Better Bad News Buy: Ariad Pharmaceuticals vs. Exelixis

Ariad Pharmaceuticals (NASDAQ: ARIA  ) and Exelixis (NASDAQ: EXEL  ) have both stumbled, with bad news causing significant drops in share price over the past year (Ariad has lost over 60% of its value, while Exelixis is down 30% over the last year and over 60% from its 52-week high at the beginning of 2014).

Ariad had issues with its drug Iclusig, which was pulled from the market by the FDA due to safety issues, and has now returned with stronger warning labels and a reduced market potential. Investors were hoping that Exelixis' Cometriq, which is currently approved for thyroid cancer, would be so effective in a prostate cancer trial that the trial would be stopped early. That didn't happen.

With both stocks down badly from their 52-week highs, which is the better bad news buy?

In the video below, Motley Fool health care analysts Michael Douglass and David Williamson tell you which, and why.

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