ARIAD Pharmaceuticals (ARIAD Pharmaceuticals) Predictability Rank

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What is ARIAD Pharmaceuticals Predictability Rank?

Not Rated

Warren Buffett said many times that the companies he likes are:

1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.

It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.

GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.

ARIAD Pharmaceuticals Predictability Rank Calculation

In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.

Our study may be subject to these biases and assumptions:

Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.

The correlation between business predictability and investment returns of a company is showed below.

Correlation Between Business Predictability and Investment Returns

	Predictables	Non-Predictable	All stocks
Total Number of stocks	570	1833	2403
Total Lost Money	61	830	891
Total Lost More Than 50%	18	412	430
Total Lost More Than 90%	4	86	90
Average Gain	260.6%	100.0%	138.1%
Median Gain	150.0%	13.0%	39.0%
Maximum Gain	2852.0%	11483.0%	11483.0%
Maximum Loss	-100.0%	-100.0%	-100.0%
Annualized Average Gain	12.7%	6.7%	8.4%
Annualized Median Gain	8.9%	1.1%	3.1%

For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4-Star	3.5-Star	3-Star	2.5-Star	2-Star	1-Star (non-predictable)	Average among all
% Out of All 2403 Stocks	3.3%	2.9%	3.7%	3.3%	3.3%	3.7%	3.3%	76.3%	100%
% that are in Loss (10y)	3%	10%	8%	9%	11%	18%	16%	45%	37%
Average Gain (10y)	364.6%	330.9%	278.0%	235.1%	243.5%	227.8%	154.8%	100.0%	138.1%
Median Gain (10y)	238.5%	193.5%	171.0%	159.0%	132.5%	113.5%	87.0%	13.0%	39.0%
Maximum Gainer	2228.0%	2547.0%	2452.0%	2852.0%	2432.0%	1892.0%	1807.0%	11483.0%	11483.0%
Maximum Loser	-82.0%	-53.0%	-67.0%	-100.0%	-83.0%	-100.0%	-78.0%	-100.0%	-100.0%
Annualized Average Gain	15.4%	14.6%	13.2%	12.0%	12.2%	11.7%	9.1%	6.7%	8.4%
Annualized Median Gain	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%

For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank

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ARIAD Pharmaceuticals (ARIAD Pharmaceuticals) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Healthcare » Biotechnology » ARIAD Pharmaceuticals Inc (NAS:ARIA) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.ariad.com

ARIAD Pharmaceuticals Inc was organized as a Delaware corporation in April 1991. It is an oncology company. The Company is focused on discovery and development of breakthrough medicines to treat cancers by regulating cell signaling with small molecules. The Company's first approved cancer medicine, Iclusig (ponatinib), and its product candidates, AP26113 and ridaforolimus, were discovered internally by its scientists based on the expertise in computational and structure-based drug design. AP26113 is an investigational inhibitor of anaplastic lymphoma kinase, or ALK. In non-clinical studies, AP26113 also demonstrated that it can inhibit epidermal growth factor receptor, or EGFR, and c-ros oncogene-1, or ROS1. . Iclusig and its drug candidates and preclinical compounds are small molecules that can be readily synthesized by processes that it has developed. The Company do not own or operate manufacturing facilities for the production of clinical or commercial quantities of Iclusig or its product candidates. The company's competitors includes pharmaceutical and biotechnology companies such as Amgen Inc., AstraZeneca PLC, Bristol-Myers Squibb Company, Celgene Corporation, Eli Lilly and Company, the Roche Group, GlaxoSmithKline plc, Johnson & Johnson, Merck, Merck KGaA, Novartis AG, Pfizer, Inc., Sanofi-Aventis, Takeda Pharmaceutical Co., Ltd., and Teva Pharmaceutical Industries Ltd.Inc.

Executives

Alexander J Denner	director	C/O SARISSA CAPITAL MANAGEMENT LP, 660 STEAMBOAT ROAD, 3RD FLOOR, GREENWICH CT 06830
Norbert G Riedel	director	BAXTER INTERNATIONAL INC, ONE BAXTER PKWY DF2-1W, DEERFIELD IL 60015
Elona Esq. Kogan	officer: Sr. V. P. - General Counsel	C/O SEER, INC., 3800 BRIDGE PARKWAY, SUITE 102, REDWOOD CITY CA 94065
Manmeet Singh Soni	officer: EVP, CFO & Treasurer	C/O PHARMACYCLICS, INC., 995 EAST ARQUES AVE, SUNNYVALE CA 94085
Timothy P Clackson	officer: President, R&D, CSO	C/O ARIAD PHARMACEUTICALS INC, 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139
Jules Haimovitz	director	601 108TH AVENUE NE, SUITE 1200, BELLEVUE WA 98004
Daniel M Bollag	officer: Sr. VP, Reg. Affairs & Quality	C/O ARIAD PHARMACEUTICALS, INC., 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139
Hugh M Cole	officer: SVP, Chief Business Officer	C/O ARIAD PHARMACEUTICALS, INC, 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139
George Bickerstaff	director	C/O VION PHARMACEUTICALS, INC., 4 SCIENCE PARK, NEW HAVEN CT 06511
Paris Panayiotopoulos	director, officer: President and CEO	ARIAD PHARMACEUTICALS, INC., 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139
Anna Protopapas	director	MILLENNIUM PHARMACEUTICALS, INC., 40 LANDSDOWNE STREET, CAMBRIDGE MA 02139
Sarah J. Schlesinger	director	C/O ARIAD PHARMACEUTICALS, 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139
Massimo Radaelli	director	C/O ARIAD PHARMACEUTICALS, INC., 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139
Martin J Duvall	officer: EVP, CCO	MGI PHARMA, INC., 5775 WEST OLD SHAKOPEE ROAD, SUITE 100, BLOOMINGTON MN 55437
Frank Haluska	officer: SVP, Clinical R&D, CMO	C/O ARIAD PHARMACEUTICALS, INC., 26 LANDSDOWNE STREET, CAMBRIDGE MA 02139

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