Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Tricia Haugeto – IR

Bob Conway – CEO

Mike Carruthers – CFO

Kevin Koch – President and Chief Scientific Officer

Analysts

Mona Ashiya – J.P. Morgan

Ted Tenthoff - Piper Jaffray

John Sonnier - William Blair & Company

Howard Liang - Leerink Swann Llc

Joe Aguilera – BioRevolution Capital Management

Ryan [ph] – Barclays Capital

Andrew [ph] – UBS Investment Research

Array BioPharma Inc. (ARRY) F2Q10 (Qtr End 12/31/09) Earnings Call Transcript February 2, 2010 9:00 AM ET

Operator

Good day everyone and welcome to today's program. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during our question-and-answer session. (Operator instructions)

Please note today's call will be recorded. I will be standing by if you should need any assistance. And it is now my pleasure to turn the conference over to Tricia Haugeto.

Tricia Haugeto

Thank you, Doris [ph]. Good morning and welcome once again to Array BioPharma's conference call to discuss our financial results for the second quarter of fiscal 2010. You can listen to this conference call on Array's website at www.arraybiopharma.com. In addition a replay of the conference call will be available via telephone for the next seven days and via the Internet.

I'd like to introduce Array's Chief Executive Officer, Bob Conway; and our Chief Financial Officer, Mike Carruthers, who will lead the call today. I'd also like to introduce Kevin Koch, our President and Chief Scientific Officer, who will provide an update on our proprietary development programs and David Snitman, our Chief Operating Officer and Vice President of Business Development, who will be available to answer questions as needed.

But before I hand over the call to Bob, I would like to read the following Safe Harbor statement. The matters we are discussing today include projections or other forward-looking statements about the future results, research and development goals of Array and its collaborators and future financial performance of Array. These statements are estimates based on management's current expectations and involve risks and uncertainties that could cause them to differ materially from actual results.

We refer you to risk factors discussed in our filings with the SEC, including our annual report filed on Form 10-K for the year ended June 30, 2009 and in other filings Array makes with the SEC. These filings identify important risk factors that could cause actual results to differ materially from those in our projections or forward-looking statements. Now I would like to turn it over to Array's CEO, Bob Conway.

Bob Conway

Thanks Tricia. Good morning, everybody. Thanks for joining the call to discuss Array's second quarter results for the fiscal year ending June 30, 2010. I hope everybody got a chance to review last night's press release. Today I'd like to review three areas with you. First is the Amgen deal for ARRY-403, our glucokinase activator.

The second is a review of our partnered programs and their strategic importance to Array. And third is the progress we made during the quarter advancing our proprietary clinical pipeline. A major event during the quarter was partnering our small molecule glucokinase activator program with Amgen. This included ARRY-403, which is also named now the Amgen number AMG 151, which is currently being tested in patients with Type 2 Diabetes.

Under the terms of agreement, Array received an upfront payment of $60 million with additional potential milestones of up to $666 million. Amgen is responsible for future clinical development and commercialization of AMG 151 and any resulting backup compounds, with Array having an option to co-promote in the U.S. Array will receive a double-digit royalty on sales of 151. In addition, Amgen is providing research funding over the next two years to identify and advance second-generation glucokinase activators.

Partnering is a central part of our strategy. Unlike many biotech companies, Array has a deep pipeline of drugs in discovery and development and a track record of successful collaborations. Partnering our drugs provide resources and capital to advance the drug as well as additional non-dilutive capital to Array.

In addition, once a drug is partnered, either all or a majority of the funding is provided by the partner, reducing our burn. Today we have seven partnered drugs in development, terrific partners like Amgen, AstraZeneca, InterMune, Roche and Lilly. In discovery there are three major research collaborations on-going with Celgene, Genentech, Roche and Amgen, a total of eight partnered discovery programs that fund over 100 scientists at Array, providing $30 million of funded research annually.

Since our inception, partnerships have generated a total of $420 million in funding, which is the primary vehicle we have used to fund Array. There is significant upside in these partnered programs, with almost $2 billion of potential milestones and royalties that range up to 15%.

