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Array BioPharma, Inc. (NASDAQ:ARRY)

F2Q 2013 Earnings Call

February 5, 2013 9:00 am ET

Executives

Tricia Haugeto - IR

Ron Squarer - CEO

Mike Carruthers - CFO

Kevin Koch - President & CSO

David Snitman - COO & VP, Business Development

Analysts

Jim Birchenough - BMO Capital

Ted Tenthoff - Piper Jaffray

Matt Lowe - JP Morgan

Mike King - JMP Securities

Matthew Andrews - Wells Fargo Securities

Stephen Willy - Stifel Nicolaus

Operator

Welcome to the Second Quarter 2013 Array BioPharma Incorporated Earnings Conference Call. My name is John and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I'd now like to turn the call over to Ms. Tricia Haugeto. Ms. Haugeto, you may begin.

Tricia Haugeto

Thank you, John. Good morning and welcome once again to Array BioPharma's conference call to discuss our financial results for the second quarter of fiscal 2013. You can listen to this conference call on Array's website at www.arraybiopharma.com. Also we are using slides today to accompany our remarks. The slides can be downloaded on the Investor Relations home page of our website. In addition a replay of the conference call will be available as a webcast from our website.

I'd like to introduce Array's Chief Executive Officer, Ron Squarer; 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; and David Snitman, our Chief Operating Officer and Vice President of Business Development, who will be available to answers questions as needed. But before I hand over the call to Ron, I'd like to read the following Safe Harbor statement.

The matters we are discussing today include projections or other forward-looking statements about the future results, research and development goals of Array, 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, 2012, 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 projection or forward-looking statement.

And now I would like to turn it over to Array's CEO, Ron Squarer.

Ron Squarer

Good morning everyone. We are pleased to share with you all today details of Array's continued evolution into a late stage development company, making substantial progress in generating data to support decisions regarding our development plans for our wholly-owned hematology programs.

Some of the most recent news we have to share actually relates to AstraZeneca's announcement just last week during their earnings call of a potential Phase 3 start with Selumetinib in non-small cell lung cancer. This Selumetinib trial could start during the second half of 2013, and this news comes on the heels of the announcement by Novartis of their intentions to begin a Phase 3 trial with MEK162 in NRAS melanoma as early as April of this year. With the start of the melanoma trial, MEK162 will be the first Array invented therapy to enter Phase 3.

Novartis recently also announced plans to presume MEK162 late stage clinical development in combination with their Raf inhibitor LGX818 in BRAF mutant melanoma.

As we mentioned during previous presentations, the economics related to our MEK162 collaboration with Novartis are particularly attractive. In fact, throughout our history, Array has been successful at partnering with excellent economics and with some of the finest companies in the industry such as Genentech, Roche, Amgen, Celgene, and others in addition to Novartis and AstraZeneca. Through these partnerships, we've been able to effectively raise substantial non-dilutive capital totaling almost $170 million in just roughly the past three years.

If you add up all of the potential partnership milestones, we could earn it totals more than $3 billion, and this is before commercialization royalties kick in. Currently, we have about $110 million in cash at the end of December. This should sustain us for good period of time especially as we expect to enter into new additional partnerships and collect milestone payments from existing partners.

The next 12 months are going to be very exciting and I'll be reviewing some of the key catalysts and value drivers with you today. But I'd actually like to start by reviewing our additional potential sources of non-dilutive funding. And so, if I turn now to Slide 4, we have a list here, which is the focus of our partnering activities. Starting with our wholly-owned Heme/Onc programs if we are convinced that it could increase the value of 520 or 6142 ARRY we would consider selective partnering on one or both of these programs to bring an additional capital and/or critical expertise and capability.

I think most of you are already familiar with our partnering plans for 797 in pain and 502 for asthma. Both of these have potential utility in very, very large markets that will require significant and specialized resources to achieve a regulatory approval and commercial success.

We have a number of pre-clinical programs with significant and valuable IP behind them. TrkA for pain and GPR119 for diabetes have attracted keen interest from potential partners and there are several other early stage programs that are also gaining a partnering attraction and momentum.

Finally, we have a world class research organization with a proven track record that we wish to maintain but is neutral to our P&L and so we are closer to commercial revenue. You may recall that over the last year we announced deals with DNA BioPharma and Clovis Oncology where we provide discovery support regarding targets which are of interest to our collaborators and we continue to pursue similar partnerships to keep our discovery capabilities at the cutting edge.

