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Edited Transcript of ARRY earnings conference call or presentation 14-Aug-18 1:00pm GMT

Q4 2018 Array Biopharma Inc Earnings Call

BOULDER Aug 31, 2018 (Thomson StreetEvents) -- Edited Transcript of Array Biopharma Inc earnings conference call or presentation Tuesday, August 14, 2018 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrea N. Flynn

* Andrew R. Robbins

Array BioPharma Inc. - COO

* Jason Haddock

Array BioPharma Inc. - CFO

* Ron Squarer

Array BioPharma Inc. - CEO & Director

* Victor Sandor

Array BioPharma Inc. - Chief Medical Officer

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Conference Call Participants

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* Anupam Rama

JP Morgan Chase & Co, Research Division - VP and Analyst

* Chris Shibutani

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* Eun Yang

* Peter Richard Lawson

SunTrust Robinson Humphrey, Inc., Research Division - Director

* Stephen Douglas Willey

Stifel, Nicolaus & Company, Incorporated, Research Division - Director

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Q4 2018 Array BioPharma Inc. Earnings Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

It is now my pleasure to hand the conference over to Ms. Andrea Flynn, Head of IR. You may begin.

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Andrea N. Flynn, [2]

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Good morning. This is Andrea Flynn. Welcome to Array BioPharma's conference call to discuss our financial results for the fourth quarter and full year of fiscal 2018. You can join this conference call on Array's website at arraybiopharma.com.

We're using slides to accompany our remarks today, which can be downloaded from the Investor Relations section of our website, and a replay of the conference call will also be available as a webcast on our website.

I'd like to introduce Array's Chief Executive Officer, Ron Squarer; and our Chief Operating Officer, Andy Robbins; as well as our Chief Financial Officer, Jason Haddock, who will lead the call today.

Dr. Victor Sandor, our Chief Medical Officer, will be available to answer questions as needed. Before I turn the call over to Ron, I'll remind you of 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 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, 2018, and in other filings Array makes with 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.

Today, we're going to be discussing results related to BRAFTOVI and MEKTOVI in BRAF-mutant melanoma. For reference, the important safety information is provided in the appendix of the slide deck.

I'll now turn the call over to Array's CEO, Ron Squarer.

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Ron Squarer, Array BioPharma Inc. - CEO & Director [3]

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Thanks, Andrea, and good morning to everyone. I'm starting on Slide 3. We are thrilled to launch BRAFTOVI in combination with MEKTOVI for patients with BRAF-mutant melanoma in the U.S. after FDA approval on June 27.

BRAFTOVI and MEKTOVI were available for sale beginning on July 2, and patients began receiving the combination therapy that same week. As we're only 6 weeks into launch, it is too early to share specific sales estimates or prescription trends, but we are excited to report that early demand for melanoma prescribers for our combination has been strong. In addition, we'd like to point out that today, the weekly MSP and NPA [Accuvia] data are not representative of what we know to be true from the buying patterns of our channel partners. Now based on the therapeutic profile generated from our Phase III COLUMBUS trial, including a median overall survival in excess of 30 months, a median progression-free survival of nearly 15 months and an interactive tolerability profile, we're confident that our commercial team is well positioned for success. And shortly after approval, we were pleased with the National Comprehensive Cancer Network, or NCCN, that they updated the clinical practice guidelines in oncology for melanoma to include BRAFTOVI and MEKTOVI as a Category 1 first-line and second-line treatment option for this patient population. Now Category 1 recommendation is the strongest endorsement the NCCN offers and indicates that based on high-level evidence, there is uniform NCCN consensus that the combination of BRAFTOVI and MEKTOVI is an appropriate therapeutic choice for BRAF-mutant melanoma patients.

This is excellent news for our patients, providers and payers as these guidelines help shape how patients are treated as well as the access that is granted to new therapies. Shortly after FDA approval, we submitted a supplementary New Drug Application to seek inclusion of overall survival data from the COLUMBUS trial in the BRAFTOVI and MEKTOVI labels, and we look forward to working with the FDA on this potential update.

Outside the U.S., the BRAFTOVI and MEKTOVI marketing authorization applications have been accepted and validated with the European Medicines Agency, or EMA, and most recently the EMA's Committee for medicinal products for human use, or CHMP, adopted a positive opinion recommending approval of BRAFTOVI and MEKTOVI for the treatment of adult patients with unresectable or metastatic melanoma with a BRAF V600 mutation. The final European commission decision expected by the end of September will be available to all the 28-member states as well as Liechtenstein, Iceland and Norway.