Let me provide some comments on a select number of the partnered programs for you. The first is AZD6244. This is the MEK Inhibitor that we licensed to AstraZeneca in early 2004. It's continuing in two Phase 2 combination trials, one in non-small cell lung cancer and the other in melanoma. In addition to that there's a collaboration ongoing between AstraZeneca and Merck and they have initiated a Phase 1 trial combining 6244, the MEK Inhibitor, with Merck's AKT inhibitor, MK-2206.

This is really a unique relationship of combining two experimental agents, before obviously either has reached the marketplace. The idea here is shutting down both the Ras/Raf/MEK/ERK pathway and the AKT pathway and seeing the benefit that will provide cancer patients.

In addition there's at least six single agent clinical trials ongoing being conducted by NCI in collaboration with AstraZeneca. The InterMune Roche program, this is ITMN-191 that we invented for InterMune. It was later partnered by Roche and it also has the code RG7227. This is an NS3 protease inhibitor for hepatitis C. It's continuing a Phase 2b trial with 191 in combination, with standard of care therapies and continued to Phase 1b trial with 191 along with Roche's polymerase inhibitor, R7128.

The Eli Lilly program is a CHK-1 inhibitor that we invented for ICOS that was later acquired by Lilly. It's LY2603618 and that's continuing in a Phase 2 trial. And then in the discovery programs with Celgene, Genentech and Amgen, we anticipate filing one to two INDs this year and initiating critical trials.

One great thing about a portfolio of deals like we have with 15 partner drugs, either in development or discovery is that even before a drug reaches the market, there's a series of potential milestones that Array can receive. As our partnered portfolio advances, those milestones can become more meaningful. For example, two years ago in fiscal 2008 we received almost no milestones. This fiscal year we are projecting to receive $10 million in milestones and next year, fiscal 2011, we expect this to more than double to over $20 million in milestones.

As we partner more programs and those programs advance, we are building an increasing annuity of potential milestones which should continue to reduce our burn. We are currently negotiating with a number of major pharmaceutical companies to partner both development and discovery stage drugs. We have guided that once again in 2010, calendar 2010, we will complete one or more significant partnering deals.

Mike Carruthers, our CFO, will update our forecast, which as a result of our partnering efforts, we are revising our guidance for the second half of our fiscal year ending June 30, 2010, increasing our revenues and reducing our loss per share.

During the quarter, we made significant progress advancing our proprietary pipeline. There are five 100% owned Array programs in clinical development today that we want to report on.

Kevin Koch, who is offsite at one of our partners today, is still on the call and will highlight two of those programs. One is ARRY-380, our HER2 selective oral inhibitor for breast cancer. Kevin will discuss the current status of the program and the positive results we reported at the San Antonio breast cancer meeting in December. The second drug Kevin will report on is ARRY-162, our MEK inhibitor for cancer.

We have just completed enrollment of the escalating dose trial, reaching maximum tolerated dose and are now advancing the program in an expansion phase in biliary tract cancer patients at 10 sites in North America. In addition to these two programs, there are three others in clinical development.

ARRY-520 is our novel kinesin spindle protein inhibitor, which is being developed for AML and multiple myeloma. It continued in a Phase 1 trial in patients with solid tumors and two Phase 1/2 trials in patients with AML and multiple myeloma.

ARRY-543, our ErbB family inhibitor for solid tumors completed a Phase 1 dose escalation study with a tablet formulation in patients with solid tumors and continued three Phase 1b combination trials with Xeloda, Taxotere and Gemzar.

We anticipate initiating one or more Phase 2 clinical trials this calendar year. Finally ARRY-614 is our p38/Tie-2 inhibitor for MDS. We continued dosing patients with myelodysplastic syndrome in a Phase 1 trial to determine the safety and maximum tolerated dose, pharmacokinetics and preliminary estimates of efficacy of the compound in this patient population.

