Array Technologies Inc

NASDAQ:ARRY

Earnings Call Transcript 2018-Q3

[Operator]

Good day ladies and gentlemen, and welcome to the Third Quarter 2018 Array BioPharma Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this call maybe recorded.

I would now like to turn to introduce your host for today's conference, Ms. Andrea Flynn, Senior Director of Investor Relations and Corporate Communications. You may begin.

[Andrea Flynn]

Good morning. This is Andrea Flynn. Welcome to Array BioPharma's conference call to discuss our financial results for the third quarter of fiscal 2018. You can listen to this conference call on Array's Web site at arraybiopharma.com. We are using slides to accompany our remarks, which can be downloaded on the Investor Relations homepage of our Web site, and a replay of the conference call will also be available as a webcast on our Web site.

I'd like to introduce Array's Chief Executive Officer, Ron Squarer; and our Chief Financial Officer, Jason Haddock, who will lead the call today. Dr. Victor Sandor, our Chief Medical Officer; and Andy Robbins, our Chief Operating Officer will be available to answer questions as needed.

Before I turn the call over to Ron, I will 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 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, 2017 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.

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

[Ron Squarer, Chief Executive Officer]

Thanks, Andrea, and good morning to everyone on the call. Starting on slide three, Encorafenib and Binimetinib new drug applications and marketing authorization applications have been accepted and validated with the FDA and EMA respectively based on the strength of the data from our Global Phase 3 COLUMBUS trial in BRAF mutant melanoma patients. And the FDA set a target PDUFA date of June 30, 2018 for both applications and informed Array that based on the preliminary review of the application they have not identified any potential review issues, and they are not currently planning to hold an advisory committee meeting as part of the review process. Further, the recent manufacturing and marketing approval application by our Japanese partner Ono Pharmaceuticals has been accepted by Japan's pharmaceutical and medical devices agency.

We were thrilled to announce in February the overall survival or OS data from the Phase 3 COLUMBUS trial in patients with BRAF mutant melanoma. Overall survival was a remarkable 33.6 months which exceeded our expectations for patients treated with a combination of Binimetinib plus 450 milligrams of Encorafenib known as COMBO450, compared to 16.9 months for patients treated with Vemurafenib as a monotherapy.

Treatment with COMBO450 reduced the risk of death compared to treatment with Vemurafenib monotherapy with a hazard ratio of 0.61 and a P-value less than 0.001. This finding further validates previously reported median progression-free survival, or median PFS, and overall response rate, or ORR results from the COLUMBUS trial. And taken together with the attractive tolerability profile suggests that the combination of Encorafenib with Binimetinib has the potential to become a promising new treatment option for patients with BRAF mutant melanoma.

Now, recruitment continues in the randomized portion of the Beacon CRC trial in patients with BRAF mutant colorectal cancer based on an attractive safety profile and with encouraging clinical activity observed in the safety lead-in. We were excited to share updated results from the safety lead-in at ASCO GI in January which demonstrated an eight-month PFS in a population where current approved standards of care have historically demonstrated a median PFS of 1.8 to 2.5 months. Further, these findings demonstrated a 48% confirmed ORR, including three complete responses in a population where current approved standards of care have historically demonstrated ORRs in the range of only 4% to 8%.

Now based on these unprecedented results, we're exploring potential fast-to-patient opportunities with regulators and we'll provide more information when appropriate. We plan to present an update from the 30 patients safety lead-in portion of the trial next month at the ESMO 20th World Congress on Gastrointestinal Cancer, which is June 20th through the 23rd.

And separately we're advancing three non-exclusive clinical trial collaborations, one with Bristol-Myers Squibb, one with Merck and one with Pfizer to investigate the safety and efficacy of our MEK inhibitor Binimetinib with anti-PD1, or PD01 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 underway and we expect the Pfizer trial to start during the third quarter.

Novartis continues to substantially fund all ongoing trials with Binimetinib and Encorafenib that were active or planned as of the close of the Novartis agreement in 2015, including the COLUMBUS Phase 3 trial. Reimbursement revenue from Novartis was approximately $87 million for the 12 months ending March 30, 2018, of which $24.18 million was recorded in the quarter ending March 30, 2018. Including upfront payments total revenue collected from Novartis since the start of the 2015 agreement is $373.5 million.

Now moving to slide four, we're pleased to share that our COLUMBUS overall survival result abstract was selected for an all presentation at ASCO on June 4th. Also pleased to announce that Part 1 medium PFS results from the COLUMBUS trial were published online in March and in the May print edition of The Lancet Oncology.

And next on slide five, in the U.S. we have our entire commercial organization in place including more than 60 customer-facing employees across sales, market access and medical affairs. As previously announced, the senior level commercial and medical teams have been onboard for several months. Our customer-facing teams are building relationships with payers as well as national and regional key opinion leaders. We're thrilled with the talent that we've been able to attract based on the profile of the drugs that we look forward to commercialize in this year.

Now, moving to slide six, we have in place strong ex-U.S. partnerships to maximize the potential of Encorafenib and Binimetinib around the world. Our Europe-focused partner with a strong legacy in oncology and over 1,000 employees dedicated to this therapeutic area, including commercial research and development capabilities, has made Encorafenib and Binimetinib a top priority for their team.

