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Brief note on Ariad Pharma going into ASH meeting

|Includes:ARIAD Pharmaceuticals, Inc. (ARIA)
Ariad Pharmaceuticals’ $1.5bn market cap is mainly driven by two drugs in advanced clinical stages: ridaloforimus for soft tissue and bone sarcoma and ponatinib for chronic myeloid leukemia (NYSE:CML) and Philadelphia positive acute lymphoblastic leukemia (Ph+ ALL). The former is partnered with Merck and presented top-line results of the phase III SUCCEED trial early this year. Merck is now on track to file an NDA later this year. Ariad also announced on August 18 that the EMA had accepted the MAA of the drug.
However, the closest catalyst for Ariad is interim data from phase II PACE trial that will be presented at the American Society of Haematology meeting on December 10 - 13. Abstracts of these posters will be available as early as November 7. Ponatinib is a pan BCR-ABL TyK inhibitor for the treatment of patients resistant or intolerant to desatinib or nilotinib or those who carry the T315I mutation of BCR-ABL for whom no treatment exists. Only 2-3% of the patients develop the T315I mutation.
 The lead drug in the CML space is Novartis’ imatinib, which generated sales of $4bn in 2009 and faces two problems: increasing resistance and patent expiration in 2015. Some patients just do not respond to imatinib therapy, while an additional 10-15% of patients who do respond, end up developing a resistance in the first 5 years following the beginning of treatment. For these patients, Bristol-Mayers’ desatinib and Novartis’ nilotinib were developed and approved in 2006 and 2007 respectively.
According to different sources, the general CML market could reach a peak in sales of $9bn by 2015 whereas niche indications such as drugs targeting resistance to TyK inhibitors may get to $900m and the more specific T315I mutation market could reach $500m.
Conclusion: taking into account Ariad’s most developed compounds, their potential market and the disclosed terms of the partnership agreement with Merck, one can easily conclude that the current market cap of $1.5bn does not bear the commercial potential of both drugs. Whereas positive results from the PACE phase II trial at ASH may send the stock higher, we can expect a likely sell-off at some point between Nov 7 and the ASH meeting that may continue over the next few months.
Stocks: ARIA