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Alcon has tremendous competition in the contact lens field from Johnson and Johnson Acuvue contact lenses, and also Coopervision. Also there is such a huge move toward daily disposable contact lenses that Alcon’s Optifree has to be suffering. Optifree is used to disinfect contact lenses and isn’t needed anymore with daily throw away lenses.
Now we know why Rachel McMinn left Merrill Lynch to join Intercept Pharmaceuticals.
Bidu when it split 10 for 1 in 2010 was in a strong uptrend, but it went down for four or five days right after the split. Then it went sideways for a few weeks before it continued its strong uptrend. Apple may be different but it too may need a few days to stabilize or go down here. Then it can continue the strong move up based on fundamentals and new products. If it goes straight up here it would be a little surprising.
Why is Pharmacyclics so strong today? Is that a good buy at these low levels?
Biomaven, are you still bullish on pcyc here? It has come down a huge amount. Is this a buying opportunity?
There was no analysis of Biogen. It seems that Rachel McMinn is no longer the analyst for biotech at Merrill Lynch. She may have left. Many of her stocks that she analyzed are under review, even Celgene.
I agree, Rachel McMinn is a top notch analyst and has every right to be skeptical of Ariad. She was right as you said on Rida, and sees very little profit potential from Iclusig at this time. I have no problem with that.
Rachel added this on December 24
Iclusig price increase as expected
ARIA increased the price on Dec 23 for its leukemia drug Iclusig by 8% to $10,350
for a one month supply. The increase is just ahead of our estimated 6.5% increase,
and consistent with recent company comments that it plans to maintain a modest
price premium for Iclusig over other leukemia medicines (Gleevec, Sprycel,
Tasigna, Bosulif).
Valuation stretched, consensus too high
We maintain our Underperform rating as we believe current valuation bakes in
euphoria from the recent announcement that Iclusig would return to the US market.
We currently model $73M and $119M in 2014-2015 sales vs consensus of $87M
and $150M respectively. In addition, we think the bullish discussion in Street
upgrades around Iclusig having option value as a frontline therapy is very much
misplaced, as the safety profile, FDA label, and REMS program do not support first
line Iclusig use outside of a very rare niche T315I population.
Rachel McMinn wrote this about Ariad on December 23.
? Iclusig returns in US for T315I and last line
ARIA announced on Friday that it and the FDA have agreed on a revised product label
for the company’s leukemia drug Iclusig, and that a re-launch of the product would
begin early next year. The timing of the product re-launch was quicker than we had
anticipated, but the end result was as expected: warnings around the safety profile
have been further strengthened, the patients for whom Iclusig is recommended are
significantly narrowed compared to the original label, and the FDA is mandating a risk
mitigation plan (REMS) to limit access to the drug. While we are increasing our 2014
sales estimates to include US Iclusig sales (we had previously removed pending
clarity on market re-entry), our overall outlook for Iclusig is not materially changed. We
are increasing our PO modestly from $2 to $3 to include a higher probability of
success in reaching our projections. We believe the recent steep rise in ARIA shares
over-values the co, and expect shares to decline once the euphoria of bringing Iclusig
back to market fades and investors realize that the co is unlikely to be cash flow
positive in the next several years (and will likely need additional funding in 12 months)
and that Iclusig has limited external strategic appeal.
Iclusig a last line option, niche drug
Iclusig is now indicated as a treatment option for the rare CML patients with T315I
disease or in patients in which no other tyrosine kinase inhibitor is indicated, and the
black box warning describes vascular occlusions of “at least 27%” of Iclusig treated
patients, including the need for urgent revascularization procedures in patients with
and without pre-existing CV risk factors under the age of 50 years. We model $45M
in US 2014 sales, based on exiting 1Q14 with 375 patients on drug, adding 15 net
new patients/month (50% of prior growth rate before label revision). We model EU
sales of $28M in 2014, with global sales reaching $256M in 2018.
Cash needs in 2014-2016
We estimate ARIA ends 2013 with $224M in cash, burns $135M in 2014, $95M in
2015, $55M in 2016, requiring external funding in 2014, 2015, and 2016 to maintain
working capital through what we anticipate will be a slow product launch. We model
a 26% reduction in opex in 2014, with flat R&D expense from 2014 through 2018,
with model increases in SG&A to support an EU launch.
Rachel McMinn posted this on Celgene today. This is
Merrill Lynch report.
Increasing PO on higher sales/EPS estimates
We are increasing our CELG estimates after a careful review of our hematology sales
projections following this year’s ASH meeting. Our new estimates reflect (1) increased
penetration for Revlimid in the US/EU (2) increased duration for Revlimid US/EU and
(3) a steeper Pomalyst sales ramp following the initial launch. Following these
changes, our total product sales estimates for CELG move from $7.3B to $7.6B for
2014 and from $8.5B to $9.1B in 2015, and we are adding $500-$600M in annual
sales to our 2016-2018 projections despite cutting our apremilast sales estimates in
half. Our PO increases from $178 to $196 (continues to be based on 19x our 2015E
EPS). Our long term view on CELG’s growth prospects improved coming out of the
ASH meeting, and we continue to view CELG as a core growth holding.