Ono, the Japanese market leader in immuno-oncology has a powerful track record of success in developing and commercializing oncology products in Japan, with rights to the first-to-market PD1, Opdivo (Nivolumab). We look forward to their expertise in introducing our products in this important geography.

Now under the agreements with Pierre Fabre and Ono, in aggregate, we stand to receive up to $575 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, PF will deliver 35% royalties on annual combined net sales of Enco and Bini which exceed only EUR 100 million, and in Japan and South Korea Ono will provide 25% royalties on annual combined net sales of both products which exceed only JPY 10 billion, which is approximately $90 million.

Now, in slide eight, the results of the COLUMBUS trial exceeded our expectations not only in treatment effects size for median OS and median PFS, but also in the tolerability profile. As a reminder, COLUMBUS is at global Phase 3 trial of which Part 1 contained the primary endpoint comparison of median PFS between COMBO450 and Vemurafenib. And Part 2 is designed to inform the FDA combination rule.

Again, the median OS results exceeded our expectations coming in at a remarkable 33.6 months for patients treated with COMBO450 compared with 16.9 months for patients treated with Vemurafenib. COMBO450 demonstrated a median PFS of 14.9 months compared to 7.3 months with Vem monotherapy.

Now the Vem median OS of 16.9 months and the 7.3 months of median PFS are both consistent with historical pivotal trials results in which Vem was used as a control and this is an important validation of our results. Also, as previously reported, COMBO450 was generally well tolerated, and the reported adverse events or AEs were overall consistent with prior Enco-Bini combination clinical trial results in BRAF mutant melanoma patients.

Grade 3/4 AEs which occurred in more than 5% of patients receiving COMBO450 included increased GGT, increased blood CK and hypertension. The incidence of selected any grade AEs of special interest including toxicities commonly associated with commercially available BRAF/MEK inhibitor treatment for patients receiving COMBO450 included pyrexia at only 18%, retinal pigment epithelial detachment at only 13%, and photosensitivity at only 5%.

Next on slide nine, we show median OS results from the three separate historical Phase III trials of commercially available BRAF and MEK targeted therapies in BRAF mutant melanoma. The coBRIM trial of Vem and Cobi demonstrated a median OS of approximately 22.3 months, while the COMBI-D and COMBI-V trials of Dabrafenib and Trametinib demonstrated a median OS of 25.1 and 25.6 months respectively.

As mentioned, where vem was used as a control, it demonstrated a median OS of approximately 17 to 18 months, which is similar to the performance of Vem in our trial. We have not conducted head-to-head studies comparing Encorafenib and Binimetinib against the other MEK/RAF combination therapies. And the data I've referenced come from separate Phase III studies.

Moving on to slide 10, I would like to highlight the current U.S. market performance for BRAF/MEK inhibitors. Novartis continues to dominate this class with over 80% market share versus Roche. As you can see on the slide, Novartis reported recent quarterly sales of over $100 million suggesting an annual run rate in the excess of $400 million. While they have secured recent approvals outside of advanced BRAF mutant melanoma, the vast majority of this revenue remains tied to BRAF melanoma.

Now moving to our BEACON CRC trial which continues to be an important part of our development strategy on slide 12, we provide the details of the global phase III clinical trial in patients with BRAF colorectal, assessing the efficacy of Encorafenib and Cetuximab with or without Binimetinib in comparison to Cetuximab in Irinotecan-based therapies. The primary endpoint of the study is overall survival of the triplet compared to the control arm. Secondary endpoints include an OS comparison of the doublet to the control arm and the triplet to the doublet.

The study includes a 30-patient safety lead-in to establish combinability of the agents in the triple therapy. As mentioned, we initiated the randomized portion of the trial based on an attractive safety profile and with the encouraging clinical activity observed in the safety lead-in, and recruitment is well underway.

Now on slide 13, the median OS demonstrated by proved standards of care benchmarks for this population are only around 4 to 6 months while recent experimental BRAF containing triplets reported median OS of around nine months. The improved ORR benchmark in this patient population ranged between only 4% to 8%. With experimental BRAF containing triplet regimen demonstrating ORR rates of 16% and 21%. And as I mentioned earlier, we reported a 48% confirmed overall response rate from our BEACON CRC triplet safety lead-in at ASCO GI earlier this year. Improved median PFS benchmarks in this population fall between only 1.8 and 2.5 months with recent experimental BRAF containing triplet regimen demonstrating around four months median PFS.

Now for context, the Array triplet median PFS results of eight months announced at ASCO GI in January exceeds the median OS of approved standards of care. And these are used as a control arm for the BEACON CRC study. We look forward to presenting updated results from the Phase III BEACON CRC safety lead-in at ESMO GI in June.

Slide 14 details results from the BEACON CRC safety lead-in presented at ASCO GI in January. Thirty patients were treated in the safety lead-in and received the Array BRAF containing triple combination of Bini, Enco, and Cetux. Of the 30 patients, 29 had a BRAF V600E mutation. Micro satellite instability-high or MSI-high was detected in only one patient. As mentioned, in patients with BRAF V600E mutation, the estimated median PFS at the time of the analysis was eight months. The confirmed overall response rate in patients with BRAF V600E mutations was 48%, and three patients achieved complete response. Further, the overall response rate was 62% in the 16 patients who received only one line of prior therapy.

