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Executives

Maria E. Cantor – Vice President, Corporate Communications and Investor Relations

Harvey J. Berger – Chairman and Chief Executive Officer

Edward M. Fitzgerald – Senior Vice President, Chief Financial Officer and Treasurer

Timothy P. Clackson – Senior Vice President and Chief Scientific Officer

Matthew E. Ross – Vice President, Commercial Operations

Analysts

Phil Nadeau – Cowen & Company

Howard Liang – Leerink Swann & Company

Sar Jeneeve – JP Morgan

Eun Yang – Jefferies & Company

Derek Jellinek – Susquehanna Financial Group

[Andrew] – Susquehanna Financial Group

ARIAD Pharmaceuticals, Inc. (ARIA) Q3 2008 Earnings Call Transcript November 6, 2008 8:30 AM ET

Operator

Thank you for holding for ARIAD Pharmaceuticals' third quarter 2008 investor conference call. At this time, all participants are in listen-only mode. Following the formal report, ARIAD management will open the lines for a question-and-answer period. Please be advised that this call is being taped at the company's request and will be archived on the company's website for two weeks from today. At this time, I would like to introduce Mr. Maria Cantor, ARIAD's Vice President Corporate Communications and Investor Relations. Please go ahead.

Maria E. Cantor

Good morning, and welcome to ARIAD's investor call to discuss our corporate developments and financial results for our third quarter and nine months to date. Joining me for this call are Dr. Harvey Berger, our Chairman and Chief Executive Officer; Ed Fitzgerald, our Senior Vice President, Chief Financial Officer and Treasurer; Dr. Tim Clackson, our Senior Vice President and Chief Scientific Officer; and Matthew Ross, our Vice President of Commercial Operations.

Before we get started, I would like to state that during this call we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors, risks and uncertainties such as those detailed in our Form 10-K for the year ended December 31, 2007 and other SEC filings that may cause actual results to differ materially from the results expressed or implied by such statements.

Now I would like to turn the call over to Dr. Harvey Berger for this morning’s opening remarks.

Harvey J. Berger

Thank you very much, Maria, and good morning to everyone. Thank you very much for joining us.

I would like to take a minute to frame this morning’s call. ARIAD is demonstrating strong operational executions on each of the corporate objective we established earlier this year, and the third quarter was no exception. We are focused on these goals and I am proud to say accomplishing all that we have said we would do in 2008, on schedule and on budget. We are having a very productive year and in the third quarter we continued to fulfill our corporate objectives and to advance our oncology pipeline.

At the same time that we are delivering on all of our goals for 2008, we are demonstrating that we can be very effective in doing more with less. This morning we are favorably revising our financial guidance for 2008 to reflect a decrease of approximately $8 million in our projected net loss for the year. And a decrease of about $3 million in estimated cash used in operations for the year when compared to the guidance we had given earlier in the year. This is a significant operational accomplishment and further demonstrates the responsible management of our operations and resources.

Ed Fitzgerald will provide a full financial update for the third quarter and for the first nine months of 2008, and provide the details on this positive adjustment in our financial guidance. I will then share with you ARIAD’s progress as a company and in advancing our innovative oncology pipeline. Tim Clackson, our Chief Scientific Officer, will talk about AP-24534, or 534 as it is commonly known. Finally, we will close the call as we always do with an interactive Q&A session with the ARIAD team, including Matt Ross, our Head of Commercial Operations, who also will be available to help answer your questions.

Let me now turn the call back over to Ed for our financial update.

Edward M. Fitzgerald

Thank you, Harvey. I will now review our financial results as of September 30, 2008, details of which were provided in the press release that we issued earlier this morning. For the three-month period ended September 30, 2008, we reported a net loss of $20 million, or $0.29 per share, compared to a net loss of $10.9 million, or $0.16 per share, for the same period during 2007. For the nine-month period ended September 30, 2008, the Company reported a net loss of $54.3 million, or $0.78 a share, compared to a net loss of $42.8 million, or $0.63 per share, for the same period in 2007.

These results continue to reflect the advancement of our development programs and the positive impact of our collaboration with Merck & Co., Inc. for the development and commercialization of deforolimus for cancer.

Importantly our net loss for the third quarter is below the amount that was incorporated in our previous guidance for the year, reflecting management’s decision to tighten our spending while we focus on achievement of our key corporate objectives for the year.

The key decisions we have made and continue to make will have a positive impact on our fourth quarter results as well. Thus we are revising our financial guidance for the year ending December 31, 2008.

