What happened

Shares of Sol-Gel Technologies (NASDAQ:SLGL) rose as much as 36.2% today after the company announced positive results for its acne treatment Twyneo in multiple phase 3 clinical trials. The drug candidate met all three primary endpoints at the 12-week mark across both studies, including the number of patients achieving significantly clearer skin and significant reductions in both inflammatory and noninflammatory lesions.

Sol-Gel Technologies expects to file a new drug application (NDA) with the U.S. Food and Drug Administration (FDA) for Twyneo in the second half of 2020. It was already planning on submitting an NDA for its rosacea drug candidate Epsolay, which gives investors plenty to look forward to in the new year.

As of 11:25 a.m. EST, the pharma stock had settled to a 23.8% gain. Shares have gained 86% in the last five trading days.

A businessman tossing cash into the air.

Image source: Getty Images.

So what

Today's news adds to the recent momentum for Sol-Gel Technologies, which turned in a solid year of operations. In the first nine months of 2019, the business generated $18.9 million in revenue, compared to virtually nothing in the year-ago period. A significant increase in research and development expenses in that span eroded most of the benefits that would have trickled down the income statement as profit, but the company appears to be headed in the right direction.

Now what

If the pharma company can earn regulatory approval for both Epsolay and Twyneo, then it could have a respectable product portfolio in 2021. That said, the market for acne and rosacea drugs is very competitive, so investors may not want to get too carried away. Considering the business sports a market valuation of only $300 million, that doesn't appear to be happening (yet). But investors should brace for a public stock offering in the coming days, as management wisely takes advantage of a soaring stock price to pad the balance sheet with more cash.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.