One of today’s biggest movers in the biotech sector is RedHill Biopharma (NASDAQ:RDHL), a little-known specialty player in the space focusing on gastrointestinal and infectious diseases. Today, RDHL stock is up more than 75% in early afternoon trading on an announcement from the company that it has seen positive results for a key Phase 3 study.
This study focused on patients suffering from Chron’s disease, assessing how its RHB-104 treatment would compare to the current standards of care in the industry. Impressively, RedHill’s treatment proved to be 64% more effective than current industry standards, paving the way for a potential U.S. Food and Drug Administration (FDA) approval down the line. At least, the market appears to be viewing the announcement this way.
Let’s dive more into what the study entailed and what this may mean for RDHL stock investors.
RDHL Stock Surges on Positive Phase 3 Clinical Trial Results
What investors in any biotech stock want to see is not only movement along the clinical trial phases to a Phase 3 study (where RHB-104 currently stands) but strong efficacy and safety data reported for these drugs. Ultimately, FDA approvals are what matter in this area of the market. Accordingly, when positive data like this is released, it sends a strong signal to the market that there may be a drug with significant value under the hood.
That’s a great thing for investors in RDHL stock, given its incredible decline in recent years. Today’s surge brings the company’s market capitalization back above $20 million, meaning this is a small-cap stock many investors may be viewing as a speculative way to gain exposure to a potential big move, if an acquisition offer eventually comes following a potential FDA approval.
Of course, as is the case with any small-cap biotech stock, there’s plenty of risk to be considered when investing in such names. I’d certainly put RDHL stock in the penny stock category to be careful with, even after this promising news. While there does appear to be something here, it’s unclear how the company’s path to profitability has materially changed — and whether there’s enough cash available to bring this product to market. Accordingly, this is a stock that may be viewed as a binary bet by investors who may be more attuned to taking higher risks for a reward profile that has clearly improved.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
