Today's big stock market winner is Sarepta Therapeutics (SRPT), a small biotech company developing Eteplirsen, a novel therapy for Duchenne Muscular Dystrophy. Shares are rocketing higher by a stunning 175% today, from $15 to $41 each, on news that a phase 2 study showed promising results compared with placebo.

There are some red flags though, that should be pointed out. The study was completed on just 12 patients, normally not a large enough sample to get FDA approval. And 4 of those were the placebo group, so only 8 subjects received the drug for the full 48 week trial period. Second, the particular genetic mutation this drug targets is only present in 13% of cases, so the potential patient pool here is only about 2,000 people in the United States.

At a price of $400,000 per year (a typical level for orphan drugs that treat small patient populations), U.S. sales could reach $800 million if the drug is approved and every patient takes it. There are a lot of "ifs" in this scenario, however, and after today's huge stock price jump, Sarepta is being valued at nearly $1 billion already. FDA approval, even if it comes, it not right around the corner.

Long investors would be wise to consider taking some of their gains off of the table. Small cap biotech stocks like this are quite risky, especially after having nearly tripled in a single day. Situations like this can easily go either way longer term.

Full Disclosure: No position in SRPT at the time of writing, but positions may change at any time