Positive Ariad data may soon have Wall Street asking, what's next?

July 27, 2009 · Filed Under General 

Ariad Pharmaceuticals Inc (Nasdaq: ARIA) shares are up more than 40 percent on on more than 10 times normal volume after it released positive Phase I trial results of an investigational compound that showed anti-cancer activity in drug-resistant blood cancer patients.

Now that the shares are up so strongly, the Street may soon be asking about the next catalyst for the stock.

The trouble is, there doesn’t appear to be one on the horizon for the rest of the calendar year. If there is one, it might be a possible secondary stock offering — something that may be all the more likely now that the shares are worth much more than they were a few hours ago.

Ariad is not in a severe cash crunch. But it has used an average of about $11.7 million a quarter over the past five quarters to fund operating activities. At the end of the first quarter, it had about $50 million in cash on hand, not counting $10 million it was expected to receive in the second quarter.

The trouble is that the company announced on its last earnings conference call that a $27 million milestone payment from partner Merck & Co. (NYSE: MRK) would be delayed until the second half of 2010. All told, the company appears to have enough to wait out its Merck milestone payment, but not very much more.

A secondary offering may help provide a cushion for development of its lead candidate.

The next big data catalyts for Ariad are not expected until 2010, when it begins to show additional data for its lead candidate, called ridaforolimus, a potent mTOR inhibitor for the treatment of solid tumors, including sarcomas.

The company is expected to release a second interim analysis in a Phase III trial in sarcoma patients in the first quarter of 2010. The interim analysis may or may not include clinical data. The company is expected to follow up with trial data later next year.

The Phase I trial Ariad announced today were promising. Of the 23 chronic myeloid leukemia (CML) patients studied, 19 of them in the four highest dosing groups, are still on the drug and are not seeing disease progression.

What is particularly attractive is that all patients were previously treated with other drugs for chronic myeloid leukemia.

With that out of the way, there now could be a data lull ahead. And with the stock more than doubling since March, the February highs near $2.86 may prove to be stubborn share resistance — Mike Tarsala.

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