Good day ladies and gentlemen and welcome to Q4 2012 Array BioPharma, Inc. Conference Call. My name is [Cheverly] and I will be your operator for today. At this time all participants are in listen-only mode. Late we will conduct the question-and-answer session. (Operator Instructions)
I’d now like to turn the conference over to your host for today Ms. Tricia Haugeto from Array BioPharma. Please proceed.
Thank you, [Cheverly], good morning and welcome once again to Array BioPharma’s conference call to discuss our financial results for the fourth quarter and full-year of fiscal 2012. You can listen to this conference call is Array’s website at www.ArrayBioPharma.com. Also we are using slide today to accompany our remarks. These slides can be downloaded on the Investor Relations home page of our website. In addition a replay of the conference call will be available as a webcast from our website.
I’d like to introduce Array’s Chief Executive Officer, Ron Squarer; and our Chief Financial Officer, Mike Carruthers who will lead the call today. I’d also like to introduce Kevin Koch, our President and Chief Scientific Officer who will provide a summary of recent clinical trial results as well as David Snitman, our Chief Operating Officer and Vice President of Business Development; and Karsten Witt, our Vice President of Clinical Sciences who will be available to answers question as needed.
But before I hand over the call to Ron, I’d like to read the following Safe Harbor statement. The matters we are discussing today include projections or other forward-looking statements about the future results, research and development goals of Array and its collaborators and future financial performance of Array. These statements are estimates based on management’s current expectations and involve risks and uncertainties that could cause them to differ materially from the 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, 2011 and in other filings Array makes at the SEC. These filings identify important risk factors that could cause the 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 everyone and welcome to our fourth quarter and full-year fiscal 2012 conference call. I hope everyone had a chance to review last night’s press release. We are pleased to report today on our progress across our proprietary and partner programs.
Financially we made great progress in fiscal 2012 recording a double-digit increase in annual revenue while managing our spending and strengthening our cash position. Mike will be drilling down further on these results and providing guidance for fiscal 2013 later in the presentation.
So, turning to Slide 13 and looking ahead, Array is evolving into a late stage development stage company with five programs having the potential for pivotal trial decisions by the end of calendar year 2013. These include two wholly-owned HemOnc programs ARRY-614 and ARRY-520 and three partnered programs selumetinib which is partnered with AstraZeneca, MEK162 partnered with Novartis, and danoprevir, partnered with InterMune and Roche.
With our progress on ARRY-614 for myelodysplastic syndromes and 520 for multiple myeloma, we see a clear internal focus on HemOnc space. We believe that focusing our internal programs will in fact maximize our likelihood for success.
Now taking a quick look back, Array has an incredible legacy in terms to developing great molecule, and its history Array has filed INDs on 18 molecules which remarkable is that 15 of them are still in human development and full 10 of those are currently in Phase 2. One thing to create a molecule it's something very different to have that molecule survive into Phase 2 and we have 10 of those, 7 are partnered with some of the finest companies in the industry such as AstraZeneca, Novartis, Genentech, Amgen, Celgene and others. And we are very excited about those partnerships and they are progressing well.
We have also been able to raise non-dilutive capital very effectively, and just in the past couple of years we have raised about $170 million from high value licensing partnerships. As recently as August of last year we announced the deal with Genentech on a pre-clinical Chk-1 program that included a $28 million upfront payment nearly 700 million in potential milestones and the potential for double-digit royalties. And these types of turns have not been unusual for Array assets. In fact we add up all of the potential milestones related to our partner portfolio a total of $3.4 billion and this is before royalties kick in. And there are additional assets that we will be looking to partner between now and the end of calendar year 2013.
So, currently we have about 90 million in cash as of the end of June and that should sustain us for a good period of time especially as we expect to do more partnering. The next 12 months is going to be very exciting and I will be reviewing some of the key catalyst with you today.
So, moving on now to Slide 4. In terms of recent events, I’m pleased to announce that Andrew Robbins, has joined our executive team to head up commercial operation. And he have expensive commercial and new product development as well as strategic experience from a 15 year career in the pharmaceutical industry with significant focus on HemOnc products. Andy’s arrival is part of our continued transformation towards a commercial stage company.
Moving on we drilled down to the results of our recent and completed Phase 2 trial with ARRY-797 which is our wholly-owned pain program. In addition for our partner programs we remained confident that both AstraZeneca and Novartis will continue development of selumetinib and MEK162, respectively, based on the promise that these products hold for patients as clearly demonstrated in their Phase 2 trials which were shared at Array’s old presentations at ASCO.
