Biotech Values

[DewDiligence]

ARIA analysis from ‘GregorioAllegri’ on SI; paragraph ‘a’ (re Iclusig’s MoA) and paragraph ‘e’ (re drug holidays) are probably the most contentious sections:

http://www.siliconinvestor.com/readmsg.aspx?msgid=29297578

The FDA's decision to allow the return of ICLUSIG to the market changes the status of ARIA (the stock, not the company) from pure gamble to a trading stock. Pure gamble turned out to be very profitable for me as I doubled down and doubled my money. Now I have cashed in almost everything and intend to get in and out by the chart with a very large stake.

My view of ICLUSIG is basically the same as the FDA's. It should not be used as a first or second line therapy unless Ariad can prove it has some advantage that so far they have not demonstrated. My working hypothesis is this:

a) Ponatinib's inhibition of FGFR2 and VEGFR2 at about the same concentrations as its inhibition of bcr-abl lead to a slow deterioration of the vascular system. Specifically new endothelial cells that are created are defective because of defective proteins in the cell membranes. The median turnover rate of endothelial cells in the average person is perhaps about 1.5 years. In old people this turnover rate is faster and in younger people slower. As defective endothelial cells increase slowly over time the body reacts first with atherosclerosis leading to ischemia and later attempts wound healing leading to thrombosis. Inhibition of FGFR2 in particular (inhibition of fibrin) will in turn cause defective wound healing. With a median duration of response of 10 years or so, ponatinib is going to be a real test of the effect of inhibiting these off target TKs. This paragraph describes my working hypothesis, it is not proven.

b) The PACE trial shows that over the first two years there is no statisically significant difference between patients with and without vascular system AEs. This gives Ariad some opportunity for out of the box solutions to ponatinib's AE problem. That is, Ariad has some time between treatment initiation and median time to life ending SAEs to create a regime that minimizes the AEs.

c) At present, Ariad CCs give no evidence of out of the box thinking. In fact, the FDA's reaction was in part a response to Ariad's aggressive pursuit of first line and second line treatment with ponatinib in the face of mounting evidence of vascular system deterioration. While it is true that ponatinib may significantly increase PFS and OS versus imatinib alone in the front line, no one in their right mind would use ponatinib in the front line as currently prescribed. The true trial would be ponatinib versus imatinib followed by dasatinib if needed followed by ponatinib if needed.

d) As things stand, a competitor or Ariad will come up with an alternative drug to ponatinib that controls all bcr-abl mutants without controlling VEGFR2 and FGFR2. The only question is how long it will take.

e) Ponatinib's only hope is the STIM trial (Stop Imatinib trial) which showed that a significant percentage of patients who had MMR with 4.5 log decrease in bcr-abl DNA for years could be taken off drug, perhaps forever. The mechanism for this is not understood, so it is not known if ponatinib's faster and deeper effect on bcr-abl will lead to a faster and more universal cure of CML. In any case a very long drug holiday (given the long turnover time of endothelial cells) is probably the only way to reverse the AEs. Anticoagulants and antithrombotic drugs will only cover up symptoms of something that will still be getting worse over time. The good news from STIM is that patients taken off drug who regress can be brought back into remission by reintroducing the drug. If Ponatinib cures people within a year of treatment, then the cure is faster than the vascular AEs and ponatinib could be best in class and front line. Otherwise...

f) The future of Ariad is tied up in resolving the early onset pulmonary AEs in AP26113 or finding a new uses for ponatinib or AP26113. Ponatinib in CML appears to now be only a drug of last resort in CML and would be lucky to peak at $500M.

I have decided to turn most of my shares of ARIA into trading shares, including most of the core, as Ariad is currently, by the chart overbought and ready for sideways or down. Hopefully HB does not sell the company while I am 80% on the side-lines... Next catalyst: AP26113 into registration trial or not...