We now estimate a net loss of $73 million to $75 million for the year, a decrease as compared to our previous guidance of $81 million to $84 million. And we estimate cash used in operations of $39 million to $40 million for the year, also a decrease as compared to our previous guidance of $41 million to $44 million.

Cash used in operations in the fourth quarter of 2008 is expected to include $15 million in milestone payments from Merck related to the previously announced initiation of clinical trials of deforolimus in patients with advanced endometrial cancer and advanced prostate cancer. Based on these projections we now expect to end 2008 with approximately $50 million in cash and investments on our balance sheet.

Now let me go back and comment for o moment on our actual financial results through the third quarter of 2008. We continued to expand our development activities for deforolimus as we anticipated in our global development plan establishes with Merck last year, resulting in an increase in R&D costs in the three and nine month periods ended September 30, 2008, compared to the corresponding periods in 2007.

R&D expenses increased primarily due to the initiation and advancement of clinical trials for deforolimus in collaboration with Merck an for our second product candidate 534. Regarding deforolimus, the cost of development including clinical trials and non-clinical studies are shared equally with Merck.

Our general and administrative expenses increased in the three and nine month periods ended September 30, 2008 as compared to the corresponding periods in 2007, due primarily to increases in cost related to corporate and commercial development initiatives to support planned commercialization of our products and ongoing patent litigation. For the nine-month period ended September 30, 2008, we reported cash used in operations of $36.4 million compared to cash provided by operations of $33.9 million for the same period in 2007

Cash used in operations of $36.4 million in 2008 includes the favorable impact of a $15 million milestone payment received from Merck in the third quarter of this year.

Cash provided by operations of $33.9 million in 2007 includes, as we have disclosed previously, the upfront payment of $75 million received from Merck in the third quarter of 2007 upon the signing of the deforolimus collaboration agreement.

We ended the third quarter of 2008 with $52.7 million in cash, cash equivalents, and marketable securities on our balance sheet compared to $85.2 million at year-end 2007.

In summary, we are tightly managing our operations and conserving cash as reflected in our revised guidance for the year and expect to end 2008 with a solid cash position.

Now let me turn the call back over to Dr. Berger.

Harvey J. Berger

Thanks very much, Ed. Moving now to discuss progress within our core product programs.

During the third quarter we continued to deliver strong operational execution on all corporate objectives for the year and we demonstrated our commitment to advancing our oncology pipeline.

As I’m sure everyone knows, ARIAD was founded on strong science and this science drives our strategy and direction and we look to the future. Our attention to novel targets and areas of unmet medical need continue to guide us as we advance our product candidates to move new ones from discovery into development.

Let me begin with deforolimus. The pace of deforolimus development has increased substantially by virtue of our strong and ongoing partnership with Merck and Company and our collaborative plans for the global development of this potential best-in-class mTOR inhibitor. We are pleased to report that we have met our aggressive goals to date for deforolimus and have executed on all of our communicated timelines. We continue to fully support the broad development of deforolimus across multiple potential cancers, both as a single targeted agent and as well in combination with various forms of chemotherapy or other targeted agents.

Our phase 3 SUCCEED trial, one of the largest ever conducted in patients with metastatic soft tissue and bone sarcomas, is proceeding on track and we continue to approve patients at sites around the world. We are encouraged by the rate of enrolment into the SUCCEED trial and our timing remains on track and on plan. We expect to complete full enrolment of the trial in the fourth quarter of next year, that is 2009.

We hold firm in our belief that oral deforolimus can change the treatment paradigm for sarcoma patients for whom no treatment has been approved in the United States in more than 25 years and no treatment ever in the clinical setting we are pursuing in phase 3.

Beyond sarcomas we are maximizing the deforolimus opportunity by advancing clinical trials in several additional cancer indications. I will outline our three ongoing phase 2 trials in patients with breast, endometrial and prostate cancers, all started within the past several months. A substantial unmet medical need exists for the patients involved in these trials, creating a substantial commercial opportunity for novel molecularly targeted agents such as oral deforolimus.

Late in July we initiated a single arm phase 2 trail of oral deforolimus in combination with intravenous trastuzumab or Herceptin in patients with metastatic HER2-positive breast cancer who have developed resistance to trastuzumab therapy.

The primary endpoint for this study is clinical response to the experimental combination. In August of this year we initiated another phase 2 trial of oral deforolimus in patients with metastatic or recurrent endometrial cancer following first-line chemotherapy. This randomized trial compares single-agent deforolimus to progestin, a hormone therapy commonly accepted as part of initial rounds of treatment. The primary endpoint for this study is progression-free survival with overall survival and response rates being evaluated at secondary endpoints.