Further, the manufacturing and marketing approval applications have been accepted and are under review by Japan's Pharmaceuticals and Medicine Device Agency.

Now moving to colorectal. We are very pleased to announce that last week, the FDA granted Breakthrough Therapy Designation to BRAFTOVI in combination with MEKTOVI and cetuximab for patients with BRAF V600E mutant metastatic colorectal cancers detected by an FDA approved test after failure of 1 or 2 prior lines of therapy for metastatic disease. BRAF V600E-mutant metastatic colorectal patients have a mortality risk more than double that of metastatic CRC patients without mutation. And currently, there are no therapies specifically approved for this high unmet need population. Now we are very pleased that Breakthrough Therapy Designation provides us with the opportunity to work closely with the FDA to expedite our effort to bring an important treatment option to these patients in absolute critical need.

Now in fact, based on consultations with the FDA and EMA, we plan to amend the BEACON CRC protocol to allow for interim analysis based primarily on confirmed overall response rate and durability of response, which would support an accelerated approval submission with positive results. Now this interim analysis may also support regulatory submissions in other regions, and we anticipate top line results from this analysis in the first half of 2019. This timing allows for the subset of patients required for the interim analysis of ORR to achieve an objective response, and for the durability of responses to be appropriately evaluated. Our enthusiasm for this program continues to be reinforced by the strength of the data from the BEACON CRC safety lead-in, which we presented at ESMO GI in June. At the time of the analysis, the median overall survival had not yet been reached. However, the overall survival data were mature through 12.6 months and the observed overall survival was 62% at 1 year.

Based on these results, excitement among global investigators continues to increase. Our 3 nonexclusive immuno-oncology clinical trial collaborations with BMS, Merck and Pfizer continue to advance. And finally, consistent with our focus on commercialization, we are very pleased to welcome Carrie Cox as Chairman of our Board of Directors. As an experienced corporate director with a wealth of commercial expertise and a distinguished career in the biopharmaceuticals industry, Carrie's leadership will help drive the success of BRAFTOVI and MEKTOVI and advance our innovative treatments for patients in critical need. Now all of us at Array are deeply grateful to our former Chairman, Kyle Lefkoff, for his dedication and service to the company and acknowledge his many important contributions as Array evolved into a fully integrated commercial stage biopharmaceutical company. Kyle will continue as a director, and we look forward to his insight and guidance as a valued member of our Board of Directors.

And with that, I'm now going to turn the call over to Andy for an update on the recent launch of BRAFTOVI and MEKTOVI in advanced BRAF-mutant melanoma.

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Andrew R. Robbins, Array BioPharma Inc. - COO [4]

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Thanks, Ron. Moving now to Slide 4, we are thrilled with the FDA approval of BRAFTOVI plus MEKTOVI for advanced BRAF-mutant melanoma as well as the NCCN Category 1 recommendation we recently received. We are very pleased with our labels and believe they reflect an attractive and differentiated offering for BRAF-mutant melanoma patients.

In the U.S., we have over 60 customer-facing employees across sales, market access and medical affairs, focused on communicating the benefits of our new combination therapies to health care providers who commonly treat melanoma patients. From national key opinion leaders to community oncologists, to patient advocacy organizations and key P&T committee members at national and regional payer organizations, the reception from the melanoma community has been overwhelmingly positive to date.

Now on Slide 5. Our team was well prepared for launch and therefore able to act rapidly following the approval. BRAFTOVI and MEKTOVI were available for sale beginning on Monday, July 2, and patients began receiving the combination therapy that same week. We have seen strong uptake in the academic setting where our data indicate the majority of BRAF-mutant melanoma patients receive treatment. Based on customer interactions around the country, we believe our profile is compelling and prescribers have shown a willingness to try BRAFTOVI plus MEKTOVI in their practice.

As Ron mentioned in his introduction, it is still early in our launch phase, we are very encouraged with the feedback we're hearing from prescribers and look forward to providing additional color on our launch performance during our next financial results call.

