Why Infinity Pharmaceuticals' Shares Spiked

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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.

What: Shares of biotech company Infinity Pharmaceuticals (NASDAQ: INFI  ) vaulted higher by as much as 19% after reporting phase 1 data on IPI-145 and providing an update on its PI3K-inhibitor program.

So what: Infinity definitely set a good tone to start the week by reporting that IPI-145, its oral PI3K-inhibitor targeted at hematologic malignancies, showed clinical activity in B-cell and T-cell malignancies. This means IPI-145 could have success in treating chronic lymphocytic leukemia, indolent non-Hodgkin's lymphoma, mantle cell lymphoma, Hodgkin's lymphoma, and T-cell lymphoma. In addition, Infinity updated investors on its PI3K program. First, it insinuated an expansion of phase 1 trials to include these five aforementioned diseases. Infinity also noted that it has an ongoing phase 2a allergic asthma trial for IPI-145 that it should be releasing data on in the first half of 2013. Finally, the company is in the process of planning for phase 2 trials of IPI-145 to treat rheumatoid arthritis.

Now what: It's definitely a great day to be a shareholder, but I'm not nearly as enthusiastic about Infinity's outlook. Infinity has only two drugs past early-stage trials and nothing approved by the Food and Drug Administration at the moment. I would love for its Hsp90 inhibitor, IPI-504, to be successful, but the truth of the matter is that the success rate in non-small-cell lung cancer is very low, especially for smaller biotechnology companies. For IPI-145, which appears like a do-it-all drug, we're still two to three years away from marketability in a best case scenario. That means more dilutive share offerings and the potential for plenty of negative data with the stock having run up so considerably already.

Craving more input? Start by adding Infinity Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

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