CAMBRIDGE, Mass. (TheStreet) -- Ariad Pharmaceuticals (ARIA - Get Report) sunk after news it had suspended marketing and distribution of its leukemia drug Iclusig. The drug company said in a statement the suspension was a temporary measure while it "continues to negotiate updates to the U.S. prescribing information." The move comes after the Food and Drug Administration (FDA) expressed concerns patients were susceptible to blood clots.
Earlier in the month, further trials of Iclusig revealed higher prevalence of side effects in patients, causing shares to plummet. Sales of the drug, Ariad's sole approved product, generated $13.9 million in revenue for the second quarter 2013.
Ariad shares crashed 39.4% to $2.40 by 10:20 a.m. EDT. In the year to date, share value has sunk 87.1%, the majority of losses suffered in October.
TheStreet Ratings team rates Ariad Pharmaceuticals (ARIA) as a Sell with a ratings score of D. The team has this to say about their recommendation:
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"We rate Ariad Pharmaceuticals (ARIA) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Ariad Pharmaceuticals' earnings per share declined by 19.4% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, Ariad Pharmaceuticals reported poor results of -$1.34 cents a share vs. -93 cents a share in the prior year. For the next year, the market is expecting a contraction of 20.9% in earnings (-$1.62 vs. -$1.34).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Biotechnology industry. The net income has significantly decreased by 34.4% when compared to the same quarter one year ago, falling from -$51.31 million to -$68.99 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Biotechnology industry and the overall market, Ariad Pharmaceuticals' return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to -$45.69 million or 21.53% when compared to the same quarter last year. Despite a decrease in cash flow Ariad Pharmaceuticals is still fairing well by exceeding its industry average cash flow growth rate of -64.29%.
- Looking at the price performance of ARIA's shares over the past 12 months, there is not much good news to report: the stock is down 84.79%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: ARIA Ratings Report