CELG likely to guide above consensus
We expect CELG to provide financial guidance during the second week of January
for 2014 metrics and also update long term guidance, either updating 2017 or
introducing 2018 guidance. We expect 2014 guidance to be above consensus
($7.4B revs, $7.30 EPS), and ultimately believe CELG should be able to achieve
close to $8/sh in EPS (even if guidance starts below that; we currently model
$7.97). Our sensitivity analysis suggests CELG could increase its 2017 revenue
guidance to $13B (up from $12B), while EPS guidance could increase to the $15-16
range (up from $13-$14/sh, see pg. 3). We arrive at these estimates despite being
significantly more conservative than management on apremilast as we include
share repurchase activity in our model (adds ~$1/sh in EPS). Our 2018 product
sales and EPS estimates are currently $12.7B and $16.80, respectively.
Apremilast remains biggest uncertainty in our view
We do not expect CELG to revise its $1.5-$2B in 2017 apremilast guidance, but we
continue to feel uneasy about the drug profile driving meaningful adoption. We
believe our worry is a consensus view, but are taking the opportunity to cut our
estimates ahead of the anticipated 2014 launch, from $992M to $461M in 2017.
Not good that there is no China Mobile announcement. Short term the stock could drop quite a bit, but that would be a buying opportunity as soon as they make an announcement. Let's hope it is tomorrow, or late tonight.
Any announcements from China yet abut the iPhone? It's Wednesday there now. I'm still worried that there will be no announcement on Wednesday.
Cramer upgraded Apple from a 2 to a 1 in his portfolio Friday night. 1 is the highest level. He had Apple at a 2 rating for many months. He cited Apple as being at an attractive level after the recent pullback and having the right products for the holiday season among other reasons. This could help the stock.
The from Rachel McMinn and Merrill Lynch yesterday.
Next Shoe Drops
?Latest Iclusig update reinforces our Underperform thesis
As part of what is turning into a long laundry list of negative updates over safety concerns for ARIA’s CML drug Iclusig in the past three weeks, the company today announced that it is suspending marketing and sales for Iclusig in the US following a formal FDA request yesterday. In its own release this morning, the FDA issued stringent guidelines for Iclusig use that we believe effectively takes the drug off the market for the foreseeable future, and provides further strength to our view that future Iclusig use will be restricted to highly niche populations that are unlikely to sustain a profitable franchise in the US let alone globally (e.g. T351I mutated and patients with no other options). ARIA’s evident surprise at and disagreement with the FDA’s decision, despite the trajectory of recent events, underscores our decision to downgrade the stock to Underperform - we continue to lack confidence in management's ability to effectively assess the strategic outlook for Iclusig, set expectations appropriately and make critical upcoming decisions that are needed to restore the company on a growth trajectory. Today’s news reflects the first of the additional potential shoes to drop that we had outlined in our recent downgrade note. Other potential disappointments in store include: failure to get FDA permission to broaden Iclusig development (seems obvious after today), drastically altering its global launch plans for Iclusig, FDA refusal to allow ARIA’s ALK inhibitor ‘113 to advance as quickly as the company expects, and failure to right size opex to give investors comfort in future cash needs.
Revised FDA guidelines stringent; underscore likely niche use
Summary guidelines in today’s FDA drug safety communication release on Iclusig are very restrictive and, in our view, signal likely stringent REMS (risk mitigation program) requirements for ARIA. Specific guidelines include: (1) non responding current Iclusig patients should be taken off drug immediately; (2) current patients on drug deemed responders/who lack alternatives will now be required to access Iclusig under an IND/expanded access registry program, which we believe will create onerous work for the physicians and tangibly impact sales; (3) no new Iclusig starts unless all other alternatives are exhausted, in which case access is available only via the aforementioned programs. On today’s call, management articulated its continued hope for a broader revised label than we expect based on all news to date, but also committed to updating investors on market potential in niche populations on its upcoming 3Q call (e.g. T351I).
How do they get out of their new lease on the new building? Do they want to? How about European commitments? Their cash is critical for them to conserve now until they get things back on a simpler track. Almost starting over. How about new hires and commitments? Legal fees, etc. They have a very difficult road ahead.
The report was released at 3:36 pm on October 18, which was Friday.
Rachel McMinn and Merrill Lynch wrote this yesterday about Ariad.
It just keeps getting worse
Equity | United States | Biotechnology
18 October 2013
Date Established 18-Oct-2013
Investment Opinion C-3-9
Volatility Risk HIGH
52-Week Range US$3.98-24.85
Mrkt Val / Shares Out (mn) US$509 / 183.9
? Downgrading rating again, faith is gone
ARIA announced today it is terminating the front line EPIC study for its CML drug
Iclusig. While we had just last week removed all value for Iclusig frontline from our
model, we find today’s news symptomatic of a much larger problem with ARIA that
further weakens our confidence in management’s ability to make critical upcoming
strategic decisions that are needed to restore the company on a growth trajectory.
