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Array BioPharma Inc. (NASDAQ:ARRY)

Q208 Earnings Call

February 5, 2008 9:00 am ET

Executives

Tricia Haugeto – Manager, Communications of Array BioPharma.

Robert Conway – Chief Executive Officer.

R. Michael Carruthers – Chief Financial Officer.

John Yates – Chief Medical Officer.

Analysts

Richard Smith - JP Morgan

Ed Tenthoff - Piper Jaffray

Michael King - Rodman & Renshaw.

Eun Yang – Jefferies & Co.

Howard Liang - Leerink Swann.

William Ho - Bank of America Securities.

Graig Suvannavejh - UBS.

Jim Birchenough - Lehman brothers.

Operator

Good day everyone and welcome to todays Array BioPharma Quarterly Conference Call. Todays call is being recorded. At this time for opening remarks, I would like to turn the call over to Tricia Haugeto. Please go ahead.

Tricia Haugeto – Manager, Communications of Array BioPharma

Thank you, Adria. Good morning and welcome once again to Array BioPharma conference call to discuss our financial results for the second quarter of fiscal 2008. You can listen to this conference call in 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 would like to introduce Array’s chief executive officer, Bob Conway, and our Chief Financial Officer Michael Carruthers who will lead the today. I would also like to introduce John Yates, our Chief Medical Officer who will provide an update on our proprietary drug development program, and Kevin Koch, our President and Chief Scientific Officer, 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 Steve Harbor’s statement. The matters we are discussing today include projections through 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 the management’s current expectations and involve risks and uncertainties that could cause them to differ materially from actual result.

We will refer you to risk factors discussed in our filings with the SEC including our annual report filed in Form 10-K for the year-ended June 30, 2007, and to know their filings Array make with the SEC. These filings identify important risk factors that could cause actual result to differ materially from those in our projections or forward looking statements.

Now, I would like to turn over to Array’s CEO, Bob Conway.

Robert Conway – Chief Executive Officer

Thanks Trisha, good morning everybody, thanks for joining the call to discuss Array’s second quarter result for the fiscal year ending June 30, 2008. I hope everyone got a chance to review last night’s press release. During the quarter, we continue to make excellent progress executing our strategy to become a fully integrated commercial stage biopharmaceutical company focused on inventing, developing, and commercializing targeted small molecule drugs to treat patients afflicted with cancer and inflammatory disease.

Today, Array has six 100% owned Array drug in our proprietary clinical pipeline. We believe this is one of the deepest and most valuable pipelines in the biotech industry. Each of these programs has aimed at an important therapeutic target with a large market opportunity. They are highly selective drugs, the drugs are either first in class aimed at a novel mechanism, where second generation drugs that we believe have a competitive advantage over marketed therapies or drugs in clinical development. We continually look to take the advantage of the opportunity to replace protein therapeutics with our small molecules.

So far each of the drugs has been well tolerated, achieved appropriate human exposure, and inhibited their intended molecular target as indicated by a biomarker. We believe when any of these drugs demonstrate positive proof-of -concept data, which should see a significant increase in value for Array. We plan to start delivering proof-of- concept data in mid 2008 on our first drug Array-797 and they have data on all six drugs by the end of 2009.

Our commercial strategy for our drug pipeline is to retain as much US rights as possible and partner rest of world rights to help pay for development and provide worldwide distribution capabilities. We believe Array continues to have one of the most productive drug discovery platforms in the drug industry. Over the past five years, we put 10 Array invented drugs into clinical development between our partnered and proprietary research. The quality of our discovery platform and the clinical assets it’s created has lead the partnerships with great companies like Celgene, Genentech, Liley, AstraZeneca and others. Today, we received $270 million in funded research from our partners.

If we total all the partnerships together, we have the potential for $1.3 billion in milestones and royalties from 3% to 13% on the programs. Our discovery platform will continue to feed our proprietary clinical pipeline adding one to three additional drugs each year.

Let me review with you progress this past quarters starting with our partnered research. We announced top line results from three randomized single agent Phase 2 trials with our MEK inhibitor AZD 6244, these trials were conducted by AstraZeneca. We anticipate AZ will have a full data set on these studies in an upcoming scientific meeting. In addition, there are six signal searching trials ongoing in collaboration between Astra and NCI, which were reported out when completed. AZ is also finishing a dose escalation trial with a solid dosing form that they've worked on over the past couple of years. They're currently evaluating the best development path forward for 6244.

