Array BioPharma's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Array BioPharma (ARRY)

Start Time: 09:00

End Time: 09:53

Array BioPharma Inc. (NASDAQ:ARRY)

Q3 2013 Earnings Conference Call

May 07, 2013, 09:00 AM ET

Executives

Tricia Haugeto - IR

Ron Squarer - CEO

R. Michael Carruthers - CFO

Kevin Koch - President & CSO

Analysts

Eileen Flowers - Jefferies & Company

Dimiter Tassev - William Blair & Company

Matthew Andrews - Wells Fargo Securities

Stephen Willey - Stifel Nicolaus

Gena Wang - Leerink Swann & Company

Ted Tenthoff - Piper Jaffray

Operator

Good morning. Welcome to the Q3 Fiscal 2013 Array BioPharma Incorporated Financial Results 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'll now turn the call over to Tricia Haugeto. You may begin, Tricia.

Tricia Haugeto

Thank you, John. Good morning and welcome once again to Array BioPharma's conference call to discuss our financial results for the third 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 homepage 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 Mike Needle, our new Chief Medical Officer. Mike has only been with us for about a month and I'm sure you'll be hearing more from him on future calls. But before I hand over the call to Ron, I would 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, 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 30, 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 projections or forward-looking statements.

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

Ron Squarer

Good morning, everyone. I'm on slide 3 and we are pleased to share with you today details of Array's third quarter financial results and our continued progress towards late-stage product development and commercialization in oncology. Already at this point, we're able to look forward to five potential pivotal trial starts across our Array invented MEK portfolio in 2013.

The most recent trial was just announced yesterday. And Array conducted Phase 3 trial evaluating MEK162 in low-grade serous ovarian cancer. The study is named MILO. I'll provide more detail on this in just a bit. This follows just on heels of Novartis' announcement of their intention to begin Phase 3 trials evaluating MEK162 in NRAS-mutant melanoma and in BRAF-mutant melanoma this year.

As we mentioned in the past, the economics related to our MEK162 alliance with Novartis are particularly attractive and through our co-development agreement, our costs, including the incremental cost of the MILO study, are capped both annually and in total at a reasonable level not too different from the $9.2 million annual payment which we made in this agreement in 2012.

Last week, our other MEK partner AstraZeneca posted details of their new pivotal trial evaluating single agent selumetinib versus placebo in thyroid cancer, which they have named the Astra trial. And last month, they reaffirmed their plans to begin a Phase 3 trial with selumetinib in non-small cell lung cancer during the second half of 2013.

Regarding our wholly-owned heme programs, ARRY-520 and 614 were making substantial progress in generating data to support decisions later this year regarding our development plans. Between the two drugs, we have four ongoing trials which are building momentum with data presented at ASH in December 2012 and at the International Myeloma Workshop last month.

Throughout our history, Array has a track record of 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 raise substantial non-dilutive capital totaling over $175 million in just roughly the past three years. If you add up all the potential partnership milestones we could earn, it totals more than $3 billion. This is in addition to royalties which kick in at product commercialization.

Currently, we have $87 million in cash at the end of March. Our cash position was impacted from a shift in timing of expected milestone revenue last quarter. This revenue should now be earned during the quarter which began on April 1. We also expect to enter into partnerships and collect milestone payments from existing partners which should provide additional non-dilutive capital. The next eight months are going to be very exciting and I will be reviewing some of the key catalysts and value drivers with you today, but I'd like to start by reviewing our additional potential sources of non-dilutive funding.

On slide 4, we've detailed the focus of our partnering activities, starting with the wholly-owned HemOnc programs. If we are convinced it would increase the value of 520 and 614 to Array, we would consider selectively partnering one or both of these programs to bring in meaningful capital, expertise or capabilities. I think many of you are already familiar with our partnering plans for 520 for asthma and 797 in pain. We're looking forward to seeing top line results this summer from our 502 trial having recently completed enrollment of our 182 patient study.

We intend to seek a partner for further development in this large market disease indication. Out-licensing these products represents potentially important source of non-dilutive funding. We have a number of early-stage programs with significant and valuable IP behind them; our Trk program for pain. It could be described as a type of oral anti-NGF like product, and even may have advantages over anti-NGF antibodies, which could be very exciting.

We also have additional clinical stage programs in our portfolio that are now gaining partnering attraction. As our pipeline productivity demonstrated over the history of the company, we have a world-class research organization with a proven track record who's capabilities we have been offering to partners as we pursue our existing clinical stage programs.

