3 Things You Really Need to Know About Ariad Pharmaceuticals, Inc. Q3 Results

By Markets Fool.com

Ariad Pharmaceuticals, Inc. (NASDAQ: ARIA) has given shareholders a lot to like in 2016. The biotech's stock more than doubled by early October, although it has given up some of those gains in the last several weeks. Ariad announced its third-quarter results before the market opened on Monday. Was there more for investors to like? Here are three things you really need to know about the company's results.

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1. Iclusig picking up momentum

Ariad reported third-quarter revenue of $46 million, up 58% from the prior year period. Positive momentum for Iclusig played a major role in the company's revenue growth. Sales for the cancer drug totaled $34.3 million in the third quarter, a 25% year-over-year increase.

Iclusig performed exceptionally well in the U.S. Ariad reported net product revenue for the drug in the U.S. during the third quarter of $33.6 million, a 66% jump from the same quarter in 2015.

Ariad licensed European rights for Iclusig to Incyte (NASDAQ: INCY) on June 1. The company received royalties from European sales of the drug of $4 million in the third quarter, $3.5 million of which was recognized as revenue during the quarter.

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A big jump in license and other revenue, from $1.5 million in the prior year period to $11.7 million in the third quarter this year, also helped Ariad's revenue. Incyte contributed $3.5 million of that increase for research and development cost sharing. Ariad also received a $2 million milestone payment from Medinol.

2. Bottom line improving

Ariad reported a GAAP net loss of $27.8 million, or $0.14 per share, during the third quarter. On a non-GAAP basis, the biotech posted a net loss of $22.5 million, or$0.12per diluted share.That beat the average analysts' estimate of a loss of $0.19 per share. It also represented considerable improvement over the losses from the same quarter in 2015.

Higher revenue for Iclusig made a big difference in Ariad's improving bottom line, as did the increase in license and other revenue. However, the company also kept costs down. Ariad reported research and development costs of $43.6 million, a 10% decrease from the prior year period. Selling, general, and administrative expenses totaled$26.2 millionduring the third quarter, a 29% year-over-year decrease.

3. Cash stockpile growing

Even though Ariad posted another quarterly loss, its cash stockpile grew during the third quarter. As of the end of September, the company hadcash, cash equivalents, and marketable securities totaling$314.7 million. That's up from$278.5 million at the end of June.

While Ariad's deal with Incyte made a huge impact on its cash position in the second quarter, it was a transaction with another company that helped Ariad in the third quarter. PDL BioPharma (NASDAQ: PDLI) paid Ariad $50 million in a second tranche of funding under the companies' royalty financing agreement.

Ariad and PDL BioPharma signed an agreement in July 2015 under which PDL agreed to provide Ariad up to $200 million in revenue interest financing. In exchange, PDL BioPharma will receive a portion of Iclusig royalties.

Looking ahead

Iclusig should keep its momentum going. Ariad's partner, Otsuka Pharmaceutical, recently received approval from Japanese regulators for the drug in treating two indications. Additional clinical trials for more potential indications for Iclusig are in progress.

A decision by the U.S. Food and Drug Administration (FDA) on approval for brigatinib in treatingALK+ non-small cell lung cancer patients who are resistant or intolerant to Keytruda is expected by April 29, 2017. Ariad is also working to file for regulatory approval of brigatinib in Europe.

With Iclusig rocking along, a solid candidate awaiting regulatory approval, and plenty of cash, there are still plenty of things to like about Ariad.

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