Positive News is Driving This Cancer Drug Maker’s Stock Higher

Key Points

• IDEAYA stock is up more than 16% after reporting positive news in its Phase 2 clinical trial.
• The company is a leader in the emerging field of precision medicine that may redefine how certain diseases, such as cancer, are treated.
• IDYA stock may be overvalued at its current price, but interested investors should consider taking a position at a more opportune price.  

Shares of IDEAYA Biosciences Inc. NASDAQ: IDYA are up more than 16% after announcing positive treatment data for its Phase 2 clinical trial. The company’s pipeline candidate, IDE397, is an experimental drug designed to treat certain bladder and small-cell lung cancers. At one point, IDYA stock soared as high as 20%.  

The company reported that IDE397, when used alone, yielded a 39% response rate among 18 evaluable patients with MTAP-deleted NSCLC or urothelial cancer (the most common form of bladder cancer). Furthermore, 94% of the patients achieved some measure of disease control. The drug also delivered no severe complications or treatment discontinuations.  

Positive news in a Phase 2 trial is encouraging, but the company will still have to advance the drug through Phase 3 trials before it can submit the drug for approval with the U.S. Food & Drug Administration (FDA). 

Why Does IDEAYA's News Matter to Investors? 

Clinical-stage pharmaceutical companies are among the highest-risk investments among medical stocks. These companies are not profitable and frequently have little to no revenue. Adding to the risk is the possibility that a drug may not make it through the clinical trial stage. 

However, IDEAYA is focused on precision medicine. This emerging field uses big data to develop targeted, personalized care, taking into account individual differences in genes, environments, and lifestyles.  

The benefits are more personalized treatment, a better understanding of why diseases occur, an enhanced ability for physicians to predict what treatments will work best for individual patients, and focused drug development in the case of IDEAYA.  

Considering the above, add the word cancer, and you can see why investors are excited about IDYA stock. Precision medicine is opening up new treatment avenues that could revolutionize existing standards of care.  

The News Gets Better for IDEAYA

One benefit that may not be drawing enough attention is that IDEAYA’s IDE397 candidate comes in the form of a once-a-day tablet. Think about what’s going on in the GLP-1 arena. Companies like Eli Lilly & Co. NYSE: LLY and Pfizer Inc. NYSE: PFE are already moving on to the next generation of GLP-1 drugs, which include oral medications.  

What’s Next for IDEAYA?  

IDE397 will take some time to complete the clinical trial stage. In the meantime, the company has several other candidates in Phase 2 trials and a deep pipeline of drugs in development. All it takes is one, and investors have many bites at the apple.  

Investors should also note that the company has approximately $978 million of cash on hand. The company believes this will keep it funded until 2028. Plus, the company has collaborations with Pfizer, Amgen Inc. NASDAQ: AMGN, Gilead Sciences Inc. NASDAQ: GILD, Merck & Co. Inc. NYSE: MRK, and GSK plc NYSE: GSK that could generate approximately $2 billion if certain milestones are met.  

The primary risk appears to be valuation. IDYA stock has been up 76% in the last year, pushing its market cap to over $3 billion. That's pretty rich for a company that is not yet profitable. Plus, the stock still has over 17% short interest. On the other hand, 98% of the stock is owned by institutions, so that should temper the volatility.  

To sum it up, IDYA stock may be due for a correction. Risk-averse investors may want to put this on their watch list and wait for either a dip in the price or favorable news that will move the stock higher.