Part 3: Will Array BioPharma Become A Late Stage Biopharmaceutical Company?

May.16.13 | About: Array BioPharma (ARRY)

This is the third article in a three part series about Array BioPharma (NASDAQ:ARRY). The first article looked at several promising drug candidates Array is developing with other companies. The second article focused on the investigational drugs that the company is developing on its own. This article offers an overview of Array's finances and a discussion about whether or not buying Array stock is a wise decision.

In late 2012, Array raised $70.9 million by completing an underwritten public offering of 20.7 million shares of its common stock at a price of $3.65 per share. Array received net proceeds of $70.9 million from the sale that will be used to fund potential Phase 3 clinical trials or pivotal programs.

Finances

On May 6, 2013, Array reported financial results for its third fiscal quarter ended March 31, 2013.

Revenue was $10.0 million, compared to $19.1 million for the same period in fiscal 2012. The decline in revenue was due to delays in anticipated milestone payments in the third quarter and the recognition of previously received and deferred upfront and milestone payments from Genentech and Amgen (NASDAQ:AMGN) during the third quarter of fiscal 2012 that did not recur in comparable amounts in fiscal 2013.

For the nine months ended March 31, 2013, revenue was $44.2 million, compared to $64.5 million for the same period in fiscal 2012.

Array reported that the net loss for the nine months ended March 31, 2013, was $44.3 million, or ($0.42) per share, compared to a net loss of $15.6 million, or ($0.24) per share, in the comparable prior year period.

Research and development expense was $15.1 million, compared to $16.1 million in the comparable prior year period. Net loss was $21.6 million, or ($0.19) per share, for the third quarter, compared to a net loss of $8.2 million, or ($0.11) per share, for the same period in fiscal 2012.

The company reaffirmed the financial guidance provided for the full year ending June 30, 2013 of $60 million in revenue and ($0.55) net loss per share.

Array ended the quarter with $87 million in cash, cash equivalents and marketable securities.

Conclusion: Buy

Analysts covering Array are enthusiastic about the company.

On April 11, 2013, Zacks lowered its rating for Array from an "Outperform" to a "Neutral" rating.

On March 25, 2013, Piper Jaffray upgraded Array from "Neutral" to "Overweight."

On December 20, 2012, Wells Fargo initiated coverage of Array with an "Outperform" rating.

On October 26, 2012, Brean Murray started coverage of Array with a "Buy" rating. The firm has a $10 price target on the stock.

On August 15, 2012, Jefferies and Company maintained its "Buy" on Array. The firm has a target of $6.00 for the stock. On August 15, Leerink Swann upgraded Array from "Market Perform" to "Outperform." Leerink raised the company's price target from $4 to $8.

Array has a world class small molecule drug discovery and development platform that allows it to move rapidly from hit identification through clinical proof of concept. During the last 10 years, Array has brought 19 compounds into clinical development.

Array continues its evolution into a late-stage development company. Array has partnered with some of the biggest names in the industry including Roche (OTCQX:RHHBY), Amgen, Celgene (NASDAQ:CELG), Novartis (NYSEMKT:NVX) and AstraZeneca (NYSE:AZN). Through these partnerships, the company has been able to raise substantial non-dilutive capital totaling over $175 million in recent years. If you were to calculate all the potential partnership milestones Array could earn, it totals more than $3 billion.

With the recent Phase 3 announcements regarding Array-invented MEK inhibitors, MEK162 and selumetinib, and continuing progress with its wholly-owned hematology-oncology programs, I think Array's future looks bright.

Disclosure: I am long CELG, MRK, EXEL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.