Array shares soar on new rights to developmental cancer drug LGX818

BOULDER – Shares of Array BioPharma Inc. stock rocketed up nearly 41 percent Friday after the company announced it had reached an agreement with Novartis AG to acquire worldwide rights to another cancer drug.

Array stock, which closed at $5.05 Thursday, closed at $7.11 Friday after reaching as high as $7.58 early in the morning.

The deal, which gives Array (Nasdaq: ARRY) worldwide rights to develop and commercialize encorafenib (LGX818), comes a month and a half after Array had recovered worldwide rights to a drug it had developed, binimetinib, from Novartis. The company’s shares rose 25 percent in the days following that deal.

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Both deals stem from Novartis’ deal announced last April to acquire a suite of oncology products from GlaxoSmithKline. To gain regulatory approval, Novartis has had to divest certain drugs from its portfolio.

LGX818 is a BRAF inhibitor developed by Novartis, but in the deal with GlaxoSmithKline the company acquired another BRAF inhibitor that is already on the market called Tafinlar. Likewise, Novartis’ acquisition of Mekinist in the GSK deal conflicted with its development and licensing deal with Array for binimetinib, a competing MEK inhibitor.

The deals for both LGX818 and binimetinib are contingent upon the closing of the Novartis-GSK deal, which is expected in the first half of this year.

Specific monetary terms of the deal for LGX818 were not disclosed. Array said in a statement that “other than a de minimis payment due to Novartis from Array, there are no milestone payments or royalties payable under this agreement by either party.” Novartis, meanwhile, is responsible for conducting encorafenib trials until completed or transferred to Array for a defined transition period, Array officials said. Once transferred, Novartis would reimburse Array for out-of-pocket expenses for such trials and 50 percent of Array’s full-time employee costs connected with completing the trials.

“Acquiring worldwide rights to encorafenib, an innovative late-stage oncology product, represents a tremendous opportunity for Array,” Array CEO Ron Squarer said in a statement.

LGX818 is part of a Phase 3 clinical trial called Columbus that is looking at the treatment of BRAF melanoma – which accounts for about 40 percent of all melanoma cases – in conjunction with binimetinib.

“With rights to both encorafenib and binimetinib, Array would enhance its position to broadly develop and commercialize each product, as well as this MEK/BRAF combination, which may have differentiating advantages when used compared to available therapies,” Squarer said.

The link between LGX818 and binimetinib likely played into the decision to send LGX818 Array’s way once it was clear Novartis would have to divest the drug.

“Clearly they already had a positive relationship with Array based on the (binimetinib) experience,” said Ted Tenthoff, a BioTech analyst for Piper Jaffray. “I don’t know that that’s reason enough, but it certainly maybe puts Array in pole position as someone to consider.”

Another stipulation of the deal for LGX818 is that Array must obtain a partner with which to commercialize both LGX818 and binimetinib in Europe. Tenthoff said such a deal would likely help the European regulators ensure that both drugs continue to be developed and marketed in Europe – and not just in the United States – to keep a competitive landscape there for MEK and BRAF inhibitors.

Analysts following Array had already been bullish on the company’s stock after the deal for binimetinib. Tenthoff had set a target price of $9 even before the binimetinib deal. He said he was not changing his price target based on the binimetinib and LGX818 deals yet because the Novartis/GSK deal hasn’t closed.