The prevailing view seems to be that '113 is undifferentiated from other ALK inhibitors and the commercial market is limited to a handful of patients who no longer respond to treatment with Pfizer's (PFE) Xalkori.
But Xalkori is not a great drug. If fortunate, Xalkori patients will get about 12 months or more of progression-free survival, while the median is closer to just 8 months. This delay in tumor re-growth comes with unpleasant side effects.
Novartis' ALK inhibitor LDK378 received breakthrough therapy designation from the FDA but also has a troublesome side-effect profile that has limited dosing. Chugai's ALK inhibitor candidate looks promising, more similar to Ariad's '113, but its brain metastases data may be favorable skewed because doctors zapped tumor with radiation prior to treatment. The patients treated with '113 did not undergo prior radiation therapy, making Ariad's brain mets data look even more impressive.
About 10% of patients treated with '113 reported a serious lung toxicity but Ariad is addressing the issue with a short dose titration period. Interestingly, this side effect may be evidence '113 is working too well, too quickly, as it may be causing tumor lysis syndrome. Importantly the side effect appears to be transient and the new dosing strategy may effectively limit its occurrence.Ariad is gearing up to start a registration study for '113 which should attract more interest and recognition for the drug as perhaps best among all the ALK inhibitors. At a minimum, I believe '113 will play substantial role in treating ALK-mediated cancers. While Xalkori was the first approved ALK lung cancer drug, I expect its days are numbered. Within three years, as better ALK inhibitors are approved, Xalkori sales will disappear for Pfizer. Should '113 (and other ALK inhibitors) end up extremely well tolerated with a durability far in excess of Xalfori, the ALK cancer market will grow exponentially, as patients remain on treatment for multiple years, instead of months. This is how the market for CML drugs also grew into blockbuster status. The challenge for Ariad is to move swiftly. The opening for better ALKs to replace Xalkori is ultra-competitive and finite. If Ariad blinks, it not only risks being passed but left in the dust. Let's not kid ourselves. As an investment, Ariad has warts. Iclusig is under a cloud. Investors see '113 as a me-too drug with its own set of safety concerns. Ariad has over $300 million in cash, but also an excessive burn rate. Ariad needs to cut expenses without sacrificing the long-term growth potential of both Iclusig across multiple indications and for '113 in the hyper-competitive ALK race. A contrarian bet carries a high risk of failure but at Ariad's current stock price relative to the upside, it's a bet I'm willing to make. Silverman is long Ariad.
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