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Array BioPharma Inc. (NASDAQ:ARRY)

F1Q 2014 Earnings Conference Call

October 31, 2013 9:00 AM ET

Executives

Tricia Haugeto – Investor Relations

Ron Squarer – Chief Executive Officer

Kevin Koch – President and Chief Scientific Officer

Michael N. Needle – Chief Medical Officer

Analysts

Whitney Ijem – JPMorgan

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

Eileen Flowers – Jefferies LLC

John Sonnier – William Blair & Co. LLC

Matthew J. Andrews – Wells Fargo Securities LLC

Operator

Welcome to the Fiscal 2014 Array BioPharma Inc. Earnings Conference Call. My name is Janine 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 Tricia Haugeto. Tricia, you may now begin.

Tricia Haugeto

Thank you, Janine. Good morning and welcome once again to Array BioPharma’s conference call to discuss our financial results for the first quarter of fiscal 2014. You can listen to this conference call on Array’s website at www.arraybiopharma.com. Also, we are using slides today to accompany our remarks, so slides can be downloaded on the Investor Relations homepage of our website. In addition, a replay of the conference call will be available as a webcast from our website.

I’d like to introduce Array’s Chief Executive Officer, Ron Squarer, who will lead the call today; and Chief Financial Officer, Mike Carruthers; and our Chief Financial Officer, Mike Needle, who will also be presenting. I would also like to introduce Kevin Koch, our President and Chief Scientific Officer; and Andy Robbins, our Senior Vice President of Commercial and Strategy, who will be available to answer 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 result, research and development goals of Array and its collaborators and future financial performance of Array. These statements are estimates based on management’s current expectations and involve risks and uncertainties that could cause them to differ materially from actual results.

We refer you to risk factors discussed in our filings with the SEC, including our Annual Report filed on Form 10-K for the year ended June 30, 2013 and in other filings Array makes with the SEC. These filings identify important risk factors that could cause actual results to differ materially from those in our projections or forward-looking statements.

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

Ron Squarer

Good morning, everyone. I’m starting on Slide 3. Today, we are pleased to share with you the details of Array’s first quarter financial results and our continued progress towards late stage product development and commercialization in oncology. Array has taken a major step forward today in announcing our plan to enter Phase 3 next year with a ARRY-520, our wholly-owned hematology product for multiple myeloma.

Two additional trials are also planned to support regulatory filings for ARRY-520; one of which will begin next month. The Phase 1 trial of our wholly-owned hema product, ARRY-614, is close to completion as well and we look forward to getting more mature results for this trial by the end of 2013 and finalizing our next steps for this program.

Our partnered MEK franchise continues to make excellent progress with AstraZeneca recently announcing a Phase 3 trial in KRAS non-small cell lung cancer and Novartis announcing a Phase 3 trial in BRAF melanoma. Array still has many lucrative partnerships on products currently in clinical development. If you add up all the potential milestones related to our partnered portfolio, it totals over $2.7 billion and this is before royalties kick in.

We had about $124 million in cash as of the end of September. These funds should sustain us for a good period of time, especially as we expect to do more partnering and collect milestone payments from existing partners. We’re very excited about Array’s progress particularly with our wholly-owned franchise this quarter and look forward to sharing the details of our plan and future directions with you today.

So I am first going to provide an overview of our development plans for 520 and then have our Chief Medical Officer, Dr. Mike Needle, to provide additional details on each of the planned trials, along with the review of the clinical results we published to-date. You may recall that Dr. Needle joined us from the Multiple Myeloma Research Consortium earlier this year and has extensive experience in drug development from both ImClone and Celgene.

Now on Slide 5, as a reminder, ARRY-520 represents a novel approach to fighting multiple myeloma, which is critically important as the vast majority of patients ultimately become resistant to IMiDs and proteasome inhibitors. As we presented at multiple scientific congresses during the past year, ARRY-520 has demonstrated clinical activity both as a single agent with dexamethasone as well as in combination with on-market proteasome inhibitors, Kyprolis and Velcade. We have submitted abstracts providing updates for each trial for the upcoming ASH meeting, except for the single agent data for which final results were presented at IMW earlier this year.

In addition, we submitted an abstract referencing preclinical data regarding 520 plus Pomalyst. As predicted from its targeted effect, 520 has been well tolerated across multiple clinical studies at its recommended dose, with limited non-hematologic side effects showing no neuropathy, no alopecia, and only limited GI toxicity. The presence of on-target myelosuppression can be characterized as transient, noncumulative, and predominantly asymptomatic.

Over the summer, we began treating patients with a full dose of 520 and of Kyprolis, as well as 520 with full dose Velcade without reaching dose-limited toxicity in either trial. So this data combined with the robust single-agent signal provides us with evidence to advance 520 towards global late stage development. While we’ve observed in studies with 520 plus dex a modest incremental benefit, it did not dramatically enhance 520 activity, as when dexamethasone is combined, for example, with Pomalyst. If you look at data from their label, Pomalyst or our response rates increased over fourfold with the addition of dexamethasone.

So moving on to Slide 6, before I describe our forward plans for 520, I want to remind people about the market opportunity. Multiple myeloma is the second most commonly diagnosed hematologic malignancy, with a prevalence of over 125,000 patients in the G7. Existing standards of care fall into two classes, IMiDs like Revlimid and the recently approved Pomalyst; and proteasome inhibitors, like Velcade and the recently approved Kyprolis.

