Newly formed by the venture firm Aisling Capital, Loxo Oncology Inc. has entered a deal with Array Biopharma Inc. to advance a preclinical candidate developed by Array and to find more small-molecule drugs for oncology targets.

The arrangement could mean as much as $434 million in milestone payments as well as royalties on any resulting products for Boulder, Colo.-based Array, which also received shares of Loxo as part of the deal.

A specific oncogenic activating mutation lies at the heart of the agreement, said Josh Bilenker, Loxo's CEO and a partner with Aisling, who founded Loxo (which takes its name from an attendant of the Greek goddess Artemis, often associated with archery) in May.

Bilenker would not provide specifics about the candidate, calling the space "unbelievably competitive. There's always going to be a race to get those going. I don't want to tip [other developers] off until late this year or first half of next year," by which time clinical work will have begun, he said.

By 2014, Array could have six to eight pivotal trials under way, PiperJaffray analyst Edward Tenthoff wrote in a research report, maintaining his "overweight" rating. Near-term, investors are waiting for Phase II data with the asthma drug ARRY-502, and Tenthoff looked ahead to a "big American Society of Hematology meeting in December," including data regarding the multiple myeloma drug ARRY-520, for which the company holds all rights.

Meanwhile, in the latest deal, Loxo is funding Array's preclinical research, selecting targets and conducting trials. Incubated at Aisling's New York headquarters, Loxo employs between five and 10 people in management, clinical development and translational biology.

"We're growing the team," Bilenker said. "The number is moving upward, weekly if not daily." During the next three months, Loxo will relocate to independent space either in Fairfield County, Conn., or Westchester County, N.Y., he said, adding that the Array deal "allows us to collaborate with them at a team level as well, so we don't have to duplicate [some] capabilities."

Loxo is "really focused on being translational experts in oncology, which means having feet on the ground that let us identify emerging targets as soon as possible, translating those to molecules that work, and running the right study as possible to prove it in the clinic," Bilenker said.

"Once we identify the target, [Array] rapidly helps us de-risk and get to a molecule-that-works stage – in my opinion, in a world-class way," he said. "Our company is built around the execution, getting that idea into the clinic as quickly as possible."

Array, Bilenker noted, "has a footprint around a very wide range of kinase targets and other cancer targets. Many of the targets we've identified are ones they have some experience with."

The company has invented 16 drugs that have reached the clinical stage, including 11 in Phase II or Phase III trials. Along with wholly owned hematology and oncology programs, Array has partnered a handful of other compounds with big pharma firms and biotech.

Bilenker said he has been especially impressed with two targets: BRAF and ALK.

"They illustrate a lot of common principles," he said. "When drugged well, they lead to very robust, i.e., north of 50 percent, objective response rates. For the some of the second-generation ALK inhibitors, we may be in the 90 percent-plus range, in first line. The beauty of those stories is that, in Phase I, you know you've got something. Investors know that the follow-on dollars they put into clinical development have a very high likelihood of leading to a drug, and the FDA is cued into these stories by way of the breakthrough pathway. If you have a standout drug like this, life gets a lot easier, from a regulatory and development standpoint as well as, by extension, a financing standpoint."

Both targets, too, are cropping up in "a wide range of tumor types," Bilenker said. "Obviously, BRAF is a melanoma target first and foremost, but it's showing itself in lung, colon and other places. ALK is showing itself in lung and lymphoma."

The oncogenic-driver approach is "really redefining the way you need to do drug development," he told BioWorld Today. "It's biology driven, rather than site-of-the-body driven. They are populations that, at least today, are identified through genetics."

The trend will grow, Bilenker predicted. "In routine clinical care, more patients are getting their tumors biopsied and sequenced, so we're able to catch a much greater diversity of these oncogenic driver mutations," he said.

"Only four years ago, in lung cancer [lab tests], the only thing you really sent for was EGFR," Bilenker said. "As that list grows longer, it becomes less practical for the doctor to just check the box on the lab slip and pick the assays he wants. You're starting to push yourself into multiplexed assessment that's hypothesis-free – you don't have to think ahead of time what you might find."

Array's stock (NASDAQ:ARRY) closed Wednesday at $5.15, up 14 cents.