FDA Rejects Ariad/Merck Sarcoma Pill, Wall Street Unfazed

6/6/12Follow @arleneweintraub

When the FDA gave the thumbs-down last night to ridaforolimus (Taltorvic)—a drug being co-developed by Ariad Pharmaceuticals and Merck to treat metastatic soft-tissue sarcoma or bone sarcoma—investors barely flinched. Shares of Cambridge, MA-based Ariad (NASDAQ: ARIA) closed last night at $16.20, dropped a bit in after-hours trading, but were up to $16.68 just after the opening of the stock market today.  Shares of Merck (NYSE: MRK), based in Whitehouse Station, NJ, are up slightly today to $37.65.

What the companies received was a “complete response” letter from the FDA, stating that the agency would not approve the drug without additional clinical trials to show it is safe and effective. “Merck remains confident in the potential of ridaforolimus,” said Eric Rubin, M.D., vice president of clinical research oncology for Merck in a statement. “We will continue to work closely with the FDA to define potential paths forward for this investigational therapy.”

This rejection was not a big surprise. In March, an advisory panel to the FDA questioned the risk/benefit profile of the drug and voted 13-1 against the FDA approving it. And sarcoma was not expected to be a huge revenue generator for either company anyway: Some analysts projected the drug would bring in about $300 million a year for Merck by 2016, of which $60 million would go to Ariad as royalties. Ariad’s follow-up drug, ponatinib—for which it retains full marketing rights—is much more likely to bring the company into blockbuster territory. Ariad is currently testing that drug in patients with chronic myeloid leukemia and acute lymphoblastic leukemia.

Merck certainly isn’t giving up on ridaforolimus, which is part of a class of medicines that inhibit the cancer-causing protein mTOR. The company is still seeking approval for the drug as a sarcoma treatment in Europe and other countries. And at the recent American Society of Clinical Oncology (ASCO) meeting in Chicago, researchers presented data from a study of the drug in lung cancer patients with a certain genetic mutation.

Wall Street prognosticators took last night’s negative FDA verdict in stride. “FDA Rejection? Who Cares,” declared Motley Fool in an article suggesting that Ariad’s investors should focus on the prospects for ponatinib. And on Monday, Mad Money‘s Jim Cramer recommended Ariad’s stock based on positive ponatinib data the company presented at ASCO. Ariad CEO Harvey Berger appeared on Cramer’s show to talk about the drug.

As for Merck, it has been bolstering its cancer portfolio, as oncology chief Gary Gilliland told Xconomy a few days before ASCO. The future of ridaforolimus may be up in the air, but it’s clear both Merck and Ariad are working hard to get other shots on goal in oncology.

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