We anticipate AZ will provide a complete update of clinical results in future plans for the drug by mid 2008. ITM-191 advanced in a Phase 1 multiple-ascending-dose clinical trial evaluating ITMN-191 as monotherapy in patients with chronic hepatitis C. ITMN-191 is an HCV protease inhibitor invented at Array and in development by InterMune and its partner, Roche.

We initiated research on Celgene program on four drug discovery programs as part of our collaboration with them. The targets were mutually chosen by the two companies and have not been disclosed but they are either in cancer or inflammatory disease.

Financially, we had a solid quarter with both revenues and loss per share on forecast and ended the quarter with a $142 million in cash or equivalents. In just a minute I'm going to ask John Yates, our Chief Medical Officer to review each of the proprietary programs or six of them John will talk about today. So, let me pass it over to Mike Carruthers, our Chief Financial Officer to drill down on the financial. Mike?

R. Michael Carruthers – Chief Financial Officer

Thank you, Bob. Array's revenue for the second quarter increased to $8.4 million. This met our expectations and grew as a result of beginning the collaboration with Celgene, which resulted in recognizing $1.4 million in revenue during the quarter. Recall that Celgene paid us $40 million in September upon signing the agreement. This $40 million is being recognized as revenue over seven years, but may accelerate if we complete our discovery efforts on the four programs earlier than this.

Our loss per share for the quarter of $0.43 is in line with our expectations and slightly better than analyst's estimates.

R&D spending for our proprietary programs grew during the quarter as expected to $20.5 million. This is up from $18 million we spent in the prior sequential quarter. We are still on track to our full year guidance for R&D spending of $82 million. One other item I have note on the spending side is that during the quarter we spent $1.4 million in patent related expenses covering a number of our programs. This represented 29% of our total G&A cost for the quarter. We expect patent expenses to moderate in the near term, an average about half this level during the next two quarters.

As of December 31, Array's cash equivalents of marketable securities totaled a

$142 million. This is a solid level of cash particularly in light of using only $39 million for operations during the last 6 months.

In the next two quarters to finish our fiscal year our cash use will increase to just over #20 million per quarter. We have no change to the full year guidance we’ve provided in December. That guidance placed revenue at $29 million and loss per share of $2 for our fiscal year that will end June 31.

Robert Conway - Chief Executive Officer

Thanks Mike. Let me pass it over to John Yates to update you on Array's proprietary programs. John?

John Yates – Chief Medical Officer

Thanks Bob. I'm pleased to update you on progress with our clinical pipeline. First I will discuss our full most advanced wholly-owned development programs, all of which are either already in phase 2 or will be within the next 3 months.

ARRY-797 which is our p38 alpha pan-cytokine inhibitor for pain and inflammation is progressing well in Phase 2 for treatment of pain. In fact, we concluded enrollment of our dental pain study last week and are moving rapidly towards un-blinding and analyzing the data, which we plan to submit for presentation at a scientific meeting in mid 2008.

We believe this study is likely to provide our first proof-of-concept for ARRY-797 to show that the pharmacodynamic effects of treatment decreased prostaglandin E2 and three inflammatory cytokines TNF, IL-1 and IL-6 will translate into a meaningful clinical benefit in terms of patients' symptoms.

The dental pain model is a well accepted model of inflammatory pain and if we see positive results from this study, this will have important implications for future development of 797. First, postsurgical pain is an unmet medical need, since NSAIDs have limited efficacy and opioids are associated with dose limiting side effects. So, many patients today have inadequate pain relief following surgery.

With appropriate data from our dental pain study, we may choose to develop 797 for treatment of postoperative pain and we will also consider other pain indications. Just as importantly since ARRY-797 is a pan-cytokine inhibitor, we believe that a positive analgesic effect would be a reflection of the anti-inflammatory potential of ARRY-797 in inflammatory disorders in general. Given appropriate data, dental pain study we plan to initiate a second study in dental pain that will provide dose ranging information and allow a direct head-to-head comparison versus an active comparator.

Regardless of the data from the dental pain study we will be initiating a Phase 2 study of ARRY-797 in ankylosing spondylitis in the third quarter of this year. This study will be very useful in determining the potential for efficacy of ARRY-797 in chronic inflammatory disorders known to respond to biologic PNF inhibitors.

Next, I want to update you on ARRY-162, a MEK inhibitor for inflammatory diseases. We're currently initiating our first site in this study which would be performed on three continents North America, South America and Europe. This 12 week study will enroll 200 patients with active rheumatoid arthritis on stable doses of methotrexate. We hope to conclude enrollment around the end of 2008 or very early 2009. Based upon safety, tolerability and pharmacodynamic efficacy we have seen in patients with rheumatoid arthritis in Phase 1, we believe that there is a good chance that we will see anti-inflammatory efficacy in this Phase 2 RA study.

