Oncothyreon will join Array BioPharma in developing its early clinical-stage small molecule HER2 inhibitor ARRY-380 by agreeing to fund proof-of-concept trials in patients with metastatic breast cancer (mBC), including patients with brain metastases.

Oncothyreon will pay Array a $10 million up-front fee, most of which the company said would be funded by selling five million shares of common stock plus warrants at $2 per unit to Biotechnology Value Fund and other affiliates of BVF Partners. BVF in turn will take a stake in Oncothyreon, which expects net proceeds from the registered direct offering of about $9.8 million.

The proof-of-concept trials will support the joint Phase III development of ARRY-380 by Oncothyreon and Array, with each retaining the right to opt out of further development and commercialization in exchange for a “significant” royalty, the companies said. Array will oversee worldwide commercialization of the product, while Oncothyreon holds a co-promotion right in the U.S., and the companies have agreed to share equally the cost of U.S. commercialization, including any profit.

Outside of the U.S., Oncothyreon said it will receive a double-digit royalty on net sales intended to approximate a 50% profit share, while the company will join Array in sharing equally the proceeds from any sublicense of marketing rights.

The proof-of-concept trials follow a Phase I clinical trial completed by Array of ARRY-380 in 50 patients, 43 of whom had HER2+ mBC and had progressed on a treatment regimen that included trastuzumab, while 80% had been treated with Tykerb® (lapatinib). Twenty-two HER2+ breast cancer patients with measurable disease were treated with ARRY-380 at doses of more than 600 mg. According to Array, the trial demonstrated that the compound was well tolerated and had anti-tumor activity, with a clinical benefit rate plus stable disease or at least six months of 27%.

In the Phase I trial, two patients with partial responses during ARRY-380 treatment had confirmed progressions while on prior lapatinib- and trastuzumab-containing regimens.

An earlier Array-developed intracranial HER2+ breast cancer xenograft model demonstrated improvement in overall survival compared to lapatinib and the investigational drug neratinib.

The model provided a strong basis for exploring whether ARRY-380 can benefit patients with brain metastases, such as those in about one third of women with metastatic HER2+ breast cancer, Array said.

HER2, also called ErbB2, is a receptor tyrosine kinase shown to be overexpressed in breast cancer and other cancers, such as gastric and ovarian cancer.

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