Additional potential shoes to drop include: (1) a narrower Iclusig label than ARIA is
hoping for either in the US or EU, (2) failure to get FDA permission to broaden
Iclusig development within CML, (3) FDA refusal to allow ‘113 to advance as quickly
as ARIA expects, (4) failure to right size op ex to give investors comfort in future
cash needs. In fairness, the company stated that it will have a more granular
revision of its business plan on its 3Q earnings call in early November, and that all
options were on the table. However, given the company’s poor track record, we are
not willing to give them the benefit of the doubt on successful development from
here. Our PO moves to $2 on a slower global sales ramp and lower probability of
success in achieving our new $295M 2018 Iclusig estimate, and removal of ‘113
from valuation, offset by some additional op expense cuts and less dilution.
Let’s review areas of concern
(1) For 10 months mgmt told investors that the cardiovascular risks included in the
Iclusig label were not of fundamental concern, and that any nervousness was a Wall
Street manufactured issue. (2) On the updated safety release, mgmt continued to
point investors towards the idea that safety findings were in patients with preexisting
cardiovascular risks. (3) Mgmt that felt removal of partial clinical hold by YE
was an achievable goal and that Iclusig had a future in the frontline CML setting. (4)
Today, mgmt was unable to tell investors that frontline CML was uninvestable,
rather that it was uncertain when the company could re-start a frontline CML study.
(5) just recently, ‘113 has been associated with severe toxicities which prompted a
move to dose titrate, and results are not yet available; mgmt today articulated its
goal of pushing ‘113 into a pivotal study; both NVS and Roche have breakthrough
status for their ALK inhibitors and ARIA’s request was rejected. (6) ARIA should be
able to cut op ex to push off cash raise needs until 2015 by our estimate, but Iclusig
is unlikely to drive ARIA to profitability given marketing and discovery needs.
? Ariad Pharmaceuticals, Inc. (ARIA)
Our $2 PO is based on a risk-adjusted sum-of-parts DCF analysis that includes
$2/share for Iclusig and $1/share for cash, further adjusted for 15% dilution. We
use the following assumptions in our DCF: Iclusig global sales in CML of $295M
in 2018, sales out to 2030, no terminal value and WACC of 11%.
Upside drivers: We see potential upside to our valuation from 1) positive data for
'113 and 2) pipeline expansion.
The stop would have to have been set when the price reached 23 or 22.5. It would have to have been placed at 19 or even 18. Not below 17. Even if the stop was placed 20 percent below 22.5 which is more than recommended you would have gotten out at 17.5. 15 percent below would have gotten you out at 19.
One of the lessons to be learned from this disaster is to always use stops. Or at least to acknowledge them and consider selling some of the shares if it hits the stop. Investors Business Daily and the great investor Marty Zweig always said to use stops. Zweig suggested mental stops for OTC stocks. When Ariad hit 22 to 23 recently in September the mental stop should have been aroound 20 or 19 or even 18. I did sell some at 18.5 and 17, but not nearly enough. I knew that using stops said I should get out. But I held through previous drops. My new motto is "Remember Marty Zweig".
This today from Rachel McMinn and Merrill Lynch:
FDA’s Iclusig safety announcement questions risk benefit
FDA’s formal communication to physicians today on ARIA’s CML drug Iclusig
provides another concerning data point for investors on the short and long term
potential of the drug. The FDA is specifically asking physicians to consider whether
the safety risks for Iclusig outweigh the benefits, and notes that adverse events
have been seen across all age groups and in patients with and without cardiovascular
risk factors. While ARIA is focusing investors on the serious cardiovascular
event rate of 12%, the FDA is quoting the total event rate of 20% to physicians.
Implications in our view: (1) the chances of Iclusig coming off of partial clinical hold
any time soon (if ever) in newly diagnosed CML appear dismal (2) we believe ARIA
will be forced to consider revising its position on whether future investment in the
newly diagnosed setting is worthwhile (3) consensus sales estimates for Iclusig over
the next few years, while lowered following the safety update, appears unachievable
(4) Iclusig appears increasingly a niche drug, and we have limited confidence in our
longer term estimates. As such, we are removing the 10% probability of a front line
indication, pushing our PO from $7 to $5.
Quick survey feedback: new patient starts to decline
Before today’s announcement we asked community physicians how the Iclusig
safety update would impact their use of the drug in patients currently receiving
Iclusig and on future prescribing habits. We believe these findings are likely to be
more optimistic than real practice based on specific FDA commentary. On current
Iclusig patients, physicians generally plan on maintaining patients on treatment;
20% will discontinue treatment if patients have cardiovascular risk factors. For
future prescribing, ~45% of physicians don’t expect to alter future patient selection
standards, ~45% of physicians expect to use Iclusig less frequently because there
are groups of patients where the risk benefit is less attractive, and ~10% plan to
stop prescribing until there is more information. See charts on pg 2.