Let me hold there and pass it over to Mike Carruthers, our CFO, who will drill down on the financials.

Mike Carruthers

Thank you, Bob. Array's revenue for the second quarter of $9.6 million is at the highest quarterly level in nearly three years. This revenue result includes a partial month of revenue from completing the Amgen deal for ARRY-403 as well as an accelerated schedule for the recognition of the Celgene upfront payment that we received about 2.25 years ago. And this is to reflect the progress that we've made on the programs.

This strong revenue combined with reduced R&D spending pushed our loss per share for the quarter down to $0.44. Both the revenue and loss per share were significantly positive compared to the consensus estimate. As of December 31, Array's cash equivalents and marketable securities totaled $115 million. This includes the receipt of the $60 million upfront payment from Amgen in December.

Now, I'd like to provide a midyear update to guidance for the 2010 fiscal year that ends in June. Prior guidance for the full fiscal year called for revenue to be approximately 37 million and loss per share to be $2. We are prepared at this point to significantly improve this guidance. The revised guidance places full-year revenue at $48 million and loss per share at $1.60. Recall that prior guidance called for solid improvement for the second half of the year. The new guidance improves on that trend significantly.

Both the Amgen deal and the ongoing acceleration of the Celgene revenue recognition drive the revenue improvement. Incidentally, the Amgen upfront is being recognized evenly over about three years and Celgene will now be recognized over four years, down from seven years previously and at an accelerated rate over the next two years.

More color on the source for the 48 million in revenue between the collaboration revenue line and the upfront and milestone line on the P&L is that we think the collaboration line will be about 19 million and the larger 29 million coming from upfront and milestones.

In addition to the improved revenue, we believe the R&D for our IP will be about 76 million for the full fiscal year. This revised R&D spend level is now 9% below our original guidance and a reduction of 17% from last year. We have a recent history of burning about 21 million per quarter before counting any upfront or milestone payments. With the new second-generation glucokinase program that Amgen is funding, as well as a shifting of clinical costs for 403 over to Amgen in the next quarter, we'll push our burn down into the high teens. Of course, we would expect further burn reduction as we partner additional programs in the future.

And with that I'd like to turn it back over to Bob.

Bob Conway

Thanks Mike. Kevin, I think you are on the line from California. Why don't you update us on ARRY-380 and 162?

Kevin Koch

Thanks Bob. I'd like to give you an update on two programs from our portfolio that have achieved significant milestones over the past quarter. We provided positive interim results for our novel small molecule HER2 inhibitor, ARRY-380, in a Phase 1 trial in advanced cancer patients the 2009 San Antonio Breast Cancer Symposium, as well as preclinical results demonstrating the efficacy and tolerability of ARRY-380 when combined with certain standard of care agents.

ARRY-380 is a potent, orally active small molecule drug that has been well tolerated to date and selectively inhibits tumor growth in preclinical models of HER2 dependent tumors. HER2, also known as ErbB-2, is a receptor tyrosine kinase that has been found to be amplified in breast cancer and other cancers such as gastric and ovarian. ARRY-380 also demonstrated a significant dose-related tumor growth inhibition in preclinical models that was superior to Herceptin and Tykerb as a single agent and was additive for tumor growth inhibition in preclinical models when dosed in combination with standard of care therapeutics such as Herceptin and Taxotere.

Interim Phase 1 results disclosed at the meeting showed that ARRY-380 at doses greater than or equal to 200 milligrams BID demonstrated evidence of tumor aggression in eight out of 10 heavily pretreated patients with HER2 expressing cancers. Of these eight patients, four had prolonged stable disease for 16 weeks or longer. Activity was observed in both HER2 positive breast cancer as well as HER2 positive colorectal and salivary gland patients. ARRY-380 was well tolerated with the predominant adverse events having been Grade 1 and included nausia, rash and fatigue. Minimal diarrhea and no cardiovascular events were reported.