And finally, last month we launched a third phase 2 trial with Merck for deforolimus, a randomized study in men with asymptomatic metastatic castration resistant prostate cancer. This is a randomized double blind clinical trial comparing oral deforolimus in combination with the antiandrogen drug bicaludamide, know as casodex, against the placebo in combination with bicaludamide. The primary end point of this study is based on decreases in levels of prostate specific androgen or PSA when compared to baselines within 12 weeks of treatment.

Treatment of the first patient in each of these three phase 2 trials triggered milestone payments from Merck to ARIAD totaling $30 million. The first 17.5 million of which relates to the startup of the breast and endometrial trials and the last 12.5 million of which relates to the first patients being treated in the prostate cancer trails. Furthermore, we currently have five additional new phase 1 and phase 2 trials of deforolimus ongoing. These trials were initiated this year as well and each represents a clinically important opportunity for deforolimus and for patients with many different forms of cancer.

First, oral deforolimus in combination with bevacizumab or Avastin in multiple different cancers; second, oral deforolimus in combination with Merck’s IGF-1R inhibitor, a potential best-in-class combination for multiple solid tumors; third, oral deforolimus as a single agent being studied in Japan for multiple solid tumors; fourth, intravenous deforolimus as a single agent for children with solid tumors, sponsored by the Pediatric Cancer Foundation; and lastly, a phase 2 trial examining oral deforolimus as a first-line treatment in patients with endometrial cancer.

The National Cancer Institute of Canada, NCIC, is sponsoring the trial and it is expected to include enrollment of patients at several clinical sites around Canada.

In addition to our growing number of clinical trials for oral and in one case intravenous deforolimus, we remain diligent in ensuring that the foundation of scientific data supporting our global development plan continues to grow.

In October at the Molecular Targets in Cancer Therapeutics meeting in Geneva, sponsored by the EORTC, NCI and AACR, we presented important preclinical data demonstrating that in various models of prostate cancer deforolimus either along or synergistically in combination with the anti-androgen agent bicaludamide inhibited the growth of prostate cancer cell lines providing scientific rationale for our phase 2 trail design.

At the same meeting we presented results of preclinical studies on our second ARIAD discovered oncology product in development, our multi-targeted kinase inhibitor 534 showed for the first time in site tumor activity and solid tumor cancer models. And as you will hear from Tim, these studies provide further underscore of the importance of these results to our 534 clinical program.

I want to shift our attention now and move on to the 534 program. I will introduce it and you will hear from Tim Clackson shortly about additional information on this important program.

Currently from a clinical perspective 534 is being studied in a phase 1 clinical trial enrolling up to 50 patients with refractory hematological cancers, particularly patients with drug resistant forms of chronic myeloid leukemia, or CML, and acute myeloid leukemia, AML. This study is evaluating the safety and tolerability of 534 as well as its pharmacokinetics, that is the behavior of the drug in patients, and its pharmacodynamics, the effects of the drug in patient’s cells.

As all of the participants in this sequential dose escalation trial have well-characterized malignancies, initial information describing the product candidates' antitumor activity is also being evaluated and studied.

We plan to advance the clinical development of 534 in patients with solid tumors and expect to initiate phase 2 clinical trials based on our assessment both of the clinical data from the ongoing phase 1 study in hematological malignancies as well as the strong preclinical data reported at the recent ENA meetings.

Finally, our discovery programs. As mentioned earlier, ARIAD is and always has been a science-driven company. With two internally discovered compounds now in clinical development and multiple potential cancer indications, the strength of our programs is quite evident.

While our corporate vision includes, importantly, product commercialization, our discovery capabilities are and will remain central to ARIAD’s culture and strategy going forward. ARIAD remains at the forefront of innovation in accelerating small molecule targeted cancer therapeutic discovery and we remain confident and excited about our future. Our innovation engine continues to deliver and we expect to nominate our third orally active small molecule targeted oncology drug candidate from our pipeline by year end 2008 with others to follow.

Before we open the lines for your questions I would like to step back to 534 for a moment, as I mentioned earlier, and ask Tim Clackson to expand on why we are so enthusiastic about advancing and expanding our clinical development plans for this new product candidate. Tim?

Timothy P. Clackson

Thank you, Harvey. And good morning everyone. I am happy to have the opportunity this morning to give you a little bit more detail on 534, our second clinical candidate.

