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Executives

Tricia Haugeto - IR

Ron Squarer - CEO

Mike Carruthers - CFO

Kevin Koch - President and CSO

David Snitman - COO and VP, Business Development

Karsten Witt - VP, Clinical Sciences

Analysts

Cory Kasimov - JP Morgan

Howard Liang - Leerink Swann & Company

Jim Birchenough - BMO Capital

Amol Pawar - Stifel Nicolaus

John Sonnier - William Blair & Company

Array BioPharma Inc. (ARRY) F1Q13 Earnings Call October 30, 2012 9:00 AM ET

Operator

Good day ladies and gentlemen and welcome to the financial results for Array BioPharma first quarter 2013 conference call. My name is Julian and I will be your operator for today. At this time all participants are in listen-only mode. (Operator Instructions)

I’d now like to turn the call over to Tricia Haugeto. Please proceed ma’am.

Tricia Haugeto

Thank you, Julian. Good morning and welcome once again to Array BioPharma’s conference call to discuss our financial results for the first quarter of fiscal 2013. You can listen to this conference call on Array’s website at www.arraybiopharma.com. Also we are using slides 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, 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 answer questions as needed.

But before I hand over the call to Ron, I’d like to read the following Safe Harbor statement. The matters we 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 to the SEC. These filings identify important risk factors that could cause actual results to differ materially from those in our projections or forward-looking statements.

Now I’d like to turn it over to Array’s CEO, Ron Squarer.

Ron Squarer

Good morning everyone. First, I want to say that we've been following the massive storm in the eastern United States and our thoughts are with those across the region who are affected by this devastating event. We hope that you and your families continue to be safe and that the affected communities will recover quickly. We appreciate that some who may have wished to call in and participate this morning are unable to and maybe only have access to either the transcript or the webcast but we will be available here at Array for anyone who would like to contact us with specific questions.

I am turning now to slide three where we’re showing how Array is evolving into a late stage development company with full five programs having the potential for pivotal trial decisions by the end of calendar year 2013. These include two wholly-owned hemox programs ARRY-614 and ARRY-520 as well as three partnered programs selumetinib partnered with AstraZeneca, MEK 162 partnered with Novartis and danoprevir partnered with nterMune/Roche.

With our progress on 614 for myelodysplastic syndrome and 520 for multiple myeloma, we’ve established a clear internal focus here at Array on the hemox space. We believe that focusing our internal efforts on a single therapeutic area will in fact maximize our likelihood for success.

Looking back there were a couple of very remarkable things about Array. Now the first is how productive and sustainable our discovery engine has been. In our history, INDs have been filed on 18 molecules. 15 of them are still in human development and a full 10 of those are currently in phase 2 having stood the test of early development. The other remarkable thing about Array is our ability to partner with excellent economics and with some of the finest companies in the industry such as Novartis, AstraZeneca, Genentech, Roche, Amgen, Celgene and others. And we’re very excited about those partnerships and they're progressing well.

Through these partnerships, we've also been able to raise non-dilutive capital very effectively. In the past few years we’ve raised about $170 million from high-value licensing partnerships. As recently as August of last year, we announced a deal with Genentech on a preclinical ChK-1 program that included a nearly $30 million in upfront payments and nearly $700 million in potential milestone and the potential for double-digit royalties going forward. These types of terms have not been unusual for Array assets. In fact, if you add up all of the potential milestone related to our partnered portfolio it totals $3.4 billion, and this is before royalties kick in.

There are also additional assets that we'll be looking to partner between now and the end of 2013. Currently, we have about $70 million in cash as of the end of September and that should sustain us for a good period of time especially as we expect to do more partnering and collect milestone payments from existing partners.

The next 12 months are going to be very exciting and I will be reviewing some of the key catalysts and value drivers with you today. On slide four, we summarize our value drivers. The components of our value can be separated into three clear buckets. Now while these buckets are roughly similar in value on a risk-adjusted basis, we sense that many in the investment community value Array mostly on our MEK inhibitors alone. And that’s in the middle bucket on the slide which includes the MEK programs which have demonstrated already impressive multi-tumor activity. Selumetinib partnered with AstraZeneca and MEK 162 partnered with Novartis, and both of which we believe to be progressing towards a pivotal trial.

