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Array Biopharma Inc. (NASDAQ:ARRY)
Q2 2019 Earnings Conference Call
Feb. 5, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Quarter Two 2019 Array Biopharma Inc. 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. If anyone should require operator assistance, please press "*0" on your touchtone telephone. As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Andrea Flynn. Please go ahead.

Andrea Flynn -- Senior Director, Investor Relations and Corporate Communications

Good morning. This is Andrea Flynn. Welcome to Array Biopharma's conference call to discuss our financial results for the second quarter of fiscal 2019. You can join this conference call on Array's website at arraybiopharma.com. We are using slides to accompany our remarks today, which can be downloaded from the Investor Relations section of our website. A replay of the conference call will also be available on our website following today's presentation.

I'd like to introduce Array's Chief Executive Officer, Ron Squarer, our Chief Operating Officer, Andy Robbins, and our Chief Financial Officer, Jason Haddock, who will provide remarks 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 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 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 discussing results related to BRAFTOVI and MEKTOVI and BRAF-mutant melanoma. For reference, the important safety information is provided in the appendix at the end of the slide deck.

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

Ron Squarer -- Chief Executive Officer

Thanks, Andrea, and good morning to everyone. We are pleased to announce another strong quarter this morning. Starting on Slide 3, BRAFTOVI and MEKTOVI continue to receive a positive reception from oncologists treating BRAF-mutant melanoma patients and we generated nearly $23 million in net product sales in our second commercial quarter, with quarter-over-quarter growth of 62%.

We've seen strong demand for BRAFTOVI and MEKTOVI, with over 2,600 total prescriptions during the second commercial quarter and approximately 4,000 total prescriptions launch-to-date. As a reminder, BRAFTOVI and MEKTOVI are written as separate prescriptions so each time the combination is prescribed, there's one prescription for BRAFTOVI and one prescription for MEKTOVI.

We believe current demand reflects the strength of data from the COLUMBUS trial and the foundation of differentiated PFS, OS, and tolerability. There are approximately 5,000 new addressable BRAF-mutant metastatic melanoma patients each year and we currently estimate the existing targeted therapy market for BRAF-mutant metastatic melanoma at over $400 million in net sales annually in the U.S. and over $1 billion globally.

Moving to BRAF-driven CRC, we're very happy to report a remarkable 15.3 months of median overall survival from the Safety Lead-In of the BEACON CRC trial last month at ASCO GI. As announced in early January, we have completed enrollment in the BRAF CRC trial and look forward to the interim analysis in the first half of 2019.

In August, we announced that the FDA had granted Breakthrough Therapy Designation to BRAFTOVI in combination with MEKTOVI and Cetuximab for patients with BRAFV600E-mutant metastatic melanoma cancer, as detected by an FDA-approved test, after failure of one or two prior lines of therapy for metastatic disease. Patients with BRAFV600E-mutant metastatic CRC have a mortality risk more than double that of metastatic CRC patients without the mutation and, currently, there are no therapies specifically approved for this high unmet need population. The ANCHOR CRC trial, which is designed to assess the efficacy and safety of the combination of Encorafenib, Binimetinib, and Cetuximab in patients with BRAFV600E-mutant metastatic CRC in the first-line setting, continues to advance, as well as our three non-exclusive immuno-oncology trial collaborations with Bristol-Myers Squibb, Merck, and Pfizer.

With the successful launch of our first two commercial products, we're now a fully integrated company, with research, development, and commercial capabilities, and we're looking forward to creating even more value. In the past couple of years, we've refocused our exceptional research engine to create new, wholly owned oncology INDs for Array Biopharma and we look forward to a new IND this year. Additional oncology INDs are expected moving forward and we will provide updates as appropriate.

So, now moving to Slide 4, we have in place strong ex-U.S. partnerships to maximize the potential of BRAFTOVI plus MEKTOVI 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 BRAFTOVI and MEKTOVI a top priority for their team and has launched the two drugs in Germany, Austria, the Netherlands, and the UK.

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-PD1 therapeutic, Opdivo or nivolumab, and we look forward to their expertise in introducing our products to patients. We're very pleased that BRAFTOVI plus MEKTOVI received approval in Japan in January.

Under the agreements with PF and ONO, in aggregate, we stand to receive nearly $540 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 royalties on annual combined net sales of BRAFTOVI and MEKTOVI, with rates starting at 20% and rising to 35% when sales exceed only €100 million. While in Japan and South Korea, ONO will deliver royalties on annual combined net sales of both products, with rates starting at 22% and rising to 25% when sales exceed only 10 billion Japanese yen, which is approximately $90 million.

And with that, I'll now turn the call over to Andy Robbins for a commercial update.

Andy Robbins -- Chief Operating Officer

Thanks, Ron. Moving to Slide 6, we remain encouraged by the second full quarter performance of BRAFTOVI plus MEKTOVI for advanced BRAF-mutant melanoma, with net product sales of $22.7 million. As Ron mentioned, demand for BRAFTOVI plus MEKTOVI was over 2,600 total prescriptions during the most recent quarter and nearly 4,000 total prescriptions during the first six months on the market. Again, as Ron mentioned, BRAFTOVI and MEKTOVI are written as separate prescriptions, so each time the combination is prescribed, it is counted as one prescription for BRAFTOVI and one prescription for MEKTOVI. The vast majority of prescription fills we've seen to date have been for the combination.

We continue to increase our customer base with new prescribers identified every week. As expected, early adoption has been strongest in academic centers, which is where the majority of metastatic melanoma patients receive care in the United States. We are pleased with how physicians in these centers have embraced our combination therapy and gratified that they are increasingly adding the combination to their practice.

