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ArQule, Inc. (NASDAQ:ARQL)

Q3 2009 Earnings Call Transcript

November 5, 2009 9:00 am ET

Executives

Bill Boni – VP, IR/Corporate Communications

Paolo Pucci – CEO

Rob Weiskopf – VP of Finance, Corporate Controller & Treasurer

Brian Schwartz – Chief Medical Officer

Thomas Chan – Chief Scientific Officer

Analysts

Jay [ph] – Oppenheimer

Joel Sendek – Lazard Capital Markets

Mark Monane – Needham & Company

Howard Liang – Leerink Swann

George Zavoico – Westport Capital Markets

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2009 ArQule Incorporated earnings investor conference call. My name is Keesha and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Bill Boni, Vice President, Investor Relations. Please proceed, sir.

Bill Boni

Thank you, Keesha. Good morning, everyone. Welcome to the ArQule investor conference call reviewing operational and financial results for the third quarter of fiscal year 2009. This morning, we issued a press release that reported results for the fiscal quarter ended September 30, 2009. This release is available on our website at www.arqule.com.

Leading the call today will be Paolo Pucci, Chief Executive Officer of ArQule, who will be followed by Rob Weiskopf, Vice President of Finance. Also present for the company and available for questions at the end of the formal portion of the call are Peter Lawrence, President and Chief Operating Officer; Dr. Brian Schwartz, Chief Medical Officer; and Dr. Thomas Chan, Chief Scientific Officer.

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. We are closing to the end of the year. And I think it is appropriate for me to start by recapping how we are doing here at ArQule against the objectives we have set for ourselves for this year. First of all, we are on track to meet or to exceed the recruitment goals for the ARQ 197 development program.

Second, we are continuing to develop our pipeline candidates, including those from our Eg5 program and our B-RAF program. Work on goals of those programs is proceeding as planned. And we are also accelerating our discovery network, and as proof of that, we will present soon here in Boston, the triple meeting, our novel FGFR program.

Based on the successful implementation of our business plan for 2009, we can look ahead to 2010 and we can say that in 2010 -- precisely, during the first half of 2010, we will have two very important events for our company. The first event or set of events is around 197 c-Met program. We will avail data from the non-small cell lung cancer trial and from our MiT program. You will see that the non-small cell lung trial has been executed in record time. It is a testament to the work that has been done here at ArQule, but as well it is a demonstration of the interest that the scientific community had in such a trial.

I would say that arguably that is the most important event coming up for ArQule in the first half of next year. The results were another event that we are going to have early next year in the first half and that is the end of Phase I for ARQ 621, which is the lead compound from our Eg5 program.

Let me now provide you some detail for the ARQ 197, our first in class c-Met program. First of all, I’ll go back to the non-small cell lung cancer trial. Last month, we announced that patient enrollment in this trial has been completed with approximately 170 patients enrolled in the US, in Western Europe and in Eastern Europe. I would like to remind you that the trial design is randomized double-blind design comparing the combination of ARQ 197 and erlotinib against placebo and erlotinib in EGFR inhibitor-naïve patients in second line therapy.

In addition, this trial provides for (inaudible) that allows us to treat in third line therapy patients who have progressed after receiving FGFR therapy in the form of erlotinib in earlier line of therapy. The primary endpoint for this trial is progression-free survival, and final data is expected, as I mentioned, to be available in the first half of 2010. So again I would like to say, a very robust trial with a very strong design, with a very strong clinical rationale that has steered up a very significant interest, in our opinion, from the investigators. They rewarded our effort by recruiting basically very rapidly for this trial.

Our second most advanced trial with ARQ 197 is in MiT-associated tumors. Although the rarity of these tumors (inaudible) patient enrollment challenges and we have faced many of such challenges over the past year and a half, we are on track nonetheless to complete enrollment in this monotherapy trial by year-end. This has been a tremendous effort by our clinical development team and our partners, as well as investigators. And I’d assume [ph] the investigators have been added to this trial along the way to ensure the successful completion of our recruitment goal.

