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Here's Why Rigel Pharmaceuticals Stock Jumped as Much as 10.7% Today

By Maxx Chatsko - Oct 23, 2019 at 4:28PM

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Investors cheered the latest business update, including a surprise move into an exciting area of research.

What happened

Shares of Rigel Pharmaceuticals (RIGL 11.03%) gained over 10% today after the company announced a business update highlighting recent areas of progress. The small-cap pharma told investors that third-quarter 2019 revenue for its only drug product, Tavalisse, is expected to come in at about $11.7 million. That's actually a little below the average Wall Street expectation of $11.9 million, according to numbers compiled by Yahoo! Finance

But it's close enough, and somewhat eases concerns over the drug's sluggish launch. Perhaps more important, Rigel announced that its pipeline -- another concern -- is suddenly buzzing with activity. The company completed a phase 1 trial for its lead wholly owned drug candidate and announced an entirely new branch of its pipeline that had never before been known to investors. The first drug candidate from this new focus has already started a phase 1 clinical trial. 

As of 3:30 p.m. EDT on Wednesday, the stock had settled to a 7.7% gain.

A businessman drawing an ascending yellow step chart.

Image source: Getty Images.

So what

Rigel fell out of favor with investors after Tavalisse, a treatment for a rare blood disorder characterized by a shortage of platelets, got off to a brutally slow start. Analysts thought the drug could reach peak annual sales of $300 million, but it's on pace for just $40 million in full-year 2019 revenue. Perhaps it's a sign of impatience, but the stock has fallen 20% since the beginning of the year.

The recent update provides some hope that Tavalisse is getting back on track. The unofficial $11.7 million figure would translate to a 15% quarter-over-quarter increase, up from recent 10% sequential growth clips.

The update also shows that Rigel Pharmaceuticals is continuing to invest in its future. The company's pipeline has four unique drug candidates partnered with four different collaborators, but only had one wholly owned asset before today. That asset, R835, inhibits interleukin receptor associated kinase 1 (IRAK1) and IRAK4. It could treat inflammatory and autoimmune diseases such as psoriasis, rheumatoid arthritis, and lupus. It successfully wrapped up a phase 1 trial.

And now R835 finally has some company. Rigel announced that it's developing new drug candidates that inhibit receptor-interacting protein kinase 1 (RIP1, or sometimes referred to as RIPK1), led by R552. Investors may have never heard of RIP1, but it's an increasingly hot area of research. The protein plays an important role in a number of inflammatory diseases, notably with strong links to Alzheimer's and multiple sclerosis. And some RIP1 inhibitors can easily cross the blood-brain barrier. That makes it an intriguing target for new drugs -- and the company appears to be one of the first to enter clinical trials.

Now what

It's encouraging to see the company's lone drug product accelerate revenue growth, and especially good to see the pipeline buzzing with activity. It's a little too soon to get excited over R835 or R552, but they could provide Rigel with a first-mover advantage in partnering activities depending on early stage clinical results. That said, even with today's pop, Rigel Pharmaceuticals is valued at just $300 million, so investors must remain mindful of the inherent risks of investing in small-cap pharmaceutical stocks.

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.

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