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Array BioPharma, Inc. (NASDAQ:ARRY)

Q4 2014 Earnings Conference Call

August 12, 2014 9:00 a.m. ET

Executives

Tricia Haugeto - Director, Corporate Communications & IR

Ron Squarer - CEO

Mike Carruthers - CFO

Andy Robbins - SVP of Commercial & Strategy

Analysts

Matt Lowe - JPMorgan

Eun Yang - Jefferies

Ted Tenthoff - Piper Jaffray

Stephen Willey - Stifel

Matthew Andrews - Wells Fargo

Nick Abbott - BMO Capital

Operator

Welcome to the Fourth Quarter 2014 Array BioPharma, Inc. Earnings Conference Call. My name is Sophia, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Please note that this conference is being recorded.

I'll now turn the call over to Tricia Haugeto. Tricia Haugeto, you may now begin.

Tricia Haugeto

Thank you, Sophia. Good morning, and welcome once again to Array BioPharma's conference call to discuss our financial results for the fourth quarter and full year 2014. You can listen to this conference call on Array's Web site at www.arraybiopharma.com. Also, we're using slides to accompany our remarks. The slides can be downloaded on the Investor Relations homepage of our Web site. In addition, a replay of the conference call will be available as a webcast from our Web site.

I'd like to introduce Array's Chief Executive Officer, Ron Squarer; and Chief Financial Officer, Mike Carruthers, who will lead the call today. In addition, Andy Robbins, our Senior Vice President of Commercial and Strategy will be available to answer questions as needed.

But before I hand over the call to Ron, I'd like to read the following Safe Harbor statement. The matters we're 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, 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.

And now, I'd like to turn it over to Array's CEO, Ron Squarer.

Ron Squarer

Thank you, Tricia, and good morning and welcome to all those who are joining today. I'm starting on Slide three of our presentation. We believe that Array represents a compelling investment opportunity. During the past year, our clinical stage portfolio has made significant progress. And we're pleased to deliver significant value to our shareholders in the near-term.

I'm now going to describe our progress and our plans with you today. There are three key value drivers for Array; binimetinib, selumetinib and filanesib. Novartis has projected regulatory filings for binimetinib in NRAS-mutant melanoma in 2015. AstraZeneca has also projected regulatory filings for selumetinib in uveal melanoma in 2015. And success with either of these filings would lead to commercial revenue in 2016, which would be an important inflexion point for Array. As on filanesib, we continue to work towards initiating a Phase 3 trial this year.

But the single most important near-term catalyst we see is the potential return of binimetinib global rights from Novartis to Array. In April 2014, Novartis and GlaxoSmithKline announced a definitive agreement, which included Novartis acquiring GSK's MEK inhibitor Mekinist. The transaction is subject to approval by GSK shareholders in closing conditions, including anti-trust approvals.

We believe our agreement and potential anti-competition issues would make it inappropriate for Novartis to own two MEK inhibitors at this time. Further, we do not believe Novartis is entitled to divest binimetinib to a party other than Array under our agreement. Although divesting MEKINIST would allow Novartis to retain binimetinib ownership, we believe it is unlikely Novartis would choose this route. I'll be providing more on binimetinib in the coming slides.

In addition, we have highlighted here two clinical stage programs for which we hold global commercial rights and expect clinical data this fiscal year. And there is our ARRY-797, which is currently recruiting patients in LMNA AC-related dilated cardiomyopathy, a rare genetic cardiovascular disease, and Array-380, which is our highly selective oral HER2 inhibitor partnered with Oncothyreon, which is currently advancing in three separate combination trials in metastatic breast cancer.

And turning now to Slide four, following the announcement of the GSK-Novartis deal, we published this slide to clarify the implications for binimetinib. It states that Novartis has indicated that they'll continue to owner their obligations under the Array-Novartis binimetinib agreement, including obligations related to support for all ongoing trials. This includes the three Phase 3 trials, NEMO and COLUMBUS, which are being conducted by Novartis, and MILO, which is being conducted by Array.

It also indicates that in the event that Novartis's binimetinib development and commercialization rights are returning to Array, Novartis must provide support for ongoing clinical studies as specified in our agreement.

In addition, I'd like to reiterate that we believe our agreement and potential competition issues would make it inappropriate for Novartis to own two MEK inhibitors at this time. Further, we do not believe Novartis is entitled to divest binimetinib to a party other than Array under our agreement.

Given the potential return of binimetinib and the value proposition that would represent to Array, we have re-examined our priorities. And as a result, Array has no plans to invest internally at this time in Array's 614, our p38/Tie2 inhibitor for the treatment of myelodysplastic syndromes. In addition, Array has no plans at this time to invest internally in ARRY-502, a CRTh2 receptor antagonist for the treatment of asthma, and we'll only provide updates on 502 if Array finalizes the collaboration on this program in the future.