Based on the rarity of this tumor, on the other hand, we have been pleased to report very recently that the European Medicines Evaluation Agency, EMEA, designated ARQ 197 as an orphan medical product for the treatment of soft tissue sarcoma. Future interactions with regulatory authorities, both in Europe, in the US and elsewhere in the world, as well as the evaluation of the clinical results that will come from the Phase II trial, will inform our decisions related to the possible advancement of such program in MiT into Phase III. This is the second event that we are expecting in the first half of next year.

Also recently we reported that following the evaluation of a safety event and trial, we have successfully established the safety of ARQ 197 in hepatoma patients and as a monotherapy. And we recently began patient enrollment in Phase II trial for this indication. We expect to enroll approximately 100 patients with unresectable HCC who have failed one prior systemic therapy. This trial design will be, again, like for the non-small cell lung trial, very strong, very rigor. It is going to be a randomized double-blind setting. And we will compare ARQ 197 to placebo, with the primary endpoint being time to progression.

Separately, but also in our intent as part of the HCC tumor program, we are also conducting and actively recruiting a trial to test the combination of ARQ 197 and sorafenib. You may recall that ArQule presented at AACR earlier this year in-vitro and in-vivo data for the combination of ARQ 197 plus sorafenib. But here once again we are proceeding very rigorously.

You might have known this by now that for all three of our existing combination programs, with Tarceva, with Nexavar and with gemcitabine, we have very rigorously gone through one process that is in-vitro data, in-vivo data, PK Phase I and for erlotinib, we are going to be soon on the grasp of Phase II combination data. That doesn’t mean that these are all the combinations we had studied.

We have studied several other combinations. These are the combinations that based on the in-vitro and in-vivo data and the scientific rationale that is our program and basically [ph] the chance to our c-Met to demonstrate its ability to enhance the already well-established therapy in a different -- in a significant number of different tumor types.

Let me come to the third combination program we have, which is part of the pancreatic cancer program. We are treating in fact patients with gemcitabine plus ARQ 197 in a Phase I safety trial -- in combination trial, obviously. We believe that this combination could have potential for the treatment of pancreatic cancer patients as well as patients suffering from other malignancies.

Consequently, the recruitment of this combination Phase I trial is open to patients affected by a wider than pancreatic cancer range of solid tumors. This concludes the brief analysis of the 197 program, which is coming to the next level of maturity. And we are looking forward to discuss this with you in the Q&A session.

We are also working closely with our partners, Daiichi Sankyo and Kyowa Hakko Kirin, on all the existing programs, and that goes without saying, but we are also working with our partners to assess that there are additional clinical settings or indications with c-Met inhibition is a narcotic [ph] therapeutic strategy. Our process of analysis continuously has been poured by the flow of data that is now steadily coming to us from the multiple programs that we have in place. So the quality of our decision-making improves with every passing day in every piece of data that comes in-house.

Elsewhere in our portfolio, we have ARQ 621, our Eg5 inhibitor. It continues to move forward in a Phase I dose escalation trial in solid tumor. We are testing 621 with the assumption that it might be as important as other Eg5 inhibitors in development, but with less toxicity in the form of bone marrow suppression. We hope that I’d say to achieve MPD [ph] and report on a recommended Phase II dose early next year -- more precisely, in the first part of next year.

Also what is proceeding on our B-RAF pre-clinical candidate that work, it’s aimed toward possibly filing an IND. And in the preclinical part of our business, we are unveiling, in AACR-NCI-EORTC International Conference here in Boston in November, this November, the discovery of a potent, very potent small molecule inhibitor of fibroblast growth factor, often known as FGFR, receptor.

And this scientific achievement comes from the application of our proprietary kinase inhibitor platform known also as AKIP. Historically, FGFR has been a difficult target to drug. And we are very proud of the achievement of our discovery group, and we are looking forward to submit the results of those works to be a reviewed analysis beginning this November here in the triple meeting in Boston. This concludes our operational review.

As we look ahead to 2010, we can say that we are putting a good year of work here in 2009 and we are generating those events that should drive the value of our company -- for our company and our shareholders and the patients going forward. Before I turn it to Rob Weiskopf for a financial discussion, though I have spent most of my time talking about development in our clinical programs, I would like to emphasize that we have not forgot of the need for discipline in implementation.