534 is a novel, multi-targeted kinase inhibitor which like deforolimus was internally developed at ARIAD. Our scientists designed 534 as a potent inhibitor of the abnormal pirating kinase BCR-ABL, which as many of you know is implicated in chronic myeloid leukemia or CML. In particular we designed 534 to potentially inhibit the so-called T315I mutant which accounts for around 15 to 20% of clinically observed resistance to gleevec the BCR-ABL inhibitor that is the first line standard of care in CML.

Our preclinical data which we presented at the last two ASH meetings indicate that 534 is a potent inhibitor not only of this refractory T315I mutant, but all other tested BCR-ABL variants. Based on this promising activity and as Harvey just described, we are pursuing clinical development of the molecule in a phase 1 trial involving patients with hematological malignancies, including CML.

We look forward to updating the medical community with additional strong preclinical data supporting our work on 534 in hem-malignancies at this years ASH meeting in San Francisco next month.

At the meeting in Geneva last month, as Harvey mentioned, we presented for the first time preclinical data supporting the use of 534 in patients with solid tumors. I would like to take a few minutes to describe these new data and why we are excited about the broader potential of 534 beyond hem-malignancies.

In these studies we described how 534 demonstrated potent inhibition of selected kinase targets that control tumor growth and in particular angiogenesis. Angiogenesis is the induction of new blood vessels to provide tumors with oxygen and nutrients. To induce angiogenesis tumors secrete various growth factors, in particular vascular and disealial growth factor or VEG-F, which activate specific receptors on existing blood vessels to stimulate new blood vessel growth.

534 is a potent inhibitor of VEG-F receptors. It is also an inhibitor of receptors for fibroblast growth factors, or FGF receptors, and receptors for angiopoietin, in particular the receptors TI-2. To a lesser degree, it is also an inhibitor of receptors for platelet derived growth factors.

Activity against all four of these receptor families is a distinguishing feature of 534 that in our study was not seen with the other multi-targeted kinase inhibitors we tested. This combined activity resulted in potent anti-tumor activity of 534 in mouse models of colon cancer and of melanoma. Mechanistic studies demonstrated that this activity in these models was linked primarily to the antiangiogenic activity of the compound.

Why do we believe that these data are strongly supportive of clinical development of 534 in solid tumors? Currently available antiangiogenesis inhibitors such as Avastin are designed to stop the effects of the protein VEGF. Blockade of VEGF by these agents is a clinically validated approach to treatments of several types of solid tumors but resistance to these agents is frequently observed, either primary resistance or resistance that emerges during treatment. Pre-clinical studies by others have shown that resistance to VEGF inhibitors is often associated with higher expression of additional growth factors; in particular, members of the FGF and angiopoietin families.

So simultaneous inhibition of receptors for VEGF, FGF, and angiopoietin, and PVGF, by 534 may provide more potent inhibition of angiogenesis than these agents and a more prolonged effect that is less prone to resistance than blocking VEGF alone. We are continuing our pre-clinical studies on 534 to further test this hypothesis.

A particularly interesting facet of 534’s activity is its inhibition of fibroblast growth factor receptors. There are four FGF receptors, all of which are inhibited by 534 to different extents. Several recent high-profile scientific reports have shown that expression or activation of FGF receptors occurs in multiple tumor types and these receptors are increasingly being recognized as key players in the development and progression of a variety of solid tumors. We are particularly interested in exploiting this activity of 534 in our future pre-clinical and clinical studies.

With our clinical development program in heme malignancies now well under way, we plan to advance the clinical development of 534 in patients with solid tumors. As Harvey pointed out, we expect initiate Phase 2 clinical trials based on our assessment of the clinical data from the ongoing Phase 1 study of 534 in patients with hematologic malignancies, as well as the promising pre-clinical data that I just described.

I look forward to being able update everybody with more data on this molecule in the future, and also to taking any questions that you may have this morning. So with that, let me turn the call back to Harvey.

Harvey J. Berger

Thank you very much, Tim. We appreciate the additional insight on the 534 program and its excitement going forward.

In summary, ARIAD is executing on all of our corporate objectives for 2008. Everything that we committed to doing at the beginning of the year, we have done. We are making great progress advancing deforolimus and 534 in the clinic, we are building the commercial infrastructure to be ready to launch these two and future product candidates, we are managing our financial resources wisely and tightly, and are creating a fully integrated oncology business. Our progress during the third quarter and year-to-date demonstrates our unequivocal commitment to this business strategy and business model.

I’d like the operator now to open the call up to questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions.) Your first question comes from the line of Phil Nadeau, representing Cowen & Company. Please proceed.

