Why Shares in Array BioPharma, Inc. Are Soaring Higher

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What: Shares in Array BioPharma are rallying by more than 10% after the company released its first quarter financial results and offered up insight into its pipeline.

So What: As a clinical-stage biotechnology company, Array BioPharma doesn't generate sales from any commercialized products (yet). Instead, its revenue comes from collaboration deals with larger drugmakers.

In the first quarter, revenue from those collaborations totaled $6.6 million. Although that was lower than a year ago, when the company reported revenue of $7.8 million, investors appear far more interested in the company's timeline for submitting its first new drug applications.

Last quarter, Array BioPharma was able to capture the rights to two intriguing cancer drug prospects that were divested by Novartis and GlaxoSmithKline as part of their restructuring.

The first of those drugs is binimetinib, a MEK inhibitor that is being studied in phase 3 trials as a therapy for the treatment of melanoma. The second of these drugs is encorafenib, which is a BRAF inhibitor that is also in phase 3 melanoma trials as an adjunct therapy to binimetinib.

If results from phase 3 trials are solid, the company expects that it can file for FDA approval of binimetinib next year.

Additionally, the company's selumetinib, a MEK inhibitor licensed to AstraZeneca, continues to progress through phase 3 trials as a therapy for specific variations of metastatic lung cancer, thyroid cancer, and uveal melanoma. According to Array BioPharma, an application for approval of selumetinib for uveal melanoma could come in the second half of 2016.

Now What: Array BioPharma may end up benefiting significantly from its deal with Novartis to get control over binimetinib and encorafenib. As part of their agreement, Novartis handed over $85 million to Array BioPharma and agreed to help usher along ongoing trials.

If trials go as planned, Array could end up generating revenue from binimetinib as early as late next year. Another drug, selumetinib, could add a second revenue stream in 2017; however, before investors get too excited they should remember that there are plenty of hurdles that can trip up late stage trials. That means there's considerable risk, but for investors willing to take on that risk, Array BioPharma's clinical stage cancer pipeline is intriguing.

The article Why Shares in Array BioPharma, Inc. Are Soaring Higher originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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