Moving now to Slide five; we remain very enthusiastic about the potential for binimetinib and we're pleased to share data from two studies, which we'll present it at this year's ASCO meeting. The first is a Phase 1(2) combination study of binimetinib with Novartis' CDK4/6 inhibitor LEE011, which are promising activity in NRAS-mutant melanoma patients. Of 21 evaluable patients, 33% achieved partial response and 52% had stable disease. Several patients experienced early tumor shrinkage with major symptomatic improvement; 55% of patients remain on treatment with the duration of up to eight months. And we believe that simultaneous addition of MEK and CDK4/6 could suppress the activation of two major signaling pathways associated with NRAS-mutations and may provide additive benefit over single-agent therapy alone.

Second, on Slide six, we share the results of a Phase 1(2) combination study with binimetinib in Novartis' alpha-selective PI3K inhibitor, BYL719, in patients with RAS and BRAF-mutant solid tumors. That's exciting preliminary activity we've seen in patients with ovarian cancer where three out of four patients, small set or 75% achieved a partial response. RAS and RAF and BRAF-mutations are far more common in low-grade serous than in high-grade serous ovarian cancer. This result suggests a potential lifecycle opportunity related to our ongoing Phase 3 ovarian trial named MILO.

Turning to Slide seven, we summarize three ongoing Phase 3 trials for binimetinib in NRAS-mutant melanoma, low-grade serous ovarian cancer and BRAF-mutant melanoma. So, while NEMO and COLUMBUS are being conducted by Novartis, Array initiated and continues to conduct the MILO trial. This 300-patient study is a global randomized Phase 3 trial with sites in the U.S., Canada, Europe and Australia. NRAS-mutant melanoma will likely the first indication for binimetinib, and as I mentioned, Novartis is currently projecting a regulatory filing of 2015.

Now, on Slide eight, we list a subset of the ongoing or initiated Novartis or Array sponsored binimetinib trials. It is our expectation that all of these trials are continuing according to plan. We remain interested in the combination trial of binimetinib with panitumumab in colorectal cancer as KRAS mutations drive approximately 35% of colorectal cancer; also not listed as in MTI trial with binimetinib and FOLFOX in patients with metastatic colorectal cancer, who have failed prior standard therapy. Patients with colorectal cancer represent a large population and it continues to be a high unmet need disease.

On Slide nine, I'm turning now to selumetinib. Here we show the results from ASCO that Phase 1 study in pediatric patients with neurofibromatosis type 1 known as NF1 and plexiform neurofibromas or PN. While surgery remains the standard of care for many patients with NF1, it's not feasible for most patients with PN due to the physical property of these lesions. There are no standard medical therapies. So there is a great unmet medical need for these patients and their families.

In this study, 61% of patients achieved a partial response to find as a PN volume decrease of greater than or equal therapy 20%, but it's important to note that all patients remained on trial at the time of publication with the duration of treatment up to 34 cycles. Given these promising results, AstraZeneca is currently evaluating a forward path for this program.

On Slide 10, we summarize the three ongoing Phase 3 trials for selumetinib in KRAS-mutant non-small cell lung cancer, the SELECT 1 trial, uveal melanoma summit and thyroid cancer, that's the ASTRA trial. As AstraZeneca announced in April, uveal melanoma likely will be the first indication for selumetinib with a projected regulatory filing in 2015. As we mentioned, we see the possibility of revenue from selumetinib to Array in 2016. Of note, KRAS-mutant non-small cell lung cancer represents a commercial opportunity greater than $1 billion on its own, and the top line results from the SELECT 1 trial are expected mid-2016.

Moving to Slide 11, in the past month, AstraZeneca has announced two exciting new lung cancer studies. One, including a combination of selumetinib and docetaxel with MEDI4736, their anti-PD-L1 antibody, and the other trial including a combination of selumetinib with AZD9291, they're mutant-selective EGFR inhibitor. And AstraZeneca continues to explore several combinations of selumetinib with established standards of care in non-small cell lung cancer to support future studies in this indication. As you can see AZ is exploring the utility of selumetinib in combination with gem/cis, carboplatin and pematrexed, any of which would facilitate a first line pivotal study.

And now on Slide 13 where I provide a summary of our ongoing global development plans for filanesib; during the quarter we initiated the AfFIRM Phase 2 trial and began treating patients AfFIRM as shown in the bottom arrow is a single agent, single-ARM study of filanesib in 160 heavily pre-treated relapsed/refractory multiple myeloma patients. Eligible patients who have received at least two prior lines of therapy have received prior Velcade and Revlimid and have disease refractory to Kyprolis and/or Pomalyst.

We believe this represents a very high unmet need population. In addition to providing an important safety and pharmacologic data necessary for regulatory filing, this trial would generate additional data on the patient selection marker Alpha 1-Acid Glycoprotein or AAG, and if successful could support broader labeling in conjunction with a positive Phase 3 trial. As shown in the middle arrow, the ongoing Phase 2 study of filanesib plus Kyprolis compared to single-agent Kyprolis continues to enroll patients. Prior to initiating the FACTOR Phase 3 trial will have the benefit of combinability data from this study.

