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Executives

William B. Boni - Vice President of Investor Relations & Corporate Communications

Paolo Pucci - Chief Executive Officer and Director

Robert J. Weiskopf - Principal Accounting Officer, Vice President of Finance, Corporate Controller and Treasurer

Brian Schwartz - Chief Medical Officer and Senior Vice President of Clinical & Regulatory Affairs

Analysts

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Chad J. Messer - Needham & Company, LLC, Research Division

Jonathan Eckard - Citigroup Inc, Research Division

Howard Liang - Leerink Swann LLC, Research Division

Reni J. Benjamin - Burrill & Company

George B. Zavoico - MLV & Co LLC, Research Division

ArQule (ARQL) Q2 2013 Earnings Call July 30, 2013 9:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the ArQule Inc. Second Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

I would now like to introduce your host for today's program, Mr. William Boni, Vice President, Investor Relations and Corporate Communications. Please go ahead.

William B. Boni

Good morning, everyone. Welcome to the ArQule investor conference call reviewing operational and financial results for the second quarter of fiscal year 2013. This is Bill Boni, the Vice President of Investor Relations at ArQule.

This morning, we issued a press release that reported results for the fiscal quarter and 6 months ended June 30, 2013. This release is available on our website at www.arqule.com. Leading the call today will be Paolo Pucci, Chief Executive Officer of ArQule. Also present for the company are Peter Lawrence, President and Chief Operating Officer; Doctor Brian Schwartz, Chief Medical Officer; and Rob Weiskopf, Vice President of Finance.

Before we begin, please note that we will be making forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results may differ materially from those projected in the forward-looking statements due to numerous risks and uncertainties that exist in ArQule's operations, development efforts and the business environment, including those factors discussed in our press release announcing this call and posted on our website as well as in our reports on Forms 10-Q and 10-K and subsequent documents filed with the SEC.

The forward-looking statements contained in this call represent the judgment of ArQule as of today. ArQule disclaims any intent or obligation to update any forward-looking statement except to the extent required by law.

We will provide an opportunity for questions and answers at the end of this call.

I would now like to introduce the CEO of ArQule, Paolo Pucci.

Paolo Pucci

Thank you, Bill. Good morning, everybody, and thank you for joining us this morning.

I would like to begin our operational review, giving you an update for our most important clinical trial, which is the METIV-HCC trial. The -- in the second quarter of 2013, we made very steady progress with this trial, which is our pivotal Phase III trial for hepatocellular carcinoma that is testing tivantinib against best supportive care in second-line HCC patients.

As we have discussed in the past few calls, the scope of our activities is entirely focused in getting the trial up and running and getting the sites, therefore, up and running. And I'm pleased to report that well over half of the clinical trials that were selected to participate have been initiated since. This is thanks to the hard work of our CRO as well as our good operational partnership between Daiichi Sankyo and ArQule.

We were also very pleased to see that there is a high level of interest in this trial among clinical investigators. And what we hear from clinical investigators is that their interest is driven by the fact that it is a very unique trial, one of the very few, if not the only one, that is testing a population selected through a biomarker in HCC.

The fact that this trial is breaking new scientific ground is, in our opinion and from what we hear from investigators, the driving factor for their interest and enthusiasm in participating. The -- this interest and enthusiasm is important because the downside of utilizing a biomarker to select the population is that the selection process is very complex and that we don't know yet, and we won't know until we have screened a very large -- relatively large number of patients, what the screen failure rate is going to be.

The -- we plan to enroll in this trial approximately 300 patients. These patients are going to be randomized 2 to 1. And the primary endpoint for this trial is going to be overall survival. And I shall remind you that at this point in time, there is no standard of care for second-line HCC and much less there is any standard of care for third-line HCC.

Going back for a second to the screening failure and the -- to the complexity of the screening process, we remain committed to complete this trial with full enrollment at mid '15. If along the way we learn more about the screen failure rate, and then we will update this time line. But this is the working assumption still that we would like to offer to you,

with the caveat that we were quite encouraged by the interest of the investigators in screening actively, and with the caveat that we are well on plan to initiate the -- timely all the clinical centers included in this trial.

Let me now speak to you briefly about the MARQUEE trial. So I'm shifting gear and I'll talk for some time about the non-small cell lung program that we still have active.

You will recall that the Data Monitoring Committee recommended the discontinuation of this MARQUEE study when the interim analysis that is now almost 1 year away showed that the overall survival in the tentative population would not be reached and that, therefore, we had [indiscernible].

You'll also recall that at that time, we reported that the treatment arm, which was tivantinib plus Tarceva versus Tarceva plus placebo in the control arm, showed that significantly affects the [indiscernible]. And we saw no unexpected side effects. And therefore, we were in the position to continue that trial until year end. And we have discussed this before, so I trust that those of you that have follow us remember this description.

Now we have been in the position to carry out a full-study analysis. And out of this full-study analysis, we have been able to analyze the more -- one of the more interesting patient subgroups, which is that of the MET-expressing patients. This subgroup was comprised of around about 445 patients that were a valuable 4 protocol. And let me remind you what the 4 protocol boundaries were. The boundaries were defined by immunohistochemically, by 50% tissue staining, with an intensity or -- of the 2-plus and/or 3-plus. So this was the predefined protocol definition of what is an evaluable patients.