Here on the slide we’ve listed the oral presentation topics from ASCO 2012, any one of which, or I’d say all of which could represent a forward registration pathway for these products. However MEK in general has shown even broader tumor activity than even listed here.

The lower left bucket on the slide includes our existing partnerships beyond MEK as well as ARRY-797, our pain program and ARRY-502, our asthma program, which we plan to partner given our internal focus on hematology oncology. And the bucket on the top right includes our two wholly-owned hematology products ARRY-614 for MDS and ARRY-520 for multiple myeloma for which we are pleased to have submitted multiple abstracts for the upcoming ASH meeting.

So as an investor or analyst if you have focused your evaluation of Array on only one or two of these buckets, we would encourage you to consider our full portfolio.

Moving on to slide five, regarding our MEK programs, we expect Novartis to provide an update on MEK-162 during their R&D investor day, which is now scheduled for November 8, 2012 and starts 8 a.m. Eastern Time. Also during the past quarter, Array initiated a phase 1b clinical trial in combination with paclitaxel in ovarian and related cancers as part of our crew development effort with Novartis on MEK 162.

For selumetinib, a positive update on patient reported outcomes from the phase 2 KRAS-mutant lung study was reported at ASMO (ph) earlier this month. I will drill down a bit on the state later in the presentation. We’re also very pleased to see that AstraZeneca hired a new oncology focused CEO, Pascal Soriot, which we believe will be very promising for the selumetinib program. In fact, we’ve heard that the oncology teams at AstraZeneca have been quite energized by this new arrival.

Moving on to slide six, regarding our wholly-owned hematology programs, abstracts were submitted on ARRY-520 and ARRY-614 for presentation at ASH. The three abstracts for 520 include updates on the single agent 520 trial, the part A portion of the two-stage 520 plus DEX trial which was in triple refractory patients, interim data on 520 plus carfilzomib phase 1b dose escalation trial and new data which we’re excited about regarding patient selection biomarker to predict potential 520 responders and non-responders. In addition, an abstract for 614 was submitted describing PKPD data with our new formulation. ASH will publish those abstracts which have been accepted on Monday, November 5.

In addition, we submitted a late-breaking abstract to ACR for 797, the pain program, which provides the final phase 2 ’08 pain data, updated safety data and exciting new biomarker data evaluating disease modification end points for cartilage and bone degradation in osteoarthritis. I want to point out that simultaneous pain relief and disease modification in OA would be unprecedented. ACR is expected to publish any late-breaking abstracts which are accepted at the conference.

I’m going to move forward to the slide eight in our clinical development section where we’ve outlined our 100% wholly-owned development pipeline. You will note that we have highlighted in the red box both 520 and 614 as having potential pivotal trial decisions in 2013. For 520 positive results in the three ongoing trials could define a path to late stage development and for 614 we intend to meet with the FDA to discuss the development plan to support registration. Our current focus is on the use of HI or hematologic improvement for full approval.

For 614 in myelodysplastic syndrome, we’ve studied the product in low risk Int-1 HMA failures and have demonstrated already a nearly 40% response rate at our highest dose with our two-thirds of patients at this dose showing multi-lineage response. Given the very poor prognosis for these patients and the absence of treatment options following HMA failure, these results are striking.

We are currently conducting a phase 1 trial in MDS patients with our new optimized formulation that is about 2 to 3 times more bioavailable and has lower inter-subject variability than the prior formulation. We've introduced a new formulation because of the pill burden that we saw in the prior study.

Regarding 520 for multiple myeloma, we’re currently evaluating the product in three clinical trials, that would be the combination with bortezomib, combination with carfilzomib and a combination with dexamethasone. Our focus is on patients with some variation of being relapsed and/or refractory to prior treatment. I will point out that many of our patients that we studied have been heavily pretreated with unusually high numbers of prior therapies versus studies recently conducted on other new entrants to the field.

I’ve already touched on 797, our pain program, so I will point out that with 502, our product for asthma, we continue to advance in the phase 2 trial in persistent asthma, which we initiated this year in February. This is a randomized and blinded six-week study comparing 502 to placebo in 180 patients. We expect to announce top line results for this trial around the ATS meeting in May of next year. With positive results in this trial, we will seek a worldwide partner given our internal focus on hemox.

