Ariad Pharmaceuticals, Inc. made the logical decision on March 17 to exercise its option with Merck & Co. to co-promote ridaforolimus, an mTOR inhibitor that the companies are investigating for the treatment of sarcoma.

The co-promotion option will allow Ariad to build a sales force for its oncology pipeline, while Merck foots the bill. Yet it also benefits Merck by enabling the Big Pharma to offer its biotech partner one more perk without incurring much additional risk.

Under a 2007 agreement, Merck is developing ridaforolimus for the treatment of sarcoma and plans to file for U.S. approval within the year. As per terms of an agreement that the partners re-jiggered in May 2010, if the drug is approved, Ariad will assume responsibility for up to 20% of the sales effort for the product in all indications in the U.S. Details of the co-promotion, as well as the sales and marketing plans for the drug were not disclosed by the companies.

"The decision to co-promote ridaforolimus is one step along the way in building the infrastructure within Ariad to market and sell oncology drugs, starting in the U.S. and transitioning down the road into Europe and potentially other countries," Chief Executive Harvey Berger said in an interview.

Co-promote options like the one Ariad exercised are by now a common feature in pharma-biotech deal terms. For Ariad, the opportunity to build a sales force allows it to add value to the company. While Ariad and Merck see plenty of promise for the mTOR inhibitor, Ariad plans to use the experience it gains from detailing ridaforolimus help its launch of its most valuable asset, a pan-BCR-ABL inhibitor, ponatinib, if that compound gains FDA approval. The compound is in Phase II for patients with resistant or intolerant chronic myeloid leukemia (CML).

The company will likely file an NDA in the second half of 2012 and begin regulatory filings outside of the U.S. shortly after, putting it almost a year behind ridaforolimus. Ariad currently retains 100% of the rights to ponatinib and intends to keep those rights in the U.S. and Europe, while out-licensing commercialization rights in Asia, including Japan, said Berger.

"We're committed to building a commercial business with ponatinib, our second drug, which we expect will launch soon after ridaforolimus, potentially as early as late next year," said Berger. "We're going to field a sales effort in the U.S. and commercialize Ponatinib, for CML, in the U.S. ourselves and very possibly in major European countries as well."

Co-promotes can be expensive and complex to administer, however, so until very recently many biotechs, short on cash, chose not to exercise them ('Co-Promotes: A Marketplace Reality, But Do They Make Sense? IN VIVO, April 2007). Ariad says it has enough cash to last through 2012. For pharma partners, on the other hand, they're part of the cost of doing business - and a perk they're willing to offer, despite the cumbersome logistics.

The benefits can be real, as demonstrated in a very recent example, Daiichi Sankyo's acquisition in February of cancer drug developer Plexxikon. Daiichi is paying up to $935 million for the biotech, although it has only one asset, a BRAF inhibitor in Phase III, which it has out-licensed to Roche. Under the terms of the Roche deal, however, Plexxikon has the right to co-promote the drug in the U.S. if it gets FDA approval. Without its co-promote, Plexxikon most likely could not have commanded the valuation that it got ('Daiichi Sankyo To Buy Plexxikon Of U.S. For Up To $935 Million,' 'PharmaAsia News,' March 1, 2011).

Jonathon Fendelman, practice executive of the business development practice of Campbell Alliance, an industry consulting firm, says co-promotion clauses in deals between biotechs and larger pharmaceutical companies creates options for biotechs. "As a biotech, co-promotion deals are the direction you should be going because you want options."

Creating Near-term Value

The original deal, signed in July 2007, called for Merck to give Ariad an upfront cash payment of $75 million in exchange for co-development and co-commercialization rights, and the two companies split the cost of development (Also see "Merck/Ariad Form Billion-Dollar Collaboration To Develop mTOR Inhibitor For Cancers" - Pink Sheet, 12 July, 2007.). Merck later paid Ariad $53.5 million in milestones for the initiation of Phase II and Phase III clinical trials for ridaforolimus.

Under the deal revised in May, Merck took over all development and funding responsibilities for the ridaforolimus clinical program and paid Ariad $69 million in cash, including a $50 million upfront payment and $19 million for reimbursement of ridaforolimus expenses incurred since the start of 2010. Ariad also is poised to get up to $514 million, if ridaforolimus meets certain regulatory and sales milestones in multiple indications (Also see "Revised mTOR Deal With Merck Gives Ariad Time" - Pink Sheet, 5 May, 2010.).

The revisions to the original deal gave Ariad something it was sorely lacking - cash. At the time, the biotech only had enough money to last it through the quarter; now it has enough cash on hand - about $103.6 million as of Dec. 2010 - to last through the end of 2012 (not counting any milestones it will likely receive from Merck as the ridaforolimus NDA is accepted).

Under the terms of the co-promote, Merck retains control of sales and marketing strategy. But Ariad will get clear visibility on Merck's progress and plans for commercializing ridaforolimus, pointed out Berger.

Merck, on the other hand, gets to build out its growing oncology pipeline. "Merck certainly isn't one of the big dogs in oncology," said Campbell Alliance's Fendelman. But Fendelman contends that the purchase of Schering-Plough put Merck into the oncology game; now it's a matter of getting to the head of the pack. Ridaforolimus is currently Merck's latest stage oncology asset.

-Lisa LaMotta (l.lamotta@elsevier.com)

Ariad Opts-in To Co-Promote mTOR With Merck

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