Moving to Oncology, ARRY-543 is an EGFR and ErbB-2 Pan-ErbB inhibitor. We are more than 50% complete in our enrollment of the Phase 1b expansion phase, which is enrolling patients with ErbB-2 positive metastatic breast cancer and other ErbB family driven tumors. We're moving rapidly to initiating phase 2 and we'll be commencing a study of ARRY-543 plus capecitabine in patients with metastatic breast cancer around April of this year.

Based on the pharmacokinetics, pharmacodynamic and tolerability data seen to date, we believe we have a drug with superior pharmacokinetics and better tolerability than (Inaudible). And at maximum tolerated dose have greater efficacy both on ErbB-2 and EGFR. While ErbB-2 positive breast cancer is a primary disease target. These features should translate into a drug with clear efficacy in a wide range of ErbB-2 and/or EGFR driven tumors.

In addition, we are in Phase I expansion phase of our kinase and spindle protein inhibitor ARRY-520. This is a targeted inhibitor of mitosis which we believe may have the potential to be used either in solid tumors and/or in hematological malignancies. A key advantage over drugs such as the taxanes is due to the specificity of action we believe that ARRY-520 will not be associated with neuropathy. We've performed a site initiation visit for a Phase II study of ARRY-520 in patients with acute myelogenous leukemia, which is attractive because it can give us an early read out of efficacy for this drug.

Additional Phase 2 studies are being planned. At two earlier stage clinical candidates ARRY-380 and ARRY-614 are both progressing rapidly into Phase 1. We've initiated the first site for Phase 1 study of ARRY-380 as specific ErbB-2 inhibitor. We hope to complete enrollment for this study within this calendar year. We filed an IND for ARRY-614, p38 Type 2 inhibitor last month and plan to initiate a Phase 1 study in normal healthy volunteers later this month. Thus, overall we're very pleased with the progress we are making across our clinical development portfolio. Thank you.

Robert E. Conway - Chief Executive Officer

Thanks John. Let me review with you the milestones for six wholly-owned, 100% owned ARRY drugs in our priority clinical pipeline. The first is ARRY-797 that’s our p38 alpha pan-cytokine inhibitor. We plan on completing the Phase 2 dental pain study reporting out those results conducting an endo Phase 2 meeting with FDA additional postoperative pain studies. We will also initiate a Phase 1 or Phase 2 study in ankylosing spondylitis as well. ARRY-162 or MEK inhibitor for inflammatory disease, we will initiate the Phase 2 study in ARRY about 200 patients, and we should complete enrollment by the end of 2008.

Third is ARRY-543 or ErbB-2 EGFR inhibitor. We will complete the Phase1b expansion phase and initiate a series of Phase 2 studies. Four, is ARRY-520 or KSP inhibitor. We will complete Phase 1 and initiate a Phase 2 study. Five, is a ARRY-380 our selective ErbB-2 inhibitor, and we should about complete enrollment of the Phase 1 we are just initiating today. And finally, ARRY-614, p38 Type 2 inhibitor, we will conduct a Phase 1 study and define the Phase 2 development plans. So we will have significant progress on six 100% owned ARRY drugs, and we think achieving all these milestones will create significant value for the organization. Let me – I will go back to queue. Adria, if there are any questions this morning

Question-And-Answer Session

Operator

(Operator Instruction). We will go first to Richard Smith-JP Morgan.

Richard Smith

(Inaudible)

Unidentified Company Representative

Richard, can you speak up please.

Richard Smith

Can you hear me now?

Unidentified Company Representative

Yes, that's better.

Richard Smith

Okay. Sorry about that. So I was just wondering on 543. I know – as you said, whether you are going into the Phase 2 with the 400 mg or the 200 mg, and maybe can you provide any update on the – you said some prolonged stable disease in prior presentation. Any update there?

John Yates

Yes. A 400 mg twice daily is a maximum tolerated dose determined from the dose escalation Phase of Phase1, and that dose is providing us with very good exposure over the entire 24 hour period.

Richard Smith

Okay. Any update on the dates we presented back at AACR.

John Yates

Well at that time, we have not achieved the maximum tolerated dose. So, I think that's the major update now that we have identified that and are well in the expansion phase, and obviously as we get more experienced in the expansion phase that can provide us some signals that may help guide our future development.

Richard Smith

Just one last question. With respect to the dental pain market, have you done any work there? Can give us some sense of how big that market could be?

