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Analyst says overreaction to Ariad warning label

NEW YORK (AP) -- Shares of Ariad Pharmaceuticals rose more than 5 percent on Monday as an analyst said that the market overreacted after regulators required a warning label on leukemia treatment pill Iclusig that would alert patients to potentially serious side effects.

THE SPARK: On Friday the Food and Drug Administration approved Iclusig as a treatment for two rare types of leukemia.

Iclusig, which was developed under the name ponatinib, was approved for use against treatment-resistant chronic myeloid leukemia and for patients with acute lymphoblastic leukemia with a type of chromosome abnormality. It is Ariad's first approved product.

The FDA approved the drug sooner than expected, as its decision wasn't due until late March. Federal regulators will require Ariad to include a boxed warning that Iclusig may cause blood clots and liver toxicity.

Ariad's stock dropped 20 percent Friday following news of the warning label.

THE ANALYSIS: William Blair's Y. Katherine Xu said in a client note that the market's reaction to the warning label was excessive and has opened up a buying opportunity for investors.

She also believes that the warning label likely won't deter the initial target patients from taking the drug, as they will have failed all other therapies and do not have any other options.

The analyst reaffirmed an "Outperform" rating and $28 price target on the Cambridge, Mass., company.

SHARE ACTION: Ariad Pharmaceuticals Inc.'s stock climbed $1.04, or 5.5 percent, to $19.97 in afternoon trading. The shares have traded in a range of $10.41 to $25.40 over the past year.