Why Array BioPharma Inc. Is Plunging Today

By Brian FeroldiMarketsFool.com

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What: Shares of Array BioPharma (NASDAQ: ARRY),a cancer-focused clinical-stagebiotech, are down more than 22% as of 1:30 p.m. EDT today. The reason is thatAstraZeneca (NYSE: AZN) released disappointing late-stage clinical trial results for selumetinib, acompound that it licensed from Array.

So what:AstraZeneca announced results from its phase 3 SELECT-1 trial, which was testing selumetinib in combination with chemotherapy as a potential second-line treatment in non-small cell lung cancer. Unfortunately, data showed thatselumetinib failed to meet its primary endpoint of progression-free survival, and it also had no effect on overall survival.

This trial was one of Array's most advanced programs, so the disappointing news caused traders to bail on the company's shares today.

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Now what: Selumetinib is also being researched as a potential treatment for thyroid cancer and for neurofibromatosis type 1, a genetic disorder that causes tumors to grow along nerve tissue. Both of these programs are ongoing, but seeing this news today provides investors with more reason to be cautious about their potential.

So farArray has earned more than $26 millionin up-front and milestone payments from AstraZeneca, and it was slated to earn up to $70 million more plus royalties on product sales if everything worked out. Given the clinical failure ofselumetinib in this lung cancer trial, it looks like Array has lost a large portion of that potential revenue.

We won't have more information about selumetinib's future in treating thyroid cancer and neurofibromatosisuntil those studies wrap up, which likely won't happen until late 2017.With new questions in the air about selumetinib's potential, it's not hard to understand why investors are bailing on Array's shares today.

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Brian Feroldi has no position in any stocks mentioned.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.

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