Of these round about 500 patients, half -- roughly half could be characterized to protocol of MET-high. And in this patient subgroup, the treatment arm showed a substantial overall survival improvement over the control arm. This benefit, obviously, was not observed in the ITT. The -- by comparison, the other half of the approximately 500 patients that could be assessed for protocol were confirmed to be MET-low. And in this cohort of patients, we did not observe any difference, meaningful difference, in overall survival between the 2 arms. We then went back to PFS, and we -- for this half of the trial that could be analyzed per protocol, and we saw that PFS was similar for this MET-expressing patients in that there was no significant difference between the MET-high and the MET-low groups.

Why -- I'm today pleased to say that this data in its totality, so this data that I just reviewed to you plus a lot more analyses, will be presented this fall at the European Congress, which I believe takes place September 27 to October 1, coming up.

Let me now move on to the -- obviously, needless to say, we are comforted by this data, which we find interesting in more ways than what I have described here, and we find encouraging us to take a deeper look at what our opportunities could be in the non-small cell lung cancer field. And that -- we are obviously discussing this data actively with our partner as well as with the leading physicians that help us with the trials, MARQUEE.

Now let me tell you briefly about the status of the ATTENTION trial, which is the other Phase III trial, which is part of the non-small cell Phase III for tivantinib. The ATTENTION trial was conducted -- was an Asian-only trial conducted in South Korea, Japan and Taiwan by our partner, Kyowa Hakko Kirin. The -- here as well, round about 1 month ago, the trial was subject to a suspension of recruitment, which was temporary and then become permanent. And that suspension was driven by the observation of an imbalance in the toxicity of interstitial lung disease that disfavored the treatment arm. A few patients had to be unblinded at the time to observe this imbalance.

I also remind you that we did not observe significant incidents of interstitial lung disease once we analyzed the 1,000 patients that are included in the MARQUEE trial.

So it appears now that the MARQUEE trial has been analyzed, that interstitial lung disease in this indication appear to be confined to Asia that current knowledge of epidemiology would have lead us -- led us to conclude. So that confirms the common knowledge.

Now the ATTENTION trial, I have -- will reiterate because some people still think was concluded, has not concluded. This trial continues on but with a reduced number of patients. Originally, it was expected to recruit 450 patients, and it's continuing with approximately 300 patients. But that statistical plan remains unchanged, and, therefore, the statistical hurdle to achieve overall survival separation from the control arm is much higher. And we are expecting, based on the information provided by Kyowa Hakko Kirin, that data will be available late in 2013 or early in 2014.

Moving on with earlier Phase III trial for non-small cell, I would like to remind you that we have 2 Phase II trials run -- ongoing. One is a U.S. trial that is a Phase II open-label, testing patients with care recommendations, who are receiving tivantinib plus erlotinib or chemotherapy. Approximately 100 patients to be recruited. They expect it this year. We will present at ESMO, relative to MARQUEE, also the subgroup of patients that could be defined for protocol, that being KRAS mutant.

The second Phase II trial is a Japanese trial only, patients with locally advanced or metastatic EGFR mutation-positive in non-small cell lung cancer expected to recruit 40 patients. They should be available next year courtesy of Kyowa Hakko Kirin.

Let me know briefly close the tivantinib discussion by informing those of you who were not at ASCO that at ASCO, we reported the full data set for the Phase II tivantinib plus irinotecan and cetuximab against irinotecan and cetuximab-only trial. This trial, as we reported below, failed to meet the statistical endpoint. It has been, in truth, already reduced to a signal generating trial we decided to reduce the originally set target of patients from 150 to 120. And I'll remind we did that because the trial design became obsolete due to clinical development in both frontline and third-line colorectal cancer.

Being as it may, this -- we -- the data we reported that ASCO in June called for a PFS in the treatment arm of 8.3 months compared with 7.3 months in the control arm with an hazard ratio of 0.85 and 90% -- 95% confidence interval.

The median OS in the treatment arm was 19.8 months compared with 16.9 months in the control arm, hazard ratio of 0.75 -- 0.70, I'm sorry, 95% confidence interval, 0.42, 1.17. And then on overall response rate in the treatment arm, we saw a marked advantage to treatment. In fact, treatment presented an overall response rate of 45% versus 33% only in the control arm.

For those that follow colorectal cancer closely, you will notice that both PFS and the overall response rate results obtained for the treatment and control arm were substantially greater than one would expect given the so far available information for colorectal cancer.

We also discussed at ASCO the regional differentiation between the results, which were significant. As well as, we discussed the differentiation that might be driven by using different kinds of treatments for frontline in one region versus another.

The adverse events in this trial were no different than what could have been expected, and tivantinib was generally well tolerated.

Let me now talk a little bit about pipeline discovery here. We are very pleased that the transition of the 092 -- ARQ 092 program, which is the AKT inhibitor that we have partnered with Daiichi Sankyo has gone very well. And we need to be thankful for the colleagues at Daiichi Sankyo as well as the investigators participating in the trial for making this transition smooth. We're already moving towards different dosing regimen that we believe, in the second phase of the Phase I, should be of interest, of great interest. And we have been very strongly advised to switch the dosing regimen by our investigators that brought a number of compelling investigation -- observations for us to do so.

Just as well, we're proceeding the development of ARQ 087, which is our FGFR inhibitor. We expect Phase I data for both trials to be available in the first half of 2014.