I would now like to turn to our key achievements for the quarter as a company, the achievements since our last quarterly call. So on Slide 5, I've already touched on the great news we've shared relative to both MEK162 and Selumetinib. I'll drawdown later on the results we presented at ASH in December, which showed impressive single agent and combination activity with ARRY-520 and improved bioavailability and target coverage with our new formulation of 614.

We also presented promising biomarker data for ARRY-797 our pain drug testing potential disease modification in osteoarthritis. And during the quarter, we had a successful meeting with FDA around ARRY-614 and received guidance on the use of modified hematological improvement as a primary endpoint. We also received feedback that an overall survival endpoint would not be mandatory for approval in myelodysplastic syndrome.

The next Slide 6 summarizes critical upcoming catalyst for products specifically being developed by Array and for Selumetinib. 520 and 614 are Heme/Onc programs are tracking on similar timelines and we expect to have data emerge for both of these to inform forward development decisions by the end of the year. With 614 we're pleased to have guidance from the FDA, as I mentioned, on a potential primary endpoint, and to have declared MTD, which allowed us to initiate an expansion phase, which we believe will inform a future study design.

Both MEK162, which we are co-developing with Novartis, and Selumetinib, which is partnered with AZ, are on track to potentially initiate Phase 3 trial this year, and pending appropriate results from our ongoing Phase 2 trial with ARRY-502 in asthma we will speak to partner of that drug along with 797 for pain this year.

Moving on to Slide 7, we're showing our complete clinical stage pipeline separated into three buckets of value. At the top are Heme/Onc programs; the next the two MEK programs, both of which as we've said could be in Phase 3 this year; finally, our existing partnerships continue to advance and we continue to seek additional sources of non-dilutive capital through potential new partnerships as I described earlier.

We will now turn to review of our recently published ASH data starting with ARRY-520, which as we've said before the KSP inhibitor. Its unique mechanism holds out the promise of providing benefit in multiple myeloma patients when proteasome inhibitors and IMiDs have failed. So in heavily pretreated patients or when used in combination with these mechanisms in earlier lines of therapy.

So turning to Slide 9, we detailed the updated 520 single agent data we presented at ASH indicating that 16% of patients had a PR or partial response or better with median duration of responsive 8.6 months. This single agent data is comparable to single agent data presented for other emerging therapies in heavily pretreated relapsed and/or refractory patients. And what we recognized the data's earlier we did here very positive feedback from thought leaders at the meeting about the 19 months of survival result in the 520 single agent study.

Next on Slide 10, we detail important Dex combination data that we presented. It's been previously observed as we pomalidomide that the addition of Dex can enhance response rate and durability in refractory myeloma patients in the 520 plus Dex study reported ASH, patients enrolled in our study were much more heavily pretreated than most studies reported to-date with a remarkable median number of 10 prior resonant. Still despite this, we observed an overall response rate in the 20s for the combination with enhanced duration of treatment relative to single agent alone.

The safety profile and the single agent combination ARMs were similar, and this response rate was similar to rate seen when pomalidomide was combined with Dex as seen in this table.

We also presented data on a patient selection biomarker AAG, which could potentially be used to predict improved median duration of treatment with 520 Dex from 3.9 months to 6.2 months and an overall response rate of potentially 33%, if it were to be utilized. Now, this is the first cohort here, this data, and we expect to ultimately treat three times this number of patients approximately before the study is fully enrolled.

On the next Slide 11, we have the AAG data. This is alpha-1-acidic glycoprotein, an acute phase serum protein, which appears in normal levels in most multiple myeloma patient. The issue is that it binds tightly with 3520 thereby reducing the life of the patients with abnormally high levels of AAG will benefit from the drug. And we do not believe at this time that AAG is a prognostic factor.

So, in this table you'll see that we observe no responses in the relatively small percentage of patients with elevated AAG level. But also is important to note, in this slide, that we have had several patients who have stayed on 520 for quite a long time; here you see patients even on study for 35 months or more and we do not appear to show cumulative toxicity with the drug.

Turning now to Slide 12. As I mentioned earlier, 520 has the promise that has a new -- has a unique mechanism of working synergistically with currently available mechanisms and treatments. Here, we are showing some very exciting initial data from the first two cohorts of the ongoing trial, which is combining 520 and carfilzomib. While we've recognized this data this very early, we are encouraged by the initial signs of clinical activity pointing to a 56% clinical benefit rate. We also had seen a complete response in just the first few patients.

The combination is generally well tolerated with the MTD having not been yet been reached, additional cohorts are planned, and ultimately, we expect to treat a total of approximately five times this number of patients before this study is fully enrolled.

