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ARIAD (ARIA) Stock Up on Narrower-than-Expected Q3 Loss

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ARIAD Pharmaceutical, Inc. reported third-quarter 2016 loss of 14 cents per share, narrower than the Zacks Consensus Estimate of a loss of 19 cents and the year-ago loss of 29 cents. Higher U.S. Iclusig sales and lower costs led to narrower loss in the quarter.

Third-quarter revenues shot up 58% from the year-ago quarter to $46.0 million, surpassing the Zacks Consensus Estimate of $ $41.95 million.

Iclusig Continues to Grow

Leukemia drug, Iclusig (ponatinib) recorded worldwide net product revenues of $34.3 million, up 25% year over year.

Iclusig product sales were $33.6 million in the U.S., up 66% year over year driven by an increase in both volume and price. European royalties on Iclusig sales were $4.0 million of which $3.5 million was recorded as other revenue in the quarter. In June, ARIAD divested its European operations and out-licensed the rights to Iclusig in Europe to Incyte Corporation (INCY - Free Report) . Accordingly, it records royalties from Iclusig sales in Europe recognized by Incyte.

Iclusig was approved in Japan in the quarter for the treatment of refractory chronic myeloid leukemia (CML) and Philadelphia chromosome-positive acute lymphoblastic leukemia (Ph+ ALL).

License and other revenues were $11.7 million in third quarter compared with $1.5 million in the year-ago quarter. License and other revenues include among other items, royalty revenue and R&D cost-sharing revenue from Incyte.

In the quarter, ARIAD received $50 million from PDL BioPharma, Inc. (PDLI - Free Report) , representing the second financial funding under the royalty financing deal signed with the latter last July.

Research & development (R&D) expenses declined 10% from the year-ago period to $43.6 million. The decline was due to lower personal cost and the completion of prior-year studies, which partially offset higher costs related to the brigatinib regulatory filing.

Selling, general & administrative (SG&A) expenses declined 29% year over year to $26.2 million, reflecting lower personnel expenses due to workforce reduction and the sale of European operations to Incyte.

Reiterates Outlook

ARIAD reiterated its outlook for 2016. The company expects global Iclusig net product and royalty revenues in the range of $170 million to $180 million.

R&D spend is expected in the range of $175 million to $180 million while SG&A spend is expected to be $120 million to $125 million.

Our Take

ARIAD’s third-quarter results were strong with the company surpassing both top and bottom-line expectations, sending the stock up more than 8%. We are positive on the Incyte deal which will allow the company to focus on the U.S. market. It also provides the company with a non-dilutive source of funds.

Iclusig sales are being driven by field team expansion, increasing clinical experience and patient retention programs. Going forward, label expansion, new patient starts and extended treatment duration should support Iclusig sales growth.

ARIAD finished filing a rolling NDA for its most-advanced pipeline candidate, brigatinib for ALK+non-small cell lung cancer (NSCLC) in August and could well become a two-product commercial company in 2017. The application was accepted by the FDA in Oct 2016. With the FDA granting priority review, a response from the agency should be out by Apr 29, 2017. ARIAD plans to submit regulatory application in Europe in early 2017.

Longer-term growth could be driven by AP32788 (NSCLC) and new opportunities including immuno-oncology.

ARIAD PHARMA Price, Consensus and EPS Surprise


ARIAD PHARMA Price, Consensus and EPS Surprise | ARIAD PHARMA Quote

ARIAD carries a Zacks Rank #2 (Buy). Another stock worth considering in the sector is Infinity Pharmaceuticals, Inc. (INFI - Free Report) with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Infinity Pharma has a trailing four-quarter average positive earnings surprise of 67.62%. Also, loss estimates have narrowed for 2016 and 2017 over the past 30 days.

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