John Yates

Yes, dental pain represents about 15% of the total acute pain market and so, therefore it's a relatively significant segment in an off itself. But I think we are looking at the dental pain model as a tried and true way to assess pain relatively quickly and inexpensively the analgesic potential of the drug. And then, once we have done that and seen how effective we are relative to placebo and dose range and potentially relative to comparators agents, then we will know how likely it is that we can progress for a broader pain indication and one that we are contemplating right now is a postoperative pain indication, because of the unmet medical need in that area, but clearly once you have a drug with analgesic efficacy, we can think in the future of other types of painful condition.

Richard Smith

Okay, thank you.

John Yates

Thanks Richard

Operator

Next we moved to Ed Tenthoff of Piper Jaffray

Edward Tenthoff.

Great. Thank you very much. Just following up quickly on the 797, did you say that when should we be getting that Phase 2 dental pain data?

Michael Carruthers

We completed the last patient enrolled last week. We will be un-blinding the data internally at ARRY within this month, and we hope to be able to present the data probably mid this year. We are targeting may be June or July depending on the availability of appropriate opportunities to present at scientific meetings.

Edward Tenthoff

Now would that confer to the material event where we would see a top line release may be in the March timeframe then or?

Robert Conway

You know Tenth, this is Bob.

Edward Tenthoff

Hi Bob.

Robert Conway

Our bias is always to release data at scientific meetings. We think it's the appropriate venue, you had a much bigger impact by doing it. However, there are instances like MEK data which we had revise guidance as a result and we felt it appropriate to release that. That's not the case in all, anytime you have data. So I think it's really a case by case basis given the facts, circumstances, and FD requirements. But every time you have a piece of data you don't have a requirement to release it into the investment community with the general public.

Edward Tenthoff

Fair enough. And I guess just following up going on to our 543. With the Phase 1b data, have you guys submitted for ASCO? And with the Phase 2 as we're likely looking at more of a data release kind of in the '09 timeframe. Do you think it of anything by EORTC from this Phase 2, anything (inaudible?)

Unidentified Company Representative

The Phase 1b as I indicated we have just exceeded 50% of enrollment. So we don't have any definitive data yet from that expansion Phase, but obviously we are following that closely. And, you’re right, by initiating Phase 2 studies there is no guarantee in any oncology study of what you‘re going to see at any given point in time. So we will follow the data very carefully. We’re going to be looking at patient responses overtime. If we feel that we have data that we’re presenting at any scientific meeting, we will do so. But due to the unpredictability of various things involving clinical trials enrollment and responses, I can't comment further about specific meetings or timing.

Edward Tenthoff

Fair enough.

Robert Conway

Yeah, Ted. This is Bob, just one other thing. We’ve taken the tact of not discussing when we have submitted data to a scientific meeting, only after it’s been accepted do we announce that for obvious reasons. One is, talking about that in advance diminishes your chances of getting an appropriate either poster of scientific presentation.

Edward Tenthoff

Makes sense; and then probably, if I may just kind of one last sort of more (inaudible) question for you. With the results coming out of AstraZeneca, obviously you guys have a strong balance sheet. Does this change you’re planning or prioritization for potentially partnering things? Or is 2008 pretty much going to be a head down year where we initiate and conduct these trials, report data and we look more towards 2009, next year for kind of more partnering opportunities?

Robert Conway

Well our bias today Ted, is to move our wholly-owned development assets proof –of-concept before partnering it. However, there is a lot of interest in this drugs and this interest will grow as we deliver clinical data throughout 2008 and into 2009. We don't have in any of the models a development deal in 2008, and we would stick with that.

Just a comment, a bit more on the balance sheet, we feel we are well capitalized today, particularly given how well Array has used its capital since our inception. We have a $146 million in cash. We are earning about 20 a quarter, and that doesn't consider any milestones we might receive or partnering deals we might do. So we have a lot of flexibility going forward on funding the company.

Edward Tenthoff

Great, thanks so much for the update guys.

Robert Conway

Thanks Ted.

Operator

And our next question comes from Mike King with Rodman & Renshaw.

Micheal King

Thanks for taking my question, can you guys hear me okay?

Robert Conway

We can Mike.

Micheal King

Hey thanks for taking the question. I wanted to ask a couple followup questions. First on 797, I know you guys are using a categorical scale and a visual analog scale to measure response but can you guys also talk about perhaps secondary endpoints. You’re also looking at in terms of laboratory measurements because I'm sure you are aware that the pain space is very (inaudible) of late and if you don't have a positive outcome on the clinical metrics, is there some way in which investors can get some transparency into potential activity of the drug in other indications?