Certainly discipline in implementation is recruit patient’s timing well, but it is also to maintain stringent cash management. And there is also a way for us to maintain the financial flexibility that we need going into such an important year, the one that comes with 2010. You will see at the end of Rob Weiskopf’s presentation that we are entering a year of catalytic events for our company with a very, very strong cash position.

We have pursued these objectives. We have pursued recreational event for next year. We have pursued strong financial health, precisely because 2010 is such an important year. And we don’t forget that the markets remain unsettled. As a result of Rob’s presentation, you will see that we expect that our net loss and our net use of cash for this year will be substantially favorable to guidance.

So without further ado, I pass to Robert to run through all the numbers, which is the other half of our business.

Rob Weiskopf

Thank you, Paolo. For the third quarter of fiscal year 2009 ended September 30th, the company reported a net loss of $8.1 million or $0.18 per share compared with a net loss of $11.3 million or $0.26 per share for the third quarter of 2008. For the nine-month period ended September 30, 2009, the company reported a net loss of $26.2 million or $0.60 per share compared to a net loss of $41.2 million or $0.94 per share for the same period of 2008.

At September 30, 2009, the company had a total of $178.1 million in cash, equivalents and marketable securities, including $47.8 million drawn down in 2008 under notes payable that are collateralized by the company’s auction rate securities. Net of these notes at September 30, 2009, the company had a total of $130.4 million in cash, equivalents and marketable securities.

Revenues for the third quarter of 2009 were $6.4 million compared to $2.7 million for the third quarter of 2008. Revenue for the nine-month period was $17.9 million compared to $8.8 million for the nine-month ended September 30, 2008. Increased revenues for the 2009 periods were primarily due to revenues from our two agreements with Daiichi Sankyo for ARQ 197 and AKIP discovery collaboration, both signed in late 2008. Revenues for both years also included revenue from the company’s license agreement with Kyowa Hakko Kirin Company Limited.

Total costs and expenses for the quarter ended September 30, 2009 were $14.5 million compared to $14.3 million for the third quarter of 2008. Total costs and expenses for the nine months ended September 30, 2009 were $45.4 million compared to $52.6 million for the same period in 2008.

Research and development costs for the three and nine-month periods ended September 30, 2009 were $11.3 million and $35.4 million respectively compared with $10.8 million and $39.2 million for the 2008 three and nine-month periods. The decrease in research and development expense in the nine-month period ended September 30, 2009 was primarily due to clinical trial costs in 2008 related to ARQ 501 that did not recur in 2009, lower personnel related costs, executive transition costs that did not recur in 2009

General and administrative costs for the three and nine-month periods ended September 30, 2009 were $3.1 million and $10 million respectively compared with $3.5 million and $13.4 million for the 2008 three and nine-month periods. The decrease in G&A costs in 2009 three-month period was primarily due to lower personnel related costs. The decrease in G&A costs in the 2009 nine-month period was principally due to lower personnel related costs and to non-cash stock-based compensation costs occurred in 2008 related to the company’s employment agreements with the previous and current senior executive officers.

Turning to guidance, the company previously stated that for 2009 it expects net use of cash to range between $46 million and $49 million, revenues to range between $21 million and $24 million, net loss to range between $44 million and $47 million, and net loss per share to range between $0.98 and $1.05 for the year.

The company also stated that it expects to end 2009 with between $157 million and $160 million in cash and marketable securities, including the $47.8 million that was drawn down in 2008 under notes payable collateralized by the company’s auction rate securities. Net of these notes, the company previously stated that it expects to end 2009 net cash and marketable securities in a range between $109 million to $112 million.

I’d like to reiterate Paolo’s earlier comments regarding guidance. Several factors lead us too project our net use of cash for the year to be favorable to guidance. The key among these factors are the timing of reimbursement and development costs for ARQ 197 from Daiichi Sankyo as well as cost savings initiatives that we implemented throughout the year.

