Array BioPharma Stock Continues To Rise On Positive News

| About: Array BioPharma (ARRY)

Array Biopharma Stock Continues to Rise on Positive News

Array BioPharma Inc. (NASDAQ:ARRY), a biopharmaceutical company focused on the discovery, development and commercialization of small molecule drugs, cancer and inflammatory diseases has experienced an excellent run in 2012. Array has seen its stock rising over 70% YTD, based on a slew of positive news coming from the company. Array has quietly been developing a pipeline of drugs for itself and collaborating with some of the largest and most successful global pharmaceutical companies. Array seems to have been flying under the radar compared to some of the more followed small cap biopharmaceutical companies, but with the positive news as of late Array and its stock have both received some much deserved attention.

ARRAY-502 Asthma Drug

On July 23rd the stock rose from 9% when the company announced positive results from a placebo-controlled, randomized, doubleblind Phase 2 trial for ARRY-502, an oral CRTh2 antagonist asthma drug for patients with mild to moderate persistent allergic asthma. Mild to moderate persistent allergic asthma affects more than 12 million patients in the U.S. alone. The global market for asthma drugs was projected at $15.3 billion in 2012 and estimated to reach $20.2 billion in 2017, as the disease has increasing globally due to a number of factors, including an aging population and the continued rise in pollution levels.

ARRY-502 achieved its primary endpoint showing significant improvement in pre-bronchodilator Forced Expiratory Volume in one second (FEV1), which is used as a measure of lung function. ARRY-502 was also well tolerated and showed fewer adverse events when compared to the placebo. These positive results support continued development of ARRY-502 in allergic asthma.

The exciting news about ARRY-502's positive results is that the drug, according to Dr. Sally Wenzel, Professor of Medicine and Director of the Asthma Institute at the University of Pittsburgh and lead investigator of this trial, is the first oral non-steroidal drug since Merck's (NYSE:MRK) drug Singular to show clinically meaningful activity in persistent allergic asthma. Sales of Singular, which was approved by the Food and Drug Administration in 1998, were roughly $4.9 billion from July of 2011 to July of 2012, but have dropped dramatically since the drug came off patent in early August 2012. According to Dr. Wenzel, in further discussing ARRY-502, "There remains a significant need for more convenient, safe and effective therapies for patients with persistent allergic asthma."

Ron Squarer, Chief Executive Officer of Array, also commented that, "With many asthma patients poorly controlled on currently available therapies, a drug targeting a novel, non-overlapping mechanism may present an important new option for millions of patients. We are seeking an appropriate partner to develop ARRY-502 to its full potential."

Collaboration Agreements With Large Biopharmaceuticals

Array announced on Monday, July 29th that the company entered into a new collaboration agreement with the biopharmaceutical giant Celgene Corp. (NASDAQ:CELG) for its preclinical development program targeting a novel inflammation pathway. Under the terms of the agreement Celgene will have an exclusive option to license multiple clinical development candidates, while Array will receive an upfront payment of $11 million and could receive upwards of $376 million in milestone payments based upon meeting certain development, regulatory and sales goals. Array will also receive royalties on sales of all drugs and will retain all rights to the program if Celgene does not exercise its option.

Kevin Koch, Ph.D., President and Chief Scientific Officer of Array commented on the announcement. "Given Celgene's global leadership and expertise in the development and commercialization of innovative therapies and Array's solid track record of inventing and progressing targeted drugs into clinical trials, we believe this alliance will maximize the value of a very exciting and innovative program."

This is not the first collaboration with Celgene, and since 2007 the company has received $40 million in research funding and milestone payments from Celgene for oncology and inflammation programs. Array's currently has nine collaboration agreements with some of the largest and most successful global pharmaceutical companies in its pipeline including the development of a type 2 diabetes drug, AMG 151 with Amgen (NASDAQ:AMGN) which is in phase 2 development. It also has an oncology partnership with Genentech to develop both of companies small molecule Checkpoint kinase 1 (Chk-1) programs, which includes Genentech's GDC-0425 (RG7602) and Array's, GDC-0575, each in Phase 1 clinical trials. Array is also developing with Genentech GDC-0068 an AKT inhibitor for cancer patients with advanced solid tumors that is currently in a phase 2 trial.