Rachel McMinn and Merrill Lynch:
ARIA shares likely range bound while Iclusig profile matures
We are downgrading ARIA shares from BUY to Neutral in response to unexpected
news that increasing serious cardiovascular events are being observed over time for
the company’s marketed oncology drug Iclusig. Implications of the announcement
are broad and we expect shares to stay range bound until more clarity is gained: (1)
the 20% rate of serious arterial and venous events calls into question the risk
benefit profile of Iclusig outside of a niche CML failure market, which significantly
lowers our long term revenue outlook for Iclusig from $1B+ to $400M and likely
dampens near term uptake as the Iclusig label is amended and physicians more
carefully select appropriate patients; still, we do not expect Iclusig’s approval status
to be rescinded; (2) FDA’s partial clinical hold on Iclusig across all clinical programs
slows further development of Iclusig for at least 6 months and creates substantial
uncertainty on timelines for expansion opportunities for Iclusig; (3) increasing rates
of late toxic events on limited patient numbers makes it difficult to gain conviction on
whether ARIA’s decision to lower dosing to 15-30mg will sufficiently address the
safety profile, and can only be addressed with time. Our PO falls from $24 to $7 on
our updated model changes.
What happened and EPIC timing very lengthened
Updated results from the Phase 2 PACE study, which was the basis of US/EU
approvals, showed an increased rate of cardiovascular events as the median follow
up increased by one year (serious arterial thrombosis events increased from 8% to
12% from 11 months to 24 months follow up). The company’s working hypothesis is
that drug exposure is correlated with these events, and hopes that by reducing
dosing to 30mg and in some cases 15mg that events can be avoided. The ongoing
EPIC study will have immediate dose reductions and needs to be redesigned to
support approval from a starting dose of 30mg with 15 mg maintenance. We
suspect the FDA may prevent further patient enrollment into EPIC until sufficient
follow up can assure a favorable safety assessment
When is new IPad announcement coming? I thought it would be today for a release on October 15.
Merrill Lynch and Rachel McMinn on ESMO:
ARIA, TSRO: next gen ALK data evolving
New data for ARIA’s ALK inhibitor ‘113 showed impressive activity in patients with active brain lesions (8/10 showed radiographic brain improvement; duration of benefit ongoing), and overall activity in Xalkori failures remained robust (N=19/31, 61%). The mixed update on tolerability is that ‘113 is indeed associated with dose dependent increases in hypoxia (shortness of breath) following an early signal discussed at ASCO; however, the events appear to occur early, only at >90mg doses, and the toxicity is reversible with steroid support and drug interruption. All ongoing studies are dose titrating patients with 90 mg for a week and then increasing to 180 mg thereafter. First in human TSRO data for TSR-011 showed initial evidence of activity in Xalkori failures but data are too early to directly compare to other products in development. Overall, there is clear evidence that next generation ALK inhibitors will have a place following Xalkori, but more mature data are needed to gauge where each product will fit in.
The question is how many patients are indicated with ALK. Aren't the numbers small?
There is nothing manipulated about selling when a stock is going down every day. I don't see any more manipulation than if Apple goes down for most of the year or any other stock goes down. When the earnings are there or anther molecule shows serious promise the stock will go up.
This from Merrill Lynch and Rachel McMinn:
Upcoming CML data: hints but no definitive conclusions
Investors are anxiously awaiting new data at the December hematology meeting for
ARIA’s leukemia drug Iclusig to help settle the safety debate sparked last year when
the drug was approved with an unexpected black box warning highlighting arterial
and liver toxicity concerns. The safety debate has created a major overhang for
ARIA shares, as investors grapple with whether Iclusig’s profile will be robust
enough to gain meaningful share of the newly diagnosed CML market. Our
conclusion is that the new data could provide some important clues on product
differentiation, but (1) we don’t expect the safety debate to be settled until Phase 3
results become available in 3Q14 (2) new Phase 2 results should not be
extrapolated to Phase 3, as the center conducting the study has a history of
generating efficacy results in CML that meaningfully overstate Phase 3 results.
MD Anderson CML data not representative of Phase 3
Prior MD Anderson Phase 2 data for Sprycel and Tasigna showed 30-40% higher
absolute MMR rates than what was ultimately demonstrated in Phase 3 (70-80% at
12 months), driven by inclusion of a disproportionately greater proportion of low risk
patients compared to large Phase 3 studies (see pg 3). We therefore expect Iclusig
Phase 2 data to provide a rosier efficacy picture than what EPIC Phase 3 data will
demonstrate. We will look at the MMR time course for Iclusig to see if there are
hints of a superior profile, but these data may not provide us with solid conclusions.