Unfortunately for myeloma patients, the disease remains predominately incurable and the vast majority of patients go on to progress and die despite these recent advances. We believe there remains a significant unmet need for myeloma patients, especially for new drugs with different mechanisms of actions to complement IMiDs and proteasome inhibitors or to be used when they have failed.

So both Kyprolis and Pomalyst have had very successful launches in the relapsed, refractory myeloma market. Pomalyst reported over $180 million global sales in the first three quarters, while Kyprolis reported about a $190 million in the first year of U.S. sales. As you are aware, the success of Kyprolis anchored the greater than $10 billion Amgen acquisition of Onyx and this reinforces for us that physicians and patients are anxious for new options, once the disease has progressed, and we believe 520 holds important promise for this population.

So now on Slide 7, I like to lay out just at the high level, go-to-market development plan for 520. At the top, you will see we are planning to initiate a Phase 3 trial in combination with Kyprolis in mid 2014. The trial will be appropriately sized and powered to support a full approval in the U.S. and Europe. But prior to initiating this Phase 3, we will have the benefit of early data from a randomized Phase 2 study, which we expect to begin next month. This study will confirm the tolerability we observed in our MD Anderson sponsored Phase 1 trial. I want to make it clear that we are not planning to wait for full results from that Phase 2 trial before kicking off our pivotal Phase 3. One of the reasons we are announcing our forward plans today is actually to avoid confusion on the intent of that Phase 2 520 plus Kyprolis randomized trial, which will be posted on clinicaltrials.gov very shortly.

As we have been reviewing with you throughout the year, we are encouraged by the potential of AAG as a patient selection marker for 520 and as you can see on the bottom arrow on this slide, we plan to conduct a Phase 2 single agent trial. This trial will provide important additional safety and pharmacology data; it will validate AAG as a patient selection marker; and if successful, would in fact support future regulatory filings. So overall, this entire plan is designed to support regulatory approval and future use of 520 in combination with leading therapies and when those therapies have failed.

So Dr. Needle is now going to go through the details of the trial design.

Michael N. Needle

Thank you, Ron. Slide 8 provides some additional details on the planned Phase 3 trial. We plan to announce the exact size of the trial as we get closer to its initiation next year. We expect it will be several hundred patients and in line with other Phase 3 trials being conducted in relapsed and refractory myeloma patients. As stated before, it will be powered to support regulatory filings in both the U.S. and Europe. We plan to enroll patients who would be good candidates for Kyprolis therapy, and again, we will provide the more precise inclusion/exclusion criterias as we get closer to trial initiation.

The decision to move into this study was based on our novel mechanism of action, strong single agent activity and the ability to combine 520 and Kyprolis at full dose without reaching dose-limiting toxicities on the Phase 1 trial. Our decision to move forward with Kyprolis combination, in particular, was based on our belief that this study will enroll quickly, especially in Europe, where Kyprolis is yet to be approved and demand is high, the opportunity to establish ourselves as the first novel mechanism of action partner for Kyprolis in a large randomized Phase 3 trial; and positive early activity signals seen in the Phase 1 ARRY-520 plus Kyprolis trial.

On Slide 9, we provide a summary of previously published ARRY-520 clinical data in combination with each of the proteasome inhibitors in relapsed/refractory multiple myeloma patients. As I mentioned earlier, we have submitted new data to ASH on both of these trials as well as final results from our Phase 2 trial. Accepted abstracts will be published on November 7. Overall, the ARRY-520 combinations were generally well tolerated and demonstrated activity in heavily pretreated myeloma patients. In particular, I’d like to point out that in the 520 plus Kyprolis trial more than half of the patients achieved a minimal, partial, or complete response.

Slide 10 shows the robust single agent activity we reported at the International Myeloma Workshop earlier this year. Using AAG as a patient selection marker, we demonstrated a 24% objective response rate with single agent ARRY-520 in a heavily pretreated patient population. AAG binds tightly with free ARRY-520. So in the 25% of patients with high AAG free AA – pardon me, free ARRY-520 is lower, thereby reducing the likelihood that patients will benefit from our drug. AAG does not interact similarly with other multiple myeloma drugs. As Ron stated earlier, combining ARRY-520 with dexamethasone did not dramatically enhance ARRY-520 activity as when dexamethasone is combined with Pomalyst.

Slide 11 provides specific rationale for the two additional Phase 2 trials of ARRY-520. Consider first the single agent trial, which we expect to start next year. This trial will be a robust global study designed to support future regulatory submissions, will include important safety and pharmacologic data and will provide clinical – critical information validating our AAG assay.

Turning to the randomized Phase 2 combination with Kyprolis, this trial is designed to provide near term confirmation of the combined ability data we have seen from MD Anderson ARRY-520 plus Kyprolis trial. Positive results will support future regulatory submissions and also help validate the use of AAG. Publications from these trials should stimulate, I am sure will stimulate interest in ARRY-520 resulting in increased enrollment on the Phase 3 trail, ultimately accelerating our overall time-to-market. In summary, we believe this robust plan will help to get ARRY-520 in the hands of physicians and patients as quickly as possible, while demonstrating its effectiveness across multiple settings in an unequivocal fashion.

And now, I’d like to hand it back to Ron.

Ron Squarer

Thank you, Mike. At this point, I’d like to provide an update on ARRY-614. So on Slide 13, I just wanted to remind folks about the market opportunity in MDS. We’re currently studying the low risk in 1 HMA failure population, which number as many as 15,000 patients in the G7 and most of these are in the U.S., where HMAs are more commonly used in low-risk patients, and these patients have about a 12 month median survival. So it’s a very poor prognosis, there’s no approved therapeutic options and ongoing blood transfusions represent a substantial burden. We believe there is significant unmet need in this patient group.

