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Takeda to Buy Ariad in $5.2B Move to Build Up Cancer Drug Portfolio

Xconomy Boston — 

[Updated 1/9/17, 11:56 am. See below.] Ariad Pharmaceuticals has agreed to be acquired by Takeda Pharmaceutical in a deal that values the Cambridge, MA-based cancer drug developer at about $5.2 billion.

Under the all-cash agreement, Osaka, Japan-based Takeda will acquire all of Ariad’s (NASDAQ: ARIA) outstanding shares for $24 each, a nearly 75 percent premium over the company’s closing stock price on Friday. The boards of directors of both companies have already approved the deal, which is expected to close by the end of February.

The deal would place Ariad’s cancer drugs in the hands of a larger player with experience selling drugs around the world. Ariad’s only marketed drug is ponatinib (Iclusig), a last-resort treatment for chronic myeloid leukemia (CML) that is used when other drugs, such as Novartis’s (NYSE: NVS) imatinib (Gleevec), can’t be prescribed. The drug is also approved to treat acute lymphoblastic leukemia (ALL) in patients who have a certain genetic abnormality. Takeda says the deal would expand its hematology drug portfolio to include a treatment for both CML and ALL.

Ariad has also developed another drug, brigatinib, for non-small cell lung cancer. An FDA decision on that drug is expected by the end of April.

In a research note, SunTrust Robinson Humphrey said it expects ponatinib has the potential to expand to earlier therapeutic uses with dosing changes. The firm projects the drug could top $550 million in annual sales; adding more treatments to the drug’s label could bring another $275 million in annual sales by 2027. SunTrust Robinson Humphrey projects brigatinib could reach $500 million in annual sales in lung cancer and as a second-line leukemia treatment. [Paragraph added with analyst comment.]

Ariad has had an up and down ride since the FDA approved ponatinib in 2012. That approval came with a stern warning on the drug’s label instructing doctors to watch out for blood clots and liver damage associated with the drug. Ariad had hoped to position its drug as a competitor to Novartis’s blockbuster imatinib, but was forced to stop clinical trials comparing the drugs due to safety concerns. In the wake of the halted clinical trial, Ariad laid off 40 percent of its workforce. Ariad temporarily pulled the drug from the market. In 2014, the FDA permitted the company to resume sales of its cancer drug, but only in a more limited group of patients. [Paragraph updated with additional details on ponatinib.]

In 2015, Harvey Berger, Ariad’s founder and CEO for most of the company’s history, retired following a proxy fight. Under new management, Ariad has been able to swing a deal to sell ponatinib in Europe. Last year, Wilmington, DE-based Incyte Pharmaceuticals (NASDAQ: INCY) agreed to pay $140 million up front for the rights to Ariad’s European division, as well as the European rights to Ariad’s cancer drug.

Ariad was set to receive up to $135 million in future payments if Incyte secures approvals in Europe for other cancers. But the deal with Incyte left open the possibility that another company could reacquire ponatinib’s rights. The agreement includes an option for anyone who acquires all of Ariad to also gain back Incyte’s rights to the drug. A buyer would have to repay $140 million. But it’s too soon for Takeda to exercise that option. Under the agreement with Incyte, that option kicks in between two and six years after the June 1, 2016 closing date of the deal.

Image from Stacy Howard of the Centers for Disease Control and Prevention.