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Investing as Shakespearean Tragedy: The Story of Ariad Pharmaceutical (ARIA)

By  +Follow November 12, 2013 8:57AM
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Shares in Ariad Pharmaceuticals (ARIA) were up 10.78 percent on Veterans Day. Even for a small-cap like Ariad, coming in at a valuation just under a half billion dollars, that’s normally what one would consider a pretty solid bounce. That’s a day that, for a lot of investors, would stand out. However, for the battered shareholders of Ariad, it probably doesn’t even register any more. Okay, that’s not true, double-digit jumps always register. But after the Odyssey Ariad’s been on for the last month, it’s not difficult to imagine that days like Monday just get lost in the shuffle.

It’s not often you see a company go on a ride like Ariad just has, plunging sharply, appearing to rally, rinse and repeat. And it’s a drama that’s swept a lot of people up. Over the last 3 months, Ariad’s moved an average of 11.14 million shares a day, good to make it the 75th most traded security over that period, one spot behind Elon Musk’s Tesla Motors (TSLA) , a battleground stock and the source of general market fascination. That’s a class that contains mostly mega-cap blue chips and high-profile ETFS, relatively few small-cap companies. And that’s not even the whole story. Ariad’s heavy volume is drawn mostly from the massive spike this last month. Over the last 30 days Aria has been moving an average of 20 million shares a day, meaning that more than 10 percent of outstanding shares are trading hands on an average day.

So what’s happening with this company? The story’s a simple one, but, for Ariad investors, it’s a tragic one.

Volatile Month

Lets start with the whole story: since the start of October, Ariad Pharmaceutical’s stock has lost over 85 percent of its value. No matter how specifically you pull things apart, that’s the simple fact one cannot avoid. Especially if you’ve owned Ariad for that whole stretch. But inside that one big sell-off is a series of daily price moves that could drive an investor insane. Here’s a timeline or the events that have brought Ariad so much grief:

October 8:

After market close, news gets out regarding the clinical trials for Ariad’s leukemia drug Iclusig and it’s bad. In fact, if you’re long Ariad, it’s positively awful. The drug showed blood clots developing in 11.8 percent of people treated with Iclusig after 24 months. This was a big jump from the 8 percent rate found after 11 months, and it prompts the FDA to block Ariad from enrolling any new patients to drug trials for Iclusig.

Like most small-cap pharma companies, Ariad’s future is tied mainly to just a couple of drugs, and the news that one of them might not be safe is pretty drastic. Especially when one considers that the nearly 800 percent gains from the start of 2010 to October 7 had a lot to do with the fact that Iclusig looked so promising, even getting accelerated approval based on its Phase 2 clinical data.

So it shouldn’t be surprising that the market’s reaction was swift and vengeful. As soon as investors got a crack at selling their position on October 9 shares plummeted over 65 percent.

October 10-18:

If the story ended there, it would be pretty much in line with a familiar narrative: small-cap pharma plummets on negative results of clinical trial. But, while nothing matched the degree of the move on the ninth, Ariad kept trading at heavy volumes and kept posting double-digit moves.

A series of analyst downgrades hit the company on October 10, with Barclays (BCS) downgrading the stock from overweight to underweight and cutting the price target from $25 a share to $4 (ouch). The stock kept falling, losing another 30 percent from October 10-16 but coasting into what appeared to be a bottom on October 16.

Then, on October 17, signs of life! Following comments from JP Morgan (JPM) analyst Cory Kasimov that physicians may not be all that concerned about the blood clots, the stock rebounded, posting a 10.78 percent gain and potentially giving hope to Ariad owners that the worst was behind them.

Except that it wasn’t. Not at all. October 18, word came out that Ariad and the FDA had agreed to halt testing of Iclusig entirely based on the rate of blood clotting incidences. The discontinuation of the late-stage trial dubbed Epic by Ariad caused shares to plunge more than 40 percent that day.

October 21-October 30:

After any stock gets hammered that hard in that short a period, one might expect it to bounce back. At least a little. Considering how steep the discount it’s trading at as compared to a mere two weeks ago, it has to garner at least a little interest, right?

And it did. The company staged a pretty substantial rally, gaining almost 50 percent in just nine days. It’s not much when one considers just how fall the stock fell prior to the rally, but at least the battered shareholders got a respite in the end, right?

October 31:

Only it wasn’t the end. Halloween was extra spooky if you had decided to wait out Ariad’s steep decline. Ariad announced that it would suspend marketing and distribution of Iclusig while it "continues to negotiate updates to the U.S. prescribing information." In retrospect, it certainly seems as though this shouldn’t have been all that surprised, but it clearly surprised at least some people as the company’s stock plunged nearly 45 percent.

And Beyond…?