Moving to Slide 6. We have in place strong ex-U. S. partnerships to maximize the potential of BRAFTOVI plus MEKTOVI around the world. Pierre Fabre with a strong legacy in oncology, including over 1,000 employees dedicated to this therapeutic area, has made BRAFTOVI and MEKTOVI a top priority for their team. As mentioned earlier, we are anticipating EC approval by the end of September, and we expect Pierre Fabre would launch soon thereafter. Ono, a Japanese market leader in immuno-oncology, has a powerful track record of success in developing and commercializing oncology products in Japan, including the first-to-market anti-PD-1 therapeutic Opdivo or nivolumab, and we look forward to their expertise in introducing our products to patients in Japan and Korea. Under the agreements with Pierre Fabre and Ono, in aggregate, we stand to receive nearly $600 million in potential milestone payments, and the prospect that over half of future development costs could be offset by contributions from our partners.

In Europe and other territories, Pierre Fabre will deliver 35% royalties on annual combined net sales of BRAFTOVI and MEKTOVI, which exceed only EUR 100 million, while in Japan and South Korea, Ono will deliver 25% royalties on annual combined net sales of both products, which exceed only JPY 10 billion, which is approximately USD 90 million.

With that, I'll turn the call back to Ron.

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Ron Squarer, Array BioPharma Inc. - CEO & Director [5]

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Thanks, Andy. On the next few slides, I will just briefly review the updated results of the COLUMBUS trial that were presented at ASCO in June. As mentioned in the past, these results really exceeded our expectations, not only in the treatment effect size for OS and PFS but also in the tolerability profile. The median OS result achieved was a remarkable 33.6 months for patients treated with BRAFTOVI and MEKTOVI compared to only 16.9 months for patients treated with vemurafenib. The combination demonstrated a median PFS of 14.9 months compared to 7.3 months with vem monotherapy.

The vemurafenib median OS of 16.9 months and the 7.3 months of median PFS are both consistent with results from historical pivotal trials in which vemurafenib was used as a control, which is an important validation of our results.

Now as published, BRAFTOVI and MEKTOVI was generally well tolerated and reported adverse events or AEs are described here on the slide. The incidence of selected any-grade AEs of special interest, including toxicities commonly associated with commercially available BRAF plus MEK inhibitor combinations for patients receiving BRAFTOVI and MEKTOVI included pyrexia at only 18%, serous retinopathy at 20% and photosensitivity at only 5%.

Now moving to Slide 9, the new data showed that there was limited use of posttrial immunotherapy, which is consistent with other published pivotal trials of BRAF and MEK inhibitors in BRAF-mutant advanced melanoma. Further, the use of subsequent immunotherapies was consistent across treatment groups indicating that the efficacy results observed can be attributed to the combination of BRAFTOVI plus MEKTOVI.

Now on Slide 9, we show median overall survival results from 3 separate historical Phase III trials of commercially available BRAF and MEK targeted therapies in BRAF-mutant melanoma. The CoBRIM trial of vemurafenib and cobimetinib demonstrated the median OS of 22.3 months, while the COMBI-d and COMBI-v trials of dabrafenib and trametinib demonstrated a median overall survival of 25.1 and 25.6 months, respectively.

Now as mentioned where vemurafenib was used as control, it demonstrated a median OS of approximately 17 months to 18 months, which is nearly identical to the performance of vem in our trial. We have not conducted head-to-head studies comparing BRAFTOVI and MEKTOVI against the other BRAF MEK combination therapies and the data of reference come from separate Phase III trials.

Moving to Slide 11. I'd like to highlight the latest U.S. market performance for BRAF MEK inhibitors. Novartis continues to dominate this class with over 80% market share versus Roche. Now as you can see on this slide, Novartis reported recent quarterly sales of over $112 million, suggesting an annual run rate in excess of $450 million. While they have secured recent approvals outside advanced BRAF-mutant melanoma, the vast majority of this revenue remains tied to BRAF melanoma.

Now moving to colorectal cancer on Slide 13. The strength of BEACON CRC safety lead-in data continues to guide our regulatory strategy. As I mentioned when opening the call, we were delighted to be granted Breakthrough Therapy Designation for BRAFTOVI in combination with MEKTOVI and cetuximab. This designation will provide further access to the FDA as we work to expedite the development and regulatory review of this important combination. We plan to amend the BEACON CRC protocol to allow for an interim analysis and would seek accelerated approval in the U.S. based on positive results. This interim analysis may also support regulatory submissions in other regions, and we anticipate top line results in the first half of 2019.

