Bloomberg News

Ariad Gains a Third Day on Investor Bet of Takeover Interest (2)

January 24, 2014

Ariad Pharmaceuticals Inc. (ARIA:US), the cancer-therapy developer that lost 64 percent of its market value last year, rose for a third day as investors bet the company may attract interest from larger drugmakers.

Ariad climbed 20 percent to $8.99 at the close in New York, its biggest one-day gain since Dec. 18. The shares of the Cambridge, Massachusetts-based company increased 12 percent yesterday after a report by the U.K.’s Daily Mail of takeover interest from bigger companies. Ariad declined to comment.

The company’s only marketed drug, Iclusig, was pulled from the U.S. market in October as regulators became concerned about its cardiovascular safety. The Food and Drug Administration in December said the medicine could be sold again, with a narrower population of patients for whom it’s indicated and increased safety monitoring.

“There is significant value to be realized from Iclusig, AP26113, and the company’s highly efficient drug discovery platform,” Jim Birchenough, an analyst at BMO Capital Markets, wrote today in a research note. AP26113 is a drug in development. “Ariad assets are likely to attract large pharma interest.”

In October, the activist investment fund Sarissa Capital Management bought 11.5 million shares, or about 6.2 percent, of the company and asked for representation on the board, according to a regulatory filing. The fund is run by Alex Denner, who formerly worked on health-care investments with billionaire Carl Icahn.

Stake Increase

Sarissa, Ariad’s second-largest shareholder, has since increased its stake in Ariad to 12 million shares, or about 6.5 percent, Denner said today in a telephone interview.

“We talked to the company last week about board representation,” Denner said. “Not withstanding the uncertainty around the safety profile, we think that Iclusig is a drug that has the potential to benefit many, many patients.”

With a market value of about $1.75 billion, Ariad has attracted interest from Eli Lilly & Co. (LLY:US), GlaxoSmithKline Plc (GSK) and Shire Plc (SHP), according to the Daily Mail. Shire, based in Dublin, and Lilly, based in Indianapolis, both declined to comment. London-based Glaxo didn’t immediately respond to a request.

BMO’s Birchenough today raised his price target for Ariad shares to $14 from $8, and changed his rating on the stock to outperform. Of the 21 analysts who rate the shares, five recommend buying, 12 say hold, and four say sell, according to data compiled by Bloomberg.

Birchenough is first in Bloomberg’s absolute return ranking (ARIA:US) for Ariad, measuring the best total return based on the performance of the stock in the last year, the data show.

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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Companies Mentioned

  • ARIA
    (ARIAD Pharmaceuticals Inc)
    • $6.12 USD
    • -0.05
    • -0.82%
  • LLY
    (Eli Lilly & Co)
    • $62.62 USD
    • -0.15
    • -0.24%
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