For MEK162 the Phase 2 trial showed excellent clinical activity and good tolerability and patients with BRAF or NRAS mutant melanoma. What was remarkable is that the response rate in the NRAS mutant population was actually similar to the BRAF mutant population and this is the first targeted therapy to show activity in patients with NRAS mutant melanoma. For selumetinib the Phase 2 KRAS mutant lung cancer study showed statistically significant improvement in [PSS] it actually more than doubled. Also an objective response rate and alive and progression free at six months.
In addition, we saw a longer median overall survival of 9.4 versus 5.2 months in favor of selumetinib in combination with docetaxel when compared to docetaxel alone. This is terrific news since there are no targeted treatment options currently available for this KRAS mutant sub-type of non-small cell lung cancer.
Further we received an $8.5 million milestone in our collaboration on Amgen 151 in June. The milestone was achieved after Amgen reached a pre-defined patient enrollment level and a Phase 2 clinical trial in patients with Type 2 diabetes. As a reminder when we partnered that product we received an upfront payment of $60 million the potential for nearly $670 million in milestones and up to double-digit royalties. Again these types of terms not unusual for Array assets and in April Genentech initiated a Phase 1 trial with GDC-0575 and Chk-1 inhibitor that we licensed to them to evaluate in cancer patients alone and in combination with Gemzar.
Now moving onto Slide 5. We outlined our 100% wholly-owned development pipeline. You will notice that we highlighted in the red box both 520 and 614 as having potential pivotal trial decisions in 2013. For ARRY-520 positive results in the three ongoing trials could define a path to late stage development and for ARRY-614 we intend to meet with the FDA over the coming months to discuss the development plan to support registration.
Now to the key point for each program, for 614 in myelodysplastic syndromes, we have studied the product in low risk 1 HMA failure patients and demonstrated nearly a 40% response rate at our highest dose with the majority of patients at this dose showing multi-lineage responses.
Given the poor prognosis for these patients and the lack of treatment options following HMA failure, the results are striking. We have an optimized formulation with improved plasma exposure and lower inter-subject variability that’s currently being investigated in Phase 1 clinical trials in MDS patients.
Regarding 520 for multiple myeloma, we are currently evaluating the product in three clinical trials that would be in combination with Velcade, in combination with carfilzomib and in combination with dexamethasone. Our focus is on patients with some variation of being relapsed and or refractory at prior treatment. And we expect these data to be presented in some form toward the end of this year.
I have already touched on 797, our pain program and we will drill down more on the recent trial results in just a bit. With 502, our product for asthma we continue to advance in the Phase 2 trial in persistent asthma which we initiated earlier this year in February. This is a randomized unblinded six week study comparing 502 to placebo in a 180 patients. With the results from this trial we will seek a worldwide partner for further development of 502 since late stage asthma development in commercialization outside of our current focus. Regarding ARRY-981 our diabetes program, we continue to study this compound pre-clinically and we intend to partner the drug for further development in order to maximize its value.
Now we are moving onto Slide 6, showing our partner programs and you will notice we are highlighting in the red box selumetinib, MEK162 and danoprevir as having potential pivotal trial decision by the end of 2013. Overall, we have 10 clinical development programs ongoing in our partner pipeline, in addition there are number of discovery programs ongoing with Amgen, Celgene, Genentech, DNA BioPharma and most recently a new discovery deal with Clovis Oncology.
Array has one of the broadest partnered portfolios in the biotech industry. Not only our discovery and development collaboration a great opportunity to create value for patients but also represent an ongoing source of non-dilutive capital through both milestone payments and eventually royalty. Several of these programs have significant upside as you can see on the slides, the drugs in royal blue are programs where we have double-digit royalties potential or a profit share.
In total, there is over 3.4 billion in potential milestones and the value of this partnered pipeline will emerge as this programs advance to pivotal studies with pass course commercialization. And we have already drilled down on the ASCO results for the MET programs during our prior quarterly conference call but as I mentioned before these results are very promising.
So, moving on, I’d like now to turn the call over to Mike Carruthers our CFO who will drill down on the financials and provide guidance for 2013.
Thank you, Ron. Starting on Slide 8, our revenue for the fourth quarter of fiscal year 2012 was nearly 21 million, this level was supported by 8.5 million in a milestone payment we received from Amgen, slightly over 7 million of this payment was recognized as revenue during the quarter.