As I mentioned earlier, this timing allows for the subset of patients required for the interim analysis of ORR to achieve an objective response and for the durability of responses to be appropriately evaluated.

Next, on slide 14, we provide the details of the global Phase III BEACON CRC clinical trials just for reference. And on Slide 15, while currently there are no therapies specifically approved for this high unmet need population, the median overall survival demonstrated by irinotecan and cetuximab containing regimens for this population is only around 4 to 6 months, while recent experimental BRAF inhibitor containing triplet regimens reported median OS of only 9.1 and 9.6 months. As mentioned, the median overall survival for the BEACON CRC safety lead-in had not yet been reached at the time of analysis, at which point the overall survival data were fully mature through 12.6 months. The observed overall survival rate was 62% at 12 months. The related ORR benchmarks in this patient population range only between 4% to 8% with experimental BRAF-containing triplet regimens demonstrating response rates of only 16% and 21%.

As I mentioned earlier, we reported a 48% confirmed ORR from our BEACON CRC triplet safety lead-in at World GI.

Related median PFS benchmarks in this population fall only between 1.8 and 2.5 months, with recent experimental BRAF-containing triplet regimens demonstrating about 4 months median PFS. And for context, the Array triplet median PFS results of 8 months actually exceeds the median OS of irinotecan and cetuximab containing regimens, which are used as the control arm for the BEACON CRC study.

Looking at the overall survival curve presented at ESMO GI, on 16, you can see the data are fully mature through 12.6 months with no censoring prior to that point. The median survival was not reached and the observed survival at 12 months is 62%. Further follow-up will be needed to define the median, and we look forward to sharing updates over time.

On 17, we provide updated detailed response rate results, which were consistent with prior analysis of the safety lead-in patients.

Next, on Slide 18, we show tumor response by patient in the safety lead-in of the BEACON CRC trial. The inset graph depicts tumor response by patient in the irinotecan and cetuximab treatment arm of the recent SWOG data study, which is similar to the control arm of the randomized portion of BEACON CRC. As can be seen in the inset, the majority of patients there showed significant tumor progression as their best response in contrast, as presented at World GI. 27 out of 28 patients with a postbaseline assessment showed tumor regression and none showed RECIST defined progression as their best response.

Now on Slide 19, we show the number of months each patient has been on therapy. The rows in teal show patients who have had one prior regimen and the rows in light blue show patients who have had 2 prior regimens. The rows with an arrow denote patients who were still on treatment at the time the data cutoff. And as you can see, the majority of responses were observed at the first or second tumor assessment at 6 or 12 weeks, and these results are unprecedented for this patient population.

As shown on Slide 20, the triple combination was generally well tolerated in the BEACON CRC safety lead-in, and details are provided on this slide.

On 21, we now review our 3 nonexclusive clinical trial collaborations, one with Bristol-Myers Squibb, one with Merck, one with Pfizer to investigate the safety and efficacy of our MEK inhibitor, binimetinib with anti-PD-1 or PD-L1 therapy in several solid tumor populations, including metastatic colorectal cancer patients with microsatellite stable tumors or MSS CRC. The trials with BMS and Merck are advancing and we expect the Pfizer trial to start this quarter. Now compared to other recent MEK plus I/O approaches, each of our collaboration programs on earlier lines of therapy include the addition of a third agent of regimen and in the case of BMS and Merck utilize leading PD-1s versus PD-L1.

On slide 22, we show the global colorectal market -- cancer market. On the left side, it's estimated that approximately 10% to 15% of advanced colorectal patients have activating BRAF mutations. On the right, we can see that over 220,000 individuals, unfortunately, succumb to colorectal cancer each year across the U.S., Europe and Japan. And now it's important to point out that the BRAF CRC addressable patient population is even larger than the addressable population of patients with BRAF melanoma for which, as I mentioned earlier, annual sales are trending to exceed $450 million in the U.S. and over $1 billion worldwide for TAFINLAR and Mekinist alone.

At this point, I'm going to turn the call over to Jason to review our financial highlights.

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Jason Haddock, Array BioPharma Inc. - CFO [6]

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Thank you, Ron, and good morning, everyone. I'll be going over select financial performance on Slide 24 for the fourth quarter and full year of fiscal 2018, and I encourage you to read our full consolidated financial statements and MD&A contained in our 10-K, which was filed with the SEC this morning.

