Buzz: Back from the ER, a wounded Ariad spurs a fresh round of takeover rumors

Market rumors about a possible biotech buyout are usually triggered by research and marketing success. In Ariad's case, mere survival sufficed.

The Mail in the U.K.--never known as the most reliable source of market information--reports that a pair of sizable local players, GlaxoSmithKline ($GSK) and Shire ($SHPG), has been fishing for a possible deal. But it's Eli Lilly ($LLY) that appears to be the lead potential bidder, according to the market rumors, which regardless of their source pushed up the stock price ($ARIA) by 10% this morning.

The Mail somehow manages to overlook Ariad's near-death experience in recent months, with questions about safety issues surrounding their drug Iclusig (ponatinib) boiling up into a crisis and forcing the withdrawal of the leukemia drug in the U.S. The stock price slumped, the company restructured, laying off a big chunk of its workforce. And then the FDA relented, allowing a revised label that tailored the population to patients to a genetically defined group who didn't respond to anything else that's available.

Ariad shares jumped a bit on the new label, though they remain far, far below the pre-October crisis highs. Its market cap sits at about $1.25 billion. That price makes the company easily obtainable, but if the rumors are even remotely true, why would Lilly--or Shire or GSK--buy it?

Lilly in particular has experienced a series of challenges on the oncology side of its R&D efforts. It has two high-profile cancer drugs in the late-stage pipeline, ramucirumab and necitumumab. Ramucirumab looks promising for stomach cancer, but flunked out for the more lucrative breast cancer indication. And while necitumumab scored a win for lung cancer, researchers have also been plagued by concerns over blood clots, the same issue that threatens to scuttle Iclusig.

Would another troubled cancer product offer significant help for a pharma giant headed into a trough year after losing control of its big franchises for Zyprexa and Cymbalta? Eli Lilly badly needs new products to flesh out a dwindling portfolio. But it hasn't done many deals, insisting that the internal pipeline could provide all the new products it needs for a turnaround.

Lilly's last significant buyout was for Amyvid, an imaging agent without a market after Medicare refused to cover its use. Any deal for Ariad would have to be very advantageous if Lilly wants to avoid a fresh round of scoffing.

- here's the story from The Mail