On Slide 14, you may recall our data from ASH 2011, where we observed multi-lineage activity with the most prominent effects seen in patients with thrombocytopenia. In that population, several platelet transfusion-dependent patients actually became transfusion independent and we are currently evaluating a new formulation of 614 in an ongoing dose-escalation clinical trial in patients with low-risk intermediate 1 MDS, who have failed HMA therapy.

So on Slide 15, this is in the current Phase 1 trial, with the new formulation, we achieved MTD earlier this year and are in an expansion phase that should have mature data early next year. So we have submitted an abstract with interim data from the study to ASH and with these results, we plan to engage regulatory authorities in discussions on further development plans.

Now, I’d like to take the opportunity to provide details about progress in our partner pipelines, specifically our two partner MEK inhibitors and also to touch on our newest partnership, that with Oncothyreon. So on Slide 17, we remain impressed by AstraZeneca’s progress with selumetinib. Importantly, just last week, AstraZeneca announced the start of their SELECT-1 Phase 3 KRAS non-small cell lung cancer trial for which Array received a milestone payment. Also AZ is already dosing a registration trial in thyroid cancer and announced plans to initiate a third pivotal trial in uveal melanoma during the current quarter, so by the end of this calendar year.

On Slide 18, the SELECT-1 trial is in fact a randomized double-blind, placebo-controlled study that will evaluate the safety and efficacy of selumetinib plus docetaxel as a second-line therapy in locally advanced or metastatic KRAS-mutant non-small cell lung cancer with the primary endpoint of PFS. AstraZeneca's decision to progress selumetinib into Phase 3 in lung cancer followed the results from a randomized Phase 2 study evaluating the combination of selumetinib with docetaxel against docetaxel alone in the same population. And this prior study demonstrated a high and durable response rate of 37.2% versus 0% in the control arm, and a very powerfully statistically significant P-value 0.0001, and a statistically significant improvement in PFS of 5.3 versus 2.1 months. Their P-value was 0.014.

So listed in blue on this slide are a number of additional ongoing trials in non-small cell lung cancer. So it appears that AZ is quite focused on exploring the utility of selumetinib in broader populations of non-small cell lung cancer, including first-line and both KRAS and unselected populations. In fact, there are 45 total selumetinib trials currently ongoing. This is a very impressive roster of studies and reinforces our view that AstraZeneca remains committed to broad clinical development with this product.

Turning to Slide 19, earlier this month, Novartis initiated a Phase 3 trial with MEK162 and the Novartis BRAF inhibitor LGX818 and BRAF-mutant melanoma based on a safety and efficacy data reported from the trial presented at ASCO this year. The new trial began this month, called COLUMBUS, is a 900 patient randomized open-label multi-center parallel group three arm study comparing the efficacy and safety of LGX818 plus MEK162 and LGX818 monotherapy, as compared to vemurafenib in patients with locally advanced, unresectable or metastatic melanoma, driven by the BRAF mutation.

There are currently three Phase 3 trials enrolling with MEK162 in advanced cancer patients; those are NRAS-mutant melanoma, low-grade serous ovarian cancer and BRAF-mutant melanoma, which I just described. The NRAS-mutant melanoma will likely be the first indication for MEK162 as top line results from this registration trial are expected in October of next year, so just about same time next year.

On Slide 20, Novartis continues to explore novel combinations of 162 with their very robust pipeline of targeted agents focused on key mutant populations. This list includes four new studies initiated since the last quarter, and among these, we are excited by a new trial of 162 in combination with panitumumab in colorectal and pancreatic cancers, as KRAS mutations drive approximately 35% and 60% of those tumors respectively. While we’ve seen exciting data across many populations, we look forward to seeing results in colorectal and pancreatic cancer in the future.

Moving to Slide 21, one of our newer partners, Oncothyreon, recently announced a clinical trial for ARRY-380 plus Herceptin for the treatment of patients with brain metastases from HER2 positive breast cancer. Oncothyreon is committed to fund multiple combination studies to test 380 with other approved breast cancer products. ARRY-380 is the only selective small-molecule HER2 inhibitor in clinical development. And Phase 1 trials were shown to be well tolerated with no treatment-related SAEs and minimal GI or skin-related events.

Pre-clinically, 380 has demonstrated impressive increases in overall survival in HER2+ models of intracranial tumors relative to other tested small-molecule kinase inhibitors. And so the ability to impact brain metastases could be an important part of the drug’s development and path and ultimate use. Oncothyreon plans to start additional studies by the end of this year. So we look forward to providing visibility to those new studies in the near-term.

So on Slide 22, we are pleased with the recent advancements with our wholly-owned products and our MEK inhibitors, but we also have many additional partnerships that could drive significant future value for Array. We are proud to be partnered with great companies, including Genentech, Celgene and Eli Lilly, just to name a few. We hope to add to this list by partnering ARRY-520 that is our CRTh2 asthma drug for which we announced positive Phase 2 results this summer. Partnering 502 would provide additional funding for Array. Taken together, our partnered pipeline products, as I mentioned earlier, already hold the possibility of more than $2.7 billion in milestone patients– payments to Array, in addition to royalties from the ultimate commercialization of these drugs.

At this time, I am going to hand over the call to Mike Carruthers, who is going to walk through our financials.

