Why Novartis gives up two Phase III melanoma drugs to Array?

On January 23, 2015, Array BioPharma (NASDAQ:ARRY) acquired worldwide rights to Novartis’ encorafenib, a BRAF inhibitor currently in Phase III development for the treatment of melanoma. Array will make a minimal payment to Novartis and has no obligations to offer any milestone payments or royalties.

This deal seems absurd because Novartis gave up two Phase III products to Array for practically nothing in return. In December 2014, Array announced an agreement with Novartis to regain global rights to the Phase III MEK inhibitor binimetinib. Investors would wonder why Novartis seemed so willing to give up melanoma drugs.

  1. Redundant products

Back in April 2014, Novartis acquired GlaxoSmithKline oncology products for an initial $14.5 billion and up to $1.5 billion in development milestones. The deal gave Novartis two approved melanoma drugs, BRAF inhibitor dabrafenib and MEK inhibitor trametinib, making encorafenib and binimetinib redundant.

  1. Competitive landscape

The FDA has approved three BARF/MEK inhibitors (vemurafenib, dabrafenib and trametinib) for the treatment of metastatic melanoma with BRAF V600E or V600K mutations. Exelixis partner Genentech has filed an NDA for MEK inhibitor cobimetinib in combination with BRAF inhibitor vemurafenib. Array falls behind both Novartis and Genentech. Furthermore, immune checkpoint modulators (e.g., anti-PD1/PDL1, anti-CTLA4) complicate the treatment of melanoma.

  1. Limited market

According to the National Cancer Institute, 9,710 Americans would die from melanoma in 2014. About 50 % of melanoma harbors activating BRAF mutations (over 90 % V600E). Roche priced vemurafenib at $10,000/month reported annual sales of CHF 354 million in 2013. However the drug showed signs of weakness in 2014, with sales of CHF 230 million in the first nine months.

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