Why Rigel Pharmaceuticals Shares Surged Higher Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares in Rigel Pharmaceuticals jumped by as much as 10% today after an analyst at the brokerage firm Jefferies initiated coverage with a buy rating.

So What: Rigel Pharmaceuticals has had some setbacks in its clinical drug pipeline in the past, but Jefferies believes that its most advanced drug, fostamatinib, for chronic Immune Thrombocytopenic Purpura, or ITP, has a good shot at success when phase 3 data is reported early next year.

ITP is an immune system disorder in which a patient's immune system attacks blood platelets, resulting in abnormally low platelet counts. Rigel estimates that 100,000 people suffer from chronic ITP. Currently, treatment typically involves the use of steroids; however, if treatment fails the patient's spleen can be removed, creating additional patient risks.

During previous trials, fostamatinib successfully boosted platelet counts for certain ITP patients, including patients who had failed on other treatments. Despite showing promise in some patients, Rigel's collaborator on fostamatinib, AstraZeneca, opted to exit the partnership and return the drug to Rigel in June 2013.

Now What: Rigel hasn't given up on fostamatinib and investors will find out whether or not that's been a wise decision sometime in the first half of next year. If fostamatinib succeeds, it could mean that Rigel is significantly undervalued. For example, Jefferies has set a price target on Rigel of $10 per share. That's a pretty heady target for this clinical stage company, but before investors get too excited they need to remember that Rigel doesn't have any products on the market, has already lost a well-heeled partner, and that the vast majority of drugs that enter clinical trials fail. For those reasons, Rigel is best suited for only highly risk tolerant investors and that's why I'm content to sit on the sidelines a bit longer on this one.

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The article Why Rigel Pharmaceuticals Shares Surged Higher Today originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies 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.