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Executives

Ron Squarer - CEO

Michael Carruthers - CFO

Kevin Kock - President and CSO

Array BioPharma, Inc. (ARRY) Morgan Stanley Healthcare Conference September 10, 2012 10:35 AM ET

Unidentified Analyst

Okay. I think we will go ahead and get started here. For those of you who don't know me, I'm (inaudible) MOS Biotech team and I'm joined right now by the team from Array BioPharma. So, we have Ron Squarer, CEO; Michael Carruthers, CFO; and Kevin Kock, CSO of Array. Thank you guys for joining us. Few housekeeping things before we get started. All disclosures, personal holding disclosures and Morgan Stanley disclosures are in the Morgan Stanley website. MorganStanley.com/researchdisclosures. For those of you who haven't been here before this is open Q&A, if you are free to join us at any point if you have a question.

With that I'll turn it over to Ron and team and guys you have a lot of drugs in development a lot of stuff going on, so maybe to start if you could just give us some brief overview of the company and their drugs in recent events.

Ron Squarer

Thank you for that introduction, I'm going to be making some forward-looking statements, so please consult our 10-K for a full discussion of risk and get specifically Kevin Kock, our Chief Scientific Officer here also one of the founders of the company, Mike Carruthers, our CFO, we also in the audience have another one of our Founders and our Chairman, Kyle Lefkoff.

So, it has been a very exciting time indeed. We are about over 160% year-to-date, over 60% in the last three months, in terms of our share price and this is really been catalyzed by their progress we have made with our portfolio looking at as many as five potential Phase 3 starts between now and the end of next year.

For those who are familiar with the company, there are two really remarkable things about Array. One is our ability to discover products compounds that stand at test of time, so INDs have been filed on 18 Array invented compounds, 15 of those are still in development, and 10 of those are in Phase 2 which is pretty remarkable track record.

The other is the ability to attract and enter into very valuable partnerships with great companies such as AstraZeneca, Novartis, Celgene, Roche, Amgen and others. And perhaps there is importantly to garner very impressive financials, so just last year we entered into an agreement with Genentech on Chk-1 preclinical compound in a tough biotech market $30 million upfront, as many as $700 million in milestone and double-digit royalty.

In total in fact, if you look at our partnered portfolio, we have as many as $3.4 billion in potential milestones before royalty. And just in the last two to three year's we raised $170 million worth of non-dilutive financing from the partnerships.

So, I'll just talk for a couple of minutes about our internal pipeline and touch on our partnered pipeline and then open up for some questions. So, of the five products which we see potential entering Phase 3 and by the end of next year two of those (inaudible) products. So, as of our last quarter call we have been very clear that internally we are focused on developing and commercializing HemOnc product.

Our first product is ARRY-614 for myelodysplastic syndromes and we are targeting and publishing about 100,000 Int-1 low risk myelodysplastic syndrome patients let's say about two-thirds of the total. We are looking within that group at HMA failures patients who have no choice, no other therapeutic option and have a very poor prognosis. So, thus far we have shown that a 40% response rate with multi-lineage response in that population, we are setting a new much more potent formulation, more bio available and expect that data to fully mature by the beginning and next year.

Our other HemOnc program, 520 for multiple myeloma is very active as a single agent in heavily [protrude] patients about 20% response rate and over 8 months duration. And we are now studying in combination with dex carfilzomib and bortezomib. So, we look forward to that.

Partnering, we just (inaudible) about our data in our pain program 797at our primary end points and we are looking to partner that product and to maximize value, we asthma program that we reads out Phase 2 beginning actually May of next year at ATS and another potentially valuable partnerable product.

On our partnered portfolio we have 10 partnerships I'm not going to go through them all, but perhaps the most important to us is selumetinib partnered with AstraZeneca the MEK inhibitor that showed remarkable results in KRAS mutant lung cancer. At ASCO this year we expect AstraZeneca to continue the development of that product and look forward to them announcing their fore development plan in the near future. Novartis, actually the economics on the Novartis collaboration are substantially higher, so AstraZeneca made about double-digits upon success. Novartis has significantly higher royalties and that's what MEK162 which showed remarkable results NRAS mutant melanoma at ASCO and we expect them to move forward. We continue to very aggressively develop the product.