R. Michael Carruthers

Thank you, Ron. I am pleased to share with you the financial results for the quarter. Starting on Slide 24, our revenue for the first quarter was $14 million, a portion of which came from our recently announced partnership with Loxo Oncology. Recall that in July, Array granted this newly formed company exclusive rights to develop and commercialize certain Array-invented compounds in selected cancers. As part of the agreement, Loxo will fund preclinical development and is responsible for clinical development and commercialization, while Array will conduct the preclinical research and could receive over $400 million in milestone payments upon success.

In addition, Array received a sizable 19.9% ownership stake in Loxo as well as royalties on global sales. During the quarter, Array received $1.1 million in collaboration payments from Loxo and recognized $4.5 million in license revenue, corresponding to the estimated fair value of our equity ownership in Loxo. Also supporting revenue during the quarter, Celgene paid us an upfront of $11 million to begin a new discovery program.

As part of this agreement, we are eligible to receive milestone payments of over $350 million based on achievement of development, regulatory and sales objectives plus royalties on sales. We recognized $814,000 in collaboration revenue during the quarter for our discovery activity and deferred recognition for the remainder of the upfront payment. The cost of partnered program line on this financial results side came in a $10.7 million for the quarter and includes all the costs of our collaborations, including the Novartis co-development. This line item increased by $4.2 million from the same period a year ago and the majority of the increase is from the co-development with Novartis as MEK162 entered three Phase 3 studies.

We record the co-development expense based on our fixed share or percentage of the total MEK162 development cost without regard to the annual caps that limit our actual payment obligation to Novartis. While there is a year-over-year increase, the run rate for this line item including the Novartis co-development should remain in this current $10 million to $11 million quarterly range the rest of the fiscal year.

Moving to the next line item of spending on our financial result slide, our R&D line declined from the same period last year by nearly $2 million, because the ARRY-502 randomized Phase 2 asthma study was largely completed prior to the start of the quarter. This provides some headroom as we look to start the ARRY-520 registration and supporting studies in the coming months.

We ended the quarter with a $124 million in cash, which includes $15 million from sales of Array common shares through our ATM program. An additional $7 million of shares were sold via this program that had not settled as of the end of the quarter September 30, which have included with bringing the pro forma cash balance to $131 million. The average price for the shares sold was $6.26.

Now please go to the next Slide 25, where we update guidance for the full fiscal year. Shown here are improvements to revenue as we’re now looking for $49 million for the full year and loss per share now targeted at $0.69, which is an improvement of $0.03 from our last update. These changes are based on our solid performance in the first quarter.

Now, I’d like to turn it back over to Ron.

Ron Squarer

Thank you, Mike. So I’m now on Slide 26. And this slide summarizes the key upcoming catalysts for ARRY for 520 and 614, our wholly-owned Hem/Onc programs. We look forward to ASH abstracts publications next week and sharing updated data at the conference in December.

We are in fact hosting an investor event at the meeting. The most important announcement is the planned start of the robust global Phase 3 trial for ARRY-520 next year and the announcement of two additional Phase 2 studies on ARRY-520. We have been signaling the start of multiple registration trials for both MEK162 and selumetinib for sometime now. And at this point I’ve already seen the start of five pivotal trials with one more to begin by the end of the year.

As the MEK162 NRAS and melanoma study is expected to yield top-line result about this time next year, Array now has visibility to potential commercial revenue from this product as early as 2015 and you may recall we have high royalties from the Novartis agreement as well as double-digit royalties from selumetinib. So achieving a commercial revenue as early as 2015 that would be a very significant catalyst for us going forward. With dozens of additional studies underway with the two Array-invented MEK inhibitors, we anticipate exciting data to be shared at ASCO next year.

Finally, we continue to see partners for further development of ARRY-502 for asthma and ARRY-797 for pain. The last quarter has been very productive and we look forward to updating you on our progress in the months are ahead.

And with that I would now like to turn the call back to the operator and open it up for Q&A.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session (Operator Instructions) Cory Kasimov from JPMorgan is online with the question. Cory, go ahead.

Whitney Ijem – JPMorgan

Hi, this is actually Whitney on for Cory this morning. Couple of quick questions. So firstly on the 520 Phase 3, you guys said the trial may include an interim look at ORR. I am just wondering, what’s left to decide there? Is that dependent on the Phase 2 trial that you guys are starting soon?

Ron Squarer

Yeah. So one of things we were planning is to provide a lot more details on the study as we get close to starting as Mike said. It’s a little ways off, and we’re going to be engaging additional sources including ultimately the people who are going to be running the study as well as though leaders. And while at this point it does appear that during that interim ORR would yield value. We thought that we simply would plan to provide all of the detail associated with the trial closer to when we start it. Mike, is anything to add on that?

R. Michael Carruthers

No, just that perhaps the decision to do that is tied into just basic design and how you use alpha. So it’s not a trivial decision and so we’re still kind of in discussions.

Whitney Ijem – JPMorgan

Got it. Okay, and then secondly, just maybe any initial thoughts on next steps with 614, assuming that that new formulation data is promising?

Unidentified Company Representative

Yeah, so we’re in a – one of the reasons we did the call this morning is simply because we’re really just about to start the randomized Phase 2 for 520 with Kyprolis [ph] and then we want to explain how that fits in with the bigger plan. But we think we’ll be in a better position to talk about 614 actually when we’re able to share data at ASH, and I think that will inform our forward plan.

At this point based on what we know, we think it would be useful to take that data and talk to regulators to validate or pass forward and/or to explore items which we may not have explored to date. And so, we’ll be in a better position I think to talk about it when we have more firm data at ASH. But I think what we’re saying is that right now we are really entering very, very active phase for 520 moving forward with the plans we just described and with 614 based on the data and additional input across some regulators and others we will be providing visibility of that program in within the coming months.

