Ariad Pharmaceuticals Management Discusses Q2 2012 Results - Earnings Call Transcript

Aug. 2.12 | About: ARIAD Pharmaceuticals, (ARIA)

Ariad Pharmaceuticals (NASDAQ:ARIA)

Q2 2012 Earnings Call

August 02, 2012 8:30 am ET

Executives

Maria E. Cantor - Senior Vice President of Corporate Affairs

Harvey J. Berger - Principal Founder, Chairman of the Board, Chief Executive Officer, President and Chairman of Executive Committee

Edward M. Fitzgerald - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Analysts

Matthew Harrison - UBS Investment Bank, Research Division

Y. Katherine Xu - William Blair & Company L.L.C., Research Division

Ryan Martins - Lazard Capital Markets LLC, Research Division

Michael J. Yee - RBC Capital Markets, LLC, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Eileen Flowers - Jefferies & Company, Inc., Research Division

Ying Huang - Barclays Capital, Research Division

Michael G. King - Rodman & Renshaw, LLC, Research Division

Philip Nadeau - Cowen and Company, LLC, Research Division

Howard Liang - Leerink Swann LLC, Research Division

Karen E. Jay - JP Morgan Chase & Co, Research Division

Rachel L. McMinn - BofA Merrill Lynch, Research Division

Echo Yinghui He - Maxim Group LLC, Research Division

Operator

Thank you for holding for ARIAD Pharmaceuticals Second Quarter 2012 Investor Conference Call. [Operator Instructions] Please be advised that this call is being taped at the company's request and will be archived on the company's website for 3 weeks from today. At this time, I'd 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 on financial results and corporate developments for the second quarter of 2012. Dr. Harvey Berger, our Chairman and Chief Executive Officer; and Mr. Ed Fitzgerald, our Executive Vice President and Chief Financial Officer are joining me on this call.

During this call, we'll 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, 2011, and 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 for our opening remarks.

Harvey J. Berger

Thanks very much, Maria, and good morning, everyone. On our first quarter investor call this past May, I remember saying that we were off to a very busy start in 2012 with lots of progress, productivity taking place in all corners of the company. Well, I'm pleased to say that this progress and productivity have clearly been illustrated for our most recent announcements. These include the presentation of the updated PACE trial data at ASCO in June, the start of a global Phase III EPIC trial of ponatinib in newly diagnosed patients with chronic PACE CML and the submission of the new drug application to the Food and Drug Administration for the approval of ponatinib in CML and Philadelphia Chromosome-positive ALL in patients who are resistant or intolerance to prior therapy. Without question, we are executing on all of the objectives that we set out at the beginning of the year and we are focused on building a global commercial oncology company. With that as background, we have several updates to share with you this morning but first, Ed Fitzgerald will run through our financial results for the second quarter.

Edward M. Fitzgerald

Thank you, Harvey, and good morning, everyone. Our net loss for the second quarter was $51.3 million or $0.31 per share compared to a net loss of $47.8 million or $0.36 per share for the same period in 2011. The increase in net loss reflecting expansion of the global development program for ponatinib in preparations for commercialization of ponatinib in the U.S. and in Europe. Our R&D expenses increased by $20.7 million from the second quarter of 2011 to the second quarter of 2012, due primarily to expansion of development activities for ponatinib, including an increase in personnel expenses to support those activities.

During this period, we funded ongoing treatment in monitoring the patients in our Phase I and PACE clinical trials of ponatinib, the expansion of our expanded access program and investigator-sponsored trials of ponatinib, manufacturing activities in support of clinical trials, and importantly preparation of regulatory filings for ponatinib. In addition, R&D expenses in the second quarter of 2012 included a charge of $4.8 million to write down the carrying value of intangible assets related to ridaforolimus, following the issuance by the FDA of a complete response letter related to the NDA filed by Merck for ridaforolimus in patients with sarcomas.

Our G&A expenses increased by $6.1 million from the second quarter of 2011 to the second quarter of 2012 due to growth in commercial operations and supporting activities in the anticipation of potential regulatory approval and commercial launch of ponatinib. Our net loss for the first half of 2012 also reflects a charge of $15.9 million taken in the first quarter of 2012, related to the reevaluation of our warrant liability compared to a charge of $41.5 million for the first half of 2011 due to increases in the market price of our common stock during those periods. As we've stated before, all warrants that remained outstanding at December 31, 2011, were exercised in the first quarter of 2012, and therefore, there will be no further impact of these warrants on our statement of operations.

As of June 30, 2012, cash, cash equivalents and marketable securities totaled $250.3 million compared to $306.3 million at December 31, 2011. We are updating our financial guidance for 2012, in light of not receiving the $25 million milestone payment from Merck associated with approval -- U.S. approval of ridaforolimus in the sarcoma indication. We now expect cash used in operations for 2012 to be in the range of $162 million to $167 million, and we expect cash, cash equivalent and marketable securities at December 31, 2012, to be in the range of $142 million to $147 million. We estimate that current cash, cash equivalents and marketable securities are sufficient to fund our operations to the fourth quarter of 2013. Let me now turn the call back over to Harvey.

Harvey J. Berger

Thanks very much, Ed. Our focus for 2012 is flawless execution within our organization. This year, we will transform ARIAD from an innovative drug discovery and development enterprise into a fully integrated global oncology business.

So let's begin with an update on ponatinib. We're delighted to have ARIAD's first New Drug Application now being reviewed by the FDA for U.S. marketing approval of ponatinib in patients with resistance or intolerance CML or Philadelphia-positive ALL. The NDA submission for ponatinib is a major achievement for ARIAD and brings us another step closer to making ponatinib available to patients with CML and Philadelphia-positive ALL. We submitted the NDA ahead of schedule and have taken advantage of the rolling submission process at the agency's request to submit essentially a complete file early in the third quarter. Our NDA includes all sections of the application and will be completed by the addition of a final subset of routine CMC data that we will submit later in the third quarter. The FDA has communicated to us that it intends to begin immediate, comprehensive review of the NDA based on this week's rolling submission. We continue to anticipate approval and commercial launch of ponatinib in the U.S. in the first quarter of 2013.