Today I'd like to report that we have reached the maximum tolerated dose for ARRY-380 and have initiated expansion studies in heavily pretreated HER 2 positive breast cancer patients who have progressed on prior regiments of Herceptin and often lapatinib. Full data on the completed trial will be disclosed in a future scientific meeting this year.

A second compound I'd like to discuss is ARRY-162, our MEK inhibitor for the treatment of cancer. ARRY-162 is a potent, orally active MEK1/2 inhibitor that has proportional increases in exposure with increasing dose, low inter-patient variability and good inhibition of relevant pharmacodynamic biomarkers.

Recent research confirms that the MEK pathway acts as a central access in the proliferation of different tumors including melanoma, non-small cell lung, head and neck, pancreatic and biliary cancers. MEK inhibition, either alone or in combination with other agents is an important therapeutic strategy in treating cancer.

ARRY-162 may have advantages over other MEK inhibitors currently in development including greater potency and improved safety and pharmacokinetics. Given this data, we filed an investigational new drug application with the FDA to initiate a Phase 1 study of ARRY-162 in cancer patients.

Today I would like to report that we have completed the Phase 1 study in patients with advanced solid tumors, rapidly accruing for cohorts of patients within five months. The compound was well tolerated at doses significantly higher than those used in the RA study with low inter-patient variability in each cohort.

We are now moving 162 aggressively into an expansion study in biliary tract cancer patients at 10 sites in North America with the goal of confirming our NPD, safety, biomarker related mode of action studies and preliminary signs of efficacy. We are excited about the results on ARRY-162 and are looking forward to discussing with you our plans in the future. Thanks.

Bob Conway

Thanks Kevin. Let me make one more final comment before moving on to the 2010 -- calendar 2010 milestones. To appreciate the value of Array and other comparable companies who like us are inventing and developing new drugs. All you have to do is look at yesterday's news. Big Pharma continues to cut tens of thousands of R&D jobs to prepare for their coming patent cliff. They are being advised to significantly increase the in-licensing of new drugs at all stage of developments. There are very few new companies like us being formed and funded today.

As a result, we believe there's developing tremendous scarcity value around clinical assets and as a result, those assets should continue to increase in value. A good example of that value I think is our Amgen deal.

Let me review now are milestones for calendar 2010. We do milestones on a calendar year even though we are on a fiscal year that ends in June. ARRY-403, our glucokinase activator for Type 2 diabetes, we'll complete the MAD study in Type 2 diabetic patients and initiate a second-generation discovery program and Amgen will pick it up from there and move forward through the development path.

ARRY-162, our MEK inhibitor for cancer, we'll complete and report on the Phase 1 escalating dose trial. You heard from Kevin that we just reached MTD on a trial. We'll initiate and complete a Phase 1b expansion trial in biliary tract cancer patients and initiate a Phase 1b combination trial.

ARRY-543, our ErbB family inhibitor for solid tumors. We'll complete and report on three Phase 1b combination trials and initiate a Phase 2 combination trial in pancreatic cancer patients. ARRY-380, our HER2 selective inhibitor for breast cancer. We'll complete and report on the Phase 1 escalating dose trial and initiate an expansion phase and will initiate and complete a bio equivalency trial to enable a commercial formulation.

ARRY-614, our p38/Tie-2 inhibitor for MDS. We'll complete and report on the Phase 1b/II trial. ARRY-520, our kinesin spindle protein inhibitor for cancer. We'll complete and report on the Phase 1 expansion in solid tumors and will report on a Phase 1b trial in AML, a Phase 1b trial in multiple myeloma and initiate a Phase 2 trial in multiple myeloma patients. And finally, we'll one to two INDs and initiate clinical trials for – on our proprietary drugs. Let me pass it over to you Bob and see if there is any questions in the audience today. Operator?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Mona Ashiya. Go ahead please.

Mona Ashiya – J.P. Morgan

Hi. Good morning, guys. I'm here on behalf of the Cory. A few questions. One, just looking ahead wondering which of your assets you see as a priority in terms of getting partnerships for in this calendar year where you're seeing the greatest level of interest if you could share your top with us there.

