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What happened

Shares of the rare disease specialist Crinetics Pharmaceuticals (NASDAQ: CRNX) have been on fire this week. Through the first four days of trading, the biotech’s stock has already gained a healthy 81.3%, according to data provided by S&P Global Market Intelligence.

What’s the spark? Last Sunday, Crinetics Pharmaceuticals announced positive top-line results for the oral, once-daily acromegaly therapy known as paltusotine. Acromegaly is the result of the overproduction of growth hormone in the body, causing the enlargement of bones, soft tissues, and other organs. The condition primarily affects middle-aged adults.

So what

The currently available therapies for acromegaly consist of injectables that can be both painful and inconvenient, given that they typically have to be administered in a doctor’s office. Paltusotine is an oral therapy that can be taken in the comfort of a patient’s own home, which could give it a big advantage over the present standard of care.

Wall Street analysts have estimated paltusotine’s peak sales potential at nearly $500 million per year in this setting. That’s a hefty sum for a company with a $1.6 billion market cap at the time of this writing. Most rare disease stocks, after all, tend to trade at well over 5 times the estimated peak sales of their flagship product. In other words, Crinetics Pharmaceuticals’ stock may have more room to run following this late-stage win.

Now what

Is Crinetics Pharmaceuticals stock a buy right now? The company expects to announce top-line data from a second late-stage trial for paltusotine early next year. If positive, the biotech plans on pursuing a Food and Drug Administration approval for the therapy, putting its potential launch on track for 2025. That’s not an overly long wait for what could prove to be a major catalyst for the stock. So, if you’re the risk-tolerant type, this small-cap healthcare stock might be worth buying right now.

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George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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