Array BioPharma Inc. (NASDAQ:ARRY)
Q2 2016 Earnings Conference Call
February 2, 2016 9:00 am ET
Tricia Haugeto - Director, Corporate Communications, IR
Ron Squarer - CEO
Dave Horin - CFO
Victor Sandor - CMO
Andy Robbins - COO
Ted Tenthoff - Piper Jaffray
Anupam Rama - JPMorgan
Monica Gorman - Cantor Fitzgerald
Eun Yang - Jefferies
Stephen Willey - Stifel
Good day, ladies and gentlemen, and welcome to the Array BioPharma Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, your call is being recorded.
I'd now like to introduce your host for today's conference, Tricia Haugeto. You may begin ma'am.
Thank you, Rannia. Good morning and welcome once again to Array BioPharma's conference call to discuss our financial results for the second quarter of fiscal 2016.
You can listen to this conference call on Array's Web site at arraybiopharma.com. Also, we're using slides to accompany our remarks. So slides can be downloaded on the Investor Relations home page 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 our Chief Financial Officer, Dave Horin, who will lead the call today. In addition, Dr. Victor Sandor, our Chief Medical Officer and Andy Robbins, our Chief Operating Officer 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, 2015 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 it over to Array's CEO, Ron Squarer.
Thank you, Tricia. Good morning and thank you for joining our call today.
Starting on Slide 3, Array made significant progress in 2015, which is paving the way for important value drivers this year. Early in the year, we announced a deal with Novartis to regain rights to binimetinib and acquire rights to encorafenib. Importantly, this agreement included over $100 million in net payments plus significant financial support from Novartis to conduct and/or substantially fund all ongoing trials through their completion.
Later in the year, we entered into a strategic collaboration with Pierre Fabre related to development and commercialization of binimetinib and encorafenib. As part of the agreement, Array received an upfront payment of $30 million along with rights to receive up to $425 million in future potential milestones. In addition, to Array's eligible for robust, tiered, double-digit royalties of up to 35% once annual Pierre Fabre sales surpassed €100 million.
Array retains exclusive commercial rights to key markets including the U.S. and Japan, while Pierre Fabre gained exclusive commercial rights in other geographies including Europe and developing markets.
Array and Pierre Fabre expect to collaborate on future global development of the product including provisions for co-funding clinical trials. As we will discuss later, our cash position as of the end of December was over $185 million and with Novartis substantially funding all currently active binimetinib and encorafenib studies, we are in a healthy position to get through a number of very important upcoming catalyst.
So turning to our ongoing pivotal studies. We are excited to share positive top-line results from NEMO, our global Phase 3 trial and patients with NRAS-mutant melanoma. Even given recent advances with immuno-therapy, these patients have a poor prognosis and very limited treatment choices and we believe binimetinib could be an important new option of these patients. We plan to share full results for NEMO at an upcoming scientific conference and remain on track for regulatory submission in the first half of 2016.
We plan to announce top-line results from Part 1 of COLUMBUS in the middle of this year, which are positive, could support a regulatory submission by the end of 2016. Also during the quarter, Array completed patient enrollment in Part 2 of the COLUMBUS Phase 3 study.
The Phase 3 MILO trial and patients with low-grade serious ovarian cancer continues and we expect to complete patient enrollment during 2016. In addition, we share positive results from early stage combination trials in NRAS and BRAF-mutant melanoma and BRAF-mutant colorectal cancer and plan to provide updates this year. Based on the strength specifically of the BRAF-mutant colorectal cancer data, we plan to initiate a global Phase 3 registration trial in that population in 2016.
Finally, an exciting a new trial was recently posted on clinicaltrials.gov called SECOMBIT, which is an international clinical trial that will examine the sequential use of binimetinib and encorafenib before or after the Nivolumab and Ipilimumab in BRAF-mutant melanoma.
I'm on Slide 5 hence I will review top-line results from our NEMO trial. And by a way of background, among metastatic melanoma patients, the presence of an NRAS mutation occurs and approximately 20% of patients and is associated with the particularly poor prognosis. For this sub-group of patients that currently know specifically approved targeted therapy, we are very pleased to potentially offer another option for these patients.
