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Why Curis, Inc. Is Soaring Today

By Brian Feroldi – May 31, 2018 at 2:35PM

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Traders cheer after the company reports upbeat regulatory news. Here's what investors need to know.

What happened

Curis, Inc. (CRIS 2.86%), a beaten up clinical-stage biopharma focused on cancer, jumped 23% as of 2:43 p.m. EDT on Thursday in response to announcing that one of its key compounds has received Food and Drug Administration (FDA) Fast Track designation.

So what

Curis stated that the FDA bestowed Fast Track designation upon its lead compound fimepinostat, which is also known as CUDC-907, as a hopeful treatment for relapsed or refractory (R/R) diffuse large B-cell lymphoma (DLBCL). The agency made this decision in response to data that the company had previously released showing that fimepinostat elicited a complete or partial response in about 25% of patients. 

Scientist looking at microscope cancer research

Image source: Getty Images.

Curis CEO Ali Fattaey was excited to share this news with investors:

We are pleased with this Fast Track designation, which will enable us to accelerate the development of fimepinostat for patients with R/R DLBCL, including patients whose tumors have MYC alterations. Patients with this disease have a very poor prognosis and we are encouraged by the FDA's recognition of the unmet need that may be addressed by fimepinostat, as well as the potential durable benefit that fimepinostat can provide for these patients.

CEO Fattaey also said that the company plans to enroll patients in a pivotal study later this year. 

Given the news, it isn't hard to figure out why traders are cheering today.

Now what

Investors haven't had a lot of positive news out of Curis lately, so today's update should serve as some reprieve. A few days ago, the company's Chief Medical Officer chose to retire and return to academia. Shortly after that, the company enacted a 1-for-5 reverse stock split in order to bring its share price above $1. That's never a good sign.

The company's financial situation doesn't exactly inspire optimism, either. Curis spent $10.7 million last quarter, which is a sizable number when compared to the $49 million on its balance sheet at quarter's end. There's also $40 million in debt obligations to consider.

With fimepinostat poised to enter pivotal trials soon, the company's cash burn almost certainly will rise from here. That means that another capital raise could be in the cards sometime soon, which isn't great news given the company's long track record of destroying shareholder value:

CRIS Chart

CRIS data by YCharts.

Overall, it's possible that fimepinostat could become a winner in time, but I'd much rather bet on a biotech with a history of winning than one that has destroyed so much value. For that reason, I'm content to look elsewhere for more promising opportunities.

Brian Feroldi 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.

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