You may recall, over the last year, we announced deals with DNA BioPharma, Clovis Oncology and most recently Global Blood where we provide discovery support regarding targets which are of interest to our collaborators. We continue to pursue similar partnerships to keep our discovery capabilities at the cutting edge.

I'd like now to turn to our key achievements since the last quarterly call which appears on slide 5. First, we appointed Mike Needle who's with us this morning as our new Chief Medical Officer. Dr. Needle is a Board-certified hematologist/oncologist and will oversee clinical development across our pipeline.

Dr. Needle's deep industry experience includes prominent roles in the development of important oncology and hematology drugs including Erbitux, Revlimid and Pomalyst. And most recently served as the Chief Medical Officer of the Multiple Myeloma Research Foundation consortium and held prior executive positions at Celgene and ImClone Systems. I couldn't have hoped for a better fit given our portfolio.

Next, we continue our forward momentum with positive data on 520 in combination with Velcade in patients with relapsed or refractory multiple myeloma showing the drug was generally well-tolerated and demonstrating initial signs of activity in this heavily pretreated population. Final results from the Phase 2 single agent trial demonstrated clinical activity in heavily pretreated patients with 19 months overall survival and a 16% overall response rate.

These results are similar to those for the recently approved products Kyprolis and Pomalyst as single agents in similar patient populations. Further data of potential patient selection marker was also presented, specifically patients with normal levels of alpha-1-acid glycoprotein or AAG had a longer median overall survival, actually 20.2 months versus 4.5 months, an improved median event free survival 5.3 months versus 2.4 months and greater overall response rate of 24 months versus zero response rate when compared to patients with unusually high levels of AAG. These results may enable more precise selection of patient populations who will benefit from 520.

In addition, the planned 614 expansion is underway in patients with low or intermediate one-risk MDS since we reached our maximum tolerated dose and this expansion has the goal of identifying the ideal dose for future clinical trials. I've already touched on great news we've shared relative to both, to MEK162 and selumetinib. Later, I'll drill down a bit on MEK162 ovarian trial and share some exciting details on selumetinib that AZ provided during a recent R&D Day. We expect both MEK drugs to be featured at ASCO in June.

As I mentioned earlier, we completed an enrollment on the Phase 2 trial of ARRY-502, our selective CRTh2 antagonist in patients with mild-to-moderate asthma. CRTh2 is a novel mechanism and we selected patients for this trial based on their Th2 signature. We look forward to top line results as expected from this trial during the summer.

Finally, we initiated a multi-target drug discovery collaboration with Global Blood Therapeutics to identify small molecule lead compounds targeting chronic blood-based disease. Array will develop assays and screen our proprietary lead generation library containing 300,000 small molecules to identify both active site and allosteric modulators of certain Global Blood targets. Array's library will allow for rapid hit confirmation and subsequent lead optimization.

Moving to slide 6, this is where we summarize the critical upcoming catalysts for products specifically being developed by Array and we also include here selumetinib. 520 and 614 are on track on similar timelines and we expect to have data on both of these programs to inform decisions by the end of the year. With 614, we're pleased to have guidance from the FDA, as I've mentioned in the past on a potential primary endpoint for full approval and to have initiated the expansion phase which we believe will inform future study designs.

Both MEK162 which we're developing with Novartis and selumetinib which is partnered with AZ are on track to initiate the multiple pivotal trials this year which I described. And then pending appropriate results from our ongoing Phase 2 trial with 502 in asthma, we will seek to partner that drug along with 797 for pain this year. So a great deal of progress and a number of critical catalysts in the coming months.

I'd now like to drill down on the next slide on our Phase 3 trial with MEK162 which we refer to as MILO which stands for MEK Inhibitor in Low Grade Serous Ovarian Cancer. This is Array's first Phase 3 study that we are conducting ourselves and so we're very excited about this.

On slide 8, before I jump into the details of the study, I just want to review the attractive economics of the Novartis alliance with potential double-digit royalties for Array outside the U.S. with significantly higher potential royalties in the U.S. Our potential future milestones are as high as $412 million. We also have co-detailing and co-development rights in this collaboration. The last point is very important since funding for the MILO study falls under the co-development agreement.

Turning to slide 9, just looking broadly at ovarian, it's the 10th most common cancer diagnoses, fifth most common cancer-related death among women. It is primarily split between a high grade and low grade, low-grade representing about 10% of overall ovarian cancer diagnoses. Women diagnosed with this subtype are typically younger. While low-grade patients have a longer term survival prognosis, unfortunately they show very low response rates to traditional chemotherapy.

