In another refutation of the efficient market theory, Cell Genesys (NASDAQ:CEGE) jumped 12% Friday on a positive follow-up to its Phase I/II study of the GVAX lung cancer vaccine. Interestingly, the news came out Thursday morning, so traders failed to take advantage of a full trading day to bid up shares. Maybe they were too busy planning a Survivor party that night (Go Rupert!).

The updated trial information confirmed that the company's cancer vaccine, GVAX, benefits certain patients, especially those with a bronchoalveolar carcinoma, a rare subtype of non-small cell lung cancer (NSCLC). A pair of these patients continue to enjoy complete remission of their disease up to three years after their first treatments, as does a third patient with a more common type of NSCLC. Another seven patients, out of 43, stopped progression of their deadly cancers for up to 28 months.

I mentioned Cell Genesys briefly last September in my discussion of Geron (NASDAQ:GERN) and cancer vaccines. The GVAX vaccine varieties continue to progress through trials for prostate, pancreatic, and blood cancers. As with all cancer treatments to date, these vaccines are not magic bullets, nor should an investor expect them to be effective in all patients. Despite effectiveness in only 20% to 30% of breast cancer patients, Genentech's (NYSE:DNA) Herceptin antibody had more than $400 million in sales last year.

With GVAX ready to enter Phase III trials for prostate cancer and Phase II trials for just about everything else (actually in leukemia, pancreatic cancer, lung cancer and myeloma), and promising results so far, it seems likely that the approach should succeed in at least one or two major markets. Backing up its more advanced cancer vaccines, Cell Genesys researchers have been working on modifying viruses to kill cancer cells, but that work is still in the early stages.

The company burned through $56 million last year, but still has about $160 million in cash and another $90 million in Abgenix (NASDAQ:ABGX) stock. After adding in debt, Cell Genesys trades around $450 million in enterprise value.

Since all but one of the applications for GVAX are in Phase II, and I'm not sure exactly how big the markets will be for these vaccines if they are approved, I'm not yet ready to back up the truck and load up on this stock. I would also like to see the company reduce the time required to make a vaccine and improve its production success rate. Both factors increase the dropout rate in trials. But the results so far are definitely keeping this company on my watch list.

Motley Fool contributor David Nierengarten, Ph.D., works with a biotechnology venture capital fund. He is an active member of the TMF community as DavidMN, and enjoys the Biotechnology discussion board. He doesn't own shares of companies listed, and if he did, he doesn't have a truck to load up with stock.