ARIA

ARIAD Pharmaceuticals, Inc. (ARIA)

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ARIAD Pharmaceuticals, Inc. (ARIA)

Q1 2010 Earnings Call Transcript

May 10, 2010 5:00 pm ET

Executives

Maria Cantor – VP, Corporate Communications and IR

Harvey Berger – Chairman and CEO

Ed Fitzgerald – SVP, CFO and Treasurer

Tim Clackson – SVP and Chief Scientific Officer

Analysts

Bret Holley – Oppenheimer

Howard Liang – Leerink Swann

Eun Yang – Jefferies

Presentation

Operator

Thank you for holding for ARIAD Pharmaceuticals' First Quarter 2010 Investor Conference Call. At this time, all participants are in a listen-only mode. Following the formal report, ARIAD management will open the line for a question-and-answer period. Please be advised that this call is being taped at the company’s request and will be archived on the company’s website for three weeks from today.

At this time, I would like to introduce Ms. Maria Cantor, ARIAD’s Vice President, Corporate Communications and Investor Relations. Please go ahead.

Maria Cantor

Good afternoon and welcome to ARIAD’s investor call. This afternoon, we will report on corporate development and financial results for the first quarter of 2010.

Joining me for this call are Dr. Harvey Berger, our Chairman and Chief Executive Officer; Mr. Ed Fitzgerald, our Senior Vice President and Chief Financial Officer; and Dr. Tim Clackson, our Senior Vice President and Chief Scientific Officer.

Before we get started, I would like to state that during this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to factors, risks, and uncertainties, such as those detailed in our Form 10-K for the year ended December 31st, 2009 and other SEC filings that may cause actual results to differ materially from the results expressed or implied by such statements.

Now, I would like to turn the call over to Dr. Berger for this afternoon’s opening remarks.

Harvey Berger

Thank you very much, Maria and good afternoon to everyone. We've had several notable accomplishments since the beginning of the year that include advancing each of our internally discovered drug candidates and enhancing our balance sheet to ensure that we are well financed into the second half of next year. As a result, we are now in a strong position to focus our full efforts on the development of our oncology pipeline.

Let's start with our financials and an update on the first quarter from Ed Fitzgerald.

Ed Fitzgerald

Thank you, Harvey and good afternoon, everyone. Let me refer you to our press release that we issued this afternoon for a summary of our financial results for the three-month period ended March 31, 2010.

For the first quarter of 2010, the company reported a net loss of $23.4 million or $0.21 per share compared to a net loss of $20.2 million or $0.26 per share for the first quarter of 2009. This net loss in 2010 includes a $6.1 million non-cash charge related to the revaluation of the company's warrant liability as compared to a charge of $215,000 in the corresponding period in 2009.

The increase in the valuation of our warrant liability was driven by a 49% increase in the price of our common stock from December 31, 2009 to March 31, 2010. This increased charge was offset in part by a decrease of $2.9 million in research and development expenses in the three-month period ended March 31, 2010 as compared to the same period in 2009, due to completion of patient enrollment in 2009 in several clinical trials of ridaforolimus, including the Phase III SUCCEED trial in patients with advanced bone and soft-tissue sarcomas, and the completion of certain manufacturing and non-clinical initiatives for our lead product candidates.

For the three-month period ended March 31, 2010, cash used in operations was $14.3 million, compared to cash used in operations of $10.1 million for the first quarter of 2009, which benefitted from the receipt of a $12.5 million milestone payment from Merck in that period last year. The company ended the first quarter of 2010 with cash and cash equivalents of $25.4 million compared to $40.4 million at December 31, 2009.

These financial results do not take into account the positive impact of the restructured collaboration and license agreement with Merck for the development, manufacture, and commercialization of ridaforolimus announced last week. This license agreement provides ARIAD with an initial up-front payment of $50 million, reimbursement of ARIAD's costs for ridaforolimus since the start of this year, estimated by us to be approximately $19 million through April of 2010, and funding by Merck of 100% of ridaforolimus costs going forward, including ARIAD's costs for ridaforolimus during the transition period.

The agreement also includes up to $514 million in potential regulatory and sales milestones for the successful development and commercialization of ridaforolimus in multiple indications, as well as tiered, double-digit royalties on global net sales of ridaforolimus. These royalties are approximately one-third greater that those which ARIAD would have received for ex-U.S. sales at each of the sales tiers in the original agreement. The impact of this agreement will be reflected in ARIAD's financial statements beginning with the second quarter of this year.

The revised agreement with Merck allows us to refocus our resources on the development of our other product candidates and retain the potential commercial value of ridaforolimus through substantial royalties and milestones. As stated on our conference call last week when we announced the revised agreement with Merck, we – now we anticipate positive cash flow from operations for 2010 in the range of $5 million to $7 million, reflecting the impact of the $50 million up-front payment from Merck. We also estimate cash and cash equivalents at year-end 2010 in the range of $44 million to $46 million.

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