As I mentioned earlier, we were excited to share that NEMO met its primary endpoint of improving progression free survival when compared with dacarbazine treatment with a hazard ratio of 0.62 and a p value of less than 0.001, the median PSF favored binimetinib at 2.8 months versus 1.5 months. In the trial, binimetinib was generally well-tolerated and the adverse events reported were consistent with previous results in NRAS-mutant melanoma patients. If successful, binimetinib would be the first specifically labeled agent for NRAS melanoma disease for which there are few options. We look forward to discussing our data with regulatory authorities moving forward.
Full results from the NEMO trials including progression free survival, overall survival, objective response rate, safety and a pre-specified sub-group analyzes including outcomes in patients who received prior treatment with immunotherapy will be presented at a medical conference this year. And NRAS specifically, immunotherapy is expected to often be used in the first line and we believe, it's important to understand how binimetinib performance following immunotherapy.
Moving to Slide 7, an outstanding question regarding the treatment of BRAF-mutant melanoma relates to the optimal weight to utilize immunotherapy and targeted therapy to maximize benefits to patients. The SECOMBIT trial is a multi-site, multinational, cooperative group trial exploring this question. This trial compares three treatment strategies, first treatment with encorafenib and binimetinib until progression followed by the combination of Ipilimumab and Nivolumab.
Second, treatment with the immunotherapy combination through progression followed by the targeted therapy combination. And third, an induction strategy with the targeted combination for two cycles then a switch to immunotherapy through progression followed by re-treatment with encorafenib and binimetinib.
The vast majority of metastatic BRAF melanoma patients will ultimately receive both immunotherapy and targeted therapy and this trial positions the encorafenib and binimetinib combination as the leading edge of the exploration of this issue as to the best way of sequencing this powerful treatment. And we are particularly pleased that the investigators including the lead, Dr. Paulo Ascierto, choose binimetinib and encorafenib over alternative compounds to explore this critical question.
So now on Slide 9, I would like to discuss our strategic collaboration with Pierre Fabre, based on the historic robust clinical development program initiated and conducted together with Novartis, our focus for a partner centered on companies with development and commercial capabilities, which met several key criteria.
First, we wish to find a Europe-based and Europe-focused company with a robust emerging market capability to provide scale to the collaboration. Second, our future partner needed to have an established oncology and sales -- oncology sales and marketing infrastructure, in order to support near-term product launches. Third, it was important to us that our future partner would prioritize binimetinib and encorafenib at the head of their portfolio ensuring the investment and intention of an experienced organization would be focused on our products.
And finally, we wanted to create a partnership with an exceptional royalty structure, so that we could capitalize on the robust clinical development that has already been made in these products. Through an extensive process, we selected Pierre Fabre as our partner based on the unique position meeting each of our partnership criteria. As part of the agreement, Array received an upfront payment of $30 million and is entitled to receive up to $425 million of certain development and commercialization milestones were achieved. Array is eligible for tiered, double-digit royalty starting at 20% at first commercial sale and ranging up to 35%, once annual Pierre Fabre sales surpass €100 million.
With the deal, Array retains full commercial rights for binimetinib and encorafenib in key territories including the United States and Japan. While Pierre Fabre will have exclusive rights to commercialize both products in other countries including Europe and other emerging markets.
In Pierre Fabre, we have a uniquely positioned strategic partner with a focus on oncology to develop and commercialize binimetinib and encorafenib in Europe and key emerging markets around the world. These two targeted agents fit perfectly with their broad experience in oncology and dermatology and will strengthen their current portfolio in international presence. Our partnership is fully aligned with their growth strategy in pharmaceutical, by geographic footprint and their corporate mission of bringing to market novel oncology products which address unmet patient needs.
Next on Slide 11, I would like to touch on our pre-clinical activities, our discovery activities. While we have historically partnered much of our discovery capabilities with leading biopharmaceutical companies, we do retain some proprietary discovery capability. We are focused now on what we believe is the underserved area of small molecule immunotherapy impacting the tumor micro environment. With the great scientific advisory board including Dr. Flaherty, Cravatt, McDermott, Lauffenburger and others that have helped us to prioritize a series of targets.
