Why Xeris Biopharma Stock Zoomed 7% Higher on Wednesday

A competitor's setback was Xeris Biopharma's (NASDAQ: XERS) gain on Hump Day. On news that a potential commercial threat to one of its three commercialized drugs had been neutralized (at least for now), investors piled into Xeris stock, sending it to a more than 7% price gain. A bullish analyst note reinforced this positive sentiment.

A fateful FDA decision

That would-be rival is Xeris's fellow biotech Corcept Therapeutics. Wednesday morning, the company announced that the U.S. Food and Drug Administration (FDA) had not approved its relacorilant, a medication used to treat hypertension (high blood pressure) associated with the hormonal disorder hypercortisolism, also known as Cushing's syndrome.

Image source: Getty Images.

In the FDA's complete response letter, Corcept stated in a press release that the regulator cited the lack of additional evidence of the drug's effectiveness as a key reason behind its decision. Corcept has vowed to continue attempting to get the treatment approved; however, this will likely necessitate more clinical trials (which can be lengthy and expensive).

The rally in Xeris stock was largely due to a sense of relief. After all, the company's Recorlev -- originally developed by Strongbridge Biopharma, which Xeris acquired in 2021 -- earned FDA approval for the treatment of Cushing's syndrome at the end of that year. This well-established medication, then, won't have to contend with an upstart.

Triple play?

This was the crux of the analyst update, published by Jefferies's Glen Santangelo that morning. In reiterating his buy recommendation and $10 price target on Xeris, according to reports, the analyst wrote that the addressable market for Cushing's disease should continue to grow, with the company benefiting more than it would have if Corcept's drug had won approval.

According to Santangelo's calculations, the current $1 billion U.S. market could triple by 2030 if awareness of the disorder increases sufficiently.

That might be somewhat optimistic, but Corcept's loss is almost indisputably a gain for Xeris. I'd be optimistic about the company's future, too.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Corcept Therapeutics and Jefferies Financial Group. The Motley Fool has a disclosure policy.