Following first-line treatment with a platinum-based regimen, less than 4% of these patients show a response to additional rounds of chemo. Historic data suggest a median progression free survival of only seven month for this population, which speaks to the high unmet need among these patients.

In addition to a recent positive MEK Inhibitor clinical data presented in low-grade serous ovarian cancer patient, which is covered on the next slide, we believe the presence of frequent RAS, RAF pathway mutations in these tumors provide further rationale for studying MEK162 in this disease.

On slide 10, as presented at AACR '12, a MEK Inhibitor demonstrated proof of concept with an overall response rate of 15% and clinical benefit rate of 81% in patients with platinum resistant low-grade serous ovarian cancer. As I mentioned, when prepared with the historic data related to common used treatments for low-grade serous ovarian cancer, that being chemo and hormonal therapy, treatment with MEK Inhibitor demonstrated improved clinical activity and in a more heavily pretreated population. We closely evaluated these results and based on this data and other research, are advancing MEK162 into this extremely high unmet need population.

Moving to slide 11, the study design, this is a pivotal trial comparing 162 to physicians' choice of standard chemo. 300 patients with recurrent or persistent low-grade serous ovarian cancer will be randomized two-to-one to receive MEK162 or chemo. Patients must have received prior platinum containing therapy but no more than three prior chemo regimens. Unlimited prior hormonal therapy is allowed. The primary endpoints for the trial is PFS, we're also measuring OS and other important secondary endpoint.

On 12, just to note that we met with FDA and EMA to discuss the registration strategy in low-grade serous. There was an agreement that LGSOC is a distinct subgroup of epithelial ovarian cancer that the patient population is suitable for registration trials, that PFS isn't an acceptable endpoint, primary endpoint and that our physician choice comparators are acceptable. And the MILO protocol design is consistent with Health Authority feedback and is designed for regulatory submissions with both FDA and EMA.

More broadly with MEK162 on slide 13, we've listed 15 MEK162 trials which are currently in the public domain including important target-target agent combinations such as MEK162 plus PI3K inhibitors. We think this impressive roster of ongoing studies reinforces our view that Novartis remains committed to broad clinical development with the product. They continue to focus on novel combinations with their fantastic pipeline of targeted agents and on key mutation populations.

In green are the three trials which are the registration pathways and NRAS and BRAF melanoma and the low-grade serous ovarian cancer that Array plans to begin soon. On slide 14, we show the late-stage development plans for 162. I've already detailed in the title of an ASCO abstract that we expect at the conference. We look forward to sharing the preliminary results of the 162 LGX818 combo at ASCO that certainly supported the decision to move into a pivotal trial.

Of note, Novartis plans to share Phase 1 results of single agent LGX818 and BRAF melanoma. We're excited to have the investment community learn more about any properties of LGX818 as MEK162-LGX818 combinations may have utility in multiple BRAF mutation driven tumors over time.

Moving to AstraZeneca selumetinib on slide 15, as a reminder, through the deal with AZ, Array is entitled to potential milestones and double-digit royalties. And AZ is responsible both for all development and commercialization. Currently selumetinib is advancing into 47 trials, 31 of which are in Phase 2.

I'd like to highlight the two oral presentations expected at ASCO this June. The first will be in uveal melanoma and the second in BRAF mutant melanoma. Results from an earlier smaller Phase 2 trial in uveal melanoma with the previous formulation of selumetinib showed stunning PFS of 114 days of selumetinib versus 50 days for temozolomide. So we look forward to sharing the results with the new formulation of selumetinib then at ASCO. This is certainly also a much larger study.

Beyond that, we expect five additional scientific posters in pancreatic cancer, BRAF-mutant melanoma, KRAS-mutant non-small cell lung cancer and KRAS-mutant colorectal cancer, but I do believe the uveal data is going to be more and more important – new presentations for that compound.

On 16, we're actually referring here to the AstraZeneca Analyst Day where selumetinib was featured. Most importantly they announced they'll initiate the two pivotal trials in 2013, first in KRAS-mutant non-small cell lung cancer based on the data presented ASCO '12 and a second trial which is the thyroid cancer trial we referred to. Also during the event, AstraZeneca projected selumetinib at peak sales to exceed $1 billion and suggested selumetinib may have the opportunity to lead in high unmet need indications such as uveal neurofibromatosis and gastrointestinal cancers.

They also pointed to the advantage of selumetinib over, for example, the GlaxoSmithKline MEK Inhibitor trametinib when combining with standard chemotherapy. As you can see from their chart, selumetinib was able combine at its MTD with chemo while trametinib needed to dose reduce the levels substantially below their MTD when they explored these combinations.