And we believe -- but that these products are interesting -- so interesting to us that we needed to make sure that we could be in the position to further finance their development.

So the good progress that we are making in our pipeline, and particularly 092 and 087, have led us to take some painful and difficult decisions relative to our cost base. And I would like to talk about that next.

This morning, we announced a workforce reduction of approximately 25 positions, and this is effective immediately. We will be operating going further with a total personnel of approximately 67 full-time equivalents. And in addition to the workforce reduction, we have implemented a number of additional cost saving initiatives.

Three reasons in why we proceeded that way and 3 objectives we're going to achieve having proceeded that way. So the first and most important objective we achieved is the ability to sustain our operations as they are into 2016. This is a change versus what we discussed in the last call because until today, we had said that cash on hand would sustain current operations until 2015. By this, we have extended the financial runway, so-called financial runway, in -- for about another year.

The second objective, and here we go back to the pipeline, was to be in the position within this new guidance of cash available until 2015 -- we wanted to be in the position to finance independently at least 1 Phase II for 1 of the 2 assets we have currently in development. This is not for lack of interest in potential partners for these assets. We have received a number of solicitations. It is because we believe that once tivantinib were to be successful, is to have a fully owned follow-on compound of interest to the investment market that will power our subperformance. And because Phase II costs are still relatively contained, we believe that it was important for us to carve a path financially to execute Phase II before AKT or FGFR.

The third objective we had in mind when we proceeded with the restructuring, and that's why it had to be very finely tuned, was that we wanted to maintain our core discovery capabilities. And we wanted to direct those discovery capabilities to the further development and mining of our property library and the further identification of interesting L.O. candidates.

So 3 objectives we achieved with the current restructuring and realignment of resources: number one, cash will be sustaining our business into 2016; number two, we will be in the position to fund independently at least 1 Phase II trial for either FGFR and AKT; and number three, we will be able to retain and deploy still effectively core discovery capabilities.

Now it is always a very bad time separating from colleagues with whom we have worked, as I have, 5 years and some of the people here in this room have worked much longer. So it is with that spirit that I would like to extend our gratitude and sincere personal appreciation to those employees who believed in the company. Rest assured that we're offering to them support and assistance during this transition period. And we wish them all the best.

Before I call -- I turn the call over to walk Rob Weiskopf, I would like to talk to you about the cost of this restructuring. And in reality, it's very brief statement to make.

The costs related to this restructuring will not impact our current financial guidance because they will be offset by a number of cost containment measures that we have planned or will implement in the second part of the year.

Now I would like to turn over the call to Rob, who will give you further details about our financial performance for Q2 of this year. Rob?

Robert J. Weiskopf

Thank you, Paolo. The company reported a net loss of $6,786,000, or $0.11 per share, for the quarter ended June 30, 2013, compared with a net loss of $885,000, or $0.01 per share, for the quarter ended June 30, 2012.

For the 6-month period ended June 30, 2013, the company reported a net loss of $12,561,000, or $0.20 per share, compared to net loss of $5,145,000, or $0.09 per share, in the 6-month period ended June 30, 2012.

At June 30, 2013, the company had a total of approximately $111,114,000 in cash equivalents and marketable securities.

We recorded research and development revenue of $4,436,000 for the quarter ended June 30, 2013, compared to revenues of $11,829,000 for the second quarter of 2012. Revenues for the 6 months ended June 30, 2013, were $10,097,000 compared to revenues of $20,327,000 for the 6 months ended June 30, 2012.

The $7.4 million revenue decrease in the 3 months ended June 30, 2013, were primarily due to revenue decreases of $4.9 million from our Daiichi Sankyo research collaboration agreement that ended in November 2012 and $2.3 million from our Daiichi Sankyo tivantinib program.

The $10.2 million revenue decrease in the 6 months ended June 30, 2013, was primarily due to revenue decreases of $9.8 million from our Daiichi Sankyo research collaboration agreement that ended in November 2012, $0.4 million from our Daiichi Sankyo ARQ 092 agreement that ended in June 30, 2013 and $1.8 million from our Daiichi Sankyo tivantinib program. These decreases were partially offset by a $1.8 million of other revenue related to onetime research projects.

Total costs and expenses for the quarter ended June 30, 2013, were $11,280,000 compared to $12,785,000 for the second quarter of 2012. Total cost and expenses for the 6 months ended June 30, 2013, were $22,861,000 compared to $25,687,000 for the same period in 2012.

Research and development costs for the 3 and 6 months ended June 30, 2013, were $8,082,000 and $16,263,000, respectively, compared with $9,271,000 or -- and $18,574,000 for the 2012 3- and 6-month periods. The lower research and development costs and expenses in the 2013 periods were due to lower outsourced clinical and product development costs related to our Phase I and for Phase II programs for tivantinib and pipeline programs, as well as lower labor-related costs.

General and administrative expense for the 3- and 6-month period ended June 30, 2013, were $3,198,000 and $6,598,000, respectively, compared with $3,514,000 and $7,113,000 for the 2012 3- and 6-month periods. The lower general and administrative expense in the 2013 periods were due to lower professional fees.

I would now like to discuss the financial implications of the workforce reduction addressed by Paolo earlier. We estimate costs in connection with these actions will be comprised principally of severance payments of approximately $525,000 and related benefits continuation costs of approximately $100,000, all of which is expected to be paid by December 31, 2013.

