- Pfizer announced the acquisition of Boulder, Colo.-based oncology specialist Array BioPharma for $11.4 billion. The share offer price of $48 represents a 62% premium on Array's closing price June 14.
- The big pharma group will finance the buyout with a combination of debt and cash, with a "strong majority" represented by debt, executives said. Pfizer's credit rating was put under review by S&P Global and declared "credit negative" by Moody's.
- Array gained approval in June 2018 for two drugs for melanoma, Braftovi and Mektovi, which had combined sales of $72 million in the first nine months after launch. The combination recently had positive results in colorectal cancer, a disease where it could become the first-line treatment.
Mergers and acquisitions are what Pfizer does. The takeout of Array is its third since March, and is the biggest by far at $11.4 billion. The Array deal comes in the area of targeted oncology drugs using kinase inhibition, which has been overshadowed in the era of immuno-oncology.
Array last year gained Food and Drug Administration approval of the Braftovi/Mektovi (encorafenib/binimetinib) combination for use in BRAF-mutated melanoma. It was the third such combination to receive approval, but is reckoned as "best in class" by Cantor Fitzgerald analyst Varun Kumar.
Most importantly, the Array combination recently returned positive results in second-line BRAF-mutated colorectal cancer in combination with Erbitux, which likely was Pfizer's trigger for dealmaking. The company was planning on asking the FDA for approval in that setting later this year. In addition, a study in first-line disease should read out next year, and work is underway to combine Mektovi with immuno-oncology agents Keytruda (pembrolizumab), Opdivo (nivolumab) and Pfizer's Bavencio (avelumab).
One down side of the deal is that Array only has full rights to the combination in North America, as it has partnered with Pierre Fabre in Europe and Ono in Japan. The price will also prove to be challenging to Pfizer's financial outlook, as executives estimated it will be 4 to 5 cents dilutive to earnings per share in each year 2019 and 2020, and only begin to be accretive in 2022.
But Pfizer justified the deal's valuation on both the commercial prospects for Braftovi/Mektovi and the Array pipeline.
On that count, Pfizer executives were insistent that they would maintain Array's laboratories as part of its research network. That may be a necessity given Pfizer's stated desire to diversify its oncology pipeline with targeted therapies.
This also gladdened investors in companies specializing in targeted oncology drugs, both marketed and experimental. Shares in Clovis Oncology rose 8%, Exelixis 4% and Mirati Therapeutics 6%.
This story has been updated to reflect Moody's outlook on the transaction.