Biotech Values

[mcbio]

ARIA strikes me as a potentially profitable short. Reasons:

• The enterprise value is a whopping $1.5B (fully-diluted).

• Even knowledgeable posters claim that Ponatinib is a “lock” for FDA approval based on interim data, so hugely bullish expectations are already baked in.

• The CEO is untrustworthy and has a propensity for pumping that goes beyond what you typically see for a small biotech.

• At least one and possibly two generic competitors for Ponatinib will be on the market in the next few years.

• Expensive cancer drugs for niche markets are, by and large, a bad business proposition; they will be among the easiest targets for government-mandated price controls in the US (and around the world).

Feedback welcome.

I wouldn't short ARIA personally but all of your points, especially the first one, are why I continue to be on the sidelines and have no intention of taking a long position. I think the expectation is that ponatinib will be a more potent drug than the generics that will be on the market in the next few years, and will work on the mutation that the generics will not, but it's a reasonable question to ask if that market alone is enough to support current valuation, let alone any reasonable upside. And what are the chances ponatinib will make any reasonable headway into the rest of the market served by the soon-to-be generics. Seems like a fair question, especially at current valuation. There is still rida and the ALK drug but I haven't seen enough convincing data on rida yet and the ALK drug is a bit too early itself.