And on slide 15, we show tumor response by patient. The bars in teal show patients who have had one prior regimen. And the bar in light blue show patients who have had two prior regimens. As presented at ASCO GI earlier this year, remarkably out of 28 patients with both a BRAF V600E mutation and a post-baseline assessment, 27 showed tumor regression.

On slide 16, we show the number of months each patient has been on therapy. As with the prior slide, the rows in teal show patients who have had one prior regime; the rows in light blue, patients who have had two prior regimens. The rows with an arrow denote patients who were still on treatment at the time of data cut-off. And as you can see, the majority of responses were observed at first tumor assessment at six weeks.

Responses were ongoing in 43% of responders at the time of the data cut-off. Of note, nine of the 15 patients or 16 -- 60%, six-zero, who did not formerly achieve a response by RECIST, demonstrated prolonged stable disease of greater than six months. These results presented at ASCO GI in January, unprecedented for this patient population compared to existing approved standards of care.

As shown on slide 17, the triple combination was generally well tolerated in the BEACON CRC safety lead-in. The most common Grade 3 or 4 adverse events seen in at least 10% of patients were fatigue, urinary tract infection, increased AST, and increased blood CK. Two patients discontinued treatment due to AEs, with only one of these considered to be related to treatment.

On slide 18, we show the global colorectal cancer market. On the left side, it's estimated that approximately 10% to 15% of advanced CRC patients have activating BRAF mutations. On the right, we can see that over 220,000 individuals succumb to colorectal cancer each year across the U.S., Europe, and Japan. And it's important to point out that the BRAF CRC patient population is even larger than the size of the population of patients with BRAF melanoma, which as I mentioned earlier generate annual sales exceeding $400 million in the U.S. and is turning to exceed a $1 billion worldwide for [indiscernible] alone.

And moving to slide 20, we are advancing three non-exclusive clinical trial collaborations. One with BMS, one with Merck, and one with Pfizer to investigate the safety and efficacy of Binimetinib with anti-PD1 or PD01 therapy in several solid tumor populations including metastatic colorectal cancer patients with micro satellite stable tumors.

In each collaboration, we are pursuing a unique trial design that includes a third agent. With BMS, it's Ipilimumab. With Merck, it's standard chemotherapy regimens in order to enroll but first and second line patient. And with Pfizer, we are investigating the contribution of their PARP inhibitor in patients with pancreatic or non-small cell lung cancer. The trials with BMS and Merck continue to advance. And we expect the Pfizer trial to start during the third quarter.

And at this time, I will turn the call over to Jason to review our financial highlights.

[Jason Haddock, Chief Financial Officer]

Thank you, Ron. Good morning everyone. Slide 22 outlines our financial performance for the third quarter of fiscal 2018. We reported revenue of $66.4 million for the quarter compared to $42.2 million for the prior quarter. This growth was primarily driven through a $23 million upfront license fee from ASLAN Pharmaceuticals. As we move to our operating expenses, cost-to-partner programs for the third quarter was $17.7 million compared to $13.7 million for the prior quarter.

This increase was primarily due to higher cost incurred for Beacon CRC as patient recruitment continues to advance. Research and development expense for proprietary programs increased to $53.6 million compared to $42.6 million in the prior quarter. The $11 million increase was primarily driven by higher activity on Novartis transition studies and pre-commercial manufacturing cost for Encorafenib and Binimetinib.

G&A for the third quarter was $16.8 million, which was $5 million higher than the last quarter driven primarily by cost associated with building our commercial infrastructure, staffing, and other operating expenses. Of which, approximately $2 million is onetime in nature. The brings our reported loss from operations for third quarter 2018 to $21.8 million compared to $25.7 million in the previous quarter, driven by the increased revenue which was partially offset by increased BEACON CRC and pre-commercial activities.

Other expenses totaled $1.1 million, which represents a $7.2 million decrease from last quarter largely driven by the $6.5 million non-cash loss on extinguishment of our 2020 notes and our lower interest expense with our new 2024 notes. Net loss for Q3 was $22.9 million or $0.11 a share compared to $34.1 million or $0.17 loss per share from Q2. Finally, we closed the quarter with a balance of $440 million in cash, cash equivalents and marketable securities. This balance includes a portion of the $23 million ASLAN upfront mentioned in revenue. And we expect to receive an additional $11 million payment in our fiscal year '19.

Our cash burn for the quarter increased as we progress our proprietary programs and prepare for potential commercial launch. Excluding nonrecurring items, our burn rate was approximately $34 million for the quarter.

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

[Ron Squarer, Chief Executive Officer]

Thank you, Jason. On slide 24, I'd like to wrap up with our top priority slide and then open up for Q&A. We focused on our three most promising value propositions. First is the near-term commercial opportunity with the combination of Enco, and Bini and BRAF mutant melanoma, our NDAs are currently under review at the FDA with a PDUFA date of June 30, 2018. And our MAAs and MMA applications are under review at the EMA and PMDA in Japan. Preparations for the anticipated U.S. launch are well underway, and we're pleased to have our entire commercial leadership and infrastructure in place, which includes over 60 customer-facing team members across sales, marketing, and medical affairs.