In addition this study will help us validate the use of AAG as a patient selection marker in a combination setting and generate data for publications to -- and support enrollment of the Phase 3 trial.

Array continues to work towards initiating the FACTOR trial this year. As shown in the top arrow, FACTOR is a global Phase 3 study comparing Kyprolis plus filanesib to Kyprolis alone in several hundred patients with relapsed/refractory multiple myeloma. This study is designed to support full regulatory approval both in the U.S. and Europe with a primary endpoint of progression, increased survival and would represent the first novel drug combination of Kyprolis in patients who have previously been treated with Revlimid and Velcade, and there are more than 70,000 patients with relapsed/refractory multiple myeloma in developed countries.

Now moving to Slide 15, we have been very proud to have ongoing collaborations with some of the biggest names in our industry including Genentech, Celgene, Novartis, AstraZeneca to name a few.

We were very pleased to announce this past quarter a new collaboration with Biogen Idec for the discovery and development of kinase inhibitors for the treatment of autoimmune disorders. The collaboration target and lead inhibitors were discovered through Array's proprietary Kinase-Directed Phenotypic Screening Platform. This technology relies on Array's deep experience in kinase inhibitor chemistry and Phenotypic Screening, which can be applied to any disease where a desired cellular phenotype can be envisioned. And Biogen will be responsible for all aspects of clinical development and commercialization. The agreement includes research funding for three years, potential development and commercialization milestone payments and royalties to Array.

On Slide 16, we will talk a little bit about Loxo which has been a very exciting event. It really represents a great example of innovation, speed and value creation. Loxo was founded around pre-clinical Array technology just in July of 2013. They were in the clinic with Loxo-101 and array invented selected PAM track inhibitor in April of 2014, just 10 months after the formation of the company. At the end of July, just three months later, Loxo completed its IPO and a valuation of over $200 million.

Array currently holds 10% ownership stake in the company. In addition to receiving funding for ongoing research, Array is eligible to receive up to $434 million in milestone payments and to receive royalties on sales of any resulting drugs.

At this point I would like to turn the call over to Mike Carruthers who will provide a summary of our financial performance during the quarter.

Mike Carruthers

Thank you, Ron. I am pleased to share with you the financial results for the quarter. Starting on Slide 18, our revenue for the fourth quarter was 6 million. The collaboration revenue line was strong with the new Biogen Idec deal initiating part way through the quarter. License and milestone revenue was minimal during the quarter while the same quarter last year compared on the same slide included a Phase 3 milestone for binimetinib and the upfront payment for licensing 380 to Oncothyreon.

Our R&D spent increased modestly by 3% from the prior sequential quarter as the 160 patients single-agent Phase 2 study with filanesib began.

Cash used in operations due the quarter was 22 million and we ended the quarter with a solid cash position of 112 million. This balance includes completing the ATM during the quarter. Many of you are aware that we took 19.9% ownership as a collaboration partner at Loxo Oncology about 13 months when we licensed our PAM track program to them. We value that partnership on our books at 4.5 million and that's the value reflected on our financial statements we are reporting on today.

As Ron has indicated, Loxo began trading as a public company earlier this month and now has a common stock price of approximately $13 per share. Today Array owns 1.6 million Loxo common shares having value of about 21 million.

We've included on Slide 19 our guidance for the next fiscal 2015. This is the first time we have provided fiscal '15 guidance. Our guidance is based on little to no financial impact during the fiscal year in the event of binimetinib being returned. We will update guidance as necessary as the year progresses.

The license and milestone revenue guidance is below last year because we entered fiscal 2015 we had fully recognized previously received upfront and milestone payments from Novartis. Collaboration revenue guidance is up largely based on existing deals.

R&D spend shows an increase from 15 million in 2014 to 63 million in 2015. This increase includes launching the filanesib Phase 3 study knows as FACTOR in comnbination with Kyprolis versus Kyprolis.

Cash used in operations was 72 million in fiscal 2014 and we expect this to increase to the mid to high 80 million for fiscal 2015. Lastly, for guidance as shown on the bottom of Slide 19, the first quarter of fiscal 2015 for revenue and loss per share will be similar to the quarter just ended.

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

Ron Squarer

Thank you, Mike. On Slide 20, there is a summary of key upcoming catalysts for Array. As we stated it's our expectation that all clinical trials with binimetinib are continuing to advance according to the current development plan. And the event that binimetinib has returned to Array, Novartis must provide support for ongoing clinical trials as specified in our agreement.

Given a potential 2015 filing for NRAS melanoma, we believe that we possible returns of all rates for binimetinib to Array could represent a substantial upside scenario and be transformative to the company.

Selumetinib continues to enroll three Phase 2 trials and has recently initiated multiple innovative non-small cell lung cancer trials. We look forward to a potential 2015 filing for selumetinib in uveal melanoma.

