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ARIAD Pharmaceuticals, Inc. (NASDAQ:ARIA)

Q1 2014 Results Earnings Conference Call

May 07, 2014, 08:30 AM ET

Executives

Maria E. Cantor -SVP, Corporate Affairs and Human Resources

Harvey J. Berger - Chairman and CEO

Edward M. Fitzgerald - EVP, CFO and Treasurer

Timothy P. Clackson - President of Research and Development and Chief Scientific Officer

Martin J. Duvall - EVP and Chief Commercial Officer

Analysts

Eun Yang - Jefferies & Co.

Terence Flynn - Goldman Sachs & Co.

Y. Katherine Xu - William Blair & Company, LLC

Michael J. Yee - RBC Capital Markets, LLC

Cory Kasimov - JPMorgan Chase & Co

Joel Sendek - Stifel Nicolaus

Ying Huang - Barclays Capital

Michael G. King, Jr. - JMP Securities

Nicholas Bishop - Cowen & Company

Howard Liang - Leerink Swann & Company

Andrew Peterson - UBS

Jonathan Eckard - Citi

Reni Benjamin – H.C. Wainwright & Co.

Nicholas Abbott – BMO Capital

Brett Holley - Guggenheim Partners

Echo He - Maxim Group

Operator

Thank you for holding for ARIAD Pharmaceuticals’ First Quarter 2014 Financial Results Conference Call. At this time all participants are in a 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 three weeks from today. At this time I would like to introduce Ms. Maria Cantor, ARIAD’s Senior Vice President, Corporate Affairs. Please go ahead.

Maria E. Cantor

Good morning, and thank you for joining us. This morning we report our financial results for the first quarter of 2014. With me on this morning's call are Dr. Harvey Berger, our Chairman and Chief Executive Officer; Ed Fitzgerald, Chief Financial Officer; Dr. Tim Clackson, our President of R&D and Chief Scientific Officer; and Marty Duvall, our Chief Commercial Officer.

During the call we'll be making forward-looking statements. Please note that these statements are subject to factors, risks and uncertainties, including those that are detailed in our Form 10-K for the year that ended December 31, 2013 as well as other SEC filings that may cause actual results to differ materially from the results expressed or implied by such statements. Now let me introduce Dr. Berger with our opening remarks.

Harvey J. Berger

Thank you very much, Maria and good morning everyone. Today we report on the early progress of the commercial re-launch of Iclusig in the United States and the continued commercialization of Iclusig in Europe. Early launch date in the U.S. represents approximately 10 weeks of promotion with a revived product label and they show market support for Iclusig from both community and academic physicians.

Iclusig commercialization in Europe during the first quarter was expanded to now include the Nordic countries and Switzerland and we will continue to expand into other regions of the EU throughout the year. We made important R&D progress in the first quarter with the start of a pivotal trial of 113, our ALK inhibitor in patients with crizotinib-resistant non-small cell lung cancer.

As we proceed through 2014 our focus remains steadfast on building shareholder value. We've several important updates to share with you this morning. Ed Fitzgerald will cover our financials, Marty Duvall will review the Iclusig launch and Tim Clackson will provide an R&D update. Ed?

Edward M. Fitzgerald

Good morning, everyone. As noted in our press release this morning we reported net product revenue from sales of Iclusig of $8 million for the first quarter of 2014, an increase of 25% from the first quarter of 2013. Of this amount $4.7 million is from sales of Iclusig in the U.S. while $3.3 million is from sales in Europe.

In addition, we have recorded $1.3 million in deferred U.S. revenue representing Iclusig inventory on hand at our specialty pharmacy as of the end of the quarter. Also during the first quarter of 2014 we shipped $1.8 million of Iclusig to patients in France which will be recorded as revenue when pricing and reimbursement negotiations in France are completed and our list price is determined.

License revenue for the first quarter of 2014 was $3.8 million, reflecting milestone payments from Medinol under our license agreement for the development and commercialization of drug eluting stents incorporating our investigational MTOR inhibitor with sirolimus. Our net loss for the first quarter of 2014 was $49.7 million or $0.27 per share compared to a net loss of $64.7 million or $0.36 per share for the same period in 2013.

Our R&D expenses decreased by $12.7 million or 31% from the first quarter of 2013 to the first quarter of 2014 predominantly reflecting decreased clinical trial costs as well as decreased manufacturing and other supporting costs related to Iclusig clinical trial.

Our SG&A expenses increased by $2.1 million or 7% from the first quarter of 2013 to the first quarter of 2014, reflecting investment in the commercial re-launch of Iclusig in the United States expanding Iclusig commercialization in Europe and related activities. Finally, as of March 31, 2014 we reported cash and cash equivalents of $183 million compared to $237.2 million at December 31, 2013.

Let me now turn the call over to Marty to provide details on Iclusig commercialization.

Martin J. Duvall

Good morning, everyone. Total first quarter recognized revenue of $8 million represented a 25% increase over Iclusig net sales in Q1 of 2013. As we reintroduced Iclusig in to the U.S. market and proceed with the European launch this year our key priorities are to rebuild confidence in Iclusig and to improve the benefit risk profile of the drug. We are succeeding on both fronts.

We are very pleased with our early success in reintroducing Iclusig to the U.S. market in mid-January. There were three key and encouraging takeaways from the early days of the U.S. reintroduction. First, patient numbers are higher in 2014 versus 2013. Second, utilization of Iclusig is across all lines of therapy and clearly our drug is not viewed as just a TP15I only drug. Third, Iclusig is being used at lower doses in 2014 compared to the previous year which may positively impact compliance in patient retention which will improve revenue.