Our second value proposition is in BRAF colorectal, where we will present an update from the 30-patient safety lead-in from the Phase 3 BEACON CRC trial at ESMO GI on June 23rd. Enrollment is well underway in the randomized portion of the trial in BRAF mutant CRC patients. And we're currently exploring fast to patient opportunities with regulators based on the promising data from the Phase 2 and the BEACON triplet safety lead-in results. And finally, we remain excited about the potential of MEK inhibitors to enhance the activity of IO therapies especially in patient populations which have not been responsive to immunotherapy in the past. Our collaborations with BMS, Merck, and Pfizer to combine Bini with IO therapies in CRC and other solid tumors should inform future development strategies for these innovative combinations.

And with that, I will now open up the call to Q&A.

[Operator]

Thank you. [Operator Instructions] And our first question comes from Anupam Rama with JPMorgan. Your line is open.

[Unidentified Analyst]

Hey guys. This is Eric [ph] in for Anupam. Thanks for taking the questions here. Just a couple from us, first, separate from your ongoing programs in colorectal cancer with BEACON in the immuno-oncology collaborations. Just wondering how you're thinking about the potential for additional expansion indications with Enco Bini particularly in adjuvant melanoma and BRAF non-small cell lung cancer? Thanks.

[Ron Squarer, Chief Executive Officer]

Yes, good morning, Eric. Thanks for calling in. So I would emphasize from a valuation perspective that the two -- the actual two largest commercial opportunities and medical opportunities or clinical opportunities for the use of these agents is in BRAF colorectal first, and then BRAF melanoma second in terms of patient population. Although, of course, we expect the order for our entrance to be a melanoma, and then colorectal. And then of course is MEK inhibitors potentiate IO in MSS colorectal that could actually apply to other populations as well. As you know, with Pfizer we're also exploring pancreatic and lung, looking at also the possibility [indiscernible] that could help with the mix.

So there's a whole lot of value in there before you sort of need to look beyond. But what I will say is that even within this group of opportunities, as you know, the BEACON CRC trial is a second and third line trial. And one question we're interested in potentially is what about first line from the point of view of potential for longer duration, better benefit to the patients, and also sort of blocking a possible entry point for other treatment options. So that's certainly high on our list. And then regarding lung cancer additional studies in melanoma, I think that it's best that we present our plans there as relevant as they become public, and as we're able to speak about it more. And of course, we're always weighing the prospect of generating data and simply informing the community about our activity looking at compendia listings and potential guidelines versus pivotal trials. And so I think it's best to answer that question at that time.

[Unidentified Analyst]

Got it. And maybe just a follow-up here on BEACON CRC, as you approach the FDA in discussing other potential registration endpoints, maybe there might be earlier forthcoming than overall survival. I'm just wondering if you could just walk us through sort of what specific endpoints you're looking to kind of put on the table here, PFS, duration of response. And whether there's any optionality around the current safety lead-in study, whether that data or kind of expanding that trial might be something that would enable earlier accelerated registration? Thanks.

[Ron Squarer, Chief Executive Officer]

Right. Great, Eric. Thanks for the question. So I'll just explain the dynamic. So, first of all, we wouldn't do an interim analysis, meaning we wouldn't want to know the results or publish the result of an interim analysis on an ongoing Phase 3 trial until it's well recruited or fully recruited. And we are expecting to recruit the BEACON CRC trial this year. And so that's why it is rate limiting recruitment more so than announcement of our plan. The second thing I would say is that the more information we have the better we can pick the right strategy. And as I mentioned, we will be providing an additional update next month at ESMO GI from this 30-patient safety lead-in.

So the 30-patient lead-in provides more of a source of knowledge and information about how the triple might perform. We have a pretty good pool of knowledge about how the control-arm Rituximab containing regimens perform, including recent examples. And then we have some history on our doublet. But the more information of course we have the better. In terms of what we would look at, I think your suggestion of response rate mPFS is relevant. It's essentially FDA likes to see durable responses which essentially becomes PFS at some point. And so those are very reasonable assumptions. And all I would say is, oh gee whiz, that regulators should've been open to us potentially modifying this study in order to allow for an interim evaluation, the details are what we are assessing, and the potential impact. And when relevant we'll share that, reminding folks that the recruitment of the trial is what's really rate-limiting to that analysis. And so there's no reason really to announce or put a stake in the ground about exactly how we're going to do it at this time. Does that help, Eric?

[Unidentified Analyst]

Yes, absolutely. Thanks, Ron. Thanks for taking my questions.

[Operator]

Thank you. And our next question comes from Chris Shibutani with Cowen. Your line is open.

[Chris Shibutani, Cowen & Company]

Great, thanks very much. Ron, two questions; we're kind of in this period post the disappointing results from another company's IO combination trial, where people are trying to understand perhaps what is the factor driving differences and results. When we see smaller studies we're always trying to extrapolate the potential results that we might see in larger randomized trials. And also when we see studies comparing different kind of PD1 backbones, we're debating whether or not it's to do with trial design versus whether there's perhaps a component of the PD1 backbone itself. So two questions, one more on the side of BEACON, this 30-patient safety lead-in, as we get this update, what should we understand about the full body of patients that will be in the BEACON trial when we see that data?

