What happened

Shares of BioXcel Therapeutics (BTAI 7.84%) jumped by as much as 14.4% on Monday -- and finished the trading session up 11.7% -- thanks to a Wall Street analyst making a bullish case for the biopharmaceutical company.

So what

UBS analyst Colin Bristow initiated coverage of BioXcel Therapeutics' stock with a buy rating and a $99 price target. The company's shares are worth $51.72 apiece after today's rally. Why does Bristow see such huge potential upside for BioXcel Therapeutics'? The answer lies with the company's leading pipeline candidate, sublingual thin film BXCL501. In a phase 3 clinical trial, BXCL501 was shown to be effective in treating acute agitation in patients with schizophrenia and bipolar disorder.

Hand drawing upward pointing graph.

Image source: Getty Images.

Although BioXcel Therapeutics currently has no products on the market, Bristow thinks that its current stock price is supported by BXCL501's opportunity in treating patients with those two psychological disorders. However, the analyst sees an even bigger upside for the stock in another market. BXCL501 is also being investigated as a treatment for acute agitation in patients with dementia, an opportunity that exceeds the schizophrenia and bipolar disorder markets combined.

Now what

It is always wise to take analyst recommendations with a grain of salt. But for what it's worth, Bristow is onto something, at least in my view. BXCL501's potential does seem very enticing. What's more, BioXcel Therapeutics currently has a market cap of only $1.26 billion, and that's after the company's shares gained 211.5% over the past 12 months. In other words, it is definitely worth keeping an eye on this healthcare stock.