So takeaway number one, U.S. patient numbers are higher in 2014 versus 2013. Our top priority in Q1 was the rapid conversion of approximately 300 single patient sIND patients to commercial drug, execution by the U.S. commercial team and our internal partners with [Excellent] and the transition is complete. In total 76% of patients are continuing on Iclusig therapy from the sIND program including 210 patients transitioned to commercial drug and another 22 transitioned to free commercial supply through our patient assistance program.

About 24% of the sIND patient discontinued Iclusig therapy. As expected the majority of these patients were advance stage or last stage patients. Despite a more restricted label with the 2014 reintroduction of Iclusig it is encouraging to note that patient totals year-to-date are nearly 15% higher than the 2013 U.S. launch. Boosted by the success of sIND conversion through April we have already reached 400 unique patients with commercial drug in the U.S.

Each month we are expanding the 2014 U.S. prescribing base of Iclusig with approximately 300 unique prescribers as of March 31 across both academic and community accounts. As you may recall, a total of 742 physicians prescribed Iclusig in 2013. We are determined to continue to expand the use of Iclusig and fully rebuild confidence in the benefit risk profile.

Takeaway number two, Iclusig uses across all lines of therapy and the drug is not being viewed as a TP15I only therapy. In Q1 usage of Iclusig by line of treatment is split as follows; 15% second line, 30% third line and 55% fourth line. This 45% combined use in second and third line compares to approximately a 70% combined use in 2013. We are encouraged by this use across all lines of therapy and are optimistic about the numerous external surveys in which physicians forecast increased use of Iclusig and used earlier lines of therapy over the next 24 months.

As for the new patients on Iclusig in Q1, 2014 the non-sIND patients, approximately 60% are chronic phase, roughly in line with the 65% chronic, 35% advanced split in 2013. We expect the proportion of chronic phase patients to steadily grow in percentage through the 2014 reintroduction.

Takeaway number three, Iclusig is being used at lower doses in 2014 compared to the previous year which may positively impact compliance and continuation of therapy in the future. We are pleased to note the U.S. physicians are showing confidence in using lower doses of Iclusig based on the PACE experience, this should improve the benefit risk profile of the drug. The most recent disclosure of the PACE data suggests that lower doses are associated with maintenance or response with a reduction in adverse event rates.

In the 2014 commercial setting physicians are already choosing to start patients at lower doses with approximately one-third being dosed at 15 milligrams daily and additional 20% at 30 milligrams daily. One might recall that in the 2013 U.S. launch all patients were started on 45 milligrams daily and dose reductions were significantly less frequent than the clinical experience, leading to early therapy discontinuation. Obviously keeping patients on Iclusig therapy any dose will build brand revenue in future quarters.

Currently at 15 milligram daily, Iclusig revenue is compromised by lower daily pricing. It is important to note that we will be addressing this issue through pricing and packaging actions which are timed to begin impacting U.S. sale by the end of Q3 this year.

Turning now to Europe, our EU commercialization continues in the early launch countries. During the first quarter of commercialization efforts were expanded to include selling Iclusig in Germany, the UK, France, Austria, The Netherlands, Norway and Switzerland. Iclusig revenue recognized for Europe was $3.3 million.

In the face of safety communications in late 2013 this modest increase in EU sales over Q4 of 2013 suggests that our work to rebuild confidence in Iclusig extends into Europe. We believe Iclusig use in Europe represents a greater proportion of advanced versus chronic phase patients. Additionally there has also been a move to lower starting doses.

As we build confidence in Iclusig we expect utilization to shift towards more chronic phase patients and used in earlier lines of resistance intolerant CML therapy. We see early signs of confidence growing in April and expect to build on this throughout the year.

In France, it is important to note that shipments of Iclusig of $1.8 million in the first quarter is below the average in 2013 due primarily to an alignment of pricing with the EU list price. Underlying patient demand in the quarter was consistent with 2013 levels. The article 20 process continues in Europe. In March we submitted company responses into the PRAC as part of the Article 20 process which was initiated in December of last year. We now expect the full assessment by the PRAC and CHMP in July instead of the original May timeframe. P&R process timelines have been impacted in several countries with the extended Article 20 review.

Throughout the year and into 2015 based on pricing and reimbursement approvals we will expand our promotional activity in 16 countries that include Germany, France, UK, Italy, Spain, Austria, Portugal, Netherlands, Belgium, Luxemburg, Sweden, Denmark, Finland, Norway, Ireland and Switzerland.

We are now completing our customer facing teams in key European countries. We continue to execute on our strategy of adding to the Iclusig selling footprint through distributors. As we make P&R progress beyond the EU16 we are also working to select strong partners who will help market Iclusig in Central and Eastern Europe.

In closing we're pleased with the Q1 commercial execution. Overall patient numbers are tracking higher than we anticipated. As we move deeper into Q2 it is clear that we're making solid progress in both the U.S. and EU markets giving us confidence in our full year outlook for Iclusig. We look forward to upcoming Congresses on both continents ASCO and [EEHA] to be able to share updated clinical data that would be helpful to our customers in better understanding the benefit-risk profile of Iclusig.

And in turn I look forward to sharing additional updates with you throughout the year on our continued commercial progress. Now let me turn the call over to Tim.

Timothy P. Clackson

Thanks, Marty and good morning everyone. I'd like to provide a brief update on the Article 20 procedure in Europe and recent R&D progress. As Marty noted the Article 20 procedure is ongoing. We submitted our responses in March to the PRAC as part of the Article 20 procedure which was initiated in December of last year. We received a preliminary list of outstanding issues being discussed at the ongoing PRAC meeting this week.

