Staff Writer

Array BioPharma Inc. has formed a partnership with Amgen Inc. around its early stage pipeline glucokinase activator in a deal that will bring in $60 million up front for Array and provide research funding.

Wall Street clearly took a positive view, sending shares in the company up more than 23 percent.

Under the deal, Amgen will gain exclusive worldwide rights to Array's small-molecule GKA program, including ARRY-403, which is in Phase I testing in patients with Type II diabetes.

Array is responsible for completing the Phase I trial, while Amgen is responsible for future clinical development and commercialization for the compound and any resulting backup compounds, with Array having an option to co-promote in the U.S.

ARRY-403 met its primary and secondary endpoints of safety, pharmacokinetics and glucose control in a Phase I single ascending dose study.

In that study of 41 patients with Type II diabetes, the compound was well tolerated at all doses, ranging from 25 mg to 400 mg.

ARRY-403 provided dose-dependent reduction in glucose excursions in response to a standardized meal as well as reduction in 24-hour fasting blood glucose, the company reported in August.

Based on the positive results of the single ascending dose study, Array initiated a Phase I multiple ascending dose study in patients with Type II diabetes. The multiple ascending-dose trial is expected to be completed in the first half of 2010.

Piper Jaffray analyst Edward Tenthoff had predicted that the dosing data could prompt an early out-licensing deal. And that deal has come, even before the completion of the multiple ascending dose trial.

Christopher Raymond, analyst at Robert W. Baird, pointed out in a research note that the deal was secured, "true to management's word," by year-end 2009. He called the $60 million payment a "decent value for a Phase I compound."

But Raymond said that the "while the deal provides much-needed operational breathing room, we remain on the sidelines until we see more substantive pipeline maturation."

Amgen spokeswoman Mary Klem told BioWorld Today that while the efficacy and safety profiles of ARRY-403 still need to be determined in subsequent clinical trials, the molecule holds promise.

"Glucokinase represents an attractive diabetes target with strong human genetic validation. This molecule has potential to have a robust effect on glucose lowering by targeting both liver and pancreas," she said.

In addition to the up-front payment, Boulder, Colo.-based Array also is eligible to receive contingent payments for certain clinical and commercial milestones. Array would receive double-digit royalties on sales of ARRY-403.

In addition, Thousand Oaks, Calif.-based Amgen would fund an agreed-upon number of full-time Array employees as part of a two-year research collaboration intended to identify and advance second-generation glucokinase activators.

Rodman & Renshaw analyst Simos Simeonidis said that Amgen is diversifying its cancer pipeline away from oncology, and he said Array won what he believes was a competitive process to partner with the major biotech in the area of diabetes.

Simeonidis called the deal "vintage Array," once again attracting a major partner, just as it did in deals involving its MEK inhibitors with London-based AstraZeneca plc, South San Francisco-based Genentech Inc. (now Roche AG), Celgene Corp., of Summit, N.J., and InterMune Inc., of Brisbane, Calif.

This is actually Array's second deal with Amgen, the first being a small deal in the late 1990s when Array was founded, Array spokeswoman Tricia Haugeto noted.

The only other companies developing clinical stage GKAs are AstraZeneca and Merck & Co., though quite a few companies have preclinical GKAs, she said.

Raymond gave Array a neutral rating until he sees more pipeline success. He noted the "less-than-stellar year" for Array's pipeline, which included the Phase II miss of ARRY-162 in rheumatoid arthritis. (See BioWorld Today, Sept. 8, 2009.)

Still, he said that the deal would boost Array's balance sheet, taking it from net debt of $31 million to positive cash balance. But with a cash burn of about $20 million a quarter, Array will likely need to raise some more money in the next year or so, Raymond wrote.

J.P. Morgan analyst Cory Kasimov called the deal impressive given the Phase I stage of the compound and said that the $60 million up-front payment should give Array added leverage in partnership negotiations for other assets.

Shares in Array (NASDAQ:ARRY) were up 53 cents or 23.6 percent, closing at $2.78. Shares in Amgen (NASDAQ:AMGN) were down $1.11, closing at $55.75.