Why Infinity Pharmaceuticals Shares Soared

Is this meaningful or just another movement?

Sean Williams
Sean Williams
Feb 19, 2013 at 2:42PM
Health Care

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 clinical stage biotechnology company Infinity Pharmaceuticals (NASDAQ:INFI) soared as much as 17% after Morgan Stanley initiated coverage on the company.

So what: Morgan Stanley initiated Infinity Pharmaceuticals with an "overweight" rating and a price target of $47 on high hopes for one of its leading drug candidates, IPI-145, which is designed to treat multiple hematological malignancies. Morgan Stanley noted that the company's positive early stage results and wide potential reach of IPI-145 could translate to a multi-billion dollar platform.

Now what: Personally, my advice would be for Morgan Stanley to come down from cloud nine. As usual, I'd take any analyst upgrades, downgrades, and initiations with a grain of salt because they have very little long-term effect on a stock's share price. What's really important here is IPI-145. Yes, it showed plenty of promise in phase 1 trials... but let's keep in mind as well that these were merely, phase 1 trials! We really haven't dug into the basics of efficacy or safety yet, and that'll more than likely come later this year when we have some phase 2 results to examine. In the meantime, Infinity's shares have catapulted around 570% over the trailing 12 months on those high hopes. I feel a sizable pullback may be in order and am keeping my CAPScall of underperform squarely in place.

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