We are very pleased with our loss per share at only $0.09, this is slightly better than the general expectations and resulted from the strong revenue and spending that remained in check. Our cash equivalents and marketable securities as of June 30 is 90 million reflecting a net $10 million burn or use of cash during the quarter.
Now please go to Slide 9, I will provide guidance for fiscal 2013 which ends next June 30. This is the first time we have provided guidance for the new fiscal year. The revenue plan shows license and milestone revenue of 45 million. This has decreased from the prior year because we recognized a majority of the 28 million upfront payment from Genentech for the Chk-1 program last year.
For fiscal 2013, while we intend to license 797 and possibly other programs as we previously indicated, there isn’t any benefit of this in these numbers. The reason I’m providing guidance without new deals is that the dollar impact is impossible to predict, not only does the initial upfront impact of revenue recognition but also the timing of the deal and the specific terms which will drive the period and timing of recognizing the revenue.
Now for collaboration revenue, we are showing a 20% planed increase as we target cost neutrality for s discovery team. To achieve this we planned to do additional discovery deals during the year similar to the recent deals with DNA BioPharma and Clovis.
We look for our R&D cost to increase $7 million to 63 million total for the year. This represents our focus on the Oncology l of 520, 614 and 162. We are targeting the resulting loss per share to be $0.60. For the first quarter we think that revenue will be approximately 17 million ad loss per share about $0.15.
And with that I’d like to turn it back over to Ron.
Thank you, Mike. And now we would like to drill down on Slide 11, to the promising results from our Phase 2 trial with ARRY-797 in osteoarthritis patient. To provide some background there is actually huge market for new medicines to treat both acute and chronic pain, and that both of these markets combined globally it works about $40 billion slightly more than half of that is in fact for chronic pain.
What’s interesting is that we are seeing the pendulum swing with regulators and that there hasn’t been a novel agent of significance of wide spread use approved for a very long time. And there is a sense of urgency in developing new mechanisms for this area. This is especially true given the growing burden in countries like the U.S. associated with the rampant use of opioids and very poor safety and tolerability profile associate with those opioids and NSAIDs.
On Slide 12, we show that ARRY-797 has been well tolerated in about 450 patients in which the study has been trusted and has shown statistically significant analgesic effects already in two randomized controlled acute pain studies in dental pain patients. In addition, in a small study with ARRY-797 and rheumatoid arthritis and another in ankylosing spondylitis we showed durable pain relief out to 28 days and 85 days, respectively.
These results all let us to test ARRY-797 in a very high hurdle osteoarthritis trial in which ARRY-797 met its primary endpoint. We are very excited about these results which show statistically significant pain reduction on top of NSAIDs when compared to placebo plus NSAIDs in osteoarthritis patients suffering from moderate to severe knee pain. Remarkably for patients who completed the trial, the level of pain relief demonstrated by ARRY-797 a non-opioid drug was comparable with oxycodone ER a proven powerful opioid but one with significant tolerability and safety issues.
The dropout rate for oxycodone ER was more than five times greater than that for ARRY-797, and 797 in fact had a lower dropout rate than the placebo plus NSAID arm. Demonstrating a comparable effect of opioids in patients who completed the trial is an important achievement given the burden of opioids in society and our healthcare system and opioids have a significant dependency and tolerability issue, in fact it represent a second leading cause of accidental death in the U.S. with more than 12,000 deaths recorded annually.
Prescriptions for opioids and deaths from overdose are in fact increasing every year. Other pain medicines also pose wig health risk, NSAIDs have the potential for serious GI events these occurring about 1 to 2% of regular users. Use of NSAID approximately doubles the risks for cardiac morbidity such as congestive heart failure and myocardial infarction. NSAID accounts for about 100,000 hospitalizations per year in the U.S. and there are approximately 17,000 related deaths annually amongst arthritis patients. Acetaminophen was the leading cause of liver failure in the U.S. in five-year period accounted for almost 5,000 deaths.
So, further OA patients who must resort to knee replacement certainly when their pain is not well controlled with existing therapies face significant risk as well. After more than 5,000 deaths within 90 days of surgeries of this type each and every year.
I’m now pleased to hand off to Kevin Koch, our President and Chief Scientific Officer will dive a bit deeper into the Phase 2 results.
