Things have gone from bad to worse to worst for Ariad Pharmaceuticals (NASDAQ: ARIA ) . Its one-month stock chart resembles stairs down to the Grand Canyon.
The first drop happened when Ariad announced that it continued to see blood clots in patients taking its blood cancer drug Iclusig. The drug is currently approved as a second-line or later treatment after patients have already been treated with Novartis' (NYSE: NVS ) Gleevec or Bristol-Myers Squibb's (NYSE: BMY ) Sprycel.
As a treatment of last resort, a risky safety profile could be acceptable, but Ariad was valued as high as it was before the news because investors were counting on Iclusig getting approved as a first-line leukemia treatment. Being used before Novartis' or Bristol-Myers Squibb's drugs could have made Iclusig a blockbuster.
Ariad was testing Iclusig head to heat against Gleevec in a trial dubbed Epic, but the biotech paused enrollment in the trial when the safety issue was announced earlier this month.
Ariad eventually came to the conclusion that the Epic trial wasn't worth continuing. That second dip in the middle of the month doesn't look all that bad, but that's only because of the scale. It's actually a 59% haircut.
Which brings us to today, when ARIAD fell another 44% after announcing that the FDA wants Ariad to temporarily stop marketing and commercial distribution of Iclusig.
While it's pretty bad news, Ariad believes there's a good chance the FDA will eventually allow patients to use the drug again. There's likely a population where the benefit from taking Iclusig outweighs the risk of blood clots.
Until the FDA and Ariad define that population and how they're going to keep other risky patients from taking Iclusig, the FDA wants to limit access to the drug. Essentially, the FDA is saying that doctors are idiots and don't do enough research into drugs they prescribe.
Eventually, the FDA and Ariad will rewrite the label and establish an Elements To Assure Safe Use, or ETASU, which could be as simple as educating doctors before they prescribe the drug, but might include something more complex like a patient registry.
Ariad doesn't know how long that'll take. My guess is a month or more to write up the new plan plus a few months to actually implement it. If the FDA decides it needs help from outside experts, it'll take much longer to schedule an advisory committee meeting.
Keep in mind there's always the possibility that the FDA will conclude that it's too hard to define the risk-benefit and pull the drug completely off the market until Ariad runs clinical trials to establish the best population to be treated with Iclusig.
Or in other words, there could still be another step down. Ariad is, after all, is still a decently sized company with a $400 million market cap.
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