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Why Atea Pharmaceutical Stock Is Ripping Higher Today

By George Budwell – Oct 1, 2021 at 12:21PM

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This biotech's experimental COVID-19 medication could be a big winner.

What happened

Shares of the mid-cap biopharma Atea Pharmaceutical (AVIR 0.55%) 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.

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Atea Pharmaceuticals, Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Atea Pharmaceuticals, Inc. Stock Quote
Atea Pharmaceuticals, Inc.
AVIR
$4.59 (0.55%) $0.03
Merck & Co. Stock Quote
Merck & Co.
MRK
$108.81 (0.33%) $0.35

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