Thanks Ron. p38 is a serine/threonine kinase target involved in the regulation of production of the pain mediator PGE2 and the inflammatory mediators TNF and IL-1. Conceptually, we wanted to position the prog-free patients with a significant unmet medical need. As Ron described there is a tremendous need to identify new drugs with alternative mechanism and pain relief that could treat patients whose pain is poorly controlled by current standard of care or for the significant number of patients who cannot tolerate these drugs.
With this goal in mind we designed a three arm study in a patient population that had moderate to severe pain even while taking an optimal dose of a non-steroidal anti-inflammatory drug. The alternatives for this population are typically joint replacement with the chronic use of debilitating opioids. Given the successful trial results, ARRY-797 could be positioned as a safe efficacious non-addictive alternative to opioids.
In the trial we enrolled 50 patients in each of three arms comparing placebo, ARRY-797 and oxycodone extended release. All patients were on a stable regimen of their NSAID of choice. Patients need to have a pain score as measured on a visual analogue scale or VAS scale of at least 4. The median VAS across the three arms was 6 out of 10. Patients were assessed weekly for four weeks with the WOMAC pain subset scoring system as well as being evaluated on a number of other appropriate secondary end points and for safety.
As stated earlier, ARRY-797 met its primary end point in the treatment of osteoarthritis pain, treatment with ARRY-797 resulted in a statistically significant reduction in pain over a 28 day period Western Ontario and McMaster Universities Arthritis Index or the WOMAC pain score which is a zero to 10 pain scoring system. Patients receiving ARRY-797 experienced a mean reduction in WOMAC subscale score at day 28 versus baseline that was 0.8 greater than those receiving placebo. This is a real decrease of 2.4 for ARRY-797 versus 1.6 for placebo.
Oxycodone extended release was used as an active control for the trial and achieved improvement of 0.28 versus placebo due to the higher discontinuation rate. ARRY-797 also showed improvement relative to placebo or oxycodone extended release in additional measures including WOMAC physical function, WOMAC stiffness and the patient’s treatment satisfaction measure. The discontinuation rate due to an adverse events was higher in patients treated with oxycodone ER of almost 34% then we either ARRY-797 of 6% and placebo of 8%.
In patients completing the trial, the reduction in WOMAC pain observed for ARRY-797 was comparable to that seen with oxycodone extended release. In this trial ARRY-797 was considered overall to be well tolerated at the selected dose of 400 milligrams twice daily. The most common adverse events observed in patients treated with ARRY-797 were dizziness, diarrhea and nausea which were mainly mild in severity.
ARRY-797 treatment was associated with sporadic, transient increases in creatine kinase and aspartate amino-transfer rates. Mild prolongations of the QTc interval and sustained decreases in systolic and diastolic blood pressure were also observed. Given the scope of the development program in pain, Array will seek an appropriate partner to maximize the value of this drug.
Thank you, Kevin. And before we go to Q&A, I’d like to review our corporate catalyst through December of 2013. So, for ARRY-614 we planned to report interim Phase 1 dose escalation data in myelodysplastic syndromes with our improved formulation and ideally we will have an update on our progress around the time of ASH, we plan to meet with the FDA to discuss our internal development plans for registration later this year prior to initiating registration trial.
With ARRY-520 we planned to report results from our Phase 2, 520 dexamethasone combination trial and interim results from Phase 1 ARRY-520 plus bortezomib in multiple myeloma. Here I’d like to also mention that we are currently running a combination with carfilzomib which we expect to read out roughly the same time as the (inaudible) but probably before bortezomib. Again for all of these trials we were hopeful to be able to provide some insight at ASH that these trials fully mature really towards beginning of next year.
Regarding MEK162 given our ongoing co-development rights with Novartis which we have discussed in the past we will be evaluating registration trial opportunities with Novartis. And then as we discussed earlier we are looking forward to Phase 3 decisions or potential Phase 3 decisions for selumetinib, MEK162 and danoprevir. With selumetinib we also believe AstraZeneca will report complete results trial for their double blind randomized Phase 2 trial in selumetinib plus DTIC versus DTIC in BRAF mutant melanoma at upcoming scientific meeting.
Regarding ARRY-797, we will seek the partner for further development in commercialization to maximize the value of this drug and we have already received a significant interest in such partnerships. Regarding ARRY-502 we plan to report top line results for our Phase 2 trial in asthma patients and seek a partner for further development in commercialization next year.
