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: After reporting fourth quarter and full year earnings yesterday, shares in Ariad Pharmaceuticals, (NASDAQ: ARIA) jumped by more than 10% today on news that its largest shareholder, Sarissa Capital Management L.P., will seek to oust Ariad's CEO and founder Harvey Berger at the company's annual meeting in June.
Source: Ariad Pharmaceuticals
So What: Berger has been on the hot seat since safety-concerns for Ariad's only approved medicine, Iclusig, prompted the FDA to institute a temporary suspension of its sales in 2013.
Following a revised label that includes a Risk Evaluation and Mitigation Strategy and a warning regarding cardiac risk, Iclusig returned to market in January 2014.
In the fourth quarter, sales of Iclusig, which is used to treat chronic myeloid leukemia and a specific form of acute lymphoblastic leukemia, totaled $21.4 million. That fourth quarter performance brought full year sales of the drug to $55.7 million in 2014.
Despite Iclusig's sales increasing 47% sequentially from the third quarter, the company still reported that it lost $0.03 in the fourth quarter and lost $0.87 last year.
During its fourth quarter conference call, the company also issued guidance for Iclusig sales of between $130 million and $140 million this year. However, those sales will still trail expenses. Ariad is planning to spend between $185 million and $195 million on R&D and between $135 million and $145 million on selling, general, and administrative expenses this year.
Now what: It's little wonder that Sarissa Capital, whose founder formerly worked for activist investor Carl Icahn, would like to see some changes.
Expectations for Iclusig were sky high following its approval and despite cost cutting measures the company still expects that its cash will shrink from $352.7 million exiting 2014 to $200 million exiting 2015. That said, Sarissa Capital probably isn't too disappointed with its return on its Ariad shares. Since reporting that it had taken its 6.2% equity stake in the company in October 2013, shares have doubled. Whether or not shares can continue higher remains to be seen, but given the ongoing losses, I'm sitting on the sidelines on this one.