We reported revenue of $35.4 million for the fourth quarter of fiscal 2018 compared to $66.4 million for the prior quarter. The decrease was primarily due to a onetime upfront license fee from ASLAN Pharmaceuticals received during the third quarter as well as lower Novartis reimbursable activities. This brings our full year 2018 total revenue to $173.8 million, which is up $23 million from 2017.

This increase is primarily driven by over $49 million in collaboration, license and milestone revenue earned on our proprietary and partnered assets received from our partners. This increase was partially offset by $26 million of lower Novartis reimbursement as those underlying studies continued to decrease.

As we move to our operating expenses, cost of partnered programs for the fourth quarter was $16.2 million compared to $17.7 million for the prior quarter. The decrease was primarily due to the timing of clinical trial expense. Full year 2018 expense is $59.4 million, up $24 million from 2017. These increases are driven by the BEACON expenses as that program continues to advance.

Research and development expense for proprietary programs decreased to $48.1 million compared to $53.6 million in the prior quarter, primarily driven by lower activity on Novartis transition studies. Our full year 2018 R&D spend is $186 million, up $8 million from the prior year. The increase was driven by activity on our proprietary programs and manufacturing expenses as we prepare for commercialization. These were partially offset by lower activity on Novartis transition studies.

Selling, general and administration expense for the fourth quarter was $19.3 million, which was $3.7 million higher than the last quarter driven by higher commercial and corporate expenses. Full year 2018 SG&A expense is 58.8 -- or $58.5 million, up $19 million from 2017. The increases were driven primarily by costs associated with building our commercial infrastructure, staffing and other operating expenses. This brings our reported loss from operations for fourth quarter 2018 to $48.1 million compared to $20.6 million in the previous quarter, which was primarily driven to the ASLAN milestone we recognized last quarter. Our total loss for operations for fiscal 2018 is $129.9 million, compared to $102.1 million in 2017. This increase is driven by higher spend on proprietary programs and commercial capability, partially offset by increased earned milestones and collaboration revenue for the year.

Other expenses for Q4 totaled $3.2 million, which represents a $2.1 million increase from last quarter, largely driven by a noncash change in fair value of notes payable. Other expenses for 2018 full year totaled $15.1 million, which is up slightly from fiscal 2017. Note the income tax expense relates to withholding on our upfront payment from ASLAN.

Net loss for Q4 was $52.4 million or a loss of $0.25 per share compared to $22.9 million or $0.11 loss per share last quarter. Net loss for the full year 2018 was $147.3 million or $0.74 loss per share compared to a net loss of $116.8 million or $0.72 loss per share in the prior year. The increase in net loss was primarily due to increased research and development expense and cost to establish our commercial infrastructure in preparation of the BRAFTOVI and MEKTOVI launch.

Finally, we closed the quarter with a balance of $413 million in cash, cash equivalents and marketable securities. As we have guided, our cash burned over the past quarters has increased as we progress our proprietary programs and prepare for BRAFTOVI and MEKTOVI launch. Excluding nonrecurring items, our burn rate for Q4 was approximately $39 million. We expect our quarterly burn to continue to tick up as we progress our clinical studies, execute our commercial activities and close out the Novartis transition studies.

With that, I'd like to turn the call back to Ron.

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Ron Squarer, Array BioPharma Inc. - CEO & Director [7]

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Great. Thank you, Jason. Now on Slide 26, I'd just like to wrap up with our top priority slide. We are focused as a company today on the commercialization of MEKTOVI and BRAFTOVI in BRAF-mutant melanoma and expect that the additional opportunities to interact with FDA that our recent CRC breakthrough therapy designation provides will help us bring forward the potential approval of these 2 products in BRAF-mutant colorectal. Our marketing applications in Europe and Japan for BRAF-mutant melanoma are under review, and final EC approval is expected by the end of September.

We've seen a very positive reception from U.S. melanoma health care providers during our first 6 weeks on the market and expect to share more granular performance details on the next quarterly call.

And at this time, I'd like to open up the call to Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from the line of Chris Shibutani with Cowen.

