Ariad Pharmaceuticals, Inc. (ARIA)
INITIATION
Proprietary Survey Suggests Uphill Battle for
Iclusig; Initiating at Neutral
¦ We Are Initiating Coverage with a Neutral Rating and a $22 TP: Despite robust activity, Iclusig’s belated entrance into the chronic myeloid leukemia (CML) market could limit it to later lines of treatment, particularly in Europe.
ARIA’s AP26113 has demonstrated strong clinical activity in ALK+ lung cancer, but it, too, will likely face a market crowded by established agents.
¦ Our Proprietary Survey Suggests Uphill Climb for Iclusig in US and EU Markets: Doctors in our proprietary survey expect to use Iclusig mostly in the third and fourth lines of therapy. In the US, the second generation CML drugs are preferred in the first and second lines. In the EU, Glivec (EU name for Gleevec) is used primarily in the first line, with second-generation agents
predominantly used in the second and third lines. This is significant because the Iclusig EU label is for patients failing a second generation TKI, potentially forcing Iclusig to third and fourth line treatment.
¦ Not Totally Bearish: While our analysis suggests Iclusig sales could disappoint in the longer term, near-term expectations for AP26113 data are low, providing potential upside on good results, and ARIA could also be considered a takeout candidate for its two proprietary drugs.
¦ Catalysts: Key near-term drivers include: (1) the ongoing Iclusig launch, (2) data for AP26113 against EGFR T790M in Sep/Oct 2013, and (3) interim analysis of the Phase III EPIC trial of Iclusig in first line CML in Q3:14.
¦ $22 Target Price: We estimate the risk-adjusted DCF valuation of Iclusig, AP26113, and year-end 2013 cash at $21/share and $1/share for its pipeline
These are just the highlights. The report goes indepth.
Table of Contents
Portfolio Manager Summary 3
Reasons for Caution—Key Risk Factors 3
Reasons to Be Positive on ARIA 4
Valuation—$22 Target Price 5
Iclusig: Best TKI for CML, but Is It Too Late? 8
Challenges to Near-Term and Long-Term Iclusig Sales 8
Initial Iclusig US Launch Metrics 9
Iclusig EU Approval: Different Label Could Limit Use in Earlier Lines 10
US and EU CML Market Survey 11
CML Patient Pool Similar in US and EU 12
Drug Choice by Line of Therapy 14
Expected TKI Use over Next 12 Months 15
Depth of Response Drives First and Second Line Use of Second-Generation TKIs 18
Longer-Term Outlook: Iclusig First Line Label and Generic Gleevec Available 20
Striking Difference in Reasons Patients Stop TKI Therapy in US and EU 21
Iclusig Is Differentiated More on Efficacy than Safety 22
Iclusig Use in the US Is Expected to More than Double over the Next 24 Months 24
A Growing Prescriber Base for Iclusig 24
Qualitative Observations 25
EPIC: The Next Big Clinical Catalyst for Iclusig 29
CML Overview 33
Ongoing Clinical Development for Ponatinib 37
AP26113 Next Gen ALK/EGFR Inhibitor 38
Clinical Data Support Competitive Activity in ALK+ Tumors 39
A
P26113 for EGFRm NSCLC Still Not Proven 42
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