Now, turning to Slide 13. We're very pleased with the data emerging with 520 and feel that the recent approval of carfilzomib has provided clarity regarding the regulatory hurdles for late stage multiple myeloma therapy. We're currently looking at a couple of potential regulatory paths with 520. The first is to pursue accelerated approval in multi refectory patients. The other is to pursue a study with 520 in either with the carfilzomib or ultimately with bortezomib in relapsed refectory patients. Given appropriate results from our ongoing studies in these populations, we anticipate a potential pivotal trial decision in 2013. The exception there would be bortezomib data really will only be available to us towards the end of this year.

On Slide 14, this is regarding ARRY-614. We're able that ASH to present data indicating that we achieved important goals with the new formulation, including improved bioavailability leading to two to three times exposure and improved pharmacokinetics. As I mentioned, we also recently met with the FDA to receive guidance on the use of modified hematologic improvement as a primary endpoint and the feedback that overall survival would not be mandatory for approval.

Now, we recently declared MTD for 614, as I mentioned, and are now are moving to expansion phase, and given the feedback from FDA on the primary endpoint, we would like to generate additional data through this planned expansion at the selected dose and in the refined target population to inform or forward clinical plan.

Now, I'd like to turn to the MEK inhibitors and provide more details on our two partnered programs. I'm on Slide 16, and as I mentioned earlier economics with Novartis for 162 are exceptional with potential double-digit royalties outside the U.S., but significantly higher potential royalties in the U.S. also potential future milestones as high as $412 million. We also have co-detailing and co-development rights in this collaboration and our development cost are in fact capped both annually and in total at a reasonable level.

Listed on Slide 17 are the 11 Novartis sponsored trials which are currently in the public domain including important target agent combinations such as PI3K, and in the shaded in blue a brand new study, and I just announced in combination with their CDK inhibitor. We think this new study just continues to reinforce our view that Novartis remains committed to broad clinical development with product with continued focus on novel combinations with their fantastic pipeline of targeted agents and their continued focus on key mutant population.

In green are the two trials, which informed at their planned registration trial in NRAS and BRAF melanoma that we expect to start soon. At the bottom we've listed an Array type docetaxel combination study; we're currently conducting in ovarian and related cancers.

Slide 18, actually taking directly from Novartis is our R&D Investor Day from the end of last year. Here they noted the impressive results in NRAS melanoma, which supported their current plan to advance into the pivotal trial this April. In the same presentation they announced their intention to pursue a combination with their Raf kinase inhibitor LGX81a in BRAF melanoma in 2013 as well.

Now turning to 19 and Selumetinib, I would like to provide more details on the progress at AstraZeneca. In this partnership, Array is entitled to potential milestones in double-digit royalty. AZ is responsible for development and commercialization. Selumetinib is currently advancing in an amazing 65 Phase 1 or 2 clinical trials globally and AZ recently completed a Phase 1 formulation trial. In this chart, you'll see select studies that are active with the drug looking at populations for lung cancer to uveal melanoma, pancreatic prostate and kidney cancers.

Next Slide 20 at the recent ASCO Meeting, AZ shared that Selumetinib plus docetaxel demonstrated statistically significant improvement in PFS, overall response rate, and alive and progressions free at six months in KRAS-mutant lung cancer. They have also recently initiated a study listed here below, which interestingly is focused on unselected non-small cell lung cancer, examined two different currently approved doses of docetaxel in combination with Selumetinib and this study could provide data to and form important future non-small cell lung cancers.

But on 21 is really the exciting news that just popped up last week in the public domain taken directly from their quarter call, a clear statement of AZ's intention to move Selumetinib into registration trials soon. Here we see Selumetinib listed as potential Phase 3 start this year and is one of only five possible Phase 3 starts starting at AZ in 2013. So we would assume a very important asset for them going forward.

So, on this very positive news, on this very positive note, I'll turn over the presentation to Mike Carruthers, our CFO, who will discuss financials.

Mike Carruthers

Thank you, Ron. Starting on Slide 23, our revenue for the second quarter was solid at $18 million. This revenue level is about $2.5 million better than the prior sequential quarter and is driven by a milestone payment from VentiRx for the Array invented compound entering Phase 2 in an ovarian cancer study.

Our revenue declined by $5 million from the same quarter last year due to the prior year included the recognition of a significant portion of the $28 million upfront payment we received from Genentech.

Our loss per share of $0.10 is slightly better than our expectations as spending remained in check.