John Yates

You’re right. The primary endpoints are things like (Tupa) 6 and so, these had more traditional endpoints for pain studies. We have some exploratory endpoints in there which will help us to look at inflammatory markers. But those are certainly exploratory in nature. I think our focus is really that we are looking for clinical benefit with this drug. We have already seen with the pharmacodynamic markers in normal healthy volunteers that we can suppress production of the cytokines TNF IL-1, IL-6 and also PGE2 and all of those effects are quite propound of the higher doses, and we believe that is likely to translate into clinical benefits. So really this study is all about clinical benefits in terms of pain relief, which, I think if we see that, and there is a president with an early p38 in this model. So we have some reasonable optimism that we should see that. We think that they may will really help in terms of increasing probability of success in chronic inflammatory disorders, as well as being able to further explore the potential the 797 to be used as an analgesic agent.

Kevin Koch

So Mike, this is Kevin, I will just followup and a little color to that. You know, in all surgical or many surgical indications, you do see, for instance, CRP, IL-1, TNS and IL- 6 up regulation. And in fact, with a more severe the surgical insult, the more severe the increased in cytokines and PGE2. So I think, we are looking at those endpoints and feel this is the ideal compound with a combination of PGE2 inhibition and cytokine modulation to first affect the pain aspects, and then to hit secondary endpoints and particularly in the surgical indication. Now of course, dental pain is a relatively minor surgical procedure, so the up regulation of these cytokines and CRP are less. As you go to more severe surgical indications, the delta and when they will become much larger and we think that’s where the greatest benefit will be, which will give us a significant competitive advantage over current agents.

Michael King

Okay. And if I am not mistaken, I think it was Roche. I just had a p38 inhibitor that they killed, do you care to comment about, you know, I think about the data there, and what gives you confident that Kevin will escape similar fate?

Robert Conway

We don’t know anything about the data with Roche. We don’t have all the PDLD. One of the problems with p38 is a good -- someone actually putting out the data set associating blood level, side effect profile, PD biomarkers and efficacy all in one shot, I wish somebody would actually do that. But, it’s interesting I think, I guess we will.

John Yates

We will though. Actually, I promised somebody, one of the clinician that, in one of the ACR meeting. But in fact, we like the ankylosis spondylitis indication, I think p38 compounds are not been evaluated in that particular indication. NSAID is a standard of care followed by TNF inhibitor. There is a very rapid response to TNF inhibitor in ankylosing spondylitis. We’re using it as a monotherapy where in the past some p38 inhibitors have had some modest effect in as a monotherapy and say RA. So I think ankylosing spondylitis is the ideal trial for p38 compound, and we’re going to push forward on it, because we think it’s a right thing to do, and we will give it the best shot in the chronic inflammatory disease.

Michael King

Okay, great. And then on 886 are we are going to see, it’s a plan still for data AACR, ASCO, what’s the remaining, what the plan is for? Are the data released?

Robert Conway

The plan is that Astrazeneca will release data, they control all the communication here Mike, and I think they’ve guided that mid 2008 in an appropriate scientific meeting.

Micheal King

Okay, got it.

Robert Conway

Thanks.

Operator:

We will move next to Eun Yang of Jefferies

Eun Yang

Thanks very much. Two question John. I probably have missed it, but can you go over the timeline for 162 when we might see a Phase 2 rheumatoid arthritis data. And second question is, it seems to me that you are also developing 797 for chronic inflammatory disease. So assuming both 162 and 379 being developed successfully, how would you position two drugs against each other? Thanks.

John Yates

Okay. So timelines for 162, we are initiating our first study sites as we speak in terms of enrollment. Other sites will come onboard over the next three or four months, and we anticipate having probably about 30 sites enrolling this study by mid this year, and therefore, we are hopeful that we will be able to complete enrollment of the study by the end of this year, if that’s correct then, because it’s a 12 weeks study, then the last patient, last visit will occur somewhere probably early second quarter of next year. And then of course there will be time taken to close out the study, analyze data and then report. So overall, I think we would hope to have data in house by mid next year and data report of the scientific meeting, somewhere in the second half of next year.

Robert Conway

And then the issue on 797 and 162, I think we are very fortunate in – the whole pain and inflammation space is very wide. There is fantastic opportunity for small molecules to play in pain inflammatory disorders like ankylosing spondylitis, rheumatoid arthritis, ulcerative colitis, Crohn's anywhere, where the TNF inhibitors have gone, we can potentially go as well as with 797 anywhere that non-steroidal anti-inflammatory drugs have shown benefit because of the PGE2 knock down.

