Array played with Pfizer’s eagerness to land a deal on time—and got itself a better offer

When it comes to buying an experienced cancer drug specialist, a bidding war is naturally expected. But in the case of Pfizer’s $11 billion deal for Array BioPharma, that didn’t happen. Still, it didn’t stop the two companies from pressing each other.

Pfizer was the only one who’d ever made an offer for Array, even though two other firms also expressed interest, Array disclosed in a recent securities filing. That makes the deal the second recent one in the targeted cancer realm that took shape without much drama—Eli Lilly’s $8 billion buyout of Loxo Oncology didn’t emerge from a bidding war, either. 

Despite the absence of competition, Array investors shouldn’t worry, as the documents suggest that "Pfizer was proactively willing to pay a substantial premium that exceeded Array's threshold," SVB Leerink analysts said in a Monday note to clients, adopting the same tone they had for Lilly-Loxo a few months ago.

In January 2017, Array hired Centerview Partners to advise it in a possible strategic transaction. However, of the four parties Centerview contacted, including Pfizer, none came forward with a proposal of any kind—partnership or acquisition.

Almost two years later, in October 2018, the CEO of a multinational biopharma company approached Array’s CEO Ron Squarer about a potential merger. But after running an internal review, the Array board decided not to sell the company at that time. During the meeting, the board formed a new committee that excluded one director, who had a relationship with that potential buyer, Party A.

Party A’s CEO reassured Squarer of the company’s interest in a transaction twice in the following November and January, only short of offering any financial terms.

In the meantime, another company, Party B, showed some interest in making a deal with Array. The two signed a confidentiality agreement for a potential research team-up and amended it in May to allow for M&A-related discussions.

Things also turned cozy with Pfizer. In February, Array’s Chief Operating Officer, Andrew Robbins, visited Pfizer’s offices in New York City. He met with the Big Pharma’s business development executives to discuss Array’s commercialization of MEK-BRAF combo inhibitor Mektovi and Braftovi, as well as its research platform. In exchange, Pfizer’s management visited Array’s headquarters in Boulder, Colorado in May.

Array and Pfizer had held talks even before 2017, which in some cases involved "exchanging confidential information," according to the Array document.

One data set likely helped make up Pfizer’s mind to make a formal move. Array unveiled interim results from the phase 3 Beacon trial, showing a combination of Array’s Braftovi, Mektovi and the anti-EGFR drug Erbitux could significantly extend lives in certain patients with metastatic colorectal cancer. SVB Leerink analysts at that time called the data "extremely compelling," as it marked the first randomized, controlled trial to show an overall survival benefit in the patient population.

A week after the positive results, Array’s Robbins and Chief Scientific Officer Nicholas Saccomano met with an expanded, C-Suite-level team of Pfizer executives to discuss a deal

The next day, on May 29, Pfizer CEO Albert Bourla reached out to Squarer, offering to buy Array at $44 per share, which represented a 62% premium to Array’s previous closing price. Pfizer sounded eager, making clear that it would like to publicize the deal on June 17.

But Array didn’t take Pfizer up on its first offer. Array’s special committee decided that the $44-apiece offer "was insufficient to allow Pfizer access to additional diligence or for Array to commit to Pfizer’s timeline of a June 17 announcement," the company described in the filing. Capitalizing on Pfizer’s keenness to close a deal, however, Array’s board said it would be interested on that date if Pfizer came up with a higher price.

Pfizer quickly responded, upping its offer to $48 per share. But it also provided Array little time for additional back-and-forth, linking that proposal with the target June 17 date. That meant just two weeks for Array to decide, refine the merger agreement and execute.

Meanwhile, Array’s discussions with Party B didn’t go anywhere, despite a meeting between Array’s advisers and representatives of Party B in Chicago during this year’s American Society of Clinical Oncology annual meeting, plus two conference calls afterward to discuss Array’s programs.

On June 11, as its last try, Centerview told Party B that Array had already made meaningful progress toward a transaction. Party B said "it would not likely be in a position to submit a formal proposal to acquire Array in the near term" and also suggested that it wouldn’t be able to offer an attractive price, according to the Array document.

At that, Array decided to accept Pfizer’s $48-per-share offer on June 14, a Friday. And the two unveiled the deal on June 17.

The Array disclosure also provided a glimpse into the company’s internal financial forecasts for the years to come. As of June 14, the company expected its total revenue could reach $452 million in 2020, growing all the way to $2.57 billion in 2031.