Where Ariad’s going from here is unclear. Since the start of November, the stock’s up over 15 percent, including a 17.27 percent leap the day after Halloween and Monday’s double-digit gain. However, precisely what to expect moving forward is unclear. In the event that Ariad can return Iclusig to the market and ensure that it’s safe, there’s a pretty good chance the stock takes off. That said, there’s no real way to know whether or not that’s possible. In the meantime, the company announced that it was shedding 40 percent of its American-based workforce on November 7.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for ARIA
wininstocks2014
24 Oct 14 18:48:34
ARIA 5.83 Stock Charts $ARIA Ariad Pharmaceuticals Inc. (NASDAQ) Last Updated: 10/24/2014 20:48:32 ARIA Stock http://t.co/0G4O8R1AnQ
Victor Roberts, MD
24 Oct 14 15:08:54
$ARIA Short interest @ 50.38 Mill, + 1.2%, but Days to cover down to 5.5! Avg daily trading vol increasing! - nasdaq! http://t.co/8iyJDVK1to
Victor Roberts, MD
24 Oct 14 15:06:03
$ARIA Short interest @ 50.38 Mill, + 1.2%, but Days to cover down to 5.5! Avg daily trading vol increasing @ 9 Mill! http://t.co/GLxzQInwAV
Stockaholics
24 Oct 14 14:38:07
Our Penny Stock Alerts Gained 371% In 2 weeks! Sign Up For Free Text Alerts For Our New Pick: http://t.co/Wsu24zYrur $FASC $ARIA $TUCN
Sarcasm Bot
24 Oct 14 13:14:31
$ARIA No one willing to add to their position Poison pill is not GOOD Mr. CEO
$Stocknewsalerts
24 Oct 14 13:11:13
$ARIA ALERT: New ARIAD Pharmaceuticals, Inc. SEC Filing From our Stock News Alerts App
Baffoe K8B Awotwi
24 Oct 14 13:10:30
$ARIA - Current Report Filing (8-k) http://t.co/VIXk1yDsQs
StockNews
24 Oct 14 13:10:29
$ARIA - Current Report Filing (8-k) http://t.co/TWy6O1Wo99
Pzaa...Guy
24 Oct 14 13:10:26
$ARIA - Current Report Filing (8-k) http://t.co/MqZtCXMMhc
4-traders.com
24 Oct 14 13:10:22
ARIAD PHARMACEUTICALS : Other Events (form 8-K) http://t.co/0CtQWMem2R $ARIA
Stocks News&Markets
24 Oct 14 13:10:20
$ARIA - Current Report Filing (8-k) http://t.co/8g80kHQnTw
NASDAQ
24 Oct 14 13:10:15
$ARIA - Current Report Filing (8-k) http://t.co/mQC8apw5fY
Instrumental Data
24 Oct 14 13:08:09
ARIAD PHARMACEUTICALS INC $ARIA 8-K now available
A
24 Oct 14 13:07:39
RT @FonsieTrader: $ARIA Nice reversal! Heading higher
Dan Forman
24 Oct 14 12:56:29
RT @MaisaCorp: $ARIA European regulators recommended continued use of $ARIA cancer drug, Iclusig, in its already approved indications to tr…
MAISA
24 Oct 14 12:47:21
$ARIA European regulators recommended continued use of $ARIA cancer drug, Iclusig, in its already approved indications to treat leukaemia.
Dan Forman
24 Oct 14 12:26:58
$aria more and more great news but no short squeeze yet. Someone holding price down for buyout?
A P
24 Oct 14 12:13:33
Update: $ARIA trading +1.93% #trading #BiotechTraderHandbook--> http://t.co/JDdc1OTfZF
Large Void Bot
24 Oct 14 12:00:21
Popular: $INVN, $F, $RGLS, $ARIA, $CCIH, $ATVI, $REXX, $M, $WDAY, $XON, $BREW, $NTAP
Kenneth Meyerson
24 Oct 14 11:35:20
RT @FonsieTrader: $ARIA Nice reversal! Heading higher
Kenneth Meyerson
24 Oct 14 11:35:12
RT @ffrommgen: $ARIA creating a he'll of a daily candle. Finish strong please
FonsieTrader
24 Oct 14 11:31:27
$ARIA Nice reversal! Heading higher
Rick Frommgen
24 Oct 14 11:27:57
$ARIA creating a he'll of a daily candle. Finish strong please
Kenneth Meyerson
24 Oct 14 11:26:19
$ARIA (now): "It's not easy being green" $ARIA (3 hrs ago): "no kidding!"
Victor Roberts, MD
24 Oct 14 11:26:06
Commented on StockTwits: $ARIA new HOD, 90 more minutes to go. Say bye to 5s and say hello to 6s ! LOL http://t.co/5VtckrDBbI
Helmer
24 Oct 14 11:25:06
$ARIA finally.. new hod
