Ariad Pharmaceuticals (NASDAQ: ARIA) captured Merck’s (NYSE: MRK) attention enough with its cancer drug, ridaforolimus, in July 2007 to forge a partnership to help Ariad through several clinical trials for multiple cancer indications. More recently, preliminary results of the phase III were impressive enough to give Ariad enough leverage to modify the agreement in May to a much more favorable position for Ariad.
The agreement gave Merck an exclusive license to develop, manufacture and commercialize ridaforolimus; and Merck assumed responsibility for ridaforolimus activities, including clinical trials and regulatory filings. In exchange, Ariad received $50 million upfront as well as an additional $19 million to retroactively fund the development of ridaforolimus to the date of the new agreement.
Previously, at the start of the collaboration, Merck had already made a $75 million upfront payment to ARIAD and since then has paid ARIAD $53.5 million in milestone payments for the initiation of Phase 2 and 3 clinical trials of ridaforolimus in addition to paying its 50 percent share of ridaforolimus development, manufacturing and commercialization costs.
In the future, ARIAD will be eligible to receive up to $514 million in regulatory and sales milestones based on the successful development and commercialization of ridaforolimus in multiple indications. This includes $65 million in milestones associated with the potential sarcoma indication, which currently is in Phase 3 clinical development ($25 million for acceptance of the new drug application by the FDA, $25 million for U.S. marketing approval, $10 million for European marketing approval, and $5 million for Japanese marketing approval) and $200 million in milestones based on achievement of significant sales thresholds.
Ridaforolimus is Ariad’s most advanced drug in clinicals. It is being studied in a trial termed SUCCEED. This trial is a randomized, double-blind, placebo-controlled Phase 3 study of oral ridaforolimus in patients with metastatic soft tissue and bone sarcomas who have achieved a favorable response to chemotherapy. This trial will be completed and data compiled in 4Q 2010. Sarcomas are a group of aggressive cancers of connective tissues for which there are limited treatment options.
In 2009, the American Cancer Society estimated that approximately 10,600 new cases of soft-tissue sarcomas were diagnosed in the United States, and more than 3,800 Americans would die of the disease. In addition, approximately 2,600 new cases of bone sarcomas would be diagnosed and nearly 1,500 deaths were estimated. See here for more information.
There has been no new approved therapy in the U.S. for patients with soft tissue or bone sarcomas in more than 20 years. Ridaforolimus has been designated both as a fast-track and orphan drug product by the U.S. Food and Drug Administration (FDA) and as an orphan drug by the European Medicines Agency (EMEA) for the treatment of soft tissue and bone sarcomas. Merck and ARIAD are pursuing this indication as the initial registration path for ridaforolimus. Ridaforolimus is a novel small-molecule inhibitor of the protein mTOR, a "master switch" in cancer cells. Blocking mTOR creates a starvation-like effect in cancer cells by interfering with cell growth, division, metabolism and angiogenesis. Merck’s interest in ridaforolimus is, not doubt, fueled by the fact that this mechanism could potentially be utilized to fight multiple indications of cancer, not only the soft tissue and bone sarcomas.
On May 25th of this year, shortly after the modification of the initial agreement between Ariad and Merck, Ariad announced that the independent Data Monitoring Committee (DMC) of the Phase 3 SUCCEED trial completed the second interim efficacy analysis as specified in the study protocol and recommended that the randomized, placebo-controlled trial of oral ridaforolimus in patients with metastatic sarcomas continue to its final analysis, without modification to the study protocol. Additionally, they noted that no new safety signals were noted and that the final analysis of progression free survival, the primary endpoint, is expected in the second half of 2010. With the FDA’s apparently increased new focus on drug safety, ridaforolimus as an mTOR inhibitor could benefit as pertaining to its safety profile from Wyeth Pharmaceutical’s (NYSE: WYE) TORISEL and Novartis’ (NYSE: NVS) Afinitor. TORISEL and Afinitor are both mTOR inhibitors. Torisel, given by infusion, was approved by the FDA in May of 2007 for advanced kidney cancer. Afinitor, given orally, was approved in March of 2009 specifically as first treatment for patients with kidney cancer after failure of either of the drugs sunitinib or sorafenib. Although this could be a likely first-in-class approval for sarcomas, the kidney cancer indications for TORISEL and Afinitor both give a proven safety and concept track record for this class of drugs.
Merck has deep pockets with its varied pipeline and $45.4 billion dollar 2010 projected revenue. However, it must really see promise in ridaforolimus and its inhibition of mTOR as viable and a likely mechanism to fight cancer in order to invest in the drug’s past, present and future. Ariad has already benefited from the collaboration and may likely continue doing such as the phase II and III preliminary data for ridaforolimus in multiple applications indicate.
Oncology drugs take a tremendous amount of time and money to discover, develop in phase I, II and III trials as well as have the production facilities and marketing to manufacture and promote. This appears to be a win-win scenario for Merck and Ariad Pharmaceuticals. Merck benefits from the novel discovery of another, smaller and perhaps more flexible and creative company’s product. Meanwhile, Ariad Pharmaceuticals benefits from the financial aspects of development, and the experience with the FDA and production facilities of Merck.
With this partnership, the potential could always arise for something more than a partnership between the two companies. At market close on October 13, 2010 the market cap for Ariad Pharmaceuticals at $3.91 per share could be a tempting offer for Merck at $433 million.
As the final phase 3 data is evaluated and a NDA is filed likely during 4Q of this year, more details of the product’s efficacy and safety will become self-evident. Meanwhile, Merck could possibly be the party initiating a surprise change of its own in the relationship between them and Ariad Pharmaceuticals.
Disclosure: Author holds long positions in the above-mentioned stocks