What happened

Shares of BioCryst Pharmaceuticals (NASDAQ:BCRX) up 10.8% to around $4.76 Friday as of 3:30 p.m. EDT. The big gain came after JMP Securities analyst Jonathan Wolleben bumped his price target for the stock up to $11 from $10.

So what

It's typically best to take analysts' price targets for stocks with a grain of salt. However, understanding the rationales behind their perspectives can be helpful in evaluating the prospects for a company.

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In this case, Wolleben is expecting that BioCryst's hereditary angioedema drug berotralstat will win a thumbs-up from the FDA. The agency is scheduled to announce its decision on the drug by Dec. 3. Wolleben estimates that there's an 80% chance that berotralstat will win FDA approval based on its positive clinical results.

He is also upbeat about BioCryst's oral factor D inhibitor, BCX9930. The drugmaker initiated a proof-of-concept clinical trial in March evaluating the drug in treating paroxysmal nocturnal hemoglobinuria.

Is Wolleben's optimism justified? Probably so. Around 85% of drugs that successfully complete phase 3 testing go on to win FDA approval, based on historical data analyzed by biopharmaceutical industry trade organization BIO. If approved, berotralstat could generate peak annual sales of more than $500 million, which would likely make the JMP Securities price target of $11 per share attainable. 

Now what

The key thing to watch now with this biotech stock will be the FDA's decision on berotralstat. BioCryst also awaits European approval of the drug, which is expected in early 2021.

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.