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [2]

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Obviously, congratulations on the launch of the combination. I did want to ask a question to clarify and make sure everybody understood about the BEACON CRC plans there. With your modification of the protocol, can you give us a sense for where you are in terms of total enrollment for BEACON? I know that you haven't been specific previously, but some general sense since your previous calls had been to try and make sure you fully enrolled that. And if you don't have U.S. continued enrollment, roughly what that geographic breakdown might be? And then as a follow up to that. If you can comment about what the line of treatment experience will be by the time you have the top line readout for BEACON CRC?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [3]

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Great, Chris. So we have stated that the enrollment on the BEACON CRC trial continues to be strong, and we do anticipate full enrollment around the end of the year. The timing related to the interim analysis for the possible accelerated approval is driven by time needed to achieve responses and then for those responses to be evaluated after they are considered mature. And it was important, it always is important, to present that type of information and to know that type of information only after your study is fully recruited, as we've said. So from that point of view, things are going according to plan now. I think your additional question related to the line of therapy, is that right? Maybe you'd repeat that question so we understand it?

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [4]

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Yes. I was just trying to get a sense for since you're no longer going to be enrolling in the U.S., and you believe you have sufficient numbers, what the rough geographic breakdown will be of when we finally think about the total cohort of BEACON that you'll report when you do the interim analysis potentially in the first part of '19? And also, when we think about our patient cohort that you'll be reporting on, what might be that percentage of patients second line versus other lines?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [5]

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Got you. Okay. So regarding the U.S., it's always been a small minority of patients from the BEACON trial would come to the U.S. This is a very large global -- 250 sort of target sites around the world, and we've been adding sites as we moved along. And did know that when the product is approved or would be approved that we'd have to consider whether to continue enrolling for the BEACON trial in those countries. Today, that's only the United States. Regarding the line of therapy, we have capped -- this is in the BEACON CRC trial. We have capped third line to a maximum of 35%. And so we would expect the split to be somewhere in the order of 65%, 35% second versus third line. Does that address your question, Chris?

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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [6]

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Yes. No, that's very helpful. And then perhaps one for Jason. We're getting an increasing number of questions about potential royalty streams. Obviously, as a company, you've been very productive in the past out-licensing. Is there something that you would be able to share with us as far as giving visibility on potential magnitude and timing of any upcoming royalty that you think that the street should become more confident or aware of as we think about your financials going out, say, over the next 12 to 24 type of months?

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Jason Haddock, Array BioPharma Inc. - CFO [7]

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Yes. So we have some substantial royalties that will be coming online. But there is still some uncertainty of the timing of when our partners will commercialize, and then how much of the uptick they will get or what the trajectory looks like. So as we get closer to that, I'll be happy to provide some better focus or clarity. But at this time, we'll...

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Ron Squarer, Array BioPharma Inc. - CEO & Director [8]

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Maybe just in terms of order, we do expect most likely the first event to be with the Loxo TRK, which also importantly would come with some cash. So let's call it around the time of launch commercialization. And then royalties would kick in over time. But AstraZeneca presented, as you I'm sure saw at ASCO, a repeat really amazing performance with selumetinib in neurofibromatosis this time, including measures of functional improvement in addition to tumor shrinkage, which we believe should be the basis of an approval in that rare pediatric condition that unfortunately causes morbidity throughout the lifetime of the patient. That we understand -- those results will be mature later this year, and then that should drive potentially a final approval. So that also would have milestones. We would then have, I think, we've stated up to double-digit royalties associated with it. Perhaps the most important royalties in the near term though are going to come from our European partner, Pierre Fabre, whereas Andy mentioned, our royalties fairly quickly reach 35% level starting out at a high level as well. And then ultimately, Japan. Maybe the last product we think about is that -- in a sort of a reasonable time frame is Genentech has our AKT in 2 pivotal trials. And we certainly look forward to seeing the results there as we move forward. So there is a good stream there of partnerships. Although I take this opportunity, Chris, to remind everyone that we are getting back to building new I&Ds for Array, and expect our first new I&D in cancer next year from out of our labs.

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Operator [9]

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And our next question will come from the line of Eun Yang with Jefferies.

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Eun Yang, [10]

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So BRAF-mutant colorectal cancer. So in terms of potential accelerated approval based on response rate and durability, is there any threshold that you got to achieve? Or if you show similar to what you have shown 48% of 8 months of PFS, would that be sufficient for approval?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [11]

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Victor, address that to the extent that we can comment.