As we mentioned last quarter, immediately following launch, we heard feedback that physicians began switching many patients onto BRAFTOVI plus MEKTOVI who were already receiving treatment from other targeted therapy combination. This was certainly encouraging and drove strong first quarter performance. Given this switching dynamic, we expect some of this early uptick will help provide experience for prescribers but likely will not represent a sustained pattern of use, especially as BRAFTOVI and MEKTOVI are used more often as the initial targeted therapy for patients. As we've mentioned previously, because we have imperfect data on historical treatment for BRAFTOVI plus MEKTOVI patients, our ability to predict the split between de novo patients and switch patients remains directional at this point.

BRAFTOVI plus MEKTOVI is the first targeted therapy to demonstrate more than 30 months of overall survival in a Phase 3 study and we are pleased that on January 23rd, the FDA agreed to update our product labels with these overall survival results. Based on our own physician interactions and third-party audits, our sales and marketing messages on overall survival, progression-free survival, and tolerability results from the COLUMBUS trial continue to resonate strongly with melanoma healthcare providers.

We continue to believe that BRAFTOVI plus MEKTOVI offers the best targeted therapy choice for patients with metastatic or un-resectable BRAF-mutant melanoma and I'd like to recognize the tireless efforts of our sales, marketing, medical, and manufacturing teams and their dedication to patients.

Two quarters into launch, we are pleased with how commercial payers have covered BRAFTOVI plus MEKTOVI prescriptions and see no significant barriers to reimbursement for the combination in BRAF-mutant metastatic melanoma. Payers are well-versed in this space and understand the value proposition for BRAF-MEK combination therapy in this patient population, as well as the benefits of our overall survival and progression-free survival results, coupled with our tolerability profile. We believe that BRAFTOVI plus MEKTOVI offers the best option for patients with BRAF-mutant metastatic melanoma and remain committed to providing access to these patients regardless of their insurance or income status.

Moving now to Slide 7, as I just described, our launch in BRAF-mutant metastatic melanoma is going well and as we begin to prepare for a second potential indication, we are pleased to announce our new disease education campaign, which was introduced at the ASCO GI conference last month. While we've previously guided that the majority of melanoma patients in the U.S. are treated at academic centers, the dynamic in the colorectal cancer market is quite different, with the majority of patients receiving care in the community setting. The goal of our newly introduced campaign is to educate physicians on the increased risks associated with BRAF-mutant colorectal cancer and to encourage them to test their patients for the BRAF mutation, consistent with the current recommendation in the NCCN CRC guidelines. More information can be found on our disease education website at brafmcrc.com.

With that, I'll hand it back to Ron.

Ron Squarer -- Chief Executive Officer

Thanks, Andy. Continuing on the topic of BRAF colorectal cancer, on Slide 9, the strength of BEACON CRC Safety Lead-In continues to guide our strategy. As I mentioned earlier, we were granted Breakthrough Designation for BRAFTOVI in combination with MEKTOVI and Cetuximab. This designation provides enhanced opportunities for interactions with the FDA as we work to expedite the development and regulatory review of this important combination.

And we've initiated an amendment to the BEACON CRC protocol to allow for an interim analysis of trail endpoints. And should the planned analysis, based primarily on confirmed ORR and durability of response in roughly half the enrolled patient population, be supportive, we plan to seek accelerated approval in the U.S. The interim analysis may also support regulatory submissions in other regions and we anticipate top line results from the analysis in the first half of 2019. This timing allows for the subset of patients required for the interim analysis of ORR to achieve a response and for the durability of responses to be appropriately evaluated.

Next, on Slide 10, we provide the details of the global Phase 3 BEACON CRC trial just for reference. As a reminder, we announced the completion of enrollment in January.

Moving to Slide 11, while currently there are no FDA-approved therapies specifically indicated for this high unmet need population, the medium OS demonstrated by EGFR and chemotherapy containing regimens for this population is only around 4-6 months. And while recent experimental BRAF inhibitor containing triplet regimens reported medium OS of 9.1 and 9.6 months, we're thrilled to report a remarkable 15.3 months medium overall survival from the BEACON CRC Safety Lead-In at ASCO GI last month.

Now, the related ORR benchmarks in this patient population range between only 4% and 8%, with experimental BRAF containing triplet regimens demonstrating ORR rates of 16% to 21%. We reported a 48% confirmed ORR from our BEACON CRC Triplet Safety Lead-In.

Now, related median PFS benchmarks in this patient population fall only between 2-3 months, with recent experimental BRAF containing triplet regimens demonstrating only around four months median PFS. For context, the Array triplet median PFS results of eight months already exceed the expected median OS for the control arm of our study based on historical results in this patient population.

I'll note that Array has not conducted head-to-head studies comparing Encorafenib plus Binimetinib against other BRAF combination therapies and these data come from separate Phase 3 and Phase 2 studies. I'll also issue our standard caution about making cross-trial comparisons, in general. These trials were conducted under varying conditions and results may not be directly comparable.

But now on Slide 12, at ASCO GI last month, we shared the Kaplan-Meier curve depicting the 15.3 months of median overall survival from the Safety Lead-In in the BEACON CRC trial. Median duration of follow-up was 18.2 months. On Slide 13, we also provided updated detail response rates by local assessment, which were consistent with central assessment and with prior analyses of the Safety Lead-In patients.

On Slide 14, we show tumor response by patient in the Safety Lead-In presented at the meeting; 27 out of 28 patients with a post-baseline assessment showed tumor regression and none showed resist-defined progression as their best response. Now, this is in contrast to the inset graph, which depicts tumor response by patient in the Irinotecan and Cetuximab treatment arm of the recent SWOG data set, which is similar to the control arm of the randomized portion of BEACON CRC. As we can see on the inset, the majority of patients showed significant tumor progression as their best response.

Now, on Slide 15, we show the number of months each Safety Lead-In patient has been on therapy. The rows in teal green show patients who remain on treatment and the rows in light blue show patients who are off treatment. As you can see, six patients have been on treatment for 18 months or longer now, with several approaching two years. Further, the majority of responses were observed early, at the first or second tumor assessment at six or 12 weeks. The median time on treatment is 7.9 months. These results are unprecedented for this patient population. Key safety data for the BEACON CRC Safety Lead-In are shown on Slide 16.

