When the FDA gave Ariad Pharmaceutical, Inc. early approval of its leukemia drug (Iclusig), it expected Iclusig to be used as a third (at most a second) defense. Yet, the FDA did not grant approval subject to any restriction on Iclusig being used as a first defense drug for the treatment of certain uncommon forms of leukemia.
The valuation of the company has, so far, been based on its expected revenues based on sales of Iclusig as a third defense drug. Field research suggests, however, that the key assumptions in that valuation may be incorrect. Former short-sellers quickly abandoned their bearish positions on ARIA this week.