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Image source: Axovant Sciences.

What: After Axovant Sciences Ltd. (NASDAQ:AXON)  expanded its development pipeline, reported third-quarter financials, and presented at an industry conference, its stock soared by 56% last month.

So what: Axovant Sciences acquired global rights to nelotanserin from its parent company, Roivant Sciences, in October. Roivant Sciences had previously bought those rights from Arena Pharmaceuticals (NASDAQ:ARNA).

Axovant Sciences paid Roivant $4.8 million to get its hands on nelotanserin, a drug that is being developed to treat Lewy body dementia (LBD), the second most common form of dementia behind Alzheimer's disease, and Parkinson's disease dementia (PDD).

That payment essentially reimburses Roivant for the money it handed over to Arena Pharmaceuticals up front, but Axovant could also end up paying Arena Pharmaceuticals as much as $101.5 million in milestones plus 15% of any eventual nelotanserin sales if nelotanserin makes its way to market.

Axovant Sciences also offered up insight into its financial picture last month that shows it is well capitalized with $320 million in cash on the books. Depending on how much future trials cause costs to spike, that cash stockpile should be big enough to last it through 2017.

In addition, the company gave an update on progress it's making on RVT-101, the once-maligned Alzheimer's disease drug that was rescued from GlaxoSmithKline's discard pile late last year.

Axovant Sciences initiated a global study of RVT-101 in mild to moderate Alzheimer's disease patients in October. That phase 3 trial will enroll 1,150 patients and evaluate the impact of 24 weeks of treatment with RVT-101 alongside Aricept, a widely prescribed Alzheimer's disease drug.

Take Long View

Now what: Axovant Sciences presented mid-stage trial data for RVT-101 at the Clinical Trials in Alzheimer's Disease Meeting that was held on Nov. 5.

Presentations highlighted RVT-101's safety and previously reported efficacy, including data showing that use of RVT-101 as an adjunct to Aricept offered advantages to the use of Aricept monotherapy.

Whether prior clinical findings hold up in the much larger phase 3 trial isn't certain; 99% of Alzheimer's disease drugs entering clinic to date have failed in human trials, so the jury is still out on RVT-101.

Since trial failure rates are high and this study won't wrap up until 2017, investors should approach this stock cautiously, especially since the company's $1.9 billion market cap already prices in a lot of RVT-101's clinical progress to date.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.