During this year we will continue to collect data from multiple ongoing filanesib trials including the Phase 2 randomized combination trial with Kyprolis, which will inform the FACTOR Phase 3 trial. We remain on track to have preliminary results from a proof of concept study of Array-797 in a rare cardiovascular disease by the end of the year and look forward to emerging clinical data on ARRY-380 the selective HER2 and they are oral.

So at this time, I'd like to turn the call back to the operator for Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from Cory Kasimov from JPMorgan. Please proceed.

Matt Lowe – JPMorgan

Hi. It is actually Matt Lowe in for Cory today. I guess my first question is if for whatever reason you were not to receive the rights for binimetinib back, what then would be the plan for 614? Would 614 then be developed or I guess I'm just wondering what would happen in a situation where you did not receive the rights of binimetinib back regarding 614?

Ron Squarer

Right. Well, thanks Matt for the question. It's tough to answer -- to answer a theoretical question. In our position I think as we stated today is that it is likely that binimetinib will be returned to Array. But there is certainly no -- we are not doing anything that would impede the ability for a 614 to be developed. We have collected the data from the last ongoing trial. We have had interactions with regulatory authorities, which suggest a potential path forward for that product, but at this time we feel that our focus should be on binimetinib and we will provide on updates on 614 if that situation changes.

Matt Lowe – JPMorgan

Okay. And as a quick follow-up, do you have -- understanding it may be a bit early to say anything, but you have plans for any Array sponsored, additional future trials of binimetinib assuming you do get the rights back?

Ron Squarer

So at this point our focus is on planning for a potential return and that's all we are really able to say at this time as that product will potentially be returned to Array. And we stated that we believe that our contract alone indicates ongoing financial support during the case of a return including a transition period. And as a result we think that the return of binimetinib will come with financial support. But still we are able to clarify for ourselves and in investment community the exact conditions under which binimetinib could possibly be returned, it would be difficult for us to lay out additional investments.

With that said, we've indicated just on the call today a couple of innovative lifecycle opportunities in our lead indications. So we believe NRAS melanoma will be the first indication and that BRAF melanoma and ovarian will come next. The data which was presented in combination with the CDK-46 and the PI3K alpha selective, those are in NRAS melanoma and ovarian cancer respectively. So just those two data sets plus additional data that we've collected, Novartis has collected could certainly inform future investment opportunities. But realistically having even three indications for wholly owned MEK inhibitory to array alone would be quite transformative. And that's really what we are focusing on and just make sure we get that right.

Matt Lowe – JPMorgan

Okay, understood. Thank you.

Operator

And our next question comes from Eun Yang from Jefferies.

Eun Yang – Jefferies

Thank you. Ron, so a quick question on filanesib. So the Amgen ASPIRE trial data came out, so with that the Kyprolis usage could actually move upstream. So does that impact your thinking on FACTOR trial in relapsed/refractory multiple myeloma?

Ron Squarer

Well, I am going to let Andy who is focused on our commercial planning answer that. But what I would say first is that the positive news on Kyprolis is very significant to our strategy in that. We have selcted Kyprolis as the product with which to combine in our planned pivotal trial. And we discussed the reasons for that in the past namely that we feel that it's a less crowded space. We are currently the only novel driver that has planning to combine with Kyprolis in a pivotal trial because of the stage of the patients that we would treat in that trial, we believe the PFS will be shorter and the trial would be smaller both in duration and in size to show the treatment affected. Finally that there is just a great window of opportunity to recruit patients in Europe although it would be a global trial, who have a more difficult time getting access to Kyprolis because the product is not yet approved and reimbursed.

So the fact that data is coming out on Kyprolis that the maybe earlier issues associated with concerns about the cardiovascular profile seem to have been laid reinforces that Kyprolis remains an excellent choice for us as an initial indication. The Velcade data we've generated is certainly impressive, but we believe that Kyprolis represents a more efficient first indication for filanesib as a proteasome inhibitor enhancer.

Now, regarding specifically the interpretation of the new Kyprolis trial, I will turn it over to Andy.

Andy Robbins

Hi, Eun. Yes, ASPIRE for us is a positive advantage as Ron said. I think it reinforces that Kyprolis is a very active agent and had very significant PFS in a early line of one or three priors in multiple myeloma. We also were pleased to see the safety profile characterized as similar to what has previously been seen. We also want to see the focus data as that emerges hopefully in the next week to a month.

But to your specific question, I think the general answer is in myeloma there is room for many, many different regimens and combinations. And it's probably too early to call what the standard of care in one or three priors will be until we see the LO data from BMS and the CD-38 as they emerge over the next few years given that they are going after similar combinations and regimens. So I think it's pretty much earlier to say that Kyprolis is now the standard of care in one to three priors. But we are encouraged by the positive data and that's how we characterize into that.

Eun Yang – Jefferies

Okay. In the FACTOR trial the patients also -- patients have taken Pomalys before they enrolled for the FACTOR trial?

Ron Squarer

So the FACTOR trial, the Phase 3, we haven't put out the exact patient inclusion criteria. All I can say is it's going to look very similar to what our Phase 2 current trial is which would allow for patients to have received PAM in prior lines of therapy but would not require it.