In addition, in the third quarter of 2013, the company expects to incur noncash charges of approximately $150,000 related to the modification of employee stock options.

As Paolo stated, the workforce reduction does not affect our cash guidance for 2013, which remains the same as provided at the 2012 year-end call and which I will now reiterate. For 2013, ArQule expects net use of cash to range between $40 million and $45 million. Revenues are expected to range between $12 million and $15 million. Net loss is expected to range between $28 million and $31 million, and net loss per share to range between a loss of $0.45 and $0.50 for the year. ArQule expects to end 2013 with between $85 million and $90 million in cash and marketable securities.

With that, I would like to turn the call back to Paolo.

Paolo Pucci

Thank you, Rob. And operator, we -- if you could please open the call up for questions. And obviously, all the people here might take one or another depending on the question.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from line of Adnan Butt from RBC Capital Markets.

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

I think you mentioned that nearly half the centers are up. Would you be able to share how many of them are enrolling and what you expect the pace of centers going up into the second half to be?

Paolo Pucci

I think that more than half of the centers are by now up and rolling. There's no -- I -- if I say nearly half, I meant more than half. And the target of centers to open is around about 80. And we have around about 60 sites open. As far as enrolling sites, it's a fraction of the 60.

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

Okay. So would you say it's -- so when would you be able to discuss how -- using a biomarker to select patients? When do you expect to give an update on that, Paolo?

Paolo Pucci

I would say -- and I'll let Brian comment as well. I would say that we need to have screened probably 200 patients or so before we get a somewhat better idea. I'd say that between 200 and 300 patients screened, we'll get -- we'll have a better idea because we would like to also have an idea about the geography. Because in the past, we have seen some differences between geographies. But Brian, you're closer to it.

Brian Schwartz

I think your right, Paolo. About 200 -- Adnan, about 200 approximately screened. We anticipate we need to screen about 1,000 for the trial. And definitely, in the third quarter, we'd be able to give you an indication of where we are.

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

Okay. And then...

Paolo Pucci

And then how many screened. I'm actually -- more comfortably 200 to 300 patients. It's uncharted waters. One could make some assumptions about what the screen failure rate is going to be. But this is really the first trial that gets executed that way. And the long -- the experience we had in the long trial has made us more cautious. The expectation in the long trial was that up to 70% would test MET-high, and the reality has told us that, that's an optimistic project -- that was an optimistic projection. It was based on the letters that were available at the time, but it was optimistic nonetheless. So we'll have to wait a little bit before we can give more clarity.

Operator

Our next question comes from line of Joel Sendek from Stifel.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

So if I put this altogether, it seems to me that even though it's hard to -- assess when you get the HCC interim data, I guess even though under the most conservative circumstances with the workforce reduction, you'll have cash to get to that or beyond that point in time. Is that fair to say?

Paolo Pucci

Based on the current plan, Joe, that was definitely a consideration that we took in proceeding as we did.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Okay, because my -- if I -- if my guesses are correct, you'll have that interim data sometime in 2015. And you said you were going to have cash, I guess, you don't know exactly how long, but you're saying into 2016. I'm assuming...

Paolo Pucci

[Indiscernible] and we will give more clarity about that once we will do -- once we will have the call -- the initial call for the new year to come.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then will the workforce reduction facilitate -- and I apologize if I didn't hear this on the call. Moving forward in colon cancer between now and then, I guess [indiscernible] do that?

Paolo Pucci

That -- so any additional work that might take place in colon cancer as well as non-small cell lung cancer is really independent from the dynamics of the cost structure here at the company. That influences more our ability to bring forward pipeline than tivantinib. The discussions around what next to do in colorectal cancer and non-small cell, which are still fluid at this point, but they are occurring, relate more to the reading of the data. The colorectal piece is quite interesting in many ways. In my opinion, it might lead to further Phase II work more than further Phase III work, or it might be a hybrid of the 2, but those discussions are ongoing with Daiichi Sankyo. In non-small cell, much will be depend on how the data will be received at ESMO and how certain other data sets that are still afoot will develop. For example, we don't have a final data set for quality of life for MARQUEE, which will be an important additional data set to look at. So those discussions are independent. They're purely scientific. They're based on the data. They are between ArQule and Daiichi Sankyo and they are not influenced by headcount reduction or any additional cost dynamic here that at ArQule.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Got it, okay.

Paolo Pucci

What that cost dynamic influences is the runway for the whole company or the fully integrated enterprise. And let me take this opportunity to say again, primary objective was to extend the runway into 2016. And you correctly observe that, that means extend the financial runway over the currently expected timeline for a read-out of the HCC Phase III METIV trial based on the current assumptions. And then that would impact more so is our ability to bring forward the pipeline in Phase II once we see a positive thing in Phase I. These 2 targets, AKT and FGFR, are very interesting. With the scientific literature, we have topnotch investigators working on them with lots of enthusiasm and great ideas, but we also see the incoming business development interest. The incoming business development interest, however, would limit our strategic options. And that's why we wanted to expand our strategic options relative to the pipeline. And that was a driving -- a major driving factor of the restructuring. Let me stress as well we maintain our core discovery capabilities, and we maintain our belief that those core discovery capabilities create value. And in fact, the mix of employees that are unfortunately separated is a mix. It started -- it probably in part limits our ability to pursue more than one target in parallel, but we are still fully equipped to pursue one target in parallel and a relative and low -- one target and a relative -- a low process, so.