The net impact of these factors will be revenues at or above the high end of our range, expenses at or below the low end of our range, and a resulting net loss below the low end of guidance. In addition, the total of the company’s net cash and marketable securities at year-end, net of our loan, is expected to be above the high end of the range, which is $112 million.

That concludes our financial review, and I would now like to turn it back to Paolo.

Paolo Pucci

Thank you, Robert. So we are in November, two months shy of closing 2009. And as I said, we have worked at 360 degrees, but I think that everybody’s interest is really on the events that we will have the work to create, which will happen in the first half of next year. And the three events I should remind you so that could be formal to our call. And the first two events are the non-small cell data unveiling [ph] for 197, MiT data unveiling for 197 as well, and the end of Phase I for our Eg5 inhibitor 621.

The other activity that we have going are less visible. They not necessarily will generate events. But ourselves and our partners, and for ourselves under the lead of our Chief Medical Officer, Brian Schwartz, we have really worked hard to make such that any success that we might achieve in the non-small cell lung trial for the combination ARQ plus 197 is now going to be an isolated event.

We have worked hard to create the possibility to form one such an event is positive with further data that will speak to the combinability beyond that Tarceva for 197. That’s an interesting concept that we are working at. We cannot really consider it an event, but it’s nonetheless something at first that I wanted to leave you with before we open it to Q&A. And now we can open to Q&A.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Bret Holley with Oppenheimer. Please proceed.

Jay – Oppenheimer

Good morning. This is Jay [ph] calling in for Bret. I had a quick question on 197 in pancreatic cancer. And that is, given the positive indications you see with Tarceva in non-small cell lung, is there any rationale for trying 197 on top of the gemcitabine-Tarceva combination that’s in the Tarceva label?

Brian Schwartz

Jay, I think I can take that. In terms of -- as Paolo mentioned, we have been very encouraged with our combination data with c-Met and have explored two other programs, which we try to move forward in parallel, which would then give us the options, as you mentioned, either versus gemcitabine or with the triplet dependent on the information that we see at the time. In terms of a clinical rationale, there is definitely a clinical -- a reasonably strong rationale in terms of using an EGFR inhibitor plus c-Met inhibitor in pancreas. But then in addition to that, there is also good rationale to use chemo plus c-Met in pancreas as well. So we are trying to bold and get as much information as we can so that we will be able to fully inform our Phase II randomized decision moving forward.

Jay – Oppenheimer

All right. Thanks a lot.

Bill Boni

You’re welcome.

Operator

Your next question comes from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Joel Sendek – Lazard Capital Markets

Thanks. Two questions on the 197-Tarceva combo. I’m wondering if the data are good, how good the data need to be in order for you to contemplate a registration for that. And my second question is, are you looking at the mutant population in that study as well?

Brian Schwartz

Let me take the easy one first. In terms of the inclusion/exclusion criteria, we included basically Tarceva-naïve patients. So there is in academic sight, the slot [ph] buyers who have already evaluated the status of those patients and some of those didn’t come in. However, we are looking at the mutant status of all patients and we will have that information at the end of the trial. So we didn’t upfront exclude. We do have a small bucket of mutant patients expected to be in this trial. The second question is a much harder question.

In terms of how robust does progression-free survival data in non-small cell lung cancer have to be to take that data for some form of approval. I think in terms of the precedence sect [ph] with other agents, you would have to see at least a doubling in a very robust form, in which -- and we’ve actually conducted this trial exceptionally robustly. So if we would see at least a doubling and everyone would agree it would be a potential option. But in terms of the progression-free survival, there is no precedence for less than a doubling in progression-free survival to even consider it.

Joel Sendek – Lazard Capital Markets

Okay, great. That’s very helpful. Thank you.

Bill Boni

You’re welcome.

Operator

Your next question comes from the line of Mark Monane with Needham & Company. Go ahead, please.

Mark Monane – Needham & Company

Thank you. We know already about your plans for Tarceva and finishing enrollment in combination with 197. Could you comment a little bit more? Are we going to see that data, I guess, in the middle of next year? But you already have plans to start combination trials with 197 with other agents. Is there -- how did you come to that conclusion? Is it from the data pre-clinically with these agents? Did you learn something with the Tarceva combination? What gives you confidence going forward?