Our cash equivalents and marketable securities as of December 31 is $110 million reflecting a net $29 million burn or use of cash during the quarter. This includes paying Novartis $9 million during the quarter for our annual fractional share of MEK162 development costs.

Recall that our U.S. royalty rate with Novartis is significantly higher than the basic double-digit royalty rate we can receive outside the U.S. for MEK162. This high U.S. royalty rate is maintained through paying a fractional share of the development costs. We have the ability to opt out of this funding on an annual basis without losing the pro rata increased level we achieved from any payments we make or development costs we incur.

We're bullish on the prospects of MEK162 and therefore are currently continuing to share a fractional portion of the development costs, because we have an annual cap and total cap on the total out of pocket we're obligated to pay under this arrangement, for the next several quarters, we will be cash flow neutral because Novartis will reimburse Array for actual internal and outsource costs that we're incurring under this program.

I'll now update on the next page guidance for fiscal 2013, which ends June 30th. We're holding guidance with only a slight adjustments. Revenue should come in about $60 million with loss per share of $0.55. I would generally characterize the small changes in guidance as a result of having half the year under our belt at this point. For the next quarter, our third quarter of fiscal 2013 ending this March, we look for numbers to more closely reflect our first quarter results at $14 million in revenue and a $0.14 loss per share.

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

Ron Squarer

Thank you, Mike. I'm going to review on Slide 25, our potential catalysts in calendar year 2013 and then open up for questions. In 2013, we look forward to multiple potential Phase 3 trials getting underway. We really couldn't be more pleased with the progress we and Novartis are making with MEK162 and now AZ appears to be in a position to capitalize on Selumetinib in lung cancer and has additional studies and other indication as well progressing during the year.

For both 520 and 614, we're focused on generating data to drive decisions regarding future development plans and we'll make those decisions this year as well. With 797, we continue to engage in partnering discussions and regarding 502 and Asthma, we plan to report top-line results for Phase 2 trial in selected asthma patients this summer and with positive data we'll seek a partner for further development and commercialization. This could be another additional important source of non-dilutive capital.

Roche appears to be positioning danoprevir for second line or resistant HCV patients and we look forward to a potential Phase 3 decisions from them this year as well. Finally, we expect Amgen to complete their Phase 2 evaluation of our partnered diabetes drug AMG 151 during the year.

And at this time, I would like to turn the call back to the operator and open up for Q&A.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Jim Birchenough from BMO Capital. Please go ahead.

Jim Birchenough - BMO Capital

Congratulations on all the progress. A couple of questions. Just first on the financials just as you think about the spend in the second half of the calendar year, would you expect it to be steady with what we're seeing in the first half or with all the trials you're running should that go up, if you could give any guidance there that would be helpful? And just on 614, I just want to understand how many patients will have before you make the Phase 3 decision? What is your hurdle for moving forward and do you need another meeting with FDA and an SPA as gating items. Just trying to get a sense of what needs to happen before you start the Phase 3? Thanks.

Mike Carruthers

Thanks, Jim. Mike Carruthers, I'll comment on the cash flow that we've got the asthma study, the Phase 2 for ARRY-502 that will be winding down of course as some of the other studies start to ramp up. So really for the next 9 months, 10 months or so, we're not going to see a significant change in the cash burn rate.

Ron Squarer

And then Jim, this is Ron I'll take a stab at the 614 question. And so I think, the way we're not -- we haven't been specific about the number of patients we're going to be enrolling in the expansion. But we do feel it's a sufficient number to validate both safety and to look at signs -- for signs of activity to inform a further decision.

And perhaps the best way to think about it is, is that just looking at the timing, what we're saying is that we'll enroll the study and have the data in time to be able to make a decision on entering future pivotal trials by the end of the year, and so that gives you a sense of how long it will take to enroll and then complete the study but we haven't been specific on the actual numbers yet.

Jim Birchenough - BMO Capital

And once you make that decision, do you then go back to FDA and put a protocol in front of them or have you already established that and once you make the decision you can just get going?

Ron Squarer

Yeah in a way, we apologize a little bit for not being completely specific on our plans with regards to endpoints for registration trials. The reason we're doing this is we want to see the full set of data in order to determine if we’re comfortable using the end points which we've received guidance on to-date. We’ll take FDA up on the offer they made to come back to discuss alternative if the data justifies alternatives. And as a result we felt that if we were very specific on the end points we were planning to use, it would make a more difficult than to introduce variations to that.