How much can we extrapolate from this 30-patient? What are the rules to the road to make sure we bear in mind before we draw too many conclusions about the results in a larger study? And then secondly on the MSS, PD1 combination studies you and you need position with all the partnerships you have with different PD1 backbones, PD-L1 as well with Pfizer, how should we think about what factors there go into making a difference that we don't jump to conclusions based upon just because of the first study that reads out. Thanks.

[Ron Squarer, Chief Executive Officer]

Yes, all right so there's a lot in elements trying and go through step wise Chris thanks for that question, so the first one to talk about the IO Landscape look at it's difficult to predict how this is all going to play out. I think you might be referring to at the model study in which there was a currently a temporary safety hold put on an arm that contained Cobimetinib in there PD-L1 which is as we understand it's the company has provided some insights in different forums it's sort of an unfortunate result of perhaps at an experience research group in a very complex study design because from what we understand these are known issues with the molecules and should not have come as a surprise.

Now it's temporary and we think it will proceed the more importantly on that issue. We know that Cobimetinib has a trial a Phase I trial which they updated recently that's been going after some time and of course the emblazed trial which we think we'll see next month and certainly looking forward to that important statements made by Roche and that of course has been going on, so I think from a safety point of view we would have heard and seen things and if we had some serious issues I think with our combinations we would know that by now and would find a way to signal that.

So I don't think, I think we're okay from that point of view. In terms of how these drugs are going to perform and I was encouraged by the Phase I update that the Colbert tests showed earlier this year in that it showed activity where you'd expect no activity but I think it leaves a lot of room for improvement and we haven't seen place results which would drive at approval but we're not resting on match checkpoint. We are adding full possible theory with Merck and Ipilimumab or with PMS we're adding a part potentially with Pfizer and the other factor which you alluded to is we are focused with Merck and BMS not only on PD1 versus PD-L1 but you could argue the leading checkpoint inhibitors in terms of their historic track record of performance in the number of different settings. And so which of those factors is going to matter is a question. Now in terms of what can you do with 30 patients all say is that there's some other history and so first of all I look at the Novartis studies which were larger than 30 patients. I think the triple MEK BRAF EGFR had over 90 patients and what we saw there is that the use of a BRAF plus in EGFR shows interesting activity. In a population that is very difficult to treat and then the further addition of the MEK in the triple it does improve over the double alone.

And so we have some validation from Novartis, now their numbers were much lower than the numbers we've reported to-date, so focusing on response rate they were sort of close to 10%, 20% for response rates double, triplet it where as were we've shown with our triplet 48% number, so we think that the implication that adding a MEK2 RAF an EGFR is a good idea and should enhance activity and we've seen that compared to some older data we've done Phase II with just the RAF and Rituximab this was a couple years back where we showed interesting activity but quite a bit lower than the triplet in fact, our double response rate was around what the Novartis triple delivered. And so I think that the totality of information from our 30 patients from a previous Phase II from the Novartis trial all point to the fact that it's a good idea to use a MEK RAF at an EGFR at BRAF colorectal and ultimately the full B Conspiracy trial will demonstrate the result well the 30 patients sort of give you a hint in a tease.

[Chris Shibutani, Cowen & Company]

Great and then just to clarify has this GI meeting in Europe at the end I'm not as familiar, they are not one to have an abstract with keys and then the data that you will present at that meeting in Barcelona would be what is the data, date of cut off? Thank you.

[Ron Squarer, Chief Executive Officer]

So Victor can you address that and say what you can?

[Victor Sandor, Chief Medical Officer]

Yes, so I think the expectation is generally that when we submit the abstract we have a certain amount of data and given that there's a reasonable period of time between the abstract submission date and the actual meeting you can expect that there would be additional data at the meeting relative to what's in the abstract?

[Chris Shibutani, Cowen & Company]

Great, thank you.

[Operator]

Thank you. And our next question comes from Jim Birchenough with Wells Fargo Securities. Your line is open.

[Yanan Zhu, Wells Fargo Securities]

Hi thanks for taking the questions. This is Yanan Zhu on for Jim today. Just one first question is in the Pembrolizumab combinational study in colorectal cancer. The study didn't select for RAF mutation patient population but just wondering what's the mechanism of action for Binimetinib in this setting and the rational for going with the all rationale for going with [indiscernible] patient population?

[Ron Squarer, Chief Executive Officer]

Yes, Victor, if you want to address that?

[Victor Sandor, Chief Medical Officer]

Yes, so let me just understand this is the Bristol-Myers collaboration.

[Ron Squarer, Chief Executive Officer]

Of the Merck.

[Victor Sandor, Chief Medical Officer]

Yes, so I think that there is a question still that remains to whether or not selecting for RAF versus not is the way to go certainly the Roche study did not select for RAF although there were some analyses done both looking at add patients with or without RAF mutation we can talk a little bit about what that might meant and also more interestingly looking at patients with and without activation or activation pattern in a number of different genes of the map kinase pathway. I think the jury still out in terms of whether RAF mutation makes a difference I think that there's a good preclinical and scientific rational as to why it might but it's not clear and I think that what we've done with the BMS, the Merck as well as the Pfizer collaboration is try to pursue different strategies. And so I think that the strategy that we've pursued with the BMS or to try to restrict it down to the patient population that we feel is most likely to benefit but I think Merck is taking a different approach which is equally reasonable to look at the broader population given the fact that data are simply not solid at this point one way or the other.

