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Actionable news in ARRY: Array BioPharma Inc.,

SECURITIES AND EXCHANGE COMMISSION

Delaware84-1460811
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
3200 Walnut Street, Boulder, CO80301
(Address of Principal Executive Offices)(Zip Code)
(303) 381-6600
(Registrant’s Telephone Number, Including Area Code)
Large Accelerated Filer xAccelerated Filer ¨
Non-Accelerated Filer ¨Smaller Reporting Company ¨
(do not check if smaller reporting company)
Emerging Growth Company ¨
Page No.
PART IFINANCIAL INFORMATION
Item 1.Condensed Financial Statements
Condensed Balance Sheets as of September 30, 2017 and June 30, 2017 (unaudited) 3
Condensed Statements of Operations and Comprehensive Loss for the three months ended September 30, 2017 and 2016 (unaudited)4
Condensed Statement of Stockholders' Equity for the three months ended September 30, 2017 (unaudited)5
Condensed Statements of Cash Flows for the three months ended September 30, 2017 and 2016 (unaudited)6
Notes to the Unaudited Condensed Financial Statements7
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations25
Item 3.Quantitative and Qualitative Disclosures About Market Risk37
Item 4.Controls and Procedures37
PART IIOTHER INFORMATION
Item 1A.Risk Factors38
Item 6.Exhibits38
SIGNATURES39
EXHIBIT INDEX
September 30,June 30,
20172017
Assets
Current assets
Cash and cash equivalents$295,414
$125,933
Marketable securities168,093
108,390
Accounts receivable26,601
31,279
Prepaid expenses and other current assets3,716
4,575
Total current assets493,824
270,177
Long-term assets
Marketable securities829
732
Property and equipment, net7,579
8,132
Other long-term assets77
104
Total long-term assets8,485
8,968
Total assets$502,309
$279,145
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable$8,881
$8,636
Accrued outsourcing costs37,533
31,388
Accrued compensation and benefits12,185
10,172
Other accrued expenses2,617
1,575
Deferred rent640
624
Notes payable at fair value12,400

Deferred revenue16,669
17,156
Total current liabilities90,925
69,551
Long-term liabilities
Deferred rent5,610
5,714
Deferred revenue54,886
57,325
Long-term debt, net123,266
121,305
Notes payable at fair value
12,600
Other long-term liabilities1,001
923
Total long-term liabilities184,763
197,867
Total liabilities275,688
267,418
Commitments and contingencies

Stockholders' equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding

Common stock, $0.001 par value; 280,000,000 shares authorized, 196,125,505 and 171,307,715 shares issued and outstanding as of September 30, 2017 and June 30, 2017, respectively196
171
Additional paid-in capital1,183,122
930,293
Accumulated other comprehensive loss(42)(76)
Accumulated deficit(956,655)(918,661)
Total stockholders' equity226,621
11,727
Total liabilities and stockholders' equity$502,309
$279,145
The accompanying notes are an integral part of these unaudited condensed financial statements.
Three Months Ended
September 30,
20172016
Revenue
Reimbursement revenue$18,192
$31,321
Collaboration and other revenue8,008
6,289
License and milestone revenue3,546
1,661
Total revenue29,746
39,271
Operating expenses
Cost of partnered programs11,759
8,845
Research and development for proprietary programs41,445
46,563
General and administrative12,048
7,862
Total operating expenses65,252
63,270
Loss from operations(35,506)(23,999)
Other income (expense)
Impairment loss related to cost method investment
(1,500)
Change in fair value of notes payable200
(200)
Interest income525
70
Interest expense(3,213)(2,979)
Total other income (expense), net(2,488)(4,609)
Net loss$(37,994)$(28,608)
Change in unrealized gain on marketable securities34
4
Comprehensive loss$(37,960)$(28,604)
Weighted average shares outstanding – basic174,772
145,100
Weighted average shares outstanding – diluted174,772
145,100
Net loss per share – basic$(0.22)$(0.20)
Net loss per share – diluted$(0.22)$(0.20)
The accompanying notes are an integral part of these unaudited condensed financial statements.
Additional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Common Stock
SharesAmounts
Balance as of June 30, 2017171,308
$171
$930,293
$(76)$(918,661)$11,727
Shares issued for cash under employee share plans424

1,423


1,423
Employee share-based compensation expense

5,583


5,583
Issuance of common stock, net of offering costs / At-the-market offering324
1
2,829


2,830
Issuance of common stock, net of offering costs / Public offering24,070
24
242,994


243,018
Change in unrealized loss on marketable securities


34

34
Net loss



(37,994)(37,994)
Balance as of September 30, 2017196,126
$196
$1,183,122
$(42)$(956,655)$226,621
The accompanying notes are an integral part of these unaudited condensed financial statements.
Three Months Ended September 30,
20172016
Cash flows from operating activities
Net loss$(37,994)$(28,608)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense577
475
Non-cash interest expense1,961
1,698
Share-based compensation expense5,583
1,913
Impairment loss related to cost method investment
1,500
Financing fees on notes payable
117
Change in fair value of notes payable(200)200
Changes in operating assets and liabilities:
Accounts receivable4,678
5,364
Prepaid expenses and other assets886
2,522
Accounts payable and other accrued expenses1,287
(3,352)
Accrued outsourcing costs6,145
6,414
Accrued compensation and benefits2,013
1,521
Deferred rent(88)284
Deferred revenue(2,926)(4,676)
Other long-term liabilities34
23
Net cash used in operating activities(18,044)(14,605)
Cash flows from investing activities
Purchases of property and equipment(24)(1,046)
Purchases of marketable securities(104,468)(46,182)
Proceeds from sales and maturities of marketable securities44,746
48,695
Net cash (used in) provided by investing activities(59,746)1,467
Cash flows from financing activities
Proceeds from issuance of common stock / Public offering258,750

