Iclusig Troubles Continue for Ariad in Europe

Ariad Pharmaceuticals (NASDAQ: ARIA  ) is once again facing regulatory troubles as its sole product, leukemia therapy Iclusig, faces renewed concerns from the European Medicines Agency.

Iclusig has had a history of causing the struggling Ariad significant woes. It was granted accelerated approval for chromic myeloid leykemia (CML) and Philadelphia chromosome positive acute lymphoblastic leukemia (ALL) in patients who had already failed or could not use Bristol-Myers Squibb's (NYSE: BMY  ) Sprycel or Novartis' (NYSE: NVS  ) Gleevec or Tasigna.

Brought to market within a speedy five years and released at the hefty price of $115,000 per year, Iclusig looked like a possible blockbuster that put Ariad on the oncology map. Even back then, however, it was approved with a black-box warning, and its approval day actually saw a 20% decrease in the company's share price.

After data showing increased thrombosis rates in patients, the product was taken off the U.S. market in October. It underwent review in Europe and seemed to have dodged a bullet in November when the Committee for Medicinal Products for Human Use allowed Iclusig to remain on the shelves. This was done with a restriction in place, preventing it from being used by patients with prior heart attacks or strokes as these patients would be at higher risk of thrombosis as a side effect.

Now, the EMA's Pharmacovigilance Risk Assessment Committee has started an in-depth review of the risks of Iclusig. The news sent share prices down on the day it was announced.

Executives have stated that they will continue to work on getting the drug back on the market in the U.S., a process that analysts predict could take over a year. For the struggling Ariad, though, it may not have that kind of time; it is fully possible that the drug may be permanently withdrawn.

The company is cutting $26 million in costs by the end of 2013, resulting in more than 160 layoffs . These cuts have thus far been restricted to the U.S., but in light of the EMA's new actions it is possible that its European counterparts could also be on the chopping block.

Share prices have been declining since the clotting risks came to light in October, dropping nearly 90% since the FDA first imposed a hold on a late-state study. This spurred Ariad to cancel the trial completely when patients receiving Iclusig developed clots. Later that month, Ariad pulled Iclusig from the market upon FDA request.

ARIA Chart

ARIA data by YCharts.

Having lost most of its $3 billion market cap, Ariad enacted a "poison pill" plan to protect its remaining inventory of $307 million in net operating loss carryforwards and $17.8 million in research tax credits. Under the currently active shareholder right plan, if a shareholder purchases more than 5% of common stock then other shareholders will be able to buy stock at twice the market value to dilute the percentage and prevent ownership change.

The bottom line
Sales in Europe are critical, not necessarily as an independent market that the company can bank its market cap on but as a bridge until Ariad can figure out its strategy with the FDA. Only approved since July in Europe, Iclusig has not proven itself yet through sales. Iclusig's steep price tag may deter physicians in nationally funded health care systems from prescribing the drug. Share prices soared on the day that Iclusig passed EMA review with just the new restrictions on cardiovascular risk; Europe is definitely an important market for Ariad and its shareholders.

The real battle is in the attempt to return Iclusig to the shelves in the U.S., however. It should be noted that there is a group of patients with refractory leukemia already in remission who are using of Iclusig. For this patient population, the thrombosis risk is nominal compared the risk of their cancer returning. These patients and their doctorshave been lobbying for the prompt return of Iclusig.

All therapies come with both risks and benefits, and Ariad only needs to show that the benefits of Iclusig outweigh the risk. If the company were to present Iclusig as a last-resort therapy, the FDA might be more lenient regarding the clotting risks. Of course, it is unknown how many patients in its current market would fall into that pool. The FDA has an established system within its Risk Evaluation and Mitigation Strategies to help determine whether patient populations are appropriate for a therapy; this system considers both the risks and benefits and how they compare to the patient's disease.

Looking at the other oncology competitors who might benefit from Ariad's failure, Novartis is without a doubt at the front of the line. The classic CML therapy is Novartis' $4.7 billion blockbuster Gleevec. While a large percentage of patients do eventually develop resistance to Gleevec, that number accounts for less than 50% of patients.

Patients who do discontinue Gleevec are usually prescribed Novartis' new therapy Tasigna or Bristol-Myers Squibb's Sprycel. Sprycel, however, has been unable to achieve first-line therapy approval and will continue to lag Gleevec's sales until it can do so. Its 2012 sales of $1 billion were less than a quarter of Gleevec's sales total. However, Gleevec has seen declining sales as these second-line agents gain strength. There will undoubtedly be other companies looking to chip away at those sales as well.

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