At the same time, our diagnostic collaborator MolecularMD has submitted a premarket approval application to the FDA to support commercialization of a companion diagnostic test to identify those CML and Philadelphia-positive ALL patients who have the T315I mutation of BCR-ABL. And in Europe, the committee for medicinal products for human use or commonly known as the CHMP recently granted an accelerated assessment designation for the ponatinib marketing authorization application, potentially decreasing its regulatory review time. We believe this is a particularly important announcement. An accelerated assessment is granted to product candidate that address major unmet medical needs or constitute a significant improvement over currently available therapies. We plan to submit on schedule, a marketing authorization application for ponatinib to the EMA this quarter.

While the marketing applications for the use of ponatinib in patients with resistant or intolerance CML and Philadelphia-positive ALL are being submitted, a Phase III global clinical trial of ponatinib in patients with newly diagnosed CML is now underway and enrolling patients. The EPIC trial is a randomized 2-arm, multicenter trial that compares the efficacy of ponatinib with that of imatinib, the standard of care in adult patients with newly diagnosed CML in the chronic phase. This trial will be conducted in up to 175 investigational sites in North America, Europe and Asia-Pacific. Approximately 500 patients will be randomized 1 to 1 to standard doses of ponatinib or imatinib. The MMR rates at 12 months of treatment is the primary endpoint of the trial. This endpoint was chosen to support accelerated approval in the United States for this indication. All patients will be evaluated for molecular response using PCR at a single central laboratory MolecularMD. MMR is defined as the less than or equal to 0.1% ratio of BCR-ABL, 2 ABL transcripts on the international scale measured in peripheral blood. Thus, this is a highly standardized approach to definition of the primary endpoint.

The EPIC trial is designed to have a 90% power to detect a 15% absolute improvement in 12-month MMR rate by ponatinib versus imatinib. This is based in part on the results of the nilotinib and dasatinib Phase III trials which have been published. The 12-month MMR rates for the imatinib arms in these 2 trials were 22% and 28%, respectively. Using the more conservative estimate of the 12-month MMR rate for imatinib, the upper bound of the 95th percentile confidence interval for the higher of the these 2 estimate is 34%. The ENESTnd trial, that's the trial for nilotinib, was designed to demonstrate a 15% absolute improvement in 12-month MMR rate comparing nilotinib to imatinib. Thus, the EPIC trial using this guidance is 90% power to detect the same 15% absolute improvement in 12-month MMR rate, in this case, by ponatinib compared to imatinib. What that means is a 49% MMR rate versus a 34% MMR rate. Obviously, the ability of the trial to detect larger or smaller differences will still be there, but the 90% powering defined the sample size and allowed us to design the trial in a comparable way to the nilotinib trial.

Key secondary endpoints include the major molecular response rate of 5 years. That will be important for full approval in the U.S. Molecular response at 3 months, a newly accepted criterion of frequently used now to get an early assessment of the response to various therapies, complete cytogenetic response at 12 months, PFS and overall survival. Each patient will be followed for up to 8 years from the time the last patient is randomized to either the 2 treatment arms.

Importantly, a key design feature of the trial is an interim analysis of efficacy. This analysis will take place 12 months after half of the patients in the trial have been randomized. The interim analysis will focus on the primarily endpoint of the MMR rate at 12 months of treatment and depending on the results and the timing, may allow us to file for regulatory approval of ponatinib in the newly diagnosed CML clinical setting, approximately 6 months earlier than otherwise.

So now let's turn our attention to AP26113, our investigational dual inhibitor of EGFR and ALK. The Phase I/II clinical trial with 113 is proceeding very well, and it's now open for patient enrollment at 7 sites. Patient enrollment is ongoing and dose escalation has moved beyond the 120-milligram daily oral dosing that we last reported in May. As a reminder, the Phase I portion of the Phase I/II trial has a dose escalation design to allow us to determine the maximal tolerated dose of 113, the dose-limiting toxicity, as well as other parameters, as well as to provide initial clinical proof of concept. We will continue dose escalation until we determine the MTD, just as we did with ponatinib in the Phase I trial of ponatinib.

The Phase II portion of the 113 trial will include 4 prespecified patients cohorts and is expected to begin later this year. Both ALK-positive and EGFR-positive lung cancer patients are being entered into this trial, and non-small cell lung cancer patients are exclusively being enrolled at this time. An abstract of the Phase I portion of the trial has been accepted as an oral presentation at the European Society of Medical Oncology or known as ESMO. This meeting will be held from September 28 to October 2 in Vienna, Austria. The 113 data will be presented on Saturday, September 29, in a session devoted to this topic. While the abstract will be made publicly available on the ESMO website, sometime in mid-September, prior to the meeting, it is important to note that we will present fully up-to-date data on 113 as of a few weeks prior to the time of the meeting, thus, data up to some point in September. We're planning to host an investor call from Vienna following presentation of the 113 data. Full data slides will be posted to the Investor page of our corporate website at the time of that investor call and we will take analyst and investor questions regarding the data on this call, just as we are doing today. Like ponatinib, we believe that 113 will be a key value driver for ARIAD this year, potentially moving into pivotal trials next year, depending, of course, on the date from the ongoing Phase I/II clinical trial. We plan to move quickly through the Phase I portion, but we are focused on determining the dose-limiting toxicity and identifying the optimal dose for further study.

Finally, a few words on our preparation for the global commercial launch of ponatinib. We've talked about a lot of the R&D activities in the company, regulatory filings, but at the end of the day, one of the next major important steps for ARIAD is commercial launch and putting in place an effective commercial organization to take advantage of the exciting data on ponatinib that we have presented both of the academic medical community as well as now to the regulatory agencies. So ARIAD is committed to being launch ready in the United States by October 31, 2012. The U.S. commercial team is nearly all in place and U.S. sales representatives and key medical science liaisons in the R&D group are expected to be hired by early fall to support launch readiness at the end of October. Thus, we are only a few months away from launch readiness. Finally, our Swiss subsidiary, ARIAD Pharmaceuticals Europe, has been established and facility planning is being finalized for our European headquarters that will be based in Lausanne, Switzerland.