Turning now to our partnered programs, moving to slide 10, here we are showing our full list of partnered programs. You will notice that we've highlighted in red, the selumetinib, MEK 162 and danoprevir as having potential pivotal trial decisions by the end of 2013. Overall we have 10 clinical development programs ongoing in our partner pipeline. In addition, there are a number of discover programs ongoing with Amgen, Celgene, Genentech and recently a new discovery collaboration with Clovis Oncology.

I also want to mention that earlier this month, VentiRx announced a collaboration with Celgene where Venti received an upfront payment of $35 million to advance VTX 2337. In addition, Venti will be eligible to receive additional funding, including a potential equity investment by Celgene. We believe this is great news for the program and for Array since we have milestones royalties and even an ownership interest in Venti.

Moving on to slide 11, I’ll state that in a moment I am going to discuss the new patient reported outcome data with selumetinib from ASMO earlier this month. Before I do, I wanted to remind you all of the positive phase 2 results in KRAS-mutant lung cancer. It represents about 20% of lung cancer, of non-small cell lung cancer which was reported at the oral presentation in ASCO in June.

This study showed statistically significant improvement in PFS, actually it more than doubled, as well as in objective response rate and alive and progression free at six months. In addition, we also saw a longer median overall survival of 9.4 months versus 5.2 months in favour 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 the KRAS-mutant sub-type of non-small cell lung cancer.

So on slide 12, at ASMO conference earlier this month, additional patient reported outcome data were disclosed in a poster and oral presentation. In a post-hoc analysis, more patients experienced clinically meaningful improvement in lung cancer symptoms using LCS, a lung cancer scoring system, with a 44% improvement observed in the selumetinib plus docetaxel combo, versus 24% improvement with docetaxel alone.

And the second measure of patient reported outcomes using LCS, the median time to deterioration was approximately 170 days for the combination versus approximately 50 days for docetaxel alone. This was statistically significant in favour of the combination. Using an alternative scoring system called the lung cancer specific questionnaire, LSSQ, the selumetinib combination provided numerically superior outcomes versus docetaxel alone.

These results confirmed be unprecedented benefit that is observed with the combination of selumetinib plus docetaxel in KRAS-mutant non-small cell lung cancer patient and adds to the statistically significant progression free survival benefit, an impressive overall results data presented at ASCO.

Moving on, I'd like now to turn the call over to Mike Carruthers, our CFO who will drill down on financials and provide guidance for 2013.

Mike Carruthers

Thank you, Ron. Starting on slide 14, our revenue for the first quarter was nearly $16 million. There were no new milestone payments during the quarter that significantly impacted this revenue level. Our loss per share of $0.13 was slightly better than our expectations as spending remained in check.

Our cash equivalents and marketable securities as of the end of September is $68 million, reflecting a net $22 million burn or use of cash during the quarter. This is about $3 million to $4 million higher than we had projected because the accounts payable on accrued expenses were at a very high level at the prior quarter ending in June and have since come down.

Now please go to slide 15, I will now review guidance for fiscal 2013 which ends next June 30. We are holding our guidance without any change. Revenue should come in at about $62 million with loss per share around $0.60. For the next quarter, our second quarter of fiscal 2013 ending this December, we look for a very similar quarter as what’s just finished at $16 million in revenue and a $0.14 loss.

And with that, I’d like to turn it back over to Ron.

Ron Squarer

Great, thank you, Mike. I am now on slide 16. This slide summarizes a critical upcoming catalyst for products specifically being developed by Array. ARRY-520 and ARRY-614 are tracking on similar timelines both with data submitted to ASH, the timing of the topline results earlier next year and the potential to initiate phase 3 trials in 2013.

Both MEK 162 which we’re co-developing with Novartis and ARRY-502 for persistent asthma should see their data mature also on a similar timeline those two in the first half of next year. With success, MEK 162 is likely to proceed to registration trial and as I mentioned we will be seeking a partner for ARRY-502.

Finally, we've already initiated partnering discussions regarding ARRY-797 for pain with a number of leading pharma companies and look forward to presenting our disease modification data. This would be as I mentioned unprecedented in OA if our abstract is accepted as a late-breaking presentation at ACR in November.

