Pharma giant Pfizer announced Monday it will buy cancer drug maker Array BioPharma for $11.4 billion.
Pfizer said it will pay $48 per share in the deal, which requires final approval from the boards of directors for both companies. The price is 62 percent above Array’s Friday closing price, representing a market capitalization of $10.64 billion.
Array is a commercial-stage biopharmaceutical company which develops and commercializes targeted small molecule medicines to treat cancer and other diseases. Nearly a year ago, the Food and Drug Administration approved two Array drugs for patients with one of the deadliest types of skin cancer metastatic melanoma.
“[The deal] reinforces our commitment to deploy our capital to bring breakthroughs that change patients’ lives,” Pfizer CEO Albert Bourla said in a statement.
“The proposed acquisition … sets the stage to create a potentially industry-leading franchise for colorectal cancer alongside Pfizer’s existing expertise in breast and prostate cancers.”
Array also is testing a combo therapy for colorectal cancer patients.
Pfizer said it expects to complete the deal by the second half of this year.
Array shares rose 58% in to $46.67 at 9:32 a.m. in New York. Pfizer was little changed.
Cancer has become one of the hottest areas for deal activity between drug and biotechnology companies. Research efforts dating back decades have helped scientists understand how genetic mutations cause some cancers to grow, and other scientific advances have helped them learn how tumors evade the body’s defenses. That knowledge has created an array of targets for drugmakers to attack, leading to new tailored therapies often defined by a tumor cell’s specific biology rather than its location in the body.
Unlike other biotech stocks, many of which have pulled back from recent 2018 highs, Array’s shares have been on a steady march upward. The stock was already at a record before the deal announcement, following Array’s news last month of positive clinical trial results using Braftovi and Mektovi with Eli Lilly & Co.’s Erbitux. That combination could be the first chemotherapy-free regimen for some patients who have advanced colon cancer.
Array’s drug targets a mutation called BRAF, which can show up in some forms of melanoma, colorectal and thyroid cancers, among others. Other drugs on the market target that mutation as well. Roche Holding AG’s Zelboraf is projected to bring in $168.7 million this year, according to a survey of analysts. Novartis AG’s Tafinlar is used in combination with another drug Mekinist, and the combination is expected to bring in $1.24 billion this year, according to analysts.
The deal could also boost other biotech stocks, especially companies with drugs in the later stages of development that could be appetizing for big drugmakers. “We expect this announcement to provide a tailwind for the sector,” said Stephen Willey, an analyst with Stifel Nicolaus & Co. He called the premium for the Array deal appropriate, given the company’s positive clinical trial news.
The deal is Pfizer’s biggest since its 2016 acquisition of Medivation for $14 billion, another blockbuster cancer deal that the New York-based company used to expand its oncology offerings. With that takeover, Pfizer gained Xtandi, a prostate cancer drug that last year Xtandi brought it $699 million.
“From an overall capital allocation perspective, our priorities don’t change,” Pfizer Chief Financial Officer Frank D’Amelio said on a conference call Monday. The company will continue to look at dividends, buybacks and small or mid-size deals, and doesn’t see the need for a large merger, he said.
Pfizer has lagged behind drugmakers like Merck & Co. and Bristol-Myers Squibb Co. that have brought to market best-selling drugs that use the immune system to attack tumors. But the company has acquired or developed a set of other treatments for breast, prostate other cancers that target disease based on its biological profile. Such methods can result in more effective drugs, fewer side-effects, or both.
Pfizer plans to fund the deal with a combination of debt and cash. It said it expects the deal to close in the second half of this year. The deal comes with a $400 million termination fee, according to a regulatory filing by Array.
Guggenheim Securities and Morgan Stanley & Co. served as Pfizer’s financial advisers, and Wachtell, Lipton, Rosen & Katz gave legal advice. Centerview Partners was Array’s financial adviser, and Skadden, Arps, Slate, Meagher & Flom LLP served as its legal adviser.