So with that as background, let me turn the call back to the operator. And I asked that we open the call up to your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Matthew Harrison with UBS.

Matthew Harrison - UBS Investment Bank, Research Division

Let me just ask a question on the ponatinib filing. Can you characterize what the additional data was, is this stability data? And then can you help us understand if that will slow down any facility inspections that need to occur? Basically what I'm trying to understand is will this final piece of data slowdown the FDA's ability to review the application? And I have a quick follow-up?

Harvey J. Berger

Sure, great question. Thanks, Matt. All issues that we've dealt with directly with the regulatory agency with the FDA. The data are, I would characterize them as almost trivial. They're important that they be in the file for completeness, but they are very routine and we filed the rolling submission at the request of the FDA because I would say that 99.5% of the file, at least, is complete. This is really one very small bit of follow-up CMC data that is quite routine, and I am virtually sure, will have no impact in the timing of the review or of facility inspections. We talked to the agency about facility inspection, both investigational sites, manufacturing sites, all the things that are critical and that we all know could delay anybody's review and decisions by the agency. But the FDA is moving forward on all fronts with all of the inspection, with the complete review of the file, really as if the file were complete at this point in time. Obviously, we have to file this, the remaining information later this quarter. I have no doubt whatsoever that we will and it will be, as I have described, quite routine.

Matthew Harrison - UBS Investment Bank, Research Division

Okay. And then just a quick question on 113. Can you help us think about how many patients of data we're likely to see here? Is this 20 patients, 40 patients? Because it's unclear how many patients you're enrolling per cohorts, so just can we get a better idea there?

Harvey J. Berger

Sure, I will only be able to answer your question to some degree. But let me tell you what's in the protocol and what we've said. The design of the trial is a fairly routine 3-plus-3 design in which you enroll 3 patients per cohort. You can readily expand any cohort to 6 patients, i.e., 3 plus 3. You must expand the cohort, if you see any significant toxicity, but you can expand the cohort to learn more about the activity, either efficacy or tolerability at any one of the levels of dosing. You also can and we have the opportunity to expand out to greater than 6 patients at the cohort, if we choose to, it's a very flexible design. What we've said is that we estimated that the Phase I dose escalation portion of the trial will have, at the end of the day, 30 to 50 patients that we believe will take us to the maximum tolerated dose and the dose-limiting toxicity. We believe that original estimate of 30 to 50 patients is accurate. We will have a substantial number of patients for review and analysis at the time of the ESMO presentation. I'm not going to give guidance on exactly the numbers. Quite honestly, I don't know today how many patients we're going to have, say, in the second or third week of September that will be enrolled and evaluable, but the trial is moving along smoothly without difficulty along the lines I described, the dose escalation with the primary objective of the Phase I portion to identify the dose limiting toxicity. And in turn, back off and to identify the maximum tolerated dose, which to us translates into the optimal dose to carry forward into prospective trials. So we expect to have that information in the 30 to 50 patient range. And we'll present as much data as we have for analysis at the time of ESMO.

Operator

And your next question comes from the line of Katherine Xu with William Blair.

Y. Katherine Xu - William Blair & Company L.L.C., Research Division

I'm just curious, when you said you're going to -- you're only non-small cell lung cancer patients in the Phase I right now, does that mean that you already have identified the MTD and DLT? And also, could you just elaborate a little bit on the accelerated timeline in Europe?

Harvey J. Berger

I couldn't hear the second -- the timeline for filing ponatinib in Europe?

Y. Katherine Xu - William Blair & Company L.L.C., Research Division

Yes, the accelerated review timeline in Europe?

Harvey J. Berger

Sure, let me deal with that first, the accelerated assessment in Europe is extremely unusual. Firstly, it's a new program at the EMA and CHMP. It is not something that has been in place for years. Very few products have received accelerated assessment designations. It's very uncommon. So it generally can cut, say, on the order of 2 or 3 months off the total review process, which for us, obviously, we think is important. So we're still sticking to our guidance that we project launch -- approval and launch in the second half of next year until we actually file the MAA, which will be this quarter, probably in about a month from now, until we engage with the agency on the various mechanical processes of timing of putting it into the review process. We can't really fine-tune that guidance. But in general, the accelerated assessment process is about 2, maybe 3 months out of the total process that can be cut off in terms of the timing and how the reviews go. Obviously, in order to get a assess -- an accelerated assessment both rapporteur and co-rapporteur need to support that designation. And in fact, they need to advocate for it to the full CHMP internal board. And so it's a informal designation that's led by rapporteur and co-rapporteur, but that has the support -- or needs to have the support of a broader base of the voting members that determine the review of the products. So we view it as a really wonderful and positive feedback from the European Regulatory Agency, which is very tough to get. Your first question, refresh -- was what again? Katherine?

Y. Katherine Xu - William Blair & Company L.L.C., Research Division

Sorry, yes. Sorry, I'm just wondering, you're enrolling only the non-small cell lung cancer patient not in the Phase I portion. I'm just wondering does that mean that you identified the MTD and DLT out of the non-small cell lung cancer patients, what kind of patients -- are you identifying them or start identifying them by molecular target at this stage already?

Harvey J. Berger

Katherine, thank you. We have to back to the design of the trial. The Phase I portion of the trial, had we wanted to, we could have enrolled all end stage pancreatic cancer patients to just put it at the extreme. There is complete flexibility on the Phase I portion of the trial, because the goal is really determine the MTD, determine the DLTs, determine the pharmacokinetics. Having said that, at our last call, which you may or may not been on, I think you weren't, we said that now predominantly lung cancer patients were enrolling and we've also indicated that now ALK and EGFR patients were enrolling pretty regularly. That does not mean or shouldn't be interpreted to mean that we have either the MTD or the DLT. It doesn't mean anything with respect to that. The Phase I patients do not have to be genotyped. We obviously have good information on their genotypic presentation. But in the Phase II portion, they must be genotyped for entry into the Phase II cohorts. In the Phase I, we can go based on the historical data and to the extent we can get additional genotypic data that's great and we try to obtain that. But the goal here is to get clinical proof of concept, of course, but as a primary goal are the DLP, MTD, pharmacokinetics and other parameters and those we are obtaining. We have not indicated nor should you conclude that just because we're enrolling patients with non-small cell lung cancer or patients who are EGFR or ALK-positive that we have, in fact, identified either the DLT or the MTD. You can't draw that conclusion. So let me thank you before we move on, just welcome you, Katherine, I appreciate your initiating coverage and look forward to your questions going forward.