Whitney Ijem – JPMorgan

Got it. Thanks for taking the question.

Operator

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

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

Yes, hi. Thanks for taking the questions. With respect to just the selection of Kyprolis as kind of the backbone for some of the combinatorial studies, can you maybe just kind of walk us through the decision-making process there a little bit? Just with respect to kind of some of the perceived risks. Specifically, I guess, just in the context of Kyprolis still being a drug that doesn’t necessarily have a full approval, and also with the understanding that Onyx is doing some dose-ranging work, which maybe a few years from now might change the convenience and may not make the 520 and carfilzomib dosing schedules in unison like they are now.

Unidentified Company Representative

Yes, those are – thanks, Steve good question. So let’s just tackle this question of – will Kyprolis be approved. We think like we heard that it will be approved is extremely high and I think most of the folks we talked to would certainly agree with that. And there are many studies that are ongoing of course that could ultimately support it converting from an accelerated to a full approval. And so that said, I’ll just point that in the – what I would consider to be extremely unlikely situation that it was somehow delayed. We have pointed out that we believe that 520 will work well with Velcade as well of course, Velcade is very approved and that could represent a path going forward there.

In terms of I think – other part of your question was rationale for Kyprolis beyond the fact that it is expected to be standard-of-care and a very exciting product. And so I think Mike, who has helped us to drive that decision of starting with Kyprolis, although Velcade and other drugs could very well be a part of our lifecycle planning or investment and I think it is best if he sort of describes the benefit of Kyprolis and why we chose to start there.

Michael N. Needle

So intrinsically, there is no reason to choose based on the preclinical data or early Phase 1 clinical data to choose one or over the other. We would expect the drug to work with both. The advantage of – there’s a couple of advantages to Kyprolis. First has to do with where it is used. So because right now, the standard of care is Velcade gets used very early and Kyprolis is a rescue drug, patients who get Kyprolis tend to have a shorter time-to-event. So overall, the time to get the answer is shorter because the control arm progresses more quickly. Second, a huge advantage to us really is kind of a patient supply-and-demand issue. Particularly outside the U.S., there it’s hard to get Kyprolis. And so there will be demand for this trial for patients frankly will be pleased to be on the control arm and they will certainly be pleased to be on the active arm.

It is also true that there is a lots of Velcade add-on studies right now. So we think from an operational standpoint both from an enrollment competition standpoint and from a time-to-event standpoint, which will ultimately drive the final analysis. Their significant time advantages to combining with Kyprolis. And we think that offsets I personally think that very comfortably offsets the very minor, I mean it’s not zero, but the small risk that Kyprolis doesn’t get full approval.

Unidentified Company Representative

Also, Steve asked a question about what if treatment regimens change? So I think what we’re saying there is we’ll be providing very specific details as we’re initiating the trial about how we are going to be dosing. But suffice it to say that as long as you are treating with a regimen that is approved and we think that even if there are additional regimens approved for Kyprolis in the future the existing regimens would still be part of the label that shouldn’t be a concern, but we’re certainly looking the changing and evolving landscape over time to determine whether – what’s the best path forward is.

Kevin Koch

Yes, and Steve, this is Kevin. Just to remember that the IST is exploring increasing doses of carfilzomib. So we will have data from or work with Jaden on increased doses of carfilzomib plus 520.

Ron Squarer

Kevin is referring to the MD Anderson study, which is ongoing, but for which we are going to provide some interim results at ASH in the next few weeks. Anything else to add Mike?

Michael N. Needle

No.

Ron Squarer

Good question, Steven thank you.

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

Okay. Just have one more follow up if you don’t mind.

Ron Squarer

Okay.

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

I know that Zeneca recently initiated the pivotal Phase 2 with selumetinib in lung. and I know that they’re still doing some PK and safety work looking at that drug in combination with some chemo doublets in the front-line setting. So just kind of wondering if they have given you any further insight as to their intentions there in front-line lung specifically? Thanks.

Ron Squarer

Good question, Steve, thanks. Our relationship with Astra is very, very good. We are in contact with them, their leadership, the project team on a very regular basis. But they are aware that we are developing a drug with Novartis as well. And so we’re always careful about how much we know about that they’re doing. But in this case, I don’t think u need to hear from them, you can simply judge them based on their activity. And specifically, what they really appear to be doing quite aggressively is looking at all of the first line agents used in non-small cell lung cancer. So gem, cis, paclitaxel, carboplatin, pemetrexed.

And essentially, what appears to be the goal of these studies is to quickly verify combinability with docetaxel, which as you might CEO Pascal Soriot has been sort of heralding as the advantage of selumetinib over other MEK inhibitors we believe that MEK162 had similar properties. Different drug with similar properties, but the ability of – the combinability of the drug with cytotoxics like docetaxel and others will ultimately be a key advantage for the drug and be part of how it’s developed.

What we do find interesting and encouraging is beyond what is clearly looking to enable our first line lung cancer trials. The studies don’t only include KRAS, but also include unselected patients. and there’s couple of reasons for that, one is to generate to data to see, if you focus only on KRAS or go broader and the other is clearly would – clearly reach much faster recruitment and let them the data quickly and go forward there. but in the cancer field, you’re either best or you’re first. We’d like to think that the two Array-invented MEK inhibitors are in fact best-in-class. but that said even then, you do want to be first and I think that AZ knows it’s sitting with the non-small cell lung cancer pivotal on one of the largest commercial opportunities in the entire cancer landscape today. 360,000 non-small cell lung cancer patients, they estimate KRAS alone is about 25% of that population by being in multiple lines of therapy. I think their goal would be to own the lung cancer and basically, be in a position to keep anybody else out. Does that answer the question, Steve?

