By: Adam Feuerstein | 01/27/14 - 11:34 AM ESTI spoke with an institutional investor this morning who's been shorting Ariad Pharmaceuticals (ARIA), betting against the Daily Mail-fueled speculation of a takeover from Eli Lilly (LLY) or any other Big Pharma suitor.
"A takeover of Ariad by any Big Pharma would be career suicide for the business development guy proposing such a deal," this investor told me. He's not allowed to be quoted by name, per his fund's compliance rules.
Why is the Ariad takeover speculation bunk? Because both of the Ariad drugs a potential suitor would be conceivably paying a premium for -- the chronic myeloid leukemia drug Iclusig and the ALK-inhibitor AP26113 -- are facing significant competition from drugs in Novartis' (NVS) pipeline, he says.
Whatever value Iclusig and AP26113 have today stands a good chance of being erased if Novartis' drug development strategy pans out -- a risk not likely to be lost on Lilly or anyone else remotely considering an expensive Ariad acquisition.
Here's his Ariad short thesis summarized:
Novartis is developing a third-generation BCR-ABL inhibitor known as ABL001 which works synergistically with Gleevec or Tasigna, the company's currently approved CML drugs. Novartis highlighted some preclinical data on ABL001 at an R&D event in November. Here's the slide:
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