Ariad Inks Cancer-Drug Deal with Merck, Hopes to Realize $1 Billion

7/12/07

Cambridge-based Ariad Pharmaceuticals announced today that it has formed a major joint development and commercialization collaboration with Merck; the deal focuses on an Ariad cancer-drug candidate, AP23573, that’s now in Phase 1 and 2 trials.

In a conference call, Ariad chairman and CEO Harvey Berger called the agreement a “transformation event for the company” and said the deal “may be valued at approximately $1 billion.” Berger’s rounding may be a bit generous, but the agreement does include an upfront cash payment of $75 million and a host of additional cash payments and advances, as well as profit sharing disbursements and royalties.

Berger said that over the last 18 months several big firms had competed for AP23573—an orphan drug and member of a class of molecules known as kinase inhibitors. That interest, and the deal’s ultimate price tag, shows that the industry still has an appetite for drugs that follow the strategy pioneered by Novartis’s kinase inhibitor Gleevec of speeding regulatory approvals by focusing initially on a very small market. (Gleevec was approved in 2001 for a rare leukemia; AP23573’s first target is metastatic sarcoma.) Whether AP23573 can both replicate Gleevec’s initial success and prove itself in bigger cancer markets will be key to determining whether Merck gets what is paying for—and whether Ariad receives anywhere close to its billion-dollar target.