Piper Jaffray, Stifel Defend Array Biopharma As Stock Falls On Profit-Taking

The Food and Drug Administration approved Array Biopharma Inc (NASDAQ: ARRY)’s combination therapy of Mektovi and Braftovi in the treatment of BRAF-mutant melanoma on Wednesday. 

The stock, which rallied ahead of the news, subsequently plunged as investors walked with profits — but Street analysts defended Array’s upside potential.

The Ratings

Stifel Nicolaus analyst Stephen Willey maintained a Buy rating on Array with a $23 price target.

Piper Jaffray analyst Edward Tenthoff maintained an Overweight rating on Array and increased the price target from $21 to $25.

The Street’s Take

The label, which to Stifel’s dismay omitted overall survival data, allows use of Mektovi-Braftovi as a first-line therapy.

The treatment demonstrates improved safety and tolerability over Novartis AG (ADR) (NYSE: NVS)’s Mekinist-Tafinlar combo, which saw a 52-percent incident rate of pyrexia against Array’s 18 percent. Array also showed superiority in the incidence of rashes, serous retinopathy and photosensitivity.

“The label's reflection of this enhanced tolerability will position Array to compete versus Novartis' industry-leading Mekinist + Tafinlar, which sold $873 million last year,” Piper Jaffray's Tenthoff said. “ ... We conservatively project uptake in the second-line setting, but could see MEKTOVI + BRAFTOVI take some first-line share from checkpoint inhibitor immunotherapy.”

With partners having submitted out-of-U.S. filings and won approval in Japan, Piper Jaffray forecast a $1-billion global market opportunity, with initial U.S. sales of $17.2 million in 2018, $71.5 million in 2019 and $297 million in 2020.

Stifel anticipates 2019 and 2020 sales of $69 million and $185 million, respectively.

Price Action

At the time of publication Thursday, Array was trading down 3.75 percent off the open at $16.94. 

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