With AMG 151 we expect Amgen will complete enrollment for the Phase 2 trial in Type 2 diabetes patients and finally we continue to pursue new discovery collaborations and have seen significant interest of firm partners regarding these types of partnerships.
With that I’d like to go to Q&A.
(Operator Instructions) Your first question comes from the line of Eun Yang representing Jefferies. Please proceed.
Eun Yang - Jefferies and Company
Question on 797, given that you saw mild QTc prolongation and blood pressure changes in the clinical trial. I want to ask you whether you have seen any kind of QTc in animal study?
So, I’ll turn that over to Kevin, but I do want to emphasize that in the trials we have run to-date the drug was well tolerated. And that the therapeutic index or the market which we are entering going up against opioids and NSAIDs and Acetaminophen, these competitors are quite toxic in many ways and we believe the regulatory environment has really swung towards really trying to facilitate the introduction of new mechanisms in pain and other therapeutic areas. With that I’ll turn the question over to Kevin.
The pre-period mechanism is quite interesting, some study extensively in cardiovascular disease pre-clinically are now clinically. We have shown positive effects in genetic models of congestive heart failure, so we have increased the overall survival of our rodents in congestive heart failure models. Pfizer has shown some extensive work on p38 inhibitors blocking the damage associated with myocardial infarction and they are actually running, actually Glaxo is now running a trial in that patient population with another p38 inhibitor. And I think that our effects on blood pressure are actually beneficial to the profile and add QTC in the range where we see in the therapeutic dosing is actually quite acceptable especially for this patient population.
After digging into the whole QTC issue, what we are seeing is, for instance, antihistamines like Benadryl for instance, there is one case one cardiovascular event out of 10 million doses. And so what is clear that the agency has designed the QTC standards for patient populations that are primary care where there are multiple other alternatives and that’s the place where you should be concerned about QTC increases. However, in the patient population where we are treating using ARRY-797 or in patients who are resistant to NSAIDs and which only alternative are opioids or total knee replacement is a different bar. And obviously in cases for instance in oncology and other indications, there really QTC did not come into play at all.
So, I’d say that we feel that we have efficacious safe doses of 797, the 400 milligram BID dose is a high dose which we used in the study on purpose to see any signals we might see. We have already seen some level of efficacy in preliminary studies that 200 milligrams BID and I think that we have a drug that can provide significant benefit to patients with unmet medical need.
In regards to our last press release where we saw somewhat greater increases in QTC, I think it's important to note that what we need to always be concerned about is overdose of a drug and you are probably need to be concerned about overdose of opioids as well. And this case so with the guidance is also clear, drugs that have a good PK profile, meaning very little intra-patient variability and drugs that do not have drug-drug interactions like ARRY-797 are also of lower risk, because again with the agency now will be concerned of is overdose, not actual dosing at therapeutic level.
So, overall I’m quite satisfied with the safety profile of the drug. I think the patients as observed by the (inaudible) are actually enthusiastic about the drug. And I think it's really exciting example of a new drug for the treatment of patients with no other alternatives besides opioids.
Eun Yang - Jefferies and Company
So, in animal studies I’m assuming that for pain indications, [SKUs] will require [skilled] species of long-term (inaudible).
We never reported the multiple of therapeutic doses or lowest well I have not reported it but it's certainly is above what we have used with treating patients. The long-term tox studies were in rats and (inaudible) and we have six months tox data in rats and nine months tox data (inaudible) and again there were no adverse events that would drive us to limit the ability to develop this compound.
Your next question comes from the line of Jim Birchenough representing BMO Capital. Please proceed.
Jim Birchenough - BMO Capital Markets
A couple of questions, just on the myeloma program, to the extent you are doing several combination studies would we anticipate that a Phase 3 study would be a combination study and maybe you can elaborate on how you see a Phase 3 being designed. What are you proposing to FDA?
So, I mentioned we are in fact running the three combos with dex, bortezomib and carfilzomib, and I think while there is an option to move forward is a single agent for commercial utility I think we believe the combinations are going to be important and it's specifically combinations with either carfilzomib or bortezomib is really going to drive the most use. Now a combination with dex, we expect to see benefit in combination with dex, it can be important additional information for the treating physicians, but I think the real drivers is going to be combination use.
Jim Birchenough - BMO Capital Markets
And so what would Phase 3 trial look like Ron?
