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Array BioPharma Inc. (NASDAQ:ARRY)

Collaboration with Oncothyreon to Develop and Commercialize anti-HER2 Compound ARRY-380 Conference Call

May 30, 2013 10:00 pm ET

Executives

Ron Squarer – Chief Executive Officer

Kevin Koch – President and Chief Scientific Officer

David L. Snitman – Vice President of Business Development and Chief Operating Officer

Analysts

Mara Goldstein – Cantor Fitzgerald Securities

Ted A. Tenthoff – Piper Jaffray, Inc.

Matthew J. Andrews – Wells Fargo Securities LLC

Matthew J. Lowe – JPMorgan Securities LLC

Rene Shen – Leerink Swann LLC

Operator

Welcome to the Array BioPharma Conference Call. My name is Loraine 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 will now turn the call over to Ms. Tricia Haugeto. Ms. Haugeto, you may begin.

Tricia Haugeto

Thank you, Loraine. Good morning and welcome once again to Array BioPharma's conference call to discuss our collaboration with Oncothyreon. You can listen to this conference call in 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 –of the webcast from our website.

I'd like to introduce Array's Chief Executive Officer, Ron Squarer, 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 answer the questions as needed. 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 plans to progress and develop ARRY-380 under the agreement with Oncothyreon. Our potential to earn royalties on future sales of any drugs that may be approved for marketing and the potential for results of ongoing preclinical and clinical trials to support regulatory approval or the marketing success of a drug candidate. 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 and forward-looking statements.

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

Ron Squarer

Good morning everyone. We realized that we're just about to enter ASCO weekend and several of you are either are on your way or will be on your way soon. So we appreciate the call. We expect it to be a – this to be a quick call. Really just focused on our great collaboration announced this morning with Oncothyreon for ARRY-380 and happy to take some calls just to make sure that the deal is clear to everyone.

So, again we are here to discuss the collaboration to develop ARRY-380 which is our HER2 inhibitor for breast cancer patients. Now under the agreement announced today, Array retains commercialization rights globally. We book sales and receive half of the commercial profit. Additionally, we will soon receive an upfront payment of $10 million.

Array recently completed a Phase 1 study with ARRY-380 which demonstrated promising clinical activity and a favorable safety profile on patients with HER2 positive breast cancer. From this point forward Oncothyreon has committed to fund multiple clinical studies to test ARRY-380 in select combinations with other approved breast cancer products. A joint development committee has been established to oversee the program. But Oncothyreon will be responsible for conducting these proof of concept or POC trials, including 100% of the associated expenses.

Now upon completion of the agreed POC studies, Array will have their choice to either begin cofounding and development of a Phase 3 registration program or to opt out of development and commercialization entirely. In the event that we Array opt out of development and commercialization, we will still receive a significant royalty upon commercial success. We expect this to be double-digit when the product is commercialized.

Now in the interest of clarity, Array is not obligated to contribute any future funding to the program, although we are optimistic that the POC results will in fact justify additional future investment.

For your reference, in the deck, and this is mostly on slide three, we’ve included preclinical and clinical data on ARRY-380 to orient folks. ARRY-380 is the only selective small molecule HER2 inhibitor in clinical development or on the market. In preclinical models, 380 is synergistic with trastuzumab and shows strong activity in Taxane combination. Also preclinical, 380 has demonstrated impressive increases in overall survival in HER2 models of intracranial tumors relative to other tested small molecule kinase inhibitors.

Now turning to clinical data, so clinically in heavily pretreated patients who had progressed on both trastuzumab and in most cases lapatinib, we have demonstrated tumor regression, reductions in visceral target lesions and regressions in skin disease. We believe this data compares favorably to historic data with lapatinib and neratinib as single agents in these late stage heavily pretreated patients.

