Andrew Peters - UBS
Good morning and welcome everyone to the second day of the 2012 UBS Global Life Sciences conference. My name is Andrew Peters and I’m a member of the biotech research team here at UBS. It’s my pleasure this morning to introduce Array BioPharma, and speaking on their behalf will be Ron Squarer. As a reminder, after the presentation there will be a Q&A and breakout session in the Alvin Room downstairs. Thank you.
Good morning everyone. It’s a pleasure to be here with you today. It’s been a very, very exciting time at Array. We’ve seen great progress with the stock up about 160% year-to-date, about 60% just in the last three months or so, really based on a number of items which are leading to the momentum with the company.
I am going to be making some forward-looking statements here that are associated with risk. For a full discussion of risk, please consult with our 10-K.
So for those of you who aren’t familiar with the company, there’s two quite remarkable things about Array. One is the quality of our pipeline. There have been INDs filed for 18 Array invented products. Fifteen of those products are still active and in development. A full 10 of them are in Phase II, and so it’s quite remarkable to see so many molecules stand the test of time and development with so many progressing to Phase II. What’s even more remarkable is as we look forward between now and the end of 2013, we see a potential of five Phase III starts as that very robust portfolio begins to emerge.
The other thing that’s quite remarkable about the company is our ability to partner with great companies and to see good value from those partnerships, so currently we have 10 partnerships with great companies like Novartis, AstraZeneca, Celgene, Amgen, Roche, just to name a few. And the value associated with those deals has been very robust. We’ve raised about $170 million in dilutive financing just in the last period, just over about two years, and just recently last year signed a deal for Genentech for a ChK-1 preclinical program. And just to give you a sense of the valuation of those types of deals, about 30 million upfront, milestones totaling as much as $700 million, and the potential for double-digit royalties.
If you add up all of our partnership, just the milestones, you get to about $3.4 billion that would emerge, assuming success, and that’s before royalties. And as you’ll hear today, we do have a number of additional great partnering opportunities but we also have the intention to take forward two products that are wholly owned by ourselves all the way to market. And in fact, what we’ve stated quite clearly as of our last quarter call is that it is our intention to progress with our two wholly-owned hem/onc programs – that’s ARRY-520 for multiple myeloma and ARRY-614 for myelodysplastic syndrome – we plan to take those to market ourselves.
Other important catalysts that have been part of the recent momentum include the results that we presented on our pain program, 797, quite remarkable results that I’m going to touch on today and we can also discuss further at the breakout session. But we did meet our primary endpoint of showing significant efficacy over the placebo arm and comparable efficacy to opioids in that study. In addition, many of you are familiar with the very impressive data that emerged at ASCO earlier this year, both with our Novartis partnered MEK162 – that would be in the NRAS mutant melanoma population – as well as the data presented on selumetinib, which is partnered with AstraZeneca that was in a KRAS mutant lung population. There was also an oral presentation on thyroid, and there is a lot of data that has been emerging around our MEKs beyond just ASCO. We also received a milestone associated with our Amgen diabetes collaboration just a few weeks ago, and we’ve seen the ChK-1 program at Genentech actually initiate a Phase I combination with gemcitabine, so a lot of very exciting progress in the portfolio.
As I mentioned, we are going to be progressing our two wholly-owned hem/onc programs and we expect to see the data emerge between now and the first half of next year to drive those decisions. We’ve announced that we will be partnering 797. We are in active discussions with a number of companies that have shown great interest in the program. We also initiated a Phase II for our asthma program, 502. We initiated that in February of this year. We expect to read that data out at ATS in May of next year, and that would provide another source of potential non-dilutive financing through partnership. We’ve also decided to partner our early stage diabetes program, the GPR119, in order to allow us to focus fully on our hem/onc portfolio.
So I’m going to touch a little bit on 614, which is one of our very exciting wholly-owned opportunities. The disease, just as a quick intro, is quite large – about 150,000 patients. We are specifically focused on the low risk Int-1 population which represents about 65% of the total. Within this population, initially we’re studying HMA failures. These are folks who have failed either Vidaza or Dacogen. For those who aren’t familiar with the disease, the burden is very heavy, leading to multiple cytopenias, and the prognosis for the HMA failure patients is quite bleak. Data will be emerging, we believe, later this year showing how short the median survival is for these patients, and that data has not been widely dispersed to date but we expect it to support our position with FDA that this is an extremely high unmet need population where patients have absolutely no alternative therapy.