Operator

Our next question comes from the line of Chad Messer from Needham.

Chad J. Messer - Needham & Company, LLC, Research Division

And really appreciate the update, particularly on your further analysis with the lung trials and certainly looking forward to hearing more. Were there any differences and between the high- and low-MET populations in any safety parameters? I'm just trying to think through...

Paolo Pucci

Not that I recall.

Chad J. Messer - Needham & Company, LLC, Research Division

I'm sorry?

Paolo Pucci

Not that I recall.

Chad J. Messer - Needham & Company, LLC, Research Division

All right. I'm just trying to think through again, and I -- we've had this conversation before. We're just...

Paolo Pucci

Overall, Chad -- I would say that overall, the safety profile that emerged from the trial was nothing unexpected at the interim analysis, and that's the reason why we continued on until December. And remember that the interim analysis occurred in October, so we carried on another 2, 3 months. And the final analysis has also not revealed any unexpected finding as far as side effect profile, which tells us that for every tumor type, we need to expect different side effect profiles because as you'll remember, the -- a neutropenia has a far more prominent toxicity in HCC than it has turned out to be in non-small cell. And now for non-small cell, we have a really -- we really have a big database because we have more than 1,000 patients who started fairly vigorously. The side effect that we were looking for with great attention in MARQUEE was interstitial lung disease based on the situation we have seen develop in Asia. And the reason why we do this was obviously because we put the patient first, and we wanted to make sure that this was a toxicity limited to Asia, which is why, but also for commercial reasons because should we receive a positive surprise from the ATTENTION trial, we want to be in a position to support our funder, Kyoka Hakko Kirin, with as much safety data relative to their contentious toxicity as we can develop. So we will transfer the full -- we will transfer that knowledge to the -- any Japanese regulatory discussion that might occur down the road. And that's why that knowledge is important. It's also important for any future development in non-small cell because we know we are dealing with a relatively safe combination in this disease setting. That is for sure.

Operator

Our next question comes from the line of Jonathan Eckard from Citi.

Jonathan Eckard - Citigroup Inc, Research Division

So the first question is kind of a follow-up to Joel's question regarding potential costs of our focus on non-small cell lung. So if you could remind us of the Daiichi agreement? Were the milestones and cost sharing aspects of that collaboration officially associated with the MARQUEE trial or are they associated with the program such that they are potentially transferable? I'm just trying to understand the dynamics of whether you start another trial, should we have the same areas around it?

Paolo Pucci

So let me address that. Now for those of you -- and there's quite a few people on this call today. So welcome to about 10, 15 people that represent funds that we have not met with yet in person. So for the benefit of those on the -- that are present here that might have not been -- listened to the story, the partnership we have for -- with Daiichi Sankyo covers the Western world. In this partnership essentially, all the costs -- it's a 50-50 development partnership, and all the costs which are pre-Phase III are funded 50-50 by the partners, and each partner is out-of-pocket, including ArQule. For the Phase III costs, the 50% share that belongs to ArQule is funded by ArQule through milestones and royalties, exclusively through milestones and royalties, to be received from Daiichi Sankyo, the milestones and royalties that don't apply to a specific tumor but is rather tumor 1, tumor 2, tumor 3 and so on. So we have accrued -- so if you -- if we talk numbers, so far we have received a number of milestones that related to MARQUEE. And the -- those milestones have in full been returned to Daiichi Sankyo as the -- our share of the costs for MARQUEE kept accumulating. And at this point in time, we do owe Daiichi Sankyo an x amount of millions of MARQUEE costs that could not be covered by milestones. To give you a sense of that, even though we have disclosed the milestones but we haven't yet disclosed the costs, we are in the neighborhood of around $30 million out in terms of money owed by us to Daiichi Sankyo. Now the -- going forward, the -- going forward, obviously, the METIV trial now makes HCC tumor 1. And relative to the METIV trial there will be a number of milestones which are -- some are -- at this point in time, some are regulatory and some are sales milestones, and then there will be royalties. The milestones relative to METIV are going to be equal to the milestones relative to non-small cell because they don't relate to the size of the commercial opportunity for each tumor, but they relate to the fact that it's tumor 1, tumor 2, tumor 3. Okay? So those milestones remain fairly significant because you can imagine that the milestones associated with the first tumor are higher than the milestones associated with the second tumor. Where are we -- we're switching from non-small cell lung cancer to HCC, we lose a little bit of the potential royalties because the sales prospects of second-line non-small cell are superior to the sales prospects of second-line HCC, though the sales process of second-line HCC, at least according to our own actual forecasts, are still very interesting. So that's the situation we have right now, Jonathan. Does this answer your question?

Jonathan Eckard - Citigroup Inc, Research Division

Yes. So -- but I guess it also is kind of important with regards to whether you do a Phase II or a Phase III in colorectal?

Paolo Pucci

Yes, it is.

Jonathan Eckard - Citigroup Inc, Research Division

Okay, great. And then the other question is just checking on some numbers that you had mentioned on the call regarding the MARQUEE.

Paolo Pucci

Yes.

Jonathan Eckard - Citigroup Inc, Research Division

The 445, is that the number of patients that were MET-high via I...