Flipping to slide 17 which is our traditional catalyst list which you've seen before, the only other items that I haven’t already mentioned include the pending phase 3 decision on danoprevir in HCV and the completion of the phase 2 diabetes study with AMG 151, which is the glucokinase activator we partnered with Amgen. As a reminder, the AMG 151 phase 2 trial was initiated in February and in fact, we received already an $8.5 million recruitment milestone in June indicating that recruitment was moving according to plan.

Just as a reminder, again, of the kind of value that Array has tended to receive for its partnerships, that study completed – I am sorry, that deal completed in 2010, had an upfront payment of $60 million potential milestones of as much as $670 million and double-digit royalties in addition to code detail opportunities.

So as you can see, we continue to make progress across all three of our buckets of value, the partnerships, the MEK inhibitors and our wholly-owned hematology programs. In general, we’re very pleased to report on progress, which is bringing us closer to a full five potential pivotal trial decisions by the end of 2013. Some we would hope would come even sooner. We’re also carefully narrowing our internal focus specifically to development and commercialization of hemox programs and that we've seen a lot of progress in terms of our developing story.

All of us on the call here at Array would like to thank our employees for their commitment, ingenuity and diligence that continues to fuel Array success. I also want to thank our patients, partners and shareholders for their continued confidence and support. And with that, we will close – we will turn to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Cory Kasimov, JP Morgan.

Cory Kasimov - JP Morgan

Good morning guys. Thanks for taking the questions, and a nice way to build up the suspense there. First of all on ASH, obviously we’re going to be seeing updates on two different drugs that it sounds like having potential to rapidly advance in your pipeline into pivotal development. So I guess the question is given the early nature of the upcoming data we will see later this year, what is that you’re looking for to really inform the next steps of development and on 614 in particular, will we see anything beyond PKPD data at ASH?

And then the second question is on with your new hemox focus, is it your intention then to keep rights or at least U.S. rights to both 614 and 520?

Ron Squarer

Great questions. Cory, thank you for calling in today. So as we said in the past with 520, we see any one of the current clinical trials informing a forward registration pathway. So for example, we've already stated that or shown last year at ASH that single agent therapy in heavily pretreated patients we achieved let’s about 20% response rate with just over eight months of duration. Now we are adding dex which has shown with other agents to improve outcomes. We are also doing a combination with carfilzomib and a combination with bortezomib.

Certainly a dex combination if successful could represent an accelerated approval option. But that ultimately a combination with carfilzomib or with bortezomib would represent a substantial commercial value given that we would be used essentially when they are used. And the objective of presenting data at ASH, assuming that those abstracts are accepted, is really simply to inform the community that we continue to make progress in showing benefits in those populations. So then with 614 what I would say is we had showed very good data with our prior formulation, as I mentioned almost 40% response rate, two-thirds multi-lineage response. But we had that substantial pill burden or capsule burden, about 12 capsules a day.

So the new formulation is two to three times more bio-available and we’re already studying at significantly higher doses than the highest dose in the prior study and have been impressed with the tolerability of the product to date. What we’re able to show if our abstract is accepted is that we continue to progress that essentially that new formulation is behaving the way we wanted to behave from a PKPD point of view. The results in terms of repeating that very impressive initial result in the prior formulation really would mature only for public consumption in the next year.

Regarding plans moving forward on both of these agents, we own them globally. Currently we have not partnered either of them anywhere. And our intention is to move forward to commercialization with them. We have not yet been specific about which geographies. I will just give an example with 614, the myelodysplastic syndrome program, we know that the disease tends to present in younger patients, for example, in Asia which represents a higher sort of a sweet spot for 614 there. It is a type of market that’s is a little bit more challenging than at the U.S. and Europe. And so we might consider with the right partner in the right terms of partnering in Asia, but we haven't made those decisions yet and have not certainly telegraphed that at this point. So it’s an intention to continue to move forward with them until we provide further news. Did that answer the questions for you? Would you like any more specifics from other members of our team?

Cory Kasimov - JP Morgan

Yeah, that did answer. And then I guess just one follow up is on the KSP program. Is there something about the mechanism with KSP that you’re just evaluating the combination with the proteasome inhibitors right now and pomalidomide (ph)?

Ron Squarer

I’ll turn that over to Kevin.

Kevin Koch

We actually have evaluated both proteasome inhibitors and the IMiD combinations. I would say that in general almost every combination -- almost every time we’ve studied the proteasome combination we've seen synergy in both bortezomib refractory patient samples as well as naive samples. And so we’re impressed by that synergy and we decided that would be the most appropriate first step. Of course, as we progress the drug we will study the IMiD combinations as well.