Importantly, ARRY-380 has demonstrated a highly competitive safety profile. For example, in our studies there were no treatment related serious adverse events, no treatment discontinuations due to drug-related AEs and minimal GI or skin related events. We believe this is due in fact of the highly selective nature of the agent and we believe this is an important differentiation.

So finally before we open up for Q&A, I'd just like to express how pleased we are to have entered into this partnership with Oncothyreon who as both the capabilities and the financial resources to reveal the potential of this product through the planned POC studies. We are also pleased that the terms of this deal allow us to retain substantial value, and rights for Array for what may emerge as a very important and valuable asset going forward.

Now, I'd like to turn the call over 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 Mara Goldstein. Please go ahead – from Cantor Fitzgerald.

Mara Goldstein – Cantor Fitzgerald Securities

Thanks very much for taking my question. Maybe you could if you wouldn’t mind, perhaps characterizing the Phase I results in terms of dose and dose response that you did see through the clinical trials if that’s possible?

Ron Squarer

Yeah, sure. Mara, good morning.

Mara Goldstein – Cantor Fitzgerald Securities

Good morning.

Ron Squarer

I am going to ask Kevin Koch to walk you through that.

Mara Goldstein – Cantor Fitzgerald Securities

Thank you.

Kevin Koch

Yeah. We were well tolerated through from roughly 100 up through 800 BID. At 800 BID we saw two DLTs of AST and ALT increases. So same patients were then dose reduced to 600 BID and actually we are on study for quite a while and the compound is very well tolerated. So it has had a very clean safety profile. We have largely demonstrated efficacy at the higher dose levels although it is sporadic at the dose levels, it’s been joint benefit. But it does – I would say although we don’t have data in close, I would say there is a good correlation between AUC and response and/or stable disease.

Mara Goldstein – Cantor Fitzgerald Securities

Okay. Did you see any stable disease responses in the trial?

Kevin Koch

Yes. In fact, if you look at slide – it would be on your slide 8.

Mara Goldstein – Cantor Fitzgerald Securities

I apologize, I don’t have the slides in front of me, but that’s okay.

Kevin Koch

So in slide 8 there are stable disease. I should point out that a significant portion of this material is public both on our posters, on our websites which are public and AACR presentation in 2012.

Mara Goldstein – Cantor Fitzgerald Securities

Okay.

Operator

Thank you. And our next question comes from Ted Tenthoff from Piper Jaffray. Please go ahead.

Ted A. Tenthoff – Piper Jaffray, Inc.

Great, thank you very much. So can you describe a little bit sort of the bidding process? I know you can’t reveal too much, but were there other parties interested in the compound and when it came down to ultimately selecting Oncothyreon, what were some of the attributes that led you to trust this team, trust the development capabilities? And I guess as one quick follow-up; I know that they are in development of their own Oral p38 Inhibitor, is sort of the potential for future combination there?

Ron Squarer

Great. So, Ted good morning. Good to have you in the call. So we can’t go into a whole lot of detail about the entire process, but I will characterize it at broad level and will see if there is some additional detail required. First of all, we’ve had this data that emerged, I guess about a year ago or so, and since then we have been talking to a number of parties about the best way forward. Now just in terms of our insight into this, the opportunity here you also know we’ve got Gwen Fyfe who was one of the key executive to Genentech involved with the development of Herceptin that helped us sort of understand what needed to be done for the product.

So, again we sell to a lot of companies, but I will tell you that the rationale for working with Oncothyreon. So first of all, we do believe that they are in a position now to be focused on running these proof of concept trials since they have the financial resources. Now we will be in the picture as well with the capability, knowledge, resources and connections that we have through the joint development committee. And if the proof of concept is positive and there is a bit of work to be done there, number of studies that they will be funding with substantial investment we will continue to work with them into the future.

But at the bottom line, Ted, I would say is, it was important for us to retain substantial control and value from this program including as I mentioned earlier things like the ability or the right to book sales and to have control over the commercialization process globally and of course assuming that the product is in fact as valuable as it could be that we retain substantial rights. And that was an important consideration. I think those came together in this partnership.

