ARIAD restructures collaboration with Merck for ridaforolimus mTOR inhibitor

May 5 2010

ARIAD Pharmaceuticals, Inc. (Nasdaq: ARIA) today announced that it has restructured its July 2007 collaboration with Merck, Sharpe & Dohme Corp. ("Merck") for the development, manufacture, and commercialization of ridaforolimus - ARIAD's investigational mTOR inhibitor. The Company will host an investor conference call this morning at 9:00 a.m. ET to discuss the revised transaction and financial guidance.

“With Merck assuming all costs associated with the development, manufacture and commercialization of ridaforolimus and providing ARIAD with near-term cash payments totaling approximately $69 million, we have greatly strengthened our balance sheet”

Key Terms of the Amended Agreement

• ARIAD has granted Merck an exclusive license to develop, manufacture and commercialize ridaforolimus in oncology, and Merck will assume responsibility for all ridaforolimus activities, including clinical trials and regulatory filings. Both companies had previously shared co-exclusive rights.
• Merck will make an upfront cash payment of $50 million to ARIAD and will reimburse ARIAD for its ridaforolimus expenses incurred since January 1, 2010, estimated by ARIAD to be approximately $19 million. Merck will also fund 100 percent of future ridaforolimus development, manufacturing and commercialization costs, effective immediately.
• ARIAD will be eligible to receive up to $514 million in regulatory and sales milestones based on the successful development and commercialization of ridaforolimus in multiple indications. This includes $65 million in milestones associated with the potential sarcoma indication, which currently is in Phase 3 clinical development (i.e., $25 million for acceptance of the new drug application by the FDA, $25 million for U.S. marketing approval, $10 million for European marketing approval, and $5 million for Japanese marketing approval), and $200 million in milestones based on achievement of significant sales thresholds.
• Merck will book global sales of ridaforolimus and pay ARIAD tiered double-digit royalties on global net sales of ridaforolimus. In addition to now receiving royalties on U.S. sales in lieu of a profit split, these global royalty rates are approximately one-third greater than the royalty rates that ARIAD would have received for ex-U.S. sales under the original collaboration agreement with Merck.
• ARIAD will have an option to co-promote ridaforolimus with up to 20 percent of the sales effort for the product in all indications in the U.S., and Merck will compensate ARIAD for its ridaforolimus sales efforts.
• ARIAD will transition all ridaforolimus activities to Merck, which ARIAD estimates will be completed within six months. Merck will reimburse ARIAD for 100 percent of its ridaforolimus costs incurred until the transition is completed.
• Milestones associated with the start of four Phase 3 clinical trials ($74.5 million) in indications other than sarcoma and the development-cost advance contemplated by the original collaboration agreement are not included in the revised agreement, since Merck will be responsible for fully funding all clinical trials and other development activities.
• The terms for development and commercialization of ridaforolimus in potential non-oncology indications remain subject to future agreement between the companies.

Benefits to ARIAD of Restructured Partnership

"The restructuring of our ridaforolimus partnership represents the culmination of over a year of negotiations with Merck and speaks to the strong commitment both companies are making to broadly develop and commercialize ridaforolimus as a potential new treatment for patients with cancer," stated Harvey J. Berger, M.D. chairman and chief executive officer of ARIAD.

"With Merck assuming all costs associated with the development, manufacture and commercialization of ridaforolimus and providing ARIAD with near-term cash payments totaling approximately $69 million, we have greatly strengthened our balance sheet," he added. "We are retaining critically important commercial value through substantial global royalties, regulatory and sales milestones and a co-promotion option and eliminating the need for us to fund fifty percent of the ridaforolimus costs. This will allow us to focus our resources on commencing the pivotal trial for our next promising product candidate - AP24534 - our investigational pan BCR-ABL inhibitor and on advancing development of AP26113 - our investigational ALK inhibitor."