Paolo Pucci

Mark, this is Paolo speaking. Very good question. There are scientific reasons for us to have thought about the combination programs that we have. And there are also some business reasons that are a little bit more difficult to elucidate in a conference call. But let me try to get the business reasons. All of you agree with so many agents present are single agents. And with more single-agent coming showing only marginal improvement over other single agents from a business point of view. It’s very attractive to pursue the idea to enhance the value of the single agent with a novel combination. And as you know, in non-small cell lung cancer and several others, the novel agents have not proven particularly successful combining with standard chemotherapy or among themselves. So there is, in many tumor types, a business opportunity for a new drug to come along and enhance the value of monotherapy, like it is for us (inaudible) second line non-small cell lung cancer. Those are the business reasons.

Scientifically, the concept that we will have embraced when we looked at the opportunities for 197 in combination, there (inaudible) substantially from its peculiarity. It’s a very selective drug, and as such, should lend it up [ph] better to combinations and others. What we are seeing from Tarceva -- I will say, what we’ve seen from the Tarceva program overall is that the combinability is there. That’s what we’ve seen. And that’s why we have recruited so nicely and so rapidly. We are not seeing the efficacy yet. And that’s why the efficacy of Tarceva is an event that the efficacy that we might see out of that trial being a shortening [ph], as Brian and Joel were discussing, or being just putting us over the hurdle of the three-month PFS -- that’s short of three-month PFS that you add in second line. It will be an event, but it could be achievable event. Of course, we are obviously by then going to see combinability of 197 plus gemcitabine and Nexavar. And we will see if there is any hint of efficacy in all those combinations. The trials are not to start, Mark. And maybe I need to (inaudible).

The trial, 197 plus gemcitabine, is very actively recruiting and so is the trial 197 plus sorafenib. We don’t give a lot of clarity on the timeline, but you can imagine that we are going to make every effort possible to inform any result we may receive from the non-small cell lung trial with the results of these additional two combination trials. And we will try to compress the time around which we will be (inaudible). The way we have picked Nexavar and Tarceva as well as gemcitabine has been, as I mentioned before, quite rigorous. We had set several concepts for pursuing combinations, both from a business point of view and from a scientific point of view.

And then we have a very strong, for a company of our size, discovery group led by Tom Chan. And Tom was kind enough to devote time and resources from his group, actually he stripped [ph] some of his group from the FGFR program and a couple of other programs we were pursuing to give us the opportunity to have an exceptionally robust set of data in-vivo and in-vitro. And we’ve got some internal in-vivo capabilities. So we are quite a bit stronger in testing those earlier (inaudible) line. And I will let Tom give you some comments of what he thinks has been the work done in-vivo and in-vitro to come to this combination.

Thomas Chan

Thank you, Paolo. I think there is just a couple of things maybe to mention when we talk about combination therapy. One is that if you have a selective inhibitor, hopefully the off-target top six side effects are so benign or minimal that it doesn’t synergies with whatever compounds that you’re going to combine the candidate drug with, and that is in fact what we saw here pre-clinically as well as in animal studies. And then second, of course, is one also to look for synergistic activity. And so some of you who had visited our poster at AACR, ARQ 197 combine very nicely, for example, with sorafenib and previously we’ve shown with Tarceva. But we probably didn’t have a strong synergy with some of the more promiscuous multi-kinase inhibitors. So as Paolo said, we pick and choose our combination carefully from the science, from the data, and not by just which we think we will like to combine it with. That’s all I have to say.

Paolo Pucci

Mark, I hope that answers. And I would like it to make a point of our indication, Joel’s question was about -- as we understood, it was -- what would it take to make the Phase II data good enough for a potential approval of some form? And that’s what the answer that Brian gave was. So somebody here at ArQule had some doubt about whether we had correctly addressed that answer. So we are not speculating, really, of what would it take for the data to be approvable under any circumstance. Obviously, a very robust improvement over the standard of PFS is something that we’re going to look at with great interest. But the problem remains that PFS is not really an endpoint that makes the process of an approval with just that data particularly easy.

