What happened

Shares of the mid-cap biopharma Atea Pharmaceutical (AVIR) are up by a respectable 21.5% as of 11:44 a.m. EDT Friday morning. The biotech's shares are taking flight today in response to a successful interim analysis for Merck's oral COVID-19 pill, molnupiravir, in a late-stage trial.

Atea, for its part, is also trialing an oral COVID-19 medication, known as AT-527, with a broadly similar mechanism of action (they both interfere with viral replication). AT-527 is being evaluated as a treatment for patients who are already infected with COVID-19. 

A pill for COVID-19.

Image source: Getty Images.

So what

While the idea that Merck's promising interim results are somehow a harbinger of things to come for AT-527 is a bit of a stretch, Wall Street is enthusiastic about its commercial prospects. Current peak sales estimates range from a low of $2.3 billion to a high of $4 billion. Either one of those way-too-early revenue forecasts would be an enormous payday for a company with a market cap under $4 billion right now. Investors, however, seem to be taking this Merck news as as positive sign that AT-527 will eventually become a key therapy in the fight against COVID-19.

Now what

Is Atea's stock a buy on this news? COVID-19 stocks -- especially ones with important new therapies -- can produce jaw-dropping returns in the blink of an eye. There's no doubt about that at this point in the pandemic. So it might not be a bad idea to buy a few shares of this red-hot biotech stock today. That said, it's probably best to keep your position small.