Operator

Your next question comes from the line of Howard Liang, Leerink Swann.

Howard Liang - Leerink Swann & Company

I just have a couple questions on your MEK program, for selumetinib, what is your understand of what AstraZeneca is waiting for in terms of (inaudible) program and for MEK 162, do you believe that (inaudible) in a position to start pivotal trial?

Ron Squarer

This is Ron. And hi, Howard, good morning. So we have co-development relationship with Novartis and so we have a lot more dialogue on the program with them. With AstraZeneca we do have regular communication but we do have a more let’s call arm’s length relationship with regards to the development program. That said, I'll tell you what we have observed is -- what you've observed, which is an unprecedented data in KRAS-mutant lung which they're way ahead of and sort of own. We've also seen, as I mentioned earlier, that oral presentation in thyroid. And I mentioned that only because as you know AstraZeneca, in fact, had a thyroid product approved just last year and they’re currently marketing it. And what we understand is that there is new leadership on the selumetinib team at AstraZeneca and in fact, that is the person who developed and helped to commercialize the thyroid product and has a very active of course network of investigators and institutions in the thyroid space.

But there is nothing that we know that would suggest that the natural course for AstraZeneca which would be to move forward into a registration trial in KRAS mutant lung and to consider potentially, even thyroid is additional path to market opportunity. There is nothing that we know that would suggest that, that they're not going to do that. But we are unable of course to speak for them. We do -- we are very encouraged also by them having a CEO and we know that it was challenging for them to take some decisions as a company without a CEO. The fact that Pascal was in fact an oncology focused leader and that there isn't a whole lot of oncology options at AstraZeneca, we’d all - view all of these as positive sign. And so really the only question is when will there be a definitive indication of their plans? Many of the large pharmas don't preannounce phase 3s although we are aware that Novartis is holding an R&D Day and that we’d be interested to see what they’re going to say about MEK 162 there.

Typically companies don't preannounce phase 3. They announce it at dosing the first patient. But at AstraZeneca with the new CEO having to essentially provide an indication of the forward path of the company and the strategy, there could be opportunities for them to provide that insight. Unfortunately we’re not able to so. To sum up that answer, we have no reason to believe in our going forward the way we would all expect them to. But we -- as you’re, we are waiting for that public announcement.

Kevin Koch

Howard, I’d just like to add that they are running a bioequivalency study of what they call their phase 3 formulation and they are running trials for Japanese bioequivalency and Asian bioequivalency studies. And of course, they have a strong lung franchise in Asia.

Ron Squarer

Of course, yeah and actually the bioequivalence study I believe has just completed enrolment which would have been certainly rate limiting on their path to initiating that registration trial. Howard, did we get to your question?

Howard Liang - Leerink Swann & Company

Yes, I think the bioequivalence study is I think this is for phase 3 formulation, presumably they’re going to phase 3.

Ron Squarer

That’s what we presume.

Howard Liang - Leerink Swann & Company

And then just follow up on the I guess MEK inhibitors, I think there are a lot of combination studies with MEK inhibitors, especially for MEK 162. What are you most excited about based on biology, what kind of combination?

Ron Squarer

Well, I will turn that over to Kevin to talk about the biology but I do want to just point out that in terms of target-target combos, clearly Novartis is the lead there and they have currently 10 ongoing -- at least 10 ongoing target-target combos in the public domain. And I can only tell you what they appear to be most excited about and that would be the combination with the BRAF mutant inhibitor, the LGX 818. Now they've shown unprecedented data in NRAS-mutant melanoma and one might ask why are they pursuing BRAF given that at least one competitor may be ahead. But their position appears to be that they have the absolute best in class BRAF and that they believe that ultimately they will end up on talk.

The other combination that they appear very interested in is PI3K in combination with MEK and they do have a number of versions of it. In their pipeline they’ve got selective PI3K with some (inaudible) activity. And so those are the ones that appear to be at the forefront at least from our dialogue. But I am going to turn it over to Kevin to talk about biologically which ones could be interesting.

