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Takeda's $5.2B Ariad bid tops flurry of deals to kick off 2017

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By Jennifer Boggs
Managing Editor

SAN FRANCISCO – In a sign that could bode well for the industry going into 2017, attendees hadn't even begun plodding through crowded halls at the Westin St. Francis Hotel when a flurry of deals hit the news Monday morning. All of them were dwarfed by Takeda Pharmaceutical Co. Ltd.'s $5.2 billion bid for Ariad Pharmaceuticals Inc.

Under the terms, Takeda agreed to acquire the Cambridge, Mass.-based firm for $24 per share, representing a 79 percent premium to Friday's closing price and, predictably, sending shares of Ariad (NASDAQ:ARIA) soaring 74 percent in premarket trading.

The deal comes a few months after speculation of a buyout for Ariad hit a fever pitch in September, not long after Ariad completed a rolling NDA for its ALK inhibitor brigatinib, seeking accelerated approval for treating patients with metastatic ALK-positive non-small-cell lung cancer (NSCLC) who are resistant or intolerant to Pfizer Inc.'s Xalkori (crizotinib). The FDA accepted the application and granted priority review, setting a PDUFA date of April 29. (See BioWorld Today, Aug. 31, 2016.)

Data for brigatinib looked even better in December, when Ariad updated results from its pivotal ALTA trial in ALK-positive NSCLC patients who experienced disease progression on crizotinib, showing that those in the 180-mg regimen who had a median follow-up of 11 months, 55 percent achieved confirmed objective response rates. Median progression-free survival was 15.6 months in that arm, and 67 percent of those patients with measurable brain metastases achieved a confirmed intracranial objective response. Based on those data, Cowen analysts suggested brigatinib could have best-in-class potential, an important factor given that brigatinib comes to the market after second-line ALK inhibitors Alecensa (alectinib, Roche Holding AG), approved in December 2015, and Zykadia (ceritinib, Novartis AG), which got an FDA nod a year earlier. (See BioWorld Today, Dec. 14, 2015.)

Peak sales estimates have run the gamut, usually falling between $500 million and $800 million, though Takeda and Ariad are estimating peak sales topping $1 billion.

Launch is set for this year, and Takeda's buyout does answer the outstanding question of whether Ariad would attempt selling brigatinib itself, building or buying its own sales team.

Takeda also gains Ariad's Iclusig (ponatinib) for chronic myeloid leukemia, which gained full FDA approval late last year, a decision largely expected but was reassuring nonetheless, given Iclusig's rough start. After an accelerated approval in late 2012, sales of the drug were temporarily suspended due to safety concerns, resolving in a narrower label at relaunch. (See BioWorld Today, Dec. 17, 2012, and Dec. 23, 2013.)

Full approval was accompanied by data from a supplemental NDA that included long-term follow-up data from the pivotal PACE phase II trial, which should help bolster sales, as could a potential second-line label expansion.

Suntrust analyst Yatin Suneja wrote in a research note that current peak sales for Iclusig are expected to be about $500 million; the second-label expansion could add potentially $275 million to that number by 2027.

Ariad reported third-quarter worldwide net product revenue for Iclusig of $34.3 million, with most of that – $33.6 million – coming from U.S. sales.

Ariad out-licensed European rights to Iclusig to Incyte Corp. last year.

Ariad also has AP32788, a kinase inhibitor targeting NSCLC patients with exon 20 mutations in EGFR or HER2, with data from a phase I/II trial expected this year. Other small-molecule immuno-oncology programs are advancing through discovery.

As of Sept. 30, Ariad had cash, equivalents and marketable securities totaling $314.7 million.

The acquisition is structured as an all-cash tender offer for all outstanding Ariad shares, followed by a merger in which remaining shares of the company would be converted into the right to receive the same $24 per share price.

The deal, approved by the boards of both companies, is expected to close by the end of February.

OTHER DEALS TO FOLLOW?

Whether Ariad's buyout will trigger subsequent deals is anyone's guess, as is whether another bidder might emerge to best Takeda's offer. But there continues to remain a dearth of companies boasting commercial-stage oncology assets, noted Suntrust's Suneja. "However, we believe the acquisition price offered by Takeda . . . is fair," he wrote.

Leerink Research analyst Michael Schmidt added that it could be good news for other commercial-stage oncology firms such as Exelixis Inc. and Incyte Corp. Exelixis markets Cabometyx (cabozantinib), which has been gaining market traction in the advanced renal cell carcinoma patients. Incyte, while holding the European rights to Iclusig, developed Novartis AG-partnered JAK inhibitor Jakafi (ruxolitinib) for myelofibrosis.

For Ariad, the deal has not come without some growing pains, a fact Chairman Alexander J. Denner pointed out, referring to the 2015 ousting of longtime CEO Harvey Berger to pre-empt a further proxy fight with hedge fund Sarissa Capital, which was founded by Denner. Berger, who had been criticized for the slow uptake of Iclusig, later agreed to retire.

Sarissa led the charge to install a new board and management and, in early 2016, the company undertook a work force reduction, cutting about one-fourth of its staff, in part to focus resources on regulatory approvals for brigatinib.

The Takeda deal "underscores the tremendous value that shareholder activism can create for shareholders, patient and society," Denner said. "While Ariad's stock price was collapsing and many investors were abandoning the company, Sarissa Capital saw a company with important drugs and innovation, and stepped in to become one of Ariad's largest shareholders."

Sarissa Capital holds a 6.6 percent stake in Ariad. Other large stakeholders include Wellington Management Group, FMR LLC and Vanguard Group Inc.