And now moving to Slide 18, we detailed the design of the ANCHOR CRC trial, which is now enrolling patients. ANCHOR CRC is an international trial designed to assess the efficacy and safety of the combination of Encorafenib, Binimetinib, and Cetuximab in patients with BRAFV600E-mutant metastatic CRC in the first-line setting. Essentially, this trial is similar to the triplet arm of the BEACON CRC trial but in patients with metastatic BRAF CRC in the first-line setting. The trial was designed in partnership with top global CRC key opinion leaders and we are excited about the potential that we believe this combination therapy has to offer these patients.

Moving to Slide 19, we show the global colorectal cancer market. On the left side, we can see that over 220,000 individuals unfortunately succumb to colorectal cancer each year across U.S., Europe, and Japan. On the right, it's estimated that approximately 10% to 15% of advanced colorectal cancer patients have activating BRAF mutations. I'll also point out that the BRAF CRC addressable patient population is even larger than the size of the population of patients with BRAF melanoma, which, as I mentioned earlier, we currently estimate to generate over $400 million in net sales in the U.S. and over $1 billion globally.

On Slide 21, we review our 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-PD-1 or PD-L1 therapy in several solid tumor populations, including metastatic colorectal cancer patients with microsatellite stable tumors or MSS CRC, and all three trials continue to advance. Now, compared to other recent MEK IO approaches, each of our collaboration programs, in earlier lines of therapy, include the addition of a third agent or regiment, and in the case of BMS and Merck, utilize leading PD-1s versus a PD-L1.

And so, with that, I'm now going to turn the call over to Jason to review our financial highlights.

Jason Haddock -- Chief Financial Officer

Thank you, Ron, and good morning, everyone. Slide 23 outlines our select financial performance for the second quarter of fiscal 2019 and I encourage you to read our full consolidated financial statements and MD&A contained in our 10-Q, which was filed with the SEC this morning.

We reported total revenue of $82.5 million for the quarter compared to $56.9 million for the prior quarter. We were pleased to report, for the second quarter, net product revenue for BRAFTOVI and MEKTOVI of $22.7 million. Net revenue from product sales is recorded net of estimated rebates, chargebacks, discounts, fees, and vouchers. These gross-to-net adjustments represented 16.6% of gross product sales for the second quarter.

Our collaboration revenue for the quarter was $50.9 million, which includes recognition of $40 million of milestone revenue from Loxo Oncology related to the approval of their TRK inhibitor, Vitrakvi. We also received our first quarter of royalties related to the European sales of BRAFTOVI and MEKTOVI, which we anticipate to become more meaningful in the coming quarters.

Finally, our Novartis reimbursement revenue was $8.9 million for Q2, which is down $3 million from the prior quarter due to the activity of the underlying studies and certain reimbursement limits, as mentioned last quarter.

As we move to our operating expenses, our cost of goods sold related to our product revenue was $0.8 million, which represents 3.5% of net sales. Our research and development costs were $62.1 million for Q2, which is up $6.6 million from last quarter. The increase in R&D expense was primarily driven by activities related to the BEACON CRC trial and other proprietary trials, which was partially offset by lower activity on Novartis transition studies.

SG&A for the second quarter was $30.5 million, which was $5.6 million higher than last quarter, primarily driven by commercialization activities. This brings our reported loss from operations for the second quarter of fiscal 2019 to $10.8 million, compared to $23.7 million in the previous quarter. Our loss is lower due to our increased sales revenue and earned milestones from Loxo, partially offset by increased R&D and commercial spend.

Other expenses for Q2 totaled $0.5 million, which represents a $0.6 million decrease from Q1, largely driven by higher interest income from our higher cash balance. Net loss for Q2 was $11.4 million, or a loss of $0.05 per share, compared to $24.8 million, or a loss of $0.12 per share, for Q1. The decrease in net loss was primarily due to the new product revenue from BRAFTOVI and MEKTOVI, earned milestones, and partially offset by increased operating expenses and reduced reimbursement revenue from Novartis.

Finally, we closed the quarter with a balance of $478 million in cash, cash equivalents, and marketable security, which includes received milestones from Loxo and Pierre Fabre. Excluding non-recurring items, our net burn rate for Q2 was approximately $39 million.

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

Ron Squarer -- Chief Executive Officer

Thank you, Jason. Now, just to conclude the presentation, I'll review our top priorities and value drivers on Slide 25. We remain focused on the commercialization of BRAFTOVI and MEKTOVI in BRAF-mutant melanoma and are encouraged by the results from our second commercial quarter, with nearly $23 million in net product sales and 62% quarter-over-quarter growth. We continue to caution that these results are just from our second full quarter of launch and there were dynamics early in our launch, such as switching, which are unlikely to be sustained. So, it's important to wait a few quarters before building a trajectory.

Next, the regulatory process continues to advance outside the U.S. with the recent BRAFTOVI and MEKTOVI approvals in Europe in September 2018 and in Japan just last month. Now, further, we were thrilled to announce the median overall survival from the Safety Lead-In of the BEACON CRC trial at a remarkable 15.3 months and that we completed enrollment of the full BEACON CRC trial -- that announcement in January.

Now, following consultations with the FDA and EMA, we have planned an interim analysis based primarily on confirmed overall response rates and durability of response, which we believe could support an accelerated approval submission given positive results. This interim analysis may also support regulatory submissions in other regions and we anticipate those top line results from this analysis in the first half of 2019. We're also happy that the ANCHOR trial in the first-line BRAF metastatic CRC setting continues to advance. And we remain excited about the prospects for our commercial activities, the programs we've described today, and future INDs, and look forward to providing additional updates over time. And with that, I'll now open up the call to Q&A.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, if you have a question at this time, please press "*1" on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press "#". To prevent any background noise, we suggest you please place your line on mute once your question has been stated.

And our first question comes from Chris Shibutani with Cowen. Your line is now open.