Kevin Koch

They’re all quite exciting. What we’re impressed by Novartis it that almost in every case they have a targeted combination that is going after and associated targeted population that has been validated pre-clinically. And so most recently you saw some data coming out preclinically about the combinations of CDK4 inhibitor plus MEK inhibitor. Of course, Novartis has that CDK4 inhibitor as well combinations with PI3K, combinations in multiple KRAS populations, and we’ve already seen some data in KRAS ovarian at the recent ASCO. And so I think that we will see what the exact combination for which exact population will probably come out sometime next year. As you know almost every trial they are running has a dose escalation phase followed by an expansion phase and each trial is somewhere between 60 and 80 patients.

So we anticipate Novartis being able to choose a particular drug population combinations sometime in the second quarter of next year and you might anticipate that they are moving very rapidly to take advantage of some of the outstanding debut (ph) they have seen.

Operator

Your next question comes from the line of Jim Birchenough, BMO Capital.

Jim Birchenough - BMO Capital

Just following up on the regulatory path for 520 in myeloma, I am trying to get a sense of whether fast to market strategy with more like the (inaudible) single arm study or whether you would entertain doing a combination with dex versus dex alone like the pomalidomide 003 study? And the second part of it is just thinking about the combinations with Velcade and Kyprolis, presumably if those are going to go anywhere you’re going to have to at some point do a head to head with RAF, Velcade dex or CRD. It seems a little bit beyond the scope of what you guys could do yourself. Would you consider partnering if you got into those kind of registration study? Thanks.

Ron Squarer

On the study design, I think I’ll turn it over to Kevin. But let me just sort of give you that overview of how we'd like to proceed. So using the carfilzomib, ODAC recommendation and subsequent approval, recent approval, I think there is a sort of clear line in the sand as to what it would take to get accelerated equivalent in this environment, let’s call it 20-25% response rate in 8-9 months duration is sort of a threshold. And as we mentioned even from the ASH data last year in single agent in heavily pre-treated patients and that is one of our – the one of the characteristics of our program is that I think we are much more heavily pre-treated than other agents that have been studied. But by adding on dex, we've seen from other cases, other products that there seemed to be a benefit there and then of course, we’re looking for synergy in combination with carfilzomib and bortezomib.

The one item which we have which we think is important and somewhat unique, I referred to the fact that we submitted data to ASH for an abstract on a selection biomarker which we think can also help us to improve the numbers even beyond that where they are today. And so our first priority as a company at our stage development is to reach the market with an important agent that's wholly owned that we can commercialize. And so I think we will definitely be focused initially on accelerated approval options and clear combos which would help us to, as I mentioned, accelerate to earlier lines of therapy, not be relegated only to too much later lines of therapy. I did mention that we currently wholly own the compound globally and have not stated any intention to partner it but that we will always seek the best path to move forward in development and commercialization at the right time.

And then that I guess the type of studies which you are describing, which probably we would see more as lifecycle or things that we would address at the time we felt it was most relevant. But on the concept of those lifecycle studies, I will turn over to Kevin for a little bit more color.

Kevin Koch

Yeah we are looking, I would say, a more of a pomalidomide like strategy where we would run a 520 versus 520 plus dex trial which would use response rate as the approval – end point for accelerated approval and we would anticipate needing a response rate in the 25% to 30% range with the durability of somewhere north of six months depending on the patient population chosen. And with the carfilzomib data out there I think that's within the striking distance of both carfilzomib and pomalidomide for approval.

So from a full approval strategy or, if we weren’t satisfied with the response rate in combination with dexamethasone, there’s clearly a full approval strategy with a carfilzomib plus minus 520, I think the initial strategy would be to use exactly the same population as we’re working as carfilzomib a was approved in. We know that we have data coming out at ASH in as a bortezomib refractory or intolerant patient population and the response rate was 16% for carfilzomib as a single agent. So of course, we know the bar, and we can look at our data and actually have a good understanding of whether or not we believe we can outcompete carfilzomib in that population. I should also say that I think the biomarker data is very strong. The rationale is strong. I think that we can with this biomarker enhance our response rates and not treat patients that are necessarily not going to respond to the drug. I think that's what the FDA is looking for and we already have data in heavily pretreated patients to show that this biomarker can help us predict responders.

Ron Squarer

Jim, the only caveat I’d add there is that we submitted the abstracts to ASH and it’s only if they’re accepted that we would be able to present them. If not, we’d probably find a different form for that.

