Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) and Incyte Corporation (NASDAQ:INCY) announced the entry into a definitive agreement for Incyte to acquire ARIAD’s European operations. At the close of the transaction, the companies will also enter into a license agreement whereby Incyte will obtain an exclusive license to develop and commercialize Iclusig® (ponatinib) in Europe and other select countries.
The planned acquisition of a fully-integrated and established pan-European team of 125 employees, including medical, sales and marketing personnel, will further Incyte’s strategic plan and accelerate the establishment of its operations in Europe, helping to optimize clinical development and maximize the potential of future European launches for Incyte’s portfolio of products in development.
The agreement to divest its European operations and out-license Iclusig in Europe will enable ARIAD to focus its promotion of Iclusig on the highly valuable U.S. market, while strengthening its financial position and maintaining important optionality through a potential buy-back provision for the Iclusig license rights in the event of a change-in-control of ARIAD, as described further below.
Under the terms of the license agreement, Incyte will receive an exclusive license to develop and commercialize Iclusig, the only approved BCR-ABL inhibitor with activity against the T315I mutation, throughout Europe and in other select countries. Iclusig is approved in Europe for the treatment of patients with chronic myeloid leukemia (CML) and Philadelphia-positive (Ph+) acute lymphoblastic leukemia (ALL) who are resistant to or intolerant of certain second generation BCR-ABL inhibitors and all patients who have the T315I mutation.
“The acquisition of ARIAD’s European operations is a unique and strategic opportunity for Incyte, which will further establish our medical and commercial footprint in Europe,” said Hervé Hoppenot, chief executive officer of Incyte. “Adding the ARIAD team’s experience, talent, resources and relationships to our existing European organization accelerates our planned global expansion and leaves us well-positioned to maximize the potential future European launches from our rich development portfolio.”
“The decision to divest our European operations and out-license the commercial rights to Iclusig inEurope is one of the key outcomes of our ongoing strategic review,” stated Paris Panayiotopoulos, president and chief executive officer of ARIAD. “We are delighted to have Incyte as a committed partner to continue Iclusig’s strong revenue growth in Europe, while significantly strengthening our financial position and maintaining future strategic optionality with a potential buy-back of Iclusig.”
Terms of the Agreements
Pursuant to the terms of a share purchase agreement (the “SPA”), Incyte will acquire all shares ofARIAD Pharmaceuticals (Luxembourg) S.a.r.l., the parent company of ARIAD’s European subsidiaries responsible for the commercialization of Iclusig in the licensed territory, for a payment to ARIAD of$140 million that will be funded by Incyte through available cash on hand.
In addition to the SPA, the parties have agreed to enter into a license agreement (the “License Agreement”), upon the closing of the SPA, pursuant to which Incyte will be granted an exclusive license to develop and commercialize Iclusig in the European Union and 22 other countries, including Switzerland, Norway, Turkey, Israel and Russia. ARIAD will be entitled to receive tiered royalties of between 32 and 50 percent on net sales of Iclusig in the territory and up to $135 millionin potential development and regulatory milestones for Iclusig in new oncology indications in the territory. ARIAD may also become eligible to receive additional milestones for non-oncology indications, if approved, in the territory. Incyte has also agreed to fund a portion of the ongoing clinical development of Iclusig in ARIAD’s OPTIC and OPTIC-2L clinical trials through cost-sharing payments of up to $7 million in each of 2016 and 2017.
The terms of the License Agreement also include an option for an acquirer of ARIAD to buy back the rights to Iclusig by repaying the upfront and milestone payments, plus paying an additional amount based on Iclusig sales during the previous 12 months and royalties of 20 to 25 percent on sales for the remaining royalty term. The buy-back provision cannot be exercised before two years or after six years from the closing of this transaction, and includes a transition period of up to one year.
The transaction is expected to close on or about June 1, 2016, subject to customary closing conditions, and is expected to reduce ARIAD’s 2017 annual operating expenses by approximately $65 million. The transaction is expected to be earnings accretive for Incyte in 2018.
Both Incyte and ARIAD expect to file additional disclosure documents with the Securities and Exchange Commission related to this transaction. (Original Source)
Shares of Ariad Pharmaceuticals closed last Friday at $6.98, up $0.25 or 3.71%. ARIA has a 1-year high of $10.07 and a 1-year low of $4.37. The stock’s 50-day moving average is $6.78 and its 200-day moving average is $6.18.
On the ratings front, Ariad has been the subject of a number of recent research reports. In a report issued on May 5, Cowen analyst Phil Nadeau upgraded ARIA to Buy. Separately, on April 19, JMP’s Michael King reiterated a Buy rating on the stock and has a price target of $9.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Phil Nadeau and Michael King have a total average return of -3% and -9% respectively. Nadeau has a success rate of 35.7% and is ranked #3215 out of 3828 analysts, while King has a success rate of 42.1% and is ranked #3358.