Chris Shibutani -- Cowen -- Analyst

Thanks very much. Congratulations on another strong quarter of results. Two questions, if I may. The first on the switching patterns. Can you comment a little bit about where you're seeing it, primarily in the academic versus the community setting? And at what point over the course of their treatment are you sort of seeing these patients to switch? Andy, I think in the past you've talked about how you thought this might be a phenomenon that would roll over but a little bit more granularity would be helpful to get a sense for that trajectory.

Ron Squarer -- Chief Executive Officer

All right. So, I'll turn that over to Andy. I just wanted to point out that our whole sort of assessment of the switching dynamic is an estimate. So, as we've said, just to reorient people, we saw a sort of remarkable early uptake right out of the gate that was hard to explain from sort of treatment of new patients coming in to be diagnosed for the first time. We do believe that, over time, that dynamic is becoming less and less common but we think it's going to continue to be a feature of use even over time. So, these are estimates based on our sort of observations and anecdotes. So, perhaps Andy can give a little bit more color about where it's happening.

Andy Robbins -- Chief Operating Officer

Yeah. Hi, Chris. Thanks for the question. I think, as we've said before, the concentration of our business, which matches where melanoma patients typically seek treatment in the U.S., is in the academic setting. And, certainly, we see that the propensity to switch patients from one regimen to another without progression is primarily driven in the academic setting and those physicians.

As Ron mentioned, we're on record and continue to maintain that there's probably two broad types of switching patients: those who were essentially waiting for us to get approved last summer and then those that start on a different targeted therapy combination and run into tolerability challenges. We think that the proportion of the first type of switch patient is probably declining over time, just based on time passing and the availability of our products for the last six or seven months. But the second type of switcher we think will continue into the future, as physicians still are starting patients on other targeted therapy combinations. We don't yet have 100% market share, last I checked.

Chris Shibutani -- Cowen -- Analyst

And then as far as the results from this quarter that you reported, are you seeing any sales into patients for use in BRAF colorectal cancer? And, in particular, I think you'd mentioned in the past how you believe that guidelines could possibly pick up the use of the triple combination even while you're filing or during the regulatory process? Dr. Grophi had mentioned, for instance, a possibility that if the Safety Lead-In data was published, that might be a potential source of triggering for the NCCN guidelines. So, were there any revenues from CRC and are you thinking about publishing the Safety Lead-In? Thank you.

Andy Robbins -- Chief Operating Officer

Thanks again for the question, Chris. So, the $22.7 million in net product sales that we reported were for all patients, not only for melanoma, but even in this quarter, we still maintain that the vast majority of patients treated on the combination are in BRAF-mutant metastatic melanoma. We do see sporadic use in other tumor types, notably BRAF-mutant colorectal cancer, and we even have some indication that creative physicians, or physicians who are willing to go through a couple of no's, are getting reimbursement for the triple combination, even from commercial payers. So, that's encouraging. But it is certainly not a significant driver of the sales that we're reporting in the second quarter. We do think, over time -- as Ron mentioned, we're waiting in the first half of this calendar year for the interim results from the randomized portion of the BEACON trial. Those results, if positive and directionally consistent with what we've shown in the Safety Lead-In, could lead to expanded usage in that population.

Chris Shibutani -- Cowen -- Analyst

And publishing of the Safety Lead-In?

Andy Robbins -- Chief Operating Officer

We typically don't comment in advance of those things occurring. But we certainly are aware that publishing data in peer-reviewed journals would be helpful to the product.

Chris Shibutani -- Cowen -- Analyst

Great. Congrats on the quarter. Thank you.

Andy Robbins -- Chief Operating Officer

Thanks, Chris.

Operator

Thank you. And our next question comes from Anupam Rama with J.P. Morgan. Your line is now open.

Anupam Rama -- J.P. Morgan -- Analyst

Hey, guys. Thanks for taking the question and congrats on the quarter. Maybe a quick question from me. In the slides, you talked about new prescribers identified every month. Maybe you could expand on where you are in terms of penetration into your top-tier physician cohorts, both in the academic and community setting. Thanks so much.

Andy Robbins -- Chief Operating Officer

Hi, Anupam. Thanks for the question. It's Andy again. I think we feel pretty confident at this point that, in the academic setting, we've had very strong usage, especially at high-decile target physicians. Certainly, the awareness and the prescribing, we're seeing that come through very strongly in that setting. As you might imagine, given the sort of epidemiology of melanoma and the number of community oncologists in the U.S., that there are many, many physicians who may see one, two, three melanoma patients per year. And so penetrating the community setting will take more time. We are doing that now. We have many strategies in place, both from a salesforce perspective as well as a non-personnel perspective, to get them interested in our combination and prescribing in those patients when they see them. But, again, our focus remains in the academic setting as we see that's where the concentration of patients is treated and, frankly, the number of physician targets that we need to reach is quite a bit more manageable.

Ron Squarer -- Chief Executive Officer

Maybe, Anupam, just to comment on our ability estimate sort of market share, especially new prescription market share. So, as I've described, even where we're able to estimate when patients are new to our products, our ability to understand whether they're part of that switch cohort, which means they're not naïve to the class, is challenging. So, what we are doing at this time is we provided our estimate for what we think the dollar value in the U.S. and globally are for metastatic melanoma. Obviously, we're providing net sales each quarter. We're providing prescriptions, which are TRx. The secondary sources, unfortunately, that we have at our disposal are not credible, at least at this point. And so, at least for the foreseeable future, that's what we're gonna be able to do, in terms of talking about our progress.

Anupam Rama -- J.P. Morgan -- Analyst

Got it. Thanks for taking the question, guys.

Ron Squarer -- Chief Executive Officer

Great. Thank you.

Operator

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

Stephen Willey -- Stifel, Nicolaus & Co. -- Analyst

Yeah. Good morning. Thanks for taking the questions and congratulations on the quarter. Maybe, Andy, if you could just give us a little bit of insight as to what kind of read you might have on patient persistency at this point. I think all of us are still kind of wondering what duration of treatment might look like. And just given, I guess, that you had some patients who were switching off of competitive combinations early in the launch, just wondering if you have any color as to whether or not those patients remain on therapy at this point.

