What: Ariad Pharmaceuticals (NASDAQ:ARIA), a company focused on developing novel cancer drugs, saw its shares slip by as much as 10.5% today on heavy volume. The company's shares fell after news broke late last Friday that Ariad rejected an initial tender offer from Baxalta (UNKNOWN:BXLT.DL) that was reportedly worth somewhere in the neighborhood of $2 billion. A buyout at the price would have represented a 40% plus premium, compared to where the drugmaker's shares were trading prior to news of this deal leaking out. 

So what: It's not entirely surprising that Ariad would reject an offer in the $2 billion area, even though the company would be fetching a fairly substantial premium. After all, Ariad garnered a market cap that was far higher not so long ago:

ARIA Market Cap Chart

As a reminder, the company's stock has struggled ever since its flagship leukemia drug Iclusig was shown to increase the risk of severe clotting, leading to the FDA to significantly revise the drug's label.

Initially, Iclusig was approved as a treatment for chronic myeloid leukemia and Philadelphia chromosome positive acute lymphoblastic leukemia in patients who had failed to respond to at least one other therapy. The revised label, however, restricted the drug's use to patients with a specific genetic mutation, or to patients unable to use alternative treatments. Most importantly, this more restrictive label is believed to have slashed the drug's peak sales potential from around $1 billion to somewhere closer to $400 million. 

Now what: Aside from Iclusig, Ariad does sport brigatinib as a potential treatment for ALK+ non-small cell lung cancer. Unfortunately, this drug may not offer much value-wise to a buyer in light of the fact that Pfizer's Xalkori and Novartis' Zykadia are already approved for this relatively rare indication. Ariad's management, on the other hand, may think otherwise, evinced by their statements at various investor conferences, leading them to demand a premium that's ultimately too rich for Baxalta. Time will tell.