Pfizer just struck an $11 billion deal, and it marks an ambitious shift in the US drug giant's blockbuster cancer strategy

• US drug giant Pfizer just announced that it is buying cancer biotech Array BioPharma for about $11 billion.
• Pfizer has been betting heavily that new cancer drugs will be key to its future growth.
• The latest deal marks a shift for the company into two new, important areas: the skin cancer melanoma and colorectal cancers that start in the colon or rectum.
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US drug giant Pfizer, which has been charting an expansion into cancer, just struck a deal to buy cancer biotech Array BioPharma for roughly $11 billion.

The deal, Pfizer's biggest since 2016, represents a big investment into finding treatments for two types of cancer the drugmaker hadn't previously focused on: the skin cancer melanoma and colorectal cancers, which start in either the colon or rectum. Pfizer had largely honed in on breast and prostate cancers, cancer chief Andy Schmeltz told Business Insider earlier this year.

Both melanoma and colorectal cancers are common, with an estimated 145,600 and 96,480 new US cases expected this year, respectively, according to the National Cancer Institute.

Cancer has become a major area of investment for pharmaceutical companies with the advent of cutting-edge technology justifying sky-high prices.

"Through the proposed acquisition of Array, Pfizer will set the stage to establish an industry-leading colorectal franchise with a potentially first and best-in-class combination that could have blockbuster revenue potential," Schmeltz said on Monday as part of a conference call about the Array BioPharma deal.

"This will further augment our existing leading positions in both breast cancer and prostate cancer."

Read more: Pfizer has a new strategy for fighting cancer that could generate $5 billion a year. We got a look inside.

A push further into 'targeted' cancer drugs

Array BioPharma makes "targeted" drugs that are developed for patients with certain types of cancer, like those who have tumors with certain gene mutations, in hopes of better fighting off the disease.

That approach has been a big focus in the biopharmaceutical industry. It's part of a boom of similar, "personalized medicine" approaches that are tailored to an individual's disease and made possible by advances like faster genetic testing.

Array BioPharma's combination of two drugs, Braftovi and Mektovi, was approved in the US last year to treat a serious, deadly type of melanoma. It could also be tested out in combinations with Pfizer's portfolio of medicines, the drug giant said on Monday.

Array has also been testing the combination out in a type of colorectal cancer, where Pfizer says it has "blockbuster revenue potential."

Data that Array released last month in colorectal cancer was described as "impressive" and favorable for approval by US regulators, Cantor Fitzgerald analysts Varun Kumar and Alethia Young said then.

On the Monday call, Pfizer executives pointed in particular to the melanoma and colorectal cancer opportunities as a reason motivating the acquisition.

Analysts like UBS's Navin Jacob said the deal made sense strategically, "given Pfizer's focus & marketed portfolio of targeted cancer products."

Jacob pointed, for instance, to the company's Xalkori drug for lung cancer. A targeted therapy, Xalkori is one of a handful of crucial cancer drugs for Pfizer, bringing in $524 million in revenue for the pharmaceutical company last year.

Pfizer has so far staked out expertise in two types of cancer, breast cancer and prostate cancer, through the flagship drugs Ibrance and Xtandi, respectively. The company planned to keep those two in focus, Pfizer's Schmeltz told Business Insider earlier this year.

"We're trying to be thoughtful that, given the unmet need in oncology, you can't have deep expertise and capability in everything across oncology," he said then.

• Read more:
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