So we got clear guidance on the set of endpoints or on an endpoint but also very rich discussion with FDA on the possibility of additional options for looking at hematologic improvement. And so at this point, if we stick with our current plan, we would not have to go back to FDA for discussions but if the data emerges with interesting activity that we would like to explore through endpoints then we may in fact go back in such pace with them I guess that would be this year.

Operator

Our next question comes from Ted Tenthoff from Piper Jaffray. Please go ahead.

Ted Tenthoff - Piper Jaffray

Thank you. Do you guys hear me okay?

Ron Squarer

Yes. We can Ted, good morning.

Ted Tenthoff - Piper Jaffray

Good morning, and my congrats too on really just a lot of balls up in the air and a lot of progress going on, on a lot of different fronts. I wanted to pick back up on 520 and just makes sure that I heard you correctly. So it sounds like the interesting signal that we saw with AAG biomarker is not holding, is that correct?

Ron Squarer

No, no, its not my intention.

Ted Tenthoff - Piper Jaffray

Okay. So, maybe you can walk me back through that so that I can understand sort of how those trials can progress?

Ron Squarer

Right, okay. So I think what we were saying is and this would be back if we can find the slide here, on the dex, its really most prominent in the dex combination trial.

Ted Tenthoff - Piper Jaffray

Yeah.

Ron Squarer

We’re saying is that we saw by adding Dex to 520 that we actually are achieving now response rates in the 20, this was in this very heavily pretreated population with 10 medium prior therapies with the 11th line essentially, on average. And that by applying Dex -- I am sorry, by applying AAG as a potential selection marker that would predict that the response rate in this study would have been 33%, now we’re into the 30. And with in very important the duration of therapy, the duration of therapy actually changing from 3.9 months to 6.2 months, and not quite doubling but a very substantial improvement.

And so we believe AAG can be an important selection marker. We've said in the past that elevated AAG occurs only in a small percentage of patients. We sort of estimate may be 20%, 30% just using a broad range. We, as I mentioned, don’t believe its prognostic but then in fact it appears in certain patients and because it binds tightly with 520 taking it out of the picture that it reduce –

Ted Tenthoff - Piper Jaffray

I see.

Ron Squarer

The patients will respond. No real change on our AAG.

Ted Tenthoff - Piper Jaffray

And I apologize for asking this but in the studies that you have done so far AIG been validated in monotherapy with 520 or also with Dex?

Kevin Koch

Hi, Ted. This is Kevin here. This is the data set that was presented at ASH, actually included all patients in both the dose escalation in the single agent and in the combination with dexamethasone. So, its actually a large cohort of patients across their studies who have been treated in multiple myeloma, and it does seem to hold across different patient populations different combinations. Of course, we are studying it now with in Carfilzomib and we are looking to expand our knowledge with the completion of the dexamethasone expansion.

Ted Tenthoff - Piper Jaffray

And since I have screwed up the message here, just to get a completely back on point, looking at pivotal studies and you are going to wait and see how Velcade trial reads out. And then, what are the potential pivotal studies that you would consider with 520?

Ron Squarer

Okay. Ted, let’s walk through because there is a few studies in the timing. So, we have been sort of pointing to the fact that both the Dex combination trial and the ongoing Carfilzomib combination trial are on, let’s say, similar time line. Those would be the first data sets to fully emerge in the next few months. And if they are positive and the data we have seen, data has been very encouraging both in our eyes and the eyes of advisors and opinion leaders, we think that we could make a decision to move into pivotals with that data.

The Bortezomib data we expect later in the year. And so, while it could represent an important path for especially up for Europe where Carfilzomib is not going to play its important role. But even also in the U.S., we can decide to initiate a trial then. And so, I suppose the only way we would wait for Bortezomib is for some reason we weren’t convinced of the robustness of the Carfilzomib Dex data.

Now, with the regards to the study, at this point because we haven’t yet discussed this with FDA and plan to do so in the future, we are really pointing to a study in, I would just say, in multi-refractory patients and with Dex or single agent and then another program that looks at 520 initially ideally with carfilzomib. And at this point, we're just referring to the potential accelerated to be in a multi refractory patients.

Operator

Our next question comes from Cory Kasimov from JP Morgan. Please go ahead.

Matt Lowe - JP Morgan

Hi. It's actually Matt Lowe in for Cory today. Just a few questions. I guess to start with specifically what are you looking for in the top line Phase 2 read out for 502 in the summer? I guess, I mean like which endpoints are you looking at and what would consider a good result there?