We expect to receive the final list of follow-up questions from the PRAC at the conclusion of the meeting. We expect these questions from the PRAC to be largely focused on clarifications on the initial set of submission, requests for additional protocols and reports that are under development and recommendations for refining the proposed modifications to the SNPC, the European Prescribing Information.

Based on the questions received to-date modifications to the SNPC could include updated safety information, additional dosing recommendations and potentially a change in the labeled indication. We plan to address these items next month with the intent of completing the Article 20 review by the end of July.

Five investigator-sponsored trials have been cleared to resume enrollment for Iclusig. A U.S trial in patients with RET driven non-small cell lung cancer, a U.S trial in patients with medullary thyroid cancer with or without RET mutation; a U.S trial in endometrial cancer patients with FGFR2 mutations, a French trial in patients with FLT3 positive AML and a UK trial in patients with Philadelphia-positive ALL.

In addition there are eight other ISTs awaiting regulatory and/or IRB approval. We submitted a filing to the FDA to request the listing of the clinical hold in the Phase II trials in GIST patients. The FDA is now reviewing our materials and we're responding to follow-up questions from the agency. Over the past quarter we've been diligently addressing our post approval commitment to the FDA on the time table we agreed with the agency. This includes submissions of clinical study reports and other summary from the EPIC trial and updated summary of safety data from the Iclusig program and the protocols for our enhanced pharmacovigilance study and our observational study.

Importantly we've also submitted a full draft protocol for the randomized trial to evaluate lower doses of Iclusig in chronic phase CML patients which we expect to initiate in the second half of this year. All of these reports and protocols are now undergoing review of the agency. We're very pleased with the momentum we have in the ponatinib development program and we're eager to move forward.

During the first quarter we initiated a pivotal global Phase II trial, the ALTA trial of AP26113 in patients with locally advanced or metastatic non-small cell lung cancer who were previously treated with crizotinib. This trial is open to patient enrollment and is expected to enroll approximately 220 patients including those with brain metasticity.

We will present data from the ongoing phase I/II trial of 113 at ASCO in June. In addition, we will have multiple clinical update on Iclusig at ASCO including updates from the Phase I and PACE trials, data from the EPIC trial for the first line in patients with newly diagnosed CML, the Phase II trial in patients also with GIST.

The ASCO aspects will be public next week. They will contain data from the September data cut. To align with the ongoing Iclusig regulatory submission the Phase I and PACE presentation at ASCO will use a January data cut. However, the PACE presentation will also include updated data on dose reductions and later Iclusig events through April.

With this update I will now turn the call back to Harvey.

Harvey J. Berger

Thank you very much Tim. May I ask the operator to please open the lines to analyst’s questions?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). As a courtesy please limit yourself to one initial and one follow-up question. The first question is from Jason Kantor with Credit Suisse. Please go ahead.

Unidentified Analyst

Good morning this is [Joe Myers] filling in for Jason. In regards to the 15% of second line patients that are actually receiving Iclusig at this time, what is the make-up of those patients, how many of those are chronic phase versus the normal background versus the TP15I background?

Harvey J. Berger

Yeah thanks for the question Jim and I won’t be able to answer that directly as we kind of cut the numbers but I’ll be able to provide you maybe a little bit more detail that would be helpful. As we cut the numbers we begin between advanced and chronic phase based on the past prescribing forms we get into some pretty thin numbers so I need to speculate based on data from only one quarter. I can tell you this first of all, from a TP15I perspective we’re at about 25% of our patients are TP15I patients. So clearly the majority of patients are not TP15I patients.

And also as it relates to the second line patients some of the -- a portion of those TP15I patients would be second line patients.

Unidentified Analyst

Thank you for taking the question.

Operator

The next question comes from Eun Yang with Jeffries. Please go ahead.

Eun Yang - Jefferies & Co.

Thanks very much. So Marty you mentioned that you have about 400 prescribing physicians in the U.S. and they are spread over community and academic setting. Can you quantify what percent of the prescribers are coming from academic versus community and also of those 400 prescribing physicians what percent of those are new prescribers versus prior prescribers before marketing suspension? Thank you.

Martin J. Duvall

Yeah good question, thank you for that. So in terms of the prescriber split, 55% of the actual prescribers are community and 45% are academic. We do see a higher concentration of the business in the academic market. So there is less prescribing on a per doc basis in the communities we would expect. So that’s kind of the current split. What’s the second question?

Eun Yang - Jefferies & Co.

So the 400 prescribing physicians what percentage of those are new prescribers versus prior prescriber?

Martin J. Duvall

Yeah there are predominantly carryovers from that 742. I think one thing we feel very good about is that that number of prescribers actually compares favorably to the 2013 numbers. I think we reported in the second quarter of last year that we had about 450 unique prescribers after two full quarters, so having 300 at this point is currently good sign.

Eun Yang - Jefferies & Co.

Thank you.

Operator

The next question is from Terence Flynn with Goldman Sachs. Please go ahead.

Terence Flynn - Goldman Sachs & Co.

Hi thanks for taking my questions. First just in terms of the new patients adds, it looks like you guys added about 60 patients in April and I was just looking back to the first quarter of ’13 and I guess my math would suggest you are adding about 75 patients per month. So just wondering if you could provide some more details there as it sounds like you are on may be a better trajectory in ’14 versus ’13 and then any more insight in terms of the PRAC recommendation, I think you mentioned last call that you did not anticipate any major changes to the indication statement but Tim it seemed to suggest that may be this is a possibility on the table now, and I was wondering if that’s also a change and any more color there? Thank you.

