Tuesday, May 06, 2008

Array BioPharma: Secures $80M Debt Facility

With over $116M in cash on the books as-of 31 March that did not keep management at Array BioPharma (NASDAQ: ARRY) from securing an additional $80M debt facility from Deerfield Management. Deerfield currently holds in excess of 4.7M shares of Array or nearly 10% of the company. This new debt round will be drawn down in two $40M tranches in June and December of 2008.

Needless to say how costly it is to commercialize a drug, depending on the source a common number used today is $800M and about ten years to reach the market. Now think about that cost for a single agent, small molecule, biologic etc. relative to the incredibly robust pipeline at Array where there are currently six compounds in the clinic for oncology and inflammation, and add to that the work ongoing in the discovery program…$116M simply may not provide enough dry-powder to get a single candidate to the finish line, but at this point financing events are rather often about achieving value-inflection based milestones, like demonstrating proof-of-concept, an IND filing or moving a compound into or advancing in the clinic, and not getting to market.

So how does management raise the requisite financings to achieve such milestones while protecting existing shareholders from dilutive effects? The answer is...debt, and CEO Robert Conway & Company are doing outstanding work not only stewarding the clinical and pre-clinical stage assets at Array but concurrently deploying a carefully architected fiduciary approach to the financing needs.

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