What happened

Shares of Xeris Biopharma (XERS), a small-cap biopharmaceutical company, are on the move following good news from the Food and Drug Administration (FDA). Investors excited about the company's latest new drug approval drove the stock 27.7% higher as of 12:07 p.m. ET on Friday.

So what 

In May, Xeris Biopharma agreed to use shares of its own stock to acquire Strongbridge Biopharma, which was developing Recorlev. The decision to acquire Strongbridge came shortly after the FDA began reviewing a new drug application for Recorlev, and it looks like Xeris made the right decision.

Scientist looking down into a microscope.

Image source: Getty Images.

Recorlev is a purified isomer of ketoconazole, a decades-old drug used to treat fungal infections. Today, the FDA approved it to treat patients with Cushing's syndrome, or hypercortisolism.

During trials leading to its approval, treatment with Recorlev helped normalize the amount of cortisol coursing through a patient's bloodstream.

Now what

Cushing's syndrome is rare, but patients display a variety of symptoms usually associated with more common diseases, including elevated blood pressure and blood sugar. As such, it's often misdiagnosed. The availability of a new tablet to treat the disorder could bring enough patients out of the woodwork to drive annual sales above $200 million in a few short years.

Recorlev wasn't the only rare disease drug Xeris acquired from Strongbridge. The company also picked up Keveyis. This is the first and only available treatment approved by the FDA to treat primary periodic paralysis. 

During the first nine months of 2021, Keveyis sales rose 33% year over year to $30 million. With the addition of Recorlev to Xeris' product line, the company could feasibly begin generating annual sales above $100 million before the end of 2023.

At recent prices, Xeris Biopharma sports a very modest market cap of just $366 million. That seems extremely cheap for a company with several commercial-stage products. I wouldn't be surprised if this biotech stock shoots through the roof in the new year.