Martin J. Duvall

Yeah, thanks Terrence. With regard to the new patient uptake we are encouraged by the numbers and view them positively compared to the situation last year. I will turn the second question over to Tim.

Timothy P. Clackson

Hi, Terrence. So as you know the recommendation from the PRAC -- is not to modify the indication statement and we believe the only additional information that we submitted in response to the PRAC is consistent with that. As I mentioned in my comments based on the preliminary set of questions one is possible outcomes of what was the discussion right now could be a change in the labeled indication. I would say it’s certainly premature because we are right in the middle of discussions to know with anymore clarity beyond that.

Importantly it is quite possible the indication statement will not change. It is simply don’t know at this point. I guess I can comment that we know that we are not talking about for example a TP15I only indication it’s a different set of discussions in there.

Operator

The next question is from Katherine Xu with William Blair. Please go ahead.

Y. Katherine Xu - William Blair & Company, LLC

Good morning. I was just wondering with the real world experience with starting dose that are lower Marty you said at 15 and 30 how do you have a view of how that has been affecting efficacy. And on that on your refractory patients and also I think for EPIC you have data for maybe lower dose in front line patients. But how have these current data effects your confidence really lowering doses going forward?

Martin J. Duvall

Yeah I think we have a better, it's a great question I think we will have a better sense of that going forward. We will have the opportunity to follow these patients longitudinally. But it’s a little too early to tell with only one or two months' worth of therapy to be able to speculate on that. But that’s certainly something that we will be interested in following and we will report on.

Harvey J. Berger

I would also it's Harvey that we will be presenting data on precisely those questions at ASCO in June. So there will be the follow-up from certainly the PACE trial that will speak directly to the question that you have and of course that's a trial as opposed to routine clinical use but it’s still pretty early what new patients are being added commercially to have the long-term follow-up on dosing but the PACE data will be very interesting and directly on point.

Y. Katherine Xu - William Blair & Company, LLC

And then I have got some questions more like when you start the dose lower whether you have the same kind of response. I know that it’s mainly -- if you have lower doses mainly it's a -- just we need to find a start dose?

Harvey J. Berger

Those data will really come from two sources, one ultimately the trial, that randomized trial that we are finalizing with the FDA that of course will be the best information and then of course as you point out commercial use over time we will be able to get some of those data corrective. We are obviously looking with physicians who are prescribing Iclusig on routine commercial use at their experiences with patients who are starting at lower doses. So we are certainly going to be able to collect data. It is just too early to have enough information from commercial use to address that rigorously quite yet.

Y. Katherine Xu - William Blair & Company, LLC

Okay and just quickly how do you think the approval of [Aldig] Phase III data would effect to your accrual for the -- study?

Harvey J. Berger

We don’t think it affects our projections Katherine because we obviously anticipated that, that would occur and planned our clinical site strategy and enrollment plan accordingly.

Y. Katherine Xu - William Blair & Company, LLC

Thank you.

Operator

The next question is from Michael Yee with RBC Capital Markets. Please go ahead.

Michael J. Yee - RBC Capital Markets, LLC

Hey guys good morning, thanks for the question. On your launch numbers you reported $4.7 million US. last year’s first full quarter you had $6.4 million but you’re saying demand was higher. Do you think that the majority of that difference there is average price. You were saying that 60% of your patients will be starting at the lower dose. I think you implied therefore that would imply obviously a price difference per pill, is that the primary difference and you implied you try to prevent that from happening and modifying something, can you walk through that and is that the primary difference there?

Harvey J. Berger

Yeah, good question so I would attribute to a few factors and you touched on one. So one is the 15 milligram utilization that we talked about that I kind of mentioned in the upfront remarks. The second thing is the quick start shipments so we did have quite a number of bottles that went out that were able to get patients on therapy much faster and we actually had more Quick Starts in 2014 compared to last year. Also keep in mind that a healthy proportion of patients were transitioned from the single patient IND, some of them had a clinical supply. So they didn’t need as much product in during the first quarter.

And a final factor perhaps a little minor but it does have an impact is gross to net. That included some product returns and a higher overall growth to that in the first quarter based on Medicare rebates and returns from last year.

Michael J. Yee - RBC Capital Markets, LLC

Okay but to be clear, I am right by saying the price per patient is directly correlated to exactly the proportion of lower dose and what are you doing to try and change that, should I be adjusting my model for that if that’s a big difference here?

Harvey J. Berger

So I mentioned we have an approach that we’re going to take regarding the 15 milligram daily and we intend to implement that by the third quarter. So we’ll see some impact starting at that point in time.

Michael J. Yee - RBC Capital Markets, LLC

Okay, thank you.

Operator

The next question is from Cory Kasimov with JP Morgan. Please go ahead.

Cory Kasimov - JPMorgan Chase & Co.

Thanks, good morning thanks for taking the questions. Marty just a follow up on the pricing comment that you were just talking about should least be modeling for I guess flat pricing scheme that you guys would be undertaking is that what you’re referring to?

Martin J. Duvall

I think that would be -- I don’t want to put our whole strategy out there but I think that would be a fair way to approach the model.

Cory Kasimov - JPMorgan Chase & Co.

Okay and then for 113 and a follow-up on the LBK question, can you just talk about what you guys see as a key differences between the products and what keeps you excited about the opportunity for 113?

