What happened
Shares of the rare disease specialist Travere Therapeutics (TVTX -3.02%) jumped by a healthy 19.9% over the first two and a half days of this holiday-shortened week, according to data provided by S&P Global Market Intelligence. This double-digit gain is noteworthy because most small-cap biotech stocks have struggled in recent trading sessions due to the possibility of more aggressive rate hikes by the Federal Reserve later this year.
What sparked this rally? Last Friday, Travere announced that the Food and Drug Administration (FDA) granted an accelerated approval to Filspari (sparsentan) as a treatment for proteinuria in adults with primary IgAN at risk of rapid disease progression.
So what
Filspari could generate peak sales in excess of $1.4 billion in this setting, according to various Wall Street analysts. That's a huge commercial opportunity for a healthcare company with a $1.3 billion market cap at the time of this writing.
There is an important risk factor for investors to consider, however. The drug's full approval is contigent upon positive results from the ongoing phase 3 PROTECT Study, which are due out in the fourth quarter of 2023. What's important to understand is that the FDA has been far stricter of late about monitoring drugs approved for its accelerated pathway program. Investors, therefore, will want to keep a close eye on Filspari's upcoming trial results.
Now what
Is Travere stock still worth buying? Apart from the risk presented by its forthcoming PROTECT Study results, Travere's shares do come across as significantly undervalued right now. The long and short of it is that investors appear to be waiting for confirmation that Filspari will get a traditional approval before bidding the stock up even further. If you're a risk-tolerant investor, though, this latent valuation gap may represent a compelling entry point.