We're not going to turn to 520 and review our recently published data at the 2013 International Myeloma Workshop. On 18, a reminder that 520 is a novel mechanism, critically important as all patients ultimately becomes resistant to IMiD and proteasome inhibitors. The product has the potential to be used in combination with these backbone mechanisms in earlier lines of therapy, in fact synergistic effects have been observed in preclinical models.

Our product is a highly selective KSP inhibitor and it acts preferentially on hematopoietic cells over epithelial cells based on MCL-1 survival dependence. As predicted from its targeted effect, 520 has been very well tolerated across multiple clinical studies at its recommended dose with minimal non-hematologic side effects showing no neuropathy, no alopecia, only limited GI tox. The presence of on-target myelo suppression can be characterized as transient, non-cumulative and predominantly asymptomatic.

On 19, we referred to the IMW meeting where we presented interim results on the 520-Velcade combo trial, and these were heavily pretreated patients with the majority, actually 72% refractory to prior Velcade treatment. The combination was generally well-tolerated. Neutropenia was the most common adverse event and non-hematologic grade 3 or 4 toxicity was infrequent.

The neutropenia is well managed by the use of supportive care and therapy. And initial signs of activity including responses and prolonged stable disease were observed in this very heavily pretreated population, the majority of which, as we mentioned, were actually refractory to Velcade. An alternative treatment regimen with the addition of low-dose dex will be evaluated in this study.

On slide 20, we also at the meeting detailed the final 520 single agent data indicating 16% of patients had a PR for a better with median duration of response of nearly nine months. The single agent data is comparable to single agent data presented for other emerging therapies in heavily pretreated relapsed or refractory patient. While we recognize the data is early, we did hear a very positive or continue to hear positive feedback from thought leaders about the 19 months of survival.

On slide 20, the AAG data is presented – I'm sorry, slide 21. Here we are using this acute phase serum protein which appears in normal levels in most multiple myeloma patients, roughly three-quarters or more but binds tightly with free ARRY-520 reducing the likelihood patients can benefit from the drug. As predicted from the binding effect, you can see we have reserved no responses in patients with elevated AAG. It's also important to note that we have several patients who have stayed on 520 for more than two years and we have seen no cumulative toxicity in that setting.

On 22, you will recall the 520 dexamethasone combination data we presented in the past. As with pomalidomide, the addition of dex can be helpful to 520 patients. What's remarkable about this data is the number of median prior regimens, 10 in this case, and yet we still observe overall response rates in the 20s with combination. The safety profile of 520 single agent and the dex combo patient were similar. Applying AAG as the patient selection marker could enhance the rates of clinical activity even further into the 30s, response rates nearly improved 60% when using AAG as a selection criteria.

On slide 23, we refer to our regulatory path based on the data emerging and the path with regulators that Kyprolis and Pom have recently taken, we feel that we were likely to move forward to a potential regulatory path with 520 in multi-refractory patients and also to consider a randomized controlled confirmatory study in combination with carfilzomib or bortezomib in relapsed refractory patients. Now assuming that we see appropriate results from our ongoing studies, we would expect to be in a position to make a pivotal trial decision on these regulatory pathways by the end of the year.

On 614 for MDS, we've received the MTD and are currently enrolling the expansion phase. As a result, we haven't released new data for this program in the past quarter. So on slide 25, just a reminder that we have achieved our goal for the new formulation of 614 and we present PK data at ASH 2012 and December. The new formulation demonstrated improved bioavailability and target coverage, including higher peak plasma concentration and overall exposure when compared to the original formulation.

We've discussed the FDA feedback which we received and with our expansion phase ongoing, we're on track to generate the data we need to determine how to move forward with this program if we feel the need to swing back to FDA to discuss what we learned about the program through the expansion, we'll be able to do that by the end of the year.

I'm now going to turn over the presentation to Mike Carruthers, our CFO who will discuss financials.

R. Michael Carruthers

Thank you, Ron. Continuing on slide 27, our revenue for the second quarter was 10 million and our loss per share was $0.19. These figures are lower than what we had guided to last call because of a delayed milestone payment which we now expect to recognize in the current quarter – for the fourth quarter of this fiscal year ending June 30. Even with this shift in timing, we are reaffirming guidance for the full fiscal year.

Our cash equivalents and marketable securities as of March 31 is 87 million. Our use of cash is largely driven by spending on clinical trials. The ARRY-502 asthma study is the largest trial we are currently running. This trial is expected to conclude by midsummer at which time, we will seek to partner the program assuming positive results.