Harvey J. Berger

So Corey I would say that we continue to be very pleased what we see with 113. We obviously will have a nice update at ASCO where we’ll give the mature update on the 113, Phase I/II trial data with long follow up. But in terms of the response rate coverage of resistance in patients and tolerability we see all those potential as advantages of 113 over the competitive agents.

I think obviously with the approval of Sorafenib we now have greater insights into the safety findings of the drug and thanks to some nice publications that address resistance mechanism we also understand what the potential mutational liabilities could be and see important differentiating avenues compared to 113.

Cory Kasimov - JPMorgan Chase & Co.

Okay and then at ASCO roughly how many patients will we see from the frontline EPIC study?

Harvey J. Berger

You’ll see all of them. So there were I believe 306 patients enrolled at the time of termination and it will be a report on the essentially complete wrap up summary of the trial.

Cory Kasimov - JPMorgan Chase & Co.

Alright great, thanks for taking the questions.

Operator

The next question is from Joel Sendek with Stifel Nicolaus. Please go ahead.

Joel Sendek - Stifel Nicolaus

Thanks, a couple of Europe questions. Maybe you touched on this but real quickly on the - PRAC decision or the delay what is the reason for the delay, is it just the administrative? And then on the marketing in Europe I'm wondering what -- about countries I am wondering what percent of prescribers, rough numbers do you have covered as of now? And then can you give any clue as to the duration of therapy in U.S.? Thanks.

Harvey J. Berger

I’ll take the first question and pass the baton on to Marty. The feedback that we’ve received so far in the form of preliminary list of questions is being discussed by the PRAC right now and we expect to be sent a final form later this week or early next week, includes a mixture of clarifications or requests for clarifications of the response that we've sent in, in March, requests for some documents and protocols that we didn't have in March but that we now do have for example the full draft protocol of the dose ranging study which is of obvious interest and relevance to the PRAC review, and then a series of suggestions and recommendations for amending some of our proposed modifications to the SNPC to the European label.

So in essence that's the follow-up question all linked to the original set of questions.

Martin J. Duvall

So Joel the question on… I am sorry, go ahead.

Joel Sendek - Stifel Nicolaus

No, I got it. So for they just need documents and that's causing the delay. Thank you.

Harvey J. Berger

Yeah and a series of clarifications and further questions. There is obviously a large group and the dossier we submitted in March was very extensive dossier. So that's lead to a few questions.

Joel Sendek - Stifel Nicolaus

Okay.

Martin J. Duvall

So, Joel the question is little tough to answer, I'll just give you the high level numbers, covering the big five in terms of prescriber base would touch on about 80% of the business expanding out to the EU16 would take that out to a good 90%, 95% of the important prescribers. So that's kind of the way we're approaching it. As for duration of therapy too early to tell from 2014 commercial experience. Obviously in our model we continue to update based on the evolving pace data as we saw at ASH it's outstanding from a maintenance response, duration of therapy, projections of median duration of response. In our model we have chronic going from 2.5 years to 5 years depending upon line of therapy. That's the way we're approaching it.

Joel Sendek - Stifel Nicolaus

Okay. Back on the Europe question, how long will it take to get to the 95% with the EU16?

Harvey J. Berger

So we should be there by Q1 of 2015.

Joel Sendek - Stifel Nicolaus

Great. Thanks a lot.

Operator

The next question is from Ying Huang with Barclays. Please go ahead.

Ying Huang - Barclays Capital

Good morning. Thanks for taking my questions as well. First of all thank you for providing the clarity on the second line therapy and first line in the U.S market. Do you have similar data in the EU market based on your current experience with that in terms of the therapy? And then also can you talk about where most patients start in terms of the starting dose for Iclusig in Europe, is that also within the 15 to 20 -- sorry 15 to 30 milligram dose. And lastly I have a finance question on the net cash flow was about $53 million in the last quarter and your current cash is about a $180 million. So what's your thought on financing there? Thank you.

Harvey J. Berger

Yeah, thanks, Ying. Real quickly on the questions, the insight unfortunately we have on the pharma side into Europe are much less so, there is much less transparency on a country-by-country basis. So we have qualitative information, not quantitative information to that regard. We do get feedback that the starting dose has dropped. I would not suggest that the numbers are as aggressive as what we saw in the U.S. starting dose. But as we learn more we will share more.

So in terms of funding -- certainly we've given thought to this and this question has come up at times in the past. We expect we will take some action this year to have funding one way or another to our balance sheet but really at this point we've not made a decision as to what the best approach would be. There certainly are a variety of alternatives for funding from partnering of Iclusig in Japan with upfront payment as well as equity funding, all of those options are on the table. And as we go through this year we will make the best decision we can at the appropriate time later this year.

Ying Huang - Barclays Capital

Thanks, Harvey. Just a follow-up you mentioned a Japanese partnership. Should we expect the Japanese partnership in the very near-term?

Harvey J. Berger

No, we haven't given any guidance on the timing of the partnership; I certainly would not suggest that it's to use your words very near-term. It's certainly something we are very actively working on; our new Chief Business Officer is very focused on it. There is clearly great interest, there are plenty of opportunities. We will be able to deliver to a Japanese partner, essentially a drug that is not quite approved but very late in the clinically and regulatory process in Japan, which is a very unusual set of circumstances for partnering discussions are very positive for us, all of which are creating value in the negotiations and discussions.

So we are well positioned for a good Japanese partnership, but I wouldn’t try to focus in on timing because it is really too early to make that decision.

Ying Huang - Barclays Capital

Thanks very much.

Operator

The next question is from Mike King with JMP Securities. Please go ahead.