Ted A. Tenthoff – Piper Jaffray, Inc.

Great, thanks. And when should we start to see studies initiated with the compound?

Ron Squarer

Yeah. So we think that will be in the near-term, certainly both Oncothyreon and Array have an interest in things moving quickly. But we really haven’t published the actual plan, which has been agreed too. And so I think you’d probably be best to look to Oncothyreon for some detail there as soon, upcoming and of course the studies will be posted to clinicaltrials.gov on an ongoing basis. But as we’ve mentioned in here, we’re looking at metastatic populations and we are interested in this concept of brain met secondary to breast cancer, which could be an important differentiation for this product. So those will emerge overtime, but we expect them to be – we expect there to be visibility in the near-term.

Ted A. Tenthoff – Piper Jaffray, Inc.

And any comments on the PI3K and potential combination?

Kevin Koch

Well, so clearly PI3K has the potential to have benefit in HER2 positive patients. I think it would be a fine combination. We have not discussed whether or not that would be one of the combinations. We did say that currently if the current plan is to look at standard of care agents which would be the most aggressive path towards the registration.

Ted A. Tenthoff – Piper Jaffray, Inc.

Great, thanks very much.

Operator

Thank you. And our next question comes from Matthew Andrews from Wells Fargo. Please go ahead.

Matthew J. Andrews – Wells Fargo Securities LLC

Yeah, good morning, thanks for taking the question. Ron, by the end of this year, early 2014, you will have three of your own Phase 3’s ongoing plus potentially three partnered Phase 3’s with the mix ongoing. So can you discuss your thoughts relative to the next few years? How you see them evolving and expectations on potential timelines for this new program relative to your investment in MEK162 and ovarian and 520 and 614. Do you see these timelines setting up where you could be establishing a solid tumor sales force followed by heme sales force or vice versa? Any comments there would be great.

Ron Squarer

Yeah, thanks for the question Matthew. I think the most important thing to note is that either through the NRAS melanoma trial that Novartis is about to initiate, which we believe based on their communications will have a fast readout and will be eligible for accelerated review. And we are very, very much looking forward to the news this weekend about uveal melanoma with Selumetinib that’s our AstraZeneca MEK partnered which we have to wait and hear what AZ has to say, but assuming that they see a quick path to market for Selumetinib through uveal and that will hopefully be revealed in the near-term. We see the potential for commercial revenue here at Array in 2015, and high double digit royalties through Novartis, double digit royalties through AstraZeneca and so that’s very important.

Timing wise for this product 380, we believe that the decision about whether to continue to invest will probably come after that and so that’s one of the reasons we’re very happy that we can focus our resources on our internal programs, which includes the ovarian study on MEK162 as well as our multiple myeloma and MDS programs 520 and 641.

Now regarding commercialization, the company raised focused on hem/onc for some very obvious reasons, not only the efficiency of development and the ability to develop expertise in the area, but even commercialization tends to be more focused than something like solid tumors.

That said as you are aware our collaboration with Novartis does allow us to field a potential solid tumor field force which is covered by the collaboration and therefore they may have utility for this program going forward. The good news is we have some time on 380 to see where it’s going to go before having to make those decisions and by the time it’s ready for commercialization, we will have made the decisions on the MEK162 co-detailing. Great question, sir.

Matthew J. Andrews – Wells Fargo Securities LLC

Okay thank you.

Operator

Thank you. And our next question comes from Cory Kasimov from JPMorgan. Please go ahead.

Matthew J. Lowe – JPMorgan Securities LLC

Hi there, it's actually Matt Lowe in for Cory today. Just a couple of questions. I guess the first one on the drug itself. Understanding it's still early in clinical development, I was just wondering if you could kind of outline for us what you see is the key differentiating factors versus competition at this stage besides the drug being oral?