Paolo Pucci

Oh, that's the number of patients that could be evaluated for protocol. And that's around about half of the trial. And there is a number of reasons why another half could not be fully evaluated for protocol. And there are [indiscernible] in there. I'll remind you that we did not stratify for MET in this trial. So -- and we switched diagnostic along the way as the -- in time, diagnostic become available commercially. So half of the patients were evaluable for trial, and the per trial was -- even though histochemically by 50% or more is sustained and with an intensity of 2-plus or 3-plus.

Jonathan Eckard - Citigroup Inc, Research Division

Okay, that's great. And did you give proportions of that 445 that were MET-high versus MET-low? I thought that.

Paolo Pucci

Yes, I can give you a proportion, and I mentioned some of it. And the proportion is so roughly half of the patients scored as MET-high, and the other half scored as MET-low per protocol.

Jonathan Eckard - Citigroup Inc, Research Division

Perfect.

Paolo Pucci

So it's a fairly -- it's a pending data obviously from the trial that Roche is conducting, METMAb, where they are restratifying for MET. And theoretical, they should have 400-plus patients that are MET-high in their trial. This would be, until then, the biggest data set available for assessing this population. And it's -- after trial, it's 250 patients, around about, either side. So it's going to be a quite -- a very interesting scientific publication, and it was important for us to see this signal in this population. There is a number of learnings that as a scientific community, based on what we were told about our investigators, one could say about how much you can achieve, ones you don't struggle for, i.e. in terms of patient populations that you can properly analyze per protocol. And those will be discussed at ESMO and probably thereafter as well because there is [indiscernible] And this data set is so rich that probably it's going to stand more than one global congress presentation.

Jonathan Eckard - Citigroup Inc, Research Division

See you at ESMO.

Paolo Pucci

You also. I'll see you then.

Operator

Our next question comes from the line of Howard Liang from Leerink Swann.

Howard Liang - Leerink Swann LLC, Research Division

I have a few clinical questions. So how important is the KRAS trial? And how that might factor into your decision tree for lung cancer? And so related, the -- from the MARQUEE trial, how many -- I think you said we'll see data at ESMO, KRAS subset as well. How many patients in that have KRAS? Patient? I guess if I think of maybe half of the 1,000 had some testing, and then maybe -- would that be 20% of that or maybe 100 patients with KRAS in MARQUEE as well?

Paolo Pucci

Okay, Brian will take that, and I'll...

Brian Schwartz

Howard, well, maybe we can't give specific numbers until we give the presentation. But what I can tell you is that the incidence of KRAS in EGFR is very similar to the incidence of KRAS in EGFR mutations in the normal non-squamous cell population. So we're talking about 10% for EGFR mutations and about 25% to 30%, depends on the region of the world, for KRAS mutations. I think it's -- you asked the other question, is how important will it be in terms of decision making. As you're aware, there have been a number of trials in second line looking at Tarceva -- well, lots of it single agent versus chemotherapy, and have shown differences in different populations. So I think we need to take out data for MARQUEE, which will be tivantinib plus erlotinib. The data from the KRAS trial, which is tivantinib, erlotinib versus chemotherapy, and then, for example, the Taylor trial versus the Japanese trial, put all the data together and decide whether it's worthwhile to pursue KRAS or not and see how all they benefit.

Howard Liang - Leerink Swann LLC, Research Division

And for ATTENTION did that include MET testing as well? And is the rate similar to MARQUEE?

Brian Schwartz

It did include MET testing. It didn't mandate MET testing. And here, Hakko Kirin haven't given us any indication of what the proportion of patients are. In fact, they haven't completed the MET testing as yet, Howard. So we do not know what the rates are, but there will be a mix evaluation. We have learned quite a lot in terms of the important validation steps you need for a proper diagnostic should you need to use it in Phase III. And there will be some limitations of the MET data we have in ATTENTION just because of tissue acquisition, timing of analysis, et cetera. So we're not really sure exactly what number of MET patients we're going to end up with.

Paolo Pucci

And given that we are on ATTENTION, to our knowledge the newly established number of events for the reduced recruitment trial has not been achieved yet.

Howard Liang - Leerink Swann LLC, Research Division

And then just a question on the early-stage pipeline. You mentioned you wanted to fund basically one of them for Phase II. Can you talk about what you see as the priority among these early-stage agents? It sounds like it will be FGFR or AKT inhibitor.

Brian Schwartz

Well, I think it does hold a lot of promise at the moment, Howard. I think our AKT inhibitor, we're following the example of other PR3 kinase and AKT inhibitors in that we're trying to push the dose as high as we can and manage the sugar and we have very little rash and see if we can get a higher degree of efficacy. At the same time, we're looking at patient selection to see if there's a patient population that we could take forward in Phase II. For example, PR3 K mutations in breast would be one potential thing that have emerged from the cloth in the recent future. So AKT is very exciting for us because it has a very nice pharmacodynamic marker and very nice biomarker data in terms of the pharmacodynamic effect of the drug. The FGFR inhibitor, if you follow the literature, there's a huge amount of data merging -- emerging in the last couple of years looking at both FGFR1 and 2 tumors. And we're moving nicely through the cohorts and also, at the same time, looking at the literature, the competition and our agents to find an enriched population for FGFR. But it looks like there was another paper today looking at small cell, and more people are looking at FGFR genetic events or protein expressions. So we're starting to see more potential avenues to potentially pursue with FGFR. But right now, both are moving nicely through Phase I. And by this year next time, the Phase I should all be ramped up.