Safety insights so far
MD Anderson is conducting an 80-patient study for Iclusig in newly diagnosed CML,
with the first 50 patients receiving the FDA approved 45 mg once daily dose, and a
newer 30mg cohort. On our recent investor call, the rationale to test 30 mg was
described as driven by the belief that it could avoid unnecessary toxicity and deliver
comparable efficacy to 45 mg, similar to Tasigna. These comments suggest no
major safety signals in Phase 2. Iclusig tolerability has been good commercially
based on our recent oncology survey, but adoption remains concentrated
Background on MD Anderson frontline CML data
The first Phase 2 data for ARIA’s Iclusig for newly diagnosed CML is expected to
be presented at the ASH meeting (abstracts released: Nov 7, late breaker
abstracts: Nov 18, meeting: Dec 6-10). Investors are anxiously awaiting these
results to better assess a potential out of the ongoing newly diagnosed CML
Phase 3 EPIC study (interim top-line results expected 3Q14). It is often the case
in oncology that single center study data paint a more optimistic profile than what
is observed in a large Phase 3 study. We expect this to be especially true in the
case of Iclusig, as prior data for other TKIs in this setting from MD Anderson have
proven to be particularly better than Phase 3 results (see Tables 1, 2).
Key conclusions:
? Phase 2 results show an absolute 30-40% better major molecular response
(MMR) rate compared to Phase 3 data as reported for Sprycel and Tasigna
at 6 and 12 month time points
? Using a more conservative ITT analysis (our estimate based on starting
population), the difference collapses to a 10-20% benefit, showing a peak
MMR rate in the low 50% range at months 6-12
? Month 3 MMR ranges from 24-40% as reported, and is 19-33% based on our
estimated ITT analysis.
Table 1: Comparison of MD Anderson Phase 2 to Phase 3 studies for Tasigna/Sprycel
Tasigna frontline Sprycel frontline
Month N MMR [1] MMR [2] Phase 3 Month N MMR [1] MMR [2] Phase 3
3 50 40% 33% 9% 3 50 24% 19% 8%
6 46 71% 54% 33% 6 49 63% 50% 27%
12 38 81% 51% 43% 12 42 71% 48% 39%
[1] As reported
[2] ITT estimated by BofA Merrill Lynch Global Research N=61 for Tasigna, N=62 for Sprycel starting population
MMR=major molecular response
Table 2: Updated MD Anderson frontline Sprycel/Tasigna experience
As reported ITT calculation (BofAML est)
Month N MMR comMR CCyR Month N MMR comMR CCyR
3 160 32% 1% 48% 3 167 31% 1% 46%
6 155 63% 7% 25% 6 167 59% 7% 23%
12 129 71% 7% 21% 12 167 54% 5% 16%
18 119 69% 14% 13% 18 167 49% 10% 9%
MMR=major molecular response
comMR=complete molecular response
CCyR=complete cytogenetic response
Source: BofA Merrill Lynch Global Research, JCO 2011 publication
MD Anderson data bolstered by lower risk CML patients
Importantly, patients in the MD Anderson studies have a much lower risk status at
baseline compared to the Phase 3 studies (Table 3), which could drive response
rate differences. For the upcoming Iclusig data, it will be important to understand
how these baseline characteristics compare to prior MD Anderson studies to
gauge whether Iclusig could report MMR data that are clinically meaningfully
Table 2: Updated MD Anderson frontline Sprycel/Tasigna experience
As reported ITT calculation (BofAML est)
Month N MMR comMR CCyR Month N MMR comMR CCyR
3 160 32% 1% 48% 3 167 31% 1% 46%
6 155 63% 7% 25% 6 167 59% 7% 23%
12 129 71% 7% 21% 12 167 54% 5% 16%
18 119 69% 14% 13% 18 167 49% 10% 9%
MMR=major molecular response
comMR=complete molecular response
CCyR=complete cytogenetic response
Source: BofA Merrill Lynch Global Research, JCO 2011 publication
MD Anderson data bolstered by lower risk CML patients
Importantly, patients in the MD Anderson studies have a much lower risk status at
baseline compared to the Phase 3 studies (Table 3), which could drive response
rate differences. For the upcoming Iclusig data, it will be important to understand
how these baseline characteristics compare to prior MD Anderson studies to
gauge whether Iclusig could report MMR data that are clinically meaningfully
better than data observed for Sprycel/Tasigna.
Table 3: MD Anderson studies enroll lower risk CML patients
MD Anderson studies Phase 3 studies
Sprycel Tasigna Sprycel Tasigna
Low 81% 70% 33% 37%
Intermediate 13% 23% 48% 36%
High 6% 7% 19% 28%
Note: Sprycel Phase 3 reported as Hasford risk, others Sokol score
Source: JCO 2010 and NEJM 2010 publications
How to think about existing Iclusig data
The most data available for Iclusig comes from the PACE study, which evaluated
patients with resistant CML disease. In that study, there was a correlation
between MMR rate and less prior therapy, with an MMR rate of 53% for the small
proportion of patients receiving only one prior therapy (N=19). It seems
reasonable to us to expect a similar or better outcome for newly diagnosed
patients. However, the caveat is that we don’t know anything about the 19
patients in that one prior TKI group (PACE data not published in peer reviewed
paper yet); if these patients were concentrated in a few centers, that too could be
a product of selection bias and could provide an overly optimistic view of what to
expect for Iclusig in newly diagnosed patients. Nonetheless, we expect even the
one prior TKI failures to have a worse Sokol risk score than newly diagnosed
patients at MD Anderson.