Ron Squarer

Yeah, hi, Cory. Yeah we designed the trial in a selective patient population with the express purpose of trying to maximize FEV1 and so the primary endpoint is FEV1 for this group. We believe that this target population, there is an important population, we'll respond to this drug, and if we see, I think we're hoping for something north of 10% increase.

Matt Lowe - JP Morgan

And then just as a follow-up in terms of the partnering with 797, I guess what is your level of confidence there in securing a partner in 2013?

Mike Carruthers

We continue to engage in partnering discussions. And what I'll say is that the disease modification data that we presented at ACR was well received and has brought us some additional interest. But as I mentioned, these are very large disease area, and identifying the right partner and the right partnership is something that we expect to take some time. And so, we'll continue to pursue those discussions and we do still plan to have sort of a decision on 797 this year. We'll provide updates on an ongoing basis.

Operator

Our next question comes from Mike King from JMP Securities. Please go ahead.

Mike King - JMP Securities

I just had a couple of quick follow-ups on 520, and then one or two if I may on 614. So just with respect to AAG, who would like to comment maybe Kevin is there any way that higher doses might be typical of overwhelming this system or is AAG such a big stink that patients with high expression are just not worth, are not worth bothering with?

Kevin Koch

No, no, I think that we've done out explicitly studied that patient population, but we've been discussing that with our key opinion leaders of whether or not we would does escalate in the high AAG group. But it's a relatively small number of patients, 20% to 30%. So it isn't the primary strategy right now. But we're certainly discussing this with investigators.

Mike King - JMP Securities

Okay. So you haven't written them totally off as you said the path of least resistance is in the low expressors?

Kevin Koch

Yeah, I know and we're trying to focus and track forward towards that strategy.

Mike King - JMP Securities

And then I don't know how much more specific you can be about kind of where you are in regard to the combination dosing of 520 with the proteasome inhibitors, just I assume you're stepping each agent in the regiment up to certain dose levels, I don't know if you can may be give us a little more color on kind of where you're dose level one, two, three?

Ron Squarer

Yeah, so we've reached the -- with Bortezomib that we've reached the let's not call them the approved doses, but the standard to care doses are 1.3 with Velcade and 125 with 520 and that seems to be well tolerated. And so we're moving forward. We, as you know, on the protocol we've both an expansion, the addition of dexamethasone and also the change in actually another schedule for Bortezomib. So we have a couple of different opportunities to be quite successful with Bortezomib, but it will take a number of additional months to get that full data.

With Carfilzomib, we've now reached the approved dose of Carfilzomib and we're now dosing that cohort 1.5 MEKs of 520 along with the 20, 27 schedule of Carfilzomib.

Mike King - JMP Securities

Any intention to go to the higher doses of Kyprolis?

Ron Squarer

Yeah, in the protocol there is an expansion of phase to go to the 2057 schedule. So that so we anticipate that the next generation of dosing Carfilzomib will be -- we'll look to enhance the dose of Carfilzomib. I think the trials will be little ways off before it becomes an approved strategy, but we want to shoot ahead and make sure that we are the drug of choice in combination with Carfilzomib.

Mike King - JMP Securities

And then I wonder if you could talk about the method of administration, because the Kyprolis right now is given IV, but the majority of the world has transitioned over to sub-q Velcade. So I just wonder what the -- if there is any implications in terms of either use from the standpoint of 520 partnering with Carfilzomib versus Velcade and can it be administered in same IV line, then have to be given sequentially, and walk us through some of the technicalities to that if you don't mind?

Mike Carruthers

I believe actually I shouldn't -- I had not looked exactly at the exact precise protocol. I'd say I'll give you what I remember. I haven't looked at it very closely, but I'd say that we give it sequentially. Right now, as far as I know, we've carfilzomib; we're on exactly the same or very similar schedule. So we're dosing simultaneously on day one, two and day 15, 16 with carfilzomib study. With Bortezomib I'm less clear. I think we again is sequentially, so it was not in this line.

Mike King - JMP Securities

You give the 520 IV and the sub-Q Velcade?

Mike Carruthers

Yeah. We -- I think we've an option for both sub-Q Velcade and for IV Velcade. So it's investigator choice.

Ron Squarer

And Mike, this has been an important topic within the strategy teams. And what we'll do is we will follow-up with you specifically on the details but we actually believe --

Mike King - JMP Securities

Yeah, sorry, yeah sorry to consume so much time on this. Just a real quick question on 614 and then I'll get off. Any starter obviously, there is no obligation to go beyond hematopoietic improvement for regulatory purposes but I'm wondering if you're thinking about from a market standpoint if, other outcomes whether it's whatever transformation AML or progressive free survival or anything like that that enter into your thought process as you develop the molecule? Thank you.

