Hammer Stock Blog

Array’s (ARRY) shares keep on fluctuating in the $2.5-$3.5 range, relatively unchanged from the beginning of 2010. It seems that the market is having trouble assessing the real value of the company and its pipeline, which includes 13 (!) drugs in clinical trials. With a market cap of ~$170M, the market puts an average price tag of $13M per asset, a ridiculously low valuation (assuming no value is assigned to the company’s discovery platform). The company’s long term debt (due in 2014) could be partially blamed for this anomaly, but the problem seems to be more related to the company’s business model. The good news is that during the next year the company is looking at multiple events that might change the way Wall Street views Array. (more…)

Yesterday Pfizer (PFE) announced that Sutent failed to prolong survival of lung cancer patients when given in combination with Tarceva. The drug led to an increase in progression free survival (PFS), which was the secondary endpoint of the study. The results are not published and there are several open questions such as the extent of PFS improvement, benefit across different subtypes and use of Sutent in patients from the placebo cohort after progressing on Tarceva. Nevertheless, chances to see Sutent+Tarceva  as a standard of care for 2^nd/3^rd  line NSCLC are slim.

Pfizer’s failure provided some clarity for Arqule (ARQL) and its partner Daiichi Sankyo, who plan to initiate a phase III study for ARQ-197 in combination with Tarceva. The indication Arqule is pursuing is very similar to that pursued by Pfizer, so had the Sutent trial been successful, it would have adversely affect ARQ-197’s prospects in general and potentially the required clinical route. (more…)

Exelixis (EXEL) came under a lot of pressure recently and the stock is now trading near its 52 week low following two unrelated events that took place last month. In late June, the company announced the resignation of its CEO, George Scangos, who was appointed as Biogen Idec’s (BIIB) CEO. Earlier that month, the company announced BMS (BMY) decided to give back rights for Exelixis’ flagship product, XL184. Adding to the pressure are interesting but not stellar clinical results for some of the company’s compounds at ASCO and potentially an additional partnership termination. (more…)

Array’s (ARRY) recent licensing deal with Novartis (NVS) is another evidence of pharma’s appetite for new oncology compounds, especially for targeted agents. Facing a patent cliff and dwindling internal pipelines, pharmaceutical companies are willing to pay a generous price for promising early stage compounds.

This is why companies with broad platform technologies that can feed the industry with new compounds represent an attractive investment opportunity. These companies include (in alphabetical order)  Arqule (ARQL), Array, Exelixis (EXEL), Immunogen (IMGN), Micromet (MITI) and Seattle Genetics (SGEN). From that list, Array has been the worst performer in 2009 due to liquidity fears as well as lack of exciting clinical data for its proprietary compounds. The two recent deals with Amgen (AMGN) and Novartis helped Array strengthen its balance sheet, but more importantly, they prove that the company’s discovery and early stage development capabilities have been underestimated by the market. (more…)

No matter how diversified or well managed a biotech company is, eventually there is no escape from binary events. These events usually come in the form of data readout from clinical trials that can make or break the stock. Two weeks ago, Arqule (ARQL) announced topline results from a much anticipated   phase II trial of its lead agent, ARQ 197, in lung cancer. The trial is evaluating ARQ 197 in combination with the approved drug, Tarceva, in patients with non-small cell lung cancer (NSCLC) who have been previously treated with chemotherapy. Although the data set is not a clear slam dunk, it generated an impressive efficacy signal that warrants advancing ARQ 197 into phase III. This, coupled with the progress the company has made on other fronts in the past year makes Arqule one of most attractive biotech stocks in the market.

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