I’ll turn it over to Kevin for some of the details of what we might be pursuing. Of course it would be based on the treatment effect size and the data that we see coming out of our trials, but roughly I think he will give you a sense.
So Jim, it's actually the carfilzomib approval, really leaves a nice opening for combination study. Right now the bar for bortezomib refractory patients is 16% with carfilzomib. It was about 7 month duration. So, we are actually testing our drug exactly in that population, relapsed and refractory, typically refractory to bortezomib. And so once we finish up this trial and a short expansion and of course this is (inaudible) responsive trials so we have less control over this trial but we have lot of enthusiasm for our investigators on moving the carfilzomib along quickly. I think that we can really understand what the bar is and actually be able to define what we need to achieve. And we are looking for at least the 50% improvement over carfilzomib itself or more. And I think that would be the go. So, it's a very simple trial it's carfilzomib plus/minus 520.
Jim Birchenough - BMO Capital Markets
And then just a follow-up just on the QTC question on 797. I’m assuming you will do a thorough QT study, what are the timelines for conducting that study and what multiple of how high in terms of super therapeutic dose do you think you need to go t reassure FDA?
It's kind of interesting, we have seen efficacy at 200 BID and there is a question of whether or not a multiple of 200 is more appropriate than a multiple of 400. I think that at this point in time, we have sufficient data to actually build the model of the relationship between dose exposure and QTC. And that given the patient population we are working in it's not clear that we would need a QTC study to actually license the product.
We have had quite a bit o interaction with some of the thought leaders in this field and we feel pretty comfortable. We are going to learn, most of what we need to know by modeling the data we already have across our studies, certainly much more clinical work is going to be needed ultimately to develop a registration package and we prefer to do so with a partner. So, we are pretty comfortable, we can characterize the profile of the product. I think we have were determined to be really transparent and conservative in our presentation to that data, but we would certainly look to provide an improving view of it overtime if we thought that it was appropriate based on the modeling. But we do feel we are able to engage effectively with partners with the data we already have.
Your next question comes from the line of Cory Kasimov representing JP Morgan. Please proceed.
Matt Lowe - JP Morgan
It's actually Matt Lowe in for Cory today. Just wondering if you know when there might be a decision to go into Phase 3 from AstraZeneca regarding selumetinib?
So, we do have a healthy relation with AstraZeneca, however we do have as well an active relationship with Novartis in fact our relation with Novartis involves co-development and ultimately co-commercialization. So, we are careful about the information that we discussed with AstraZeneca and they did discuss with us. That said they did in fact have two oral presentation in ASCO in addition to other very exciting data, so I’m referring not only to the KRAS mutant lung cancer but also the resuscitation of thyroid patients to radioactive iodine as well as other exciting data. So, we know that the clinical team there and leadership remain extremely enthusiastic about the compound and we believe they fully intend to continue development of this specific timing and the design of those trials, where specific trials are going to be running, unfortunately are not in the public domain. And AstraZeneca has a history of not announcing new clinical trials until they have dose first patient. So, you kind of have to keep an eye on clinicaltrials.gov and if you go there you will see that they are studying a Phase 3 formulation, currently for bio-equivalency and that’s how the data is going to be coming out, certainly in their investor materials they continue to identify selumetinib as an important agent going forward. I wish we could tell you more right now, but we based on what I have just told you we obviously remain confident that this product will continue to be developed.
Matt Lowe - JP Morgan
Can you say is a milestone included in the guidance?
So, our guidance includes 15 to 20 million of milestones for the year and we haven’t drilled down to exactly what milestones that includes.
Your next question comes from the line of Mike King representing Rodman & Renshaw. Pleas proceed.
Mike King - Rodman & Renshaw
Questions both on the MEK program broadly speaking, that is just to say ask if you have much control over what indications in particular MEK162, what control you might have to influence Novartis and if you have perhaps taken the drug into what I’d prefer it was (inaudible).
We do have a very active relationship with them, we have a joint development committee and which we talk certainly about the programs that Array may run but also the progress they are making in their own shop. And generally speaking we have found Novartis to be quite focused and very aggressive in the development of oncology drugs. So, currently they have a full 10 trials ongoing many with some very exciting [target-target] combos including their own BRAF and actually three different flavors of PI3K. So, we are very confident they are going to extract a significant value. It would be logical to assume that they would pursue [a faster] patient strategy with the remarkable melanoma data that they have already demonstrated, but it's really for them to announce that at the appropriate time.