We are pleased also to have announced recently an immuno-oncology collaboration with Dana-Farber Cancer Institute. Their expertise complements the capabilities and drug discovery track record at Array. Specifically Dana-Farber's target validation, pre-clinical models and immuno-therapeutic activity and translational medicine will greatly enable Array's ability to delivery innovative therapies in this area.
So moving on Slide 13, I would like to provide an update on the ARRY-797 program for LMNA-related dilated cardiomyopathy or DCM. DCM is a very rare disease affecting approximately 250,000 patients in the U.S., our investigation focuses on a subset of patients whose disease is driven by mutation in the lamin A/C gene which is estimated to be about 6,000 to 8000 patients in the U.S. alone. This mutationally driven disease as a poor prognosis of age 45, 70% of patients will have died suffered a major cardiac event or will have undergone a heart transplant. This disease is progressive. So patients are expected to get worse and not improve over time.
On Slide 14, we provide the rationale for ARRY-797 in the treatment of LMNA-related DCM. Scientific literature suggest that mechanical stress-induced apoptosis is the mechanism underpinning DCM in lamin A/C–deficient hearts. p38 MAPK signaling regulates myocyte growth and survival in response to mechanical stress and has been implicated in cardiac dysfunction in laminopathies. ARRY-797 is a potent inhibitor of p38 MAPK and has been shown to normalize left ventricular morphology and to improve function in models of DCM.
In a physician-sponsored single-patient IND ARRY-797 treatment was associated with improvements in cardiac function and was well tolerated.
On Slide 15, we are currently advancing as well patient proof-of-concept study of ARRY-797 and patients who have LMNA DCM. The primary endpoint has changed from baseline and a six-minute walk test to 12 weeks and patients continue treatments through 48 weeks.
As I mentioned earlier physicians would not typically expect patients to improve over time. However, that's what we are looking to achieve here. Working with great sites including Harvard, Hopkins, Meriter and others.
Other endpoints include left and right ventricular function, quality of life, safety and pharmacokinetics and ongoing [a rule over] [ph] study allows us to continue tracking patients even past 48 weeks.
So turning to Slide 16, here we are pleased to give a description of what we are seeing in the six-minute walk test. Reserving the details for a future scientific conference, but what we are showing on the chat is a number of rare disease products which have been approved in the past few years using six-minute walk as the primary endpoint. We are showing the range of results in terms of mean, change versus baseline measured in absolute meters. These trials were placebo controlled, the ARRY-797 trial does not have a placebo controlled and was not blinded and these are important caveats. But this data does provide us with some initial indication of activity.
What this implies here, is that our mean change and six-minute walk versus the baseline at the study start exceeded the range of results seen with other products. While we are not disclosing our mean absolute improvement from the graph like you can interpret the results to be greater than the mean change versus baseline for these approved drugs and other rare diseases.
This is 12 weeks which was our primary endpoint; durability though is really the issue as we want to see this product working over substantial period of time. We do have patient experience out to 48 weeks and other secondary endpoints including a composite measure called NT-proBNP a serum biomarker of heart failure severity. And they continue to be encouraging.
Our message is that, we are seeing important activity and we are working rapidly to determine how best to move this program forward to potentially help these patients in great need.
So at this point, I would like to turn the call over to Dave Horin, who will review the financials for the quarter.
Thank you, Ron.
I'm pleased to share with you the financial results for the second quarter of 2016, which ended on December 31. The increase in our reimbursement revenue as a result of our Novartis arrangement of approximately $37 million and the corresponding increase in research and development expense for the first six months for fiscal 2016 as compared to the prior year period have significantly impacted our financial statements. Therefore, we are providing a financial comparisons of December 31, 2015 quarter versus September 30, 2015 quarter as well as the comparison to the quarter ended December 31, 2014.
Array ended the quarter with $184.4 million in cash, cash equivalents, marketable securities and accounts receivable. Current account receivable of $64.8 million as of December 31, 2015 including $30 million from Pierre Fabre which was received in January and $32 million from Novartis, which we expect to receive within 60 days.