[Yanan Zhu, Wells Fargo Securities]

Got it. That's very helpful. Thank you and also just curious in the colorectal cancer setting where you're pursuing the Bini-Enco Erbitux triplet in second third line and also are earlier lines setting from second line was PD1 for the Keytruda combination, is there a possibility to use BINI sequentially those two kind of settings or was the you tried it in the frontline mutation programs you cannot possibly use it in line setting?

[Ron Squarer, Chief Executive Officer]

Yes, Andy why don't you address that?

[Andy Robbins, Chief Operating Officer]

Right, so that the patient population for the BEACON study relative to the PD1 or PD-L1 post MEK combination studies it is quite different so in the BEACON study obviously we're looking only at patients that are BRAF mutant which is about 10% to 15% of the colorectal population in the PD1 plus in Binimetinib studies were either looking at that the all of micro satellite stable patients which is probably 85% of colon or as Victor just mentioned in our collaboration with BMS looking at all the patients that are MSS plus RAF positive which is about half of that overall MSS population.

And if we look long into the future, we feel very bullish about how our BEACON CRC triple combination is going to perform both in the current iteration and potential future earlier line settings and so we do believe that BRAF mutant patients would get the most benefit from seeing a combination of an easier far antibody with our MEK and BRAF inhibitors and but the other 50% to 75% of the population would certainly benefit if the PD1 plus MEK hypothesis is born out.

[Ron Squarer, Chief Executive Officer]

Victor, you want to one?

[Victor Sandor, Chief Medical Officer]

Yes, so I think again not a 100% clear but just mechanistically, there are differences, what a MEK inhibitor does in the BRAF mutant setting where it's basically synergizing with a BRAF inhibitor and the EGFR targeting that particular pathway in the tumor and, so resistance mechanism that could develop in that setting. It may not affect some of the mechanisms related to enhancement did relate to T-cell biology and the T-cells are not going to develop the resistance mechanism, so it is possible and I think it's a relevant research question that somebody is going to ask at some point at least his treatments evolve and become part of the standard of care but mechanistically it's possible that MEK inhibitor could be effective sequentially MEK in that context.

[Yanan Zhu, Wells Fargo Securities]

Got it. Thank you very much and that's very helpful.

[Operator]

Thank you. And our next question comes from Peter Lawson with SunTrust. Your line is open.

[Peter Lawson, SunTrust]

Thanks for taking the questions. Just we think about the number of sales guides you're going to need to have couple years, how many do you think you'll need in the U.S. and then how many FDAs in Japan versus Europe and you think it around that would be helpful?

[Andy Robbins, Chief Operating Officer]

Hi, Peter this is Andy, so as Ron mentioned on the call earlier we now have in place over 60 customer facing employees here in the States and that's across sales our market access team that calls on payers and GPOs in large idioms as well as our medical affairs group of medical science liaisons. We believe that force for a melanoma indication is going to be quite competitive and will be effective in getting our message out, certainly at when if BEACON read out positive and we get an approval from the FDA for colorectal cancer we will revisit the size of the customer facing force that's needed to effectively commercialize the product.

With regards to outside the U.S. as we are in partnerships with Peter Fob in Europe and the rest of the world and with Ono pharmaceuticals in Japan and Korea we're very confident that those organizations with their existing sizable oncology customer-facing organizations will be able to commercialize Encorafenib and Binimetinib in those territories.

[Peter Lawson, SunTrust]

Do you get any sense of how many FDAs you've got? Access to in Japan and Europe?

[Andy Robbins, Chief Operating Officer]

I think it's probably not for me to disclose their commercial organizations it would be easier for those companies to do, so we have in the past suggested that Peter fob on a global basis has north of a thousand employees or a focus in the oncology therapeutic area. That's a mix of customer facing in home office employees but both they in Europe and Ono in Japan with their impressive performance with Nivolumab over the past few years seem quite adept at bringing oncology drugs to market.

[Peter Lawson, SunTrust]

And then kind of entering the market the late but, later what's the strategy there, is there any way of kind of saying the only kind of data is there any way of kind of segment in the market you're thinking through?

[Ron Squarer, Chief Executive Officer]

Yes, that's a long question Peter, we can do that over a meal some day but the short answer is yes we certainly understand that we're the third combination to market we are confident that we have a differentiated profile both from a tolerability as well as an activity perspective. We do see that we have some advantages from a dosing perspective over the incumbent market leader based on how they're patient experiences with refrigeration and food effect, as well as some other advantages we maybe don't want to disclose on a call but overall I think at the end of the day in oncology it's going to be up to us to demonstrate that our combination is differentiated in is the best MEK BRAF combination out there, if we can do that then I think oncologists will change and they will adopt our combination over time as they get experience using it. I think the best drugs always win at the end of the day.

[Andy Robbins, Chief Operating Officer]

One thing I've to add, Peter, you're clearly your question was about melanoma but where we've gotten the sort of best profile you can hope for in terms of a strong OSPF response rate and an attractive tolerability profile but that we well into the Phase III looking at accelerated paths to market in colorectal where there sensually there are no good available therapies for most of the patients we're trying to address and, so that is part of the offering it's just a timing issue.

[Peter Lawson, SunTrust]

Got it. And then just finally, any updates on the use of cash particularly in line with the ATM this morning, just kind of how you're thinking about using capital going forwards and access the capital?