Ron Squarer

Yes, so I think certainly the key pre-clinically is that it’s a highly selective agent for HER2 relative to lapatinib and neratinib and so that we’ve shown that in a multiple different ways that has translated into clinical safety benefit. We believe that we’ve seen very low incidences of rash and GI side effects, which we think are limiting for some of the other HER2 positive small molecule agents. And then finally most recently we spent significant effort to understand our ability to penetrate the blood brain barrier and actually treat metastatic HER2+ brain mets. And we believe that we have a clear advantage over other agents in that area. And we believe that is one of the major unmet medical needs in HER2+ disease today.

So I think that’s in all three areas. We have a strong differentiation, now. Of course you have to demonstrate the differentiation. It would take a significant investment. I think we’ve found a great partner in Oncothyreon to make that investment and demonstrate that differentiation.

David L. Snitman

So let me just add or emphasize, it really should say points that were made earlier. Cory – so if this drug 380 does have the potential to combine with other important agents, presumably you would be talking about patients who would be on drug for a very long period of time, which first of all is great for patients and of course economically quite important to Array and Oncothyreon. And so the tolerability profile of an agent using this population will be absolutely critical and that’s one of the things we are most excited about right now, is that the tolerability probably due to the selectivity of 380 does appear to be quite unique when you look at other choices that are either in development or on the market today and couldn’t make all of the difference. Now of course we’d always love to see differentiation on efficacy ultimately, but frankly if patients cannot benefit from the drug over long periods of time – efficacy isn’t really going to matter.

Ron Squarer

Just one more point, I think one of the reasons why we are so excited about this, we’ve talked extensively with key opinion leaders in the last year. We believe they were highly encouraging to continue to move this product forward. Also some draft guidance came out from the FDA in regards to how to characterize and evaluate pathologic complete responses in early HER2+ breast cancer patients. And so we believe that it provides some more streamlined path to earlier breast cancer patients where I think the true value of this agent can be demonstrated because of the safety profile.

Matthew J. Lowe – JPMorgan Securities LLC

Okay, that’s helpful. I guess just another quick question as a follow up. What other types of partnerships could we expect in the remainder of this year? And I guess, how do you see your evolution of your strategy evolving? Thanks.

Ron Squarer

Great question, look we don’t actually see our strategy evolving – these types of transactions have been very much part of the way Array has managed the business overtime where we pursue partnerships for certain assets while developing others on our own.

Now as we have said in the past and perhaps just to reiterate some of the other important assets that we’ve sort of had folks focus on, we have a very important read out occurring this summer on an asthma program. This is ARRY-502 - CRTh2 for a mild to moderate asthma. It’s a blinded trial and so we don’t have any insight today as to the results but based on the science and what we know about our molecule and the history of CRTh2 and the careful selection of the patients in this trial – pretty robust trial about 180 patients. We are pretty excited about it. And that could be a very, very important source of capital going forward. We also continue to talk to companies about Array-797 and what we have said is, that we would hope to have a decision on how to move forward with 797 by the end of the year.

We have also been in the public domain talking about a very exciting mechanism which is Trk and looking to do some collaboration on that, and I believe at ASCO, we are focused on pain for Trk; it’s basically, you can kind of think of it is an oral NGF antibody, but it’s all and more suitable on the other side of the receptor, but with significant advantages.

We also understand that there is some pretty exciting data that’s going to be covered ASCO this weekend about the potential utility of Trk in cancer, so that could be another important area. And then there are other based on our legacy of discovering great molecules against important targets, small molecules, I could say there are other earlier stage assets that we are currently talking to companies about.

So as I said, this has always been part of our business model and it will continue to be the numbers we quoted in the past about $175 million of capital from partnerships to just in about the last three years. I guess this deal would add another 10 on top of that. So no change in strategy and watch the space going forward.

Matthew J. Lowe – JPMorgan Securities LLC

Okay, that’s helpful. Thank you.

Operator

Thank you. And our next question comes from Rene Shen from Leerink Swann. Please go ahead.

