William Blair Raises Price Target on ARIAD Pharmaceuticals, Inc. (ARIA); Here’s Why

William Blair analyst Y Katherine Xu is out with a research report on shares of Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) after having recently updated her model for the biotech firm. As such, the analyst reiterates an Outperform rating on shares of ARIA while raising the price target from $12 to $15, which represents a 67% increase from where current levels.

For the third quarter, Xu has boosted her estimate from $31.7 million to $34.6 million for U.S. sales for Iclusig, designed to treat adult patients with chronic-phase (CP), accelerated-phase (AP), or blast-phase (BP) chronic myeloid leukemia (CML) that is resistant to or is intolerant of previous tyrosine kinase inhibitors (TKI) therapy or for patients with Ph+ ALL that is resistant to or intolerant of previous TKI therapy. Subsequently, the analyst has also adjusted her projection for loss per share from $0.23 to $0.19.

For her probability-adjusted net present value (NPV) model, Xu lifted her estimate for peak global sales of Iclusig from $900 million to $1.1 billion, “based on projected increased second-line uptake in 2019 and beyond.”

Additionally, Xu has upped¬†her estimate from $640 million to $790 million for global peak sales of brigatinib, an investigational tyrosine kinase inhibitor designed to treat patients with anaplastic lymphoma kinase-positive (ALK+) advanced non-small cell lung cancer (NSCLC), “based on the competitive profile analysis” following this month’s European Society of Medical Oncology (ESMO) annual meeting. The analyst’s model values Iclusig in CML at $9 per share and brigatinib at $6 per share, noting a probability of 90% for success in ALK+ NSCLC.

Xu notes, “The third candidate, AP32788, targeting EGFR Exon 20 mutation in NSCLC currently in Phase I/II study, as well as the preclinical pipeline, is upside to our valuation. Based on such assumptions and including $0 in net cash by year-end 2017, our probability-adjusted NPV model derives a fair value for Ariad at $15 per share.”

“Recent congressional inquiry on Iclusig pricing is unlikely to affect our Iclusig peak sales estimates, in our opinion, and we continue to believe that Ariad remains an attractive candidate for acquisition in the 2017-2018 time frame given the pending brigatinib approval and the strength of the portfolio,” Xu concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate, two-star analyst Y Katherine Xu is ranked #2,607 out of 4,197 analysts. Xu has a 40% success rate and earns 0.0% in his annual returns. However, when recommending ARIA, Xu faces a loss of 5.8% in average profits on the stock.

TipRanks analytics demonstrate ARIA as a Buy. Based on 8 analysts polled in the last 3 months, 5 rate a Buy on ARIA, 1 maintains a Hold, while 2 issue a Sell. The 12-month price target stands at $13.33, marking a nearly 48% upside from where the shares last closed.  screen-shot-10-27-16-at-09-36-pm

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