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Victor Sandor, Array BioPharma Inc. - Chief Medical Officer [12]

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Yes. So I don't know how much we can actually comment. We generally don't like to disclose, just for data integrity and study integrity reasons, details of the statistical analysis plans for an interim analysis. However, as we've said, we have had discussions with both EMA and FDA around this. And our interim analysis is designed around these discussions. Obviously, we've used data from the safety lead-in to sort of structure what we think might happen in the study. And so the interim analysis takes that into account. But beyond that, I really can't provide much in terms of details.

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Andrew R. Robbins, Array BioPharma Inc. - COO [13]

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So, Eun, this is Andy. The only thing I'd add is that in oncology, often times people are familiar with subpart H or accelerated approval strategies, which include a single-arm trial. In this case, this is a randomized trial. So we will have data obviously in the full analysis of the trial, but also at the interim, which shows both our active triplet as well as the control arm. And so in addition to the FDA or the regulatory agency potentially trying to judge the data relative to some historical control, we'll actually have an internal control on the trial, which they can compare it to. So I think that's an incremental step over some other approaches to accelerated approval.

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Eun Yang, [14]

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Okay. And then with this interim look, is there modification to the final assessment of overall survivor data and then number of patients that you originally planned for 615 patients?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [15]

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Right. So the primary focus of the interim analysis will be that durable response rates. But it is common that at the time of these types of analysis, other endpoints are measured. And so we're really not in a position to comment on the specifics of that, but I do think that the regulatory agencies, of course, will look at the totality of the information we provide them.

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Victor Sandor, Array BioPharma Inc. - Chief Medical Officer [16]

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Now just to comment a little bit further. So again, we're going into the specifics of the statistical analysis plan and how that's structured, but suffice it to say that we've again designed this in such a way that we retain sufficient power, and the structure of the final analysis is preserved in a way that we believe is -- will allow for a final assessment in the trial.

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Operator [17]

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And our next question will come from the line of Pam Rama with JPMorgan.

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Anupam Rama, JP Morgan Chase & Co, Research Division - VP and Analyst [18]

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I know you guys submitted the OS data for COLUMBUS to the FDA about a month ago. Can you talk about the time lines to inclusion of that data within the label? And what does your market research suggest about how the inclusion within the label might shift the launch curve?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [19]

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Yes. I'll have Andy address the sort of market dynamics. I'll just say that we submitted the data as rapidly as possible. We will continue to work with the FDA to see it included, and we'll provide updates as we have them.

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Andrew R. Robbins, Array BioPharma Inc. - COO [20]

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Yes, so as you can see on our websites and our promotional materials, we are already using our overall survival data in our messaging in the market. We believe strongly that it's consistent and not misleading when compared to the totality of the evidence from the COLUMBUS study and the labels we received for both BRAFTOVI and MEKTOVI. So while I'd echo sort of Ron's comments about working with the FDA to get it into the label as rapidly as possible, I don't see a significant change on an uptake curve for getting the data formally into the label as opposed to what we can communicate today. The data will be the same. We'll be the first -- we'll still be the first targeted therapy to achieve more than 30 months of median overall survival with a 33.6 months of median overall survival as well as our landmark analyses, which we presented at ASCO.

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Operator [21]

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And our next question will come from the line of Stephen Willey with Stifel.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [22]

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I hopped on a little bit late, so sorry if this is redundant, but just wanted to make sure that I was clear on BEACON. So is it your intent to fully enroll the trial and run a response based in term on all patients once the enrollment has been complete -- been completed? Or is timing here really dictated by just making sure that some significant proportion of patients have a minimum medium follow-up?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [23]

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So it is the latter. We will be using a substantial subset of the overall trial. We need to allow for sufficient time for responses to occur and then for those responses to be evaluated as durable, which is why we've given a sort of broad swath after the point at which we believe we'll be fully recruited in the trial, which is around the end of the year. And that's what we're suggesting we will -- that is when we're suggesting we will have that interim readout.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [24]

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Understood. And then how does the interim contemplate the presence of the doublet arm, if at all? I guess I ask the question just because I think we've seen EMA kind of recently reemphasize this notion of the combination rule within another tumor type. I'm just kind of curious as to how that factors in here?

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Victor Sandor, Array BioPharma Inc. - Chief Medical Officer [25]

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Yes. So the interim analysis would include all 3 arms, and the statistical analysis plan is designed in such a way as to incorporate those analyses. So again, I don't want to, sort of, get into the specifics of the statistical analysis plan. But again, the discussions with the health agencies did include the combination rule and what data might be required to meet that rule. But just to reiterate things that we've said in the past is that, that rule certainly as far as the FDA is concerned and also as far as the EMA is concerned, it has a lot to do with the totality of the data that is available at the time, and not necessarily with any one particular piece of statistical data.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [26]

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Got it. And then just lastly, I guess you made a comment about providing some color on launch performance from the next call. I'm just kind of curious as to what metrics we might be expecting to hear about?