Operator

And your next question comes from the line of Ryan Martins from Lazard Capital Markets.

Ryan Martins - Lazard Capital Markets LLC, Research Division

I just wanted to ask you around the review process in Europe for the diagnostics, can you give us some color on how that process occurs in Europe? And follow-up is, it clearly seems that you have been able to push the dose beyond 120, are you still going in the 30 mg increments or are you flexible in terms of how you can increase the dose beyond the 120 mgs that you're looking at -- that you've looked at?

Harvey J. Berger

Sure. In Europe, there is no regulatory process at the moment for the diagnostic. And in fact, the filing of the PMA for the diagnostic only applies to the US. Obviously, MolecularMD will make the diagnostic test available or, I think, continue to make the T315I testing available in Europe. But there really is in no obligation whatsoever at this point in time to have a diagnostic test in Europe that is officially approved. And on top of it to the extent that there would be an approval in Europe, it would be a CE Mark which is a completely different process than a PMA in the U.S. So this is one place where the regulations and guidance completely diverge. And so the focus for the diagnostic has been entirely in the U.S. Obviously, if the European Regulatory Agency were to decide a year from now that they would like approved diagnostic, we would be with our partner MolecularMD in an excellent position to give them whatever they want. It would clearly pass CE marking today, given that we believe it will be PMA approved in the U.S. So in terms of the dosing in the 113 trial, the protocol is originally posted and filed on clinicaltrials.gov has 30 milligram increments for the first 4 dose levels 30, 60, 90, 120. There's nothing in the protocol then that is explicit about the increments going forward. Obviously, once you establish a feel for the drug which to supply to any drug, not just 113, you can start to go up in much larger increments. And just to give guidance, I'll give a textbook answer rather than one specific about 113 or any of ARIAD's drugs. Once you get to appoint of, say, you've been in a couple of dose levels, any other good comfort level with the drug, you frequently go up, you either double the dose or half double the dose. So let's say, your last dose is 100, you could go up to 200 or more often you would probably go up to half of that, so you go from 100 to 150. You would then probably take half of that 75 and go to 225. Obviously, it's all dependent upon the realtime assessment of what you see. So there are no rules. The protocol is designed in such a way that so long as the investigator support it, and you make thoughtful clinically relevant decisions about the increments, you have flexibility within those guidelines, which I just described, which are largely more in a good practice, good clinical trial design and we've obviously used those sort of criteria in escalating past 120. We'll provide all the details of how it's been done, what the dose levels are and where we are at the time of presentation at the end of September.

Operator

And your next question comes from the line of Michael Yee with RBC Capital Markets.

Michael J. Yee - RBC Capital Markets, LLC, Research Division

Harvey, a question on 113 and then question on ponatinib. On 113, I know you went through a lot of dosing and walk through some of that. Do you think that you're in the therapeutic dose ranges for EGFR? And how should we think about that if you're going to start a Phase II by end of the year, I think about the 3-by-3 design, I would think we're in the range. How should we think about activity in EGFR? Also, you mentioned you would have some history on EGFR patient, do you know or can you say if you have T790 patients in the study? And then on ponatinib, I know you filed and you were looking for -- can you just tell me what type of specific label you've actually filed for? And do you think it would be more broad or just the inclusion criteria?

Harvey J. Berger

Sure, Michael, thank you. On 113, the way you need to think about 113 really is in the context of the therapeutic levels for inhibition of ALK, inhibition of EGFR, both inhibition of the primary target 113, the translocated version and then the mutated versions with respect to EGFR, you want to inhibit EGFR, the oncogenic conformation, but not the naturally occurring form of EGFR and you want to as well inhibit the mutants of EGFR such as T790M that being not the only mutation that exist. But that's a good example. So there are over -- there are bands, if you will, of ranges of therapeutic activity and concentration that are needed in order to inhibit each of those targets. The ranges for ALK and EGFR overlap. And the goal is to have a dose of 113. That's above, meaningfully above the therapeutic range -- excuse me -- above the concentrations of each of those so that you have a concentration of 113 that well exceed the levels you might need for ALK and the levels you might need for EGFR. And so that's clearly the goal, that's clearly where we're headed. And our plan is to, again, get to the dose-limiting toxicity, have clear understanding of what the maximum-tolerated dose is. And exactly in the same way as this concept works for ponatinib to have a dose that's associated with the concentration that's well above the overlapping ranges of activity for ALK and EGFR. And yet, not have toxicities of one affecting the other. So there's no reason to think that we can't be at a concentration of 113. That's well above what's needed for each, but has none of the side effects or lack of tolerability associated with one or the other of the target. So that's where we're headed. We will be able to provide additional guidance on that when we actually present the trial. T790M, obviously, we are identifying patients who have a history or have documented T790M mutation and they are a part of the trial and will provide data on those patients along with the other patients in the trial that are either EGFR-positive or ALK-positive, as we go forward. With the respect to the label, the clinical trial focus on patients who are resistant or intolerant to prior therapy with tyrosine kinase inhibitors as the data have been presented most of those patients have become resistant or intolerant to nilotinib and dasatinib through various numbers of treatment and regimen. And we'll -- we're obviously -- we have built the regulatory filing of the clinical data and of the strength of a PACE trial. I can't really say much more about the scope or the design of the label. We will reserve that discussion to a later time when we are close to having agreements with the FDA on the scope of the label and the relationship of clinical data to the breadth of the label. But certainly, we are working hard and will work hard with the agency to be sure that the final label reflects the strength and robustness PACE trial data.