Howard Liang - Leerink Swann LLC, Research Division

And last question, if I could. Can you talk about a timeline for data from the NCI trials on tivantinib?

Brian Schwartz

It's a little bit more complex because it's a little bit outside of our control. I think they will be -- the first 3 trials to read, and I've got to give a little bit of space because we get a wide range for when they'll be completed, is the multiple myeloma, the triple negative breast and the prostate cancer are almost completed accrual or near the end of accrual phase of their trials. So most probably, within about 6 months thereafter, but it could take up to 1 year to bring in the different data sets. But those 3 are completing the accrual timeframe, getting very close to the end.

Operator

Our next question comes from the line of Ren Benjamin from Burrill & Company.

Reni J. Benjamin - Burrill & Company

Just very quickly, can you just take me through -- I jumped in on the call a little bit late, but can you take me through the screening process for the METIV trial? Once a patient comes in, what's happening? And how long does it take before they are officially enrolled as part of the trial? And if there is a central read that's taking place, how is all that occurring?

Brian Schwartz

So briefly, 2 things can happen. Once a patient is already on sorafenib and progressing, they can be potentially identified for the trial, or patients who have failed sorafenib. So we have 2 groups of patients: patients that have started sorafenib and patients that -- or have progressed on sorafenib. Both of them will submit a biopsy, and we will check the MET status of those patients. Only the patients who progress who start screening will be identified to the investigator that says whether they're MET positive or MET negative. Once the patients progress who are intolerant to sorafenib, the patients will then undergo a screening period, get in normal labs and into the trial. So for early patients, it can be as long as 4 to 6 months before they come on to the trial. For patients who have progressed on sorafenib and identified and get their biopsy by then, it's as quick as 4 weeks washout. So there's a sort of range between -- so when we talk about screened, that's what Paolo mentioned earlier, we need quite a large number of patients screened to see what the flow is going to be before a patient gets randomized.

Reni J. Benjamin - Burrill & Company

Got it. And do we have any sense as to what happens to the MET status after treatment with, let's say, sorafenib or progression on sorafenib? Has there been any discussion regarding how MET is influenced by sorafenib?

Brian Schwartz

We are trying to look at that and have a couple of -- and working with a couple of investigators to look at that concept, but we don't have the data as yet. I know we have data sets on different patients, but we don't have the MET status for the same patient over time. So we have a group of patients that, for example, are very early disease, what the MET status is versus late disease, but we don't have the same patient as they progress through therapy how does it change or doesn't change.

Reni J. Benjamin - Burrill & Company

And will there -- will we have any sort of stratification between those patients that are early versus those that are already progressing when the complete analysis is done? Or will the -- will all the patients be just one data set?

Brian Schwartz

So our stratification criteria are pretty much based on vascular events, so were based on a longitudinal study done by the Barcelona group, as well as the -- a combination of data and learnings from the, for example, the brivanib trial. So we stratify them by 3 entities which we feel are the ones that are most important, that being vascular invasion, extrahepatic spread and alpha-fetoprotein above 200. And you're correct, we are not stratifying for those other 2 groups as we only -- it's a relatively small drop and had to pick out our important strata or the strata that we felt would influence the data the most.

Reni J. Benjamin - Burrill & Company

Got it, okay. So switching gears to MARQUEE. Can you -- or are you -- I don't know if you've said this in the past, but have you mentioned what the statistical significance was? You obviously mentioned a substantial improvement in overall survival, but can you give us what the p-values were for both OS and PFS?

Brian Schwartz

I think -- let me just put it in perspective. Working with Daiichi in a very purest perspective, they don't want to disclose any p-values until the presentation. But also, if you missed your primary, they concern of what is the relevance of the p-value or the relevance of the difference. But we will show all those numbers at ESMO and World Lung.

Reni J. Benjamin - Burrill & Company

Got it. And just one final question, and this is primarily building off of your experience with CRC and the changing landscape. Obviously, the landscape is changing in non-small cell lung cancer as well with the PD1s and PL1 exhibitors coming out and showing some impressive results. How are you guys taking into account sort of the changing landscape as you and Daiichi discuss the next steps to move forward?

Brian Schwartz

I mean, we're currently in discussions with key opinion leaders. And you're correct, lung is starting to look a little bit less breast in that you have these molecular subparts and you have the histological subparts, the molecular subparts. And we're starting to see where the highest sort of need is going to be and how we performed in that group in MARQUEE. I think that's going to be very important in terms of deciding how we move and if we move in our next steps. So for example, to give the breast cancer analogy, or for example, the triple negative breast is where highest MET need is, and it's most probably going to be a similar-type scenario in lung, looking at the molecular status of these patients, the ALK, the patients that don't qualify for the ALK inhibitor or for the EGFR inhibitor or for maybe one of the new -- new drugs that are potentially targeting KRAS. So to look at that or some potential marker for the PD-L1 patients. So I think it's going to subset out, and we're looking forward to see if one of those negative group is going to be high risk and easy, with enough patients, to treat in a trial.

Operator

Our next question comes from the line of George Zavoico from MLV.

George B. Zavoico - MLV & Co LLC, Research Division

I just have a couple of quick ones. Paolo, you mentioned that you thought you'd need to screen 1,000 patients to get to the target for METIV, which I think is about 300. So that's about -- is that a conservative estimate of 30% METIV? Because in lung you had 50%.