So as far rheumatoid arthritis is concerned, clearly the first data will be on 162 MEK inhibitor, and if we see positive results with that we would anticipate with a partner going very quickly into Phase 3 and brining this drug to market as quickly as possible for a rheumatoid arthritis indication. With 797, the timing for rheumatoid arthritis if we go in that direction will be somewhat later. But I think that these drugs will declare themselves in terms of differences in that overall profile. And I think that there is room even within the rheumatoid arthritis space for more than one targeted small molecule.

Eun Yang

Okay, thanks. And then on 797, you said if data is positive, you are going to run a competitor trail, and well, would it be competitor in the trial and also would that be a non-inferiority study?

John Yates

Yeah. So the competitor that we are considering right now is Celecoxib, because that’s has the largest market share of the NSAID market. And so we would anticipate – we actually have to see the results of the study before we can say what the statistical test would be. Certainly non-inferiority is good. Superiority is even better. So we will basically make that decision when we see the full data from our first dental pain study.

Eun Yang

Okay. Thanks very much.

Robert Conway

Thanks Yang.

Operator

We will go next to Howard Liang at Leerink Swann.

Howard Liang

Thanks. Good morning. Regarding 6244, the MEK inhibitor for cancer, you mentioned there will be an update by Astra towards the middle of the year. I guess what's the nature and venue of that update will review and sort of Analyst Meeting or is that go no-go decision?

Unidentified Company Representative

No I think the -- what I plan on doing is we’re really seeing a full data set at an appropriate scientific meeting in mid 2008, and along with that, they will layout the future plans they have for the drug.

Howard Liang

Okay, great. That’s helpful. Regarding 520 the KSP inhibitor, you talk about, it’s in dose expansion state. So I guess that you have hit the dose limiting toxicity, can you talk about what that is, it sounds like its non-neuropathy?

Unidentified Company Representative

No. So we see neutropenia, which is anticipated as on-target affect of the drug. And we will fortunate actually that we got that dose very quickly in that Phase I study. So we were able to define the maximum tolerated dose within a couple of months and I'd just say we are now in the expansion phase.

Howard Liang

Okay, great. And last, regarding the Phase II trial for 162, can you talk about the design of the trail, I know, its 200 patients, but I would assume there is a methotrexate control or there are different doses of 162?

John Yates

There are. So the patient population is patients who have continuingly active rheumatoid arthritis despite stable doses of methotrexate. So I would say this methotrexate is pretty much as the standard for first line therapy of rheumatoid arthritis and many patients fail to have an adequate response. So that’s the patient population we will be adding on top of continuing methotrexate. And then the treatment groups, there is a placebo group and three active arms, and those are 10 mg twice daily, 20 mg twice daily, and 40 mg once daily, and so we anticipate, based upon pharmacodynamic effects that we've seen in our earlier studies that at least one of those regimens may well have anti-inflammatory efficacy.

Howard Liang

Where do you plan this study, in Eastern Europe or?

John Yates

Yeah, mainly in the European sites, it would be Eastern European countries, because they have been very productive in being able to enroll patients, and then, Latin America has also many patients with rheumatoid arthritis that fit this description, and we are also using one or two centers within the United States.

Howard Liang

Great, thanks very much.

Robert Conway

Thanks Howard.

Operator

Next, William Ho from Bank of America Securities

William Ho

Hey great, thanks for taking my question guys. A couple of quick questions, first of all ARRY- 797, did you ever give us an update on the multiple-ascending-dose studies, and what are the plans for that in other inflammatory indications again?

Robert Conway

Yes, multiple ascending dose studies we have submitted data to a scientific meeting and hope to be able to present data on that in the mid-2008 timeframe, but the general update that I have provided is that we have seen good tolerability in our multiple-ascending-dose-studies, with doses up to and including 200 mg twice daily, and 400 mg once a day, and that we have seen with that, good pharmacodynamic knockdown of key cytokines, particularly prostaglandin E2, TNF, and IL-1 with some effect also on IL-6. And so, without getting into specifics, we do have a good level of knockdown of each of those inflammatory mediators, which is why we are enthusiastic about the drug going forward and I think, whilst there have been a number of drugs that have been attempted to be developed, p38 mechanism, we have a very different profile with this drug, and I think that we are enthusiastic that this may well be the first p38 inhibitor and it is specific for p38 Alpha, but the first p38 inhibitor that really will make it all the way through to a drug.

William Ho

On your opinion you do have an adequate therapeutic window?

