Ariad Pharmaceuticals, Inc. will receive up to $200 million in revenue interest financing from PDL BioPharma, a company managing life-science assets, in exchange for royalties on the net revenues of Ariad’s cancer drug, Iclusig (ponatinib). Funding of the first $100 million will be made in two tranches of $50 million each, with the initial amount having already been funded on the closing date of the agreement and an additional $50 million to be funded on the 12-month anniversary of the closing date. In addition, Ariad has an option to draw up to an additional $100 million at any time between the sixth and twelfth month anniversaries of the closing date.

PDL will initially receive 2.5% of the worldwide net revenues of Iclusig until the one year anniversary of the closing date, at which time the royalty increases to 5.0% of the worldwide net revenues of Iclusig and remains until December 31, 2018. Beginning January 1, 2019 and thereafter, the royalty rate will increase to 6.5%, subject to an additional increase to 7.5% if PDL’s funding exceeds $150 million. If PDL does not receive payments equal to or greater than the total amount funded on or before the fifth anniversary of each of the respective fundings, Ariad will pay PDL the difference between the amounts funded by PDL and the amounts paid to such date. PDL has a put option based upon certain events and Ariad has a call option to repurchase the revenue interest at any time. Both the put and call prices have been pre-determined.

Under the agreement, Ariad will pay PDL 2.5% of global net revenues of Iclusig for the first year of the agreement, 5.0% after the first year through the end of 2018, and 6.5% from 2019 until PDL receives a specified very low double-digit IRR. The 6.5% royalty rate would increase to 7.5% if the company draws down more than $150 million. In all cases, the royalty no longer is payable once PDL receives its predefined IRR. Ariad may also buy out the royalty at any time by making a payment to PDL that will, together with royalties paid, provide a specified return to PDL. Furthermore, if after five years from receiving each payment tranche, PDL has not received total payments that are at least equal to the total amounts it has paid to Ariad, then Ariad will be required to pay to PDL an amount equal to such a difference. Upon the occurrence of specified events, such as a change of control of Ariad, PDL has the right, but not the obligation, to terminate the agreement by requiring Ariad to repurchase the revenue interests owed to PDL at a predefined price.

Ariad intends to use the base funds to conduct a front-line trial of brigatinib, its investigational ALK inhibitor, in patients with non-small cell lung cancer and to support brigatinib commercial readiness, as well as to continue its ongoing Iclusig initiatives. Ariad is on track to complete enrollment in a Phase III trial of brigatinib in third quarter 2015, to file for approval in the US next year, and subject to regulatory approval, to launch brigatinib by early 2017. Brigatinib has breakthrough designation from the US Food and Drug Administration.

Iclusig is a kinase inhibitor for treating specific forms of leukemia. It is approved in the US, European Union, Australia, Switzerland, Israel, and Canada. In the US, it is approved for treating adult patients with T315I-positive chronic myeloid leukemia (chronic phase, accelerated phase, or blast phase) or T315I-positive Philadelphia chromosome positive acutelymphoblastic leukemia (Ph+ ALL) and for adult patients with chronic phase, accelerated phase, or blast phase chronic myeloid leukemia or Ph+ ALL for whom no other tyrosine kinase inhibitor therapy is indicated.

Source: Ariad Pharmaceuticals and PDL BioPharma