What happened

Shares of Acceleron Pharma (NASDAQ:XLRN) lost over 10% last month, according to data provided by S&P Global Market Intelligence, but it's not nearly as bad as it looks. Investors simply adjusted the company's market valuation following a huge one-day surge of 42% at the end of June, when the biopharma announced positive results for a phase 3 trial evaluating its lead drug candidate.

So what

At the end of June, Acceleron Pharma announced that luspatercept met all primary and secondary endpoints treating patients with a rare group of blood disorders called myelodysplastic syndromes (MDS). Although approval isn't guaranteed, the drug has blockbuster potential. Celgene, which co-developed the therapy, has estimated peak sales could be in the neighborhood of $2 billion per year. That's equal to the smaller partner's market cap.

A chart drawn on a chalkboard showing steady gains and then a sudden drop.

Image source: Getty Images.

Given the market potential and the company's current valuation, shareholders find themselves in an interesting position. The collaborating duo expects to report more data in the back half of 2018 that will be used to support submissions for regulatory approval. Therefore, even if the drug is approved, the first sales wouldn't occur until late 2019 or early 2020 at the earliest. But Acceleron Pharma could receive up to $185 million in milestone payments in addition to profit sharing and royalties on future sales, so the wait could be well worth it.

Then again, the wait may not be needed. Celgene owned about 13% of Acceleron Pharma at the end of last year. Therefore, if luspatercept continues to impress between now and the close of ongoing studies, then some have suggested the larger peer may just move to acquire the remaining 87% of its partner. Considering there are multiple other mid-stage assets in the pipeline, that could make too much sense. 

Now what

While it seems Acceleron Pharma is on the cusp of receiving marketing approval for a potential blockbuster drug, and the argument could be made that its entire pipeline is undervalued, nothing is guaranteed. Luckily, it looks as if the company's current market cap isn't getting too far ahead of itself, as happens all too often in this industry. Long-term shareholders should remain patient -- and perhaps a little confident -- heading into the end of 2018. And if shares slide much further without any news, then it might be worth taking a hard look at this promising drug developer.