JPMorgan Downgrades ARIAD Pharmaceuticals (ARIA) to Underweight
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(Updated - October 24, 2016 10:00 AM EDT)
JPMorgan downgraded ARIAD Pharmaceuticals (NASDAQ: ARIA) from Neutral to Underweight with a price target of $7.00. Analyst Anupam Rama anticipates more volatility, as concerns about valuation are coupled with political headline risk related to Iclusig pricing.
"We do not expect to see resolution of these political / pricing headlines, nor clarity on the appropriate dose for Iclusig in the near term. As a result, on the former point, the reality is that now headlines on drug pricing (related to Iclusig or not) have the potential, at a minimum, for incremental downside risk for ARIA shares. Importantly, on the latter point, the key update from the OPTIC study (assessing the optimal go-forward dosing regimen) is anticipated in 4Q17 (likely at ASH 2017) and we do believe that flat pricing across all dose options will ultimately become a reality, putting ~20%+ of US Iclusig revenues at risk(which we believe may be an underappreciated point by the Street)," said Rama.
"We note that a central point to the bull thesis for many on the Street has been the strategic attractiveness of the company (source: Bloomberg). That said, while we understand commercial oncology companies have historically been strategically attractiveto big-pharma / biotech and acknowledge that brigatinib is perhaps more central to this is thesis than Iclusig, we DO NOT see a high likelihood of a potential acquirer stepping up in the midst of a congressional inquiry / climate of ongoing pricing scrutiny. Finally, we do not see any clinical catalysts in the next 6-9 months that are not already widely anticipated to be positive by the Street. Given these points, we are moving to arelativeUnderweight rating," added the analyst.
Shares of ARIAD Pharmaceuticals closed at $10.38 yesterday.
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