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You don't see epic crashes bigger than this.

ARIAD Pharmaceuticals (NASDAQ: ARIA  ) is trading down about 70% today on word that its blood cancer drug Iclusig causes serious arterial thrombosis -- blood clots -- in more patients than previously reported. After 11 months, serious arterial thrombosis occurred in 8% of patients, but follow-up data from its pivotal trial show that the number of patients increased to 11.8% after patients were treated for a median of 24 months.

It's not like the rate -- the number of events per year that patients are on the drug -- increased; it's just that patients have now been on the drug longer, so the number of patients that have experienced a blood clot increased. Ironically, keeping patients in remission and on the drug for years seems to be Iclusig's downfall.

The blood clots aren't so bad for Iclusig's use as a third-line treatment for leukemia patients. When you're the drug of last resort, the risk of blood clots isn't a big worry; patients are clearly responding to the drug. The only issue would be if the blood clots were killing patients faster than not treating the patients. Unfortunately the trial didn't have a placebo control arm, so it's impossible to say.

The bigger problem for ARIAD is that it's counting on moving Iclusig into patients earlier in their disease development. The drug is approved for patients that have failed a tyrosine kinase inhibitor, Novartis' (NYSE: NVS  ) Gleevec¬†or Bristol-Myers Squibb's (NYSE: BMY  ) Sprycel, for example. In August, ARIAD said that 40% of patients treated in the second quarter had failed only one tyrosine kinase inhibitor, which was up from 25% in the first quarter.

In other words, after patients had failed one tyrosine kinase inhibitor, doctors were increasingly turning to Iclusig as the second choice rather than prescribing the other first-line tyrosine kinase inhibitor that hadn't been used. The new data might help Novartis and Bristol-Myers capture some of those patients that were going to Iclusig instead.

ARIAD is also trying to move into the first-line treatment to compete directly with Gleevec and Sprycel. The biotech is running a trial, dubbed EPIC, testing Iclusig against Gleevec in newly diagnosed patients. Enrollment in that trial is being paused, and the patients already in the trial will have their dose reduced.

If the reduced dose causes fewer blood clots, the risk-benefit of Iclusig might be better than Gleevec, but that's a big unknown at this point. Until we get that data, ARIAD is a risky bet even at this beat-down price.

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