Ariad’s (NASDAQ:ARIA) conference call and the discussions that followed confirmed our optimistic projections regarding Ariad’s leukemia drug Iclusig (ponatinib) sales. The announced exciting news, while being met with a stock sell-off, cemented our conviction that Iclusig possesses all the features of a blockbuster and the criteria of growth, which are built through its efficacy derived from its mode of action. Iclusig has offered the oncology community a new option for hope in patients who, for one reason or another, cannot use the conventional first line treatments and those whose leukemia, or recurrent leukemia stopped responding to the currently used treatments. Although Iclusig is not officially designated a breakthrough, it is viewed as indispensable for the various kinds of leukemia it has been granted approval for, which is the main reason behind FDA granting it early approval.
Internally discovered by Ariad, Iclusig (ponatinib) is a BCR-ABL inhibitor that selectively inhibits certain tyrosine kinases in preclinical studies, including FLT3, RET, KIT and the members of the FGFR, PDGFR and VEGFR families of kinases. The early FDA approval of Iclusig in the U.S. was granted in December 2012 for adult patients with chronic, accelerated or blast-phase chronic myeloid leukemia (NYSE:CML) resistant or intolerant to prior tyrosine kinase inhibitor (TKI) therapy or Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ ALL) resistant or intolerant to prior TKI therapy. It is also approved for the treatment of adult patients with Philadelphia-chromosome positive acute lymphoblastic leukaemia (Ph+ ALL) who are resistant to dasatinib; who are intolerant to dasatinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation.
Q2 drug penetration and the company’s promptness and preparedness during the launch of the drug stimulated our optimistic projection about the drug’s sales and its sales’ growth going forward into the future. We witnessed Ariad’s projections materialize and its promises being achieved. From the firm’s conviction that Iclusig will be granted early approval, which has materialized, to the drug sales expectations, which have become obvious as per the depth and breadth of the drug market penetration, the European approval that came on time and the readiness Ariad has clearly demonstrated in marketing the drug in the U.S. and making it ready to be launched in Europe.
The European Union regulators approved the drug in July as an orphan medicinal product for the treatment of adult patients with chronic phase, accelerated phase or blast phase chronic myeloid leukaemia (CML) who are resistant to dasatinib or nilotinib; who are intolerant to dasatinib or nilotinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation. EU regulators approved Iclusig also for adult patients with Philadelphia-chromosome positive acute lymphoblastic leukaemia (Ph+ ALL) who are resistant to dasatinib; who are intolerant to dasatinib and for whom subsequent treatment with imatinib is not clinically appropriate; or who have the T315I mutation.
According to Ariad, the drug was made available in France even before Ariad completes its due diligence regarding pricing, reimbursement and other bureaucratic and non-bureaucratic requirements. A small shipment was made possible through the ATU or Temporary Authorization for Use program, which the firm will not record as revenue until the commercial list price is established in France. At the conference call, Ariad confirmed that the negotiations with European health agencies about reimbursement for Iclusig are going smoothly.
Ariad reported $13.9 million in net sales of Iclusig during the second quarter, beating analysts’ expectations. The sales represent pure product demand. Over 600 patients, precisely 610 have joined, which is double the number of patients reached in the first quarter. The successful penetration led Ariad to forecast 1,000 to 1,100 patients to be treated with Iclusig by the end of this year in the U.S. The firm’s goal to make sure Iclusig becomes the most widely prescribed TKI for resistant/intolerant CML and Philadelphia-positive is, indeed, on track.
Investors and sell side analysts who seemed to look only for the firms’ revenues and earnings had nothing to complain about following the announcement of Q2 financial results. The Iclusig market penetration has beaten their expectations and Ariad’s revenues, i.e., $14 million has also beaten their prediction of $11 million. With regard to the firm’s increased spending, fair analysts and savvy investors recognize the fact that companies involved in launching an important life-saving cancer drug in several countries around the world will definitely have climbing selling, general and administrative costs. This is especially true when the product is the first to be approved and marketed for a development-stage firm. In addition to the Iclusig’s launch, Ariad is in the middle of running various clinical trials with Iclusig in order to further broaden its approval, enlarge the market size for the drug, thus grow the sales. The firm is also conducting advanced trials on its promising investigational lung cancer drug AP26113, which makes a rise of the cost of research and development a normal phenomenon.
Watching the stock’s sell-off following the announcement of Q2 results makes us believe that the sell-off cannot be caused by overwhelming investors having negative sentiment for the drug. The sell-off is rather caused through computers preprogrammed to counteract the stock’s signs of positive momentum.
In the meantime, Ariad projected a lower spending as the launch of Iclusic goes forward. The firm has also projected the availability of more cash on hand at the end of the year. It expects it would spend $245 million to $255 million on operations in 2013, down from its previous estimate of $255 million to $265 million. It projected it would end the year with about $200 million to $210 million in cash, cash equivalents, and securities, up from its prior estimate of $195 million to $205 million, which is enough to continue clinical development into the fourth quarter of 2014.
We saw no devils in any details. Through the first 6 months of launch, using IMS prescription audits, cumulative Iclusig total Rxs were 40% higher than nilotinib total Rxs at the same point in the Novartis product launch. The data reinforced the confidence in expanding the Iclusig patient base as this year’s launch proceeds.
In Japan, the Phase 2 portion of the Phase 1/2 clinical trials of Iclusig in resistant or intolerant CML and Philadelphia-positive ALL, patients are fully enrolled. Ariad expects to file for initial regulatory approval of Iclusig in Japan next year. Japan is the third-largest CML market in the world.
Phase 2 trial of Iclusig in patients with gastrointestinal stromal tumors, GIST, is well underway. Top line data are expected early next year.
The investigated sponsored trial of Iclusig in FGFR-driven non-small cell lung cancer is now open and enrolling patients. In addition, Ariad announced it has recently signed a Cooperative Research and Development Agreement, or CRADA, with the U.S. National Cancer Institute to explore the potential of Iclusig as a RET inhibitor in patients with medullary thyroid cancer. An NCI-sponsored Phase 2 clinical trial of Iclusig in this setting will begin shortly.
In parallel to enrollment in the Phase 2 expansion cohorts, Ariad will begin a pivotal registrational trial of AP26113 in ALK-positive non-small cell lung cancer patients who are resistant to crizotinib.
Ariad will present a clinical update on the Phase 1/2 trial of AP26113 at the 2013 annual meeting of the European Society of Medical Oncology, ESMO, at the end of September. This update will include data in both ALK+ and EGFR T790M patients. The firm expects to present data on a small number of EGFR T790M patients with additional updates of medical meetings later this year. By year-end, Ariad anticipates having sufficient clinical data to fully evaluate 113 potential as an EGFR T790M inhibitor.
What does this mean?
That’s is what those who advocated selling ARIA never told you. That's why what did not mean anything to you until today meant a lot to those who knew the following facts: Non–small cell lung cancer (NSCLC) patients harboring activating mutations in the epidermal growth factor receptor (EGFR) kinase domain tend to respond well to the tyrosine kinase inhibitors drugs, gefitinib and erlotinib. However, the benefited patients typically relapse within a year of treatment. In many cases, the resistance is caused by an acquired secondary EGFR kinase domain mutation, T790M.
Ariad anticipates that at the end of 2013, sufficient data will be available to fully evaluate its drug's AP26113 potential as treatment for EGFR T790M patients. When this news is announced, it will make headlines in the international media, while promising billions of dollars in revenues for Ariad.
Ariad is in excellent shape. We maintain our optimistic projections for Ariad and we are accumulating the stock on weaknesses caused by sellers.
Disclosure: We are long ARIA.