Endocyte Inc's shares more than doubled after the company said its cancer drug was recommended for conditional approval in Europe for ovarian cancer and that the drug improved survival rates in lung cancer patients.
Analysts said investors were not really expecting European regulators to back the drug.
"(The conditional approval) is additional evidence that the drug is active and safe and should give investors increased confidence that the ovarian cancer study will be positive," Wedbush Securities analyst Greg Wade said.
This form of approval is given to drugs when the benefits of providing the drug to patients outweigh the risk, even as companies continue to run trials.
Endocyte's partner Merck & Co Inc is conducting a late-stage study of the drug, vintafolide, in patients with ovarian cancer who have failed prior treatment.
The European Medicines Agency's Committee for Medicinal Products for Human Use recommended conditional approval for the drug along with Endocyte's imaging agents that help identify tumors.
Endocyte's Chief Executive Ron Ellis said he expected the European Medicines Agency to grant the drug conditional approval in two to three months.
Credit Suisse analyst Jason Kantor said the trial data and European recommendation increased the probability that the drug would get conditional approval for lung cancer as well.
The company said the drug improved survival rates in lung cancer patients without the disease worsening, when used in combination with an approved treatment in a mid-stage study.
Endocyte said the risk of the disease worsening or death was reduced by 25 percent for patients treated with the drug combination in a mid-stage study, compared with patients who only took the approved treatment.
The company also said the combination showed better activity in a subset of patients with adenicarcinoma, a common type of non-small cell lung cancer that forms in mucus-secreting cells.
The trial tested vintafolide in combination with a chemotherapy drug known as docetaxel in 199 patients who failed one prior treatment with chemotherapy.
The company said there were no drug-related deaths in the group of patients taking a combination of the drug, though that group did have a higher rate of adverse events related to nerve damage and an abnormally low count of white blood cells.
Vintafolide delivers an anti-cancer agent by binding to certain receptors on cancer cells.
The company's shares were up 89 percent at $27.60 in afternoon trading. They rose 130 percent to a life-high of $33.70 earlier in the day. Over 13 million shares had changed hands by 1300 ET, about 20 times the company's 10-day average.
(Reporting By Vrinda Manocha in Bangalore; Editing by Don Sebastian)