If one sector can buck any market trend in the world, it is biotech and emerging pharmaceutical stocks. Usually when you see stocks double, it is based on a buyout or a major partnership development. That is not the case for Furiex Pharmaceuticals Inc. (NASDAQ: FURX), which soaring on news of positive top-line study results of two pivotal Phase III clinical drug trials of its eluxadoline in patients with irritable bowel syndrome (IBS).

The studies pertain to IBS-d. The company showed that eluxadoline proved successful in the treatment of diarrhea-predominant irritable bowel syndrome, meeting the primary endpoints targeted by the guidelines of both the U.S. Food and Drug Administration (FDA) and the European Medicines Agency.

In almost four years, Furiex completed nine Phase I studies, a Phase II dose-ranging trial in approximately 800 patients, and these two large Phase III trials. The company said that it has completed all toxicology studies and believes it is on schedule to file for a new drug application submission by the end of the second quarter of 2014.

Some 2,428 subjects were enrolled across the two studies. Here is the real reason to get excited. IBS-d comes with chronic abdominal pain and frequent diarrhea. It affects approximately 28 million patients in the United States and the major markets in Europe. We are not yet going to address pricing, but 28 million potential drug users is more than just a very large market.

The move in the stock has been massive in both percentages and in market capitalization. Furiex shares were up 124% at $103.19 in mid-morning trading on Tuesday. Keep in mind that the new 52-week range, with the high coming on Tuesday as well, is $32.01 to $121.97. This stock has already had more than a $20 price swing in one day!

Furiex shares were worth less than $500 million before this news, and now they are worth $1.07 billion in market cap. Perhaps the biggest driver here is that eluxadoline has been granted fast track status by the FDA, implying a much shorter FDA approval process from the time that the new drug application is filed.

The only warning we might signal is that Furiex may need to raise capital. As of September 30, it had $51 million in long-term debt and only about $34.6 million in cash. Its net tangible value was even negative by more than $26.5 million.

The company filed its shelf registration to raise up to $100 million back on December 24. That was a mixed shelf filing, which allows for the sale of common stock, preferred stock, warrants, debt and units. The “use of proceeds” section of the SEC filing said:

We cannot assure you that we will receive any proceeds in connection with securities offered by us pursuant to this prospectus. Unless otherwise provided in the applicable prospectus supplement, we intend to use the net proceeds from the sale of our securities by us under this prospectus for general corporate purposes, including clinical trials, research and development expenses, marketing and commercialization of our products or future products, if any, and general and administrative expenses. We will set forth in the applicable prospectus supplement our intended use for the net proceeds received from the sale of any securities by us. Pending the application of the net proceeds, we intend to invest the net proceeds generally in short-term, investment grade, interest-bearing securities.

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