The company is also collaborating with Novartis (NYSE:NVS) on the development of, a small-molecule MEK inhibitor ARRY-162, which targets a key position in the Ras/Raf/MEK/ERK signaling pathway. MEK, a key protein kinase, pathway acts as a central line in the spread of various tumors such as melanoma, head/neck, and pancreatic cancers, and is regularly activated in cancer, mostly in tumors that have mutations in the RAS and RAF oncogenes.

Through June 30 2012 Array has received $577.9 million in research funding and in up-front and milestone payments from its collaboration partners, including $174 million in initial payments Amgen, Genentech and Novartis. Additionally Array could receive up to or even exceed $2.2 billion in additional potential milestone payments from those three collaborations alone if all clinical and commercialization milestones under the agreements are achieved. And if one adds in the other existing partnered programs, the company could receive upwards of over $3.6 billion in additional potential milestone payments if the development and commercialization objectives detailed in those agreements are reached.

ARRY-520 Multiple Myeloma Drug

Though a big part of Array's business strategy involves collaborative agreements with larger pharmaceutical companies, as pointed out earlier in the article the company develops its own pipeline of drugs. One which may have excellent potential is its multiple myeloma (NYSE:MM) drug ARRY-520, a potent, selective KSP inhibitor with a mechanism of action distinct from other drugs used to treat MM. ARRY-520 acts preferentially on MM cells over terminally differentiated and epithelial cells due to restricted tissue distribution of KSP and the reliance of MM cells on the MCL-1 protein for survival. In June the company announced positive interim results it two phase 2 studies. According to Jatin J. Shah, M.D., Assistant Professor, Lymphoma/Myeloma, Division of Cancer Medicine, The University of Texas, MD Anderson Cancer Center, "To date, the combination of ARRY-520 with Kyprolis has been well tolerated. Reversible neutropenia is the most common adverse event and does not appear to be additive relative to the observed events for either drug alone. While this is an ongoing study, and we await mature data, there have been promising signs of activity in a heavily pretreated population, which includes several patients previously exposed to ARRY-520 or carfilzomib." According to the American Cancer Society there are roughly 22,350 new cases of MM diagnosed per year and about 10710 deaths per year due to the disease.

Array's stock recently closed at $6.45 per share, just shy of its 52 week high. The company has a market cap of $756.7 million. Though the company has yet to turn a profit, it's the potential of its pipeline that has driven the stock upward this year. Array has seen its revenues increase over the past few years. In 2011 the company had revenues of $71.9 with the net loss to $56.32 million, while in 2012 revenues climbed to $85.14 million while the company cut its loss in half down to $23.58 million. For 2013 Array is expecting revenues of $60 million with a loss of $.55 per share, slightly below I/B/E/S Estimates, analysts of $62 million with a loss of %0.58 per share, though that may change with the announcement of its collaboration with Celgene. The company is also sitting on $84.5 million in cash and marketable securities, giving it plenty of reserves to continue to develop its products.

Conclusion

With a strong pipeline of its own drugs in development and a number of collaborations with the most successful global pharmaceutical companies Array BioPharma appears to have positioned itself as one of the up and coming drug development companies. However, there is no guarantee that any of the drugs in its testing pipeline will successfully make it to market. But unlike many small biopharmaceutical companies, Array has a solid and diversified number of drugs it is developing and testing, thus hopefully raising its odds for a successful product. I also like that Array has actively persued collaborative efforts with the major drug manufacturers as they have the financial strength, and the sales and distribution network that would be needed to compete successfully in the competitive pharmaceutical business. The stock price should continue to rise with positive news from the company.

Disclosure: I am long ARRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.