Table 4: Iclusig MMR rates from PACE by prior TKI exposure
Prior therapies 1 TKI 2 TKIs 3 TKIs
N 19 107 143
MMR 53% 35% 31%
Median time to MMR=5.5 months [1.8-19.2 months]
Source: ASH 2012 data presentation
Also, this was a very significant call that Merrill Lynch and Rachel McMinn hosted concerning use of Iclusig, written on September 9th.
We hosted an investor call with two CML physician experts to gauge the latest CML
market trends as well as gain better perspective on the safety profile for ARIA’s
Iclusig. Overall, we believe the call solidifies the bullish view that Iclusig will be an
important therapy over time in resistant CML; the question of how important Iclusig
will be in newly diagnosed CML is unanswerable without knowing how the
efficacy/safety benefits play out in the ongoing EPIC study (interim data 3Q14).
Key highlights from the call:
? Both physicians are using Iclusig directly after Gleevec failure, skipping over the
second generation drugs (Tasigna, Sprycel), on the belief that Iclusig is the
best TKI in CML for resistant disease. However, community physicians are
slower to adopt and this trend will persist for some time; given the rarity of the
disease, community physicians are more likely to reserve Iclusig for third or
fourth line therapy, choosing to stick to drugs with which they have extensive
experience.
? On the specific rationale for adding the lower 30mg Iclusig dose in the MD
Anderson frontline Iclusig study, the investigator noted that first/second gen
CML TKIs have settled on doses that were different than initially tested. With
30mg Iclusig still well above what is needed to inhibit emergence of resistance,
and from prior experience with Tasigna not needing as a high a dose frontline,
he felt that studying the lower Iclusig dose is warranted. He does not view EPIC
as a flawed study design (45mg being evaluated), and emphasized that dose
reduction of TKIs is very common across the CML landscape.
? On Iclusig safety, both physicians agree resistant progressive CML disease
warrants use of Iclusig, regardless of the FDA labeled safety risks. However,
physicians were unwilling to make definitive statements on how safety in the
newly diagnosed setting will directionally compare to Tasigna/Sprycel without first
seeing data from EPIC. One expert noted that the initial Iclusig safety profile is
very similar to Tasigna (CV, pancreatitis risk), making the point that although
there was significant initial concern on Tasigna safety that physicians were able
to gain comfort with time. If EPIC shows a more substantial event risk vs Gleevec
than Tasigna, Iclusig would be reserved for second/third line treatment.
?
What caused Ariad stock to jump over 50 cents in last 10 minutes?
This from Merrill Lynch and Rachel McMinn today.
Call balanced on ARIA’s Iclusig: advantages and challenges
We hosted an investor call with two CML physician experts to gauge the latest CML
market trends as well as gain better perspective on the safety profile for ARIA’s
Iclusig. Overall, we believe the call solidifies the bullish view that Iclusig will be an
important therapy over time in resistant CML; the question of how important Iclusig
will be in newly diagnosed CML is unanswerable without knowing how the
efficacy/safety benefits play out in the ongoing EPIC study (interim data 3Q14).
Key highlights from the call:
? Both physicians are using Iclusig directly after Gleevec failure, skipping over the
second generation drugs (Tasigna, Sprycel), on the belief that Iclusig is the
best TKI in CML for resistant disease. However, community physicians are
slower to adopt and this trend will persist for some time; given the rarity of the
disease, community physicians are more likely to reserve Iclusig for third or
fourth line therapy, choosing to stick to drugs with which they have extensive
experience.
? On the specific rationale for adding the lower 30mg Iclusig dose in the MD
Anderson frontline Iclusig study, the investigator noted that first/second gen
CML TKIs have settled on doses that were different than initially tested. With
30mg Iclusig still well above what is needed to inhibit emergence of resistance,
and from prior experience with Tasigna not needing as a high a dose frontline,
he felt that studying the lower Iclusig dose is warranted. He does not view EPIC
as a flawed study design (45mg being evaluated), and emphasized that dose
reduction of TKIs is very common across the CML landscape.
? On Iclusig safety, both physicians agree resistant progressive CML disease
warrants use of Iclusig, regardless of the FDA labeled safety risks. However,
physicians were unwilling to make definitive statements on how safety in the
newly diagnosed setting will directionally compare to Tasigna/Sprycel without first
seeing data from EPIC. One expert noted that the initial Iclusig safety profile is
very similar to Tasigna (CV, pancreatitis risk), making the point that although
there was significant initial concern on Tasigna safety that physicians were able
to gain comfort with time. If EPIC shows a more substantial event risk vs Gleevec
than Tasigna, Iclusig would be reserved for second/third line treatment.
