What happened

Brooklyn ImmunoTherapeutics (NYSEMKT:BTX), a relative newcomer to the world of publicly traded biotech stocks, saw its shares rip higher in April by a stunning 1,230%, according to data provided by S&P Global Market Intelligence. The stock took flight last month for two related reasons:

  1. In late April, Brooklyn secured an exclusive license for mRNA gene-editing and cell-therapies technology from Factor Bioscience and Novellus Therapeutics. This novel therapeutic platform has attracted significant interest from investors since the rapid development of mRNA-based COVID-19 vaccines from both Moderna and Pfizer/BioNTech
  2. Ahead of this landmark business development deal, Brooklyn's stock was singled out as a "top idea" on multiple social media platforms. 
A rocket taking off.

Image source: Getty Images.

So what

Perhaps the most compelling aspect of this story is the fact that Brooklyn may not have a product approved by the Food and Drug Administration on the market until 2026. The company's lead product candidate is the immunotherapy IRX-2, which won't wrap up late-stage testing for head and neck cancer until 2025.

What's more, this mRNA license isn't slated to yield an all-important human clinical trial until 2024, according to the biotech's latest investor presentation. Long story short, Brooklyn's nearly $1.6 billion valuation might not be warranted at this early juncture in its life cycle. 

Now what

Not surprisingly, Brooklyn's shares have fallen by a noteworthy 51% from their recent highs since the start of May. So the reality of the company's long road ahead appears to be settling in among retail investors. That's not to say that this small-cap biotech stock won't turn out to be a winner over the long term, but investors may want to wait for a more attractive entry point before buying shares. 

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.