Ariad Pharmaceuticals Inc fka ARIA

[justthefacts1]

Eli Lilly, GlaxoSmithKline, or Shire will buy Ariad Pharmaceuticals?? (just to lay it to rest once and for all)


You couldn't make some of this stuff up if you tried, but according to the U.K.'s Daily Mail late last week, Eli Lilly (NYSE: LLY ) , GlaxoSmithKline, and perhaps even Shire are considering a purchase of struggling biopharmaceutical company Ariad Pharmaceuticals (NASDAQ: ARIA ) for as much as $20 per share -- a near-tripling in its share price from the prior day's close.

With the exception of Eli Lilly, the notion that a deal would even remotely make sense for GlaxoSmithKline and Shire was far-fetched at best. GlaxoSmithKline's oncology pipeline is growing nicely with the addition of Mekinist and Tafinlar in 2013 to treat advanced melanoma, and it's maintaining its premier position as a leading COPD treatment specialist alongside its drug development partner Theravance. What Glaxo would want with Ariad is beyond me!

The same can be said for Shire, which had seven of its 10 best-selling drugs deliver sales growth of 17% or better in the third quarter. With EPS anticipated to grow 50% from 2012 through 2016, it's not exactly as if Shire is in any way hurting for growth opportunities.

Eli Lilly, on the other hand, would at least make a shred of sense, primarily because three-quarters of Lilly's pipeline is exposed to generic competition between 2010 and 2017, and quite a few of its late-stage drug hopefuls have failed over the past two years. But, to proclaim that Ariad is on Eli Lilly's radar, or worse yet, that it would pay up to $20 per share for Ariad might be the biggest farce yet!


Source: Ariad Pharmaceuticals.

Ariad's only FDA-approved drug is Iclusig, a leukemia drug that has only recently returned to market in the U.S. after being pulled briefly over toxicity issues. A two-year follow-up study in October revealed that an increasing number of patients on Iclusig experienced thrombotic events (i.e., blood clots). Although Iclusig has been cleared for continued use in the U.S. and in Europe, it now comes with more stringent warning labels regarding its use, and at least in the U.S., it's being used as an absolute last line of defense in treating Philadelphia chromosome-positive acute lymphoblastic leukemia! Not to mention that its original promise laid with gaining an indication to treat chronic myeloid leukemia (the Epic trial), but that trial was scraped in mid-October.

The only advantage a company like Ariad can offer a buyer is its exorbitant cash value and its carry-over losses, which can help reduce taxes on corporate profits. Those two things alone are very, very unlikely to be enough to merit any biotech to bid for Ariad.

Finally, with the exception of AP26113, a mid-stage non-small cell lung cancer drug, every other indication being researched involves Iclusig -- so we're likely talking about limited usage because of toxicity issues in these indications as well!

With Ariad not expected to be at breakeven results until 2016 (assuming everything goes right from here on out), and peak sales for Iclusig cresting at no higher than $300 million by my own estimations, I'd say the prospect of any company buying Ariad is just plain silly.


http://www.fool.com/investing/general/2014/01/28/the-3-most-ridiculous-biotech-buyout-rumors-over-t.aspx