Bob Conway

If you look down the portfolio, we have a good deal of (inaudible).

Mona Ashiya – J.P. Morgan

Hello.

Bob Conway

Hello. Mona, let me answer your question. We had significant interest I think across the portfolio both in the development and discovery assets. We generally don't talk much about the discovery assets publicly but we have ongoing discussions on several of those and then in the development assets kind of across-the-board. I would say 162 there is significant interest on which is the MEK inhibitor for cancer. Also, 380 our selective HER2 inhibitor but we also have discussions ongoing with 543 and 520 as well. So kind of across the development portfolio.

Mona Ashiya – J.P. Morgan

Okay. And then actually just a quick question on 403 regarding the second-generation compounds. I guess this is a question for Kevin. I was just wondering what attributes you are seeking to optimize and also a separate question related to the two-year research funding commitment, any details you can share there?

Kevin Koch

Not too much. We're like, I think in all cases, you'd like to have a drug that is in the, kind of the 10 milligram range of potency and I think this drug is likely in the 50 milligram to 100 milligram range in, as far as how it's used. So I think that's one goal of collaboration. I can't really say anything about the discovery collaboration except that we've already had a kickoff meeting and it's, there are two companies that are very much aligned in our goals and so we anticipate producing a second-generation compound that will have perhaps different attributes, perhaps somewhat more potent but I think probably a different structural class and then looking at how the compound is metabolized and looking at a different metabolic route of elimination. So I think all of these things are just minor variations. I think it's, we had the comment in the meeting that it's hard to beat 403. So we will see.

Mona Ashiya – J.P. Morgan

That's very helpful and then one last question on 162. I was just wondering if you, what the data was that drove the decision to expand the trial and enroll the biliary tract cancer patients. How compelling were those data, if there weren't, if there were clinical data? And what are the next steps there?

Kevin Koch

Well, there are some really good theoretical arguments of why biliary cancer would be an interesting place to evaluate MEK inhibitors. Biliary cancers have high IL-6 and TNF which is a hallmark of that disease. They have a high level of angiogenesis and they also have the BRAF mutation in some of the patients. What caught our interest back at ASCO was that the AZ compound, AZD6244, had some quite exciting data in a small biliary tract cancer trial where they saw three partial responses. They saw a prolonged, a progression free survival and of really great interest is what, there was quite a bit of benefit to quality of life.

In fact there was an increase in weight gain in these patients and these and this particular tumor type is highly cachexic. So we think the profile of a MEK inhibitor fits very well into this tumor type. We also think that there is some preliminary clinical data that a MEK inhibitor would be efficacious as a single agent and we're just now looking to confirm that in this dose escalation, in this expansion study with the thought of how we might develop a MEK inhibitor in this tumor type. This tumor type's I think exciting from the standpoint of the original standard of care for this tumor type. It's a growing need so there are increases in this tumor type in the U.S. And actually in Asia this tumor type, in Japan for instance, has over 78,000 patients. So it's actually a very large opportunity in Japan.

Mona Ashiya – J.P. Morgan

Is there any chance we could see data on this at ASCO this year? Or would it be later?

Kevin Koch

I think we don't want to really say when the data is coming out. I think we have a number of activities in and around 162 and it's a highly competitive area. I think for the moment we'd like to tell you when we have initiated a particular trial and leave it at that.

Mona Ashiya – J.P. Morgan

Okay. Thanks a lot.

Operator

Thank you. Our next question comes from Ted Tenthoff. Go ahead please.

Ted Tenthoff - Piper Jaffray

Great. Thanks very much. Good morning, everyone. And Congrats again on the Amgen deal and on getting things on track here. My question, I guess comes back to MEK a little bit. Does the fact that you've signed the deal with Amgen and have rescued the balance sheet in such a great way change your timing or interest in partnering MEK? And specifically I am looking to kind of some of the clinical goals for this year with respect to the 1b combo study and obviously having a partner could influence that decision or certainly a partner would want to have some input into which cancer areas you'd go into. So just want to kind of ask for a little bit more along MEK and sort of where it stands in your head the program in general.