Operator

And your next question comes from the line of Joel Sendek with Stifel, Nicolaus.

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

So I wanted to ask you about the EPIC trial, Harvey. So a couple of questions, you went in great detail, thanks for that on the interim analysis, it seems like you're pretty confident in that. I just want to pin you down on that. I guess, it seems to me that you have a really strong chance of meeting that. And then my follow-up is, you said in the prepared commentary you could file for full approval 6 months earlier than otherwise. What would the base case be? I mean, how long would you have to -- would the study run to regular completion, just if you can help us with that?

Harvey J. Berger

Sure. Let me just correct something you said at the end and then I'll come back. It's not full approval that you could file for early, it's accelerated approval. Full approval requires the 5-year MMR data. So we're talking entirely about accelerated approval, which is exactly the path in nilotinib and dasatinib took with their comparable randomized trials. Okay. So let me come back. The confidence in the interim analysis. You put interim analysis in the trial because you think it makes sense. We've powered the trial approximately. We didn't try to skimp and come up with a -- the smallest trial possible. You've heard me say this on -- before in other setting, I don't think there's any benefit for a company like ARIAD or them or anyone to try to design a development program with the fewest patients possible. That's where you get into big trouble. So we've designed the trial just like Bristol and Novartis designed their trials properly powered, properly sized so that you can detect the appropriate differences. Now we have the advantage and that we have 2 excellent estimates of the target of the nilotinib control group response rate. Frequently, you don't have that, you don't really know what the control group's going to do. And here we have plus the 500 patients in 2 randomized trials that gives us a very good estimate of the target comparative group. We then took the most conservative approach so that we assume that Gleevec or imatinib did the best it has ever done. So that we've set a very high bar for ourselves by virtue of assuming Gleevec does great. We could have come up with half the number of patients, if we assume that imatinib did the worst it's ever done. But that doesn't make sense in terms of the designing of programs. So we've designed the program with a focus on how do you design the best trial and be smart about the available data? Confidence in the interim analysis? I mean yes, we have confidence in it. We build our program around the base case and would look at the successful outcome at the interim analysis, giving us the chance to file potentially 6 months earlier is a homerun outcome that I think is certainly possible. I think I have confidence in it, but we run the company and build the story, and build our business around the base case and look at the interim analysis as upside. So if we just do the simple timing for accelerated approval, we began enrollment. We've guided that we think full enrollment will be completed by the end of next year. Obviously, we're going to try to do it in less. But that's again our base case. Yet, we would have to follow in a conservative approach, the very last patients for 12 full months. That takes you to the fourth quarter of '14 and that then if you assume several months for analysis presentation and filing and review, approval in sometime in the first half of 2015. On the other hand, with a interim analysis that's positive. You could probably knock 6 months off of that and probably the best case would be the end of 2014. Am I -- are we going to turn heaven and earth to try to get approval by the end of 2014? Absolutely there are a lot of benefits for doing that, every 6 months on the market really matters. It dovetails better and earlier relative to when Gleevec becomes generic, imatinib in 2015. So certainly, we want to get approval in 2014. But the base case is first half of 2015.

Operator

And your next question comes from the line of Eun Yang with Jefferies.

Eileen Flowers - Jefferies & Company, Inc., Research Division

It's actually Eileen dialing in for Eun. My question is on your plans for 113 and EGFR mutated lung cancer. Do you anticipate a future trial with compare 113 and EGFR naive patients or would you focus on EGFR resistant patients? And if the trial is in resistant patients, would you potentially use Alimta as a comparator?

Harvey J. Berger

That's a lot of questions so I'll blend it into one. The choices that exists you've outlined very well with a positive move forward for EGFR. In the EGFR side of 113, the 2 major options are a trial in which you go early in the course of the disease and not wait for resistance or you take patients who have become resistant who have failed, Tarceva or other EGFR inhibitors. If the profile in the clinic of 113 matches its preclinical profile, that is no inhibition of the naturally occurring form of EGFR, the natural confirmation. And thus, none of the side effects associated with inhibiting the natural form that is no rash and GI side effects, you would obviously have a significant benefit to the patient for any use of EGFR inhibitor including upfront. That is a big undertaking and may not be the best or fastest route to get the EGFR inhibitor product to the marketplace. The big clinical need and the place where you would have a significant unmet medical need is in patients who failed erlotinib or other EGFR inhibitors. And we know that 50% of the patients who fail Tarceva or other EGFR inhibitors fail due to the T790M mutation. So you have a very large well-defined population that can be identified with a single biomarker of T790M for which there are no good therapies available. Certainly, no therapies with an acceptable safety and tolerability profile. So it's much easier to think about developing 113 along the EGFR profile on in patients who have failed. And thus, become resistant to currently available EGFR inhibitors. If we have to run a randomized trial to achieve that, Alimta would be one of the choices that you would consider and we'll make that decision and the design of the trial once we have the data, a little more data and are in position next year to finalize those decisions. But I can tell you, and this is a broader comment to everyone, we are already working very hard on -- assuming, we jumped into the -- into a registration mode next year, earlier rather than later, we already are working on the design, structure and plans for registration trials both on the ALK side as well as the EGFR side. So there's a lot of planning work already on going and in place. It will be, in part, driven by the data. And I don't rule out that we run 2 trials, 1 for registration as an EGFR inhibitor and 1 for registration as an ALK inhibitor or one or the other. We'll make that decision next year and we'll make it as early as possible next year, with the goal of starting one or more of the trials as quickly as we possibly can. We realize these are competitive areas, there are other drugs in the space. And I think one thing we've been able to demonstrate, I think, most all of you know, we can move very, very quickly on the initiation of big trials and get them done quickly. And I think we can compete with the biggest and the best of our competitors in doing that, and I have every expectation that we will.

Operator

And your next question comes from the line of Ying Huang with Barclays.