Eun Yang – Jefferies

Okay. And the second question is on second generation of MEK inhibitors with AstraZeneca and Novartis. Is there any update there or you guys are just focusing on the first generation selumetinib and binimetinib?

Ron Squarer

Eun, I believe you might be referring to backup programs that are …

Eun Yang – Jefferies

Yes.

Ron Squarer

Yes. I think it's really for them to describe the details of their internal portfolio prioritization. But I think it's safe to say that the focus and the investment currently really is on binimetinib in Novartis and selumetinib at AstraZeneca. And frankly, the profile of those drugs, both of those compounds is quite favorable. Combinability of the clinical data that we just justified entering into now is a total of six pivotal trials in many signal searching trials Phase 2 in combination with cytotoxics and in many types of innovative targeted agents. So I think that there is two lead Array invented MEK inhibitors, have the profile that both companies would expect and have the potential. And time will tell to be best-in-class MEK inhibitors in the marketplace. So we will see how that emerges over time. Does that answer the question, Eun?

Eun Yang – Jefferies

Sure. And the last question is on selumetinib. If I remember it correctly AstraZeneca was going to make a [co-novo] (ph) decision for (indiscernible) putting first-line KRAS-mutant non-small cell lung cancer patients, is there any update there?

Ron Squarer

I don't think there is any update. This is what something that's put out in their investor materials I think about a quarter ago. But what's more compelling than the idea or the statement that they may be starting a Phase 3 first line and lung cancer is the very broad investment they are making in generating data to that effect. So as we mentioned and as we talked about in the past a broad program combining selumetinib with let's say a leading or a standard of care first line cytotoxics that would be gem/cis, carboplatin and pematrexed, but also these very rapid and impressive studies that they have started with their hot new drugs that were the talk of ASCO and that would be PDL one and the -- meeting EGFR escape compounds. So in fact they went in very quickly into combining selumetinib with those speaks to what we believe and we have regular contact with leadership team at ASTRA including Pascal himself, and so we believe they are very much seeking to build the broad lung cancer franchise. They are well ahead of anyone else in that area and they are building very much around it.

And so we will look forward to any future announcements on first line KRAS and selected patient populations. We think that all of that is in scope and I can't speak for AZ or Pascal, but I think we will all agree here on this call that they are under tremendous pressure having rejected an offer from Pfizer to generate revenue and value as an independent company. And we think that selumetinib represents a near-term opportunity to do so. And that's certainly the signal we've heard from Pascal and his team.

Eun Yang – Jefferies

Thank you. That's helpful.

Operator

Our next question comes from Ted Tenthoff from Piper Jaffray.

Ted Tenthoff – Piper Jaffray

Great. Thanks very much for taking the question. While this has been answered, I wanted to ask about the programs that are partnered with Oncothyreon, and of what the status is there. And if you could just remind us what your routine rights are routine economics are around those programs?

Ron Squarer

Great. Ted, thanks for the question. Yes, 380 is the anchor is our view at Oncothyreon. We know that they have made an announcement about expanding their portfolio just today but it disappear more earlier stage in investigational type programs. We have been in regular contact with the team there and including the CEO there, Bob Kurtman, who remains very much focused on generating data on 380. So as a review of what data is being collected there are currently three combination trials underway. The first, the one start first with at Dana-Farber, it's a combination with trastuzumab or herceptin in patients. All of them have brain metastases. I believe that study will enroll ultimately about 50 patients and looking at another number of different dosing options. So that data will be collected over the year.

Now, at Oncothyreon, so they are executing and funding on their own at this point. Two combination trials, one is trastuzumab or herceptin plus Xeloda gemcitabine. And a second trial which is a combination of TDM one and this is in metastatic disease. These are poor of concept trials. With the recent interest in neratinib, we certainly get questions about the potential for this drug longer term. But we feel that these studies that are ongoing right now represent a great opportunity to see the behavior of the drug in this disease and then we would determine how to move forward. Specifically we think that is a highly selective HER2. It is possible that the tolerability profile could be a distinguishing factor and that product could ultimately be tested and used in populations that might be on drug for long periods of time.

But it's really these trials and getting the data from them that will be important. In terms of the deal and what we made public on it, I thin first and foremost, if we continue to move forward with what would be a co-development after the proof of concepts are funded and completed by Oncothyreon. We'd retain global commercialization rights, but Oncothyreon would have commercialization rights co-promote specifically in the U.S., but we would book sales and be responsible for commercialization worldwide. It is essentially a profit share arrangement in that situation. There are provisions if either company chooses to walk away from the deal there would be substantial trailing royalties if that was the case. But the goal here is to run the proof of concept study, see what we have, determine the value and then choose a path forward. Does that help, Ted?

Ted Tenthoff – Piper Jaffray

Yes, very much. Thank you.

Operator

And our following question comes from Stephen Willey from Stifel.