Andy Robbins -- Chief Operating Officer

Hi, Steve. Thanks for the question. So, we're still not in a position where I think we can try to estimate means or medians for duration of treatment, just based on the cycle and the launch and how many months have elapsed. But we are encouraged that even the switcher patients who came on in July and August, many of those patients remain on therapy today. So, I think we had maybe a hypothesis that many of those patients were at the very, very end of their treatment potential for MEK and BRAF and, coming on, they might not represent a good estimate for duration of therapy, but whether it's the activity of our combination or the tolerability, I think we are seeing signs that even switchers in the early portion of the launch cycle, many of those patients remain on. So, we're encouraged. It's gonna take us at least a few more quarters to get to any sort of metric that we are comfortable providing externally but, again, we feel very strongly that our combination provides such a differentiated therapeutic index, both on activity and safety, and we're hopeful that will lead to very strong duration of treatment.

Ron Squarer -- Chief Executive Officer

Just to set expectations, I think it's going to be a long time before we're able to feel comfortable that we have a good assessment of duration. So, I think, directionally, we're excited but it will take a while. And, of course, we'll have to parse out, to the best of our ability, from different sources, whether the patients were naïve to the class or not. Certainly excited to see some patients do well. Of course, others don't. And so you have the dynamic of that complicating an assessment of duration. And that's a critical issue, of course. We recognize that it's a critical issue for how the business grows but it's going to be a while until we sort of settle on some numbers.

Stephen Willey -- Stifel, Nicolaus & Co. -- Analyst

Understood. And just with respect to gross-to-net, I guess it perhaps maybe looks like it was within that 20% range that had characterized 1Q. Is that a fair statement?

Andy Robbins -- Chief Operating Officer

Yeah, we reported gross-to-net of 16.6% this quarter. And so, as you might imagine, some of the dynamics in the early stages of an oral oncology launch are moving in the direction where the gross-to-net is coming down slightly based on volume. So, some of those dynamics about quick start programs are coming out as we move through the launch cycle.

Stephen Willey -- Stifel, Nicolaus & Co. -- Analyst

Got it. And maybe just a couple quick pipeline questions. I guess, is there any update with respect to a potential selumetinib filing for NF1 from partner AstraZeneca? I think they had perhaps previously suggested that that could have been a year-end '18 event. And then I know that there was also some discussion around the currently enrolling 797 trial with respect to maybe trying to set up some kind of futility analysis to get a better read on effect size. So, if you could maybe just give us some incremental updates there, that would be helpful. Thank you.

Ron Squarer -- Chief Executive Officer

Yeah, sure. So, with NF1, first of all, remind folks how remarkable the results are now through two series of studies over time, showing very high response rates, around 70%, and most patients receiving benefit. These are young people, many of whom have been on a drug for a long time. So, we think it's a remarkable advance in the treatment of the disease. Now, from what we understand, AstraZeneca is still completing what they would term the "final analysis." Now, this is a study that they're doing in cooperation with other organizations, which may explain why it seems to be taking so long, but we do think that they will, in the not too distant future, complete that analysis and we hope that, of course, it would support a regulatory filing and ultimately commercialization. Beyond that, we'd have to direct you back to AstraZeneca.

With 797, yes, it is true that there is a futility analysis envisioned for the ongoing registration trial for 797 in this rare mutational driven form of dilated cardiomyopathy. That is not uncommon for these types of studies but we have articulated that we have set, in our mind and with our partners, what we would call sort of a high hurdle. If the product can meet that hurdle, of course, we will continue with more confidence of a useful outcome. If not, we'll move on to the many other programs and even new INDs that we look forward to in the future. So, that's our position there.

Stephen Willey -- Stifel, Nicolaus & Co. -- Analyst

Understood. Thanks.

Andy Robbins -- Chief Operating Officer

Thank you, Steve.

Operator

Thank you. And our next question comes from Michael Schmidt with Guggenheim Securities. Your line is now open.

Michael Schmidt -- Guggenheim Securities -- Analyst

Hey, good morning. And thanks for taking my questions and also congrats on a good second launch quarter. I just had a follow-up on your sales growth dynamics quarter-over-quarter. When I look at the prescription TRx figures that you provided, it looks like there's still a little bit of a disconnect between growth quarterly of that compared to your net sales figures. Just wondering if there's anything else ongoing, in terms of inventory changes maybe, that could explain some of that.

Andy Robbins -- Chief Operating Officer

Hi, Michael. It's Andy. We feel confident that there's nothing going on from an inventory perspective that's impacting our sales. So, the numbers that we reported, as you see, they are sort of estimated as "greater than" and "approximately." That might help back out some numbers. But I think to directly answer your question, there's nothing significant with inventory that should be changing our numbers.

Michael Schmidt -- Guggenheim Securities -- Analyst

Great. Thanks for clarifying that. And then a question around your BRAF colorectal cancer. You did mention your awareness campaign that you launched recently. Just curious, given that testing is already in NCCN guidelines, do you, by any chance, have market research or have done market research looking at what percentage of BRAF positive colorectal patients are actually already being identified today? I'm just curious how that might affect potential launch dynamics, pending approval, obviously.

Andy Robbins -- Chief Operating Officer

Sure. That's a great question. And while we, of course, hope that every patient with cancer gets next-gen sequence testing, that's unfortunately not the reality today in the United States. We think that, in the academic setting, nearly all colorectal cancer patients are aware of their BRAF status by the time their disease has spread to Stage 4 or metastatic cancer. In the community setting, where the majority of CRC patients get their treatment, it's definitely not at that level. It's probably more in the half to two-thirds of patients are being tested today for their BRAF status. And so that is, essentially, why we've embarked on this disease education campaign to get those numbers up in advance of what we believe will be an important finding from the BEACON CRC trial.