Bob Conway

Yeah. This is Bob. Ted, I don't think it changes the strategy with 162. We are continuing down a track to move to, we hope, a rapid registration plan while continuing discussions with partners on what we think is a very exciting asset. The value of a partnership is the ability to expand what we are doing on the drug but it's not something we have to do. We can continue down the track that we are currently on with the drug as well and we are very pleased with how rapidly we enrolled this Phase I trial. In five months, we completed four cohorts. It shows I think that what the team was able to do execution-wise as well as how excited the investigators were about having an opportunity to provide this drug to their partners. We have 115 million in cash and the burn rate continues to be reduced over time and we see that going down even more next year. So we think we are in pretty good shape on the capital front. But we are looking at each of the assets and what makes the most sense for them whether it's us advancing those or a partnership where we would have significant input and bring significant expertise to the development efforts.

Ted Tenthoff - Piper Jaffray

Good. That's helpful. And just may be as a quick follow-up, I know there's, it's going to be a very data-rich year. I'm looking at for ASCO a pretty big number of presentations including it looks like may be you've submitted for the Phase I study of 162. Will the five-four, did you submit abstracts for the 543 studies as well as 380? And is there anything I'm missing for ASCO?

Bob Conway

We will have, present at a scientific meeting all of those drugs probably in the first half of this year that you've just mentioned. What we don't do is to say until the presentations or abstracts have been accepted, what meetings they're going to be presented at because having said that publicly decreases your chances of those things being accepted. So we're pretty careful about doing that. But in the first half of 2010 we will have data presented at scientific meetings on all of the drugs you just mentioned.

Ted Tenthoff - Piper Jaffray

Okay. Fantastic and I can appreciate that. Thanks so much.

Bob Conway

Okay. Thanks Ted.

Operator

Thank you. Our next question comes from John Sonnier. Go ahead please.

John Sonnier - William Blair & Company

Just a couple of questions about Dr. Bergstrom's role. May be a three-part question. What do you see is his initial focus? Do you anticipate that there will be a different portfolio or relationship review? And will he have an influence on anything in the preclinical basket moving forward this year?

Bob Conway

Great question, John. Thanks for it. We, as we disclosed in the press release hired a 20-year veteran from Roche who has been involved, all the therapeutic areas that Array is very strong in. He has a great background of experience in each and every one of those from IND through phase IV studies. So we have a wealth of experience coming to us in Dr. Bergstrom. The, his initial focus is moving forward the development portfolio that we currently have. But you asked about how he will influence discovery. One of the things we do I think pretty well at Array is to have a team approach across each of these drugs that spans from early discovery through development and the team stays with the drug during that entire time frame. And Bengt will be actively involved in, not only in the development portfolio but the early discovery portfolio and already has been. He's brought us great expertise.

John Sonnier - William Blair & Company

All right. Thanks a lot.

Bob Conway

Thanks, John.

Operator

Thank you. Our next question comes from Howard Liang. Go ahead please.

Howard Liang – Leerink Swann Llc

Hi. Thanks very much. I just want to follow up on the biliary tract tumor trial for 162. Would the target, BRAF here? And if so, are you going to screen for BRAF mutations in the patients?

Kevin Koch

There are a number of different mutations within biliary tract cancer, we will be screening for all those where we are able to get that information. The design of the trial is to look at biomarkers of activities to look at various plasma compartment biomarkers, to get tissue samples for each patient and try to understand a relationship between mutation status and response and/or prolonged stable disease. And then I think, it's very important to understand the quality of life measures for this drug and is there weight gain in this patient population? Can we demonstrate that? And is there actually pain relief? Which we've already demonstrated with 162?

Howard Liang – Leerink Swann Llc

So this is a six dose trial and do you know how many patients you would be in enrolling?

