Why Ariad Pharmaceuticals' Shares Dropped


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: Buy the rumor, sell the news is in full effect today for Ariad Pharmaceuticals which fell as much as 20%, after announcing that the Food and Drug Administration has approved Iclusig (formerly ponatinib) for the treatment of a rare blood borne and bone marrow cancer ... with a catch.

So what: The once-daily drug can now be used to treat chronic myeloid leukemia, or CML, and Philadelphia chromosome positive acute lymphoblastic leukemia. Both diseases are rare, which granted Iclusig orphan drug and accelerated review status. However, the FDA is also requiring a warning on the box for physicians and patients that Iclusig can cause blood clots and liver toxicity.

Now what: Congratulations are definitely in order for Ariad, which brings its first FDA-approved drug to market, although, as we can see from today's trading, very few investors expected a warning to be placed on the box. While I welcome any new drugs that improve the health-care landscape, I can't help but be pessimistic about its near-term outlook, considering that Ariad, even with today's drop, is still valued at around three times peak sales of Iclusig. I'm going to need a lot more evidence of success from Ariad if it's going to maintain this valuation!

Craving more input? Start by adding Ariad Pharmaceuticals to your free and personalized Watchlist so you can keep up on the latest news with the company.

The article Why Ariad Pharmaceuticals' Shares Dropped originally appeared on Fool.com.

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