[Andy Robbins, Chief Operating Officer]

Yes, so I think that what you can see and what we've been alluding to for some time now is that, we suggested there would be a creep up in quarterly burn related both to the commercialization effort, where it's proven to be ready before you before you PDUFA date and the increased recruitment in the Phase III BEACON trial and so that's what you have seen is historically we were sort of below 30 now we're certainly above 30 a quarter and that's what the proceeds are for. We do look forward potentially to milestones and even royalties from several of our partners including Loxo, potentially AstraZeneca and others and so that combined with revenue may put us in a good position in the, not too distant future but with the capital markets as volatile as they can be, we felt that it was always good to have enough cash on hand so as to not create concern. If the capital markets were to run into some issues does that answer the question?

[Ron Squarer, Chief Executive Officer]

I may just add that you'll see in our queue that we fully utilized our previous ATM instrument which we said up back in 2013, so again this is just a refreshed of that vehicle to access the capital markets.

[Ron Squarer, Chief Executive Officer]

Yes and it's our history is that we tend to use these over a long period of time opportunistically. And so I wouldn't see that as a departure from our historic practices.

[Peter Lawson, SunTrust]

Okay, thank you so much.

[Operator]

Thank you and our next question comes from Stephen Willey with Stifel. Your line is open.

[Stephen Willey, Stifel Nicolaus]

Hey good morning, thanks for taking the questions. Maybe for Ron I guess the COLUMBUS OS data materialized a little bit late in the FDA review cycle so just wondering how you guys are thinking about the prospect of OS data showing up in the product label at time of approval?

[Andy Robbins, Chief Operating Officer]

Hey, Steve this is Andy. So we haven't disclosed anything specific about the label certainly we're going to wait for the FDA to finalize assuming they do what we think that they should do and forth with an approval and were happy to discuss a label ones it's made available and you're right the overall survival data we announced that I think in February if I'm not mistaken and will have a full disclosure or presentation of it upcoming at ASCO.

From sort of a strategic perspective we believe that based on some of the evolution of the FDA and how drug promotion works in the U.S. that regardless of its status in the label at the time of approval will be able to message and promote on overall survival because it is in our opinion consistent and not misleading with respect to the results of the rest of the COLUMBUS trial, so we don't see it as a as an obstacle but I think Victor and his team will do everything they can to most effectively reflect the results of the COLUMBUS trial in our label.

[Stephen Willey, Stifel Nicolaus]

Got it, thanks. And then maybe just a follow-up on the commercialization side, I guess can you just remind us what proportion of the U.S. prescribing base in melanoma is some unity and I guess how much of the initial launch effort here will be initially focused on this targeted prescribing base? I guess is it fair to assume that you guys are expecting more data driven adoption out of the gate from academics at this point? Thanks.

[Andy Robbins, Chief Operating Officer]

Yes, without getting into the very specific numbers we think that both academic and community settings will play an important role in the adoption and uptake of Encorafenib and Binimetinib in the melanoma setting. I think you're right from a kind of an adoption curve perspective. The early adopters typically are those who sit in academic centers and are more familiar with the overall breast of data both from obviously the COLUMBUS trial but our competitor trials as well, so if I had to guess we'll see the uptake in the beginning over the gate from academics at this point? Thanks.

[Ron Squarer, Chief Executive Officer]

Yes. Without getting into the very specific numbers, we think that both academic and community settings will play an important role in the adoption and uptake of Encorafenib and Binimetinib in the melanoma setting. I think you are right, from a kind of an adoption curve perspective, the early adopters typically are those who sit in academic centers and are more familiar with the overall breadth of data, both from obviously the COLUMBUS trial, but our competitor trials as well. So if I had to guess, we will see the uptake in the beginning over the first few quarters from the academic setting with the community coming on a little bit later.

[Stephen Willey, Stifel Nicolaus]

Is the community split somewhere in, I guess 60%-70% like it is for other oncology engagements?

[Ron Squarer, Chief Executive Officer]

It's hard in melanoma because I think with the advent of PD1 therapy the community has adopted PD1 therapy across many different tumor types. So they are quite familiar with it now. With regards to targeted therapies in melanoma, I think it's probably not as penetrated in the community. So I think the academic setting still plays an important role, you know, maybe even outsides from the numbers you gave.

[Stephen Willey, Stifel Nicolaus]

Got it. Thanks for taking the questions.

[Ron Squarer, Chief Executive Officer]

Sure.

[Operator]

Thank you. Our next question comes from Eun Yang with Jefferies. Your line is open.

[Eun Yang, Jefferies]

Thank you. I have a couple of questions; one is IMblaze that 37 Big Data expected in next month from Roche. So, just broader line, product of cancer comparing to Regorafenib, and I think Regorafenib shows about six or seven months or little survivor in the broader line setting, so what over survivor benefits with the -- inhibitor crumble would be exciting to you?