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Andrew R. Robbins, Array BioPharma Inc. - COO [27]

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Steve, it's Andy. Certainly, by the end of our first full quarter, we'll disclose our net sales for the quarter. We would also hope to provide some insight as to prescription trends. So probably at that point from a new prescription NRx spaces. And so I think that those would be the 2 data points I'd be looking for at that time.

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Operator [28]

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And our next question will come from the line of Pete Lawson with SunTrust.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [29]

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Just -- Andy, thanks for the launch dynamics. Just wondering if you could tell us anything around the -- where it has been used initially? Which lines? Whether it's -- the mix is academic versus community? And any issues around reimbursement?

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Andrew R. Robbins, Array BioPharma Inc. - COO [30]

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So we're still, I think, today probably 6 weeks into the launch. So it's probably early for me to comment on most of those things. What I can say is we haven't seen any unexpected challenges with the payer community. We still perceive that BRAF melanoma is an indication where they are familiar with MEK and BRAF inhibitors. It's not a significant budget impact to the large national payers because of the epidemiology underlying the population. And of course, we are working closely together with both national and regional payers to get our products on policy. But as you're probably well aware, that takes some number of months. But we can say we haven't -- just to reiterate, we haven't seen any unexpected challenges of getting our drugs reimbursed. So to follow up to Steve's question and your question, on our call in November after the first full quarter, I think we'll probably feel more comfortable answering some questions like which lines of therapies are being used? Some of the dynamics about where prescribers are, how they are seeing BRAFTOVI and MEKTOVI fit into their treatment armamentarium. So we'll provide some additional color in addition to just the statistics I quoted before.

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Ron Squarer, Array BioPharma Inc. - CEO & Director [31]

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Yes. The message, just to be clear, is very early, too early to predict long-term trajectory. But that demand has been strong. And that the feedback has also been very, very positive. So we want to be prudent with how we describe it, but that's what we're seeing at this point.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [32]

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And then just thinking about the SG&A spend with the buildout in 2019. How should we be thinking about that?

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Andrew R. Robbins, Array BioPharma Inc. - COO [33]

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So just from a sales and marketing perspective, Peter, we had the entire, sort of, quarterly impact of the full sales force in our fiscal Q4 from 2018, so in this most recent quarter. So from a headcount perspective, I wouldn't see any significant uptake -- uptick in spend. Of course, in the launch phase, there will be potentially a small increase in discretionary spend from a marketing perspective. But I think, overall, SG&A should not be dramatically different in fiscal '19 relative to the run rate of the Q4 fiscal '18.

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Ron Squarer, Array BioPharma Inc. - CEO & Director [34]

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We'll take one more call this morning if there's a question, one more question.

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Operator [35]

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Yes, sir. Our last question will come from the line Ed Tenthoff with Piper Jaffray.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [36]

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Looking forward to hearing more about the launch. Most of my questions were answered, but I wanted to get an update on 382 quick and see what we can be expecting for data through the back half of this year and 2019?

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Ron Squarer, Array BioPharma Inc. - CEO & Director [37]

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Yes. So beyond, of course, the MEKTOVI, BRAFTOVI franchise that we're focused on, we are progressing additional opportunities. One of them being 382, the other, could suggest related is the combination of the MEK with leading PD-1s in MSS colorectal. And the time line, generally speaking, is going to be similar from -- for those we're going to be enrolling -- continuing to enroll patients and examine the data. But because it's immunotherapy, it's important not to judge early in one direction or the other because it's not necessarily about response rates as much as sort of durability of action. So I think we'll be in a better position to discuss those programs early next year.

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Ron Squarer, Array BioPharma Inc. - CEO & Director [38]

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Great. And with that, we're going to close the Q&A. And I'd like to thank our employees here at Array for their creativity, commitment and strong sense of urgency that continues to fuel our success. Also to thank our patients, partners and shareholders for their continued confidence and support. And we will now close the call. Thank you all very much.

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Operator [39]

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Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program, and you may all disconnect. Everybody, have a wonderful day.