U.S. Markets open in 4 hrs 53 mins

Here's Why Mirati Therapeutics Jumped 55.8% in January

Cory Renauer, The Motley Fool

What happened

Shares of Mirati Therapeutics (NASDAQ: MRTX), a clinical-stage biotech developing new cancer drugs, surged 55.8% in January, according to data from S&P Global Market Intelligence. Plans to advance its sitravatinib into a pivotal study with Opdivo from Bristol-Myers Squibb (NYSE: BMY) gave investors a reason to cheer. 

So what 

Keytruda, a PD-1 inhibitor that makes it hard for tumors to shut down attacks from the immune system, is already a standard first-line treatment for non-small cell lung cancer (NSCLC). It doesn't work every time, though, and a lot of PD-1 refractory patients in the second-line setting need new treatment options.

Mirati shares rose in January after the company announced a collaboration with Bristol-Myers that involves a free supply of its PD-1 inhibitor Opdivo to use in clinical trials, but no financial assistance. Investors are increasingly hopeful Mirati's lead candidate, sitravatinib plus Opdivo, will become a new option for second-line NSCLC patients.

Businessperson with a jetpack.

Image source: Getty Images.

In October, Mirati showed results from an ongoing phase 2 study with NSCLC patients that relapse after their first PD-1 treatment that turned some heads. A surprising 20% had confirmed tumor responses, which is much more than you'd expect from standard care.

Mirati will start a pivotal study in the first half of the year comparing Opdivo plus sitravatinib to standard chemo for a similar patient group. Mirati thinks the FDA will be willing to grant accelerated approval based on improved response rates then use long-term survival data from the same study to grant a full approval down the road.

Now what

As part of a popular second-line NSCLC therapy, annual sitravatinib sales could top $1 billion within a few years, but investors shouldn't get too excited yet. In January, the company was still presenting initial phase 2 data from an Aug. 21, 2018, data cutoff. It might be a good idea to wait for further results from the ongoing study before taking a chance on Mirati.

Footing the entire bill for a phase 3 trial with sitravatinib won't be cheap, but Mirati has enough cash to take the company through a response rate assessment that could support an approval. The company finished September with $243 million in cash, and in January, it raised another $115 million through a secondary offering that boosted the outstanding share count around 6.4% higher.

More From The Motley Fool

Cory Renauer 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.