Kevin Koch

We -- at the moment it is north of 15 patients. We have it fairly open to be able to treat, I don't know what the exact upper limit is, but it's certainly is substantial number of patients.

Howard Liang – Leerink Swann Llc

Great. Just another question on AZD6244. What is the next data point of this compound in melanoma?

Kevin Koch

I would -- I don't know the exact timing of the completion of the melanoma trial, which is a combination plus/minus -- DTIC plus and minus AZD in a BRAF melanoma population. We anticipate they will have the trial completed in the next year or less. When they publish that data? We don't have any insight.

Howard Liang – Leerink Swann Llc

Thanks very much.

Operator

Thank you. (Operator Instructions). Our next question comes from Joe Aguilera. Go ahead, please.

Joe Aguilera – BioRevolution Capital Management

Congratulations guys on the Amgen deal. Bob, this is for you maybe or for Kevin. On the -- when do you anticipate the Phase 2 trial starting on 403 with Amgen?

Bob Conway

Amgen is going to be here for a development meeting in the next week or so and we will get better visibility for that. I think the original plans were for this year, but that's going to be fine tuned bringing Amgen's expertise across the program as well.

Joe Aguilera – BioRevolution Capital Management

And is there a milestone payment? Or that we will get to start a Phase 2 with them? What's the next milestone payment?

Bob Conway

We have not disclosed the exact triggering of milestone payments but there is a Phase 2 as well as Phase 3. There is a number of clinical milestones as you go along. The next one would be at Phase 2.

Joe Aguilera – BioRevolution Capital Management

And Kevin, what's the mechanism of action on the glucose activator that you feel has advantages over the current ones? And where do we fit into the landscape with Byetta and all the other current type 2 diabetes drugs out there?

Kevin Koch

Well, it's interesting. This is a dual mechanism of action really acting on the pancreatic beta cells to cause a secretion of insulin and at the same time and in parallel having a direct affect on the liver and the metabolism of glucose. So it -- the mechanism allows one to titrate glucose and IL-1 and our compound, what we really strove to do was to identify a compound that was creating greater activity at high glucose levels when you need it and less activity at low glucose levels.

So I think we've accomplished that in 403. I think within the therapeutic regimen, it can be used in probably any line of therapy. The glucokinase mechanism is one that has a -- is important for the genetics of diabetes. Patients with mutations in glucokinase actually get type 2 diabetes and so it's a mechanism that is likely to be both successful and part of multiple different regimens. And so we don't know, the exact development plans of Amgen, but I see it as a potential blockbuster both from the standpoint of being able to use in early diabetic patients and in advanced diabetic patients.

Joe Aguilera – BioRevolution Capital Management

And it will be once a day, I'm assuming, right? That's the…

Kevin Koch

It really depends on how you want to use the drug and in which combinations. But it has, it's certainly amenable to once a day and amenable to twice a day.

Joe Aguilera – BioRevolution Capital Management

And on 380, Kevin. What's the -- or Bob, maybe you can help us here. When do we look to partner this? Do we -- and when would we look to start a Phase 2 there? Do we want to build a little more value in that, being that we have a little more cash from the Amgen deal? Can you elaborate?

Bob Conway

Now, we have some discussions ongoing, Joe, on 380 with partners that we probably will look to build more value, get more data before we do anything there.

Joe Aguilera – BioRevolution Capital Management

When would a Phase 2 look to start, Kevin, on that? What timeframe are you looking?

Kevin Koch

We are probably looking by the end of the year, a Phase 2 and we may have a run in study in a combination or we may choose to go after a single agent indication. But I think certainly by the end of the year something should be initiated.

Joe Aguilera – BioRevolution Capital Management

And what are the main indications on 162? You talked biliary, pancreatic. What do you feel, Kevin, are the main top three indications there that the drug could be effective in your mind?

Kevin Koch

Well, I think that any -- this has been pretty well described in the literature that any place, where there is a -- the KRAS mutation is a likely place where a combination study would be quite efficacious. We -- there are a number of those trials ongoing now. There are also a number of places where we might think of working as a single agent. Certainly, biliary is one that's high on our list. So I think you could go across multiple tumor types and have an opportunity with a MEK inhibitor.