So, between the two internal program, the MEK inhibitors and danoprevir which Roche has indicated is a Phase 3 decision for the next year. We have five programs that maybe moving towards commercialization in the very near future.

So, with that I'll pause and take your questions.

Question-and-Answer Session

Unidentified Analyst

Maybe we can start with 520 for multiple myeloma, you mentioned in your comments you have three key trials ongoing, given the opportunity the patient populations in those trials and what response rate you believe you would need to see for an (inaudible)?

Kevin Kock

So, it's really important to be here to select your patient population, because each population typically have a different response rate and there are differences between patients who are refractory or lapsed to different types of agents, different mechanism of agents. To find the dif populations, relapse meaning you have ultimately being treated with the drug but not necessarily failed. A drug can be retreated with the drug; a different level is refractory and so refractory drugs or drug that you refractory to, the drug where you progress on the drug or you progressed within 60 days off of treatment of the drug. And so we have been focusing on is largely to refractory patient population because of the high unmet medical need. So, in our trial with our original Phase 2 trial as a single agent, the majority of our patients were refractory to both amid and protease inhibitor and they had a median prior treatments of at least five.

With the new dexamethasone 520 study, where we actually have strictly refractory patients where all the patients are refractory to IMiD, proteasom and dexamethasone and actually the median is higher, so many of these people are going on to hospice. We have completed the first portion of that dose escalations, so this is or actually that Phase 2 study is com-stage design first 18 to 20 patients we actually announced [Mike] on the conference call that we had data good enough to go to the second stage of that design and we had another 30 patients. The first stage of that design should be meeting at the end of the year.

In the carfilzomib study, this is an investigator sponsor trial with our collaborators MD Anderson that is study where we are doing a dose escalation with carfilzomib, that part of the population is a strictly defined as bortezomib refractory and so in the bortezomib refractory patients with carfilzomib their FDA documents show there was a 16% response rate. So, of course we are looking for somewhere in the upper 20s to 30% response rate that provides a clear development path in the bortezomib refractory patients and I think would also allows us to develop the drug with the actual label of carfilzomib as well.

Third study is bortezomib study; of course bortezomib is a very attractive drug to combine with because it will be coming off patent in the next few years. It's very widely used. We are currently in the dose escalation that’s a relapsed refractory population, actually somewhat earlier stage patients so I think we will understand probably first half of next year we will have a good understanding which development path would be appropriate for the drug in which combination.

Unidentified Analyst

And looking pre-clinically in these early studies given any overlapping toxicities between carfilzomib in 520 or Velcade in 520 that you are concerned about?

Kevin Kock

We have not discussed any of the other side effects associated with the drugs. I'd say that the proteasom inhibitors in general have a lower propensity for (inaudible) relative to the IMiDs, so we chose the proteasom inhibitors are primary side effects is (inaudible) we have been very well tolerated otherwise we don't have a lot of other side effects with the drug, there are patients that actually have in our ARRY-520 for more than 18 months and I think there is, it's very comparable to some of the other agents and I think the physicians are quite satisfied with the safety profile.

Ron Squarer

Specifically, because it's a unique mechanism which is quite [important] that mechanism KSP is not associated with any kind of neuropathy which can be an issue within these patients.

Unidentified Analyst

Can you plan at some point around a combination within IMiD or those proteasom profiles to a relapse?

Ron Squarer

I think we try to focus now on these three trials I think that we are in a position where we can predict which would be the most appropriate registration with these drugs and we will save the IMiDs for after registration.

Unidentified Analyst

Maybe we can move onto talk about 797, you recently put out next primary endpoint. The dropout rate in the oxycodone in the trial was quite high it was 34% versus your drug which was much lower. The dropout rate that we saw on the trial typical of what we have seen in the real world, over that kind of durations?

