Boulder biopharma luring array of investment

BOULDER — The renewed investor interest seen in Array Biopharma Inc. over the last seven weeks might be just the beginning if analyst projections prove correct.

A month and a half after announcing a deal to regain full worldwide rights from Novartis to the late-stage cancer drug candidate binimetinib – a deal one analyst termed “transformative” for Array – the Boulder-based company’s shares continue to trade nearly 15 percent ahead of where they closed on Dec. 3.

Shares of Array (Nasdaq: ARRY) rose from $3.91 at the end of trading Dec. 3 to $4.93 in the days after the announcement. They’ve cooled a bit since, closing at $4.49 on Jan. 16. But analysts’ price targets range from $5 to $9, with multiple analysts upgrading the stock in the wake of the deal.

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Piper Jaffray biotech analyst Ted Tenthoff rates the stock overweight, with a price target of $9. Binimetinib has the potential to treat multiple types of cancer. But in just one type of melanoma – for which binimetinib could gain Food and Drug Administration approval by sometime in 2016 – Tenthoff believes the market potential could be $200 million.

“It’s just a fantastic deal in my view for Array,” Tenthoff said.

In addition to regaining full rights to binimetinib, the deal generating the buzz will see Array receiving payment of up to $85 million from Novartis, not to mention an extinguishment of $15 million in payments Array owed Novartis for development costs. Novartis also will continue to reimburse Array for the clinical trials necessary to get binimetinib to market.

Under the previous deal, signed in 2010, Array had received $40 million up front from Novartis plus milestones of $20 million. Total milestones were to top $400 million, with royalties on top of that. But Array officials believe they’ll be able to market the drug on their own once approved, meaning large potential for additional annual revenue.

The new deal comes in the wake of Novartis’ acquisition of GlaxoSmithKline oncology products that included a binimetinib competitor, Mekinist. Novartis had to sell off some of its assets that could have prevented the deal with GSK from gaining regulatory approval. Array’s deal for binimetinib will become official upon closing of the Novartis/GSK deal, which is slated for the first half of this year.

“It’s an excellent deal for Array, no doubt,” Array chief executive Ron Squarer said.

Binimetinib is a MEK inhibitor, targeting a key enzyme on a critical pathway that drives several types of cancer.

The drug is undergoing Phase 3 trials for the treatment of NRAS melanoma, BRAF melanoma and low-grade serous ovarian cancer. BRAF melanoma, for which Mekinist already is on the market, accounts for about 40 percent of all melanoma cases. But NRAS melanoma – the potential $200 million market noted by Tenthoff – accounts for about 20 percent of melanoma cases, and binimetinib would likely be the first MEK inhibitor to market for treatment of the disease, helping drive much of the excitement around Array’s new deal.

Array shares, trading at $5.23 on March 18 last year, slid steeply to $3.74 by April 14. Tenthoff said much of that drop had to do with market conditions and the decline of a key Nasdaq biotech index. The Novartis/GSK deal was announced on April 22, leading to some uncertainty over the next few months about what would happen to binimetinib and Array’s stake in it. The company’s stock closed at $3.03 per share as recently as Oct. 3 before the rebound.

“We think that as we move forward, especially in clarity, we think there’s potential for more appreciation of the company,” Squarer said.

Founded in 1998, Array has received most of its revenue from a number of collaborations with other pharmaceutical and biotech companies.

The company has two wholly owned drugs in clinical development, including one for multiple myeloma and another for a rare cardiovascular disease. Including binimetinib, Array has partnerships involving 11 more clinical-stage programs, mostly cancer drugs. Selumetinib, another MEK inhibitor being developed with AstraZeneca (NYSE: AZN), is also in stage 3 clinical trials, looking at treatment of non-small-cell lung cancer, melanoma of the eye and thyroid cancer. The lung cancer application, Tenthoff said, could be the largest market opportunity of all of the MEK inhibitors.

Array employs about 200 people, mostly at offices in Boulder and Longmont. Tricia Haugeto, Array’s director of corporate communications and investor relations, said it won’t be clear how many employees might be added in the wake of the binimetinib deal until after the deal is closed. She also stopped short of making any revenue projections for the drug, although Tenthoff’s view of the market for NRAS melanoma suggests such a number could be quite large.

“We’ll just have to see where it comes out,” Tenthoff said. “But for a small company like Array, it’s a pretty nice revenue potential.”

In addition to the $85 million coming Array’s way in the binimetinib deal, the company also recently announced a licensing deal with Seattle-based Oncothyreon Inc. (Nasdaq: ONTY) to develop and commercialize breast cancer drug ONT-380. That deal brings with it an upfront payment of $20 million.

A $105 million cash infusion is significant for a company such as Array, which finished the fiscal quarter ending Sept. 30 with $47 million in cash and cash equivalents. The company reported $42 million in revenue and an $85.3 million net loss for fiscal year 2014, which ended June 30. That followed $69.6 million in revenue and a $61.9 million net loss in 2013.