Equity Research Healthcare I Biotechnology ARIAD Pharmaceuticals, Inc. Iclusig Comes Back With a New Label and REMS; Upgrade to Outperform and Increase Price Target to $12 On Friday, December 20, Ariad announced that it has reached agreement with the FDA for immediate reauthorization of Iclusig marketing in the United States, with a narrower label and accompanying Risk Mitigation Strategy (REMS) and postmarketing requirements (PMRs) Ariad plans to resume shipping of Iclusig by midJanuary 2014. The new label stipulates that Iclusig is indicated in adult patients with T315I-positive chronic myeloid leukemia (CML) or T315I-positive Philadelphia chromosome positive acute lymphoblastic leukemia (Ph+ ALL), or in adult patients with CML and Ph+ ALL where no other tyrosine kinase inhibitor (TKI) therapy is indicated. We note that on October 31, the Food and Drug Administration (FDA) suspended marketing of Iclusig based on the risk of life-threatening blood clots and severe narrowing of blood vessels associated with Iclusig treatment. We had been expecting the recommercialization of Iclusig with a narrower label, and we consider the REMS accompanied by four PMRs without an Elements to Assure Safe Use (ETASU) to be a favorable. We discuss the new label, REMS, and PMRs in detail herein. We are upgrading Ariad shares to Outperform and increasing our price target from $3 to $12 (exhibit 1, on page 5), based on the following: 1) limited downside with REMS and PMRs in place, in our opinion; 2) positive physician feedback during ASH and high number of single-agent INDs filed during marketing suspension; 3) potential for safer administration of Iclusig with lower doses in the future; 4) potential attempt at the frontline setting at lower doses as long-term upside; 5) other potential indications of Iclusig that are not included in our model: GIST, and NSCLC with FGFR and RET mutations; and 6) valuation: although the addressable patient popul