Array acquisition provides ‘blockbuster revenue potential’ for Pfizer

BOULDER — Array Biopharma Inc. (Nasdaq: ARRY) posted a net loss of $11.4 million in the second quarter of 2019, but that’s no cause for concern for Pfizer Inc. (NYSE: PFE).

The pharmaceutical giant, which is buying Array for about $11 billion, is betting the Boulder-based cancer therapy developer has the potential to provide “blockbuster revenue potential” in the long term.

“We have the rare opportunity to advance our oncology strategy and to augment our business with three value drivers,” said Andy Schmeltz, Pfizer’s global president of oncology.

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Those drivers are Array’s existing cancer therapy, a combination of drugs Braftovi and Mektovi; royalties from out-licensed medicines and molecules; and a productive research platform and pre-clinical portfolio.

Array’s Braftovi and Mektovi drug combination has been approved for the treatment of certain types of melanoma. Pfizer believes uses for the combo could soon expand, resulting in a revenue windfall for the firm.

The Braftovi and Mektovi treatment is “being investigated as a potential first-in-class combination for certain patients with metastatic colorectal cancer,” Schmeltz said.

If Braftovi and Mektovi, used to treat melanoma patients with a mutation of the BRAF gene, are approved for additional therapies, recent quarterly sales figures of $35 million could increase exponentially.

“Melanoma is the third most common cancer among women and the second most common cancer among men between 20 and 39 years of age,” said Mikael Dolsten, Array’s global president of research and development. “30,000 people are diagnosed with metastatic melanoma each year.”

Pfizer estimates Braftovi and Mektovi could be an appropriate treatment for about one-third of those patients.

The colorectal cancer patient pool could be even larger.

Colorectal cancer is the third most common type of cancer in the world and the second most common cause of cancer-related death in the United States. Of the 200,000 patients diagnosed annually, about 15 percent likely have BRAF mutations and could benefit from Array’s therapies, according to Pfizer.

Preliminary research on Braftovi and Mektovi’s colorectal cancer use have shown “statistically significant improvement in overall response rate and overall survival,” Dolsten said.

Pfizer plans to submit data about colorectal cancer treatment to U.S. drug regulators for review this year.

“This is truly exciting news for patients,” Dolsten said.

In addition to new uses for the drug combo, Pfizer values Array’s Boulder-based research and development team.

“Array’s research team includes approximately 100 scientists at its research center in Boulder. We will maintain Array’s current structure and locations,” Schmeltz said.

Array’s Boulder laboratory operations will be a node in Pfizer’s Oncology Research and Development network, which includes operations in La Jolla, California, and Pearl River, New York.

Pfizer’s decision to keep Array resources in Boulder comes as a relief for local economic development leaders. Past acquisitions of local firms by giant national players have resulted in the relocation of operations.

Moving resources out of Boulder “is always a concern when one of the big guys buys a company here, for example, Conagra buying Boulder Brands,” said Clif Harald, executive director of the Boulder Economic Council.

Conagra Brands Inc. announced in February that it would permanently close the Boulder office of Pinnacle Foods Inc., parent company to Boulder Brands, and lay off 100 workers.

Pfizer’s stated commitment to maintaining operations in Boulder, combined with the city’s status as a burgeoning biotech hub, lessens some of the concern, Harald said.

“They see the value in the local workforce and the whole ecosystem supporting a company like Array,” he said.

Dolsten said Pfizer is “very impressed with the research team that Array has. We want to ensure that this productive culture and way of operating can continue in the most successful manner.”

Pfizer expects existing Array-discovered molecules that have been licensed to other drug companies could be a significant source of future revenue.

“We are incredibly proud that Pfizer has recognized the value Array has brought to patients and our remarkable legacy discovering and advancing molecules with great potential to impact and extend the lives of patients in critical need,” Array CEO Ron Squarer said in a statement. “Pfizer shares our commitment to patients and a passion for advancing science to develop even more options for individuals with unmet needs. We’re excited our team will have access to world-class resources and a broader research platform to continue this critical work.”

Pfizer’s acquisition strategy prioritizes “bolt-on deals with mid- to long-term value creation, and revenue and earnings growth,” Schmeltz said.

Bolt-on acquisitions typically involve a larger company purchasing a smaller firm in the same industry in an effort to enhance the larger company’s product portfolio and core competencies.

Pfizer’s strategy also involves absorbing firms with strong leadership teams already in place.

“The acquisition of Array meets all of these objectives,” Schmeltz said. “It has potential to provide breakthrough medicines that change patients’ lives and enhances our long-term growth prospects as we look to strengthen and add durability to our growth profile over the next decade.”

The Array acquisition is a major feather in the cap for Colorado’s life sciences industry.

“Array was founded in 1998 and this deal shows that over the course of 20 years something can grow from just an idea to a multi-billion dollar acquisition by a giant global [pharmaceutical] manufacturer. That’s so exciting,” said Jennifer Jones Paton, president of the Colorado BioScience Association. “This spotlights Colorado and what our life sciences ecosystem has to offer. It shows that we have a talented workforce, we have excellent infrastructure, innovation, research and educational institutions.”

While the acquisition announcement was exciting, it didn’t come as a complete surprise, Harald said.

“We have just been waiting for the next big development in Array’s evolution,” he said. “The company has been around for a long time and there have been some pretty high expectations that something like this [acquisition] could happen. My reaction when I first read the headline was, “Yes! Finally.’”