Robert Conway

Yes, we have started doses as low as 25 mg, worked all the way up to 200 twice daily or 400 once a day, and at least from the pharmacodynamic markers that we are seeing, we have efficacy across the entire dose range. And what’s nice about this mechanism is that the efficacy is dose-dependent. So exactly how much reduction in cytokines is optimal, is something that needs to be determined, but across the dose range that we have, we can go from a small level of reduction all the way to suppression significantly greater than 50% in these various markers. Of course, the caveat is that this an ex-vivo, whole blood LPS challenge assay, so how that translates into patients remains to be seen, and I think this is part of the reason why we are excited about dental pain study because that will actually help us to understand whether the pharmacodynamic markers that we have used will translate into clinical efficacy.

John Yates

It will, as you certainly know, most of the drugs that have demonstrated efficacy, especially the NSAIDs, but others as well in pain models drugs that demonstrate efficacy as analgesics, certainly a significant component of rheumatoid arthritis and ankylosing spondylitis is pain, so you can connect the dots and if we show good efficacy in the dental pain model, one would suspect that with the safety profile, and the effect on pain. I think we should have some effect in some of these chronic inflammatory disorders. So as how we are thinking about it with kind of measured investment in p38 and I think we have been really happy with the results so far.

William Ho

Right, one another question on 6244. When we looked at it that really look so bad and I think it probably surprised many of us as to the endpoints that AstraZeneca picked. Can you by any chance say anything at all as to why AstraZeneca set such a high hurdle to demonstrate superiority over standard of care as in monotherapy, and do you believe there is still potential for the drug to one day to be marketed successfully?

Robert Conway

Oh! Yes, we are very, very bullish on the mechanism. I think there is continue to be significant interest throughout the industry in the mechanism, there is several combination studies that have been shown in the literature and at presentations and meetings where combinations with MEK have either added a vertiginous effect with standard of care. And then, I think regarding the endpoints, realistically, developing a monotherapy is the fastest, easiest, highest market value way of developing a compound. If you are successful, it is a home run, in our case, we were only as good as $2 billion drugs. So I think we are relatively happy with that result, although, I think the market has reacted rather fiercely to the data, but I think, I am very bullish on it and we believe at this moment that AstraZeneca will continue to move these compounds rapidly in clinical development and demonstrate its value.

William Ho

Right, thank you.

Operator

And we will take our next question from Graig Suvannavejh at UBS.

Graig Suvannavejh

Good morning, thank you guys for taking my question. I have got a couple and they all have to do with partnerships actually. With regards to the Celgene collaboration that you have got going, I know that targets haven’t been disclosed. I was just curious when you think we might be able to hear when those targets -- what those targets are that something that is under the control of Celgene or do you have prearranged to be able to discuss those?

Unidentified Company Representative

Yeah, Graig, so you know in a collaboration, such as this where we are starting off with – these are early discovery efforts, I believe that we will wait till these programs go into the clinic before they are declared.

Graig Suvannavejh

Okay, and just generally speaking overtime about a year or so sometime?

Unidentified Company Representative

You know our track record typically is it takes us two years to develop to go in discovery from initiation of program to identification of the clinical candidate and then another year to initiate clinical studies.

Graig Suvannavejh

Okay.

Unidentified Company Representative

That is historically over the ten programs that we put into clinical development between ourselves and our partners.

Graig Suvannavejh

Okay. That actually segues nicely into my second question, which has to do with any update on the collaboration that you have with VentiRx Pharmaceuticals on the TLR program?

Unidentified Company Representative

You know, I think that it is going well, we are very pleased with VentiRx taking this program on and you know we will look for an update probably later this year and again the communication on that is controlled by VentiRx, but we are pleased with the progress we are making. You know they are a startup company, where ARRAY has an equity position, so we are keeping a close eye on o it.

Graig Suvannavejh

My last question has to do with other signal search trials that are underway in collaboration with the National Cancer Institute. What do you think we might be able to get some update on what happened there?

Unidentified Company Representative

You know that is a little more complicated because the contract with the NCI is between AstraZeneca and the NCI and we are reliant on AstraZeneca to provide us with information which we get occasionally, but we don’t have full visibility into what the NCI is doing. So unfortunately I really cannot help you out there.

Graig Suvannavejh

Thank you for taking my questions.

Robert Conway

Okay

Operator

We will move next to Jim Birchenough at Lehman brothers.

Jim Birchenough

Hi guys a few followup questions on just to understand the frame of reference for the 797 data. If you fail the trial, will you tell us or we really have to wait for medical meeting to hear about that?

