decision and announcement on this conference call to partner for, potentially, programs would be different if we were holding this call in an environment where the financing window was wide open and your ability to raise funds for alternative means would've been different?

Bob Conway

Yes, that's a great question. And, what we were talking about there is evaluating partnerships in discovery. And, I think the financing window has changed a little bit.

But, probably equally important that, Chris, we want to make sure that we can execute very well in the trials we have ongoing in development. Now, we have six, soon to be seven programs in development. And, we think that with the size team that we have there now, that's about the optimal number that we can handle appropriately in development.

And, so we don't want to overload that, and we think there's significant opportunities in discovery right now for partnerships. And, we don't want to put more into development until we have some partnering coming out of development, which, we have a lot of ongoing discussions there as well. So, we're looking for a bounce and what we have ongoing in development to make sure we're maximizing to the assets.

Chris Raymond – Robert Baird & Company

So, is it safe to say this is kind of independent of the other factors?

Bob Conway

I think it's probably a little bit tied together at this point regardless. But, fortunately we have a significant amount of cash on the balance sheet today, and we have the Deerfield money coming in in December. But, really a lot of it's driven by not overloading what we can get done well in to develop right now.

Chris Raymond – Robert Baird & Company

Okay. Thank you.

Bob Conway

Thank you.


And, it appears we have no further questions at this time.

Bob Conway

Okay. Well, thanks very much, operator. We'd like to thank everybody for being on the call this morning. And, we would also like to thank our employees for their dedication, creativity, and hard work. We look forward to updating everybody about 90 days from now. Thank you.

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Source: Array BioPharma F1Q09 (Qtr End 09/30/08) Earnings Call Transcript

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