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

I does. Thank you.

Ron Squarer

Great. Thank you.

Operator

(Operator Instructions) We have Eun Yang from Jefferies on the line with a question. Please go ahead.

Eileen Flowers – Jefferies LLC

Hi, good morning. It’s actually Eileen Flowers in for Eun Yang. My question is around the cost of the Phase 3 for ARRY-520 and the two additional Phase 2s. What are your expectations around the cost of the trials? And how long do you think the studies will take? Thanks.

Ron Squarer

You want that in dollars or euros? So Eileen, good morning and thanks for the question, so at this point, as I said, we’re going to be providing the details of the study design and exactly how it’s going to be run as we get closer to starting it. I think at that point is the right time to sort of describe what the budget implications are. I will ask Mike in a moment to sort of give you just a rough sense of how our burn may look at least over the next couple of years even just directionally, because we certainly have done some modeling and I think can provide just a directional answer to that.

What we – I think that Dr. Needle would be good to sort of give a sense of what typical Phase 3 trials in this space have taken in the past, Mike, as a benchmark for how long it might take to get this Phase 3 done?

Michael N. Needle

Ballpark I would say, a good place to start is roughly around three years from first patient to top line results generally about two of those years are in the accrual phase and then about year’s worth of follow up. So starting with the benchmark of three years is probably a pretty good par for the course.

Ron Squarer

And the other Mike?

Michael N. Needle

Right. Along with that, the burn directionally is at a similar level to what we have been tracking and the reason is we’ve run reasonably large Phase 2 studies outside of hematology over the last couple of years with – in pain, in asthma. Those are done. Our focus on hematology even in these larger studies is going to keep the burn in kind of same zip code area as we are today, and even in hematology, Eileen, we have been running, as we all mentioned earlier, four different trials just for 520, some that are either – that are done, single agent or wrapping up, and of course, we’ve had the active 614 program as well. So it’s – for Array, it’s not as if we are for the first time entering the world of robust development – development programs. We also have a large Phase 3 ovarian cancer with through the Novartis collaboration, although, of course, as Mike Carruthers has explained in the past, most of those costs are covered by Novartis, as we have a cap essentially each year and ultimately in total. But generally speaking, Array has a pretty robust clinical trial experience, U.S., Europe and multiple studies, multiple therapeutic areas. It gives us confidence, first of all, that we’re going to execute well on the 520 program and also that we will be able to give you good estimates of time and money, as we get closer to initiating the trial. Eileen, does that answer the question.

Eileen Flowers – Jefferies LLC

Yes, that's helpful. As a quick follow-up, are you expecting that you will need to expand your clinical development team for these trials?

Ron Squarer

Well, I don't know that we would typically comment on sort of staffing levels, but just, Mike has been talking to the team about how to staff these and I think, as with any other company, it’s a combination of internal resources and partnering with great CROs, but Mike, would you like to add some color on that?

R. Michael Carruthers

Yes, I mean, there are a couple of things. It may be in a modest way, but I really don’t think so. I think what’s happened is our role is going to change from direct execution in many of these studies that we’ve done in the past were done essentially with a 100% or nearly a 100% Array personnel. Now, we’re going to be probably spending a disproportionate amount of our time managing contract research organizations. For example, we have no intention of building an infrastructure at least at the moment. No intention of building an infrastructure in Europe to conduct both the single-agent randomized – single-agent Phase 2 and the randomized Phase 3, which are going to be multinational studies. So I think it’s going to be less about adding Array personnel and more about using and in fact global CROs.

Ron Squarer

I will say for Mike that it’s nice to have someone with such rich experience, specifically, in multiple myeloma and the hematology in general leading our Chief Medical Officer, our clinical effort. And it’s not certainly the only reason, Mike is here but it is a nice effect for us. So we definitely have that expertise and insight. As you probably know at multiple myeloma there have visibility and collaborate and work with many, many companies developing drugs in the space. So we get at least a benefit of that experience and an insight through Dr. Needle.

Eileen Flowers – Jefferies LLC

Okay, great. Thank you.

Operator

We have John Sonnier with William Blair online with the question. John, please go ahead.

John Sonnier – William Blair & Co. LLC

Hey, thanks for taking the question. It’s John Sonnier. Just a couple of follow-ups on 520, and congrats on all the progress there. The treatment history in this patient population is becoming increasingly diverse with all the new options. Can you talk a little bit more or give us any more granularity about what your entry criteria look like for the Phase 3? Number of prior therapies, time since diagnosis, transplant status, that type of thing.

Ron Squarer

Right, so you’re talking about multiple myeloma, I assume is that right there.

John Sonnier – William Blair & Co. LLC

Yes.

Ron Squarer

So, again, just a caveat, just so as not to disappoint, we are – we’re going to be providing more details on the exact criteria for the trials, which we’re starting next year. The Phase 2, which is going to be starting in the very near-term, I think we can give a very clear answer to that and perhaps directionally Dr. Needle will be able to give you a sense of who we’re targeting. But ultimately, we do want to make sure that we’re targeting patients, which represent an unmet need in order drive, not just regulatory approval and use. So Mike, do you want to give visibility to the Phase 2 randomized trial that’s about to start and then just directionally, if you can explain where the single agent and the Phase 3 might be?