Micheal Carruthers

I think as Bob says you know if there is anything that we regard as it depends on what the results of the study are. You always with any study you can exceed spectacularly, fail spectacularly or be somewhere in the middle. And so, we will look at the data and if we believe that there is a need to communicate in either direction prior to the scientific presentation then we will make that decision as Bob says on a case by case basis, but we will watch the space and but otherwise, I think you can anticipate results either positive or negative at a scientific meeting and we will make the commitment that we will present the data.

Jim Birchenough

I guess I'm just trying to understand if we should assume that no news is good news?

Robert Conway

I can't think I would read anything into that either positive or negatively (multiple speakers). So, I think that the results will be made public within the next 6 months.

Jim Birchenough

And just so we have an appropriate frame of reference when you look at the magnitude of benefit that you're looking to show here, what magnitude of benefit would tell you've got a competitive molecule?

John Yates

That really depends on the indication that we're considering.

Jim Birchenough

For dental thing?

John Yatese

The dental thing I believe that we would want to look at something. This is a new chemical entity. And, we would want to have something that at least numerically was better than an NSAID, better than what's out there currently today. And we think that's certainly a possibility given pan-cytokine and very profound PGE2 efficacy.

For chronic inflammation, I think any analgesic efficacy will be very encouraging because this is an acute study with essentially a single dose, and if we see efficacy with a single dose that will first of all confirm that we have some benefits in terms of patient's symptoms and chronic inflammatory disorders are uniformly painful. So pain is a key symptom of disorders like ankylosing spondylitis and rheumatoid arthritis. So, I think it will give us encouragement there, but I think we would anticipate when the drug is dosed continuously daily, continuously for weeks or months. There may well be a different overall effect on underlying inflammatory process and so, even if the acute analgesic efficacy is say similar to a nonsteroidal, I think that that will have profound implications for the potential of this drug to be beneficial in chronic inflammatory disorders.

Jim Birchenough

Okay. And just may be the final 30,000 foot view question on the 797 program obviously positioned against NSAIDs and acute pain and positioning the drug against anti-TNF drugs and things like rheumatoid arthritis. You've got different price points and I assume at some point, you're going to have to pick a path or do you see a path where you can develop right through Phase III in both indications. Just trying to understand how you position the drug in different markets where you may have different price points?

John Yates

I think rheumatoid arthritis and the biologics provide a very nice price flexibility for a drug that would have efficacy similar to a TNF inhibitor or maybe even a little bit less, because I think it's possible to go in ahead of biologics if you have a drug that works in substantial number of patients. As far as pricing relative to nonsteroidals is concerned, I think that the reason to go into acute pain, postoperative pain, or other acute pain disorders would be if we had something that was substantially superior to nonsteroidal antiinflammatory drugs. And any superiority and efficacy can command a higher price point than what's already out there and lot of its generic nonsteroidal. So again I think we are perhaps most likely to say that if we see positive data that will really increase our probability of success, but to control of signs and symptoms in chronic inflammatory disorders, but if we have something that works really well in pain then we would progress with pain indications potentially including postoperative pain.

Jim Birchenough

Just one final question on 6244, is it safe to assume that AstraZeneca is going to continue to pursue these randomized phase 2 trials and given the results of the phase 2 we have already had, where would you expect to have success with this class lass of drug if you don't have it in melanoma, lung or colorectal?

Robert Conway

I think that melanoma is still a very, in particular melanoma non-small lung are very interesting areas. Certainly there are significant unmet medical needs where you have the b reputation and things like thyroid cancer and perhaps liver cancer. So these things are all just the data and the literature, I mean, MEK is -- we continue to be enthusiastic about it and I would see no reason for AstraZeneca to diminish its enthusiasm for it. It’s still is a critical regulator of pathway that is highly important in the proliferation and differentiation of cancer cells. So, I think it still has a wide range of use, and I believe the data in melanoma does not discount that we could use the compound in melanoma under different set of circumstances.

Jim Birchenough

Great. Thanks for taking the questions.

Robert Conway

Operator, Adria?

Operator

Yes.

Robert Conway

You know its 55 minutes past the hour and I think to be respectable of everybody's time. And I know there's a couple more in the queue. Why don't we cut it off here and so people can get back to other things by the top of the hour. Okay.

Operator

Certainly.

Robert Conway

Great. Well, let me just close by thanking our 355 employees for their dedication, creativity and hard work and the contribution they've made once again to Array's success. We' look forward to updating you all in about 90 days in our next quarterly call. Thanks everybody.

Operator

And that does conclude today's conference. Again thank you for your participation.

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Source: Array BioPharma Inc. Q2 2008 Earnings Call Transcript.
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