Jim Birchenough - BMO Capital

And so just related to the MEK 162 program, it’s listed as a Array conducted registration trial. Should you maybe speak to what’s logistics of that or do you have to fund it and get reimbursed by Novartis? Is there any increased obligation for you guys to fund given that you’re conducting it? And I guess I am just wondering why you guys would be conducting it over Novartis?

Ron Squarer

Right. Well, so let me take that one step at a time, Jim. So first of all, we haven’t stated specifically what our forward trial would be as we did mention we are in a phase 1b in combination with paclitaxel in ovarian cancer. And so depending on those results, that could be an option but we would certainly look at others.

In terms of the way it works is we have -- essentially we are capped in our total obligation to the partnership on an annual basis. We haven’t stated a number in the past but it’s a reasonable output annually and that it is capped in total. So after a few years we’d essentially max out. And so we do conduct the trial and then we essentially figure out the economics about whether we've spent more and then get money back or have to add and I think in this case, we would max out fairly easily in the program at a reasonable level going forward. In terms of why Novartis isn’t doing all of these indications on its own. Well, first of all, we do have a co-development relationship and they are very supportive of the spirit of the agreement and have helping us to select and conduct our own registration trials with very positive relationship through joint development committee that's been very supportive.

The other thing I’d say is while it’s not black and white by any measure, Novartis does tend to prefer target-target combinations which has worked out very well given that we have two MEK inhibitors partnered. AstraZeneca as you know has been very comfortable in combining with cytotoxics. Novartis is focused more on targeted agent and so we have come forward with one potential cytotoxic combination. But essentially this is a collaborative effort to maximize the value of the product and to support Array’s access essentially to registration pathway for the product.

Operator

Your next question comes from the line of Stephen Willey, Stifel Nicolaus.

Amol Pawar - Stifel Nicolaus

This is actually Amol Pawar in for Steve. Thanks for the update, seems like a lot of progress. Most of my questions have been answered. But perhaps a couple of quick questions on the biomarkers both for 520 and 797. So assuming that the data is good and it helps you identify a potential highly responding population. Would you – is there something that you would develop in-house for 520 and for 797 especially if you went after your partner the 797 program?

Ron Squarer

I will take those. So first regarding 520, we’re pleased that the biomarker, that the selection biomarker that we’re looking at is relatively common marker. So wouldn’t require a new test to be created or approved. And so we think that's a big plus.

Regarding 797, it’s a little bit different topic in that what we would like to present assuming that our late breaker is accepted at ACR next month, what we would like to present is – data related to biomarkers linked to disease modification in OA. These would be linked to improvements in bone health and cartilage. And so essentially what that suggests is that in addition to being a very effective analgesic and we’ve seen the analgesic effect now not only in our OA study on top of hands (ph) but we’ve seen it in dental pain studies and RA studies over 28 days, ankylosing spondylitis over 85 days. But in addition to this analgesic effect, we have evidence assuming that we presented at ACR which points towards disease modification in OA. And that combination of pain relief and disease modification would be unprecedented in the field going forward.

So it’s not really about selection marker, more of a early indication of a very, very potential important effect in patient. Kevin, do you want to –

Kevin Koch

Now just to add to that, this type of – because this is an unprecedented result, you would anticipate you don’t have truly validated biomarkers. These are exploratory biomarkers that have been evaluated in some cases in prognostic studies but for the most part have been retrospective analysis of biomarkers. Clearly some of these biomarkers predict rapid progression of OA to joint replacement and of course you might want to stratify for those biomarkers or if you were to be so bold as to have co-primary end points for the entire population relative to the patient population with a high level of these biomarkers, you might be able to run a trial in that way and essentially killed two birds with one stone.

But we would expect the partner to take on that kind of effort. It would be a substantial effort. It was something that we would not be able to do internally.

Amol Pawar - Stifel Nicolaus

Okay, great. Thanks very much for the clarity. I am looking forward to your ASH data in a couple of months.

Ron Squarer

I guess the abstracts will be actually presented – would be published if accepted on Monday, this coming Monday, essentially a week from yesterday and then the meeting of course you all know when that is.

Operator

Your next question comes from the line of John Sonnier, William Blair.