Ron Squarer

Yeah. We as I said, we're being a little -- we're leaving some flexibility on the endpoints, we choose ultimately of course proving survival benefit is the gold standard. But we do believe there is very strong evidence suggesting that improvements in hematologic status ultimately do lead to improvements in survival that certainly would be the goal standard. But we haven't really revealed the entire details of our clinical trials, so beyond just the endpoint from approval you would expect it to be secondary endpoints and other measures, which would support uptake commercialization and pricing. So, we would hope to be more specific about that as we see the results of our new expansion and plan potentially for our next trials.

Operator

Our next question comes from Matthew Andrews from Wells Fargo Securities. Please go ahead.

Matthew Andrews - Wells Fargo Securities

While you've discussed presumably the dual refectory population in myeloma as an initial path to market for 520, is it your sense coming out of ASH talking with opinion leaders and advisors that the triple refectory population could pose or provide an additional path to market, where you would be able to use response rate as the primary endpoint for accelerated approval?

Second question is just on the data disclosure for the five ongoing studies. Will there be any interim data announcements ahead of medical meetings or should we just expect to look for the data as part of abstracts or presentations as going at ASH and EHA?

And then, finally, can you give us any guidance relative to the milestone payment from Novartis for the Phase 3 NRAS melanoma initiation in second quarter, third quarter this year? Thank you.

Ron Squarer

Okay. So I'm going to have Kevin talk about 520, and then I'll hit on the data release, and then Mike will tell you tell you not too much about Novartis. So, why don't you go ahead Kevin?

Kevin Koch

Yeah. It's interesting question the triple-refectory versus dual-refectory. We think, for the most part we've documented triple-refectory for patients who progress well on dexamethasone but that often is maenad of the regiments who often have dexamethasone as part of them. So, we believe that multi refectory, as we've described it, is something that we'll be discussing with the FDA in regards to our patients. Do they need to be pretreated with pomalidomide Dex? Do they need to be treated pretreated with carfilzomib. So, essentially, how many IMiDs how many proteasomes and do are they refectory to Dex as well.

We think that once we come to some level of agreement with the FDA that response rate would be the appropriate measure, as well as duration of those responses. But again, we will be talking to the FDA sometime beginning of the second quarter on these points.

In regards to when we'll disclose this data, we think we tend to want to disclose these at the appropriate medical meeting; it's our prior generally.

Ron Squarer

Let me -- so, EMA is the next sort of Heme/Onc meeting that would be relevant, Matthew. And then, but our -- the timing is very tight given that we're just now are collecting this critical data that's going to form our forward plan. So we may have some presentations there. But I would say that it's more likely, that we'll be able to share some information at ASH, but even there, if you consider the timing on the expansion for 614 that could be tight as well.

So, it's always our preference as Kevin mentioned to share data at scientific meetings. But to the extent that it's important that we inform the investment community we'll do so just to redirect our communication method like this today. So, those are the portion of the expectations we've to set.

Then, perhaps with our MEK inhibitors, well, we can speak for our partners Novartis and AstraZeneca. We certainly look forward to them presenting data at ASCO, which could be very exciting, although their current commitments to their Phase 3 programs is very valuable in and of itself. And then Mike?

Mike Carruthers

Sure, yeah. Just a touch on Phase 3 milestones. There are milestones for both AstraZeneca Phase 3 and Novartis Phase 3; we haven’t disclosed what those are. In the case of Novartis, there is potential for more than one milestone or Phase 3 starts.

Operator

(Operator Instructions) And we have a question from Stephen Willy from Stifel Nicolaus. Please go ahead. Pardon me, Stephen, your line is now open.

Stephen Willy - Stifel Nicolaus

Can you maybe just remind us Kevin what you’re seeing in terms of time to response with respect to 520 and these combinations with various agents whether would be dex, carfilzomib Velcade?

Kevin Koch

Steve, I’d say, generally, as we've added dexamethasone, we've had I think kind of responses somewhat faster. I think that with a small end with Carfilzomib, I would say its definitely faster than what we typically think of about four to five months to get to a response with 520.

We have as a single agent 520 is going out even if you notice for more original ASH presentation is a single agent, we actually added a response out at I think it was kind of on the seven or eight month range. So, it is an interesting phenomenon, but it does looks like kind of response is somewhat faster in combinations.