The results that we saw in our first study – this was with an earlier formulation – were quite striking – as you can see, at our highest dose a full 40% response rate. This is in a population where you would expect absolutely no spontaneous improvement, and not only did we see a 40% response rate but the majority of those patients – 70% or so – were actually multi-lineage. And what’s more interesting is that we’re actually seeing a disease modification effect, and so what you can see as we dose the product is you’re seeing a reduction in aberrant progenitor cell death, and so not just essentially a masking of symptoms but actually a change in the course of the disease.
So where we stand now – because of pill burden we’ve put a new formulation which is about two to three times more bioavailable into the clinic. We’re testing that now. We’d be very pleased to simply see a repeat of that 40% response rate, but we’re going to see how that data emerges with our new formulation. We’re planning to meet with the FDA by the end of this year to discuss our forward path. The two most likely ways forward is to use hematologic improvement as an endpoint for full approval. Short of that, we would use hematologic improvement as an accelerated approval with probably overall survival as the supportive confirmatory study.
I’ll move now to 520 in multiple myeloma. Interestingly, also a similarly sized and very large population – about 150,000 patients. Initially, we have been studying the product in very heavily pretreated patients. We have a unique mechanism, KSP. Important to note is that the mechanism is not associated with neuropathy, which is a significant problem in patients with other treatments in this space. But it’s really the fact that it is a unique mechanism, a new mechanism that gives us confidence that when used in combination with other leading therapies, we would expect to see additional benefit. That would be in addition to the benefit we would see and have already seen in heavily pretreated patients. And in fact, if you look at the data that we’ve presented to date, we’re seeing about a 20% response rate just over an eight-month duration of treatment in a single agent in heavily pretreated patients. We hope at ASH to provide a little bit more of an update on how the program is going and also potentially to share some information about biomarkers that we’ve been looking at that we believe could help to improve our response rates even more, and so we look forward to sharing that information soon.
Where the value really lies, though, is not just in single agent or even the combination with DEX which we believe represents a very good fast-to-market opportunity. With the carfilzomib approval lately, it seems that if you’ve got about 20, 25% response in maybe an eight or nine month duration, you can get on the market and certainly see use. The tragedy is that all patients with multiple myeloma do ultimately progress and die, so there’s a tremendous need for salvage in late-stage therapy; however, the real value here is in combination with carfilzomib or bortezomib. We have those combo trials running now and that data will fully emerge at the beginning of next year.
I will now touch on 797 because it is an important source of non-dilutive funding in the near term but potentially of very significant value to the company in the long term. The market for pain is enormous – about $40 billion, with a little bit more than half being in chronic pain. Frankly, there has not been a new widely used mechanism introduced into the pain market in about a decade, and that would have been the COX-2’s which were, many would view, just a minor advance over prior non-steroidals that had been used for many years before that. 797 is in fact a non-narcotic. We do not expect it to be in any way habit forming, and we’ve seen analgesic effect now in a number of areas; so certainly the OA study, which I’ll discuss in a moment, but also in acute pain, statistically significant results in acute pain over six hours – this is dental pain – but also in some RA and related studies. So in an RA study, 28 days, we saw sustained pain relief and we saw pain actually returning to baseline when drug was removed. In an ankylotic spondylitis study that’s over 85 days, we saw sustained analgesic effect, and by now the product has been tested in about 450 patients and so we have a clear understanding of its analgesic effect and also a good data set showing how well tolerated this oral medication is.
Now to understand the value, you have to understand the environment of current pain treatments. Opioids, beyond the terrible situation with massive dependency issues around the country and the world, is actually the second-leading cause of death, usually related to respiratory failure – about 12,000 or more a year. NSAIDs, of course, have the issue of doubling certain cardiovascular risk factors as well as bleeding events in a large percentage of patients and significant deaths associated with products as well – almost 20,000. For patients who can’t get relief from NSAIDs or opioids, some turn to joint replacement, which has tremendous risks associated with it and burden, but actually is associated with thousands of deaths a year as well. So there is a tremendous need to introduce in our view, and we believe in the FDA’s view, to introduce new mechanisms into pain.
We did a very high hurdle study where we said can 797 work on top of NSAIDs in patients who are not well controlled on NSAIDs – a very high hurdle. We also used Oxycodone ER as an active control, and the results were quite surprising in that we did achieve a primary endpoint showing statistically significant benefit over placebo plus NSAIDs, and what’s even more remarkable is the treatment effect size. One was similar to what you might expect with naïve patients receiving an NSAID for the first time, and it was also comparable, although the study wasn’t designed to compare comparable, to what we saw in the Oxycodone arm for people who managed to stay on, for people who completed on Oxycodone. The dropout rate for Oxycodone was quite high – about 34%, about five times higher than the 797 arm, which had a lower dropout rate, frankly, than placebo. And so when you take into account baseline carried forward or from the initiation of treatment, you actually would see that 797 was about three times more effective than Oxycodone. And so it is oral well tolerated, appears to have very strong signal.
