What happened

Shares of Dermira (DERM) jumped 10.5% higher as of 2:35 p.m. EDT on Tuesday. The nice gain came after Citi analyst Liav Abraham bumped the one-year price target for Dermira to $20 from $15. Abraham's increased optimism stemmed from Dermira's announcement on Monday of positive phase 2b results for lead candidate lebrikizumab in treating atopic dermatitis.

So what

While investors shouldn't put too much faith in analysts' price targets, the bullishness for Dermira could be warranted. The phase 2b results for lebrikizumab were impressive, especially the 250 mg dose of the drug.

Hand drawing line chart trending upward.

Image source: Getty Images.

Lebrikizumab blocks interleukin-13 (IL-13), which is secreted by immune cells and plays an important role in causing atopic dermatitis. Another IL-13 inhibitor, Dupixent, is already on the market. Sanofi and Regeneron launched Dupixent in 2017. The drug generated sales totaling $922 million last year and could achieve peak annual sales approaching $5 billion, although roughly half of those projected sales are expected to come from the use of the drug in treating asthma.

Dermira thinks that lebrikizumab could be even more effective than Dupixent in the atopic dermatitis indication. If the company's optimism proves to be warranted, Dermira could have a major blockbuster drug in its lineup within the next few years.

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Now what

There are still several hurdles for Dermira to jump. The company has to meet with the FDA to discuss the phase 2b results and obtain the go-ahead for a pivotal study. Dermira expects to receive a green light and begin the phase 3 study for lebrikizumab by late 2019.