What I will note in the public domain is that we have Array has in fact posted on clinicaltrials.gov an exploratory trial in ovarian combination trial and so we continue to work with Novartis both as Array and with Novartis to determine the fastest way to get to market, but still exploring the full value of the program. I’ll tell you that the really good way that these two partnerships emerged, you really could have written the better script. Novartis is focused on novel [target-target] combos primarily AstraZeneca focused primarily on cytotoxics or has a comfort in combining with cytotoxic. And so I really think between the two partner’s to-date there has been relatively little overlap and great opportunity to fully maximize the MEK platform. So far very good.
Mike King - Rodman & Renshaw
Maybe just again follow-up on 797 and I don’t to blow the QT concern out of proportion, but I just wonder if, are you planning to have end of Phase 2 meeting with the FDA to talk about what long-term safety study might be required to register molecule so that you can have that information as you discuss your potential partnership?
We have talked about internally, we are still gathering some additional data. We are working through the risk profile in our target population and we have discussed whether or not we should have a meeting with the FDA as prelude to licensing the drug and would that be advantageous. And so we have not made a decision as to whether we will do that or not but I think it actually is probably a good idea. As Ron described, it's a changing environment, we were somewhat surprised by the obesity drugs getting approval as well as carfilzomib was on the edge and I think there was a lot of enthusiasm for the approval of that drug. So, I think that the new guidance PDUFA 5 seems to, say to me at least from my reading is that there is a desire to get drugs in the hands of investigators and physicians and that they should decide whether individual patients want the utilization of a particular drug. And so I think perhaps the environment is changing somewhat and that drug that fulfill unmet medical need will have a bar as appropriate.
I think the good news is that there is a significant clinical effect here which frankly with surprising given the high hurdle we put out there to basically beat the placebo when all patients are on NSAID. And so I think that certainly helps. Ultimately their interactions with the regulators is going to be very much dependent on the clinical plan going forward and the patient populations. And so it may be useful to first understand where a partner wants to go in order to fully explore the regulatory environment or that population. And a natural place where you want to see a drug like this is when patients are not well managed on NSAID or opioids either because their pain is not controlled or because they cannot tolerate either drug, that is an enormous population and one where I think we would generate a lot of value versus obviously trying to plant relatively an expensive generics. But even beyond that there are number of very significant and critical subset that a partner when explore with us that would require a potentially specific regulatory input. So, we are going to go forward and see how those discussions go and determine the best path at that point.
(Operator Instructions) Your next question will come from the line of (inaudible). Please proceed.
Just a couple of questions on the pipeline if I may. S, looking at the diabetes drug 151 with Amgen. Just wondering what benefits you would expect to see with its mechanism of action. And what are potential combo studies considering you could there is a lot of combination phase going on in the diabetes space?
So, I think it's a very exciting product, the mechanism is one where you regulate both production of insulin from the beta cell and the turnover a glucose and deliver. So, it's essentially a feedback mechanism that regulates glucose and provide glucose control. Pre-clinically we have done extensive work in combination with [DEP4] inhibitors and that four among others and shown additive or synergistic effects in this pre-clinical models. We are very happy with the profile so far of the molecule from the data we had in the single ascending dose study and multiple ascending dose study in diabetic patients. As we described we saw a decreases in glucose in those patients. Amgen is now running a large Phase 2a study largely in combination with (inaudible) which we view as the likely first initial path, but I think there are multiple ways t develop the drug and it's really up to Amgen now to take the control of the program, and I think they are doing a great job.
Quick question on the asthma program, so are you looking at any other potential formulations I the asthma phase?
No, at the moment we are powder and capsule formulation is quite good. It's oral. We are not looking at inhaled at this time and I think this product is one that could be positioned either in early stage patients where an oral is a significant competitive advantage or in later stage patients that are or perhaps resistant or on unresponsive t steroid treatment or another treatment. So, as you know we are running a trial in a targeted patient population which is the TH2 phenotype, this is the first trial that has utilized this patient population as the selected patient population and we are making good progress and look forward to be able to discuss these results hopefully at ATS next year.
And your next question will come from the line of Jim Birchenough representing BMO Capital. Please proceed.
Jim Birchenough - BMO Capital Markets
Just a follow-up on 614, in terms of meeting with the FDA to discuss a potential registration strategy, what are you looking to propose here and how long do you think a registration trial will take to run?