Ron Squarer

So, let me maybe just frame the study because the results are quite exciting, exciting because there hasn't been a new mechanism introduced to widely into the treatment of pain in over a decade and that would have been the cost to which were pretty minor incremental benefit of our older NSAID. We are also tracing as you mentioned the challenges of opioid use not only with the terrible tendency issues but very, very difficult to tolerate. So, these types of dropout rates are common and these types of trials in fact our dropout rate in our study was about 6% which was actually lower than placebo. So, just to understand what a high hurdle of the study represented. We took patients all on NSAID, we kept them on NSAIDs and then we were looking to see if 797 could add benefit on top of NSAIDs versus placebo with NSAIDs. In fact, that’s where we showed a positive result and the treatment effect size which is you might expect actually with naïve patients getting an NSAID for the first time was comparable to the opioid population. That’s for people who could stay on oxycodone ER. If you in fact looked at from the point of intent to treat, your probability or chance of benefiting from 797 was significantly better given such a high dropout rate for oxycodone. So, we are seeing in a very well tolerated drug with a very significant analgesic effect.

Unidentified Analyst

It seems like the main concern on the street at least coming out of the study was a mild [QT] elevation and AFT elevations. Can you speak about how long 797 has been studied in animals, what the dose limiting tox was there?

Ron Squarer

So, what we are looking at is patients who are not well as a treating population are not well managed on NSAIDs or appear or cannot tolerate them. And the prognosis, the choice for these patients are quite limited. So, first of all we know the toxicity associated with opioids almost 20,000 deaths per year because of respiratory failure within NSAIDs you got 1 to 3% lead rate, you have got doubling of certain cardiovascular and risk factors and about 12,000 deaths a year in osteoarthritis patients or you go do surgery, joint replacement surgery which brings prospect of complication and actually lead to several thousand deaths per year. What we did see in the study at therapeutic doses within mild [QTC] signal similar to the signal you see with products that are on the market and widely used. Understanding the exact safety profile of something that is possible to do through modeling the data that we have treated about 450 patients in various studies over the year. And we also have noted some positive cardiac benefits in terms of the reduced hypertension. So, I'll ask Kevin to add about the biology of the drug.

Kevin Kock

So, in the toxicities we have treated at least animals pre-clinically, six months in rodents and nine months in [primex]. And so the safety profile is quite clean that the safety profile is largely GI side effects. So, the drug is well tolerated in pre-clinical studies. We did n observe any effects pre-clinically in cardiovascular effects so at point of interest or (inaudible). When we looked at the clinical data I think it's important to note that we did not wash the patients out of their other com-meds, which this is a real world of trials so very high hurdle. I'd say anything in regards to CK or ST were mild in sporadic meaning that they were not sustained and they were actually at some point came down in the study. QTC is very interesting endpoint that serve there were lot of concern post to [biox] for some of these cardiovascular events as Ron noted we do lower blood pressure in a meaningful way. And QTC can be bucketed between drugs have QTC but very little risk of arrhythmia or have QTC and have higher risks and I think it really comes down to. And you look for guidance very carefully the FDA says that and really depends on the patient population we are treating and we are treating a patient population who are resistant to NSAIDs whose only hope is to go on opioid or have total knee replacement. We think that that population is well suited for drug with the safety profile and we think the efficacy we observed was outstanding. So, we will be talking to partners over the next two or three months and there has been a lot of interest in the drug because it is a new mechanism and the efficacy was outstanding. We anticipate understanding the value of drug pretty shortly.

Unidentified Analyst

So have you or are you planning to run the formal ATC study and is that something that partners have mentioned wanting to see or do you think they would want to see?

Ron Squarer

So, at this point it's our intention to find the right partners to take the program forward, there is going to be a lot of work to do on the path to market and we sort of work with the partner to finalize that. We think that’s in the best interest of the product, but there is as I mentioned quite a bit to be learned just modeling the data that we have. We have done a lot of that we are continuing to do it and learning more as we go. So, we remain positive given the choice that these patients have that this can be very important new agent in the treatment of pain.

