What happened

While most small- to mid-cap biotech stocks are getting hammered today over inflationary concerns, the clinical-stage drugmaker Pliant Therapeutics (PLRX 2.71%) is moving in the opposite direction. Specifically, shares of Pliant were up by a whopping 119% as of 12:07 p.m. ET Monday. This explosive move is higher is also being accompanied by a massive surge in volume. 

Why are investors piling into this tiny biotech stock today? Ahead of the opening bell, Pliant announced that its experimental drug candidate, PLN-74809, for idiopathic pulmonary fibrosis met both its primary and secondary endpoints in a phase 2a trial. The company said that the drug also exhibited a favorable pharmacokinetic profile.

A piggybank taking off like a rocket.

Image source: Getty Images.

So what

Idiopathic pulmonary fibrosis has proven to be a tough indication to drug successfully. Despite this general lack of success in the clinic, however, industry insiders still expect this indication to generate nearly $6 billion in pharmaceutical sales by 2027, according to a report by Allied Market Research.

To put this sales figure into the proper context, Pliant's market cap is currently a meager $685 million, even after today's noteworthy move higher. In short, the company is staring down an enormous commercial opportunity -- that is, if PLN-74809's mid-stage results can be replicated in a large, pivotal-stage study. 

Now what

Before investors get too excited, it's important to bear in mind that this drug still has a long way to go in the clinic. A phase 3 trial, after all, will likely take a few years to complete. That doesn't mean that Pliant's stock isn't a buy in the wake of this positive mid-stage readout. The company could boil up to the top of the buyout scene, after all. Potential investors, though, probably shouldn't expect this stock to jump again until this all-important drug hits the mark in a pivotal trial.