Replies to post #33698 on Ariad Pharmaceuticals Inc fka ARIA

[gpo344]

Merrill Lynch. Contd.
Price objective basis & risk
Ariad Pharmaceuticals, Inc. (ARIA)
Our $24 PO is based on a risk-adjusted sum-of-parts DCF analysis that includes $21/share for Iclusig and $4/share for 113, further adjusted for 8% dilution. We use the following assumptions in our DCF: Iclusig global sales in CML of $1.1BM in 2018, sales out to 2030, no terminal value and WACC of 11%. We see potential upside to our valuation from pipeline expansion.
Downside risks to valuation are: 1) disappointing Iclusig launch, 2) data disappointments for ongoing/anticipated Iclusig trials, 3) unexpected clinical strategy requirements for future Iclusig trials, 4) failure to be significantly active in EGFR lung cancer, and 5) financing risk.