Staff Writer

Ariad Pharmaceuticals will get a $50 million cash infusion thanks to a restructured deal with partner Merck & Co. Inc,. in which the pharma will shoulder all of the development costs of Ariad's pipeline cancer drug ridaforolimus going forward and acquire rights to the drug.

In addition, Merck will provide retroactive funds to cover Ariad's ridaforolimus costs so far in 2010, another $19 million for the biotech.

So Cambridge, Mass.-based Ariad will see plenty of cash on the front end under the revised deal, and will receive "roughly the same return on the back end" with regard to royalties as it would have under the previous terms, Harvey Berger, chairman and CEO of Ariad, told BioWorld Today.

With the extra $50 million, Ariad anticipates positive cash flows from operations for 2010 in the range of $5 million to $7 million. The company also estimates year-end cash and cash equivalents to in the range of $44 million to $46 million.

Without any additional funding beyond the $50 million up-front payment from Merck and the reimbursed expenses for 2010, Ariad's cash could fund operations into the second half of 2011.

The added cash will allow Ariad to move its investigational pan-BCR-ABL inhibitor, AP24534, into a pivotal registration trial in patients with resistant and refractory chronic myeloid leukemia (CML) in the second half of the year. Ariad expects that the trial likely will take a year to enroll, and the cash infusion from Merck carry the trial for "a very good distance," Ariad spokeswoman Maria Cantor said.

She said the company expects to present data for AP24534 at the annual meeting of the American Society of Clinical Oncology June 4-8 in Chicago.

J.P. Morgan analyst Cory Kasimov said that AP24534 "represents the primary area of focus for most investors in [Ariad] based on highly compelling Phase I data in resistant/refractory CML (and ALL [acute lymphoblastic leukemia])."

Ariad also hopes to file an investigational new drug application for preclinical compound AP26113 next year. The small-molecule anaplastic lymphoma kinase (ALK) inhibitor is designed to target a unique genetic feature of cancer cells, similar to AP24534.

Novartis AG's Gleevec, which is facing a patent cliff, and Sprycel by Bristol-Myers Squibb Co., currently are approved for CML.

Cantor said that while there is a "lot of movement in the CML space," the area of metastatic sarcoma has very few treatment options on the market or on the horizon.

Chemotherapy agents, which have toxic side effects, are available for sarcoma patients, and Ziopharma Oncology Inc. is developing a treatment for the first-line setting. Ridaforolimus, an oral treatment, is aimed at patients who have tried first-, second- or even third-line treatments. It is designed to extend the time when patients are progression-free.

Ariad and Merck entered into the ridaforolimus collaboration in July 2007. At the start of the collaboration, Merck paid $75 million up front to Ariad and since then has paid the firm $53.5 million in milestone payments for the initiation of Phase II and Phase III trials of ridaforolimus, in addition to paying its 50 percent share of ridaforolimus development, manufacturing and commercialization costs.

The two companies have worked together to develop ridaforolimus in multiple potential cancer indications.

Ridaforolimus is being studied in Phase II trials in advanced endometrial cancer, prostate cancer and non-small-cell lung cancer, as well as in combination with various biological agents in other trials. A Phase II registration trial of ridaforolimus in patients with metastatic soft-tissue or bone sarcomas is ongoing in Japan.

Under the previous deal structure, Ariad would have faced very large financial costs as those programs moved into Phase III trials on parallel tracks, Berger explained. Now, under the revised deal, that financial burden will be relieved.

And in exchange, Merck gets development and commercialization rights to the ridaforolimus; the parties previously had shared co-exclusive rights. And Ariad will be eligible to receive up to $514 million in regulatory and sales milestones. Additionally, Merck will pay Ariad attractive tiered double-digit royalties on global sales of ridaforolimus.

Jefferies & Co. analyst Eun Yang said the revised deal provided Ariad with "much needed near-term cash." Though, Berger insisted that the need for cash was "by no means the driver" of the restructured deal.

Rather, he said, the goal was to come up with a plan to develop ridaforolimus as quickly as possible in a number of cancers.