Interest Growing in ARIAD Cancer Medicine (ARIA, MRK)

August 17, 2009 · Filed Under Cancer, fda 

In the coming weeks, ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) will have some key drug data that could make or break the perception of the company.  There is a mixed opinion on this stock, but it is being well received today after an analyst gave a call that would imply a double in share price.  There have been several issues contributing to the interest here.  Today’s major interest comes as Oppenheimer’s analyst team gave it an “Outperform” rating with a $4.00 price target.

This is ahead of interim data analysis for Ariad’s Phase III trial for ridaforolimus, its mTOR inhibitor therapeutic indicated for soft tissue and bone cancers.  These are aggressive sarcomas and are less common forms of cancer which attack healthy connective tissue.

Oppenheimer believes that this past positive Phase II data and pending Phase III data may lead to an approval late in 2010.  The Phase II data showed almost a doubling of survival rates and Merck & Co. (NYSE: MRK) is a partner on this one and details can be found here.

It appears that some believe that ridaforolimus has the ability to become a blockbuster drug, but the number proposed by Oppenheimer was eventually annual sales of about $350 million.

ACCORDING TO BioMedReports.com…. “Based on my analysis of past outcomes from other successful cancer drugs, I am willing to wager that the Phase 3 results will confirm that rida is a safe and effective oral cancer treatment. From all existing data, there is a high probability that rida will obtain FDA approval after initial review. Absent any regulatory delays, rida could be made available for underserved Americans suffering from soft tissue and bone sarcomas by the end of 2010.  Fingers crossed.”

Some are not so optimistic.  Merriman Curhan Ford issued a SELL rating at the end of July on this one.  Also worth note is that the short interest ahead of the data has seen a massive increase from the Mid-July report to the end of July reports.   Short sellers had the following short interest based on these settlement dates:

Settlement.. Short Interest
7/31/2009.   4,281,466
7/15/2009.   3,992,899
6/30/2009.   3,480,434

ARIAD does have stock options that trade, but that is nearly of no use because of the $2.00 share price.  There is an open interest of over 13,000 contracts for the Jan-2010 $2.50 CALLS.  The problem is that these options are thinly traded and at $2.00 a share it already looks and acts like a call option.

It was earlier this month that ARIAD sold shares at $1.75 and raised approximately $35.6 million after underwriting discounts and commissions and estimated expenses when you consider the overallotment shares that were also included.  Guess who the lead underwriter was on this offering….. Oppenheimer.  Lazard Capital Markets was co-manager.

It was also just in early August that ARIAD announced that its partner had initiated a Phase I/II clinical trial in advanced prostate cancer using its technology:

  • Bellicum Pharmaceuticals, Inc. announced dosing of the first patient in a Phase I/II clinical trial of BP-GMAX-CD1, a novel pharmacologically regulated dendritic cell vaccine for the treatment of prostate cancer. The disease-specific trial is being conducted under a Bellicum Investigational New Drug Application allowed by the FDA in 2008.

Shares are up 3.5% at $2.02 mid-day.  We have also seen 5.8 million shares trade today, well above the 1.8 million on average.  The 52-week trading range is $0.72 to $3.55 and the market cap today is listed as roughly $175 million.

JON C. OGG

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