Ariad Touts Impressive Financials But Investors Still Push for CEO Ouster

Published: Feb 23, 2015

Ariad Touts Impressive Financials But Investors Still Push for CEO Ouster
February 20, 2015
By Mark Terry, Breaking News Staff

Cambridge, Mass.-based Ariad Pharmaceuticals, Inc. announced its fourth quarter and full year financial reports yesterday, but despite strong growth, some are calling for CEO Harvey Berger’s ouster.

Ariad announced year-end total revenue in 2014 of $105.4 million, up from total revenue in 2013 of $45.6 million. Even its operating losses were down, from a loss of $274.2 million in 2013 to a loss of $162.6 million in 2014.

“We made solid progress throughout our business during 2014—commercializing Iclusig (ponatinib) and advancing our pipeline, moving brigatinib into a pivotal trial in patients with refractory anaplastic lymphoma kinase positive non-small cell lung cancer and nominating our next drug candidate, AP32788,” said Berger in a statement. “Additionally, we strengthened our balance sheet last year with non-dilutive funding from the agreements with Otsuka Pharmaceutical and Bellicum Pharmaceuticals, Inc.

Sarissa Capital Management LP has demanded the retirement of Berger, citing poor sales of the company’s only drug on the market. Iclusig, a treatment for blood cancer, has not lived up to expectations and the U.S. Food and Drug Administration has concerns over its safety. Sarissa is ARIAD’s largest shareholder, maintaining a 6.87 percent stake in the company.

Sarissa is run by activist hedge fund manager and Carl Icahn protégé Alex Denner. Last week the company told Ariad that it was nominating two directors to the company’s board with the goal of replacing Berger and another director, Wayne Wilson, Ariad’s lead independent director.

According to a filing with the U.S. Securities and Exchange Commission (SEC) filed Feb. 19, “the Reporting Persons have indicated their belief that based on their experiences and interactions with the Issuer, it is in the best interests of the Issuer and its shareholders that the board undertake measures to effect and facilitate the imminent retirement of Harvey Berger as CEO of the Issuer and that any settlement of a potential proxy contest must include the CEO’s retirement. Unfortunately, the Reporting Persons have not been able to reach a settlement.”

There were also speculation earlier by Meg Tirrell at CNBC and Adam Feuerstein of The Street that some of the company’s board may have been looking for a change of management.

The rumors and maneuvering don’t seem to be affecting company stock much, however. A year ago, on Feb. 27, 2014, shares were selling for $8.99. Over the course of a few months, the stock dropped to low of $5.01 per share on July 17, 2014. It is currently selling for $7.68 per share. Despite the growth, most analysts indicate the stock underperforms—24 analysts averaged a target price of $10.43.

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