Why Ariad Pharmaceuticals Inc. Shares Hit the Deck

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 cancer therapies, plunged as much as 43% -- its third plunge of 42% or more in October -- after announcing that the Food and Drug Administration requested it temporarily suspend sales of its blood cancer drug Iclusig.

So what: According to Ariad's press release, the FDA informed Ariad of its request to temporarily suspend sales of Iclusig -- a treatment for resistant or intolerant chronic myeloid leukemia and Philadelphia chromosome-positive acute lymphoblastic leukemia -- yesterday, and that it plans to work with the FDA to potentially relabel Iclusig to get it back on the market. This temporary sales suspension relates to Ariad's findings, announced three weeks ago, that 11.8% of patients on Iclusig experienced blood clots in their arteries in a two-year follow-up study compared to just 8% at the 11-month mark.

Now what: To be honest, the only shocking aspect I see is how the share price isn't down even more! Although the suspension is only labeled as "temporary" in Ariad's press release, and Iclusig could very well make it back to market, I struggle to see how Iclusig's potential toxicity is going to make it a marketable pipeline option. With seven of its eight clinical trials still involving Iclusig, Ariad would almost need to start from scratch. Plus, even if Iclusig makes it back to pharmacy shelves what doctor is going to prescribe, or patient be willing to take, Iclusig following Ariad's two-year follow-up study? There are a lot of unanswered questions here. Thankfully, Ariad still has nearly $342 million in cash on hand, so we'll be around to get those answers... eventually.

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  • Report this Comment On October 31, 2013, at 5:01 PM, alexandrudacul wrote:

    Maybe because Phizer work with FDA in order to buy Ariad cheap?

  • Report this Comment On October 31, 2013, at 9:31 PM, bachroxx wrote:

    Here's a question...not considering the burn rate, but at what point is it worth buying based on the fact that the market cap is 400 million and they are sitting on $340 million cash. Not much of a downside (at least not in the immediate future) if each share is worth it's weight in cash. Am I missing something?

  • Report this Comment On November 04, 2013, at 8:08 AM, jasoninva wrote:

    There are a number of short-sighted assumptions in this article, but I'll focus on the biggest one - that the recently-published side effects are enough to stop doctors from prescribing this drug. While a simple Google search would have revealed for you that doctors like Dr. Mauro and Dr. Druker (the guy who pioneered TKI treatments for CML) have already voiced support for Iclusig, I'll throw you a lifeline here in that the disease and its history are not as widely-known as that of other cancers. The fact is that Iclusig is the only drug on the market that has FDA-approved efficacy data for T315i treatment. T315i is a specific version of the PH+ BCR/ABL mutation which can't be treated with Gleevec. Without this treatment, patients with the T315i mutation will die without an allogeneic stem cell transplant. The mortality rate and life-changing side effects of that treatment make the Iclusig issues seem less concerning. As cited in a number of articles published since the temporary sale freeze, doctors can still prescribe the medication to special case patients with close monitoring. Is it going to be the blockbuster drug that Gleevec was/is, unlikely. Does it have value, absolutely. Add that to the company's $340m as bachroxx pointed out and the $2-3 price point seems reasonable.

  • Report this Comment On November 04, 2013, at 8:14 AM, TruffelPig wrote:

    I suggest the author starts posting at noclue.com. This is ridiculous and as the previous commenter states shortsighted. But hey, it is not the first clueless post by this author. Please read this:

    http://www.nytimes.com/2013/11/02/health/doctors-fear-losing...

  • Report this Comment On November 05, 2013, at 6:38 AM, jasoninva wrote:

    TruffelPig,

    Exactly! I'm wondering if after reading this article, Sean would be willing to post a revised view? Again, I'll give him a pass because CML is not a well-known disease.

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