Michael N. Needle

Yes, the place to start is really the Kyprolis package insert. So the randomized Phase 2 study, the entry criteria are two, at least two prior lines of therapy and refractory to the most recent. They must have been exposed to an image or and pardon me, bortezomib and Velcade, so that’s the starting point. And frankly, that’s the starting point for our thinking around the randomized Phase 3, but it’s into – we’re not ready to open yet, could learn something between now and then, but that is the starting point.

John Sonnier – William Blair & Co. LLC

That was the starting point before Kyprolis and Pomalyst were approved. I guess that is why I’m asking the question. The landscape has changed.

Ron Squarer

Yes, but it’s a randomized study of Kyprolis plus minus 5.20. So Kyprolis indication is, since we are using Kyprolis, we’re basically trying to prove that our drug plus Kyprolis is better than Kyprolis. So working with the same population as the Kyprolis indication at least to me makes perfect sense.

John Sonnier – William Blair & Co. LLC

Got it. That makes sense.

Ron Squarer

The single-agent study, it’s a different kettle of fish, for the single-agent study, we haven’t exactly nailed it down, yet but in all likelihood, we are going to have to take into account, prior treatment with Kyprolis or Pomalyst. And maybe that’s where we end up, refractory to or prior failure of Kyprolis and Pomalyst – and/or Pomalyst, but we’re not quite a 100% nailed down yet.

Kevin Koch

Yes, and please understand, John, it is not that we are trying to be deceptive, we’re simply leaving all the flexibility that we feel is appropriate until we have actually announced the trial, but I completely agree with Mike that single-agent trial, it’s really and we talked about what it’s for, you may recall just taking a step back, we’ve always said that we think this agent could be – this agent could play an important role, when existing agents have failed during the heavily refractory population. but also in combination with them and clearly, the Phase 3 is driven by the need to provide evidence of that combined benefit, but that phase, but the single-agent trial is partially designed to further reinforce the message that when a lot of things have failed, you’re still going to get utility from what is a novel mechanism, not an IMiD, not a proteasome inhibitor, which is why we’re – we feel this drug had such an important role to play going forward.

And as Mike said, we’re going to look the landscape as we pull the trigger and make sure that we’re treating patients that are in fact of a high unmet need. And so again, not big, just for fun, but just making sure we have the flexibility we need, but does that answer the question for you, John?

John Sonnier – William Blair & Co. LLC

That’s helpful. And I was trying to recall, because there hasn’t been, I don’t recall there being any combination experience at least clinically with an IMiD. Perhaps there is – and I haven’t seen it. But is there a reason, Kevin, did you see something pre-clinically that would have precluded that?

Kevin Koch

No, in fact, we will have additional data. We’ve already published pre-clinical with Revlimid, is that we’ve shown additivity in synergy depending on which particular cell line and model we’re looking at. We’ll have additional data on combinations with pomalidomide.

John Sonnier – William Blair & Co. LLC

Okay.

Kevin Koch

At ASH and I think that we had to start somewhere, I think the dosing schedule is highly complementary of two IV drugs. We also believe that the competition in this area of proteasome inhibitor combinations is probably less, if you look at the daratumumab and you look at elotuzumab that both going in combination with Revlimid, but really competing with panobinostat and we think we have a safety profile that’s highly competitive for panobinostat as well as a efficacy profile. So we’ll see if that trial is ongoing, but we’re looking to position this product in a second, third-line setting and that will be very exciting if we can provide some great PFS data in a setting of Velcade relapsed and refractory patients.

Ron Squarer

John, it’s a question we got a lot and it’s a problem we would love to tackle with the question of since you appear mechanistically to potentially have important benefit far beyond Kyprolis, but also with Velcade, and then with IMiDs including potentially Pomalyst. These are things – these are as I said problems we’d love to tackle as we move forward. And I will say that part of the reason you’re seeing in addition to the Phase 3, a couple of Phase 2 trials here is because they will generate results in the near-term that will drive publications and sort of further build confidence around the product and that confidence of course, could drive additional, parallel or sequential development plans in another areas. But it’s great to have a mechanism that ain’t an IMiD or proteasome inhibitor in a disease where we know most patients ultimately progress and become refractory to all of them. So any other questions?

John Sonnier – William Blair & Co. LLC

Yes. Just one quick and I’ll jump back in. But it really gets to the heart of I guess what I’m trying to wrap my head around with your design choice. And this came up, I think you touched on it earlier; but if I look at the landscape, by the time your Phase 3 reads out, I think the reality is we’ll have the elotuzumab front-line refractory data, we’ll have the CLARION data, we’ll have the ECOG front-line data from Kyprolis; Revlimid will be approved in the front-line. I think there is increasing evidence that Kyprolis and Revlimid might be combined in the front-line.

So to me, it seems logical – Celgene said last week that they see a lot of progression from Revlimid low-dose dexamethasone to Pomalyst, people kind of maintaining their patients on IMiDs – that you would include an arm on Pomalyst, with the combination of Pomalyst. Because I think that’s going to be the natural position for this drug. You are a commercial guy; I know you have thought through this, but maybe you could comment a little bit on that? Thanks.

Ron Squarer

We’ll make this quick as I think we have one more question and then we’ll have to wrap, but we’re looking at the Andy Robbins, here Senior Vice President of Commercial and Strategy also helps to make our portfolio decisions and he has been doing a lot of work on competitive landscape, so let him sort of give you our top line view.

