Here's Why ArQule Stock Rose as Much as 16.8% Today

What happened

Shares of development-stage biopharma ArQule (NASDAQ: ARQL) rose nearly 17% today after the company announced two appointments to its management team in two newly created positions. Dr. Marc Schegerin will serve as senior vice president, corporate strategy, communication, and finance. Dr. Shirish Hirani will serve as senior vice president, program management and product planning.

It's a fairly standard move, but investors are taking it as a sign of maturation for the tiny biopharma company focused on developing treatments for cancer and rare diseases. Although it has accomplished relatively little in its nearly 20 years as a publicly traded company, recent developments have pushed ArQule stock up over 200% in 2018 alone.

As of 3:22 p.m. EDT, the stock had settled to a 12.8% gain.

So what

ArQule has made quite a bit of noise in the last year after licensing rights to its leading drug candidate, derazantinib, to Basilea Pharmaceutica. The $800 million Swiss biopharma will be able to develop the drug candidate in most worldwide jurisdictions. It's currently enrolling a phase 3 trial as a potential treatment for intrahepatic cholangiocarcinoma (iCCA), the second-most common type of liver cancer.

That move provided ArQule $10 million up front and the potential for up to $326 million in development and commercialization milestones. On top of that, the tinier company would be entitled to single-digit and double-digit tiered royalties on commercial sales.

There's no guarantee derazantinib will gain regulatory approval, but if it does, then ArQule could fund the development of the four other early-stage drug candidates in its pipeline. The bold bet to sell its lead drug candidate today for even bigger potential rewards in the future has been the driving force behind the stock's epic rise in the last six months.

Now what

Today's news of creating two new management positions isn't really that exciting or important for investors. But it did have the effect of keeping ArQule in the news, which, given the incredible rise in the stock price year to date, only added oxygen to the situation. While monetizing derazantinib could pay off over time, there's still a long way to go before this company proves it's worth anything close to its $500 million market cap. In other words, I wouldn't be surprised if this stock comes back to Earth before too long.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.