Stock Trade – Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)
Wednesday, February 12, 2014

STOCK TRADE: Buy ARIA at market price (approx. $8.16), good for the day. Place a protective stop-loss at $6.00 and a pre-determined sell at $14.00.

by Ian Harvey

February 12, 2014

Introduction

While many stocks sold off during January, a few bucked the downward trend. In fact, Ariad Pharmaceuticals (NASDAQ: ARIA) gained 8% in the first month of the year. Even more impressively, it soared over 350% between its Oct. 31 low and its late January high.

After a series of gap downs caused by negative news in October, shares plunged to the $2 area in November before steadily climbing higher to almost $10 in January. Shares have since pulled back to the $8 range where they appear to be forming a base that will make a great entry level.

The company focuses on finding treatments for various forms of cancer.

It was all systems go for this successful company last fall as its share price hit $23 in September. Soon after this high, the FDA quashed the bullish fever by placing a partial hold on new patient enrollment for clinical trials of Iclusig. This drug targets abnormal tyrosine kinase in certain leukemias.

Since that time, the FDA decided to allow ARIA to resume marketing and commercial distribution of the drug due to a revision in U.S. prescribing information. In addition, the European Medicines Agency provided a positive opinion regarding keeping Iclusig on the market in the European Union. Not to mention, the company recently signed an agreement for distribution of Iclusig in Australia.

Finally, activist health care hedge fund Sarissa Capital Management has upped its holdings in ARIA to 11.5 million shares. This represents just over 6% of the outstanding shares. Sarissa is managed by Alex Denner, a Carl Icahn protegee.

Combine these factors with rumors of a potential takeover by a major pharmaceutical company and it equals continued bullishness.

Company Details

ARIAD Pharmaceuticals, Inc. (ARIAD) is a global oncology company focused on the discovery, development and commercialization of medicines for the cancer patients.

ARIAD’s first medicine, Iclusig, is approved in the United States for the treatment of adult patients with chronic, accelerated or blast phase chronic myeloid leukemia that is resistant or intolerant to prior tyrosine kinase inhibitor (TKI) therapy or Philadelphia chromosome-positive acute lymphoblastic leukemia that is resistant or intolerant to prior TKI therapy.

As of January 11, 2013, additional clinical trials of Iclusig in other cancers were ongoing. As of January 11, 2013, ARIAD also studied AP26113, another molecularly targeted medicine, in certain forms of lung cancer.

Key Statistics for ARIA

Current P/E Ratio (ttm) -
Estimated P/E(12/2013) -
Relative P/E vs. SPX -
Earnings Per Share (USD) (ttm) -1.4500
Est. EPS (USD) (12/2013) -1.5470
Est. PEG Ratio -
Market Cap (M USD) 1,514.95
Shares Outstanding (M) 185.66
30 Day Average Volume 27,740,686
Price/Book (mrq) 5.9671
Price/Sale (ttm) 40.2321
Dividend Indicated Gross Yield -%
Cash Dividend -
Dividend Ex-Date
5 Year Dividend Growth -
Next Earnings Announcement 02/25/2014

Technical Outlook

Taking a look at the technical picture, shares dropped from the recent highs near $10 to the $7 range on profit-taking and have now started to climb again.

There was a Japanese candlestick chart printed a doji formation on Feb. 4. In candlestick charting, a doji represents indecision and often precedes a change of trend.

Earnings

Ariad Pharmaceuticals (NASDAQ:ARIA) last posted its quarterly earnings results on Wednesday, November 6th. The company reported ($0.36) earnings per share for the quarter, beating the analysts’ consensus estimate of ($0.43) by $0.07. The company had revenue of $16.70 million for the quarter, compared to the consensus estimate of $16.67 million.

During the same quarter last year, the company posted ($0.32) earnings per share. Ariad Pharmaceuticals’s revenue was up 1864.7% compared to the same quarter last year.

Analysts Opinions

BMO Capital Markets upgraded shares of Ariad Pharmaceuticals (NASDAQ:ARIA) from a market perform rating to an outperform rating in a research report released on Friday 24th January. BMO Capital Markets currently has $14.00 price objective on the stock, up from their previous price objective of $8.00.

Also, Ariad Pharmaceuticals has been the subject of a number of other recent research reports:-

• Analysts at JMP Securities reiterated an outperform rating on shares of Ariad Pharmaceuticals in a research note to investors on Monday, January 13th. They now have a $10.00 price target on the stock.

• Separately, analysts at UBS AG raised their price target on shares of Ariad Pharmaceuticals from $2.50 to $7.50 in a research note to investors on Monday, January 6th. They now have a neutral rating on the stock.

• Finally, analysts at Citigroup Inc. downgraded shares of Ariad Pharmaceuticals from a neutral rating to a sell rating in a research note to investors on Monday, January 6th. They now have a $5.50 price target on the stock, up previously from $2.50.

Five analysts have rated the stock with a sell rating, fifteen have given a hold rating and five have assigned a buy rating to the company’s stock. The company currently has an average rating of Hold and an average target price of $7.19.

Analyst Firms Making Recommendations

ARGUS RESEARCH B OF A M L
BARCLAYS CAPITA COWEN & COMPANY
GOLDMAN SACHS J.P. MORGAN
JEFFERIES & CO. LEERINK PARTNER
OPPENHEIMER HLD STIFEL NICOLAUS
UBS WILLIAM BLAIR

Conclusion

The technical picture combined with the fundamental happenings creates a very compelling bullish case right now.

Therefore, based on the facts above the following stock trade is recommended…..


STOCK TRADE: Buy ARIA at market price (approx. $8.16), good for the day. Place a protective stop-loss at $6.00 and a pre-determined sell at $14.00.



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Options traders win because they are successful.



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