Why Shares of Rigel Pharmaceuticals Inc. Exploded Today

By Markets Fool.com

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What: Shares of Rigel Pharmaceuticals are trading more than 38% higher today after the tiny biotech announced it would collaborate with pharmaceutical giant Bristol-Myers Squibb to develop new cancer therapies.

So what: Rigel specializes in small-molecule TGF beta receptor kinase inhibitors, which primarily work by improving the body's immune response to various tumors. Rigel's deal with Bristol-Myers Squibb will build on its work with these inhibitors to develop new treatments, which could include combination therapies that use Bristol's existing cancer treatments Opdivo and Yervoy. Bristol will pay $30 million up front as part of this collaboration, and Rigelcould receive more than $309 million in development and regulatory milestone payments if any of the treatments that result from this collaboration make it through FDA approval for use in treating more than one type of cancer.

Now what: The big end-game payment of $309 million doesn't include potential royalties Rigel might earn over the life of any approved treatment, but it's obviously a huge target that is worth as much as the company's entire market cap even after today's pop. However, no Rigel cancer treatments have yet progressed past phase 1 trials. Any commercial success will be years off, and the lack of clinical data on Rigel's TGF beta receptor kinase inhibitor treatments makes any investment today more speculative than an investment in likely regulatory approval.

The article Why Shares of Rigel Pharmaceuticals Inc. Exploded Today originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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