CAMBRIDGE, Mass. ( TheStreet) -- First off, kudos and congratulations to Ariad Pharmaceuticals (ARIA - Get Report) skeptics and short sellers. They nailed this biotech disaster du jour. And a disaster it was, with Ariad shares tumbling from the $20s all the way down to the $2s. I was unfortunate and got caught owning a small long position in Ariad, but I'm actually buying more shares at these low prices.
Why? Because I believe Ariad is a good long-term investment. Let me explain.
I tend to be a contrarian investor because it's impossible to outperform the market by simply doing what everyone else does. Going along with market sentiment might be safe, but it's not necessarily profitable. So, while most investors are running away from Ariad amidst a deluge of analyst downgrades, I'm holding my nose and buying the stock. I have a 12-18 month outlook, looking for a substantial recovery in the 1-2 year time frame.
Ariad's Iclusig, for whatever problems it may now have, is actually an impressive scientific feat because it's the only chronic myeloid leukemia drug (CML) drug that hits the gatekeeper as well as other pesky mutations, most notably the T315i mutation. These mutations prevent competing CML drugs from being effective over time.If Iclusig is only used to treat CML patients with the T315i mutation -- which is pretty much conventional wisdom these days -- the commercial potential is small and not very exciting. I'm not buying Ariad for the T315i market or even the possibility that Iclusig maintains or even grows market share in second-line CML.