Paolo Pucci

Yes. That's what Brian mentioned, and it's a conservative assumption.

Brian Schwartz

I mean, George, we were just saying, 50% of patients are MET positive and then you dilute the proportion of patients once they progress on sorafenib whose performance data for cirrhotic status changes.

Paolo Pucci

Because remember, George, when Brian responded to the question relative to -- I think, Brian, relative to what is exactly the screening process, what you heard is that there is a group of patients that could take between 1 and 4 months before they go on trial. Now in that period of time between 1 and 4 months, their performance status might deteriorate in such a way that though they would qualify in a MET status, they no longer qualify for as far as performance status. It's another learning we have taken from MARQUEE. It's very important to authorize the patients to come on trial in such a way that they're not really toward the very end of their life on earth. It's...

George B. Zavoico - MLV & Co LLC, Research Division

So it's actually -- in a sense it's a prescreening, because you're identifying potential patients long before they actually progress on sorafenib so that when they do, you'll be able to get them on trial faster.

Paolo Pucci

Hence, the complexity of the trial and hence, the need to stay very focused on opening the sites and then once the sites are opened, to make sure that the process works accurately. And that the patients that are coming on trial are not just any patients but are patients that meet all of the criteria for entering the trial. And that's the reason why when I was asked earlier this morning, what percent of the 60 plus sites we're recruiting, I'd say the fraction of it because the moment you're initiated, you might not be ready to recruit. And the moment you're ready to recruit, you still have to go through the -- because all the processes are in place, you still need to proceed with a screening process. The positive things is about this point in time, the competition for second-line patients is relatively minor. There are some important companies running trials, don't get me wrong, but there's not a lot of trials running. And the other positive is that this is the only trial of its kind. And so people keep a good eye on it because from the scientific point, these are of greater interest to them than other trials that repeat old protocols.

George B. Zavoico - MLV & Co LLC, Research Division

And you said that you do the biopsy centrally, right? So you have a mechanism for this difference sites to package the specimen and send it to the central site to actually do the assay, right?

Paolo Pucci

Yes.

George B. Zavoico - MLV & Co LLC, Research Division

Okay. With regard to the Phase I AKT and FGFR, I mean, you guys are really now deeply involved in looking at multiple biomarkers. And one of the issues that you brought up with MET and MARQUEE was that there weren't really any commercially available diagnostic -- there wasn't a commericial diagnostic test for MET-high versus MET-low. Are there those options for AKT and FGFR, because ultimately, when you get into the Phase II, because of what you've learned from MARQUEE, you're probably going to want to use some commercially available diagnostic test. So is this in any way going to be an issue do you think?

Brian Schwartz

I think, George, thanks for the question. That's why we're starting relatively early in Phase I. You can divide the diagnostics into 3 buckets, the one which are mutational testing, which is much easier, amplification a little bit easier if we have to drop and look at some part of protein expression, it's going to be a lot more complex. So we are going through the different pieces, but it's really going to be depend on what we end up with, how complex. But you're correct, we're already working with diagnostic companies now developing our Phase II strategies so that by the time we get to Phase III, it's all worked out.

George B. Zavoico - MLV & Co LLC, Research Division

Okay, great. And finally, just a quick question. If you can comment on the MET-high/low status? You talked about how it might change with sorafenib and with, perhaps, other treatments as well. How -- without treatment, if you follow a patient, how -- what do you know about the MET stability, the MET expression stability? Or is this still an open question?

Paolo Pucci

No more than Brian mentioned before, George. Still an open question, and that's one of the reasons why we are cautious in offering projections before we begin to see more data. And relative to your question and many other questions, we might be able to shed some light, but it's not going to be definitive, because those are more fundamental questions that require a different kind of trial than one we are running to answer completely and definitively, I think.

Operator

[Operator Instructions] Our next question is a follow-up question from the line of Adnan Butt from RBC Capital Markets.

Adnan S. Butt - RBC Capital Markets, LLC, Research Division

Just wanted to know in terms of the financial run rate for 2016, what's the assumption in terms of programs that will be conducted and covered under those expectations, please?

Paolo Pucci

So the assumptions right now is that we will continue the partnership with Daiichi Sankyo, relative to tivantinib. We have, that we will bring to Phase II, one asset from the pipeline and some capital has earmarked by that. And we will continue to develop the library, the discovery library, mine it and bring the one candidate to lead optimization. Those are the current assumptions. I can't spell out more specifically the first one. Continue the partnership with Daiichi Sankyo. There is a number of ongoing relationships -- discussions ongoing. All I can add to that is that the MARQUEE data set, obviously, is more powerful than the colorectal data set, and that is a very expensive Phase III data that is beginning to clarify a number of questions. And any follow-up work to MARQUEE would be Phase II work, in our opinion, at least. But this will have to be discussed with our partners.

Operator

This does conclude the question-and-answer session for today's program. I'd like to hand the program back to management for any further remarks.

William B. Boni

Hi, this is Bill Boni again. Thank you, everyone, for attending the call. I trust the information was useful to you, and please don't hesitate to call for any follow-up that might be needed. Thanks a lot. Take care. Have a good rest of the day.

Paolo Pucci

Bye-bye.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program, you may now disconnect. Good day.

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