Andy Robbins

Yes. so I think Kevin did a nice job laying out where we believe we’ll be positioned. And I think the way that myeloma is treated, I agree with you that over time, Kyprolis has the opportunity to migrate upstream into the front-line settings, but as you know currently today, drugs like Velcade and Revlimid are commonly used in re-treatment of patients following either maintenance therapy or transplant after induction.

And so we see that there is still an opportunity to use a drug like 520 in combination with a drug like Kyprolis, even if Kyprolis migrates to the front-line setting. In addition, I strongly agree with you that generating clinical evidence of our efficacy and safety with the IMiDs, especially Pomalyst and kind of the mid-to late-stage setting will be critical for this drug as the life-cycle management opportunities. So I think we’re going to explore creatively as to get that done soon.

Ron Squarer

Great. and then I think there is one more question. I think it’s Matt from Wells Fargo.

Operator

Matthew Andrews from Wells Fargo is on the line with the question. Matt, please go ahead.

Matthew J. Andrews – Wells Fargo Securities LLC

Yes, thank you for fitting me in. Just a couple on 520 so and following up on Steve’s earlier question related to carfilzomib, obviously, it’s not approved yet in the EU. so do you have EMA buy-in that carfilzomib is actually a valid competitor for this Phase 3 global combo study? And to what extent are the carfilzomib-focused data important in terms of you finalizing your plans and then initiating this study the middle of next year?

Ron Squarer

So the last part of the question, could you repeat that, it was how…

Matthew J. Andrews – Wells Fargo Securities LLC

Yes, the ongoing Phase III carfilzomib-focused study does that have any impact on the timing, because that they haven’t reported out the final results for that study yet?

Ron Squarer

So the answer is no, we are not waiting for the results of the Kyprolis randomized study to initiate that would certainly be nice to have it soon or rather later. but frankly, we are not waiting, because we have no control. I mean frankly, we could be – think we are waiting for 6 months and find out we are waiting for 12.

So we’re moving forward. We have high conversations with the agency here in the U.S. the FDA and they are perfectly comfortable with a plan and understand that we are going to conduct it internationally. We really can’t have a conversation with the EMA prior to the approval of Kyprolis. Having said that, we have spoken with a number of European experts who say they have absolutely no doubt that provided Kyprolis ultimately gets approval in the EU that this add-on design would be acceptable. They also have expectations that in fact the randomized trail that supports full approval in the U.S. will do the same in Europe. But of course, nothing’s guaranteed until hit happens.

Unidentified Company Representative

Let me just add a couple of other things. One, we are in a risky business and of all the risks we face in developing drugs for cancer. Kyprolis not getting approved is probably one of the smaller one. I think the general feedback on the drug and the uptake has been phenomenal. So I think that one way or another eventually the drug will get approved. So but on the topic of Europe, this does kind of bring us back to the Velcade question generally speaking with deal that in the U.S. based on what we know today and what we hear from experts Kyprolis will in fact become a standard of care and a leading product. In Europe though, we also believe that Velcade will continue to be especially when it loses patent exclusivity in the not too distant future becomes generic will be very important agent. And so ultimately, from a medical and commercial point of view, Velcade maybe more important in Europe long-term and of course that is well approved.

So there is a lot of ways that I think we are going to provide benefit with 520 not just when everything is filled but in combination with leading therapy. We’ve talked today about three potential combinations that could be important. Did that answer the question Matt?

Matthew J. Andrews – Wells Fargo Securities LLC

Yes, it did. Thank you very much. May I ask one question on MEK162?

Unidentified Company Representative

Sure.

Matthew J. Andrews – Wells Fargo Securities LLC

Just what Novartis's strategy, Kevin, is relative to Zelboraf failures? How might one 162 be combined with 818 in that patient population?

Kevin Koch

That’s an interesting question. With I would say, based on the published data LGX818 does have single agent activity in vemurafenib failures. I think generally from our published data, that combinations of MEK162 plus LGX818 enhanced the activity of the combination and the diminish side effect profile. So I think that how their positioning it and this is really speculations I’m not sitting in Novartis’ chair. Is that they would – are they looking run a trial maybe in this year they did a trial that will clearly demonstrate that LGX818 and MEK162 are best-in-class and that that will migrate to either first line or second line based on the ability of people to pay for the drug and some other variety of issues that how they are going to actually utilize the drugs. So I think that ultimately that combo will be used both frontline and second line depending what the patient has seen. But that I think the speculation, we don’t have complete understanding what Novartis is going to market the drug, maybe, Andy can…

Andrew Robbins

Just from looking at the trial design to me it looks pure displacement strategy. They are trying to prove both that LGX818 in by itself is superior to Zelboraf, but also that the combination of 818 plus MEK162 will be even better than that. So to me that trail is designed to displace Zelboraf, if not to go after it.

Matthew J. Andrews – Wells Fargo Securities LLC

Okay. Great. Thank you.

Unidentified Company Representative

And I think with that we are concluding the Q&A. Thank you all very much. I’ll just say that announcing planned Phase 3 starts for our wholly owned asset is a huge milestone for a company like Array. These are sort of the days that we kind of wait for. We are very pleased to have all of you on the call with us today. Many of you have been really traveling this journey with us overtime and we are pleased to be able to share this really important evolution with you and I hope to see some of you or all of you at ASH in the not too distant future. So with that, I’d like to thank our employees here at Array for their commitment, ingenuity and diligence that continues to fuel our success. I also want thank our patients, partners and shareholders for their continued confidence and support and with that, we will close the call. Thank you very much.

Operator

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

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