Will Ariad Pharmaceuticals Lose to Novartis and Bristol-Myers Squibb?

Ariad Pharmaceuticals (NASDAQ: ARIA  ) will release its quarterly report on Tuesday, and investors have recently seen their shares get crushed under the weight of terrible news from the FDA. As hopes for the company's lead drug fade, has Ariad lost its bid to upend Novartis (NYSE: NVS  ) and Bristol-Myers Squibb (NYSE: BMY  ) in the chronic myeloid leukemia space?

Source: Ariad Pharmaceuticals.

Until last month, Ariad Pharmaceuticals was mostly a success story, with its Iclusig leukemia treatment having gained FDA approval in December 2012 under its accelerated approval program. But lately, word that trial patients were developing serious arterial blood clots sent the stock plunging. Can Ariad recover from the negative news and the resulting request from the FDA for it to suspend sales of Iclusig? Let's take an early look at what's been happening with Ariad Pharmaceuticals over the past quarter and what we're likely to see in its report.

Stats on Ariad Pharmaceuticals

Analyst EPS Estimate

($0.43)

Year-Ago EPS

($0.32)

Revenue Estimate

$16.67 million

Year-Ago Revenue

$85,000

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

What's in store for Ariad earnings?
Somewhat surprisingly, analysts have seemed to get more optimistic about Ariad earnings recently. They've kept near-term estimates steady, but in just the past month, they've narrowed their loss projections by a quarter per share. The stock, though, has lost 88% of its value since early August.

Ariad had counted on having Iclusig become a big revenue booster, and early indications were good. In its second-quarter results, the company said sales had more than doubled from the previous quarter, with the company outpacing where Novartis' Tasigna had been right after its own launch. The fact that patients had to have already failed under treatments from Bristol-Myers Squibb or Novartis before using Iclusig was a negative, but doctors seemed to be gravitating toward prescribing Iclusig.

Ariad quickly saw things go downhill from there, though, with bad news coming in three distinct waves. In early October, Ariad said that Iclusig had led to almost 12% of patients developing severe arterial thrombosis, leading to an FDA clinical halt. That by itself posed a serious threat to Ariad's plans to seek approval to market Iclusig as a first-line treatment to substitute for Novartis' Gleevec or Bristol-Myers' Sprycel.

Later in the month, the hammer fell twice more. First, Ariad said it would discontinue its late-stage clinical study of Iclusig against Novartis' Gleevec. Then, the FDA delivered another huge blow just a couple weeks ago, asking Ariad to stop selling Iclusig temporarily while it looks more closely at the drug's safety.

The problem Ariad faces is that its entire future is in doubt. While it's not a sure thing that Iclusig won't recover, it's far from certain. With only one of the company's phase 2 trials involving a drug other than Iclusig, Ariad decided to cut its workforce by 40% in order to cut costs in an effort to survive. That's consistent with moves from Bristol-Myers Squibb and Novartis to do layoffs, but in Ariad's case, cost cutting is a lot more essential to the company's existence.

In the Ariad earnings report, watch for any sign of progress on the FDA's investigation. Ariad needs to have Iclusig cleared for further sales in order to have a chance of recovering its lost ground. Otherwise, shareholders might never see the stock bounce.

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