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August 8, 2006
Back in Court With Ariad and Lilly
How time zips along - it's time already for the next trial addressing the scope and validity of Ariad Pharmaceutical's massive patent on NF-kB pathways. It's a bench trial this time (no jury), which I think could make a big difference. I wrote about this back in the spring - scroll down to April 11 and work your way up. You'll see me short 1000 shares of Ariad stock right before the first trial's jury verdict, which to my surprise went Ariad's way.
Another recent review of the situation can be found at CNN. It's a pretty good summary, although the first version they posted was somewhat bungled. I persist in my view that Ariad's patent is too broad and never should have been issued in its current form, and that the idea that Lilly should have to pay damages to them sets an awful precedent.
So how's Ariad stock been doing? Well, that short position has been working out just fine, as the chart since their trial win will make clear. The stock dropped fairly hard today, on no particular news that anyone seems to know about, other than the unsurprising fact that the company is still burning money at a good clip. I have no updates from the trial at all, unfortunately, so I don't know how it's been going, nor when it's expected to end. (Anyone with more information is more than welcome to comment!)
If time is weighing on you while you wait for a verdict, take a look at the Ariad message board on Yahoo, and meditate on just what function these things are supposed to serve. Almost no one there seems to have a clue about the stock, other than they really like it or really hate it. The inhabitants spend their time shouting either words of encouragement or random curses at each other; hardly any information is ever exchanged. The history of the messages posted there since Ariad's court victory make for a study in mass delusion, as people continue to assure themselves and whoever might be listening that the stock really has bottomed out and that there's nowhere to go but up, etc., all the time losing money almost every trading day. It's a wasteland even by the rigorous standards of Yahoo stock message boards.
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