? On Iclusig efficacy, we were surprised that experts felt the EPIC study is
unlikely to show a substantially greater MMR benefit vs Gleevec relative to
Tasigna/Sprycel (~20% delta). Our view is that the MMR benefit for Iclusig
could be closer ~30%; which the two experts consider to be a difference that
would be clinically meaningful and would potentially secure a place for Iclusig
front-line, assuming a comparable rate of CV events relative to Tasigna.
? On anticipated impact of generic Gleevec, physicians expect to switch from Gleevec
more quickly if payers demand Gleevec upfront. There is a desire to evaluate fixed
five to seven year duration to cut drug costs, but study funding is limited.
Price objective basis & risk
Ariad Pharmaceuticals, Inc. (ARIA)
Our $24 PO is based on a risk-adjusted sum-of-parts DCF analysis that includes
$21/share for Iclusig and $4/share for 113, further adjusted for 8% dilution. We
use the following assumptions in our DCF: Iclusig global sales in CML of $1.1BM
in 2018, sales out to 2030, no terminal value and WACC of 11%. We see
potential upside to our valuation from pipeline expansion.
Downside risks to valuation are: 1) disappointing Iclusig launch, 2) data
disappointments for ongoing/anticipated Iclusig trials, 3) unexpected clinical
strategy requirements for future Iclusig trials, 4) failure to be significantly active in
EGFR lung cancer, and 5) financing risk.
Merrill Lynch mentioned some 90 day breakout charts of which Ariad was one. This was their commentary.
ARIA is a biotech stock that has a big base
in place. The move above $20.30-21.30
resistance breaks the downtrend line
from October 2012. Given the larger
uptrend, this is bullish and favors a
stronger rally to $28-29 and then up to
projected channel resistance at $31-32.
Key support is $20.00-18.50.
I guess when Harvey held that press conference after the Feuerstein piece and said he would buy here around 16 and a fraction, it was good advice. Thank you Dr. Berger.
Merrill Lynch. Contd.
Price objective basis & risk
Ariad Pharmaceuticals, Inc. (ARIA)
Our $24 PO is based on a risk-adjusted sum-of-parts DCF analysis that includes $21/share for Iclusig and $4/share for 113, further adjusted for 8% dilution. We use the following assumptions in our DCF: Iclusig global sales in CML of $1.1BM in 2018, sales out to 2030, no terminal value and WACC of 11%. We see potential upside to our valuation from pipeline expansion.
Downside risks to valuation are: 1) disappointing Iclusig launch, 2) data disappointments for ongoing/anticipated Iclusig trials, 3) unexpected clinical strategy requirements for future Iclusig trials, 4) failure to be significantly active in EGFR lung cancer, and 5) financing risk.
Merrill Lynch and Rachel on Ariad:
Ariad Pharmaceuticals, Inc.
Expert lung cancer feedback
?Key themes in lung cancer drug development
We highlight key takeaways based on our recent discussion with a key opinion leader in non-small cell lung cancer.
Novartis' LDK398 first of second gens to market, but tolerability concerns detract
As data matures for second-generation ALK inhibitors, Novartis' LDK398 has notable side-effects that are likely to relegate it to Xalkori failures, including higher rates of transaminitis and quality of life-impacting chronic GI events that force substantial dose reductions. Expect Novartis to file for accelerated approval by YE in Xalkori failures, suggesting approval in 3Q14; a proposed Phase 3 frontline study is being designed vs. chemo, not Xalkori, for fear of not generating a substantial enough benefit head to head.
'113 looking more competitive, shot at best-in-class ALK inh
'113 is earlier stage in development than NVS, but data generated to date show no apparent liver or meaningful GI issues. The most notable '113 adverse events are respiratory (shortness of breath), and new data at the ESMO meeting (Sept 27-Oct 1) should clarify whether these events are drug- or disease-related. Brain mets activity shows a strong signal for '113, and ARIA will have the benefit of collecting these data in Phase 2 (NVS can't get meaningful data retrospectively). Ability to maintain patients on high active doses should make '113 a better choice vs. LDK398 in Xalkori failures, and bolster the potential to show superiority over Xalkori in future front-line studies. Our expert doesn't expect Chugai's 90%+ response rate to stand over time when tested outside of Japan.
CLVS '1686 groundbreaking for T790M EGFR, '113 unlikely to show benefit
Our expert believes that CLVS CO-1686 data, while limited, shows ground-breaking activity for patients with T790M EGFR mutated NSCLC. However, the 75% response rate may weaken over time, not only due to small numbers tested initially, but also because at least some of the patients tested may have had tumors less dependent on T790M, since they were not dosed immediately after failing Tarceva. As data matures, a response rate of >40% with 6+ months duration of response is considered clinically meaningful. While it is worth testing '113 in T790M, our expert felt (and we agree) that if '113 were to be active in T790M, the signal in the initial Phase 1 would have been strong. First data from AZN's 9291 in T790M is expected at the ESMO meeting as well, and worth watching to understand how the competitive landscape is evolving.