Mark Monane – Needham & Company

That was --

Bill Boni

Go ahead.

Mark Monane – Needham & Company

No. I appreciate your information and will look forward to seeing the data that will inform, I think, all of us about the combinability and the next steps.

Paolo Pucci

Thank you.

Operator

Your next question comes from the line of Howard Liang with Leerink Swann. Please proceed.

Howard Liang – Leerink Swann

Thanks very much. I just have a few questions regarding first the non-small cell lung cancer trial, then a couple of questions on the HCC trial. So for the 197-Tarceva trial, just wondering about the timing and the strategy of communication. So I think you announced the condition enrollment in early October, and this is -- I think it’s the second and third line trial, which if I look at -- if you have 21, (inaudible) something like 2.5 months. So it seems like it will be early in 2010 that you might have the data. So my question is, would it be held for ASCO presentation or would you announce the top line data?

Paolo Pucci

Howard, I think we maintained the guidance that we will see data for the first half of next year. We are not speculating at this point any further. As you know, it depends on the events and we have no control over the event flow. As far as the communication strategy, we will have to consult with our partners, and we are in the process of doing so specifically with Daiichi Sankyo. And obviously, ASCO is the premier event of the year for oncology. So, on a personal level and for actual, I can say that we will give very serious consideration to the possibility over an ASCO opportunity. And indeed we hope that we could be in that position. But it is hard to predict at this time, Howard.

Howard Liang – Leerink Swann

Okay. If I can just follow up with some details about this trial. First is the -- is it going to be independently reviewed? And I think you mentioned you may know the percent of patients with each of our mutation. And can you give us that? And also is there a stratification according to EGFR mutation status?

Paolo Pucci

I will let Brian take that question.

Brian Schwartz

So, two things. I mean, we don’t really report data. It will be hard for us. But I will say, it’s differently within the range of the reported number of EGFR mutations that have been reported in the setting. So from the Spanish group, as high as 16%, and from other groups, as low as 10%. So, well within that range. In terms of the stratification, because of the number of logistical issues, we didn’t actually stratify upfront, but will be taking that account in terms of the analysis and hopefully with the study of 170 patients that randomization will take care of the mutational patients. So in terms of EGFR mutations, that is pretty much our current position. We are looking at other biological endpoints as well, which will be able to inform us in terms of MiT and other downstream market as well.

Howard Liang – Leerink Swann

Is there independent review?

Brian Schwartz

In terms of the independent review, our primary endpoint, the way the trial was written was to be investigator assessment, but there is independent review as well that will be conducted in parallel and will be available at that time that we will disclose the data.

Howard Liang – Leerink Swann

Okay. And a question on the Phase II data, the single agent Phase II data in HCC, would that be conducted in Asia or mostly western patients?

Brian Schwartz

The HCC program is three studies. The first one, which was conducted in US and Europe, which is basically psoriatic patients, primarily set up for safety as per the hepatology guidelines. That is primarily due to safety, and let us open up the randomized trial, which is a two-to-one randomization in second-line patients to receive 197 or placebo, and that trial will also be running new in North America and Western Europe.

Paolo Pucci

We might get the occasional patient of Asian heritage in these geographies, but the study is not open properly in Asia. As you know, Howard, the Asian development program is in the hands of Kyowa Hakko Kirin. Obviously, HCC is an important -- is a very important tumor type from a business point of view and from the epidemiology in Asia. And I think whatever we see in this trial will inform Kyowa Hakko Kirin’s judgment as well on how to proceed and if to proceed.

Howard Liang – Leerink Swann

Second is -- one last question regarding FGF receptor inhibitor. Is that part of the Daiichi AKIP program?

Paolo Pucci

No, it is not. It is the one program that we were able to pursue independently.

Howard Liang – Leerink Swann

Great. Thanks very much.

Bill Boni

You’re welcome.

