Investor enthusiasm was high again yesterday, as it was reminded about the recent success in the testing of ARIAD Pharmaceuticals, Inc. (NASDAQ:ARIA) lead cancer drug candidate. This was a clever action, as it managed to imitate some real news about the biotechnology company that has nor released any updates for a while.The stock price surged considerable 5.65% to a close of $2.99, and the volume was also impressive: more than twice the average for the stock. Wondering what could have rushed the stock up without any considerable news, it came out that ARIAD was mentioned on Wednesday in an article among the biotechnology companies which are expected to publish meaningful clinical results by the end of the year.
This was just a reminder of the latest financial report of ARIAD and of a previous announcement about the progress in the tests on the company’s leading drug candidate ridaforolimus, which is currently in Phase 3. The market reacted strongly and the optimistic mood was revived again.
ARIAD stock has already proven its ability to jump on announced clinical results. In June, there was a rising attempt as the company announced some encouraging results from the ongoing Phase 1 of its other product candidate. Though, the attempt to interrupt the downtrend was not quite successful and the decline continued afterwards. Considering that the demand for the stock slowed down towards the end of the day and the price started falling after the initial jump in the early trading, it seems likely that yesterday’s spontaneous price run-up could also not last too long.
ARIAD has an agreement with Merck to jointly develop its lead drug candidate ridaforolimus, on which also all hopes for near term profitability are set. So far there were only losses to be recorded and the sale of equity was the main source of funds. ARIAD had some cash at the end of March this year, which together with the upfront and milestone payments received under the agreement with Merck seem to be enough to cover the research and development costs over the next year.
Part of these initial payments is recognized as revenues in each accounting period, thus the growth in revenues will continue to depend mostly on the company’s accounting standards, at least until there is further progress in the clinical test and further milestone payments are received. Launching the cancer drug on the market seems still far way, thus revenues from sales and from royalties may not be expected too soon.