Stephen Willy - Stifel Nicolaus

And then, I guess along those same lines, and I know there was a bit of a lag with respect to time to response with the initial 614 formulation. Is that anything that seems to have improved I guess with the new formulation?

Ron Squarer

No, I would say that -- I would that we’re seeing taking about four to six months with 614, and unfortunately, and this is fairly common in this disease area. Azacytidine also has a relatively long time of onset out of six months. So it seems to be the natural progression of this disease.

Stephen Willy - Stifel Nicolaus

Okay. And just a quick question for Mike. With regard to the Novartis milestone payments that are outgoing and forgive me if you have already covered this, but have you guys provided any clarity around kind of where those payments are capped and what's the total lump sum of those payments are?

Mike Carruthers

We haven’t, you’re talking about the co-development payments?

Stephen Willy - Stifel Nicolaus

Yeah.

Mike Carruthers

No. we haven’t. They’re capped at a reasonable level annually, and in total and there are a fractional share of the total development costs that essentially we can pay in cash or in kind with our development efforts.

Stephen Willy - Stifel Nicolaus

And obviously Novartis is undertaking a fairly aggressive Phase 3 devolvement plan. So, are you kind of linked to that plan from a total perspective for long as that drug is in development or does it essentially just kind of expire at some point?

Mike Carruthers

Yeah, it goes for several years and there is an end to the co-development payment scheme.

Kevin Koch

There is a maximum overall, and then of course, we are cap. So, at some point they will be spending sums presumably that would -- wouldn't exceed the max that we would have to pay and we think they are pretty much kind of getting there and probably they are right around now.

Mike Carruthers

So, we have good visibility to it and have optionality around it.

Operator

We've a follow-up question from Jim Birchenough from BMO Capital. Please go ahead.

Jim Birchenough - BMO Capital

I just want to ask a question on 520 just to get a sense of how easily we can make the cross study comparisons and sometimes when you have better overall survival it might suggest a healthier population. So, I know, you mentioned that these patients have received 10 prior treatments, but were they explicitly refractory to both Velcade and Revlimid? Have you looked at things like high-risk cytogenetics, performance status, anything you can share to give us a sense that this is a comparable patient population to what's been studied with the other salvage regimens and going beyond just prior lines of therapy? Thanks.

Ron Squarer

In regards to single agent, I think, you can look at it from a stand point of percent, dual refractory. Well, for 520 it's on the order in the 40s and for Carfilzomib I think is around -- was around 60 and Pom was about 65 or 70 I think. In regards to cytogenetics, we have some data, but it's not with a small number of patients we don't have a good comparison. I think performance status was very similar.

As when you go to the actual the 520 plus dex study, it was a much more heavily pretreated population. It was a population that was 100% dual refractory, and I think that was quite exciting results given what we've observed what we think is a population that has a very poor response.

Jim Birchenough - BMO Capital

And can I -- just a follow-up on that for single agent study, in the 40% that were dual refractory what did the response rate look like there? Was it similar to the overall or was it a little lower?

Ron Squarer

Yeah it was actually quite similar. So, there were no real differences between single refractory to Velcade or Revlimid or dual-refractory; it looked pretty much the same. We actually had some of that data at the prior ASH and we actually broke out the different subsets, and across the subsets it was pretty similar response rate. But of course actually the response rate was slightly higher in the data we just reported because it does take some time for the drug to mature its response rates.

Jim Birchenough - BMO Capital

And just final question, if you do use AAG as a biomarker for optimal response, what proportion of the population does that sort of contain?

Ron Squarer

There is about 20% or 30% of the patients have high AAG, which would probably have limited benefit from the drug. But of course as was discussed previously we may be able to dose up those patients and actually get those patients as well but we haven't explored that yet.

Operator

I'll now turn it to Ron Squarer for closing remarks.

Ron Squarer

Well, great. We are very pleased to have this opportunity to talk to you all today. We are really in an enviable position of having these two MEK inhibitors, which appear to be very broadly active going into -- highly likely to go into to Phase 3 both of them this year with great partners investing heavily behind them.

We remain very excited about our two wholly-owned Heme/Onc programs, but it's important for us that investors understand we are going to let the data decide our forward plan and that data will be in hand during this year. And while we do feel our cash position is healthy, we always prefer a non-dilutive sources of capital and we are quite focused across a number of opportunities in bringing in that capital to fund our future development.

And so, with that, I would like to thank our employees here at Array for their commitment, ingenuity and diligence that continues to fuel our success. I also want to thank our partners and shareholders for their continued confidence and support. And with that, we'll close the call. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.

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