Zentalis Pharmaceuticals (NASDAQ:ZNTL) stock closed at $52.22 on Friday, 26.4% higher than it did on Thursday. Such spikes are nothing new for this fast-climbing clinical-stage biopharmaceutical company, which specializes in small-molecule cancer drugs. If you had invested $5,000 in the company's IPO in April, when it was selling at $18 a share, you would have $14,505 today.

There's clearly a lot of hype regarding Zentalis, which was founded in 2014 and has its headquarters in New York City with a science center in San Diego.

Strand of DNA

Image source: Getty Images.

In some ways, it's already playing like a big boy. Zentalis is partnering with Pfizer (NYSE:PFE) and Merck (NYSE:MRK) in one drug trial. On Thursday, it agreed to a deal with Tavros Therapeutics, a Durham, N.C., biotech company, to help expand Zentalis's oncology pipeline. On May 20, the company announced it had set up a $20 million Series A financing of Shanghai-based biopharmaceutical company Zentera Therapeutics. Zentalis will be the majority shareholder in Zentera, and the financing will be used for the Chinese development and commercialization of three cancer therapies discovered by Zentalis. 

Noting that it's "the second-largest pharmaceutical market in the world," Zentalis CEO Anthony Sun said that "establishing a joint venture in China is the first step toward advancing our product candidates on a global scale."

A company racing up the ramp

In four years, Zentalis has had four early-stage oncology drugs in early trials.

ZN-c5, a selective estrogen receptor degrader, is being tested against breast cancer in two separate trials. The first phase 1 trial is to evaluate biomarkers for ZN-c5 in subjects with breast cancer. The second study is a phase 1/2 study testing ZN-c5, both as a monotherapy and in conjunction with Pfizer's Ibrance (palbociclib), for its effectiveness in fighting breast cancer.

WEE1 is a type of protein that's seen in high levels in various cancers, particularly breast cancers, leukemia, melanoma, and adult and pediatric brain tumors. ZN-c3, a WEE1 inhibitor, is in the midst of a phase 1/2 study (both by itself and with other drugs, including Pfizer's Talzenna (talazoparib) and Merck's Keytruda (pembrolizumab)), on its use against solid tumors.

Also in a phase 1/2 study is Zentalis's ZN-e4, being investigated regarding its use against advanced non-small cell lung cancer.  Finally, the company just got approval of an initial drug application (NDA) for ZN-d5 to study its use as a monotherapy in patients with AML or B-cell lymphomas. 

Zetalis's IPO was a risk that paid off

Earlier this year as Zentalis was considering its IPO, the COVID-19 pandemic hit and stay-at-home orders voided any traditional methods of IPO promotion. Instead, the company did a four-day virtual road show.

"We decided to bite the bullet. It was actually a very, very difficult decision. The Dow was falling 10% per day back then, and the VIX (the Chicago Board Options Exchange volatility index) was greater than 55 when we launched the roadshow," Sun told BioWorld.

Sun, a former venture capitalist, spent four days making video calls to investors from his house, and the IPO raised $190 million and left Zentalis with a market value of $800 million. 

Big risk, big reward

It's important to note that none of these trials are scheduled to be completed until 2022, so the company will have to wait on profits for a while, and funding will be important.

On March 31, the company reported it had $63.7 million in cash plus the $172.4 million it raised through the IPO -- enough money, management estimates, to last into 2022. It's not making any revenue yet and had $16.2 million in expenses last quarter.  The biggest thing to know about clinical-stage pharmaceuticals is that they have a huge risk-to-reward ratio: Lots of risk, with huge potential for growth.

To answer the question in this story's headline, it certainly isn't too late to buy into Zentalis profitably. However, we're still a year away from finding out whether any of the company's drugs get FDA approval. 

The company is clearly riding momentum, so short-term investors may see it as a good stock to buy, then sell once they feel they've made enough profits. The Foolish way, though, is to buy and hold. If the company can get approval for a profitable drug, the upside will be huge. In the meantime, it appears to be well-financed to ride it out until 2022.

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.