JP Morgan 2017: Eschewing traditional mores, Takeda takes a chance on Ariad

Takeda has spent the last six months making a break from its traditional past and this week revealed plans to shell out more than $5 billion to purchase Ariad Pharmaceuticals, a company with oncology assets on and nearing the market but also a hint of controversy, representing yet another sizable step in this new direction.

Many analysts had been saying it was only a matter of time until someone bought Ariad. It is, after all, not easy to find a company with full ownership of one unencumbered cancer drug – let alone two. To be fair, the company’s second candidate, brigatinib, is not yet on the market, but the dual ALK and EGFR inhibitor has a PDUFA date in April and all indications are that the FDA will give it a green light as second-line therapy for metastatic ALK-positive non-small-cell lung cancer (NSCLC).

Potential buyers have no doubt been kicking Ariad’s tires off and on for years now but none has ended up pulling the trigger, and one would be hard-pressed to point to just one reason for the reluctance.

For one thing, Ariad has never been too far from controversy over the past few years, beginning with the temporary suspension of its first product, Iclusig (ponatinib), after it was found to be associated with increased risk of serious vascular events in late 2013. Sales resumed within months but Ariad struggled mightily to gain traction with the leukaemia drug, which has since been relegated to salvage use, and investor disappointment eventually led to the ouster of long-time CEO Harvey Berger in 2015. (See ViewPoints: Ariad labouring under weight of considerably lowered expectations.)

Unable to boost penetration of Iclusig, Ariad turned instead to price hikes but this too got the company in hot water last October when politicians in the US demanded information about its marketing strategy.

To its credit, Ariad persevered by focusing on brigatinib, eventually generating data the FDA found impressive enough to grant it breakthrough designation. Nevertheless, despite obvious clinical utility, serious questions remain about its commercial potential given the highly competitive market in relapsed/refractory ALK-positive NSCLC, where Novartis and Roche already have products on the market. (See ViewPoints: Ariad seeks priority review for brigatinib but is it running out of time?)

Andrew Plump, Takeda’s chief medical and scientific officer, told the audience at a JP Morgan Healthcare Conference breakout session on January 9 that Ariad will be an ideal fit for the new-look Japanese drugmaker, which is in the midst of a seismic strategic shift that was first announced last July.

“The new strategic framework is predicated on our focus on three therapeutic areas: gastrointestinal, oncology and neurology. It sounds simple but in reality Takeda has historically been a disease-agnostic, small molecule-platform based pharma company. So by changing to focus on specific therapeutic areas has meant building within those areas, removing significant infrastructure in other areas, and expanding our approach to being agnostic to modality and using whatever tool is necessary,” Plump noted.

The deal may also embody a more subtle psychological shift at Takeda, a company that traces its founding back to 1781 and until recently represented something of a holdover from the days when a conservative corporate culture was the norm inside Japanese drugmakers. In fact, Takeda’s founding family and a group of former board members protested when current CEO Christophe Weber came on board in 2014, as they took issue with the selection of a foreigner.

Takeda’s willingness to buy Ariad looks to have been a pretty sizable gamble on the part of Takeda, which – as with the recent R&D shakeup – is one that the company is unlikely to have made just a few short years ago.

It is not hard to see what has been driving Takeda’s appetite for risk, as Weber acknowledged at the meeting that the market dynamics in Japan have shifted rapidly, giving the company little choice but to evolve. “There has been a huge and fast transformation of the market in Japan” thanks to a big push towards the rapid adoption of generics, “which is pushing companies to innovate in order to be successful in R&D,” he noted.

In addition to Iclusig and brigatinib, Ariad also brings with it a dual EGFR/HER2 inhibitor in Phase I testing for NSCLC, as well as an immunokinase discovery platform. Cowen analyst Chris Shibutani suggested these would be a strong strategic fit with Takeda’s portfolio, which includes multiple myeloma drug Ninlaro (ixazomib) and an array of potentially complementary small molecule R&D capabilities.

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