Ron Squarer -- Chief Executive Officer

The only thing I'll add is that we think that the use of diagnostics, the trends are in our favor, certainly becoming more commonly a part of any treatment paradigm in any setting. I will share with you sort of my opinion that the fact that there's no real good intervention today in BRAF colorectal suggests that the motivation for testing mainly being about prognosis. As I showed today and said in the past, a very poor prognostic indicator. That's a very different motivation than if there is, potentially, if we're successful, a potentially useful or very useful intervention. And I think that's gonna drive use. So, I think the trends are in our favor but it's going to be driven by what is the benefit of actual testing. And I think that we'll be able to tackle those hurdles at that time.

Michael Schmidt -- Guggenheim Securities -- Analyst

Makes sense. Great. Thanks. And then the last one. I guess there are other cancer types that have a BRAF mutation and I was just wondering whether you have any plans to potentially develop the combination in those as well.

Ron Squarer -- Chief Executive Officer

Yeah. So, we prefer to discuss details of any kind of lifecycle when we're able to be more specific. Certainly, we've done that with our first-line BRAF colorectal trial. But the single largest population of patients with BRAF-driven disease is, in fact, colorectal. Second largest would be metastatic melanoma. And after that, there are others, like lung and even small populations, which we're certainly considering how to address but we don't have those details at this moment.

Michael Schmidt -- Guggenheim Securities -- Analyst

Thanks. Appreciate it.

Ron Squarer -- Chief Executive Officer

Thank you, Michael.

Operator

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

Jim Birchenough -- Wells Fargo Securities -- Analyst

Hi, guys. Let me add my congratulations on the strong quarter. Just a question on the BEACON study, if I could, and expectations. Could you remind us what the duration of response is with the VIC regimen, what you think the hurdle is for duration of response with your combination, and then if you could maybe share with us if you expect to look at PFS and OS at the interim? And then I've got a follow-up. Thanks.

Andy Robbins -- Chief Operating Officer

Hey, Jim. I don't think that they've reported in their publication their DOR but they did report a PFS of around four months for the VIC combination and median PFS. Which, again, it's a cross-trial comparison, but if you look at our Safety Lead-In with a median progression-free survival of around eight months, we feel that the durability of our triple therapy is noticeably different. So, maybe that helps answer your first question.

Jim Birchenough -- Wells Fargo Securities -- Analyst

And then just on whether we should expect PFS and OS data at the interim? And I guess the add-on is do you expect enough events at that time for there to be statistical power or reasonable statistical power for us to think of events?

Ron Squarer -- Chief Executive Officer

So, as we've said, the focus of the interim analysis is on OS, that it's been given sufficient time to be deemed durable. I'm sorry. ORR. Thank you. Let me start over. As we've said, the focus of the analysis in the interim is overall response rate which has been given sufficient time to be deemed durable. We have stated that there are other endpoints that will be analyzed but we've really not commented beyond that. And so that's where we are and we look forward to those results in the first half of this year

Jim Birchenough -- Wells Fargo Securities -- Analyst

And maybe just one final question just on earlier programs. Ron, just in terms of new INDs, should we expect novel targets? Are there any provisions in your current collaborations where you've designed molecules for other that prevent you from going after the same target? And if you could, are the things you've learned about those targets and designing other molecules that might serve the basis for improvement? Thanks.

Ron Squarer -- Chief Executive Officer

Yeah. So, we hope, over time, when relevant, to provide more insight into what is not just a single program, it is a pipeline that we're building. And we are comfortable saying that the answer to your question is yes and yes. So, we are looking both at more novel approaches but with good science behind them and, as well, the opportunity to take mechanisms that have shown promise and have been useful and understand their limitations and determine whether, with our technology, we can address those limitations effectively. So, the answer is, over time, you should expect to see sort of a balanced approach emerging out of Array.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Great. Thanks for taking questions.

Ron Squarer -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Eun Yang with Jefferies. Your line is now open.

Eun Yang -- Jefferies -- Analyst

Thank you. In BRAF melanoma, it looks like this is a physician-sponsored trial for triplet combo with BRAFTOVI, MEKTOVI, with pembro. I understand that Novartis is doing triplet combo as well with anti-PD-L1 with their targeted therapies. Stage 3 data is supposed to be coming out later this year. So, is this triplet combo is something you are planning to do for the restoration path? And also what's the thinking in the medical community? Is it the sequential treatment approach between targeted immune-oncology products or the triplet combo? And I have a follow-up question. Thank you.

Andy Robbins -- Chief Operating Officer

Hi, Eun. This is Andy. As you might have seen at ESMO this year, the Keynote 22 study was presented, which was pembro in combination with the Novartis targeted therapy doublet to make the triplet. And I think, talking to many, many melanoma thought leaders after that presentation, I would characterize their responses as they were underwhelmed from the combination of a PD-1 directly, at the same time, concurrent therapy with targeted therapy. We do notice that Novartis does seem to talk a lot about this trial that you've referenced and the results that they're expecting in the spring. Because there's only two modalities to treat metastatic melanoma patients with, I think the current thinking in the community or in the academic setting is that it's going to have to be pretty noticeably different to want to use all available therapies concurrently in one line.

So, it's possible and that's why we are running a study, like immu-target, which you referenced, which is our combination of BRAFTOVI, MEKTOVI, plus Keytruda. We have not announced any plans to go into a Phase 3 study to pursue registration but because BRAFTOVI, MEKTOVI, and Keytruda are all indicated for BRAF-mutant metastatic melanoma patients, we want to make sure that we do generate those data in a clinical setting, should the standard of care evolve in that direction, which would allow us to have discussions with melanoma experts about what do our drugs do in combination with a PD-1. So, the shortest answer is we have no plans to go into a Phase 3 trial at this time but, because we are generating those data and we will monitor how the field emerges, we would be ready to do so if appropriate.

