Why Ignyta Inc. Shares Are Skyrocketing Higher

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 of Ignyta (NASDAQ: RXDX), a clinical-stage biopharmaceutical company with a focus on developing therapies that target specific gene pathways to treat cancer, skyrocketed higher by as much as 59% during afternoon trading following the release of results from its phase 1 study involving entrectinib.

So what: Entrectinib is Ignyta's most advanced clinical product and is an oral tyrosine kinase inhibitor that targets tumors that harbor specific mutations to the NTRK1/2/3 gene expression pathway. Ignyta announced that in its two phase 1 studies (ALKA-372-001 and STARTRK-1) involving 11 evaluable patients, it witnessed 10 responses for a clinical response rate of a whopping 91%. Ignyta also notes that the duration of response was as long as 16 treatment cycles in some instances. What's truly notable is this entrectinib was targeted at non-small cell lung cancer, colorectal cancer, and acinic cell cancer -- three difficult to treat forms of cancer -- and it still delivered a 91% objective response rate.

Both trials were conducted to discover the maximum tolerated dose, and Ignyta now believes these results suggest a move into phase 2 studies is merited. Entrectinib was also considered to be well-tolerated with no serious treatment-related adverse events.

Now what: This is pretty incredible news for Ignyta, let alone any biotech company. However, we'll want to keep in context that we're only talking about a very small sample size of 11 people. Additionally, this was a dose-finding study and a safety study first and foremost, with objective responses taking a backseat. There's certainly reason to be excited about the future considering its phenomenal early response rates, but it'll need to duplicate these results in a much larger later-stage study before I'm ready to proclaim that entrectinib is a winning cancer compound.

Perhaps the biggest enemy for investors here is Ignyta's cash burn and the realistic idea that it could be many years away from bringing a drug to market. As of its latest quarter, and following a direct share offering that raised $42 million, Ignyta had $107.6 million in cash and cash equivalents. But, it also burned through about $40 million in cash over the trailing 12-month period. As more of its studies move from preclinical to clinical in nature, Ignyta's costs could soar and its need for capital (and possibly dilutive share offerings) may too.

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For now, I'm perfectly happy camping out on the sidelines and watching its clinical data mature.

The article Why Ignyta Inc. Shares Are Skyrocketing Higher originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.