Shares Of Array Biopharma Soared As Much As 40% On News Of Novartis Deal
Shares of Array Biopharma (ARRY) surged as much as 40% in today's trading session after the company announced that it has acquired the rights to encorafenib -- a late-stage cancer compound -- from Novartis AG (NVS). Under the terms of the agreement Novartis has agreed to continue to pay for the COLUMBUS trial through June 30, 2016. At that time Array will assume full responsibility for the trial and Novartis will reimburse Array for its out-of-pocket costs and 50% full time equivalent costs for completing the trial. Novartis will still be responsible for finishing all other current trials using encorafenib and may choose to transfer some trials to Array. If Novartis does transfer the trials to Array, though, Novartis will have to once again pay 50% full time equivalent costs for the trials. Array will also be obtaining all patents and related intellectual property associated with encorafenib as well which will be huge for the company.
The closing of this deal will be once Novartis completes its deal with Glaxosmithkline (GSK) to buy Glaxo's oncology business unit for $14.5 billion, which dates back to April 22, 2014. Array had already created a deal beforehand to acquire another late-stage cancer product from Novartis known as binimetinib. Both encorafenib and binimetinib are being evaluated as a combination therapy to treat patients with metastatic melanoma -- skin cancer. This combination study is being tested in 11 centers across the globe and may create a more efficacious compound than current standard of care therapies.
This is a good deal for Array but the company must also address the fact that the European Commission is worried about disrupting competition prospects in Europe. So to fix this problem Array has to find a pharmaceutical company it can partner with on both encorafenib and binimetinib to avoid this problem. Array will now have the rights to both of these late-stage cancer compounds which will add a lot of value for the company upon successful completion of the clinical trials with positive results. The deal between Novartis and Glaxosmithkline is expected to be completed by the first half of 2015.
Disclosure: No positions in any stocks mentioned
What do you think the likelihood is of Array finding a European partner? Do you foresee any difficulty?
I don't think ARRY will have a problem finding a partner. I think it may take some time though.