John Sonnier - William Blair & Company

Just a follow up on 797 for Ron or Kevin. I think if the profile holds up, it might be a very differentiated asset in the space clinically. But talk about where you would conceivably see this fitting in with or without kind of validation of the biomarker analysis?

Ron Squarer

So I think there are couple of factors that kind of guide, that’s a clear path forward. One is the fact that n sets or pennies assets a day and are a generic and I don't think that the goal would be to seek to replace n sets in any way. In fact, that’s one of the recent data that we generated, it was so important because we showed clear utility on top of the n sets if you recall the treatment effect size was almost one on a one max scale which is kind of what you might expect in naive patients receiving and set for the first time and it was comparable in effect size to the oxycodone arm on top of n sets in patients that could actually stay on, on oxycodone where about 34% of them have been dropped off.

And so with the incredible burden of opioids today that we see around the world, but just using the US as an example where you've got I think about 12,000, 15,000 deaths a year from respiratory suppression and that number is growing rapidly, because of the overuse of opioids and their highly addictive nature not to mention that they’re poorly tolerated was simply reinforced in our study. So if you're on an n-set, what are you choices because most patients, let’s say, not most but let’s say about half based on various expert are not well managed, continuously not well managed, what are your choices?

Do you either add an opioid and talk about that risk or you consider a replacement surgery with the incredible burden of that kind of procedure and there again you have thousands of dust linked to a complication secondary to general surgery there. And so a natural place to go is to avoid opioid or surgery and these aren’t patients who are unable to receive sufficient benefit from n sets. Beyond that, there are plenty of subsets, plenty of subsets that folks could consider and we are discussing this with partners, including patients who are unable to take n sets, that second all who either intolerant cannot – who are in tolerant cannot essentially manage the side effects or don't receive any benefit and also many, many people who are unable to tolerate opioids as well. And so we will look at all those populations and in the past we have mentioned that at therapeutic dosage we see what we characterize as a mild QTc prolongation in line with the profile that many other products that are actively marketed, (inaudible) they had to include certain antibiotics and products like viagra antipsychotics and several others.

And so we really think that finding the appropriate population with the appropriate unmet need is going to be critical to the forward path, and we are very pleased assuming that our late breaker is accepted at ACR be able to talk about disease modification, which we think just further enhances the story of benefit with the drug. So that’s what we are looking but ultimately these decisions that are going to be made with a partner moving forward.

John Sonnier - William Blair & Company

And how do we think about that – certainly strategically really refine the focus toward oncology, do you foresee keeping some rights for development or commercialization in oncology related pain or do you just give it away and collect the royalty downstream?

Ron Squarer

I think I would say it’s hard to split indications in that way, and we would anticipate that companies ultimately want to take advantage of the data we've observed already. We have tested our drugs in bone cancer pain model, seen pain relief in bone cancer pain models. Also there is good data to support that p38 mechanism may have direct effect on the bone meds. And I think the probably the third indication of interest is one where you have fractured pain where it’s clear that n sets are only slow to healing in fracture pain. And we do not head to head, and so there is a number of different populations, where you could expand the utilization. But of course I think the opioid replacement strategy is clearly the one with the highest unmet medical need and has a I think a green light from the FDA for companies to try and effect the dependency issues that are occurring in the country today.

Operator

Thank you. There are no further questions.

Ron Squarer

Operator, I think we have no further questions. Is that right?

Operator

That is correct.

Ron Squarer

Great. Okay. With that, again be safe for those who are in the East Coast and we certainly hope that you and your families weather the storm, no pun intended, well. And our thoughts are with you on that. Thanks for those who did – where were able to call in today. And that we’re very pleased to present you continued progress with our portfolio. We have a lot of very near-term events. So I will just repeat.

On Monday assuming that our abstracts at ASH are accepted, you will see data on our three ongoing studies and also on this very exciting selection biomarker, the next Friday – I am sorry, the next Thursday morning at 8 a.m. at the Novartis R&D day may provide insight into the plans for MEK 162 and then ACR assuming that our late breaker is accepted would have an update on our pain program with specific focus on disease modification markers in OA. Regarding selumetinib, with the new CEO at AstraZeneca, so sort of watch that space. We are hopeful that at some point Pascal will signal intentions there as well. So a lot of very exciting events leading up to the end of the year and we look forward to continuing to speak with all of you as we move forward. Thank you very much and with that, I will close the call.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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