Regardless of the trial outcome, we are not expecting to initiate another clinical trial with ARRY-502. As a result, our use of cash will decline until we initiate additional studies with our heme drugs in myelodysplastic syndrome and in multiple myeloma later in 2013 and early '14.

As we have already stated, the Phase 3 MEK162 ovarian study known as MILO won't impact our cash flow due to the annual spending cap which is in place for our co-development with Novartis.

To summarize, we expect a lower quarterly use of cash starting the first quarter of next fiscal year based on clinical investment activities and our overall cash balance will reflect receipt of the delayed milestone.

Now please go to slide 28, I will now update guidance for fiscal 2013 which ends June 30. We are holding the same guidance that we provided during the last quarterly call. Revenue should come in at about 60 million with loss per share of $0.55.

With that, I will turn it back over to Ron.

Ron Squarer

Thank you, Mike. I'm going to briefly review on slide 29 the catalysts for the calendar year and then open up for questions. In '13 we look forward to multiple potential Phase 3 trials getting underway, actually dosing patients. We really couldn't be more pleased with the progress that we and Novartis are making with MEK162 and now AZ is in a position to develop selumetinib in non-small cell lung cancer and has additional studies and other indications as well, progressing during the year.

For both 520 and 614, we are focused on generating data to drive decisions regarding future development plans and we'll make those decisions this year as well. With 502 in asthma, we plan to report top line results this summer and with positive data, we'll seek a partner for further development and commercialization.

Regarding 797, we continue to engage in partnering discussions. Either of these programs could represent additional and important sources of non-dilutive capital. Roche continues to develop danoprevir and recently announced a deal with a Chinese-based company to develop danoprevir in China. It's estimated that over 10 million patients in China are chronically infected with HCV with the majority of these infections being genotype 1b which have proven responsive to danoprevir. We look forward to a potential Phase 3 decision from Roche this year as well.

Finally, we expect Amgen to complete their Phase 2 evaluation of our partnered diabetes drug Amgen 151 during the year, so a lot of very exciting and milestones and catalysts for the year.

At this time, I'd like to turn the call back to the operator and open it up for Q&A.

Question-and-Answer Session

Operator

Thank you. I'll begin the question-and-answer session. (Operator Instructions). We do have a question from Eun Yang with Jefferies. Please go ahead.

Eileen Flowers - Jefferies & Company

Hi. It's actually Eileen Flowers dialing in for Eun today. First question is can you give a little color on your progress in securing partnerships particularly for the pain drug 797? And when we can expect such a partnership?

Ron Squarer

Hi. Good morning, Eileen. So regarding 797, as mentioned we're continuing to engage in partnering discussions. And what we've stated is that we expect to have a decision on how we can move forward with 797 by the end of the year. It's a large population pain and we need to find a partner in a path that we believe is in the best interest of the product.

Eileen Flowers - Jefferies & Company

That's helpful. And then a follow-up, if I may. For your proprietary programs 520 and 614, it seems like sort of the Phase 3 has been delayed a little bit. So what's the limiting factor before you start discussions with the FDA on the Phase 3 trial design?

Ron Squarer

So, I think you referred to both 520 and 614, regarding 614 as you recall we did create a new formulation in order to improve bioavailability and the PK profile. And it took a while to hit MTD, the compound itself is quite well tolerated and only to plan achieving MTD will we able to open up the expansion, which is going to be running most of this year. And so if there was a delay, it was probably related to achieving MTD. Regarding 520, the data continues to emerge. The single agent data, now that's a complete dex – the carfilzomib and the bortezomib studies continue to enroll. It's likely that we'll have the dex combo and the carfilzomib combo data earlier with bortezomib combo coming a little bit later. And so based on how that data look, we'll decide if to proceed directly to the potential seller approval in the multi-refractory patients potentially with deaths and to pursue additional studies in combination with carfilzomib. And so as we've mentioned, we should be in a position to make those decisions this year. We have said that we intend to talk to the FDA, we're still planning to do and believe we have sufficient data to drive those discussions at this time.

Eileen Flowers - Jefferies & Company

Then one quick one on MEK162, you have lots of ongoing trials, what are the next indications you expect to be approved following melanoma?