Offering costs for issuance of common stock / Public offering(15,732)
Proceeds from issuance of common stock / At-the-market offering2,917
12,572
Net proceeds from notes payable at fair value
9,883
Offering costs for the issuance of common stock / At-the-market offering(87)(331)
Proceeds from employee stock purchases and options exercised1,423
258
Net cash provided by financing activities247,271
22,382
Net increase in cash and cash equivalents169,481
9,244
Cash and cash equivalents at beginning of period125,933
56,598
Cash and cash equivalents at end of period$295,414
$65,842
Supplemental disclosure of cash flow information
Cash paid for interest$89
$130
Change in unrealized gain on marketable securities$34
$4
Three Months Ended
September 30,
20172016
Novartis Pharmaceuticals61.2%80.9%
Pierre Fabre13.8%6.4%
Loxo Oncology11.3%7.6%
86.3%94.9%
Three Months Ended
September 30,
20172016
North America$5,501
$4,098
Europe22,296
34,306
Asia Pacific1,949
867
Total revenue$29,746
$39,271
September 30, 2017
GrossGross
AmortizedUnrealizedUnrealizedFair
CostGainsLossesValue
Short-term available-for-sale securities:
U.S. treasury securities$167,831
$
$(42)$167,789
Mutual fund securities304


304
168,135

(42)168,093
Long-term available-for-sale securities:
Mutual fund securities829


829
829


829
Total$168,964
$
$(42)$168,922
June 30, 2017
GrossGross
AmortizedUnrealizedUnrealizedFair
CostGainsLossesValue
Short-term available-for-sale securities:
U.S. treasury securities$108,174
$
$(76)$108,098
Mutual fund securities292


292
108,466

(76)108,390
Long-term available-for-sale securities:
Mutual fund securities732


732
732


732
Total$109,198
$
$(76)$109,122
AmortizedFair
CostValue
Due in one year or less$167,831
$167,789
Total$167,831
$167,789
Three Months Ended
September 30,
20172016
Reimbursement revenue
Novartis (1)$18,192
$31,321
Collaboration and other revenue
Pierre Fabre3,349
1,778
Loxo2,258
2,867
Mirati1,389
875
Novartis (2)
450
Amgen500

Asahi Kasei468
267
Cascadian31
37
Celgene8

Other partners5
15
Total collaboration and other revenue8,008
6,289
License and milestone revenue
Loxo1,107
103
Ono918

Pierre Fabre750
750
Asahi Kasei563
600
Mirati208
208
Total license and milestone revenue3,546
1,661
Total revenue$29,746
$39,271
September 30,June 30,
20172017
Ono$30,310
$31,229
Pierre Fabre24,645
25,395
Asahi Kasei8,438
9,000
Mirati3,459
4,167
Loxo3,203
2,690
Amgen1,500
2,000
Total deferred revenue71,555
74,481
Less: Current portion(16,669)(17,156)
Deferred revenue, long-term portion$54,886
$57,325
September 30,June 30,
20172017
Notes payable at fair value$12,400
$12,600
Notes Payable at fair value$12,400
$12,600
Silicon Valley Bank term loan (1)$16,200
$16,200
Convertible senior notes132,250
132,250
Long-term debt, gross148,450
148,450
Less: Unamortized debt discount and fees(25,184)(27,145)
Long-term debt, net$123,266
$121,305
Three Months Ended
September 30,
20172016
Notes payable
Simple interest$126
$38
Fees paid
118
Total interest expense on the notes payable at fair value126
156
Comerica Term Loan (1)
Simple interest
130
Amortization of prepaid fees for letters of credit
3
Total interest expense on the Comerica term loan
133
Silicon Valley Bank Term Loan
Simple interest90

Amortization of prepaid fees for line of credit44

Amortization of debt discount80

Total interest expense on the Silicon Valley Bank term loan214

3.00% Convertible Senior Notes
Contractual interest992
992
Amortization of debt discount1,780
1,607
Amortization of debt issuance costs101
91
Total interest expense on the 3.00% convertible senior notes2,873
2,690
Total interest expense$3,213
$2,979
Fair Value Measurement as of September 30, 2017
Level 1Level 2Level 3Total
Assets
Current Assets
U.S. treasury securities$167,789
$
$
$167,789
Mutual fund securities304


304
Long-term Assets
Mutual fund securities829


829
Total assets168,922


168,922
Liabilities



Notes payable, at fair value

12,400
12,400
Fair Value Measurement as of June 30, 2017
Level 1Level 2Level 3Total
Assets
Current Assets
U.S. treasury securities$108,098
$
$
$108,098
Mutual fund securities292


292
Long-term Assets
Mutual fund securities732


732
Total assets109,122


109,122
Liabilities



Notes payable, at fair value

12,600
12,600
Notes Payable at Fair Value
Balance at June 30, 2017$12,600
Change in fair value(200)
Balance at September 30, 2017$12,400
Expected term - The Company estimates the expected term of its options based upon historical exercises and post-vesting termination behavior.
Expected volatility - The Company estimates expected volatility using daily historical trading data of its common stock.
Dividend yield - The Company has never paid dividends and currently have no plans to do so; therefore, no dividend yield is applied.

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