Eun Yang -- Jefferies -- Analyst

That's helpful. And question on BRAF colorectal cancer. So, in the BEACON Safety Lead-In trial, you showed a 48% response rate in second and third line. So, when you look at ANCHOR first-line trial, what response rate would you consider as encouraging and a success? Thank you.

Andy Robbins -- Chief Operating Officer

Hi, Eun. So, yeah, we haven't really set a bar as for what we think the ANCHOR trial needs to surpass in order to be successful. And, again, we're running that study because we think our triple therapy is so important for BRAF-mutant colorectal cancer patients. The numbers that you reference out of our Safety Lead-In -- and if you look at previous studies that have BRAF colorectal cancer patients in a first-line setting, like the TRIBE study -- I think if you got to 40%, 50% plus response rate, that would be eye-opening in the minds of the colorectal cancer KOLs. So, what we would love to do is essentially pass what we've seen in the Safety Lead-In or the BEACON results in the first-line setting.

Eun Yang -- Jefferies -- Analyst

Thank you.

Ron Squarer -- Chief Executive Officer

Thank you, Eun.

Operator

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

Minh Vong -- SunTrust Robinson Humphrey -- Analyst

Hi, everyone. Thanks for taking our questions. This is Minh Vong filling in for Peter Lawson. I guess our first question, looking at the scrips you guys had mentioned, you had over 2,600 scrips this quarter. That's about double from last quarter. I was wondering if you can break down that growth between patients who have switched and then treatment naïve patients for us.

Andy Robbins -- Chief Operating Officer

No, unfortunately, we can't. These are all estimates driven by, as I've said, right out of the gate, sort of a lack of any other explanation for the amount of initial volume, meaning it couldn't be explained by sort of naïve patients, and a lot of anecdotal information. So, using, again, anecdotal information, we do believe that, over time, the amount of or proportion of patients that come from switch will -- it'll become a smaller proportion. It may always be a feature of the way our products are used but it will become less important over time. And that's, unfortunately, all we're able to share because we don't know any more than that.

Minh Vong -- SunTrust Robinson Humphrey -- Analyst

Okay. Great. Thanks. I see. And then maybe one or two for Jason, I guess. How should we be thinking about R&D spend for the rest of the year? I know you had mentioned that it had gone up from last quarter, primarily due to BEACON CRC. But going forward, how should we be thinking about R&D spend? And then maybe if you can comment on other revenues as well. You guys commented on the ONO royalties starting at 22%, going up to 25%, but how are you guys thinking about other revenues as well?

Jason Haddock -- Chief Financial Officer

Yeah. As far as the R&D spend, we don't expect a substantial difference or change in what our run rate has been here. Our proprietary programs continue to advance, which will increase spend a bit, but it's partially offset by our Novartis activities, the transition studies, as those studies continue to wind down. So, net-net, we expect a fairly flat or consistent R&D spend going forward.

As far as revenues going forward, yes, you mentioned ONO, but, in addition, Pierre Fabre launched last quarter. And, again, we think we start fairly high at a 25% and then go up to a 35% fairly quickly after €100 million sales. So, we're looking forward for those royalties to become meaningful and we'll share more details on those in subsequent quarters.

Minh Vong -- SunTrust Robinson Humphrey -- Analyst

Great. I guess one last one from us. Maybe, Andy or Ron, toward your educational campaign, when would you expect to see it having an impact? Maybe not next quarter but two quarters from now potentially?

Andy Robbins -- Chief Operating Officer

So, we're sort of -- we launched it at ASCO GI because we thought that that was: 1) important from a timing perspective and 2) I think that there's a lot of eyeballs and excitement around the treatment of BRAF colorectal cancer right now. If you roll forward, we expect to have the BEACON CRC interim results sometime in the first half of this year, which you could imagine, if positive, would support a filing on a basis that's not too many months or quarters later than that. So, we want to ensure that the benefits of this disease education program improve testing during the calendar year 2019 so that we're in a really positive place by the time FDA has the potential to make a positive decision, again, assuming the BEACON CRC interim analysis is positive, and that patients are aware of their status when our drugs are made available.

Ron Squarer -- Chief Executive Officer

And we've said it, but just to be clear, this is a disease education program, not currently linked to any kind of expectation of use or sales. This is about the longer term, raising awareness about the need. As I said earlier, I think the use of such diagnostics will be driven by the availability of a useful intervention.

Minh Vong -- SunTrust Robinson Humphrey -- Analyst

Great. Thank you so much for taking my questions.

Ron Squarer -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Thomas Smith with SVB Leerink. Your line is now open.

Thomas Smith -- Leerink Partners -- Analyst

Hey, guys. Good morning. Thanks for taking the questions and let me add my congrats on the strong quarter. Maybe just a question first on the launch in Europe. Jason, you mentioned there were some royalties in the quarter but I was hoping you could give us a little more color on initial sales by your partner and how uptake in the early days there compares to uptake in the U.S. Are you seeing or is your partner seeing a similar switch dynamic play out in the European countries where BRAFTOVI and MEKTOVI are available? And then I have a follow-up. Thanks.

Andy Robbins -- Chief Operating Officer

Look, I appreciate the question. Unfortunately, we have even sort of less insight into exactly what the dynamics are there. Generally, feedback has been positive but until we're able to actually articulate the royalties and then the imputed revenue, it'll be a little harder to estimate. If I was to speculate, I think that the dynamics of, let's say, interest and the way physicians would see the usefulness of BRAFTOVI and MEKTOVI should be somewhat consistent but it'll take time before we can articulate that in more detail. So, that'll be coming up in the future.

Thomas Smith -- Leerink Partners -- Analyst

Okay. And then maybe one question on the pipeline. We've been getting a number of questions around the partnered programs, especially some of the earlier stage programs, I know the clinic. Can you confirm if you receive royalties from Mirati based on their KRAS program and, if so, can you provide some incremental color on the level of those royalties? Thanks, guys.