Ron Squarer

Right. So with MEK162, we certainly like to see the ovarian indication be approved as well. And then beyond that, it's difficult for me to comment on behalf of Novartis. As you've seen, they have a very, very robust pipeline of ongoing studies including some exciting target-target combos. What I suspect is that you will see a trial begin to hit (inaudible) as they're opened over the coming months and years but even though the coming months, which I think we'll begin to inform their interest in the compound and their development strategy as it emerges. We will continue to look to their regular analyst calls and R&D days where frankly MEK162 has been featured for more details there. But as you know, there are a very aggressive drug developer, very experienced drug developer, very successful developer in oncology and they are very excited about this drug and as I mentioned LGX818, their RAF inhibitor. So there is a lot of opportunity there.

Eileen Flowers - Jefferies & Company

Okay, thanks so much.

Operator

Your next question is from Ted Tenthoff from Piper Jaffray. Go ahead, Ted, with your question. Moving to next question from John Sonnier from William Blair.

Dimiter Tassev - William Blair & Company

Hi. This is Dimiter Tassev in for John Sonnier. I had a couple of quick questions. First on the MILO study, I wanted to know if you can comment on the powering, and also if you could tell us if you're going to look at RAS, RAF mutation status in some of these patients? And then lastly, another question is with regards to ARRY-797, I remember you guys mentioned you wanted to do a dose escalation look into the drug, since you had some QT interval prolongation with your initial Phase II studies, so maybe you could comment if you guys have done that dose escalation, and if it has shown you any additional signals?

Ron Squarer

Yeah, let me just start with 797 and then regarding powering, I'll turn this over to Kevin briefly. But we had no intention to do more clinical work. We did do better characterization of the way 797 acts on certain channels, including hurt channels to better characterize the risk profile of the drug. And as we stated in previous calls, we believe the QT is at a mild level at therapeutic doses, and that the profile the way it hits receptors seems to confirm and to bucket it in a lower risk population. But 797 we don't plan to do more clinical studies in pain going forward. Regarding – I think the other question was MILO's powering and so Kevin, if you want to address the powering of the MILO study.

Kevin Koch

Hi. Yeah, the study is powered roughly to show a 60% improvement in progression free survival, I wish I had the exact number for you, but I don't have the protocol in front of me. Roughly speaking, it's powered for a 60% improvement, roughly 300 patients in total.

Dimiter Tassev - William Blair & Company

Okay, thank you. And also with regards to the RAS, RAF mutational status, are you guys going to look at that in any of the patients that are going to be treated?

Ron Squarer

Yes. We will be looking but that won't be an inclusion criteria. We believe that the low-grade serous population has aberrant ERC activation, so there's pathway activation in this group and most of the KRAS and BRAF mutations reside in this low-grade serous group, so we think both – with preclinical data, clinical data that we have but which is both public and non-public, we believe that this is the appropriate population and we're moving aggressively to drive a Phase 3 in this area.

Dimiter Tassev - William Blair & Company

Okay, great. Thank you.

Operator

Next question is from Matthew Andrews from Wells Fargo.

Matthew Andrews - Wells Fargo Securities

Good morning. Thanks for taking the questions. A few from me. First of all, Ron, just to be clear, the meeting with FDA on 520 has not taken place yet. Is that correct?

Ron Squarer

That's correct. It is planned and as I said, we have all of the information we need to address the questions that are critical.

Matthew Andrews - Wells Fargo Securities

Okay. Second one, what 520 data will be presented at EHA? And then I had a third one on the NRAS Phase III.

Ron Squarer

Okay. Regarding 520 in the meeting coming up this summer, so certainly our carfilzomib trial continues to emerge and enroll patients. At this point, we're not able to describe what we would be showing at that upcoming meeting and I suspect we will probably have some information, but in any case it would be interim and with good results as you're familiar with. Investigators often like to save the data for a large meeting when the data is robust, so we'll be looking at that and determining the best way forward. I would say that's the main, new information we'd be in a position to share is just updating how that car combo is doing.

Matthew Andrews - Wells Fargo Securities

Okay, great. And then lastly, Kevin and Michael, can you talk about the prevalence and incidence of the NRAS melanoma, both in the U.S. and Europe? And then what were the median cycles for MEK162 reported at ASCO last year for the Phase 2 study?

Kevin Koch

The number we normally look at for NRAS is roughly 20%. I think it's not vastly different in Europe and the U.S. What we – if I remember correctly, the median progression free survival for NRAS was on the order of 3.7 to 4 months and so that would be four cycles.

Matthew Andrews - Wells Fargo Securities

Got you. Okay. All right. Thank you.

Ron Squarer

Thank you, Matthew.

Operator

Next question is from Cory Kasimov from JPMorgan.