Excluding this $30 million received from Pierre Fabre and other financing activities such as exercise the stock options and the contribution to our employee stock purchase plans, the net change in cash, cash equivalents, marketable securities and account receivable was approximately a negative $22 million.
Given the significant receivables from Novartis as of December 31, 2015, we equate this amount to net cash outflows from operations for the quarter. Additionally, during the quarter, we paid a semi-annual interest payment on our convertible senior notes and paid prior period bonuses, if one normalizes these two payments to reflect the quarterly impact, net cash outflows from operations would have been approximately $18 million for the current quarter.
Revenue for the second quarter of fiscal 2016 was $35.4 million compared to $16.2 million for the prior quarter. The $19.2 million increase in revenue was primarily due to higher reimbursement revenue from Novartis. Cost of partner programs for the second quarter of fiscal 2016 was $5.7 million compared to $6.2 million for the prior quarter.
Research and development expense was $41.4 million compared to $21 million in the prior quarter. The increase in research and development expense is primarily related to the ongoing transition of binimetinib and encorafenib trials from Novartis to Array and it's consistent with the increase in reimbursable revenue from Novartis.
Compared to the same quarter fiscal 2015, revenue for the second quarter of 2016 increased $8.5 million primarily due to $27.3 million in reimbursement revenue from Novartis. Cost of partner programs decreased $6.2 million compared to the second quarter of fiscal 2015 primarily due to binimetinib development cost presented as research and development expense instead of cost of partner programs upon becoming wholly-owned programs.
Research and development expense increased $21 million compared to the second quarter of fiscal 2015 due to the categorization of binimetinib costs as well as new spending on encorafenib.
Looking forward, there were a number of variables, which will impact the net use of cash including the timing of new life cycle trials on our partner programs. We expect our net use of cash from operations will increase over fiscal 2016 with new investments in binimetinib and encorafenib. However, this will be partially offset by reduced spending on other programs as they wind down.
Now, I would like to turn it back to Ron.
Thank you, David.
And certainly important to have a healthy cash position in this environment and now on Slide 19, I would like to summarize the many catalysts that are occurring in the reasonably near-term for which we certainly have the financial strength to get through.
So in the first half of 2016, we look forward to Array to submission for our first Phase 3 with binimetinib in NRAS melanoma, the NEMO trial as well as publication of full trial results at an upcoming medical conference in the middle of the year. We expect Phase 3 top-line results from the important and commercially valuable BRAF melanoma program, the COLUMBUS trial in the first half of the year.
The effect of MEK plus RAF in BRAF melanoma is highly precedented, so we believe that we will see robust activity, the key question we are seeking to address is, whether we maintain the differentiation on fever, rash and photosensitivity that we have seen in data published from similar prior studies with our agents.
Given that prior results with a MEK/RAF in BRAF melanoma have pointed to impressive durability of response, we believe that offering a therapy within a differentiated tolerability profile will be particularly valuable. We expect to file both binimetinib and encorafenib in BRAF melanoma this year.
Next we expect to complete enrollment during the year with MILO, our third Phase 3 in low-grade ovarian cancer utilizing single agent binimetinib. Importantly, we expect to provide an update on the current Phase 2 that's running with -- running in BRAF colorectal and during this year provide more insight on the specific design of our Phase 3 registration trial.
You may recall, we presented early data from the Phase 2 focused on overall response rates, which compared the doublet of encorafenib and cetuximab, an EGFR inhibitor to the triplet which included alpelisib an investigational PI3K inhibitor. Data from this publication indicated, the 29% objective response rate and 82% disease control rate for the doublet and patients who have previously received up to five prior regimens. These results compared favorably both to currently available therapies for BRAF colorectal patients, and importantly, to other recently published investigational approaches in this population.
And historically response rates are very low for either single agent EGFR or RAF inhibitor therapies and patients with BRAF colorectal would suggest a synergistic effect for the combination of encorafenib and cetuximab in this population. And with the pending start of a Phase 3 trial, Array is in a position to potentially be a first in class and potentially be best in class in this very large commercial opportunity.