Jason Haddock -- Chief Financial Officer

Thanks for the question. So, I'll try to put two concepts together. The first is, yes, we do receive royalties from Mirati on that collaboration. And, second, on the specific level, we haven't disclosed it but what we have said is that our royalties on our Loxo collaboration were in the mid- to high-single digits and that the royalties that we expect from the Mirati collaboration would be better than the Loxo levels.

Thomas Smith -- Leerink Partners -- Analyst

Okay. Great. That's helpful. Thanks, guys.

Ron Squarer -- Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Varun Kumar with Cantor Fitzgerald. Your line is now open.

Varun Kumar -- Cantor Fitzgerald -- Analyst

Hey. Good morning, everyone, and thanks for taking my questions. Just one to Ron. At this past ASCO GI conference, Novartis had some encouraging updates in BRAF-positive biliary tract cancer. And so it looks like the company is pursuing some niche tumor indications. So, even though I understand the colorectal and melanoma will be the near-term focus for you guys, I just wanted to get some color as to how we should think about the next valid drivers? Should it come from the new INDs or you guys are equally interested in a tumor agnostic label for MEKTOVI and BRAFTOVI? Thank you.

Ron Squarer -- Chief Executive Officer

Yeah, Varun, thanks for the questions. So, look, it's great and we're certainly part of the process by which agents are tested broadly, either through company-sponsored or investigator-sponsored or collaborative studies, and that's always good for patients. We continue to be open to those types of studies. But from a value point of view, as I said, most patients are BRAF colorectal and BRAF-driven metastatic disease, then melanoma, then we'd probably go to lung next. There are a number of other settings. They get smaller at that point. We would love to pursue a tumor agnostic strategy. We think that is a way to ideally develop agents in this sort of era. But as you can already see between the two largest populations, melanoma and colorectal, there is a difference in the regimen. So, cetuximab being important in colorectal, not relevant in melanoma. But, certainly, we continue to think about these and are very supportive of the kind of research that creates new insight at the use of these drugs broadly in disease.

Varun Kumar -- Cantor Fitzgerald -- Analyst

And maybe --

Ron Squarer -- Chief Executive Officer

Go ahead. Is that Varun?

Varun Kumar -- Cantor Fitzgerald -- Analyst

Yes. I just wanted to have a quick one for Andy. I saw price increase for the product in January. So, any color you can provide us on inventory impact we should expect this quarter and anything for gross-to-net for coming quarters?

Andy Robbins -- Chief Operating Officer

Okay. So, I think three separate questions. We did take a price increase. We continue to feel very strongly about the value of our products in BRAF-mutant melanoma. We took a price increase that we would characterize as in line with many, many other oral oncology folks in the industry, including those in targeted therapy in BRAF-mutant melanoma.

From an inventory perspective, as I think I mentioned earlier on the call, we don't see inventory dynamics as driving the sales that we reported in the second quarter. We are now at a level of volume where I think that our relatively limited distribution strategy through a handful of pharmacies and distributors is now sort of on a nice run rate from an inventory perspective. So, I don't see major shifts in inventory driving anything.

And then the last, gross-to-net. Gross-to-net for the first quarter was 19.8%. For the second quarter, it was 16.6%. Of course, we will continue to look at gross-to-net and try to manage that effectively but I think we're getting close to the range for where mature oral oncology products would reside.

Ron Squarer -- Chief Executive Officer

Varun, thanks for the questions. We are coming up on the hour so we'll just take one last question, if there is one.

Operator

Thank you. And our last question comes from Paul Choi with Goldman Sachs. Your line is now open.

Paul Choi -- Goldman Sachs -- Analyst

Hi, guys. Thanks for squeezing me in and congrats on a good quarter. My question is commercial here and I was just wondering if you could maybe help us understand what your Medicare exposure is. And with the flip of the calendar, I know we're a little over a month into the new year, but if you're seeing any sort of changes in dynamics with regards to either insurance plans changing and so forth or "donut hole" impact. Thank you.

Andy Robbins -- Chief Operating Officer

Hi. This is Andy. Thanks for the question. Medicare certainly is an important part of our business just based on the dynamics of the underlying population of melanoma. It isn't probably as big as some other tumors you may be more familiar with, like breast cancer or lung cancer, where the median age tends to skew a little higher in those tumors and maybe a little bit lower in melanoma. But we still do have a pretty substantial portion, or a healthy minority portion, of our patients who do get insurance through Medicare. It's probably too early for me to comment on the impact of the flip of the calendar for the current quarter and how that will impact from a donut hole and a company topping-up perspective, but certainly stay tuned for our next call for more color on that.

Paul Choi -- Goldman Sachs -- Analyst

Great. Thanks.

Ron Squarer -- Chief Executive Officer

All right, Paul, thank you for that. And thanks to everyone who called in today. I certainly am very pleased at the progress the company has made and look forward to a lot of exciting programs for the future. So, with that, I'd like to close the call and thank our employees here at Array for their creativity, commitment, and a strong sense of urgency that continues to fuel our success. I also want to thank our patients, partners, and shareholders for their continued confidence and support. Thank you all very much.

Operator

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

Duration: 60 minutes

Call participants:

Andrea Flynn -- Senior Director, Investor Relations and Corporate Communications

Ron Squarer -- Chief Executive Officer

Andy Robbins -- Chief Operating Officer

Jason Haddock -- Chief Financial Officer

Chris Shibutani -- Cowen -- Analyst

Anupam Rama -- J.P. Morgan -- Analyst

Stephen Willey -- Stifel, Nicolaus & Co. -- Analyst

Michael Schmidt -- Guggenheim Securities -- Analyst

Jim Birchenough -- Wells Fargo Securities -- Analyst

Eun Yang -- Jefferies -- Analyst

Minh Vong -- SunTrust Robinson Humphrey -- Analyst

Thomas Smith -- Leerink Partners -- Analyst

Varun Kumar -- Cantor Fitzgerald -- Analyst

Paul Choi -- Goldman Sachs -- Analyst

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