Phil Nadeau – Cowen & Company

Good morning, thanks for taking my questions. My first is on the deforolimus Phase 3. I think initially we were expecting an interim analysis by the end of 2008; is that still on track? Is there an interim analysis that is going to happen over the next couple of months?

Harvey J. Berger

Phil, thanks very much for the question. What we have said, as you know, is that we expected an interim analysis around the end of the year. We expect that interim analysis to occur probably in the first quarter, but fully consistent with the overall timelines of the trial.

Phil Nadeau – Cowen & Company

Okay, that is helpful, thanks. Then my second question is actually on the revised financial guidance. It seems like the revision made to the net loss is larger than the revision made to cash used in operations; I just want to understand why that was. Was there some non-cash charges that are decreasing, or I guess what is going on there?

Edward M. Fitzgerald

Thank you, Phil, this is Ed. It is a combination of two factors, I would say. There are some non-cash expenses included in that bur primarily it is just based on timing. While expenses are being reduced in the current year, the full impact on cash just from a timing point of view will be felt into 2009.

Phil Nadeau – Cowen & Company

Okay. And then my last question is actually on your cash balance. It seems, just doing a back of the envelope calculation, like you will end the year with just over one year in cash; is that accurate and if so, do you have any plans to sign additional partnerships or raise funding in any way?

Edward M. Fitzgerald

Phil, this is Ed again. We have – I think you are right in terms of the projection. The projection of cash that we have provided for year-end is about $50 million. Certainly based on our current burn rate as we are projecting for the current year that would suggest a little over a year’s worth of cash left. We will continue to assess any need for funding going forward as we always do, and as we continue to tightly manage our cash, we are currently going through our planning for 2009 and we will certainly update everyone on what those projections look like at some time in the near future.

Phil Nadeau – Cowen & Company

Great, thanks for taking my questions.

Edward M. Fitzgerald

Sure.

Operator

The next question comes from the line of Howard Liang, representing Leerink Swann; please proceed.

Howard Liang – Leerink Swann & Company

Thanks very much. If I could just continue along the line of financial questions. So Ed, can you give a sense of what milestones we might expect from Merck next year? I guess because this year you are getting a fair amount of cash up front – I would say that your use of cash is probably less this year due to the amortization. Can you talk about what you might expect next year?

Edward M. Fitzgerald

Thank you, Howard. We do in accordance with the global development plan expect to earn milestones through next year and into 2010 and beyond as well, the way the global development plan was structured. We have not at this point in time provided any specific guidance as to which milestones might be earned or how much they might be for next year. I would like to defer the answer to that question when we provide additional guidance on our financial projections for 2009.

Howard Liang – Leerink Swann & Company

Okay, great.

Harvey J. Berger

Howard, to follow up, I think a lot of this depends on coming to agreement with Merck on exactly, you know, what pace we are going to – programs are going to move forward next year, what are the priorities. It is all laid out on the global development plan, but as we did at the same time last year, last November, we really fine-tuned with Merck what we are each going to do and what we would expect, and that speaks to our hitting this year’s milestones, receiving the money, starting the trials exactly as we planned because we were very aligned with Merck on exactly what is going to be done. And we are in the midst of finishing that and I think Ed is right, we really want to finish that planning process with Merck and then we will provide important and detailed guidance.

Howard Liang – Leerink Swann & Company

Okay, great, and then regarding the SUCCEED trial. I have a question regarding the randomization; I think the patients need to be stable or have response to the prior treatment, so I guess the patients that you screen probably would be more than the number of patients who are undermized (ph 00:34:27). Can you talk about whether the rate of randomization is in line with your assumptions?

Harvey J. Berger

That is a good question. We have not really disclosed, you know, any of the details to date of the screening versus the randomization but let me then comment on the concept that you lay out, that you laid out, which certainly shows a good understanding of how the trial is actually operating. Obviously we need to screen and evaluate, or at least assess, a larger number of patients than ultimately get randomized to the trial because we have to, in order to enter a patient, i.e. randomize a patient, have clear-cut proof based upon serial CT scans that in fact the patient is either stable, stable disease, or has demonstrated a response, partial or otherwise, so that it is likely. And quite honestly I do not think we even have the specific numbers because it is all at the site level and in the database. Obviously investigators at the sites need to assess more patients than they ultimately choose to enroll in the trial.

So there are sort of two levels of assessment. The investigator looks at his or his referral base and looks at ten patients with sarcoma, three of whom say – or five of them, it does not matter what the number

is – might have stable disease or better. They then have to have serial CT scans either in the file or prospectively done for entry into the trial in order to prove unequivocally that they meet the entry criteria. And as we have said numerous times, patients can only be randomized and entered into the trial who have confirmation of meeting the entry criteria by CT.

