Here's Why Ignyta Stock Soared as Much as 27.5% Today

What happened

Shares of pre-revenue biopharma Ignyta (NASDAQ: RXDX) jumped over 27% Wednesday morning after it announced promising interim results from an ongoing phase 2/3 clinical trial investigating the potential of its lead drug candidate, entrectinib, to treat patients with a rare type of lung cancer.

Entrectinib demonstrated a 69% overall response rate in patients with the disease, and even demonstrated effectiveness in shrinking tumors in the brain, where the rare lung cancer often metastasizes. It was also well-tolerated, with mild side effects and only 3% of patients discontinuing treatment due to toxicity-related issues.

As of 1:09 p.m. EDT, the stock had settled to a 12.1% gain.

So what

In the ongoing study at the center of today's update, entrectinib is being evaluated as a treatment for non-small cell lung cancer tumors expressing defective ROS1 genes. The interim data are very encouraging for Ignyta shareholders.

The only other treatment approved to treat lung cancers with ROS1 mutations is Xalkori from Pfizer (NYSE: PFE), which generated $296 million in revenue in the first half of 2017. It only gained the additional approval for ROS1 mutations in early 2016. That drug demonstrated a median response of 18 months in its phase 3 trial seven years ago and remains the standard treatment for patients. However, the drug is not effective in targeting metastatic brain tumors when the cancer spreads from the lungs, according to reporting by Adam Feuerstein of STAT.

Ignyta reported a median response of 28.6 months for patients taking entrectinib, with the improvement compared to Xalkori likely due to its ability to also target metastatic brain tumors. Today's news has investors excited about the drug candidate's potential to replace Xalkori as the standard treatment, assuming safety and efficacy profiles from the interim analysis continue to hold for the duration of the trial. If they do, then Ignyta plans to file a marketing approval application with the U.S. Food and Drug Administration in the second half of 2018.

Now what

The potential to gain marketing approval for entrectinib would prove to be a big boost to the pre-revenue company, especially considering that Xalkori is on pace to notch $600 million in annual sales this year. Marketing approval for Ignyta would also increase confidence in the remainder of its pipeline, which could help it to land a deep-pocketed partner to help in future development and commercialization efforts. Until then, investors simply need to wait for the trial to wrap up and final data to be released.

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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.