In terms of efficacy, we did observe mild QTc prolongation at therapeutic doses, similar to the kind of signal that is seen with products that are on the market and widely used. We continue to study this topic, but we have a lot of insight suggesting that from a therapeutic index point of view, the drug has tremendous utility, and the partners that we’re speaking to share that view at this point.
If we look at our other active partnerships, three of those we believe will be entering Phase III between now and the end of the year. Regarding AstraZeneca, there’s been a lot of progress at that company. They now have a new CEO. The CEO comes from a very strong oncology background from both Roche and Genentech. The oncology teams are quite excited. I’ll say also that they’ve changed the leadership of the selumetinib team as they look forward to initiating registration trials. It’s the same team that brought their thyroid product to market recently, relevant because the thyroid data with selumetinib was quite good and they represent an additional path to market beyond just lung cancer.
With Novartis as well, we’re seeing very broad and active development there. And regarding Danoprevir, I’ll just mention that Roche continues to list it in all of their investor materials as a product which is a Phase III decision in the coming year.
So just touching on the MEK data, MEK operates on the RAS-Raf-MEK-ERK pathway, and as a class we have now seen significant and positive data in a number of tumors including lung, melanoma, as well as ovarian, thyroid cancer, even in biliary and hepatocellular carcinoma, so a remarkably, broadly-active compound. The pathways that are relevant for MEK appear in a number of very large populations.
Specifically with regards to selumetinib, we have seen the data for KRAS mutant lung cancer, which we see as a direct path to market and something that AstraZeneca can certainly own. We’ve also seen them put what they’re calling their Phase III formulation into the clinic for bioequivalency study on clinicaltrials.gov, and I did mention the changes in leadership both for the team and the company, which are very positive for the program. Results in KRAS lung – statistically significant, more than doubling of PFS, substantial improvement in median overall survival from five to almost nine and a half months, as well as other key endpoints met.
With Novartis, which is actually a more financially critical program for Array. So with AstraZeneca we see double-digit royalties upon commercial success. With Novartis, the royalties are significantly higher than those at AstraZeneca. We also have the ability to co-commercialize and to run Array clinical trials which are mostly paid by Novartis. We are capped annually and in total at a very reasonable amount. And with Novartis, we saw the very impressive results in NRAS mutant melanoma, and not only is this unprecedented – no agent has shown these kind of results in the NRAS population – but it was similar and impressive in the BRAF as well, so broadly active in melanoma.
Representing a perfect path to market for Novartis and an area to own – NRAS mutant melanoma, which is quite significant – about 20% of the population, but we also see a very, very active program at Novartis. Here are the studies which are currently in the public domain – Novartis focusing on critical target-target combos, including their own BRAF, a number of PI3Ks. And you’ll note also that we have initiated ARRY, a combination with Paclitaxel in ovarian cancer as we begin to study a potential path forward for ARRY with this critical product.
From a financial point of view, we’re at about $90 million in cash, which gives us plenty of run room; but we also have, as I mentioned, substantial additional opportunities for partnering – that would be for the pain program and the asthma program, pain program now and asthma after read-out at ATS next May. To give you a sense of the kind of value that Array has garnered in the past in addition to the Genentech deal I mentioned, I’ll point to the Amgen deal, the one we just received a milestone on recently – 60 million upfront, almost 670 million in milestones, double-digit royalties. And these are not uncommon for the partnerships we’ve entered to in the past.
So in terms of catalysts, really the items to watch is our progress to registration trials with our wholly-owned hem/onc programs, 614 and 520, as our studies read out and we announce our intentions to move forward; 162, the announcement of our own potential registration trial with 162, as well as the announcements from Novartis and AstraZeneca for their own Phase III paths, which really could be expected at any point between today and the end of next year, although we’d certainly expect that to be sooner rather than later. And then the other items to note are the partnering activities around 797 and 502 at the completion of the diabetes program with Amgen. And those are the key drivers, and there’s quite a few that may generate significant movement in the company in the coming months.
So with that, I think we’re out of time in the main session. I am joined today by Kevin Koch, who is our Chief Scientific Officer and the inventor of many of—of all of our molecules, actually, as well as our CFO, Mike Carruthers. And we are going to be moving to the room downstairs, the Alvin Room downstairs to take questions. Thank you very much.
Question and Answer Session
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!