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Ariad Pharma - Ahead Of PACE

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Building a meaningful oncology business and not just an R&D operation is the goal of Cambridge, Massachusetts-based Ariad Pharmaceuticals Inc. (ARIA). If things pan out the way as expected, the company expects its first two internally discovered drugs to be on the market and available to cancer patients by late next year.

Ariad's lead product candidate is Ridaforolimus, which is under development for multiple oncology indications, including soft tissue/bone sarcomas, endometrial cancer, breast cancer, lung and colon cancers, ovarian cancers and kidney cancer. The company's second oncology product candidate is Ponatinib, which is being evaluated as a potential treatment for CML (chronic myeloid leukemia) and Philadelphia positive acute lymphoblastic leukemia. The latest candidate to enter early-stage pipeline is AP26113, a potential drug for lung cancer, lymphoma and neuroblastoma.

Now, let's take a look at the company's near-term events that are worth keeping an eye on...

Ariad's lead program of oral Ridaforolimus in metastatic soft-tissue or bone sarcomas is getting closer to an NDA. Ariad collaborates with Merck & Co. Inc. (MRK) in developing Ridaforolimus. Merck is responsible for clinical trials and regulatory filings of Ridaforolimus.

Under the original collaboration agreement inked in 2007, Merck paid Ariad an initial up-front payment of $75 million in July 2007, and agreed to pay up to $652 million based on the development goals met. Up to May 4, 2010, Ariad had received $53.5 million in milestone payments.

In May 2010, Ariad and Merck restructured their partnership, under which Merck gained an exclusive license to develop, manufacture and commercialize Ridaforolimus in oncology. Under the License Agreement, Merck paid Ariad an initial up-front fee of $50 million in May 2010. The amended agreement also calls for Merck to pay Ariad up to $514 million in regulatory and sales milestone payments, based on the successful development of Ridaforolimus in multiple potential cancer indications and upon achievement of specified product sales thresholds.

In March of this year, Ariad elected to exercise its option with Merck to co-promote Ridaforolimus in sarcoma indication in the U.S. upon approval.

Earlier this month, detailed results from a phase III study of oral Ridaforolimus dubbed SUCCEED (Sarcoma Multi-Center Clinical Evaluation of the Efficacy of Ridaforolimus) were presented. According to the study results, Ridaforolimus achieved the primary endpoint of improved progression-free survival in patients with metastatic soft-tissue or bone sarcomas. Ridaforolimus was granted a Special Protocol Assessment by the FDA for the SUCCEED trial.

Based on the SUCCEED trial results, Merck plans to submit a New Drug Application for Ridaforolimus to the FDA and a marketing application in the European Union in the second half of this year.

Cowen & Co analyst Phil Nadeau estimates Ridaforolimus to log in sales of about $365 million by 2015 for Ariad and Merck. Note that Ridaforolimus is also under investigation for other cancer indications.

Last October, Ariad announced interim results from a randomized phase II trial of oral Ridaforolimus in advanced endometrial cancer. The interim analysis showed that the primary endpoint of progression free survival nearly doubled from 1.9 months to 3.6 months in the Ridaforolimus-treated group. Following a statistically significant improvement in the trial's primary endpoint of progression free survival, Merck stopped further enrollment in the trial, while continuing to follow surviving patients.

A phase II study of Ridaforolimus in combination with Herceptin in metastatic breast cancer subjects whose tumors have shown a resistance to Herceptin is also ongoing.

By the third quarter of 2011, the company expects to complete patient enrollment in the pivotal phase II trial of Ponatinib. The trial known as PACE (Ponatinib Ph+ ALL and CML Evaluation) is designed to evaluate Ponatinib in chronic myeloid leukemia and Philadelphia-positive acute lymphoblastic leukemia (Ph+ ALL) patients who are resistant or intolerant to either of the second-generation CML therapies, or who have the T315I mutation for which no current treatments are known to be effective.

According to Ariad, the PACE trial of Ponatinib is enrolling patients substantially ahead of schedule and the completion of enrollment by the third quarter is almost six months earlier than initially anticipated. Ariad now anticipates filing for marketing approval of Ponatinib in the middle of next year and approval by the end of 2012.

With preclinical data underlining the potential of AP26113 in resistant lung cancer due to mutated EGFR (Epidermal Growth Factor Receptor), the company looks forward to advance the compound to clinical testing. Accordingly, Ariad will be filing the IND for AP26113 this month and move the compound into a phase 1/2 clinical trial in the third quarter of this year.

A quick look at Ariad's balance sheet...

The company has no marketed drugs and has historically incurred losses due to its research and development activities. At March 31, 2011, the accumulated deficit was $471 million, cash and cash equivalents were $98.4 million and total debt was $13.76 million. ( * Data as per Yahoo Finance)

Ariad shares have thus far hit a 52-week low of $2.57 and a 52-week high of $10. The stock closed Thursday's trading at $9.50, down 2.26%, on a volume of 5.56 million shares.

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