Sierra Oncology Inc. (NASDAQ: SRRA) is far from a household name for investors who delve into health care, pharmaceuticals and biotech. In fact, Sierra would have to be considered quite speculative, even for the most speculative investors out there. After a fresh capital raise of about $26 million, at least one analyst is calling for this stock to more than double — with about 180% in implied upside.

Before getting into the guts of this call, and even before giving some background information here, certain risks need to be considered. If you have read our 11 crucial lessons for value investors, it ought to be more than clear that investors should not blindly follow analysts just because they see huge upside. Some analyst calls can even prove to be disastrous. Anyhow, we wouldn’t want any readers to just think that 24/7 Wall St. believes that we expect every massive upside analyst call to come to fruition.

The driving force for Wednesday’s price move is that Wedbush Securities has issued an Outperform rating, and it raised its price target to $4.00 from $3.00. If this were to come true, that would be upside of 183% from the $1.41 closing price. Sierra’s shares were up 11% at $1.565 after the upgrade.

Sierra Oncology is clinical stage drug development company (i.e., no revenues) focused on advancing next generation DNA Damage Response therapeutics for cancer patients. It was just two weeks ago that this company had a public offering of 19.5 million shares with a price of $1.35 per share. That generated gross proceeds of $26.3 million.

While Jefferies was listed as the sole book-running manager for the stock offering, Wedbush PacGrow and SunTrust Robinson Humphrey were also listed as co-managers.

The driving force behind Wedbush’s upside is a significant potential for Sierra’s newly licensed Chk1 inhibitor SRA737 across multiple cancer indications. This report said:

We see Chk1 inhibitors as an unappreciated class of therapies targeting the DNA damage response (similar to PARP inhibitors prior to recent clinical results from 2nd-generation inhibitors), and believe SRA737 could be differentiated based on preclinical data. Sierra remains well capitalized to advance SRA737 through key data readouts and initiate clinical development of its complementary asset SRA141 (expected to enter the clinic in the second half of 2017). With Sierra’s valuation well below its cash levels, we see opportunity for investors.

Another driving force on the company’s capitalization is that Sierra paid CRT Pioneer Fund an upfront of $7 million and recognized a fee of $2 million for transfer of the ongoing trials. Sierra also will pay milestones of up to $319.5 million upon the achievement of development, regulatory and commercial milestones. The company also will pay a royalty in the high single-digits to low double-digits on net sales.

Wedbush further said that Sierra entered 2017 with approximately $104 million. That figure was said to not include the recent $26 million equity offering.

Here is why it is so easy to call Sierra a speculative stock, even for speculative investors. The Wedbush call was shown to be based upon a six-times multiple of estimated 2025 U.S. and EU sales of SRA737 in non-small cell lung cancer and triple negative breast cancer, then discounted back annually by 40% to reflect the early stage of development.

Many analyst calls make earnings and sales projections for one to three years out. In speculative biotechs they often have to look out beyond five years. This call’s basis is forecasting the discounted value of sales out to the year 2025.

Sierra is a company that has had no real analyst coverage up to this point. The company is also based in Vancouver, Canada, and Yahoo Finance shows that it has just 52 employees. Thomson Reuters shows that Sierra’s top targets are cancer, prostate tumors, breast tumors and lymphoma. In January 2017, the company changed its name from ProNAi Therapeutics to Sierra Oncology. The company also moved its headquarters after closing its Michigan-based research facility by last August.

Even after shares rose 11% to $1.565, Sierra’s market cap is less than $80 million. Again, this is a highly speculative stock, even for speculative investors.

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