Dear Shareholders,

Over the past fiscal year, we have made significant progress in advancing Array BioPharma’s pipeline focused on the development and commercialization of targeted small molecule cancer therapies. We achieved several clinical and strategic milestones for our late-stage programs, binimetinib, a MEK inhibitor, and encorafenib, a BRAF inhibitor, including:

  • meeting the primary endpoint in the Phase 3 NEMO trial and submitting a new drug application (NDA) to the Food and Drug Administration for binimetinib in NRAS-mutant melanoma;
  • completing patient enrollment in the Phase 3 COLUMBUS trial of binimetinib plus encorafenib in BRAF-mutant melanoma;
  • initiating the global Phase 3 BEACON CRC trial of binimetinib and encorafenib in BRAF-mutant colorectal cancer (CRC) based on results from the earlier Phase 2 BRAF-mutant CRC trial; and
  • partnering with Pierre Fabre for cost-effective development and commercialization in key markets outside of the United States, Canada and Japan for any drugs that are approved.

In addition, we announced results from a Phase 2 trial of ARRY-797 in lamin A/C-related dilated cardiomyopathy (LMNA A/C-related DCM), a rare, degenerative cardiovascular disease caused by mutations in the LMNA gene and characterized by poor prognosis. Furthermore, we initiated a Phase 1 / 2 trial of ARRY-382, a colony-stimulating factor-1 receptor (CSF-1R) inhibitor in combination with Keytruda® (pembrolizumab), a Programmed Cell Death Receptor 1 (PD-1) antibody, in advanced solid tumors.

Looking forward, Array is approaching significant near-term milestones, including top-line results from the COLUMBUS Phase 3 trial expected this month and a projected regulatory filing of binimetinib plus encorafenib expected in 2017. We are progressing binimetinib through the regulatory process towards possible commercialization with the NEMO NDA submission and continue to work with regulatory authorities as they review the application.

Milestones and Commercialization Pipeline Update

Below is a summary of key milestones we achieved in the last year and pipeline updates.

Binimetinib and Encorafenib

Our agreement with Novartis to regain rights to binimetinib and acquire rights to encorafenib has put Array in a good position to advance the program. The agreement included more than $100 million in up-front net cash value, and Novartis continues to substantially fund all ongoing trials with binimetinib and encorafenib that were active or planned as of the close of the Novartis Agreements in 2015, including the NEMO and COLUMBUS trials. Reimbursement revenue from Novartis during Fiscal 2016 was approximately $107 million. We estimate that Novartis will contribute a total of more than $300 million to Array for the development of binimetinib and encorafenib over the course of our agreement.

NEMO: Global Phase 3 trial of binimetinib versus dacarbazine in NRAS-mutant melanoma patients

Array submitted an NDA for binimetinib in NRAS-mutant melanoma to the FDA at the end of June 2016. The FDA accepted the NDA with a target action date under the Prescription Drug User Fee Act (PDUFA) of June 30, 2017. The FDA also indicated that it plans to hold an advisory committee meeting (ODAC) as part of the review process. Array is currently preparing for an Application Orientation Meeting (AOM) with the FDA in September 2016, which we expect will include a discussion of the NDA package including clinical risk / benefit.

Results from the NEMO trial were presented at the 2016 ASCO Annual Meeting. The study met its primary endpoint of improving progression-free survival (PFS) compared with dacarbazine treatment. The median PFS on the binimetinib arm was 2.8 months, versus 1.5 months on the dacarbazine arm. In the pre-specified subset of patients who received prior treatment with immunotherapy, including ipilimumab, nivolumab or pembrolizumab, patients who received binimetinib experienced 5.5 months of median PFS, compared with 1.6 months for those receiving treatment with dacarbazine. While the results in the pre-specified sub-group of patients who had received prior treatment with immunotherapy are of interest, interpretation beyond overall consistency with the primary result should be made with care. Array anticipates that the primary consideration for marketing approval will be the results for the primary endpoint of the trial. In addition to improving PFS, binimetinib also demonstrated improvement in overall response rate (ORR) and disease control rate. While there was no statistically significant difference demonstrated in overall survival (OS), the median overall survival (mOS) favored the binimetinib arm. Under the NEMO protocol, and in accordance with accepted statistical practice, the subgroup analyses of OS are formally conducted only if the key secondary endpoint of OS reached statistical significance. Binimetinib was generally well-tolerated and the adverse events reported were consistent with previous results in NRAS-mutant melanoma patients. Activating NRAS mutations are present in up to 20 percent of patients with metastatic melanoma, and are a poor prognostic indicator for these patients. Treatment options for this population remain limited beyond immunotherapy, and these patients face poor clinical outcomes and high mortality.

COLUMBUS: Global Phase 3 trial of binimetinib plus encorafenib versus vemurafenib in BRAF-mutant melanoma patients

We expect COLUMBUS top-line results during September 2016. If successful, we expect to file an NDA for binimetinib and encorafenib in this indication in 2017.

