Why You Should Watch Ariad Pharmaceuticals, Cigna Corporation and Shire plc Today

Today's biggest stories in healthcare and biotech.

Feb 7, 2014 at 8:41AM

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.

Good morning, fellow Foolish investors! It's time to check in on the top stories in the health care sector this morning.

Sarissa reportedly pushing for board seats at Ariad?
As has become custom of late, Ariad Pharmaceuticals (NASDAQ:ARIA) is moving upwards in premarket trading based on rumors. Specifically, the company's shares are up 7.45% with over 1.4 million shares exchanging hands in extended hours trading, at the time of writing this article.

Today's action is apparently linked to a Reuter's blog stating that Sarissa Capital Management is seeking seats on Ariad's board prior to the upcoming election on Feb. 20, much in the same way they did after taking a big stake in VIVUS Corporation last year. If you recall, Sarissa Capital and First Manhattan shook up VIVUS's board in 2013 in an attempt to right the ship so to speak. 

If this report turns out to be true, however, I don't view it necessarily as a good thing. Sarissa's involvement in VIVUS has not changed the fortunes of the company in the least, and instead, has led to instability within the executive management. In my experience, activist investors tend to cause more harm than good, and it's important to keep in mind that Ariad doesn't have a managerial problem; it has a drug with safety issues problem. Then again, this could turn out to be yet another baseless rumor swirling around Ariad. So, stay tuned!

Cigna's earnings disappoint
Continuing the parade of earnings in the health care sector, Cigna Corporation (NYSE:CI) reported this morning, missing earnings per share estimates by $0.10, but beating on revenues by a hefty $850 million. Investors shouldn't be too down on the company this morning, however, because the earnings release was generally positive. Annual revenues increased by 11% to $32.4 billion, and Cigna increased earnings per share for the year by a stately 13%.

Turning to the miss, Cigna's earnings missed estimates largely because of a $40 million special charge after taxes due to a restructuring program instituted by the company. Given that this is not expected to be a reoccurring event and instead a one time charge, I think investors would be wise to focus on the broader picture that is emerging, namely strong annual growth that will continue into 2014. The reorganization should also help falling operating margins, which hurt the company's fourth quarter performance. In sum, you might want to dig deeper into this diversified health care company. 

Shire is bummed over late-stage clinical trial results
Shares of Irish biopharma Shire (NASDAQ:SHPG) are down only slightly in premarket trading this morning after the company's experimental drug Vyvanse for major depressive disorder, or MDD, failed to meet its primary endpoints in two late-stage studies. Specifically, the studies showed that while Vyvanse is generally safe, it does not perform better than placebo at reducing symptoms associated with MDD. Because the effectiveness of Vyvanse and placebo were relatively similar at treating MDD, Shire has decided to discontinue the drug's clinical development for this indication altogether. Vyvanse is approved in the U.S. as a treatment for ADHD; so, these two studies were aimed at expanding the drug's current label. 

Although negative clinical trial results are always disappointing, they are an integral part of investing in this sector. On the bright side, large biopharmas like Shire do offer investors strong commercial portfolios that help to soften the blow when these inevitable events occur. Put simply, I don't expect Vyvanse's recent clinical failure to be a major issue going forward. 

Discover The Motley Fool's Top Stock For 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers