Why Cerus Corporation Stock Marched Higher Today

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What happened

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Shares of the biomedical company Cerus Corporation (NASDAQ: CERS) rose by as much as 14.5% today on more than triple the average volume. The company's shares took flight on the news that the U.S. Food and Drug Administration (FDA) approved the Rhode Island Blood Center's Biologics License Application (BLA) for the interstate distribution of platelets that have been pathogen-reduced with the Intercept Blood System. Cerus' Intercept Blood System reduces the risk of transfusion-transmitted infections by inactivating a range of pathogens, including viruses, bacteria and some parasites, which may be present in donated blood.

So what

This FDA approval removes a federal restriction barring biologic products from being shipped out of state. This allows the Rhode Island Blood Center to expand its distribution of Intercept-treated blood products to the whole of Southern New England. 

Now what

According to the press release, Cerus noted that seven additional blood centers have also submitted BLAs to the FDA requesting approvals to ship Intercept-treated blood components out of state. If these approvals are granted -- and they probably will be based on today's news -- Cerus' sales could nearly double next year compared to 2017 levels. Most importantly, Cerus would have a shot at becoming a cash-flow-positive operation next year if everything goes as planned.

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That being said, Cerus' stock is presently trading at a hefty nine times its trailing 12-month sales -- meaning that this positive regulatory development was probably already baked into its valuation to a large degree. That's not to say that this small-cap biotech doesn't offer further upside potential, but the company will definitely need these additional regulatory approvals to justify a higher market cap moving forward.

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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.