Activating BRAF mutations are present in approximately 50 percent of patients with metastatic melanoma. In two separate Phase 1/2 trials in this patient population, binimetinib plus encorafenib demonstrated encouraging clinical activity and an attractive tolerability profile, including low incidence of pyrexia (fever) and little to no incidence of rash or photosensitivity. Patients treated in two Phase 3 trials of dabrafenib plus trametinib (COMBI-d and COMBI-v) experienced greater than 50 percent incidence of pyrexia, while in a large, randomized trial of vemurafenib plus cobimetinib (coBRIM) nearly 50 percent of patients experienced photosensitivity reactions. Of the patients who experienced pyrexia on COMBI-d and COMBI-v, one-half reported three or more events, and at least half required dose modifications, including interruptions, reductions or discontinuation as a result of their pyrexia. Of the patients who experienced photosensitivity on coBRIM, the median duration of photosensitivity was three months, with some patients experiencing durations as long as 14 months. Only 63 percent of patients on coBRIM with photosensitivity reactions experienced resolution while on study.

BEACON CRC: Global Phase 3 trial of binimetinib, encorafenib and Erbitux® (cetuximab) versus Erbitux in BRAF-mutant CRC patients

During the 2016 ASCO Annual Meeting, Array, Pierre Fabre, and Merck KGaA, Darmstadt, Germany, jointly announced the initiation of the BEACON CRC trial, a pivotal Phase 3 global clinical trial, assessing the efficacy of binimetinib, encorafenib and Erbitux compared to Erbitux and irinotecan-based therapy in patients with BRAF-mutant CRC. CRC is the third most common cancer among men and women in the United States, with more than 134,000 new cases and nearly 50,000 deaths from the disease projected in 2016. In the United States, BRAF mutations occur in 8 to 15 percent of patients with CRC and represent a poor prognosis for these patients.

BEACON CRC is a randomized, open-label, global study evaluating the efficacy and safety of binimetinib, encorafenib and Erbitux in patients with BRAF-mutant metastatic CRC who have previously received first-or second-line systemic therapy. The study includes a safety lead-in with approximately 30 patients. With appropriate results from the lead-in, about 615 patients are expected to be randomized 1:1:1 to receive triplet therapy (binimetinib, encorafenib and Erbitux), doublet therapy (encorafenib and Erbitux) or the control arm (irinotecan-based therapy and Erbitux). The primary endpoint of the trial is OS of the triplet therapy compared to the control arm.

Array is the global sponsor of the BEACON CRC study. As part of our collaboration with Pierre Fabre for development and commercialization of binimetinib and encorafenib in Europe and other global markets, Pierre Fabre has elected to co-fund 40 percent of the cost of the BEACON CRC trial. Merck KGaA, Darmstadt, Germany, is the owner of Erbitux outside of the United States and Canada, and will supply Erbitux to all trial sites in those geographies as part of the collaboration.

Before we announced BEACON CRC, we provided updated results from a Phase 2 study of the combination of encorafenib and Erbitux, with or without alpelisib, a selective PI3K alpha inhibitor, in patients with advanced BRAF-mutant CRC. Data from this study suggest that mOS for these patients may exceed one year, which is more than double several historical published benchmarks for this population. Median PFS was greater than 4 months for both arms of our study, where several historical PFS benchmarks ranged between 1.8 and 2.5 months. The confirmed objective response rates were 22 percent and 27 percent for the doublet and triplet regimens, respectively, where ORR benchmarks ranged between 6 and 8 percent. Grade 3 or 4 adverse events occurring in greater than 10 percent of patients included anemia, hyperglycemia and increased lipase.

ARRY-797

At the end of August 2016, we shared results from a Phase 2 study of ARRY-797, an oral, selective p38 mitogen-activated protein kinase inhibitor, in patients with lamin A/C-related dilated cardiomyopathy (LMNA-related DCM), a rare, degenerative disease caused by mutations in the LMNA gene and characterized by poor prognosis. The trial results were presented at the European Society of Cardiology Congress. By age 45, approximately 70 percent of patients with LMNA A/C-related DCM will have died, suffered a major cardiac event or will have undergone a heart transplant. By comparison, it is estimated that only 25 percent of DCM patients who do not have LMNA mutations experience similar events by age 45. In Array’s open label Phase 2 trial, patients were randomized to ARRY-797 100 mg twice daily (n=6) or 400 mg twice daily (n=6). Prior to enrollment, all patients were identified as having stable New York Heart Association class II–IIIa congestive heart failure and eleven patients had an implantable cardioverter defibrillator. All patients were receiving multiple heart failure medications. The results demonstrated an absolute mean change from baseline of 69 meters on the six-minute walk test (6MWT) at week 12, the study’s primary endpoint (baseline 6MWT ranged from 246 to 412 meters). This magnitude of improvement exceeded historical benchmarks for 6MWT that have served as the basis for recent approvals of other drugs in other rare diseases. ARRY-797 administration also resulted in sustained improvements in N-terminal pro-brain natriuretic peptide (NT-proBNP), functional capacity and cardiac function through 48 weeks in LMNA-related DCM patients. Patients who rolled over to a continuing treatment protocol maintained improvements in the 6MWT and NT-proBNP levels through 72 weeks of treatment. Other secondary endpoints measured including echocardiographic measures of left and right ventricular function and patient-reported outcomes using the Kansas City Cardiomyopathy Questionnaire (KCCQ), both mirrored the favorable improvements seen with the 6MWT. A trend for greater improvement in functional capacity and cardiac function were observed with the 400 mg dose level of ARRY-797 compared to the 100 mg dose level. ARRY-797 was well tolerated at both dose levels, with most patients experiencing mild to moderate adverse events, including stomatitis, acne and upper respiratory tract infection. None of the grade 3 / 4 adverse events were considered to be related to ARRY-797 by the investigators. Four patients discontinued the study. One patient discontinued due to availability of a heart for transplant, two patients for interventional cardiovascular procedures and one patient due to grade 2 stomatitis. Taken together, the data to date suggest a path forward for this program, and Array has met with regulators to discuss the design of a study that could be the basis for marketing approval. Array is evaluating different options to advance the ARRY-797 program, including advancing it on its own, partnering the program for further development and commercialization or creating a separate company based on this asset.