Biotech comments from Rachel McMinn today:
ARIA: CML market leader Gleevec continues to slide
The overall CML market grew 4% year to date, slower than 9% growth in 2012.
Slowed growth was led by a 3% YTD decline in NVS' Gleevec TRx, offset by 16-
25% growth for NVS' Tasigna and BMY's Sprycel and the introduction of PFE's
Bosulif and ARIA's Iclusig. Iclusig TRx in July were 453, which is in line with our
model, 2.5x of PFE’s Bosulif TRx and 1.4x of NVS’s Tasigna in the seventh month
of their respective launches.
How do you know that the sales will more than triple from 2013 to 2014?
She was on the money with Rida having trouble and not getting approved. Her price target has not been met yet whether it was 27, 28, or 26, and she has a buy on Ariad. Not that bad. She is definitely conservative on Iclusig sales and 113. So what. When it gets to 24, her new target, we'll all be happy and she will raise it. At least you know that if she becomes more positive it will be a solid opinion.
Rachel McMinn report. Positive, but lowers price target.
Iclusig continues to gain steam
ARIA reported 2Q US end-user sales of $13.9M, ahead of our $11.5M estimate but
consistent with projections based on the latest US prescription data. Underlying
trends are directionally positive: (1) an increasing number of chronic phase patients
starting (70% 2Q vs. 60% 1Q), which will drive longer avg. duration; (2) an
increasing number of resistant second line patients starting (40% 2Q vs. 25% 1Q),
also a driver of longer duration; (3) guidance of 1,000-1,100 patients by YE
assumes continued steady demand in 2H13. ARIA has also launched Iclusig in the
EU on track with prior guidance, and expects to be in six territories by YE. In
addition to our model changes, we are taking the opportunity to lower our PO from
$28 to $24 on revised prospects for '113 due to increased competition in ALK+ lung
and no value for EGFR T790M given a higher competitive bar.
Iclusig pipeline updates
Of the various Iclusig pipeline updates, MD Anderson's decision to open up a
lower dose cohort in an ongoing frontline CML study is of particular investor
interest. ARIA is cautioning against over interpreting a negative read through on
Iclusig safety, highlighting two key points: (1) the study enrolled much more
quickly than comparable Tasigna/Sprycel studies (underscoring high demand)
and (2) 30mg is the standard step down dose in Iclusig trials and could be
effective as a starting dose. The Phase 3 frontline EPIC study remains on track
for data 3Q14; proof of principle data in GIST is expected early 2014.
Negative '113 news shouldn't impact timing
ARIA disclosed the FDA did not grant ARIA's ALK inhibitor Breakthrough status
due to the small number of patients and short follow up. Despite the negative
news, it doesn't appear to have a fundamental impact on development timing;
ARIA is advancing '113 into a pivotal study this quarter in crizotinib failures and
believes it could be best in class. Meaningful T790M EGFR data is expected to be
available by YE to make a go/no-go decision.
?? Estimates (Dec)
(US$) 2011A 2012A 2013E 2014E 2015E
EPS (0.93) (1.34) (1.65) (1.56) (1.43)
GAAP EPS (0.93) (1.34) (1.65) (1.56) (1.43)
EPS Change (YoY) NM -44.1% -23.1% 5.5% 8.3%
Consensus EPS (Bloomberg) (1.66) (1.25) (0.45)
DPS 0 0 0 0 0
Key Changes
(US$) Previous Current
Price Obj. 28.00 24.00
2013E Rev (m) 48.8 59.0
2014E Rev (m) 113.2 117.5
2015E Rev (m) NA 211.8
2013E EPS -1.68 -1.65
2014E EPS -1.54 -1.56
2 015E EPS NA -1.43
Price objective basis & risk
Ariad Pharmaceuticals, Inc. (ARIA)
Our $24 PO is based on a risk-adjusted sum-of-parts DCF analysis that includes
$21/share for Iclusig and $4/share for 113, further adjusted for 8% dilution. We
use the following assumptions in our DCF: Iclusig global sales in CML of $1.1BM
in 2018, sales out to 2030, no terminal value and WACC of 11%. We see
potential upside to our valuation from pipeline expansion.
Downside risks to valuation are: 1) disappointing Iclusig launch, 2) data
disappointments for ongoing/anticipated Iclusig trials, 3) unexpected clinical
strategy requirements for future Iclusig trials, 4) failure to be significantly active in
EGFR lung cancer, and 5) financing risk.
Why is the stock so strong today? Is it the Rx data?
Thanks. Do you still like mdvn?
Peter, thanks for that post. Can you list your top 5 biotech holdings? Perhaps with price objectives or comments.