Michael G. King, Jr. - JMP Securities

Thanks for taking my questions and appreciate the transparency as well on the details of the re-launch. A lot of my questions have been answered, just curious about if there has been any change with regard to the duration dose or any other information you could provide for the patients that had the individual patient INDs in that period versus the re-launch?

Harvey J. Berger

Thanks, Mike. Actually when we look at the single patient IND data, it roughly falls in line with the dosing that the starting doses of the new patients. So it is pretty much in the same line. We only have three months of visibility on it and I am not able to really note any changes or shifts.

Michael G. King, Jr. - JMP Securities

Could you talk about -- would you be willing to talk about any attrition of those patients?

Harvey J. Berger

Outside, what I mentioned the upfront comments on 24% that’s really my best view at this point in time. I think Mike our initial impression that once a patient has a response, they almost in all cases keep that response, nothing has changed from the early Phase 1 data to the PACE data to the commercial experience.

If you have a response, certainly in chronic phase, CML, those patients in almost all instances maintain that response long-term.

Martin J. Duvall

And Mike we will have an update on those types of data at ASCO that will further expand our analysis.

Michael G. King, Jr. - JMP Securities

Right, well thanks for that. And then just on some data questions, the ISTs and the other indications, what’s potentially the earliest that we might see something coming out of one of those studies?

Timothy P. Clackson

We have already reported some data, as you know from some ISTs including for example the trail in [Philly] of ALL combined with chemotherapy that was reported by the investigators at ASCO and ASH last year. Regarding the solid tumor trials, now that they are coming back and soon to start their enrolment, I think it is on this front unlikely that we have data this year, but I am sure there will be opportunities in the first half next year, but is really up to the investigators. It's possible of course that the ISTs in hemalogic indications would be reporting out of Ash and I would expect the addition…

Michael G. King, Jr. - JMP Securities

Yeah that’s where I was going, I was just wondering if it's with three positive AML could have data at ASH, is that a single arm trial or are these randomized trials?

Timothy P. Clackson

They are multiple trials including close scenarios. It is -- given we are just starting back up, it is difficult to give color on what trials and when, but I think in general to expect some data from ISTs and Universities at ASH would be very reasonable. Clearly, the investigators would be highly motivated from their point of view to get there with their support.

Harvey J. Berger

Given that Mike we have taken the approach in almost all of the indications to have more than one trial and given potential indication that creates the obvious competitiveness among investigators to be first. So there is a lot of that internal competition and of course some trials leave out earlier than others based upon their end points and design. So I think as Tim pointed out this year’s ASH would be the first time when you can start to expect some data playing out for the hematologic malignancies and that all through next year with the trials we will have matured and there should be sufficient data.

Michael G. King, Jr. - JMP Securities

I appreciate that and then just one more a quick question you’ve got you did not mention at ASCO I said Merck is presenting data with [inaudible] and MKT206 the AKT inhibitor is there hope for readout at some point down the road in the hands of Merck?

Martin J. Duvall

No, no. Mike I’ll remind you, [inaudible] will be coming back to us towards the end of this year late into the third quarter. Yes we’re aware of the data in combination with the AKT inhibitor. We’ll be evaluating our options on that forward with readout. It's unlikely to include combination with Merck dataset just given the practically but we are actively thinking about next steps to take.

Michael G. King, Jr. - JMP Securities

Great thanks.

Operator

The next question comes from Nicolas Bishop with Cowen & Company. Please go ahead.

Nicholas Bishop - Cowen & Company

Hi, I have a question on European regulatory funds and a quick follow up on the U.S. launch. So just on the PRAC review just want to clarify what the potential scenario is for a label revision if it occurs? So label in Europe already more or less indicates that patients need to be resistant to just dasatinib and nilotinib or have a TP15I mutation. So if we’re not talking about HE315 only potential label change are we talking about a resistant to both dasatinib and nilotinib label is that what we’re talking about just want to be clear?

Timothy P. Clackson

Nick I understand the interest obviously but I think it's really not appropriate or even possible for us to speculate on the discussions which are underway now we are waiting to hear from the PRAC committee we will be in discussions with them obviously but a sensitive process with respect to the EMA. So really it's just premature to go into any level of detail or speculate. As I said we clearly have inputs so far from the questions and that indicates that there could be a change in the indication statement. We also indicated that perhaps could not be a change in indication statement, we just don’t know.

Martin J. Duvall

It's just really too early, we’re literally smack that in the middle of those discussions. The committee is meeting this week and it’s an ongoing process. I think Tim described it well that it could will be no change, it could will be a change but it’s in the context of what the overall label will be the description of the safety, overall safety of the product the balance of safety and benefit. So I wouldn’t speculate because it’s impossible for me to be able to really have greater insight and we just can’t at this point speculate either.

Nicholas Bishop - Cowen & Company

Okay that’s fair. And then just on the U.S. launch just want to make sure all the numbers of patients that you mentioned since the re-launch history. So I think that you said there are about 230 patients that converted to commercial supply off of the IND and then if I remember right on your Q4 call in February you said there were a 100 new prescriptions. So if you add those together that’s 330 patients. I believe you mentioned earlier in this call that there are 400 patients on drug. So does that mean there have been 70 new prescriptions since the Q4 call or did I mix something up?

Harvey J. Berger

No, so let me test the numbers first of all the 210 on commercial paid drug. There were also 22 that I mentioned were through the patient assistance program so that's free product. The number 400 that was thrown out was based on our number of unique patients on commercial paid for drug through the end of April. So you take the difference in the 210 and the 400 as 190.

Nicholas Bishop - Cowen & Company

Okay, thanks a lot.