Unidentified Analyst

Hi. This is (inaudible) for Cory today. Thanks for taking my questions. Just two quick ones, first on 520. Could you elaborate on the framework you are using to evaluate potential drugs in combination with 520 for confirmatory or pivotal studies? And second on 502, with the upcoming Phase 2 data in the summer, what are you looking for regarding efficacy signals to move this compound forward? Thanks.

Ron Squarer

Okay, great. So as stated, our current plans include the use of 520 in combination potentially with dex, potentially with carfilzomib and with bortezomib. These are the trials that are ongoing currently having completed that single agent trial. Our goal of course is to get the product into the hands of prescribers and patients as quickly as possible and so a focused approach is important. And we chose carfilzomib and bortezomib, those are our first focus. However, that could certainly change over time. As I mentioned, we were always listening to potential partners globally for 520 and with their expertise and resources, they may be interested in pursuing also regionally other combination, and so that's something we're certainly open to. But at this time, we're focused on those in order to get to market. And then with 502…

Kevin Koch

On 502, clearly we're looking for an improvement in FEV1 of roughly 10%. We were powered to actually see a difference between placebo and treated of roughly 7%, but we think with this target of population we should be able to see a robust response and we believe at least from the normal healthy volunteer studies that we have a very good safety profile. And so we're excited about looking at these results and we think this will be the – this really is the first targeted drug in asthma to be evaluated in this population and we think that we could have a great deal of success here.

Ron Squarer

Kevin, perhaps you can also just talk about some of the theoretical combinations and maybe relevance of 520 in the future based on its mechanism and the data we have?

Kevin Koch

Yeah, certainly the Th2 population goes across…

Ron Squarer

Going back to the original question about what combinations beyond car and bortezomib…?

Kevin Koch

Yeah, no of course. So certainly we have preclinical data to support that we've actually published for combinations with image both Revlimid and pomalidomide where we show either [additively] or synergy in these combinations with a tolerable safety profile in models of myeloma that are resistant to typically bortezomib. And so we think there's a broad opportunity to test this drug in combinations and of course move – if you want to move from refractory patients into earlier lines, you need to have good combination strategies.

Unidentified Analyst

Okay, that's helpful. Thanks.

Operator

Next question is from Stephen Willey from Stifel. Please go ahead.

Stephen Willey - Stifel Nicolaus

Thanks for taking the question. I have another asthma question as well, I guess. With respect to one – just wanted to confirm that patients are going to be maintained on background steroids.

Ron Squarer

These patients were washed out of steroids. So it's a mild to moderate group with high FeNO and IgE. And so this particular group we felt that the mild to moderate group has a potential – is a very important potential population for an oral given than in adolescents combination with singular might be the optimal development path. At the same time, on top of steroid in the moderate to severe population would be another development path. I really think that the partners will perhaps dictate this path based on what is in their current portfolio and what they view as unmet medical need. But the opportunity is probably 50% of all asthma patients have this signature.

Stephen Willey - Stifel Nicolaus

Okay. And I know BI ran a study in this space with a drug with a similar mechanism of action and it's probably the best benchmark that we have in terms of a barometer. I think they pursued something in a bit more of a severe patient population because they were looking at this on top of background ICS. But I'm just wondering just in terms of the mechanism how you guys think you might be able to improve upon what we saw from the BI CRTh2 antagonist which I think showed us less than a 5% improvement in trial FEV?

Ron Squarer

From our estimation, they were not able to dose their drug at the maximum tolerated dose because of liver enzyme increases so they had to drop back. Our view is that based on what they presented on their PD markers and that we can inhibit our target at greater than 90% 24/7 with continuous dosing and that they were not going to be able achieve that level of inhibition because of liver enzyme increases. So we would anticipate a more robust activity and, of course, they were not in a CRTh2 or Th2 selected population.

Stephen Willey - Stifel Nicolaus

Okay, that's helpful. And then just a couple of 614 questions. How many patients are being treated right now in the expansion phase? And I guess based on this point, you do have regulatory guidance around what a registrational study needs to look at. Will there be any need to put another meeting on the calendar with FDA if your trial design is a little bit perhaps different than what you were imagining at the time of original FDA meeting? Thanks.

Ron Squarer

Yeah, so the expansion could include up to about a 40-patient success, so it's a pretty sized group. And regarding FDA as we've mentioned in the past, we have a clear guidance on endpoints that could drive a full approval. My comments on going back to FDA really relate to if we learn that the drug has characteristics that we weren't as familiar with from prior patient cohorts and wanted to utilize some of this characteristics introducing a different design or endpoints, that's a scenario in which we might go back to FDA to negotiate. They were very open to working with us to get a drug to market in this space given that as you know, there is no approved treatment for low risk (inaudible) HMA failure patients, their prognosis is extremely poor. Data shown at ASH points about a 12-month median survival and a drug that appears to operate across all three lineages could be potentially very important. So, their comments to us were if you see things and want to talk about modifying a path forward, we're happy to discuss those. But the data is really going to determine whether that's important to do or not. So at this point, we have no plans to go back to go FDA but we could in the future.

