Why Ariad Pharmaceuticals Inc. Shares Were an Epic Failure

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ariad Pharmaceuticals (NASDAQ: ARIA  ) , a biopharmaceutical company focused on developing therapies to treat cancer, were rocked again, falling as much as 42% after announcing the discontinuation of a late-stage trial known as Epic involving Iclusig for newly diagnosed chronic myeloid leukemia.

So what: The reason for the stoppage, as noted by Ariad, was because of a high number of arterial thromobotic events, which you may know better their less scientific name -- blood clots. According to Ariad's press release, the decision to stop the trial was mutually agreed upon between it and the Food and Drug Administration in light of news coming out last week that longer-term studies showed an increasing risk for blood clots in patients taking Iclusig.

Now what: Now I'd say Ariad is in some pretty hot water. Iclusig's current FDA approval gives the company only very minimal market share, and the drug's recent bad publicity about long-term safety may quite possibly shrink that further. To add, this early-stage CML study was supposed to be where the majority of its future revenue came from. With that now off the table, I'm not sure I see a way for Iclusig to ever get Ariad anywhere near profitability. Removing the Epic trial from the picture, out of the eight ongoing clinical studies in Ariad's pipeline, seven involve Iclusig! Given the ongoing toxicity concerns here I would, as an investor, suggest keeping a big distance from Ariad at the moment.

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  • Report this Comment On October 18, 2013, at 2:11 PM, TruffelPig wrote:

    Now that it fell from $20+ to $2.7 you would keep a big distance. Really? The drug might be salvageable at lower dose. Market cap ca. $500 million now. Not saying to jump in now but observing is certainly a good idea at this price.

  • Report this Comment On October 18, 2013, at 3:07 PM, TMFUltraLong wrote:

    Truffle,

    No, I've been saying keep your distance the entire way and have maintained a CAPScall of underperform on Ariad for quite some time now.

    Sean

  • Report this Comment On October 18, 2013, at 3:44 PM, TruffelPig wrote:

    Sean: Ok, good for you. Point well taken! I did not see the toxicity guillotine coming in that hard. This is a warning that one trick ponies (or 1.5 in this case) are dangerous. I do, however, think that this price will be pretty close to the bottom of $ARIA. There are ways to salvage this by, e.g., (a) reducing the dose which seems to be possible to 30 or 15 mg from the 45 they give now, (b) adding a blood thinner to the therapy. This is an enormous set back for the company, no doubt. But the patient $ARIA is on life support, not dead.

    It seems that the drug won't be removed from the market at least.

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