Unidentified Analyst

And then just looking forward to Phase 3, what generally do you expect the Phase 3 program to look like and what doses you anticipate going forward with?

Ron Squarer

So, I sort of fall back to, we are going to work with partner to determine that, what I will say is in our opinion the appropriate target for the drug is in these patients who cannot tolerate or do not receive benefits from NSAIDs and opioids. Specifically, and when patients are not well managed on NSAIDs as an alternative to adding an opioid with all this with severe burden that we talked about. That’s a huge population, we are talking about certainly a millions there this speculative that as many as half a patients are not currently well managed especially in the chronic setting going forward. And so it really will depend on the partner and how they want to take the product forward, but we see that namely as the population we would exploit.

Unidentified Analyst

Now just taking a step back here, there has been a number of p38 inhibitors in development, many of them has struggled. Can you talk about (inaudible) is the trend?

Ron Squarer

So, the one major difference this compound is about a 100 times more potent in human whole blood than the other p38 inhibitors are out there and the target is inhibited typically to a lesser extent during the day, meaning that this drug has a sure half life than many drugs. So, many companies have tried to develop is a drug that’s a once a day drug and because of tolerability there were not able to inhibit the target at 95% or 100%. They could inhibited 60 to 80% continuously because those were once a day. This drug is 100 times more potent what has relatively short half life. So, you have seen to inhibit the target but not continuously all day long. And so we think that aspect of the drug is high selectively for the p38 alpha target actually provides us differentiated profile relative to some of the other drugs that are out there.

I should point out also that although some of the biomarkers are transiently inhibited, (inaudible) being the most relevant for ACR 20 scores, it turns out that other end points like pain, like in the past we have reported that MT acts as a bone marker actually stayed down for full 90 days in our AS study. Those other biomarkers may be linked with different activity of p38 relative to the CRP lowering that seem to be transient. So, p38 has a multi-functional role in target cells and some seem to have transient effects and others have very durable effects.

Unidentified Analyst

[Question Inaudible]

Ron Squarer

Of course, that is a full, let's say that the FDA the trials that we run with support filings of the NDA for the drug and yes we did look at histology and there were no findings. And we will be looking at components in from the clinical study as to be sure that we are not seeing any kind of cardiovascular effects.

Unidentified Analyst

(Inaudible). Can you talk about just your general expectations for what do you expect the registration program will look like?

Ron Squarer

So, just to frame where we are in programs, so, we completed a study which I mentioned earlier with 40% response rate at our highest dose with about 70% multi-lineage response with a high [pill] burden in that study, so we are now in the clinic with a new formulations about 2 or 3 times more bio available and we are looking at the data as it emerges, we believe that data will mature in the first half of next year to allow us to move forward. And the options really now are the deferred path forward will be to use hematologic improvement as an endpoint for full approval hematologic improvement as an accelerated approval path for the confirmatory study for example, looking at overall survival. And one of the important things that isn't well understood seems that amongst low risk [H1] patients were filled in HMA that the prognosis is quite core and so this published information out there point to about a year. I may be a little bit longer, but it's a very core prognosis disease which really sees into study design an duration and the reason we believe that an accelerated path using either the surrogate opportunity for full approval and should pretty reasonable from that point of view. Anything you want to add Kevin?

Kevin Kock

Actually the trial designs are relatively similar for accelerated path or for full approval, we anticipate running a randomized control study versus best support of care, probably two to one randomization of 614 versus best support of care. I think that the need in this patient population is high. I think their PDUFA 5 seems to have laid out parameters where additional or places where accelerated approval might be appropriate for certain patient population without any other alternatives. This is something that the FDA will be looking to accelerate and we are hoping that this would be the appropriate population for an accelerated people.

Unidentified Analyst

You mentioned the new formulation you are looking at, relative to the specific differences you have seen in the new formulation and the old and when there are any potential safety risk that come with the new formulation.

