Senior Staff Writer

Facing the conclusion of two collaborations and a malaise from other potential partners, Array BioPharma lowered its revenue projections and cut staff to conserve cash.

Due to a "general market softness, especially in our tools business, and the ending of two significant drug discovery collaborations [with Amgen and Vertex]," the company is expecting about $6 million less on an annualized basis, impacting Array's fourth-quarter revenues ending June 30 and its fiscal year 2004, said Array's CEO, Robert Conway.

The deal with Amgen Inc., of Thousand Oaks, Calif., was formed in November 2000 and gave Amgen rights to optimize and develop a group of potential diabetes therapeutics. Array has since finished its work on the program and "Amgen is taking it back in-house," Conway said in a conference call. Vertex Pharmaceuticals Inc., of Cambridge, Mass., signed with Array in September 2001 to develop drugs for two targets in the phosphatase protein family area. Unfortunately for Array, Vertex "has decided not to support more outside work" on that program. (See BioWorld Today, Sept. 6, 2001.)

The loss of the collaboration revenue means Boulder, Colo.-based Array now is projecting revenues for both fiscal 2003 and fiscal 2004 on par with fiscal 2002 revenue of $35 million. In the past, 30 percent of the company's revenue has come from research tools sales and licensing, but this year, that figure will drop to 20 percent. Array will take a one-time charge of $700,000 related to the restructuring cost in the third quarter. For full fiscal year 2003, Array is anticipating a loss of 50 to 52 cents per share.

Array has three aspects to its business: its Array Discovery Platform, drug development collaborations and its own pipeline of drugs. On the conference call, Conway said the array platform and the company's proprietary pipeline are "doing well," but lamented the current state of biotechnology collaborations.

"Collaborations are still soft," Conway said, although he noted that deals are still being done if they include intellectual property. He also pointed to the lingering Pharmacia/Pfizer merger, first reported in July, as problematic. (See BioWorld Today, July 16, 2002.)

"The Pharmacia and Pfizer merger, which represents almost 12 percent of the world's R&D expenditure, seems to be dragging and anytime a merger like that is ongoing, outsourcing activities are slow," he said.

But Array is taking action. It plans to limit spending to between $8 million and $10 million next year. With a cash position of $40 million as of March 31, that would allow Array four years of cash. And it cut its staff from 285 to 255 to help reduce spending.

Looking forward, the company said it would like to invest $10.5 million this fiscal year in its proprietary research, and increase that to between $13 million and $15 million in fiscal 2004. Also, it added staff to its business development team in hopes of drumming up outlicensing opportunities for its drug candidates.

Array's stock (NASDAQ:ARRY) fell $1.19 Tuesday, or 27.9 percent, to close at $3.08.