Ariad Pharmaceuticals Expected To See Clinical Catalysts

SunTrust Robinson Humphrey sees potential upside of 65 percent in Ariad Pharmaceuticals, Inc. ARIA given clinical catalysts and the company could be a takeover target.

Ariad's lead product Iclusig is a potent chronic myeloid leukemia (CML), drug, with the potential for broader use, while brigatinib is a potential best-in-class agent for ALK+ NSCLC (Non-Small Cell Lung Cancer (NSCLC).

"We estimate Iclusig U.S. peak sales in currently approved settings at ~$500MM on further penetration, while a second-line label expansion could add an additional ~$275MM by 2027," analyst Yatin Suneja wrote in a note.

Suneja expects brigatinib's (ALK/ROS1 inhibitor) U.S. approval and launch in the first quarter 2017 for the treatment of crizotinib-resistant (2ndline) ALK+ NSCLC.

"Given the drug's superior efficacy (PFS of 12.9 months vs. 6-9 months for competitors), we expect rapid uptake by physicians upon approval and estimate ~$320MM in U.S. peak sales in this indication by 2030," Suneja highlighted.

In addition, the analyst is also optimistic for success in brigatinib's ongoing Phase III ALTA-1L trial in first-line ALK+ NSCLC (interim data likely in 2018). The analyst said this subset is the biggest commercial opportunity, and estimate about $500 million in U.S. peak sales by 2030.

Meanwhile, Suneja noted that Ariad could be an M&A target with a takeout value estimated at about $29, as its two drugs target subsets of cancers with an estimated $1 billion plus in peak global sales for each.

"There is a scarcity of good commercial-stage oncology assets, and we believe there could be significant synergies with an established oncology player," Suneja added.

Suneja initiated the stock with a Buy rating and price target of $22.

At time of writing, shares of Ariad rose 3.67 percent to $13.85.