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What happened

Shares of CoLucid Pharmaceuticals (NASDAQ: CLCD), a small-cap clinical-stage biopharmaceutical company focused on the development small-molecule drugs for the treatment of migraines, surged as much as 18% during Thursday's trading session after a bullish note was released by a covering analyst at Piper Jaffray. For added context, shares of CoLucid have risen by more than 150% since its Sept. 2 close of $10.66.

So what?

Today's surging stock price comes courtesy of Charles Duncan at Piper Jaffray, who reiterated his company's "overweight" rating on CoLucid Pharmaceuticals following the company's Sept. 6 top-line data release of its SAMURAI study regarding lead drug lasmiditan.

For those who may not be following this largely under-the-radar biotech company, on Sept. 6, CoLucid announced that lasmiditan met both its primary and secondary endpoints in its late-stage trial for the acute treatment of migraine. Both the 100 mg and 200 mg doses demonstrated statistically significant headache pain freedom at the two-hour point relative to the placebo. There was also a statistically significant reduction in most bothersome associated symptoms, such as nausea and phonophobia, two hours after dosing, which was the secondary endpoint. CoLucid's experimental drug was also deemed to be well-tolerated.

Looking ahead, CoLucid is eager to complete enrollment for a second phase 3 study known as SPARTAN, which will test oral lasmiditan in three separate doses against a placebo after two hours. This trial will also have a focus on patients with select cardiovascular risk factors, with an expected readout in the second half of 2017. 

Image source: Getty Images.

Now what?

Clearly, the success of SAMURAI is big news for tiny CoLucid. The company's subsequent spike in its share price allowed it to price 3.25 million shares at $20 last week, raising an aggregate of $65 million in gross proceeds. CoLucid ended the second quarter with $41.8 million in cash and cash equivalents and, at the time, had a cash runway through mid-2017. Presumably, with the positive results and its recent cash proceeds, CoLucid now has enough cash to make it through fiscal 2018.

The bigger news is what lasmiditan could do for CoLucid's top and bottom lines if approved by the Food and Drug Administration. Various analyst estimates project that lasmiditan could generate upwards of $1 billion in sales by 2025 if approved. Since drugmakers often trade at multiples of two to four times the peak sales of their lead drug, we could be talking about a valuation of between $2 billion and $4 billion on CoLucid, assuming a utopian scenario. That's a far cry from its current $300 million valuation.

However, investors should understand that a lot still needs to go right for CoLucid. It'll need to deliver once more in SPARTAN, and it'll have to successfully launch its product if approved. There's definitely a path to a higher valuation for CoLucid, but shareholders would be wise to temper their expectations until more data becomes available in the second half of 2017.