Boston, MA 10/14/2013 (wallstreetpr) – Ariad Pharmaceticals, Inc. (NASDAQ:ARIA) is a classic case of what happens to a single product company that loses the product. Though the company is engaged in the discovery, development, and marketing of drugs to treat aggressive cancer, it has been successful in commercialization of only one drug- Iclusig. This drug has been developed to treat aggressive forms of Leukemia. Currently being looked at as only a second line of treatment, the company was confident of making the drug a frontline treatment for such types of cancer. So confident was the company, that many analysts were recommending “buy” ratings on the stock till the announcement on October 8, 2013 informing investors that the company is halting clinical trials of the drug on reports of adverse reactions. Under pressure from the U.S. Food and Drug Administration (USFDA), the company put new trials on hold while reducing the dosage in already existing trials. This short term measure was designed to give the company time to sort out the issue. This would have entailed the use of drug as a last resort treatment, a segment containing many heavily entrenched players with heavy pockets. Investors lost confidence and the shares nose dived 66%, briefly touching the 52 week low of $4 per share on October 9, 2013 before recovering to close at $5.83 per share.
The USFDA followed this up by asking doctors and patients to report side effects from the use of the drug. Some of the side effects included heart attacks resulting in death, stroke, and the narrowing of arteries requiring urgent surgical procedure to restore blood flow. This means that the FDA now thinks that the possible side effects of the drug far outweigh its potential benefit. It can make a call only after a thorough analysis. Investors, already spooked by the earlier news, dumped the stock at whatever price they could get. The shares fell to $4.26 a share, a fall of more than 21% on October 11, 2013.
The effect of an announcement of good results on August 7, 2013 has now worn off completely, and investors will be scrambling to recover whatever they can.
