Big M&A news hit the biopharma space today when Pfizer (PFE) announced it will acquire Array BioPharma (ARRY) for $48 per share in cash, for a total value of $11.4 bln. For ARRY, which closed Friday at $29.59, the deal represents a nice 62% premium. Both companies' boards of directors have approved the merger. It is expected to close in 2H19.
Array BioPharma is not currently profitable, but it is a commercial stage biopharma. It currently sells Braftovi capsules in combination with Mektovi tablets as a treatment for metastatic melanoma with potential for expansion into other areas. It also has programs (encorafenib and binimetinib) that are in clinical testing, including a Phase 3 trial in BRAF-mutant metastatic colorectal cancer.
Pfizer CEO Albert Bourla sees the deal as "set[ting] the stage to create a potentially industry-leading franchise for colorectal cancer alongside Pfizer's existing expertise in breast and prostate cancers." According to the press release for the acquisition, colorectal cancer is the third most common type of cancer in the US.
Of note, Array recently announced positive results in its Phase 3 BEACON mCRC trial for its triplet combination (BRAFTOVI + MEKTOVI + cetuximab), which showed that the triplet reduced the risk of death by 48% versus control. The press release in May 2019 noted that this combination could become the first chemotherapy-free, targeted regimen available for patients with BRAF-mutant mCRC. We are certain that this positive data last month played a role in Pfizer's decision to acquire Array.
The deal makes sense for ARRY shareholders, as it affords them a very nice premium. The deal also makes sense for Pfizer, as Array's clinical portfolio beefs up Pfizer's development pipeline and folds well into Pfizer's other cancer programs.
Of note, Pfizer is due to lose its patent protection for its flagship/blockbuster Lyrica drug on June 30. It'll be sure to face stiff competition from generic options. Buying companies like Array helps Pfizer to restock its development programs and provide patent protection.
Array's approved drugs and pipeline look quite promising. The fact that PFE had to pay such a big premium is a testament to the attractiveness of ARRY's pipeline and potential.
This deal notably follows another big M&A deal in the biopharma space. In January, Bristol-Myers Squibb (BMY) announced it would acquire Celgene (CELG). Valued at $74 bln, that deal was much larger than today's $11.4 bln deal for Array. We expect more deals to be announced in the future as large biopharmas look to bolster their pipelines to offset patent expirations and to benefit from economies of scale.