Harvey J. Berger

And keep in mind too that with our February call we talked about prescriptions not patients on drug so there is some attrition rate between the two, when that prescription is written there is a managed care review process and other things that occur. So it doesn’t translate a 100% of the time into a patient on commercial drug.

Nicholas Bishop - Cowen & Company

Got it. Thanks a lot.

Operator

The next question is from Howard Liang with Leerink Swann. Please go ahead.

Howard Liang - Leerink Swann & Company

Thanks very much. A question on Europe and also pricing, with the two months delay I guess for the PRAC review would that effect getting additional pricing approvals and would a potential change to meet new pricing negotiations. And secondly on the pricing of 15 milligram I think you mentioned it could be addressed maybe in part by packaging, can you give us more color on that?

Timothy P. Clackson

Yes, in terms of the two month delay we do anticipate that there maybe a few P&R decisions that are impacted and delayed but we do intend to get through the majority of those or most of them by the end of 2014. So things continue to proceed in most countries unaffected by the PRAC review. In terms of speculation on our new label and impact on pricing negotiation I think it's too early make a call there on that particular point. And the third question?

Howard Liang - Leerink Swann & Company

15 milligram how it can be addressed by packaging?

Timothy P. Clackson

So I'd actually rather not go into those details at this point in time. We will talk about that at the next call.

Howard Liang - Leerink Swann & Company

Okay, great. Thanks very much.

Operator

The next question comes from Matt Roden with UBS. Please go ahead.

Andrew Peterson - UBS

Hi guys it's actually Andrew Peterson for Matt. A couple of final questions on the progress of the launch. Just want to make sure I understand it correctly, I appreciate the breakdown of the kind of T59 versus second and third line patients. Do you have that split for just the new patients -- patients not coming off INDs? And then secondly it seems like growth is mostly coming from adding new prescribers as opposed to the existing prescribers kind of expanding their patient penetration. Do you expect kind of growth to continue in this way going forward or how do you see that kind of dynamic playing out? Thanks.

Martin J. Duvall

Yeah. So I think adding new prescribers really I'll take that part first, speaks to the relative lack of concentration or prescribing or patient volume in the community setting. So as you add a docket usually attributed to one patient in the community settings than say only three less than five -- five CML patients. So the academic physician obviously sees more CML patients and it is a more productive target so to speak. So the two are kind of interrelated in that way.

In terms of line of therapy the numbers that I provided are aggregates in terms of being the sIND patients as-well-as the new patients, and the breakout is as mentioned 15% in second line, 30% in third line and then the remaining in fourth and later.

Andrew Peterson - UBS

I guess just a follow-up on that last point, of the new patients how many were T359?

Martin J. Duvall

So I have a view of the total patients in Q1 being roughly at 80 of the 320.

Andrew Peterson - UBS

Okay. Thanks.

Operator

The next question is from Jonathan Eckard with Citi. Please go ahead.

Jonathan Eckard - Citi

Thank you for taking my questions. First question regarding EU, in the countries where reimbursement is currently not a big hurdle for example Germany, could you talk about what the dynamics are of the use or uptick of that $3.35 million that's coming from Spain it appears. So I am just trying to understand what's happening in the other regions where reimbursement is not particularly a hurdle at this time?

Timothy P. Clackson

Yeah, so I think it's a normal part of the launch process and building awareness and launching a drug in a market like Germany where you have very defused prescribing, you have a situation that's pretty similar to the U.S. from a community and academic perspective. It takes time to grow and build your prevalent Iclusig patient pool, so we're in that mix. Whereas in a country like France where the treatment of CML patients is much more concentrated in a few academic centers it's much easier to impact things more quickly.

So we are pleased with the process to-date and we will continue to move forward.

Jonathan Eckard - Citi

And then second question would be, I am not sure if there is any updates on the new headquarters plans going forward there, and when could there or would there be additional expenses in finishing of those facilities for you guys to move into that, just in case there is any updates there?

Timothy P. Clackson

There is not a lot to update at this point but the building itself is under construction by the developer and that has no day-to-day cost implications for us. At some point we will need to make decisions as to how we are going to use the space, whether we sub lease a portion of the space which is likely and exactly how we do that. We’re in discussions with the developer on the best ways to achieve that but certainly for the foreseeable future there is no incremental cost associated with the [Binny] Street location.

Jonathan Eckard - Citi

Okay, thank you.

Operator

The next question is from Ren Benjamin with H.C. Wainwright. Please go ahead.

Reni Benjamin – H.C. Wainwright & Co.

Hi, good morning and thanks for taking the questions. I guess can you just talk a little bit about the RET translocation, data was presented at ACR and the market opportunity. I know you have several ISTs that are evaluating this in RET positive tumors but what's the company’s strategy regarding this potential market going forward and then if you could just an update or just a review of what’s happening in Japan from a clinical and regulatory perspective?

Martin J. Duvall

Sure and I can take that. So we were able to present what we felt was very interesting data on novel RET fusion in colon and colorectal cancer at AACR. RET as you know has now been implicated in an increasing series of tumor types, RET fusion accounts for a proportion of small cell lung cancer and RET mutations are drivers in medullary thyroid cancer.

As you know we have ISTs underway. We are about to start respectively in thyroid cancer and non-small cell lung cancer. We are also looking at approaches that would allow us to evaluate the novel fusions we found in colon cancer clinically.

Our overall strategy has been to rapidly, as rapidly as possible get initial proof-of-concept data in the investigator sponsored trial setting and then evaluate the potential for next steps through company sponsored trials. Of course based on data we can change or accelerate that strategy. We certainly are particularly interested in the activity of RET in lung cancer, given that we already have presence in that area of development.