Kevin Kock

No, so far we have said publicly that the exposure of the 400 milligram dose of the new formulation is equivalent to our old 1200 milligram formulation actually, so we are dosing two pills instead of 12. And that this is a new soft form with an enabled formulation that has much less variability. So, I'll anticipate certainly an equivalent or better safety profile because of less variability in the dosing of patients. The prior drug formulation had a minor food affect, this drug does not have a food effect. So, all in all I think this is a far superior formulation that can be used commercially.

Unidentified Analyst

Talking about the patient population you are targeting with 502, the goal to this to be a first line agent or kind of a last line option, where do you see this drug playing out in those effects?

Kevin Kock

Yes, so there are multiple opportunities largely build on the patient population we are looking to treat. So, patients with a high (inaudible) are about 40% of the patient population, they are within the three different population's mild to moderate, moderate or severe steroid resistance. We are looking at I think the first trial ever to be looked at selectively with a CRT H2 antagonist in the mild to moderate TH2 phenotype and so these patients have or expected to have (inaudible) disease or expected to have a relatively high [pheno]. And we believe that this population will demonstrate the true value of this mechanism, we would expect [SCBs] to ignore the 10% and that would be a very exciting product. We think it's a very competitive field; some of the competitors have fallen out. I think to ask ETS there actually was positive data from (inaudible) however; they were not able to dose the drug high enough because of the liver enzyme increases. So, so far we had a very clean safety profile, we anticipate this drug and this is what the patient population could have great benefit for mild to moderate patients as well as ultimately in resistant patients.

Unidentified Analyst

And what percent of [adds] locations is the PH2 in some population?

Kevin Kock

It's about 40% we think depending on where you make the cut off.

Unidentified Analyst

So, looking at your MEK inhibitor program from Astra along with Novartis, do you expect AstraZeneca did a lesser first or second line KROS lung cancer and do you have general idea when they expect to announce movement into Phase 3?

Ron Squarer

I think it's important for us not to speak for them and we did observe that the same data that world saw in ASCO with KRAS with mutant lung patients, quite a remarkable results to consider and you more than doubling the (inaudible) and a very substantial increase in overall survival as well. They have a changing leadership as you know and recently with the new CEO who is very oncology focused and has a rich history in both oncology from a development and commercial point of view. And what we are hearing from AstraZeneca is we expect them to accelerate and look at older options. They also published some striking results in thyroid cancer, this is patients who were resistant to radioactive thyroid and were re-sensitized. And they also have melanoma data which they have collected, they haven't yet shared but given the history of MEK inhibitors in melanoma one might expect that to be positive as well. So, we do believe they will move forward in KRAS lung but I do think they may look at other populations as well.

Unidentified Analyst

Can you talk about your current cash position, what milestones we have come out and then just generally if we can talk about your partnership plans for your current wholly owned assets and when we see those happening?

Michael Carruthers

At the end of the last quarter we had 90 million in cash, and that’s a pretty comfortable position for us. We burned about 50 million a year net of around 20 million in milestones. And these are milestones from the 10 wholly owned programs that we refer to before that are building as these programs mature. So, in addition to that we have talked about 797, the pain drug and 502 the asthma drug which we are looking to partner 797 in the next 3 to 6 months, 502 the asthma drug. Once we see the Phase 2 data say at the ATS conference in May and so we have got in addition to the solid cash balance relatively low burn, a number of potential non-dilutive sources of capital coming up in the next year. And we do have a long history of partnering as the 10 wholly owned programs indicate going back just a last few years a diabetes drug with Amgen, with that program we did just receive an $8.5 million milestone in June for a Phase 2 mid stage that is two milestones. We would look to see a dealing with appropriate data that drug to continue to Phase 2b and we would see a higher milestone, but that point of course our net programs have Phase 3 milestones. So, we have a lot of potential to see along the way that would augment our cash position.

Ron Squarer

At Amgen program just by example the upfront for us was about 60 million, milestone was about 670 million in double-digits royalties few years, and it was actually earlier in development in 797 just to sort of playing the kind of deals where we have seen in the past.

Unidentified Analyst

Well, unfortunately we are out of time, but thank you everyone for joining us today and thanks to Array for answering our questions.

Ron Squarer

Thank you very much.

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