The biotech industry is a wild one indeed. It isn't uncommon to see shares of biotech companies double (or more) in just a day or two. That's what happened to BeyondSpring (BYSI 2.22%) on Aug. 4, when its stock skyrocketed by as much as 211% and ended the day's trading session up 176%.

The reason for the gains was the usual suspect in this industry: positive results from a late-stage clinical trial. And while the data was enough to woo a cohort of investors, for those focused on the long term, it pays to take time to look at a company's entire investment thesis before jumping in. Let's dig deeper into this business to figure out whether its shares are worth buying today.

"Pipeline in a drug"

BeyondSpring is a biotech that focuses on developing cancer treatments. This isn't a bad market to jump into. Cancer drugs generate more sales than any other class of medicines. Further, the field of oncology is one of the fastest-growing in the pharmaceutical industry. Even considering how crowded it is, a smaller company managing to carve out a profitable niche for itself within this space is by no means unheard of. With that said, BeyondSpring currently has no products on the market.

People in scrubs move through the hallway of a hospital.

Image Source: Getty Images. 

The company's most advanced pipeline candidate is called plinabulin, and it is this investigational cancer therapy that is responsible for BeyondSpring's recent fortunes. In a phase 3 clinical trial that pitted the combination of plinabulin and chemotherapy medicine docetaxel against docetaxel alone in patients with second- and third-line non-small cell lung cancer (NSCLC), the combo therapy achieved its primary endpoint of statistically significant improvement in overall survival.

Plinabulin and docetaxel also significantly reduced the incidence of Grade 4 neutropenia, a condition characterized by a low number of white blood cells which makes patients more vulnerable to infections. BeyondSpring plans to submit an application to regulatory authorities in the U.S. and China for plinabulin and docetaxel in treating NSCLC in the first half of 2022.

It's worth noting that the biotech submitted a New Drug Application to the U.S. Food and Drug Administration (FDA) for the combination of plinabulin and granulocyte colony-stimulating factor (G-CSF, a medicine for neutropenia) in the treatment of chemotherapy-induced neutropenia (CIN) in March. The regulatory authority granted this combo treatment priority review and set a PDUFA goal date of Nov. 30, 2021.

Plinabulin's market opportunity in treating CIN seems attractive. While G-CSF is the current standard of care, the combination of plinabulin and G-CSF was shown in clinical trials to achieve significantly better outcomes. Some 650,000 patients in the U.S. receive chemotherapy every year, and these patients also receive more than 1.4 million cycles of G-CSF annually (and growing).

BeyondSpring's plinabulin could considerably eat into this market. When adding its potential in NSCLC and other indications (plinabulin is being investigated as a standalone or combo treatment in other forms of cancer), the medicine's prospects look excellent. That's probably why BeyondSpring says of its crown jewel that it is a "pipeline in a drug."

BeyondSpring's financial position

Developing breakthrough treatments isn't cheap. That's why investors need to look at a biotech's financial situation before purchasing its shares. As of the first quarter ending March 31, BeyondSpring had cash and cash equivalents totaling $90.6 million, enough to cover its operations for the next year, according to management.

However, now that its shares have skyrocketed, investors can expect the company to take advantage of this situation by resorting to a stock offering to raise additional capital. The drugmaker last used this tactic back in November when it issued 7.5 million shares of its common stock for $10 per share.

That's something for investors to think about. If the biotech company does decide to issue new shares, its stock price will almost certainly drop. 

Should you buy?

There is no denying the potential of BeyondSpring's leading candidate, plinabulin, in CIN and other indications. However, the company remains a bit risky. First, the stock more than doubled in a single day; some investors will want to profit off these gains, which will pull down the stock price. Second, the possibility of the drugmaker resorting to dilutive forms of financing could also have a negative impact on its shares. These concerns relate mostly to the short term, though, and there are more serious risks for long-term investors to consider.

These consist of the usual headwinds that can make or break a biotech company, particularly one with no products on the market: negative results from clinical trials or regulatory setbacks. Even considering how promising plinabulin looks at the moment, unforeseen events could severely harm its prospects and those of BeyondSpring. Interested investors should keep this in mind, and for those willing to press the buy button anyway, it'd be best to start by initiating a small position.