Those scans are independently read by a centralized unified reading system by independent blinded readers so that patients are entered into the trial based on objective assessment of meeting the entry criteria. What percentage of those who are looked at versus enrolled? I do not think we even have those data. But most importantly, trial is enrolling well and enrolling well all over the world, so the system must be working.

Howard Liang – Leerink Swann & Company

Okay, great, thanks very much. I have a couple questions regarding 534. Regarding the Phase 1 trial in hematological tumors, I think the entry criteria is fairly broad, can be brought – different types of blood tumors. My question is, do you have any sense of how many of your enrolled patients or a fraction of your enrolled patients are CML patients with T315I mutation?

Harvey J. Berger

We are obviously enrolling both heme malignancy patients in general, as well as those with CML and within the CML group, those that are either resistant or refractory to current therapies, which would include a subset of T315I patients.

We have not disclosed any of the details of the patient enrollment and how many patients and what the breakdown is but there is no question there are patients with CML, there are patients, you know, in the trial with T315I as part of the T-entry criteria and because it is a dose-escalating study and T315I patients are the, you know, sort of the crown jewels of the patient population at the lower doses, you would logically want to enroll patients to get through the safety datas or the safety portions of this as early as possible and enroll your T315I patients and other genetic mutant patients as the trial progresses. So we are certainly following that perfectly logical approach to enrolling patients. But all the groups are included, all of them will be part of the assessment of 534’s safety and efficacy in heme malignancies.

Howard Liang – Leerink Swann & Company

Great, that was very helpful. Last question for Tim; can you talk about pre-clinically how does 534’s activity differ from that of pure VEGF inhibitors such as Avastin?

Timothy P. Clackson

Thanks for the question. So we have not done that specific comparison that you describe. Some of the comparisons are biologic, such as Avastin, a little bit complicated because of the biology, but we have done a lot of comparisons of the potency of 534 against the various targets I laid out compared to small molecule inhibitors and much of that data was presented at the Geneva meeting as I mentioned. And in general we have fairly comparable or superior cellular effects to the current agents that are out there, for example, with respect to VEGF receptor inhibition.

As you know, some of the targets were uniquely inhibited such at type 2. As mentioned, the inhibition of PVGF receptors, little bit more modest compared to the inhibition of FGF receptors, which is very potent, and VEGF receptors.

Howard Liang – Leerink Swann & Company

Thanks very much.

Operator

(Operator instructions.) Your next question comes from the line of Sar Jeneeve, representing JP Morgan.

Sar Jeneeve – JP Morgan

Hi, thank you so much for taking my call, guys. I had a couple of quick questions; I have two quick questions, actually. One was regarding the potential data readouts from the prostate cancer study, the breast cancer study, and the endometrial study, and then will we see some data at ASCO?

Harvey J. Berger

Given that these trials just started in the last three to four months, it is much too early to say when we are going to have the readout of the trial and have enough data to present. Obviously we are motivated to get the trials done as quickly as possible, get them to either full enrollment or appropriate interim analyses as quickly as possible, but I think it is just too early right now to say where we are and when readout will occur. It will be as fast as we can get it there.

Sar Jeneeve – JP Morgan

Okay, and the second question regarding 534, I think you mentioned you are going into a Phase 2 in solid tumors; was that correct?

Harvey J. Berger

Yes, initially the plan that we had laid out at the beginning of the year was to most likely run a Phase 1 or Phase 1-b type trial in solid tumors for 534 as sort of an interim step between the Phase 1 in heme malignancies and a real Phase 2 in solid tumors based up on what we know from the 534 Phase 1 trial that is ongoing and importantly, as Tim pointed out, the striking activity and signals and clarity of activity of 534 in animal models of a variety of types. We believe that subject to final assessment and discussions with regulatory agencies that we can go directly from data in the Phase 1 heme trial and pre-clinical data in solid tumors to the Phase 2 trials of 534 in solid tumors.

Sar Jeneeve – JP Morgan

Okay, so when are you planning on initiating the study? And are you enriching the study for any particular cancer?

Harvey J. Berger

We have not made those decisions yet. The plan would be to initiate the Phase 2 trial sometime next year. We have not given guidance yet on the timing in part because we need to complete the cohorts, the sufficient cohorts in the heme malignancy Phase 1 trial, but our current plan is to do it at some point next year.

This should in sum translate into accelerating the 534 program because our plan would take out the time that would normally go to a separate Phase 1-b safety trial of 534 in solid tumors. So we will ultimately be ahead of the schedule.