Rene Shen – Leerink Swann LLC

Hey, thanks so much for taking my question. Just a couple questions here; do we know if 380 has any activity against the HER2 mutant?

And secondly, can you give some more details on the dose limiting toxicity, the LFT, the dose reduction, did you have to take patients off drug and how long did it take the LFTs to resolve? Thank you.

Ron Squarer

First question. We are actually in the process of testing the HER2+ mutation. The HER2+ mutation right now in lung cancer among others, but we don’t have any information as of yet. We have evaluated a number of tumor types where HER2+ patients have been observed. In particular, we reported at AACR that we did see benefit in a HER2+ colorectal cancer patient and there has been some recent publications about resistant mechanisms to cetuximab in colorectal cancer being driven by up regulation of HER 2, so we were quite interested in that aspect.

Regarding the second question, specifically actually I don’t know the answer to that. It was a very short dose reduction. I think typically what we would do stop dosing for a week watch the LFTs go down and then re-dose at 600 mg BID dose. So that is that typically what we would do and I think that’s probably exactly the strategy we used.

Rene Shen – Leerink Swann LLC

Great, thank you.

Operator

Thank you. And our next question comes from Stephen Willey from Stifel. Please go ahead.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Yeah, guys, just a quick question. You talked about how GI toxins been a bit of a limiting factor for some of the other HER2 drugs that are in development right now. And I guess just thinking about that, would you be a little bit more inclined to think that the combos with chemo, whereby the GI toxin might be a little bit more additive and where you kind of have to dial back dose with the existing drugs, might be the more interesting route for you guys to pursue at this point?

David L. Snitman

Actually I don’t think Steve it would make much of a difference. I mean it’s been so clean preclinically when we looked at any kind of combination. Certainly combinations with antibodies have shown in the neoadjuvant studies to have a strong synergy and I think that clearly combinations were things like Pertuzumab, T–DM1, Trastuzumab as well as combinations with Cape and the taxanes all are in play right now and we will certainly be discussing our strategy for proof-of-concept over the next coming months.

Stephen D. Willey – Stifel, Nicolaus & Co., Inc.

Okay. And just to be clear David, joint steering committee between yourselves and Oncothyreon who are deciding the nature of the pre-concept trials and then, you will then subsequently sit down and decide where you want to fate this drug from a longer-term development perspective?

David L. Snitman

Yeah. Actually we have already designed the proof-of-concept studies, which are part of the actual contract and we have vetted those proof-of-concept studies to some of the world’s experts in HER2+ breast cancer and so that we believe that once these are completed, we will be in a very good position to make a decision on further development or if both parties agrees to seek a partner to actually move into Phase III.

Ron Squarer

And Steve that’s perhaps I think we are going to wrap-up now and let people get on their way those who are going to ASCO. That’s perhaps a good way to close. The POC plan, which isn’t public yet, but overtime will emerge and we will be able to talk about it, is very robust, involves a commitment from Oncothyreon into the tens of millions of dollars as you would expect for multiple trials in this regard and it’s one of the reasons we are still excited about this collaboration.

We are going to have very robust information to understand the potential differentiation in the activity of this drug and be able to make an informed decisions about how to move forward together.

And so with that I think we are going to wrap-up and I just want to reiterate how excited we are, not just to have the opportunity to see ARRAY-380 continued to be developed in a robust and very meaningful way, but to have the kind of deal terms, control and value, retention that we have achieved through this collaboration. This is an excellent deal for Array and its shareholders in our view.

So I just want to close by saying that we want to thank our employees here at Array for their commitment, ingenuity and diligence that continues to fuel our success and thank our patients, our partners, Oncothyreon now being one of them and shareholders for their continued confidence and support and with that we will close the call. Thank you very much.

Operator

Thank you. And thank you ladies and gentlemen, this concludes today’s teleconference. Thank you for participating. You may now disconnect.

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