Zacks.com: Analyst Blog

Array BioPharma, Inc. (ARRY) focuses on developing orally active drugs by utilizing the latest advances in chemistry, biology and informatics. The company utilizes its proprietary discovery platform to enhance small molecule candidates for in-house or collaborative research and development programs.

On May 5, 2008, Array announced that it has received an $80 million funding commitment from Deerfield Management, a leading healthcare investment organization and one of Array's largest shareholders. The $80 million commitment is a six-year, interest-bearing loan under a Facility Agreement that provides for two draws by Array of $40 million each in June 2008 and December 2008.

Interest accrues on the total $80 million commitment as of the date of the Facility Agreement, and continues to accrue on the outstanding principal balance. Although we are encouraged by the recent progress in a number of collaborations, we are disappointed with recent negative phase II clinical trial results from its key lead candidate AZD6624.

We would like to see more data on the early-stage pipeline before we recommend investors purchase shares of Array. We are encouraged by the strong discovery platform and growing service collaboration business, but we are disappointed with recent negative phase II trial results from its lead candidate AZD6244.

The company is currently seeking to enter into new drug discovery collaborations which will provide the company with research funds. Albeit very early-stage, the company possesses an intriguing pipeline of small molecule candidates for cancer and inflammatory diseases.

We maintain our Hold rating on shares of Array BioPharma with a $7.5 price target. Our target corresponds to an 11.2x P/S ratio to our 2008 total revenue of $31 million. The 11.2x P/S ratio is at the middle of average biotech P/S between 10x and 15x.

Read the full analyst report on ARRY.