ARIAD's Q3 Loss Wider than Expected; Iclusig Sales Fall

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ARIAD Pharmaceuticals Inc.ARIA reported a third-quarter 2015 loss of 29 cents per share, significantly wider than the Zacks Consensus Estimate of a loss of 20 cents and the year-ago loss of 27 cents. The company's shares were down 1.8% following the release of third-quarter results.

Ariad Pharmaceuticals Inc. (ARIA) - Earnings Surprise | FindTheCompany

Third-quarter revenues soared almost 98% from the year-ago quarter to $29.1 million but fell substantially short of the Zacks Consensus Estimate of $50.2 million.

The Quarter in Detail

In the reported quarter, Iclusig generated sales of $27.5 million, down 1.1% sequentially. Iclusig sales in the U.S. were down 6% sequentially to $20.3 million reflecting a decrease in category volumes and an increase in rebates during the quarter driven by increased Medicaid utilization including a small switch of patients from the 30 mg dose of Iclusig to 15 mg.

The company reported revenues of $7.2 million from the EU, up 16.1% sequentially due to an increase in demand. Iclusig's uptake in EU countries, particularly in Italy and Germany, has been strong. Full pricing and reimbursement in EU countries are expected to take place by year end.

On the third-quarter call, ARIAD informed that there were about 980 prescribers of Iclusig at the end of the quarter, up almost 13% from the preceding quarter. Meanwhile, about 125 new patients were treated with Iclusig in the U.S. during the third quarter of 2015.

Research & development (R&D) expenses shot up 74.7% year over year to $48.2 million. This was primarily due to increased costs related to brigatinib's ongoing phase II study (ALTA) and new drug application (NDA)-enabling pharmacology and manufacturing activities, costs related to the initiation of Iclusig's phase II dose-ranging study (OPTIC) as well as an increase in personnel and other costs to support continued R&D activities.

Selling, general & administrative expenses increased 9.3% year over year to $36.7 million. This was essentially due to an increase in personnel costs including the impact of severance costs associated with the pending retirement of the chief executive officer, Dr. Berger and an increase in costs associated with the support of expanding Iclusig distribution and sales.

ARIAD is working to study Iclusig in earlier lines of therapy and intends to initiate three studies with one of the studies (OPTIC) having already commenced. In addition, ARIAD and Otsuka are working on Iclusig's NDA in Japan with the filing expected around the end of this year.

Meanwhile, ARIAD completed enrolling patients in a pivotal phase II study (ALTA) on brigatinib in patients with locally advanced or metastatic non-small lung cell previously treated with Pfizer Inc.'s PFE Xalkori (crizotinib) in Sep 2015. Preliminary data from the study will be presented at the ASCO meeting next 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.

During the quarter, ARIAD entered into a non-dilutive synthetic-royalty financing deal with PDL BioPharma, Inc. PDLI that could see the company 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 Xalkori (crizotinib) in the first half of 2016.

ARIAD continues to expect Iclusig sales in the range of $130 million to $140 million in 2015.

Our Take

ARIAD's third-quarter results were disappointing with the company posting a wider-than-expected loss and revenues significantly falling short of expectations. Though Iclusig continued to perform in the EU, the sequential decline in sales in the U.S. is concerning. However, we are positive on the deal with PDL BioPharma. Moreover, the launch of Iclusig in additional EU countries should drive sales further.

We expect investor focus to remain on Iclusig's performance and other pipeline related updates.

ARIAD is a Zacks Rank #3 (Hold) stock. Actelion Ltd. ALIOF is a better-ranked stock in the health care sector carrying a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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