Ying Huang - Barclays Capital, Research Division

So, Harvey, I just want to ask a little bit further on the interim analysis for EPIC trial. What is the hurdle for you to file early? Is it the same hurdle for the regular filing? And then next question is have you guys seen any difference at all in terms of toxicology findings from 30 milligrams to 120 milligrams for the 113 trial here in terms of toxicity you have seen or in terms of the grade of any toxicity at all?

Harvey J. Berger

On the EPIC trial, the interim analysis, we haven't disclosed any of the p values or any of the hurdles that are necessary for designating a significant outcome. We have filed with the regulatory agency a comprehensive detailed statistical analysis plan. It has been reviewed by FDA statisticians. It includes the interim analysis, the primarily analysis, the secondary analysis, the analysis for accelerated approval, the analysis for full approval at 5 years. It addresses all of the statistical hurdles that are necessary to achieve each of those. Having said that, as a matter of precedent, we have not in the past, and don't plan to now disclose all of the different p values for each of those. What I can assure you is it was done with complete input and discussion with the regulatory agencies and is entirely mainstream standard approach to defining specifical differences. But we're not going to disclose the specific p values for interim versus final for one endpoint versus the other. But it's been done appropriately, correctly and in the context of the optimal design of the trial. In terms of tolerability or toxicity in the 113 trial, we have not disclosed any details about tolerability, safety or toxicity or [indiscernible] use. At any of the dose levels that have been studied up to May at 120 milligrams a day or subsequent to May at doses above 120. Stay tuned come to Vienna.

Operator

And your next question comes from the line of Mike King with Rodman & Renshaw.

Michael G. King - Rodman & Renshaw, LLC, Research Division

I wanted to ask about ponatinib launch. Two questions, one is the gating items to final approval my guess is FDA -- if it's not any bit kind of a profile of the drug that the FDA would like to get out well before PDUFA date. So is the gating factor the CMC section, is the approval of MolecularMDs test, is it some other item, et cetera? And then the second question is given the financial guidance, it looks like you may have to reduce spending in the subsequent quarters, will you be investing appropriately in the launch if you have to dial back to spend a little bit?

Harvey J. Berger

Sure, the gating items on approval of ponatinib in the U.S. are relatively straightforward. In that, they are review of the file. The FDA's had to file and they'll file it on a of couple of days. So I don't think the gating items are MolecularMD, because as we've said all along, whether or not we have a diagnostic tests for T315I has little to do with where we are focused the indication. It's part of the story, as you know, and we've talked about this. So MolecularMD, I don't think is on a critical path. Having said that, I would be amazed based on the feedback we've got in MolecularMD has gotten that they are in any way the limiting factor. They've done a beautiful job filing a first-class PMA for their diagnostic test. But look, I'm not as close to their filing, although we work closely with them, they've done a fabulous job in every interaction we've seen. But it's not a gating item, no matter what. In terms of the CMC data, the CMC data, the CMC data will have little if anything to do with the timing of approval because we'll provide those data during this quarter, which means August or this month or next month. And so it's not really on the critical path either, obviously, we have to file those data, but there is -- I put it at virtually new -- the likelihood that there's file that. So it's pretty straightforward. That's also not a critical path. So I think what's the critical path is the FDA reviewing the file. They are very interested, as you would guess, given their suggestion and request to file a rolling submission to buy 1, 2 even couple of months head start. They're working over the summer, as you would expect, and putting a lot of effort into the ponatinib review. We've had a wonderful and open and scientifically rigorous interaction with the agency during the preparation and lead up to the filing. We've met with them on many instances. They are very atuned to the data, to the manufacturing, to the foreign talks. So there are no surprises, we believe. So I think they're ready and excited about the review process. So in the next 2 months, we're going to know where we stand between now and September. We're really going to know how fast things are going to go. We, obviously, will be ready and prepared to answer any questions they have, because no matter how good the file is you do get questions, and we're ready to go and answer those questions. So I think you're going to see the review process go very smoothly, and I don't see any impediments to a rapid assessment of the file. We're still guiding first quarter next year and I think we're quite comfortable with first quarter guidance. In terms of launch plans, the one think we're certainly not going to cut back on is funding for commercial launch. I certainly would not put up with being on a call 6 months or 9 months from now within inadequate launch and somebody said, you should have funded it better. That's just not an acceptable way to run the business. We'll manage our funds appropriately, the Merck milestone, we cut some expenses already. It's partially offset. It's not in commercial. Commercial is going to get funding it needs to ensure one of the best launches ever and to ensure that we are successful as we take ponatinib out of the gate and bring it to the patients here in the U.S. first end then next year in Europe. The commercial team has, is going to have and has had the resources they need to deliver on the potential of the drug. So we'll find ways to make that all work.

Operator

And your next question comes from the line of Phil Nadeau with Cowen and Company.

Philip Nadeau - Cowen and Company, LLC, Research Division

If it's okay, I'm going to, actually, reverse the order of my questions with the follow-up first and the real question second. The follow-up, Harvey, just in regards to the comments you just made, can you remind us of the technicalities of the PDUFA date here, is that assigned in reference to when the initial data was sent into the FDA or will that be assigned in reference to when the CMC materials submit to the FDA? And then my second question is I'm trying to get a sense of how MMR should improve for the ponatinib from refractory patients to naive patients. Do you have any sense of how that level trend and maybe more specifically, do you have any sense of what the MMR would be for the [indiscernible] on refractory patients?