Joe Aguilera – BioRevolution Capital Management

And just on this one, Kevin, on the long-term debt, we closed with 94.7, the quarter before it was 108. So we've been reducing that Deerfield loan would you say, is that correct Bob?

Bob Conway

No. This is Bob, now the accounting for all of this stuff is so complicated. What we have outstanding with Deerfield is $120 million worth of principle that's due in 2014. So over four years from now and at our option, that can be paid back in either cash or stock. And the most likely outcome here is that we get some good results, the stock goes up and we extinguish the Deerfield debt with stock. Interestingly, Deerfield is only our third largest shareholder. Both Kopp and Fidelity have greater holdings in Array in common equity, plus they have the debt on top of that. So they have been a great partner and tremendously supportive of the company and we look forward to in 2014 paying them back their $120 million that we owe them.

Joe Aguilera – BioRevolution Capital Management

Will we look to pay that back in cash, if we can from different milestone payments so we don't dilute anymore, Bob?

Bob Conway

We will play that as we go along, Joe. It depends on facts and circumstances at the time. Hey Joe, can I move on?

Joe Aguilera – BioRevolution Capital Management

Sure. Sure. Thanks you guys.

Bob Conway

We have more people in the queue. Appreciate all your questions.

Operator

Thank you. Our next question comes from Jim Birchenough. Go ahead, please.

Ryan – Barclays Capital

Hi, thanks for taking the question, it's actually Ryan [ph] here for Jim. Just had a question on 162. Have you guys disclosed what the dose limiting toxicity was with 162?

Kevin Koch

No. We haven't.

Ryan – Barclays Capital

Okay.

Bob Conway

We'll disclose that at a scientific meeting in the first half of the year.

Ryan – Barclays Capital

Okay. And in terms of 403 with the multiple ascending dose to data it's the first piece of data you have after your partnership with Amgen. Do you still expect to release top line data for the multiple ascending dose?

Bob Conway

Amgen is driving the bus on all data releases and we'll know a lot more when we meet with them in the coming weeks.

Ryan – Barclays Capital

Sure. And Mike, could you just go over the R&D numbers you were talking about?

Mike Carruthers

Sure. Total R&D spending for fiscal 2010, we are projecting that to come in at 76 million, which is down about 9% from the original guidance that we had provided and down about 17% from last year.

Bob Conway

And one of the things that helps us on that is every time we do a partnership, the spend generally goes from us over to the partner and then there is often research funding that comes in as well.

Ryan – Barclays Capital

Okay. Thanks for taking the questions.

Bob Conway

Okay. Thank you.

Operator

Thank you. (Operator Instructions). Our next question comes from Jeff Elliott. Go ahead, please.

Andrew – UBS Investment Research

Hi, this is actually, Andrew in for Jeff. I have a quick question on guidance. Is the increased revenue guidance due more -- is it due to the assumption of another deal being done or more attributed to kind of an acceleration of the recognition of the upfront payments from the Amgen deal and a preclinical Celgene deal?

Kevin Koch

Well, it's really folk -- it does not include additional deals. It's based on the current state.

Andrew – UBS Investment Research

Okay. Thank you.

Operator

Thank you. At this time, there are no further questions in queue. I'd like to turn it back to our…

Bob Conway

Thanks very much, Beth [ph]. Let me thank everybody for being on the call today and also our 340 employees for their dedication, creativity and hard work and the contribution they have made once again this quarter to Array. I'd also like to thank our partners and our shareholders for their continued confidence and support. We look forward to updating you about three months from now on our next quarterly conference call, if not before. Thanks everybody.

Operator

This concludes today's conference call. You may disconnect at any time. Thank you for joining us and enjoy the rest of your day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Array BioPharma Inc. F2Q10 (Qtr End 12/31/09) Earnings Call Transcript
This Transcript
All Transcripts