Merck and Ariad Pharmaceuticals formed a collaboration to jointly develop and commercialize Ariad's novel mTOR inhibitor AP23573 for multiple cancer indications in a deal that might ultimately be worth $1 billion to the Cambridge, Mass., biotech, Ariad CEO Harvey J. Berger said during a July 12 conference call to announce the deal.

Ariad '573, a cell-signaling inhibitor that works through the mammalian-targeted Rapamycin (mTOR) pathway, will enter Phase III clinical studies for the treatment of metastatic sarcomas within the quarter, Berger said.

The drug candidate is being developed as a once-daily pill, in contrast to Wyeth's first-in-class mTOR inhibitor Torisel (temsirolimus), which is delivered intravenously. Torisel was approved in April for treatment of kidney cancer (¹ Also see "Wyeth’s Torisel To Launch In July Following FDA Approval" - Pink Sheet, 30 May, 2007.).

Ariad Chief Commercial Officer Richard W. Pascoe estimated the peak revenue from the sarcoma indication in the U.S. at $300 million, with a similar market in the rest of the world.

Merck's expertise in diagnostics and biomarkers was important to choosing to partner with the Whitehouse Station, N.J., drug maker, the CEO explained in a same-day interview with "The Pink Sheet" DAILY.

"We felt as we were moving to the choice of a partner for Ariad '573 that Merck's commitment to biomarkers and cancer genetics was really the strongest in the industry. Their acquisition a number of years ago of Rosetta Inpharmatics, the expertise that they have built up within the company on bioinformatics, biomarkers and diagnostics really speaks to their commitment ... and it really converges nicely with our own thinking ....And I think that is in part what brought Ariad and Merck so well together," Berger said.

"An important part of our ongoing effort will be to utilize biomarkers: gene, protein, RNA patterns in cancer cells, and use that to help us understand patients at risk, differentiate responders from nonresponders and utilize our growing understanding of the human genome and cancer biology to help us be more effective and more efficient at cancer drug development."

Berger was tight lipped regarding the development plan the company is formulating with Merck for '573, including what the next target indication might be. However, Ariad currently is investigating the oncologic as a monotherapy in Phase II studies for relapsed or refractory prostate cancer and for endometrial cancer. A Phase II study in hematologic malignancies and a Phase Ib trial in glioblastoma are completed.

The company also is studying '573 in combination with doxorubicin, paclitaxel and capecitabine in "advanced cancer patients."

Under the agreement, Ariad will receive an up-front cash payment of $75 million, with a $13.5 million milestone payment due at the start of the Phase III sarcoma trial. Another $114.5 million in milestones are available for the start of other Phase II and Phase III clinical studies, Berger noted during the call. In all, Ariad will be eligible for up to $452 million in development milestones, he said.

"All of the payments in the partnership are cash based; there are no equity sales to Merck," Berger stressed. In addition, he pointed out that all development milestones are driven by the initiation of trials, "ensur[ing] that adequate, committed funding is available to support a comprehensive global development program."

As part of the deal, Ariad is also eligible for up to $200 million in payments based on sales milestones.

Ariad and Merck will jointly fund global development, and all development costs will be split 50/50, except that Merck will fund development specific to commercialization of '573 outside the U.S. For example, Merck would pay for any added studies required for approval in Japan, Berger explained.

Merck will provide Ariad with up to $200 million in interest-bearing, repayable development cost advances to cover a portion of Ariad's share of global development costs, after Ariad has paid $150 million.

Ariad and Merck will share overall responsibility for global commercialization and development. In the U.S., Ariad will distribute and sell '573 for all cancer indications and book all sales. The companies will co-promote the drug in the U.S. and will each receive 50 percent of the income from sales in the U.S., except that Ariad will take the U.S. lead in commercialization for sarcoma.

Outside the U.S., Merck will distribute, sell and promote the drug and book all sales, paying Ariad "substantial" tiered, double-digit royalties, Berger said.

Finally, Ariad will be responsible for manufacturing the active pharmaceutical ingredient used in the product on a commercial scale, while Merck will be responsible for formulation of the finished product, he concluded.

Merck currently has eight oncology candidates in Phase I or Phase II. The company's cancer drug Zolinza (vorinostat), a first-in-class histone deacetylase inhibitor, was approved in October for treatment of refractory cutaneous T-cell lymphoma (² Also see "Merck’s Zolinza Approved For Rare Skin Cancer" - Pink Sheet, 6 October, 2006.).

The Ariad/Merck collaboration marks the second potential billion dollar deal announced in a week between a small biotech and a major pharmaceutical firm. On July 9, RNA interference innovator Alnylam Pharmaceuticals, also located in Cambridge, announced a multi-faceted blockbuster deal with Roche (³ Also see "Alnylam Signs Billion Dollar RNAi Deal With Roche" - Pink Sheet, 9 July, 2007.).

- Shirley Haley (s.haley@elsevier.com)

Merck/Ariad Form Billion-Dollar Collaboration To Develop mTOR Inhibitor For Cancers

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