ARRY-382

In August 2016, we initiated a Phase 1/2 dose escalation immuno-oncology trial of ARRY-382, a CSF-1R inhibitor, in combination with Keytruda® (pembrolizumab), a PD-1 antibody, in patients with advanced solid tumors. ARRY-382 is a wholly-owned, highly potent and selective, small molecule inhibitor of CSF-1R kinase activity. We believe combining a CSF-1R inhibitor with a PD-1 inhibitor, which acts through a different mechanism to reduce T-cell activity suppression, has the potential for complementary, or synergistic, anti-cancer cell activity. The study will enroll up to 18 patients with selected advanced solid tumors to determine the maximum tolerated dose and/or recommended Phase 2 dose of the combination. With appropriate results, Array has the option to advance the combination into expansion cohorts of patients with metastatic melanoma or advanced non-small cell lung cancer (NSCLC). With this new combination study, Array is strengthening its position in the immuno-oncology field. Earlier in 2016, Array initiated an immuno-oncology research collaboration with Dana-Farber Cancer Institute's Belfer Center that Array believes has broad potential applicability to its drug discovery efforts.

Select Other Collaborative Programs

In August 2016, AstraZeneca announced results from the Phase 3 SELECT-1 trial of selumetinib in combination with docetaxel chemotherapy as 2nd-line treatment in patients with KRAS-mutant locally-advanced or metastatic NSCLC. The results showed that the trial did not meet its primary endpoint of PFS and selumetinib did not have a significant effect on OS. The adverse event profiles for selumetinib and docetaxel were consistent with those seen previously.

AstraZeneca continues to advance selumetinib in two registration trials: ASTRA in patients with differentiated thyroid cancer and a registration trial in patients with neurofibromatosis type 1 (NF1). Top-line results from both trials are expected in 2017. Last summer, interim results from a Phase 1 trial in children and young adults with NF1 and plexiform neurofibromas (PNs) were presented at the Children's Tumor Foundation NF conference. NF is a genetic disorder that can cause typically non-malignant tumors, or PNs, to grow on nerves throughout the body. These tumors can be very disfiguring, painful and disabling. Most tumors are inoperable, while some patients undergo, often repeated surgical procedures. NF1 also causes a number of other health issues, including deafness, blindness, learning disabilities, bone abnormalities and sometimes cancer. PNs exhibit the most rapid growth in young children, and therefore early intervention in children with growing PNs may result in the greatest clinical benefit. NF1, which appears in approximately one in 3,000 people, or 100,000 in the United States, has no cure. In the study, 66% (16 of 24) of patients treated with selumetinib achieved a partial response (defined in this disease by a 20% reduction in tumor size) and all patients remained on study with a median of 18 cycles (1 cycle = 28 days, range, 6-43). Improvement in function, and reduction in PN-related pain and disfigurement were also observed. The most frequent adverse events were acneiform rash, increased creatine kinase and gastrointestinal effects. Consistent volume decreases of large PNs had not been reported in prior studies with other therapies. Array continues to be entitled to potential future development milestone payments and royalties on product sales for the selumetinib program.

Additionally, in March 2016 we initiated a preclinical, Asia-focused, inflammation and pain program with Asahi Kasei to advance select TrkA inhibitors, including Array-invented ARRY-954. Importantly, Array retains exclusive rights for all compounds for all indications outside of Asia.

Financials

We ended fiscal 2016 with $130 million in cash, cash equivalents, marketable securities and accounts receivable net of related reimbursable payables.

We are pleased with the progress we have made over the course of the year and are confident in our ability to continue to drive value for shareholders. We are incredibly grateful to the patients, clinicians, collaborators, employees and shareholders who have contributed to our progress and who will continue to help us succeed.

Sincerely,

Ron Squarer

Chief Executive Officer
September 12, 2016