What happened
Shares of the clinical-stage biotech Sierra Oncology (SRRA) jumped by as much as 90% in premarket trading Tuesday. Investors are piling into this small-cap biotech stock today in response to overwhelmingly positive late-stage trial results for the blood cancer drug candidate momelotinib.
Specifically, Sierra announced ahead of the opening bell Tuesday morning that momelotinib met all of its primary and secondary endpoints in a phase 3 trial as a treatment for myelofibrosis patients who are symptomatic and anemic and were previously treated with an approved JAK inhibitor. Sierra licensed momelotinib from Gilead Sciences in 2018 for a meager $3 million upfront payment.
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So what
As a second-line therapy for myelofibrosis, Sierra's momelotinib probably won't hit blockbuster level sales for this first indication. However, this target market is large enough for the drug to conceivably haul in upward of $750 million at peak. And a peak sales estimate of around $500 million for this indication is probably a safe bet. Either of these peak sales figures would be a substantial revenue stream for a company valued at under $350 million as of yesterday's closing bell.
Now what
Sierra plans on filing for the drug's approval with the Food and Drug Administration in the second quarter of 2022. So, if everything goes according to plan, momelotinib ought to be commercially available no later than the first quarter of 2023.
Should investors buy into today's rally? The answer is a resounding yes. Sierra's stock appears to be grossly undervalued in light of momelotinib's commercial opportunity. Moreover, the market clearly wasn't expecting a positive phase 3 readout for this blood cancer drug. Aggressive investors might want to take advantage of this massive value gap while it still exists.