Stephen Willey – Stifel

Yes. Hi, good morning. Thanks for taking my question. Just wondering, Ron, if you have received any specific guidance around the potential antitrust issues that Novartis may counter with respect to containing two MEK inhibitors, or if that is an assumption on the team's part at this point?

Ron Squarer

Yes, thanks for question, Steve. As we stated our position is that we believe there are anti competitive issues associated with this project. Ultimately, I'd love to answer that question directly, but the right address for that question is Novartis, we believe there is an active regulatory process underway right now, and that Novartis would certainly be able to provide insight to it. But without going into any details because the proceedings are confidential between Novartis and the regulatory authorities in the U.S. and Europe without going into too much -- our belief that there are anti competitive issues comes from a series of let's call it data points or information we will receive, unfortunately none that is in the public domain or that should be discussed at this time. And that's the best we can offer at this point is our belief that there is an issue. And that is of course in addition to sort of on top of the contractual obligations that Novartis have that we referred to.

So we have quite a bit in our view protection. From our contract, we have stated that we think that that prevents them from or makes it inappropriate for them to own two MEK inhibitors that there is provisions for support in the event that the drug is returned. That's of in addition to or before even a potential regulatory action. I think what we can also say with certainty is that Novartis is going through regulatory process that is required by the size of the deal. And they have actually stated it. And so have to or they are seeking clearance from FTC and other global special European authorities.

From a timing point of view they likely have heard back from regulatory authorities and it would be very useful to ask Novartis what the status of these proceedings are and how they relate to oncology products specifically. I wish I could provide more information at this point, but we feel that that's appropriate answer.

Stephen Willey – Stifel

I understand that. I appreciate the color. And then on the Oncothyreon collaboration; is there a timeline by which you need to exercise those co-development optionality rights after the proof of concept data. I was just trying to think about the convergence of that event maybe coinciding with the return of the compound from Novartis and just wondering how those two events maybe occurring unlocks that make that decision making a little bit more challenging.

Ron Squarer

Yes. The way it's structured is really a stage that we are basically in and the goal would be to opt out, and so there is no specific provision for that. We are kind of in until we decide to not be in. Generally speaking, I do think we will begin to see some data, let's say, certainly in this fiscal year and probably concurrent with binimetinib getting some clarity. We had at least have some early insight that would help us to prioritize their. And so instead of speculating on what we might do because there is two factors if bini comes back, how it comes back in terms of the type of financial support we have, and then what the 380 data is pointing to. I think it's best for us to wait.

But the deal was structured in a way to allow us to retain substantial value even if we don't continue to invest going forward. And it allows us really to see data to inform that decision. So I think there is a lot of, let's call it a great optionality there that allow us to make prudent decisions as we move forward. So I think it's a good situation regarding the way we might progress with 380.

Stephen Willey – Stifel

Okay. And then just one last question on the myeloma compound, just wondering what the timing of open label AfFIRM data might be. I understand this is open label study looking at response I believe as an endpoint. So, is this a study that you can feed us data on an incremental basis, or is there any contribution to the role of the biomarker in terms of a subsequent filing that would preclude you from doing so? Thanks.

Ron Squarer

Yes. So, I'll give a shot at giving you some sense of our plan there. So, with the single-agent trial, it really has a number of aspects to it. First and foremost, it's simply our hypothesis that given filanesib has a unique mechanism of action distinct from the way IMiDs and proteasome inhibitors or other novel agents work, that it may have utility when IMiDs and proteasome inhibitors have failed, and even in the case where they both failed. And that's what this trial is. It's a very high hurdle, you might argue, because as we mentioned earlier, the design includes patients who have a failed either Kyprolis or Pomalyst, but the reality is especially in the U.S. today that many patients have actually seen both. And so, it's a very high hurdle refractory setting where if it's positive, it validates a powerful scientific rational that there is limited, let's call it "cross-resistance," because the mechanisms are so unique.

So part of it is about very, very definitely potentially proving this single-agent robust and important single-agent activity, although we recognized the drug is not necessarily only going to be used in that setting, but it's ultimate potential will be first combining with proteasome inhibitors and then perhaps in the future, IMiDs as well.

Now, you do note, as you said that AAG is the primary endpoint there. And that's because we feel that while there is certainly no guarantee that the FDA would want to look at this data or accept the filing on it or provide an accelerated approval. We do note that both Kyprolis and Pomalyst were in fact approved with single-agent, essentially single-agent, single-ARM trials for their provisional approval. And in a setting like that, if you do end up at the FDA, the effect size is important, and we think that using AAG as a selection marker could enhance that effect although we're not pre-selecting patients; we're taking all patients who have both datasets. We have the AAG normal to low and the high AAG although the endpoint of course is in the low to normal in the majority of patients, who do not have that high levels of AAG that we think potentially interfere with the way filanesib works.

So, I gave a lot of information, but to directly answer your question, we think that it's likely we'd be sharing the results of that trial, the single-agent trial when it is complete because it really has the greatest relevance in combination with other trials that are designed for registration namely the combination trials. And so, I think you really need to put them together to have a meaningful package.

