ARIAD Pharmaceuticals Inc. ARIA reported a second-quarter 2015 loss of 33 cents per share, wider than the Zacks Consensus Estimate of a loss of 29 cents and the year-ago loss of 30 cents. ARIAD’s shares were down 4.3% following the release of second-quarter results.
However, second-quarter revenues soared 141.4% from the year-ago quarter to $29.2 million, in line with the Zacks Consensus Estimate.
The Quarter in Detail
In the reported quarter, Iclusig generated sales of $27.8 million, up 16.4% sequentially. Iclusig sales were $21.6 million in the U.S., up 16% sequentially.
The company reported revenues of $6.2 million from the EU, up 19% sequentially. Iclusig uptake in EU countries has been strong. Full pricing and reimbursement in EU countries are expected to take place later this year.
On the second quarter call, ARIAD informed that there were 870 prescribers of Iclusig at the end of the quarter, up almost 16% from the preceding quarter. Meanwhile, about 145 new patients were treated with Iclusig in the U.S. during the second quarter of 2015 (up 22% sequentially).
Research & development (R&D) expenses increased 21.8% year over year to $38.7 million. This was primarily due to increased costs related to brigatinib’s ongoing phase II study and new drug application (NDA)-enabling pharmacology and manufacturing activities as well as an increase in personnel and other costs to support continued R&D activities related to Iclusig.
Selling, general & administrative (SG&A) expenses shot up 42.2% year over year to $48.6 million. This was essentially due to an increase in personnel costs including the impact of severance and related costs associated with the retirement of the chief executive Dr. Berger later this year ($2.6 million for the quarter) and an increase in legal and consulting costs as well as costs associated with the preparation of this year’s proxy and related initiatives ($4.9 million for the quarter).
ARIAD is working on studying Iclusig in earlier lines of therapy and is on track to initiate three studies by the year end. In addition, ARIAD and Otsuka are working on Iclusig’s NDA in Japan with the filing expected in the fourth quarter of 2015.
Meanwhile, ARIAD is on track to complete patient enrolment in a phase II study (ALTA) on brigatinib (refractory non-small cell lung cancer) in the third quarter of 2015. Preliminary data from the study will be presented in the fourth quarter of this year. Positive results would allow the company to file for approval in the U.S. in the third quarter of 2016 and potentially launch the candidate in early 2017.
Last week, ARIAD entered into a non-dilutive synthetic-royalty financing deal with PDL BioPharma, Inc. PDLI. The deal could see ARIAD receiving up to $200 million as revenue interest in exchange for royalties on net sales of Iclusig. ARIAD intends to use the fund to accelerate the development of brigatinib as well as to support its commercial readiness. The company plans to start a front-line phase III study comparing brigatinib with Pfizer’s PFE Xalkori (crizotinib) in early 2016.
2015 Guidance Updated
ARIAD revised its R&D, SG&A and cash guidance keeping Iclusig sales guidance unchanged. The company continues to expect Iclusig sales in the range of $130 million to $140 million in 2015.
The company now expects R&D expenses in the range of $177 million to $183 million (previous guidance: $185 million to $195 million). The decrease reflects reclassification of certain expenses from R&D to SG&A.
SG&A expenses are now expected in the range of $166 million to $172 million (previous guidance: $135 million to $145 million). The increase is attributed to the reclassification of certain expenses including legal and consulting costs associated with this year’s proxy and related initiatives ($6.7 million) and severance and related costs associated with the retirement of the chief executive by year end ($7.5 million), all of which are non-recurring expenses.
ARIAD now expects to end 2015 with cash and cash equivalents of at least $240 million (prior estimate: $200 million).
Our Take
ARIAD’s second-quarter results were disappointing with the company posting a wider-than-expected loss and revenues coming in line with expectations. However, we are encouraged by Iclusig’s steady performance in the U.S. and EU. The launch of Iclusig in additional EU countries should drive sales further. We are also positive on the deal with PDL BioPharma.
We expect investor focus to remain on Iclusig’s performance and other pipeline related updates.
ARIAD currently carries a Zacks Rank #3 (Hold). Actelion Ltd. ALIOF is a better-ranked stock in the health care sector carrying a Zacks Rank #1 (Strong Buy).
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