Paolo Pucci

I think what Howard’s question underscores is the quality of the study that we are conducting for non-small cell lung. I think we are going to be, of all the companies that are developing c-Met inhibitors, the one that might sit in the -- that might have sometimes in the first part of next year the more pristine and thorough and rich data pool of all the c-Met’s that are in development. And hence we will have to think very carefully about where the data gets presented, because it might have a very significant scientific interest, unless there is somebody on the floor knows of many more Phase II double-blind randomized trials that (inaudible) such rich data which are currently running with any c-Met. I don’t know any.

Operator

(Operator instructions) Your next question comes from the line of George Zavoico with Westport Capital Markets. Please proceed.

George Zavoico – Westport Capital Markets

Hi, Paolo. Hello, everyone.

Paolo Pucci

Very well, thank you.

George Zavoico – Westport Capital Markets

Congratulations on a great quarter. I have a question -- follow-up question. Brian, you kind of began to answer it when you talked about the biomarker data or the biomarker data that you’re going to be collecting. First, such a selective inhibitor such as c-Met, it’s of course important to see how much c-Met over-expression is in the patients. So can you please explain a little bit more detailed how you are measuring whether or not these tumors are c-Met addicted? And in the event that the data comes out pretty robustly to show that the combination works that are in c-Met -- in c-Met addicted tumors, how you are planning to proceed in a more pivotal trial in being able to include or exclude patients that are not -- that have tumors that are not addicted to c-Met?

Brian Schwartz

We’re looking at c-Met in a number of different ways, George. The easiest and most robust method that we could easily take forward into Phase III is utilizing c-Met by FISH. A number of groups, the group from Italy and the group from Chicago, have reported Italy greater than five -- copy number of five and the group in Chicago greater -- copy number greater than four that c-Met is obviously linked to outcome in terms of the higher the copy number the poorer the outcome. So we’ve utilized some of the (inaudible) in order to come up with criteria in which we’re defining patients to be c-Met positive by FISH. But as you know, this is relatively new territory. So the cutoff point is going to be a little bit arbitrary.

What we do know from early tissues -- and it depends where you cut it off. If you cut it off at four, it can be as high as 40%. If you cut it off at higher, it obviously goes down with the number of copy numbers with the ratio you have. But we anticipate there will be a reasonably large percentage of patients who are c-Met positive by FISH in the study to evaluate. We’re also looking at IHC, which is a little bit more complicated due to the antibodies and the storage of the tissue. So those are the different methods that we’re currently looking at. But FISH looks like the easiest one to move forward into Phase III.

George Zavoico – Westport Capital Markets

Okay, thanks. And two more short questions. I missed your timeline on the B-RAF IND. Could you repeat again when you expect that? And also could you talk a little bit about what the trial progress is in Japan, how Kyowa is progressing, if you can comment on that? Maybe you can’t.

Paolo Pucci

For B-RAF as well as for FGFR, we haven’t given any more precise timeline today than say that we will look to file an IND for next year. We are managing our resources carefully, frozen headcount, realized the number of savings, which means that projects proceed faster or slower depending on the resource we can make available to them. So -- and we are juggling continuously resources before. We made a priority to develop a robust combination program for 197 that required quite a bit of time in our discovery and then dedicated to that. And it led to temporary the prioritization of other projects. So for FGFR as well as for the B-RAF, we are guiding to a possible one or two INDs sometimes next year.

And for the reasons I mentioned, we don’t guide with any greater clarity to it. For the Japanese trials, you are right. I should let Kyowa Hakko Kirin to speak for themselves. And there have been, however, some recent -- there are some public communication from Kyowa Hakko Kirin that indicate their interest in beginning to explore the combination with Tarceva and that of course is part of the discussions we have with them. And that’s all the public information that I can relate to you. But I could point you to their -- we could easily point you to their sources of public info.

George Zavoico – Westport Capital Markets

Okay, thank you.

Paolo Pucci

You’re welcome.

Operator

There are no further questions at this time. I will now like to turn the call back over to Mr. Bill Boni for any closing remarks.

Bill Boni

Thank you, everyone, for joining us on this Q3 call. We appreciate your time and attention. Please don’t hesitate to give me a call for any follow-up information. My number is always on the press release. Hope you have a good rest of the day. Take care.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect your lines. Good day.

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