Sar Jeneeve – JP Morgan

So you are planning on just completing enrollment in this Phase 1 in heme, or actually completing the study before initiating the Phase 2 in solid tumors?

Harvey J. Berger

Probably neither one. It is getting enough data from the Phase 1 study so that we are in a position to know the dose –

Sar Jeneeve – JP Morgan

I see.

Harvey J. Berger

Know the dosing schedule with confidence, and to be confident that we can go to IRB’s ethics committees and the regulatory agencies that we have a profile that would not be of any more concern in solid tumor patients than in heme malignancy patients, and thus will – you know that may, you know, the trial may be fully enrolled, may be unlikely to be completed because completed, as you know, in these trials could be way off into the future because you follow all patients to the very end of dosing, and so that is really probably way past what you would need.

But you, for example, could be, you know, could have defined your DLT and are expanding your last cohorts to expand out your PK/PD and DLT assessment but yet you have your dose and dosing schedule, so, you know, it is hard to answer at the moment in the absence of having the data. But what is going to drive it is having sufficient data to be able to design an appropriate Phase 2 clinical program that will be embraced by the key opinion leaders – the IRBs, the ethics committees and the regulatory agencies, FDA and EMEA.

Sar Jeneeve – JP Morgan

Okay, fantastic, thanks.

Harvey J. Berger

Sure.

Operator

Your next question comes from the line of Eun Yang, representing Jefferies. Please proceed.

Eun Yang – Jefferies & Company

Thanks very much. Regarding SUCCEED trial for the deforolimus, the second interim analysis was previously anticipated around third quarter but also you guys mentioned previously that second interim analysis may be around the time of patient enrollment completion, so are you expecting second interim analysis in the fourth quarter next year?

Harvey J. Berger

What we have said is that the second interim analysis would come at a time when we have approximately two-thirds of the events anticipated for the trial. Two-thirds of the events is two-thirds of the total number of events that would be likely in the total trial with full follow-up.

We have also said that we would do the second interim analysis not only tied to the time when we have two-thirds of the events, but also likely to occur right about at the time of full patient enrollment. So the full patient enrollment has been targeted for approximately two years from first patient enrolled. That takes you into the early part of the fourth quarter of next year. So we expect the second interim analysis to occur, allowing that there are variables such as the ones I have just describes that will impact in the exact timing, but roughly in the fourth quarter of next year. Could the interim analysis go into the beginning of sometime into the first quarter of ’10? It all depends on the exact timing of the events versus full enrollment.

So we will know more about that as again we have said, you know, probably some time in the first quarter of next year when we will have enough events, we will have the first interim analysis either being done or behind us, so we will have a better way to judge exactly the relationship between enrollment, follow-up, what the placebo group is teaching us in terms of the times of progression. So all of that is evolving based upon actually the data.

But to answer your question, we expect full enrollment as we said in this morning’s press release on track for about two years from first patient in, which is the beginning of fourth quarter, and the exact timing will become clearer in the next couple of months, probably by the first quarter of next year.

We are still projecting filing the NDA in 2010 and projecting potential launch by the end of 2010.

Eun Yang – Jefferies & Company

Okay. And then for the three phases, ongoing Phase 2 studies. I know that the studies were begun recently, but can you give us some sort of a timeline when we might expect the data from those studies?

Harvey J. Berger

It is very difficult, Eun, at this point in those trials to give projections as to when we will have the data. If you look at the trials, and again, just going to clintrials.gov, the information that is there, what is important is not when the trial is projected to end, because that’s last patient fully evaluated. So the breast trial is the smallest of the three, so more than likely the breast trial will lead out results before the prostate trial, which is the largest and which started the latest.

On the other hand, breast cancer is a crowded area for clinical development even if you have the cure for breast cancer, and endometrial cancer is a cancer, just to give the other extreme, of where there are far fewer drugs in development ad where we have such strong Phase 2 data ready, so that trial may enroll more quickly just by virtue of lack of competition, strong Phase 2 data ready, and two trials ongoing, both in the NCIC as well as the ARIAD-Merck trial.

So until we get momentum in these trials and can really project out completion or reaching a point where you can do a readout, I am really very reluctant to, you know, guesstimate when these trials are going to read out and be presented. It is the same answer as earlier. As fast as possible, as soon as we possibly can, and we will know more, I would say again, in the first quarter of next year we will have a far better handle and begin to make some projections and guide the market on when to expect those results, but I want to do it based upon real information about how the trials are enrolling and when we expect them to reasonably reach a point where results could be submitted, you know, to ASH or ASCO or ENA, whichever is the appropriate meeting for the trial.