Harvey J. Berger

In terms of the PDUFA date, the official determination of the PDUFA date comes when the file is formally designated as complete. That means the PDUFA date, per se, would be designated formally at the time we submit the remaining CMC data. But what usually happens in a rolling submission is the agency doesn't even open the file until it is complete. What is totally different here and this is at the FDA's request, is that they wanted us to file rolling submission so that contrary to their usual approach, they have begun the review already of the file. And so the timing of the PDUFA date in our case may have less significance or meaning than in many instances. The MMR rate, as you know, the MMR rate in the PACE trial and the immediate follow up of 9 to 10 months is 30%. That's already well into the range of the MMR rates of 12 months for imatinib in the newly diagnosed patients. That's -- the 30% rate is pretty remarkable in a highly resistant/intolerant population. And we do know that MMR rates are significantly higher in newly diagnosed earlier stage patients than an end stage or more advanced patients. So we have every expectation that the MMR rate will continue to increase. In the -- as a comparison in the PACE trial, when you look at the best outcome in the prior line of therapy, i.e., the best MMR rate in the nilotinib or dasatinib failure levels, the MMR rate was 3%. 1/10 of the MMR rate for ponatinib. So in the PACE trial comparing the same patients, ponatinib had a tenfold higher MMR rate than nilotinib or dasatinib. Now, we're not going to probably have a tenfold difference in the newly diagnosed patients, although if we did, this would be very simple. But I think it highlights how much different the MMR rates or ponatinib could be relative to experience with the other drugs. It's hard to know what the MMR rates will be for the nilotinib or dasatinib because they weren't measured in all of the trials. But if you compare, if you look at the MMR rates on those drugs, in the 12-month timeframe, they're in the 40 to -- let's call it, 40% to 45% level at 12 months.

Operator

And your next question comes from the line of Howard Liang with Leerink Swann.

Howard Liang - Leerink Swann LLC, Research Division

Harvey, in terms of the launch, why do you need to be ready by October 1? And do you expect a panel?

Harvey J. Berger

October 31.

Howard Liang - Leerink Swann LLC, Research Division

31st, I'm sorry.

Harvey J. Berger

That's right. Okay. That doesn't mean every single sales reps is going to be on payroll on October 31. That may or may not be the case. But every other part of the commercial infrastructure, people, distribution chains, supply chains, manufacturing chains, MSL paths, all of those things will be ready on October 31. Clearly, some of the reps will be on board on October 31 to begin training. Whether it's all of them or some of them will be determined by the actual status of the filing. You need to have your reps on board a couple of months before you actually going to launch in an ideal setting because they certainly -- even if the world's most experienced reps and have details other related drug, they need to understand ponatinib, they need to be trained, we have a very sophisticated training system, that we have put in place we're going to test the reps, we're going to put them through their paces with -- having them detail the product to physicians as part of their training. So that takes a bit of time. So October 31 that gives you 2 months left in the year, you then have the holidays. So whether we have approval at the beginning of the first quarter or the middle or someplace in the first quarter, we want to be ready to go ahead of schedule, if the FDA gives us an earlier approval, which we can't plan on, but certainly we have to be ready for. We don't want to wake up at that point in time and say, oh, my goodness, how are we going to distribute the drug and what sort of pharmacies are going to be the access route? We need to be ready, because I am not going to put up with anything but a world-class launch of ponatinib. This is a phenomenal drug, and I simply don't want to be looking back and saying, there goes another one of those not-so-good launches by small companies. We are not going to do that. So we are going to be ready, and we are going to do a great job. Our leadership in commercial led by Marty Duvall is ready to go and we'll demonstrate our ability to compete effectively in the CML space with Bristol and Novartis on the other side of the table and to win the hearts of the physicians who are going to prescribe this drug.

Howard Liang - Leerink Swann LLC, Research Division

And the panel, whether...

Harvey J. Berger

Oh, panel? If I had to guess, I would say we're not going to have a panel. The data are pretty clear. FDA tends to use panels when there are major questions outstanding. If there is a panel, it doesn't mean there are problems. The FDA has other drugs in the CML space under review, which haven't done quite as well in their clinical development as ponatinib, both sunitinib and the ChemGenex drug. I mean, it isn't impossible to think there'd be a panel that looks at the CML resistant-intolerant population. My guess is there won't be, I really doubt it, but we'll be ready in either case. If there is a panel, it gives us an opportunity to showcase what we think our extraordinary data on ponatinib based on the PACE trial and we're ready to go in either circumstance.

Operator

You're next question comes from the line of Cory Kasimov with JPMorgan.

Karen E. Jay - JP Morgan Chase & Co, Research Division

This is actually Karen for Cory. Just one quick one on ponatinib. I'm just wondering if you have any updates on the front line investigator such as Travis [ph] being run at M.D. Anderson and whether or not it's fully enrolled, if we might see some part of interim data next year?

Harvey J. Berger

The front line trial at M.D. Anderson only started rolling patients a couple of months ago. While I'd love to say that they can enroll all the patients in 2 months, I think reality is that trial is going to take some time to fully enroll. I don't know what Dr. Cortes' estimate is of when it will be fully enrolled. I know he's very committed. He is using it as an opportunity, of course, to put a significant number of patients with newly diagnosed CML on ponatinib as part of that trial. But I think we're not in the position to give you any guidance on either when it will be fully enrolled or when or whether they'll be interim look at the data. So we'll know more about that over the next several months.

Operator

And your next question comes from the line of then you Tanya Joseph with Merrill Lynch.

Rachel L. McMinn - BofA Merrill Lynch, Research Division

It's actually Rachel. I hop on a little bit late. Harvey, you were talking about the launch and you're not going to underfund it. You want this to be a really solid launch, but I just wanted to check in some of the expectation standpoint, when we look at the numbers for the CML market, a good 2/3 are outside the U.S. And these companies that are launching are in a big multinational pharmaceutical companies. So how do you think about the European side of the business? I guess both from a timing standpoint, the approval looks like the submission is a little bit later. I would assume that the review cycle will also be lengthier. And then just given the current macroeconomic environment in Europe and country-by-country launches, should we, mean -- be a little bit more conservative in the European launch trajectory relative to other CML drugs launching in that space?