If the Phase 2 trial that we're running right now, the combination with Kyprolis, versus Kyprolis alone, that's the study which we think we'll be able to over time provide data on. We'll get safety first. And that's where we're at looking now, combinability, then ORR when we feel that it's robust, and then ultimately PFS. In that trial we're also looking at AAG for the first time really in a combination setting to see if the hypothesis holds your hypothesis that AAG binds tightly to free filanesib reducing the likelihood the patients can benefit. We want to see if that holds in a combination setting when you have two drugs on board.

So, that's probably going to be the data that we'll be sharing over time. Does that help?

Stephen Willey – Stifel

It does. Thanks.

Operator

Our next question comes from Matthew Andrews from Wells Fargo Securities.

Matthew Andrews – Wells Fargo

Yes, good morning. Thanks for taking my questions, a couple; first, Mike, if you could just specifically state what the ATM sales were in the quarter? Ron, according to clinicaltrials.gov, the NEMO study tentatively was supposed to have data I think in October last time I checked, so are we still on track for potential data in the fourth quarter? And a couple on filanesib; at this point in time or in the future; is there any benefit to applying for breakthrough therapy designation? When will you finalize your thoughts around the interim -- potential for interim objective response analysis? And then lastly, for Andrew, just some comments from him on the end-stage myeloma opportunity, it looks like J&J is moving daratumumab up into the frontline setting and possibly smoldering myeloma. If that's the case, what does that say about the opportunity in end-stage patients? Thanks.

Mike Carruthers

Hey, Matt; Mike here. Yes, we sold 24 million during the quarter.

Matthew Andrews – Wells Fargo

Okay, thank you.

Ron Squarer

And then, Matt regarding NEMO timing, I think that all we can say right now is to refer to the Novartis statements about filing and they're calling filing a 2015 event. And you have to walk backwards from that. Our priority in our discussions with Novartis is to ensure that they're remaining focused on the job at hand, and our impression is that the team actually working on these trials or the teams working on these trials are ignoring the fact that there is a transaction going through regulatory approval at this time.

And so, that's the best we can say at this point. We certainly are -- it is certainly our impression that they're working towards that goal of that 2015 filing and we'll provide updates as they become public really because we're quite restricted on what we're allowed to say about Novartis and their non-public information.

Turning I think to filanesib and the interim ORR, I think that detail will be provided at the time that we'd announce the finalization and the start of the Phase 3 trial. That's when we provide sizing, cost, timing and the rest. And so, I think I'll leave it at that at this point. I think it's a novel approach, but not without -- it's straight off that you do have to give up some statistics and we have to determine whether that's the right approach. And we'll be doing that when we provide more detail.

I'm going to ask -- yes, you asked about breakthrough as well, I think breakthrough is a great thing, in general, I think it's especially relevant in non-oncology settings in an attempt to create an environment similar to what we have in the oncology setting already. Essentially breakthrough provides better access to regulators for the planning and then initiation of trials. Our access to the FDA for filanesib has been phenomenal. They've been incredibly responsive and cooperative and helpful. So I don't want to dismiss the importance of breakthrough, but I also don't want to overstate the relevance of it. It certainly is not any indication that that drug is more likely to be approved ultimately.

But the key is it's our understanding that you really do need randomized data or it's very much preferred to have randomized data when you go for breakthrough setting even if it's not large numbers. And I think that these are currently running ongoing Phase 2 filanesib or plus/minus Kyprolis. It may represent data and if we felt it could help, we certainly would apply.

For breakthrough, based on that data that I guess I said, our interactions with the FDA have been as good as we can expect. So, turning over now to Andy to talk about the competitive environment little bit.

Andy Robbins

Yes. Matt, I think the unfortunate reality of myeloma is that even with all these new exciting therapies that patients still are going to be searching for a cure, and so ultimately they'll continue progressing through lines in regimens until they get to a place where they have no other option.

And so, if you look at something like what carfilzomib has been doing over the past I guess 18 to 24 months with an indication in, what's called the high unmet need, no other choice population, they're probably somewhere in a run rate of about 250 million to 300 million in the U.S. without European approval. So that's how I wrap my head around what does the last line of therapy look like, some single-agent approved on ORR either be accelerate approval or in a last line setting. I think as daratumumab in the Sanofi compound, elotuzumab etcetera moved up line and I think even DARA yesterday announced the first one trial. They're going to be trying to get into that naive patient population or one to three priors like carfilzomib showed with Revlimid for dex.

So the battle is going to be waged up in the frontline setting. And I think there is still going to be a very strong commercial opportunity for companies like Array, 25 million to 300 million drug in the United States would be phenomenal for a company of our size. So I think that tells its high relevant commercial space for a drug like filanesib.

Matthew Andrews – Wells Fargo

Okay, great. Thank you.

Operator

And a follow-up question comes from Jim Birchenough from BMO Capital Markets.