I’ll start and then turn over to Karsten Witt, our Head of Development for some more color, but we have engaged a number of thought leaders in preparation for moving forward here and ideally we would like to see hematologic improvement or HI as a relevant endpoint in our regulatory strategy either for an accelerated approval or for full approval. But ultimately we are still open to pursuing overall survival ultimately as part of a commercialization plan. Karsten, would you like to add anything?
Just adding that we are looking at a patient population with the highest unmet medical need. These are patients that have failed available therapies including HMAs. So we believe that there is a good fast path forward to get this drug to its regulatory process and with the (inaudible) of having the dialogue with the FDA on this.
Jim Birchenough - BMO Capital Markets
So, to be clear by year-end we should know whether we got an overall survival end point we are looking at or whether it's an accelerated approval on hematologic improvement?
I’d say that we are going to collect input from the FDA, we are going to look at our data and then decide when we are, what specifically we go public with. I’m ultimately of course, we were to initiate registration trials will be clear on study design at that time. As you know the FDA is not also black and white in its recommendations, and so I don’t know that it's common for companies to broadcast the specific details of their discussion with the FDA unless the part of a specific plan to move forward. I’d emphasize and I’m not sure we can specifically at the timing. The prognosis for these types of patients specifically 1 HMA failure population has not been well characterized but we have been working with couple of major centers in the U.S. to understand what the natural course of the disease is and we believe that there is institutions we will be publishing that data at upcoming scientific conferences. And I think it will shed a lot of light on just how acute that condition is given this perception that the prognosis for these types of patients is pretty good. It turns out that from the day we have seen it's specifically that 1 HMA failure has very, very poor prognosis. So, and that will help to inform the regulatory path going forward in addition to our meetings with the FDA and we may provide color on that but we can’t commit to specific feedback until we announce a pivotal trial.
Your next question comes from the line of Ed Tenthoff representing Piper Jaffray. Please proceed.
Ed Tenthoff - Piper Jaffray
I didn’t see the K published yet and just wanted to touch base on the debt and by the way congrats on all the progress, I mean the pipeline has really come on, and I think there is a lot of exciting partnering opportunities here. But just to touch based on the (inaudible). The share count increased as a result of the equity and at present what is payment schedule for the debt?
The debt is due mid 2015 and mid 2016, it can be paid in cash or in stock with limitations on the total amount of stock.
Ed Tenthoff - Piper Jaffray
And, is that in equal tranches? I can't remember.
Yes, the second payment is smaller at 20 million, the 2015 payment will be whatever the other balance is and I say that because it could be a lower balance than what it is today for various reasons.
Ed Tenthoff - Piper Jaffray
What is the current face value of the debt?
It's 92 million.
Ed Tenthoff - Piper Jaffray
And the total debt could get to 120, is that correct?
No, it won’t. That won’t go higher than it currently is.
Just to make a comment building on Mike’s explanation there, just wanted t remind folks that, in terms of financing moving forward, we are looking forward to partnering as many as three products. So, 797 currently based in the data we have. 502 our asthma program again targeting the ATS meeting that would be April of next year’s that’s our goal. We are not committed to yet but that’s where we are headed. And then we also have the diabetes program GPR-119 which we would look to partner. So, we have three potential partnerable assets and a pretty remarkable legacy as I mentioned earlier of partnering our assets at very high value given their resilience in the face of clinical testing. And so that’s an important part of our story, we also have this huge tail of partner programs, the 10 partnership or 10 clinical stage partner program which based on probabilistic modeling could point to some sustainability on a risk adjusted basis in the coming years. So, between some near-term assets to partner and that partner portfolio maturing, we are beginning to see some sustainability coming up not too far away and as we get closer to it we will call a particular date and time.
At this time w have no additional questions, I’d now like to turn the call back over to Ron Squarer for closing remarks.
Well, great, so really to summarize what we talked about today, we are pleased to report on progress which is bringing us, really close to a full five potential pivotal trial decisions by the end of 2013. Some we would hope would come actually even sooner. And we are also carefully narrowing our internal focus specifically to development and commercialization’s of HemOnc products. So, lot of progress in terms of our developing story. All of us on the call here at Array would like to thank our employees, their commitment, ingenuity, diligence, that continues to fuel Array’s success, I also want to thank our patients, partners and shareholders for their continued confidence and support. And with that we will close the call.
Ladies and gentlemen that concludes today’s conference, thank you for your participation, you may now disconnect, have a great day.
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