Regarding Japan, we are on track for our JNDA submission next year, the Phase I/II trial that will support that filing has completed enrolment some time ago and we are just in follow-up. We are actively in discussions with the PNDA regarding preparations for filing of the JNDA. So on track, no additional clinical activity except for the ongoing dosing and follow up of existing patients.

Reni Benjamin – H.C. Wainwright & Co.

And when might we see any data from that ongoing follow up?

Martin J. Duvall

We will have an update on that, on the Japan specific file at the Japan Society of Hematology meeting which is at the end of October, obviously in Japan. We will present the data from the Phase 1 portion of that trial at JSH meeting.

Reni Benjamin – H.C. Wainwright & Co.

Excellent, thank you.

Martin J. Duvall

Welcome.

Operator

Your next question is from Nicholas Abbott with BMO. Please go ahead.

Nicholas Abbott – BMO Capital

Good morning. Thanks for taking my question. I would like to discuss GIST, and obviously it was -- Tim you just alluded to the fact that after ISTs, there would be company sponsored trials and you had a company sponsored trial in GIST, it looked like it could be first indication outside of Philadelphia post disease. I know the trial obviously was affected by the interruption of commercial supply of Iclusig. So do you have enough data to make a decision on what the next steps are from the current data set and if you do what would that be, if you do not how will you get additional data or what additional data do you think you need to take the next step and is the next step is a registrational study?

Timothy P. Clackson

Sure, Nicholas be happy to talk about that. So the ongoing GIST trial was designed to provide initial proof-of-concept for GIST in general. And as you know we will have data from that trial being presented at ASCO clearly it wouldn't be appropriate for me to talk about those data yet. At the time of partial clinical hold the trial had largely enrolled, I think there are only seven additional patients we had yet to enroll, so as-soon-as we are off hold we will complete that enrollment.

But I think it's reasonable to say that with 43 patients and pretty reasonable follow-up now compared to the primary end point of 16 weeks CBR. We could expect that trial as reported to ASCO to be informative. We're right now in the process of considering and discussing with other -- with our academic advisors what an appropriate approach might be based on potentially supported data though we've not made any decisions at this point.

We certainly think that the next step could be a registration trial. We design our strategy, so that will be the case.

Harvey J. Berger

I think that the key is to ask that question again after we can address it in the context of the data presented at ASCO. And I think with those data in hand we and others will be able to make the judgment as to a direction going forward. So let's come back to that question in a month.

Nicholas Bishop - Cowen & Company

Sure, I appreciate that. Would it be possible just for Marty to address what kind of opportunity could be available for Iclusig in GIST?

Martin J. Duvall

Yeah. So it's really based on a lot of factors including the clinical trial data and our strategies regarding line of therapy. So it will be too early to speculate on that at this point in time.

Nicholas Bishop - Cowen & Company

Fair enough. Thanks guys.

Operator

The next question comes from Brett Holley with Guggenheim Securities. Please go ahead.

Brett Holley - Guggenheim Partners

Yeah. Thanks for taking the question. I was just wondering if there is any update on the timeline for the -- Iclusig trial, do you have to take -- you are talking about -- before, I want to understand that timeline a little bit better?

Harvey J. Berger

Well, Brett the timeline for initiation of the trial is certainly as-soon-as we can. We're very motivated to start that the second half of this year. When exactly will depend on let me guess final feedback from the FDA and they are reviewing our draft protocol vertical right now. That review will also impact when we might have first potential readout of course one of the things we're talking about is how long that follow-up would be. But I think it's reasonable to expect that we would have some first data that could be informative certainly for preliminary efficacy at least in '15.

Brett Holley - Guggenheim Partners

Okay. Thank you

Harvey J. Berger

But that is subject to finalizing the protocol as I am sure you would appreciate.

Brett Holley - Guggenheim Partners

Thanks.

Operator

The next question is from Echo He with Maxim Group. Please go ahead.

Echo He - Maxim Group

Hi. Thank you so much for taking my question. My most questions are asked and I just want to make sure, Harvey you mentioned that some pricing issues you expect to solve by the end of the second quarter. Could you explain that in more detail I just didn't get it at that time?

Harvey J. Berger

I think you -- I think Marty made a statement about addressing pricing of Iclusig. I will leave that to him, if he could just reiterate what he said.

Martin J. Duvall

Yeah. And I think it goes back to the answer to an earlier question. I think it would be fair from a modeling point of view to think in terms of adjusting and moving towards pricing to be equivalent on a 15 milligram daily, 30 milligram daily and 45 milligram daily basis.

Echo He - Maxim Group

Okay. I understand just want to make sure. Thank you so much, that's it.

Martin J. Duvall

Great, thank you.

Operator

That all the time we have for questions, ladies and gentlemen I'd like to turn the call back over to Dr. Berger for closing remarks.

Harvey J. Berger

Thanks very much. I appreciate everyone joining our call this morning. The next main event is ASCO and I look forward to seeing many of you at ASCO as-well-as some of the upcoming healthcare conferences.

I focus on ASCO because there will be many presentations as we've outlined on Iclusig as well as on 113. Thanks very much.

Operator

Thank you, ladies and gentlemen. This concludes the first quarter 2014 ARIAD Pharmaceuticals Incorporated Earnings Conference Call. Thank you for participating. You may now disconnect.

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Source: ARIAD Pharmaceuticals' (ARIA) CEO Harvey Berger on Q1 2014 Results - Earnings Call Transcript
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