Turning to selumetinib, we expect top-line results in mid-2016 from SELECT-1, the Phase 3 trial and KRAS-mutant non-small cell lung cancer patients being run by our partner AstraZeneca. If successful, this would represent a large commercial opportunity. Last summer AstraZeneca shared exciting selumetinib results in neurofibromatosis Type 1 patients and they are currently advancing registration trials in this patient population. Astra, the thyroid Phase 3 being conducted by AZ continues to enroll patients.
As mentioned, Novartis remains obligated to substantially fund all current active binimetinib and encorafenib trials including the three Phase 3s and several ongoing Phase 1 and 2 studies. While new clinical investment will be outside of our agreement with Novartis, we are pleased with our global development collaboration with Pierre Fabre who may share costs of future development of binimetinib and encorafenib.
So finally, turning to our rare disease program interim data on the primary endpoint are encouraging and as mentioned exceeded the range of benchmark drugs for several different indications that have utilized change in six-minute walk as a basis for approval. Secondary, endpoints are directionally consistent with the primary endpoint; data for patients follow through 48 weeks supports the durability of the effect. And taking together these results are just a path forward for the program. We look forward to sharing a more complete set of results at an appropriate medical conference during 2016.
And so with that, I would like to turn the call back to the operator for Q&A.
Thank you. [Operator Instructions] And our first question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is now open.
Great. Thank you very much. And I appreciate the update. Just kind of looking at the cash position right now and sort of what we can expect. How long do you think cash should last the company and if you can in the high level, can you walk us sort of through what the NRAS market looks like both in the U.S. and in Europe?
Great. Ted, good morning and thanks for the question.
And so regarding cash, I think David stated that we have cash and equivalence over $185 million. And while, we feel it's a challenging to provide very specific guidance given the puts and takes, so that means active trials on bini and enco being substantially funded by Novartis, new trials by us. What we are doing instead is sort of pointing to our exit quarter net burn, which we here we estimated when you kind of layer back in a factor for events that occur once or twice a year. We get to a net burn of about $18 million. Now, we will be starting new trials, but as David mentioned we will be winding down others.
And we will certainly be in better position to provide guidance on the longevity of our cash when we provide details not only on the timings but also on the specific design of the colorectal trial, which will be certainly one of the lower substantial investments we've plan to make. And so, with that I'm going to ask Andy to speak about the NRAS opportunity in major markets.
So in the U.S., we see the NRAS market at about 20% of metastatic melanoma. And about 2000 patients a year, with about three-month duration of treatment that's about $60 million a year market. In Europe, we see a slightly larger, so maybe about $100 million. So overall, about $200 million year market globally.
So Ted, the other things to sort of add strategically, so first, we have mentioned, we plan to share data regarding our activity following the immunotherapy we think that's an important question to answer because in NRAS they mentioned many patients will receive prior immunotherapy and that could impact certainly the value proposition. But also, there is certain value as a standalone indication as Andy is alluding to. But we also think it's a potentially important point of differentiation for the MEK as we would be the only MEK approved in this very, very challenging disease. And so as we look forward to position ourselves versus other options we think that helps to create the image of a powerful therapy. Does that answer the question Ted?
Very helpful. Looking forward to an exciting year. You guys got a lot going on.
And our next question comes from the line of Anupam Rama from JPMorgan. Your line is now open.
Hey, guys. Thanks so much for taking the question. Just a quick clarification on how we should be thinking about COLUMBUS Part 2 timeline with respect to the NDA filing in the second half of 2016, are these results required for completing the filing and ultimately getting full approval?
And then, just in terms of the Dana-Farber collaboration, what's the duration of that collaboration and maybe some internal timelines on disclosing program or a target? Thanks.
Great. Anupam, thanks for the question. So just touching on COLUMBUS Part 2, just to remind folks, we are in a unique position with our MEK and RAF that we are able to dose RAF above its single-agent MTD, when it's combined with the MEK. And so we are the only MEK/RAF that has done this. And as a result, we are treating at 4.50 of the RAF in combination with the MEK where the single-agent MTD is really 300. And that is the design of COLUMBUS Part 1.
