Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.
What: Shares of Array BioPharma (NASDAQ: ARRY ) , a biopharmaceutical company focused on the development of small molecule drugs for the treatment of cancer and inflammatory diseases, soared as much as 29% after the company reported positive phase 2 data on ARRY-502, an experimental drug designed to treat mild to moderate persistent allergic asthma.
So what: The most important aspect of the trial was that ARRY-502 met its primary endpoint of significantly improving pre-bronchodilator Forced Expiratory Volume in one second, or FEV1, a measure of lung function. For the overall patient subset, FEV1 improved by 3.9% compared to the placebo; however, patients in the pre-specified Th2 Biomarker set saw FEV1 improve by 6.8% compared to the placebo. ARRY-502 also met its secondary endpoints, which included reduced short-acting beta agonist use and symptom-free days during treatment, to name a few. Array plans to move ARRY-502 onto late-stage trials, but understanding the competitive nature of the asthma market, it is seeking a partner first. Following the news, Piper Jaffray ;boosted its price target on Array to $10 from $7, implying 80% upside from yesterday’s close.
Now what: The downside to Array’s finding is the simple fact that the asthma market is indeed very competitive. Even if Array manages to find a partner, there’s little guarantee it’ll be successful if ARRY-502 is approved. Even worse, it may not matter because the marketing expenses to make a dent in treating asthma patients — and having to share royalties with a presumably much larger licensing partner — could sap any chance it has of turning a profit. Then again, the other intriguing side to this is simply the unknown of who that partner might be. Licensing partners and the nature of the deal can make or break some of these smaller biotech companies. In the meantime, I’d suggest adding Array BioPharma to your watchlist, but sticking to the sidelines until we know who its marketing partner will be on ARRY-502.
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