Stephen Willey - Stifel Nicolaus

Great. Thank you very much.

Operator

Our next question is from Gena Wang from Leerink Swann. Please go ahead.

Gena Wang - Leerink Swann & Company

Hi. Thank you for taking my questions. I don't know if you could give us some color on the potential pivotal trial for the 520. So in addition to the AAG selection marker at the International Myeloma Workshop, what further sub group announces your better OS data such as low ISS stage and the refractory to last therapy? I'm just wondering will you be thinking to target select patient group beyond AAG? And also will you be using the prophylactic treatment in the trial?

Ron Squarer

Okay. So, at this point, as I said, our trial design is really focused on using single agent or dex in an accelerated path and in combination with either carfilzomib or bortezomib ultimately going forward for full approval strategies. The only marker that we're currently talking about publicly is that AAG selection criteria whereas we've shown we believe there's little benefit to patients receiving the drug and we prefer to allow them to avoid treatment and to use other drugs and that will be our description going forward. With regards to other criteria or selection criteria, entry criteria for the study, we haven't really been very specific about that but clearly would be if we were to initiate the study. Let's see if there is anything else I should add there. I think that at this point, that's where we are.

Kevin Koch

I mean in all likelihood, we would be looking to use again it's a bortezomib trial or a carfilzomib trial that the use would be reflective of the existing labeling for bortezomib or carfilzomib and could demonstrate that 520 adds a significant benefit.

Gena Wang - Leerink Swann & Company

Okay.

Operator

Next question is from Ted Tenthoff from Piper Jaffray.

Ted Tenthoff - Piper Jaffray

Great. Thank you very much. Appreciate the update. There's a lot of things going on and really a very exciting time for the company. Actually, I have a bit of a housekeeping question, if I may. Just when it comes to looking at the debt on the balance sheet, what are your thoughts there in terms of options around either retiring that debt, paying it off early? I believe if I'm not mistaken at the last time you refinanced, the payments were pushed out to 2015, 2016. So just what's your current thinking around that debt vehicle?

Ron Squarer

Right. So let me handle at the top level and then see if Mike wants to add anything. That debt fortunately isn't really due until '15 and then '16, and so we have quite a bit of time. And as I mentioned, Ted, our focus is really and has been for the company to generate sources of non-dilutive financing wherever possible. And so a lot of how we would handle that topic has to do with 502, the asthma program, and how that data looks when it reads out. I referred to a number of potential deals and deal flow news that we're working on. We certainly can't guarantee but we'd like to see occur in the next bit of time. And so that's our preferred approach, but we recognize that the debt is out there and that at some point it would be important to provide clarity to investors about how we plan to address it. Mike, do you want to add anything else?

R. Michael Carruthers

I'd say the only thing I'd add is there's a 7.5% coupon on it which we feel is not unreasonable and as has been said a couple of times. It's not due for two and three years, so there's plenty of time and choices available to us.

Ted Tenthoff - Piper Jaffray

Excellent. I appreciate that update and look forward to seeing you guys in Chicago.

Ron Squarer

Thanks, Ted.

Operator

That was our final question. I'll now turn it back over to you, Ron, for any closing remarks.

Ron Squarer

Yes, well, we are very pleased to have had this opportunity to share our substantial progress. We have a couple of months left in our fiscal year and when we look back, we will have made good on many of the commitments that we have suggested we were going to execute on.

We're in the enviable position of having two MEK inhibitors which appear to be a very broadly active and both going forward into multiple pivotal trials this year with great partners investing heavily in both of them. We remain excited about our two wholly-owned HemOnc programs and continue to generate data and we will let that data guide our forward plans.

And that data will be in hand by the end of the year for both of those, so that's good progress. While we feel our cash position is healthy, we are focused, as I mentioned, on bringing additional sources of non-dilutive capital the way we prefer to fund the company, to support our development efforts.

So with that, I would like to thank our employees here at Array for their commitment, ingenuity and diligence that continue to fuel our success. I also want to thank our patients, our partners and shareholders for their continued confidence and support. With that, we will close the call. Thank you very much.

Operator

Thank you, ladies and gentlemen. This concludes today's call. Thank you for participating. You may now disconnect.

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