We did run COLUMBUS Part 2 in the event that it was deemed important to answer a combinationable question and it had 300 each in arm. It's very difficult for us to estimate whether or not regulators are going to require that as this is a very unique situation. It is very rare that you dose higher in a combination arm than in a single arm. But we have that data available. And so I think the best we can do is to say we plan to file Part 1, but we will have the Part 2 data available during the review progress. And as a result, we don't think it would delay any actions here or potentially in other territories. Does that help on COLUMBUS, Anupam?
And then on Dana-Farber, we haven't disclosed much information. This is a collaboration really intended to achieve progress on specific targets and molecules utilizing, they are very robust biological capabilities and marrying that with our great track record and actually discovering and building molecules.
So suffice to say the collaboration will allow us in our view to get to -- get to important molecules that hit important targets in this immunotherapy small molecule space. And as we said earlier, do you think this is an underserved area and one where there is certainly enthusiasm amongst the thought leader community to see small molecules really discovered and developed in this area.
Thanks so much for taking our questions.
And our next question comes from the line of Monica Gorman from Cantor Fitzgerald. Your line is now open.
Hi. Thanks so much for taking the question. Just with regards to ARRY-797, when do you expect to provide more visibility on further development plan? And is this something you would be looking on to partner in the future?
Monica, thanks for the question. So regarding 797, what we were saying is, we do plan to publish at a relevant congress this year always the challenges until you've been accepted and your [abstract been] [ph] published. There is certain resistance for companies to talk about the status. But as I said, it will be this year. And we think this important to see the totality of the data. It's a small data set. And so we don't want certainly to over represent the potential here and that's how we've been quite cautious over time. And speaking about this program but we think -- but the totality of the data set out folks will be able to judge.
Regarding our forward plans, we haven't announced anything specific on this. As you can imagine, rare disease, the studies don't tend to be terribly large. So it's certainly something we could pursue on our own and but we are determining the best path forward to generate value and we will provide updates as we go. Hope that helps Monica?
Yes. Thank you so much.
[Operator Instructions] And our next question comes from Eun Yang from Jefferies. Your line is now open.
Thank you. So now that you've planned to file for binimetinib and encorafenib this year, can you talk about your commercialization -- pre-commercial just an activity for this calendar year? And also, are you planning to find a partner for those products in Japan and Korea?
Eun, good morning. Thank you for the question. I'm going to let Andy address the pre-commercial activities. But you are correct assuming there are timelines hold -- we expect to be in a position to file both products this year. But what we suggested is that, we would hope to see approvals for NRAS next year and that's what we are planning for.
Regarding partnerships, we do intend most likely to partner in markets like Japan and Korea. Now, we will point out that melanoma is not a common disease in that region of the world certainly as in the U.S. or Europe especially Northern Europe. But, there is value there and certainly indications like ovarian and most and even more so in colorectal. We think there is a great opportunity.
But there is time to resolve that going forward, and of course, the point at which you partner meaning the better you can describe the value proposition opting the better deal you can get. So with that I will turn to Andy, he will talk about pre-commercial activities.
Yes. Certainly 2016 is an important year for commercialization preparation following the positive Phase 3 data NEMO, we started those activities building out the marketing team and preparing to build out a sales force. At the same time, Victor is preparing to build out his medical affairs team as both sort of prongs of medical and commercial will be important to successfully launch and commercialize the product.
So we expect to file NEMO in the middle of the year -- middle of 2016 and depending on how the FDA gives us what kind of review they give us that could put us in position to launch either very, very much the end of 2016 or early in 2017. By that time we will also have a hand to the results from the COLUMBUS trial, so we will know prospectively before we launch NEMO, how the COLUMBUS data look. That will inform how big and how rapidly we've built out the sales force.
Our current estimates from all end commercialization perspective would be somewhere in the 40 to 60 incremental headcount at Array. And we will be focused on the U.S. from an organic perspective. Obviously Pierre-Fabre will be commercializing the product in its territories, and then, we will be assessing the best way to move forward in the other retained rate territories such as Canada, Japan and Korea.