Nick Abbott - BMO Capital

Good morning. Thanks for taking my questions. It's Nick Abbott in for Jim this morning. Can I just ask on -- reflecting binimetinib, I guess, so you've announced that 614 and 502, and there is no further spent on development. Is that due to unanticipated spent of binimetinib? I'm assuming the asset has returned to you.

Ron Squarer

Yes. That's what we're saying is that -- well, it is difficult to access exactly what the likelihood is at this point. We do think that it is very possible that binimetinib will return. While we think it's inappropriate for us to discuss the regulatory process, I think that folks can certainly reach out to Novartis and GSK to get an update there. And because it would represent such an exciting investment opportunity, I mean essentially there is a scenario in which we'll be getting back major asset multi-tumor in three pivotal trials close to filing essentially with the clinical programs either complete or paid or near paid for. And then, you'd be imagining ramping up for commercialization, and as we've discussed earlier, potential lifecycle opportunities for major asset. And at this point, we thought it's important to keep the runway clear to potentially land binimetinib. And of course we'll re-access our priorities at any time. It's not a reflection necessarily on 614 not having important utility, but really more about prioritizing the impact that Array can have ultimately in patients and then on creating value for a shareholder base.

So I think that's the best way to describe it at this point. Does that help?

Nick Abbott - BMO Capital

Yes, it does. Thanks, Ron. And can you just elaborate on the runway?

Ron Squarer

Specifically?

Nick Abbott - BMO Capital

Well, it looks like just looking at your guidance; it looks like the runway appears to be through the end of 2015, unless I'm misinterpreting this, which I could well be.

Ron Squarer

Yes. So, I think what's safe to say is that the funding for the company at this point really is earmarked for filanesib, because at the time of planning and over time we didn't have visibility to the possible return of binimetinib. This is really something that came up, I guess a couple of months ago. And a lot of it depends on -- first if, then, when and how we get that binimetinib, and how very much is about what kind of investment would be required from Array versus what kind of investment is already complete or would be completed by Novartis either through our contract or through a regulatory, let's say regulatory decree.

So, I think that's where we are. The money we have currently really is more earmarked towards filanesib, and we'd access how to prioritize and move forward when we have more clarity. Mike would like to -- Mike will just add some color to that.

Nick Abbott - BMO Capital

Thanks.

Mike Carruthers

Yes. I agree with -- Ron described it. And I mean part of the issue is we most likely wouldn't expect to spent incremental additional money in fiscal '15 even in getting binimetinib back just with the contractual commitments and so forth. So that's why we have over a year of runway. You were correct on that assessment, Nick.

Nick Abbott - BMO Capital

Okay, thank you. And then just finally, I think really in -- answer to the previous question, really you addressed this, but filanesib obviously is a very interesting asset. Myeloma is a very complex space moving rapidly and changing. I think one of the comments we've heard back from myeloma specialist Onyx was they didn't really have bandwidth of fully developed assets. And as things change you may lose opportunities that are present now. I know that you're focused on that relapse or the refractory space, but would you consider a co-development of this asset so that you could get data with Velcade, get data with other items that are commonly used in myeloma? Thank you.

Ron Squarer

Yes. So, regarding that what I'd say is our priority is really to generate data that would elucidate the value proposition for filanesib we have picked, as I have noted Kyprolis, because we felt it's the most efficient, rapid and least crowded space, but you're correct in stating that Velcade is another opportunity the data is, let's just say just as good from ASH few months ago or I should say in December, as with Kyprolis, we also have powerful scientific data point towards IMiDs and we'll be doing some enabling work there as well.

So companies like ours will never say never to the possibility of collaboration. We currently plan for filanesib as a wholly-owned asset moving forward, but if there is value to be generated through partnership and we've indicated in the past we are open even now to regional type partnerships. We've even stated that Japan or Asia is an area that we feel is probably beyond our current scope, but one potential scenario would be to have a partner help with bortezomib which really is more of an European strategy in our view, a region where generic bortezomib could have very significant stronghold for fall into the future.

So the answer is currently wholly-owned, open to prospects for value creation, but no specific decision made on that at this time. And so, I think answered -- does that answer the question?

Nick Abbott - BMO Capital

Yes, it does. Thanks a lot. I appreciate. Thanks.

Ron Squarer

Great.

Operator

We have no further questions at this time. I'll like to turn the call back over to Ron for closing remarks.

Ron Squarer

Oh, great. Thank you all very much. It's certainly an exciting time for Array. And as I mentioned, the single most important near-term catalyst we see is the potential return of binimetinib global rights from Novartis. I apologize that I'm directing you a bit to Novartis to get additional insight on the process if that comes from them. And we believe they do have some insight that they could share with you at this time. But as we look forward -- but we certainly look forward to providing more details on this as it becomes clear. It is very impactful on our prioritization and the future of the company.

So, with that, I'd like to thank our employees here at Array for the commitment, ingenuity and diligence that continues to fuel our success. I also want to thank our patients, partners and shareholders for their continued confidence and support. And with that, we'll close the call. Thank you all 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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