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lymphocytes, eosinophils and basophils, may play a particularly important role in more pronounced
symptoms and impairment of lung function.
Currently, for chronic treatment of asthma and other respiratory tract diseases, there are a wide range of
treatment options with a variety of delivery mechanisms, each of which has drawbacks. Most notably,
safety concerns have arisen with inhaled long-acting beta-2 agonists, or LABAs, and the FDA has
required producers of LABAs to describe these concerns on their labels and to conduct further large-scale
randomized trials evaluating cardiac safety. These concerns impact the leading class of LABA/ICS, or
inhaled corticosteroid, combination therapies as well. The LABA/ICS combination is under further
pressure due to physician concerns about potential side effects and the long-term safety of ICS. The
safety concerns with existing therapies and the number of asthmatics with uncontrolled disease represent
a significant unmet medical need.
Current forecasts for asthma drug therapy market growth are flat-to-slightly-declining, with sales across
the seven major pharmaceutical markets forecasted to shrink annually by less than 1% from $14.6 billion
in 2010 to $14.1 billion in 2020. This outlook is based on the lack of any new blockbuster drug class
entering the market and a potential softening of the use of LABAs in the U.S. in the short term, and
ongoing price erosion due to generic entry and competitive pricing in current therapies. This will be offset
somewhat by an expected uptake of once-daily LABA/ICS combination agents, once approved, and likely
increased insurance coverage and expenditures due to healthcare policy changes likely to take place in
the U.S. from 2014 onward.
Although there are a number of drug classes being explored for the treatment of asthma, there are
currently no approved drugs directly targeting PGD2 or CRTh2. Array is developing a novel oral drug,
ARRY-502, an antagonist of the CRTh2 receptor, which, if proven safe and effective, could allow for
targeted treatment for patients with the Th2 marker across the asthma severity spectrum, particularly
those with severe disease, who currently have few, if any, options for effective treatment.
Research and Development for Proprietary Drug Discovery
Our primary research efforts are centered on the treatment of cancer and inflammatory disease. Our
research focuses on biologic functions, or pathways, that have been identified as important in the
treatment of human disease based on human clinical, genetic or preclinical data. Within these pathways,
we seek to create first-in-class drugs regulating important therapeutic targets to treat patients with serious
or life-threatening conditions, primarily in cancer and inflammatory disease. In addition, we seek to
identify opportunities to improve upon existing therapies or drugs in clinical development by creating
clinical candidates with superior, or best-in-class, drug characteristics, including efficacy, tolerability or
dosing to provide safer, more effective drugs. During fiscal years 2012, 2011 and 2010, we spent
$56.7 million, $63.5 million and $72.5 million, respectively, on research and development for proprietary
drug discovery, which consist of costs associated with our proprietary drug programs for, among other
things, salaries and benefits for scientific personnel, consulting and outsourced services, laboratory
supplies, allocated facilities costs and depreciation.
Drug Discovery and Development Timeline
The drug development process is highly uncertain, is subject to a number of risks that are beyond our
control and takes many years to complete. The following table outlines each phase in the drug
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development process. Completion times are difficult to estimate and can vary greatly based on the drug
and indication. Therefore, the duration times shown in the table below are estimates only.
Phase
Objective
Estimated Duration
Discovery
Lead identification and target validation
2 to 4 years
Preclinical
Initial toxicology for preliminary identification of
1 to 2 years
risks for humans; gather early pharmacokinetic
data
Phase 1
Evaluate the safety and tolerability of the drug in
1 to 2 years
human subjects and find the maximum tolerated
dose. The pharmacokinetics of the drug are
examined after single and multiple doses, the
effects of food on the pharmacokinetics may be
evaluated and drug metabolites may be
monitored.
Phase 2
Establish effectiveness of the drug and its
2 to 4 years
optimal dosage; continue safety evaluation
Phase 3
Confirm efficacy, dosage regime and safety
2 to 4 years
profile of the drug; submit New Drug Application
FDA Approval
Approval by the FDA to sell and market the drug
8 months to 2 years
under approved labeling
Animal and other non-clinical studies are often conducted during each phase of human clinical studies.
Proof-of concept for a drug candidate generally occurs during Phase 2, after initial safety and efficacy
data are established.
Our Research and Development Technologies and Expertise
We are continuing to improve our comprehensive research and development capabilities, consisting of
four integrated areas of expertise:
Discovery Research -- Biology, Pharmacology, Toxicology, Chemistry and Translational
Medicine
Process Research, Development, Formulation and Manufacturing
Clinical Development -- Clinical Science, Clinical Operations, Drug Safety, Translational
Medicine, Biostatistics & Data Management, Regulatory Affairs and Program Management
Information Technology
Discovery Research
We have a broad drug discovery platform with all the necessary capabilities to efficiently invent new
chemical compounds. We continue to add to our breadth of knowledge, refine our processes and hire key
scientists who enhance our current capabilities. We have expanded our translational medicine team,
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