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Why Receptos Inc. Shares Briefly Popped

By Sean Williams – Mar 6, 2014 at 4:15PM

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Receptos shares jump following the company's fourth-quarter earnings report. Here's what investors should really have their eyes on.

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 Receptos (NASDAQ: RCPT), a clinical-stage biopharmaceutical company focused on developing therapies to treat immune disorders, briefly popped as much as 11% following its fourth-quarter earnings report after the closing bell last night, but are now up a more modest 3%.

So what: For the quarter, Receptos reported $773,000 in revenue, primarily from amortized milestone payments, and a net loss of $15.2 million, or $0.86 per share, which is significantly larger than the $4.5 million loss reported in the year-ago quarter. However, this loss of $0.86 met expectations, which is a nice change after Receptos had reported three straight quarterly losses that were much wider than expectations. The other major quarterly highlight includes the initiation of patient enrollment in a phase 3 trial involving RPC1063 in relapsing multiple sclerosis.

Now what: As you might expect with clinical-stage biotechs, their earnings reports are often non-events, and just a reason for management to further showcase a company's pipeline development. In this case, it appears that investors were pleased that Receptos' loss didn't balloon past the Street's expectations, and that it completed a sizable share offering in January which should give it ample cash to conduct its clinical research for quite some time. As for me, I'd much rather wait for the concrete data set to be released in mid-2014 surrounding RPC1063 than chase Receptos blindly higher at these levels.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any companies mentioned in this article. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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