We are really committed to not making estimates that are just hopeful estimates that we would like to see happen, but rather estimates as we have done this past year that we are confident we are going to hit. And I think, you know, if you look back to actually over the last year and a half since you and we have been talking, I have really prided myself and the company on hitting on time, on budget, on schedule, essentially everything we have said we are going to do. I want to keep it that way, especially now that there is going to be such huge visibility for the readout of these very important Phase 2 trials.

So I am not trying to circumvent your question, but it is just a little too early for us to make that prediction, and we will try very hard to do it beginning of next year if we possibly can.

Eun Yang – Jefferies & Company

That is very fair. Thanks very much.

Operator

(Operator instructions.) Your next question comes from the line of Derek Jellinek, representing SIG. Please proceed.

[Andrew] – Susquehanna Financial Group

Hi, this is actually Andrew filling in for Derek.

Harvey J. Berger

Could you speak up, Derek. You are not coming through.

[Andrew] – Susquehanna Financial Group

Oh yeah, sorry, this is actually Andrew filling in for Derek. Can you hear me now?

Harvey J. Berger

Hi, Andrew.

[Andrew] – Susquehanna Financial Group

Just stepping back, looking at some of the other mTOR inhibitors, can you do sort of a compare and contrast with and specifically the indications where we have data from both Torisel and Afinitor, kind of in the endometrial and breast?

Harvey J. Berger

Well, I am very reluctant to make head to head comparisons when there are not head to head data. And as you get closer and closer to market for deforolimus, we have got be careful not to make comparisons of results with two different drugs that were not really compared head to head. They were studied in similar indications but in different trials.

What I can say is if you look at, for example, the result in endometrial cancer, temsirolimus has some data, everolimus has more. The everolimus data certainly are encouraging in endometrial cancer. We do not know how much of a priority patients with endometrial cancer represents for everolimus. For us obviously it is a very strong priority with two important Phase 2 trials currently ongoing, one in first line, one is second line.

The biggest difference perhaps between temsirolimus and everolimus, and in turn that translates into a difference versus deforolimus, is that temsirolimus Torisel, the Wyeth drug, is predominantly – well, it is approved as an IV formulation given generally weekly, and is a – although there are some data in an oral tablet form, there are very limited data on temsirolimus given orally and it is largely developed and now marketed as an IV formulation.

On the other hand, everolimus is in a tablet form, using the dose and schedule that they put forth which is a daily dose of 10mg a day, and so there the differentiation with ARIAD’s product we are developing with Merck, namely deforolimus, is that our dose and schedule could not be more different. In fact, I would say the everolimus versus deforolimus difference in dosing schedule is as great as the difference between oral and IV.

We are dosing patients at 40mg a day five out of seven days, which results in very high exposure, very high and reliable inhibition of mTOR activity in pharmacodynamic studies, substantial blood levels and circulating levels of inhibitory mTOR activity, a different safety profile in terms of the incidents and timing and severity of mouth sores, you know, and I can go on.

So there are differences and there are similarities among these three drugs and I think until you have a head to head comparison in a randomized trial, it is very difficult to make real comparisons of their efficacy or even their safety profile. But on all fronts, we believe that deforolimus has a very solid and well-accepted both safety and efficacy profile based on the available clinical data to date, but that has really got to get assessed in a prospective randomized trial, which is what is going on.

[Andrew] – Susquehanna Financial Group

Alright, thanks. And then just lastly, I know you had expected to start the lung trial in the first quarter, first half of next year; is that still on track?

Harvey J. Berger

We have not updated any of the specifics for next year. There is nothing that has changed with what we have disclosed in the past, but we have not – we will give guidance on the trials for next year, the indications, and what exactly we are going to do next year probably, almost certainly in January at the beginning of the year presentations.

[Andrew] – Susquehanna Financial Group

Alright, thanks.

Operator

With no further questions in queue at this time I would now like to turn the call back to Dr. Berger for closing remarks.

Harvey J. Berger

Well, this was a great call with a lot of thoughtful and in-depth questions. Thank you very much to all of you for joining us on our call this morning. We look forward to hearing from you and continuing to report on our progress. We will certainly have major updates and plans for next year that we will present early in January 2009 and that will set the foundation for our expectations next year, both financial as well as developmental. Thanks again.

Operator

Ladies and gentlemen, thank you very much for your participation in today’s presentation. This concludes your conference. You may now disconnect. Good day.

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Source: ARIAD Pharmaceuticals, Inc. Q3 2008 Earnings Call Transcript
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