Small Cap Trader
24 Oct 14 11:11:44
$ARIA daily bullish
Small Cap Trader
24 Oct 14 11:10:25
$ARIA inching up 5.80
Victor Roberts, MD
24 Oct 14 10:37:04
Commented on StockTwits: nice to see u back when $ARIA was down and like clockwork u disappear when it's up. Enjo... http://t.co/loBxouplll
Kenneth Meyerson
24 Oct 14 10:31:36
RT @BlockTradeAlert: BLOCK TRADE: $ARIA 500,000 shares @ $5.72 [13:11:49] MT a #prequake for the next leg-up?
Victor Roberts, MD
24 Oct 14 10:22:46
Commented on StockTwits: Added 500 more $ARIA shares at 5.70. Nice reversal, looking good so far! Will take profi... http://t.co/qjDgu6QTlu
Victor Roberts, MD
24 Oct 14 10:19:51
Commented on StockTwits: I think its short covering which pushed $ARIA fron 5.55 to 5.72. Someone unloaded at thi... http://t.co/urGXhlXInJ
BlockTradeAlert
24 Oct 14 10:11:50
BLOCK TRADE: $ARIA 500,000 shares @ $5.72 [13:11:49]
Stockaholics
24 Oct 14 10:09:25
Our Penny Stock Alerts Gained 371% In 2 weeks! Sign Up For Free Text Alerts For Our New Pick: http://t.co/dLDRavoCi4 $FASC $ARIA $TUCN
Victor Roberts, MD
24 Oct 14 09:47:04
$ARIA May be this week ICLUSIG sales numbers caused the drop! looks some kind of adjustment of projections going on! http://t.co/tEfbXhqPLq
Stock Relay
24 Oct 14 09:37:11
$PLUG % Change Click Here: http://t.co/TsxhBArYRi Also See: $SKM $PACT $KF $ARIA ~
Kenneth Meyerson
24 Oct 14 09:25:08
@Drragu good call ;~) Now, we need analyst upgrade(s) to add that certain #OOMPH to the momentum. $ARIA
dougheuring
24 Oct 14 09:24:40
$ARIA TRx/NRx are 81/31,-20/-24% wk/wk, week 39 since Jan re-launch IMS stopped projections that overstated 8-15/14-9/5/14 Iclusig 28%;
Victor Roberts, MD
24 Oct 14 09:18:23
Commented on StockTwits: My small trading strategy is getting paid well so far in $ARIA swing today http://t.co/GEdSxYqINX
Rick Frommgen
24 Oct 14 08:42:29
$ARIA how much reimbursement are we waiting on in emea? That's not just rev but cash too right? Like they haven't been paid yet or rec rev
Robert
24 Oct 14 08:29:27
$ARIA based on CHMP News the stock went cliff diving again
Victor Roberts, MD
24 Oct 14 08:29:07
Commented on StockTwits: Market maker?looks like he or some one yet to recover losses from last year big $ARIA drop http://t.co/EnFiwrMOKi
Victor Roberts, MD
24 Oct 14 08:23:46
Commented on StockTwits: $ARIA speculative traders cashing in profits if any, LOL! buy the rumor and sell the new... http://t.co/ndyaTkVl9h
Victor Roberts, MD
24 Oct 14 08:14:11
Commented on StockTwits: maintain a core position & trade around it. added 500 more $ARIA shares @ 5.58. That's i... http://t.co/TkGiuXcijm
Mark Romero
24 Oct 14 07:59:18
$ARIA If Iclusig sales are much better in this Quarterly Report along with guidance the Europe decision will mean much more. #SalesMatter
Baffoe K8B Awotwi
24 Oct 14 07:57:10
$ARIA - ARIAD annuncia l'adozione di un'opinione finale per Iclusig da parte del Comitato europeo per i http://t.co/kRiX9PQUEX
StockNews
24 Oct 14 07:57:09
$ARIA - ARIAD annuncia l'adozione di un'opinione finale per Iclusig da parte del Comitato europeo per i http://t.co/2JNEYmiB10
Pzaa...Guy
24 Oct 14 07:57:08
$ARIA - ARIAD annuncia l'adozione di un'opinione finale per Iclusig da parte del Comitato europeo per i http://t.co/ugcne8FU0c
Stocks News&Markets
24 Oct 14 07:57:05
$ARIA - ARIAD annuncia l'adozione di un'opinione finale per Iclusig da parte del Comitato europeo per i http://t.co/9mCQAoKEye
NASDAQ
24 Oct 14 07:57:02
$ARIA - ARIAD annuncia l'adozione di un'opinione finale per Iclusig da parte del Comitato europeo per i http://t.co/eqZ9RXLdKU
				
				
By  +Follow November 12, 2013 8:57AM
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