Harvey J. Berger

I don't know if you were on the call we talked about the accelerated assessment in Europe. But -- the -- let's talk about Europe first. We've guided that we expect ponatinib to be approved by the EMA in the second half of next year. We haven't change that guidance. In addition, we have recently been granted the accelerated assessment designation in Europe which is extremely unusual. Very few drugs have gotten that. It's a new process as well. We expect that, that will take 2, maybe 3 months, of the total review process in Europe. So that 2-plus months impacts on when in the second half of next year we'll actually have the approval. As you point out in Europe, approval is only step one, you then need to get pricing and reimbursements on a country-by-country basis, allowing you to launch effectively in each of those countries at an agreed-upon price. That's the process nothing has changed. The filing in Europe is actually ahead of schedule. It's not delayed. We've always said that it will be filed roughly at the same time as the U.S. filing. I expect that it will be filed roughly within the month of the U.S. filing. The way things work in Europe, as you may know, there are specific allowable filing dates. And if you file 28 days before that date, the actual date of registration in the system is the predefined date there. It's a much more formalized filing time. We have a filing date that has been identified and agreed to in Europe. You agreed to it up front before you ever send in the filing, and before you meet with the rapporteur, we have agreed to that long ago and so we would be right on track for an imminent filing later this quarter. But roughly a month after the U.S. filing to put us in a position to meet those internal time lines of the EMA. In the CML space, certainly, the U.S. is about a third or a little bit more of the global market with the core of Europe and Japan being the next 2 largest areas. The rest of the world outside of Europe, Japan and the U.S. is a very small part of the value of the CML market. And so the overall market is driven by U.S. the core European countries and then Japan. We will be initiating clinical products in Japan shortly, as we've guided in the third quarter. And we will then, probably in the fall, provide guidance on the timing for submission and likely regulatory approval in Japan as well. We'll probably do that at our investor and analyst meeting. So yes, there are major companies that we're going to go up against in the U.S. and in Europe. We are not concerned about that competition. I'm not sure of being a multinational large company with multiple drugs and lack of focus gives you any benefit whatsoever in commercializing drug like ponatinib. I would argue in contrast that a dedicated focus sales organization that wakes up every morning, thinking about how I'm going to make a difference in the lives of CML patients who are resistant and intolerant to available therapies, who are going to be commercializing ponatinib, I think, they're going to have a huge advantage. There really is little, if any, advantage and maybe disadvantage, I think, to being a large multinational global company. Now when we got into that newly diagnosed patient population, 2 years out, we're going to obviously have to resize the commercial organization to effectively get to the prescribers of patients with newly diagnosed CML. That's part of the plan, but that's going to be driven obviously of successful launch of the drug and successful use of the drug for 2 years or so in the setting of resistant-intolerant disease where I believe the clinical data clearly indicate that ponatinib is, by far, the drug of choice for those patients. So I think we're very well-positioned. We are not at all concerned about having Bristol and Novartis on the other side. And I think we will take them on effectively and effectively launch ponatinib first in the U.S., which is our initial focus and then starting in the second half of next year, country by country, in Europe. So the ramp, will be modest in the first year. You got to get the patients in. We've identified the patients that are the likely targets. We've shared that broadly. We know who they are. We know who the prescribing docs are in the U.S., and we're ready to go.

Operator

And your next question comes from the line of Echo He with Maxim Group.

Echo Yinghui He - Maxim Group LLC, Research Division

My first question is about the EPIC study. Harvey, you just mentioned that the study is designed to have a 90% power to detect the 15% absolute improvement in the 12-month MMR data, the -- in comparison to previous trials with nilotinib and dasatinib, the absolute improvement in percentage was one, 18%, the other one was 22%, I remember. Do you think you would potentially run into some risk when talking to doctors, oncologists data how you compare ponatinib to these 2 drugs? And especially we generally feel like it should be a more potent drug? Now it's the first one. The second question...

Harvey J. Berger

Let me answer that first, just so I don't forget all the details.

Echo Yinghui He - Maxim Group LLC, Research Division

Okay. All right, okay.

Harvey J. Berger

Sample size determination has nothing to do or virtually nothing to do with the size of the difference that you may ultimately see and what is clinically significant. The 2 trials, nilotinib and dasatinib trials were designed to show the 15% absolute difference and they both met that endpoint at 12 months and exceeded it. We're just designing the trial to make sure we have an adequate power to have a similar sort of difference. We expected the ponatinib will do much better. We expect that we probably could run a much smaller trial and still reach a statistically significant difference because the expectation externally and internally. And as you point out, the ponatinib is a much more potent better drug that will have much better results versus Gleevec than either nilotinib or dasatinib were able to achieve. But the sample size determination really is entirely -- to be sure, we have the right size. And for all intents and purposes, the design of the trial is a mirror image of the nilotinib trial in terms of number of patients, randomized one-to-one. So if we have a 15.1% absolute difference versus Gleevec that was highly significant, I would say we haven't done what I expect or what this drug likely will do. But it's really sample size determination. So I wouldn't think that we'll ultimately going to try to commercialize and compete with the same sort of differences. That's the minimum, and that's really to determine sample size.

Echo Yinghui He - Maxim Group LLC, Research Division

All right, I understand your optimism. Okay. And the second question is a financial question, just what approximately you expect to spend on cash expenses on the new commercial sales force or this commercial launch preparation? And what the cash expense approximately in the European headquarters this year?

Harvey J. Berger

We haven't disclosed the details of any of those numbers. If you look at our overall guidance, that includes establishments of a commercial organization in the U.S. that includes establishments of the European headquarters, establishment of ARIAD in Europe, establishment of ARIAD in each of the major countries in Europe, initiation of all the clinical trials worldwide that we've talked about. It's all in our guidance. And we, at the beginning of the year, divided the guidance into SG&A and into R&D. Of the G&A spend, projected for 2012 is about $55 million. We indicated that approximately half is for the commercial organization this year. Obviously, next year the mix may change with the full sales organization on the ground and obviously doing that in the U.S. and Europe. But the numbers for this year are the ones that we've guided.

Operator

And there are no further questions in queue, I'd like to hand the call back to Dr. Berger for closing remarks.

Harvey J. Berger

Great. Thanks very much for everyone -- to everyone for joining our call. As you can see, third quarter is going to be very busy, continue to be busy in fact. And I look forward to seeing many of you at our upcoming fall investor conferences. And having a chance to discuss the 113 data from ESMO with you on our special investor call coming from ESMO on September 29. Thanks, very much.

Operator

Ladies and gentlemen, that concludes the conference. You may now disconnect. Have a great day.

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