Drug developer Array BioPharma and pharmaceutical giant Novartis are going separate ways, but that doesn’t seem to be bad news for Boulder, CO-based Array. The companies announced Wednesday they have terminated their agreement to jointly develop and market binimetinib, a drug candidate initially developed by Array to treat melanoma and ovarian cancer.
While such a split typically is bad news for the smaller partner, this separation actually could be good news for Array (NASDAQ: ARRY) as the agreement looks to be unusually favorable for the company. Novartis (NYSE: NVS) has agreed to an upfront payment of as much as $85 million, and it will fund planned and ongoing studies of binimetinib. That includes three Phase 3 pivotal trials that are underway and more than 20 Phase 1 or 2 exploratory studies and investigator sponsored trials.
Novartis also is returning to Array full worldwide development and commercialization rights and any patent and intellectual property rights for the drug. Finally, Array will not have to pay Novartis the $15 million it owes to cover accrued co-development costs.
CEO Ron Squarer during a conference call said it is “a very exciting, potentially transformative day for Array.” In the short term, Array is getting an influx of cash and will develop its leading drug candidate while Novartis picks up the bill. In the long term, Squarer believes Array will be able to market and sell binimetinib without relying on a large partner, allowing it to reap all the profits. Array believes binimetinib could hit the market as soon as late 2016.
Investors appear to agree with that outlook and sent Array’s stock climbing more than 20 percent in afterhours trading.
Binimetinib is an oral small-molecule MEK inhibitor, and the Phase 3 trials are testing its efficacy as a monotherapy or combination treatment for low-grade serous ovarian cancer, BRAF-mutant melanoma, and NRAS-mutant melanoma. Other early stage studies are testing it as a treatment for solid tumors and hematologic malignancies.
NRAS-mutant melanoma is the first potential indication for binimetinib, and up to 20 percent of melanoma patients have that mutation. Between 40 and 60 percent of melanoma patients have the BRAF mutation.
The big picture is that Novartis is leaving the partnership because of the deal it reached with GlaxoSmithKline (NYSE: GSK) back in April. Novartis agreed to buy GSK’s oncology drugs for $16 billion. Included in the deal are two melanoma drugs, dabrafenib (Tafinlar) and trametinib (Mekinist), that already are on the market.
Array chief financial officer Michael Carruthers said it was clear when Novartis and GSK agreed to the sale that there would be a conflict. All three drugs treat patients with the BRAF mutation who have advanced melanoma that is either late-stage or cannot be removed surgically. Trametinib and binimetinib are both MEK inhibitors with similar mechanisms of action.
Array believes Novartis’ choice was driven by business considerations and not a lack of faith in binimetinib.
“There is a reasonable likelihood that we may have a cleaner safety profile than the mekinist-tafinlar combination they’re acquiring,” Carruthers said. “I think it’s more of an issue of them taking a conservative approach and taking the assets that came in the pool and are already in the market than taking the risk and betting on binimetinib.”
Array’s separation agreement is contingent on the closing of the Novartis-GSK deal, which is expected to happen in the first half of next year.
Array and Novartis signed the development and licensing agreement for binimetinib in 2010. Since then, Array has received $60 million in upfront and milestone payments from Novartis. Array could have earned another $408 million in additional milestone payments plus royalties.
If the FDA approves binimetinib, it could be one of three MEK inhibitors available for patients with BRAF-mutated melanoma. Roche and Exelixis (NASDAQ: EXEL) are co-developing cobimetinib, which could be on the market before binimetinib.
Binimetinib would be the first MEK inhibitor available for NRAS-mutated melanoma and low-grade serous ovarian cancer, and Array believes binimetinib has the potential to generate hundreds of millions of dollars per year, Carruthers said.