Ariad approval catches bio run-up traders by surprise

An increasingly popular biotech investment strategy – buying into the run-up to a significant regulatory decision – took a knock last week when the US FDA approved Ariad Pharmaceuticals’ ponatinib.

The strategy relies on selling just before the regulatory event, which is usually the time to take profits. But in ponatinib’s case speculators were burned because the FDA decision came over three months before the March 27 PDUFA date. And, although the agency did approve the drug for all phases of chronic myelogenous leukaemia, it slapped a black box warning on the label, prompting Ariad stock to fall 21% on Friday.

Nevertheless, the market values Ariad at a still respectable $3.2bn, and even including Friday’s 21% collapse the stock is up 67% year to date. This illustrates the faith that investors still have in ponatinib’s use to move earlier in the course of treatment, as well as perhaps indicating that expectations had become somewhat excessive.

The name’s Iclusig

The FDA has approved ponatinib, under the trade name Iclusig, for the broad use of treating chronic, accelerated or blast-phase CLL or Philadelphia chromosome-positive acute lymphoblastic leukaemia – both in patients who have failed on an earlier tyrosine kinase inhibitor.

So far, so good: this is the first battleground for the novel Ariad drug, which will be launched into a market dominated by Novartis’s Glivec (Ariad passes its 12-month check-up, December 10, 2012).

In fact, on the indication alone this result might be better than had been expected, given that it opens the door for Iclusig to be given second line after Glivec. In practice, at least at first, it will likely be used after patients have also failed on Bristol-Myers Squibb’s Sprycel or Novartis’s Tasigna.

But the FDA also said the label would include a black box warning of arterial thrombosis and liver toxicity seen in ponatinib’s Pace trial. The latter especially is concerning, as key opinion leaders have not seen a link between it and the natural course of CML, and the safety signal is therefore likely related to the drug.

UBS analysts said the warning was troubling because it might limit Iclusig’s commercial potential and “could position the drug further back in therapy”. That would indeed represent a major setback, since the really bullish sales assumptions around Iclusig hinge on its use in the first-line setting; EvaluatePharma’s consensus data see the drug generating revenue of $1.2bn by 2018.

Epic readout

The Epic study, testing Iclusig first line, is due to read out in mid-2014. Although in the US drugs are often moved earlier in the course of disease without a specific label, a strong result in Epic would represent a major impetus for Iclusig’s front-line use.

In the view of Leerink Swann analysts incidence of arterial thrombosis would not affect first-line use as long as it was seen in under 1% of cases. UBS also remained upbeat, pointing to Tasigna’s black box warning of heart complications, which they said had not affected that drug’s uptake.

Not without reason the markets still credit Ariad with having a possible blockbuster on its hands. However, it cannot be denied that the Iclusig warning represents the first major setback for a drug that had so far barely put a foot wrong.

A clearer picture of its first-line use and the safety signals will emerge along with the Epic data, and until then investors, including those banking on another run-up, will have to wait patiently.

Study Trial ID
Epic NCT01650805

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobEPVantage on Twitter

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