What happened

Shares of Immunovant (IMVT -2.09%), an autoimmune specialist and subsidiary of Roivant Sciences (ROIV 1.38%), are showing no signs of cooling off after nearly doubling in value on Tuesday. Specifically, the drugmaker's shares were up by another 5.3% on sky-high volume as of 11:27 a.m. ET Wednesday morning. Roivant Sciences stock is also up for a second straight day, with the drugmaker's shares rising by as much as 6.6% in early-morning trading.

What's all the fuss about? Tuesday, Immuovant announced phase 1 data for its neonatal fragment crystallizable receptor (FcRn) inhibitor IMVT-1402. Investors piled into the stock because the early-stage therapy achieved peak immunoglobulin G (IgG) reductions on par with its late-stage candidate batoclimab without a dose-related change in serum albumin or LDL-C. In other words, IMVT-1402 might be both a more effective and safer compound than batoclimab in some settings.

So what

The big deal is that FcRn inhibition could evolve into a $40 billion-a-year therapy class for scores of IgG-mediated autoimmune indications. Several major pharmaceutical companies, like Argenx, Johnson & Johnson, and UCB, have been pouring resources into this area over the last few years with the hopes of developing the next major breakthrough in the treatment of autoimmune disorders.

Immunovant's IMVT-1402, for its part, would have to compete in this crowded landscape, but its early clinical trial data are encouraging. The biotech, in fact, thinks it could qualify as a best-in-class treatment, which would open the door to billions in future sales.  

Now what

Is this biotech still a buy? I think so, although I'm definitely biased as a Roivant Sciences shareholder. My take is that Immunovant stands a fairly decent shot at fetching a buyout offer within the next three months following this clinical update. Big pharma has shown a willingness to pay top dollar for compelling autoimmune disease candidates over the last two years, and Immunovant might be holding an important new therapy in the field. And even if this buyout thesis fails to materialize, the company could still be significantly undervalued based on IMVT-1402's commercial potential.