[Andy Robbins, Chief Operating Officer]

Well, that's an interesting question, because what's exciting for me in anticipating in IMblaze versus our own data is going to be different. So you are right, Regorafenib is a bit below bar, and I think the Phase 1 uptake they provided with Kobiatus [ph] in January was 10 months of OS for the MAC PD1 combination. And so, -- and with the very low response rate and PFS it was little disappointing, but OS the team to be good enough if it's replicated in IMblaze to get them across the line. And that in many ways is the best outcome for Array. The best outcome for Array is that IMblaze is good enough to get approved, providing a proof-of-concept, and then we of course are not resting on third line MAC PDL1, but instead looking at earlier lines and combing with additional agents, chemotherapy, AbbVie and Park and other settings as described earlier. So that would be the ideal outcome for us is a repeat of the Phase 1, good enough to get approved, leaving us plenty of room to move forward.

Now if IMblaze is negative, I think folks will be disappointed. We don't anticipate that a lot of our evaluation is based on sort of third value proposition after BRAF melanoma, BRAF colorectal, but bad news is sort of always bad news, and so we might suffer from it until we present our BMS collaboration data and our MAC collaboration data, and that provides new insight, either positive or negative over time. So that is my prediction, but I don't know any more than you do, and all I know about June is that both companies seems to be suggesting they have a data then, and we will visit at that point. Does that help, Eun?

[Eun Yang, Jefferies]

Yes, that's helpful. And a second question is that now that you are preparing and to launch Enco-Bini in melanoma setting, looking at the consensus for next -- not next year; fiscal year 2019, consensus seems to indicate about 110 million. So I want to ask you how you feel about it. Thank you.

[Andy Robbins, Chief Operating Officer]

Eun, thanks for the question. I think like with any new products introduction for an oncology biotech company, it's unlikely that Array is going to provide specific guidance. But what we can say is what we are focused on is getting trial and usage from the U.S. oncology melanoma treaters. So, for the first couple of quarters we are going to be mainly focused on looking at new prescriptions, new patient starts, and penetration of clinical sites, both academics and community. Over time, we are going to be looking at how that translates into median or mean duration of therapy. So from a total prescription at TRX basis how are we doing, and then probably sometime in calendar 2019 is when we will start looking more specifically at how -- some of the programs you put in place from a total revenue perspective that goes to net perspective are trending towards the longer term projection. So what I would say is I think the investment community understands this from other oncology launches you are going to bear with us as we provide data in the early going about how many physicians and patients are trying our drugs, and you guys I'm sure will use that to impute what the curves look like, and we will continue to provide you the data as we get it.

[Ron Squarer, Chief Executive Officer]

Yes, but we do caution -- let's say, conservatism here, because what we are -- as Andy said, focused on market performance in terms of getting share of scripts. There are lot of logistical issues and timing issues generating revenue. And so, the peak sales are easier to estimate in the first year sales, and we would very much suggest caution in conservatism in those estimates.

[Eun Yang, Jefferies]

Thank you.

[Operator]

Thank you. Our next question comes from Mara Goldstein with Cantor Fitzgerald. Your line is open.

[Mara Goldstein, Cantor Fitzgerald]

Thank you very much for taking the questions. Just a couple of things; and the first is on the combination study with Bristol, with Novo. Since you guys are sponsoring that trial, are you in control of when data is released on that or do you have to negotiate that with Bristol?

[Andy Robbins, Chief Operating Officer]

Hi, Mara. This is Andy.

[Mara Goldstein, Cantor Fitzgerald]

Hi, Andy.

[Andy Robbins, Chief Operating Officer]

As the sponsor of the trial and as the company of our size, I think relying on things like materiality of results will help us as well as the fact that we are the sponsors as I mentioned. So, yes, I think relative to our collaborations with Merck and Pfizer, we have significantly more control about when and how those data are presented.

[Mara Goldstein, Cantor Fitzgerald]

Okay. And secondarily, just on the Novartis financial commitment, if the commitment to revenues so that included tiles that were underway at time of within deal was struck. So when do you anticipate based on the current clinical programs and everything that's in place that funding will discontinue?

[Andy Robbins, Chief Operating Officer]

Again, I think over time you will see the funding trail off, but because we have some very active drugs Encorafenib and Binimetinib, we believe that there will be patients on study for a long, long time, potentially many years into the future. And as you correctly, mentioned in your question, they have an obligation to continue paying us any expenses related to those trials essentially indefinitely that were ongoing at the time of the deal. So I would suggest that it will become less material to the company, especially as we launch our own drugs and start booking revenue, but from a line item and our financials, I think you will see Novartis sending us money for several years.

[Mara Goldstein, Cantor Fitzgerald]

Okay, and I would like to just ask one more question around possible monies owed to Array; on the Loxo collaboration that's worth some $400 million between royalties and milestones, is there something -- is there a milestone do you upon approval of [indiscernible]?

[Ron Squarer, Chief Executive Officer]

Yes. So I would say, let's call it parry [ph] approval, we would be receiving some cash there, yes. And then the other one I mentioned of course was AstraZeneca depending on how their data performs in the coming weeks and months.

[Mara Goldstein, Cantor Fitzgerald]

Great. Thank you very much.

[Ron Squarer, Chief Executive Officer]

Thank you, Mara. And as we are coming from the hour, we are going to end the call. Thanks to everyone for joining. I would like to thank our employees here at Array for their creativity, commitment, and strong sense of urgency that continues to fuel our success, and to thanks our patients, partners, and shareholders for their continued confidence and support. We will now close the call. Thank you very much.

[Operator]

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.