Yes. So the good news there is, we get to have a very targeted approach for NRAS and then BRAF of course is the same co-point, but may justify a more substantial investment. So we have a lot of flexibility in approaching the market in a very sort of cost effective way. Eun, does that answer your question?
Yes. Thanks. I have a couple of follow-up questions quickly, out of $425 million potential milestone payment from [Pierre] [ph], can you break down how much -- what percentage is coming from development versus commercialization related. And also, are you expecting any milestone payment in the calendar year 2016?
And quick follow on R&D, second quarter -- not the second quarter, fiscal year first quarter, is the high -- do you think there is a $41 million is a growing run rate for the remainder of the fiscal year or do you expect it to be lumpy?
Okay. Eun your first -- yes, first regarding the milestones we haven't disclosed the breakdown of commercial versus regulatory. And at this moment, we haven't given specific guidance on milestones across our portfolio, but we certainly will, if we feel that they are eminent. So we can't help more with that.
Regarding the ongoing burn rate, Andy, if you like to describe that?
Yes. So the interesting thing about our R&D reporting now is that we include the expenses that we spend on the Novartis trials and then are reimbursed and so that's trued-up in the financial. So we do expect that there will be over let's call it the period of fiscal 2016 maybe even into fiscal 2017 a lumpy R&D spend, which is the money we are putting out for COLUMBUS and NEMO and MILO, but we get back and we netted out. So the net R&D burn isn't going up, it's just an artifact of -- we pay the money out and then Novartis reimburses us.
And this is why we made taking a great effort to refer to cash as cash and cash equivalents and to spend time each quarter talking about how much of the R&D budget is sort of reimbursable and so we will work through that. But aside from the inconvenience, it's a wonderful position to be in having Novartis basically pouring substantial resources into these programs either work they are doing directly or projects that are or they have transferred over and they are reimbursing. And it's not a common situation. But you sort of have to add to our financial situation money that is being basically invested in the products for us -- products that we own going forward. So it's an interesting dynamic.
I think we have time for one more question today.
And our next question comes from the line of Stephen Willey from Stifel. Your line is now open.
Yes. Thanks for taking the question. On the ARRY-797 program, I understand that you guys will be presenting data later this year, but I know there is two doses that are being used in that space. I'm just wondering if any of the -- if you can comment as to whether any of the improvements you are seeing either on six-minute walk or on the cardio biomarker front or dose dependent, if there is any -- if there is any segments of dose dependency within the data?
Great, Steve. Thanks for the question. So now, at this time we are not commenting on the impact of the two doses. But what we have said in the past is that patients who receive the low dose who do not respond at 12 weeks or switched over to the higher dose giving them an opportunity to benefit from the higher dose. So it's a small study but to the extent that anything could be extrapolated by dose. We will certainly be able to share that when we publish.
Okay. And then just lastly on the sequencing study that you announced, I think it's the SECOMBIT study. Are you looking at the Part 1 COLUMBUS dose in that study or is it the lower part 2 dose because I know that in some instances when we speak to physicians, they use kind of the stabilization regimen pre-immunotherapy, they sometimes opt for the lower doses to make sure that they don't run into any tolerability issues.
All right. This maybe challenging technically but I'm going to try and keep Victor Sandor, our CMO who has been involved. And getting the study going knows. Victor, do you know the dose, we are using there if it's public?
I believe, its public but in any cases it's standard dose. It's the Part 1.
Okay. Yes. The part 1. It's the Part 1 dose. Yes.
The Part 1 dose.
Okay. Thank you.
Okay. Thanks for the question. And thanks all to -- to those who called in today. With both NEMO and COLUMBUS enrollment complete, we expect regulatory filings for both encorafenib and binimetinib in 2016. We also look forward to describing our Phase 3 development plans in BRAF colorectal cancer, so it certainly an exciting time for Array. I'd like to think our employees here for their commitment, ingenuity and diligence that continue to fuel our success and to thank our patients, partners and shareholders for their continued confidence and support.
And with that, we will close the call. Thank you all very much.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may now all disconnect. Everyone have a great day.
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