Shares in Small-Cap Star Idera Pharmaceuticals (IDRA) are up today following the announcement of an agreement with Abbott Laboratories (ABT) to develop a companion diagnostics test for use in clinical development programs for treatment of certain forms of B-cell lymphoma using Idera’s IMO-8400.

“Research by Idera and by independent investigators has established TLR antagonism as a potentially promising and novel therapeutic approach for patients with B-cell malignancies harboring the MYD88 L265P mutation,” said Senior Vice President and Chief Medical Officer Lou Brenner, M.D. “This companion diagnostic will be an important tool for the clinical community in evaluating whether their patients are potential candidates for IMO-8400 therapy for the treatment of these genetically defined forms of B-cell lymphoma. We are excited about the opportunity to partner with Abbott, a leader in companion diagnostics, as part of Idera’s mutation- targeted development program for IMO-8400 in B-cell lymphomas.”

Shares in Idera gapped up 12 percent to $2.73 at open, declined sharply in the first five minutes of trading, then spiked up to an intraday high of $2.90 a share just before 9:50 pm ET. However, the stock retreated from this high as the day wore on, with shares sitting at close to $2.60 apiece, just under a 5 percent gain, by around 12:30 pm ET.

Idera is focused on developing therapies based on manipulating certain genetic triggers to treat B-cell Lymphoma and certain autoimmune diseases. From the company’s website:

“Idera Pharmaceuticals is a clinical stage biotechnology company developing a novel approach to the treatment of autoimmune diseases and certain genetically defined forms of B-cell lymphoma. Our most advanced clinical programs are based on nucleic acid therapeutics designed to inhibit overactivation of Toll-like receptors. Idera is conducting clinical development of TLR antagonists in autoimmune and inflammatory diseases, and preclinical development of their use in certain genetically defined forms of B-cell lymphoma.”

Idera’s been in the spotlight ever since late March when research firm Summer Street Research Partners poo-pooed the prospects for IMO-8400 in the same week that Celgene (CELG) announced that it was developing Otezla for psoriatic arthritis, putting a competing small-molecule psoriasis treatment into a space that IMO-8400 was intended to capture.

This initial sell-off ultimately bled into the wider market moves as investors ran from risk and growth stocks as fast as they could in late-March and April. On the whole, Idera plunged over 60 percent from its highest point in March to yesterday.

However, there are plenty of signs that Idera’s drop is an overreaction driven more by broad market conditions than it is by the company’s fundamentals. For starters, its inclusion in the Small-Cap Stars is a sign that Idera’s fundamentals have a lot in common with other successful small-cap biotechs and should indicate a greater potential for future success.

This, of course, hinges almost entirely on the science, as is true for most biotech stocks waiting out costly clinical trials that decide whether they even have a marketable product or not. But Idera has gotten some positive news on that front as well, with positive top-line data on IMO-8400 Phase II trial. It has also received praise from Piper Jaffray analysts who called the initial sell-off in late March premature and overblown.

Add to that the current technical data on the stock and it seems clear that Idera could easily be oversold at the moment. With the market trending away from biotechs, Idera’s 14-day RSI has remained very close to 30.0, the traditional lower level that indicates the barrier for oversold territory. Add to this the fact that the MACD line crossed the signal line from below, a classic buy signal, on April 22 and Idera appears to be a stock that’s ready to run if market factors can conspire to give it a nudge upwards.

And if you look at Idera’s chart, the stock appears to have halted its drop after crossing its 200-day SMA from above on April 11 and breaking past a rising support line last week. Both are negative signs, and the fact that the stock hasn’t fallen further may indicate that its found its bottom. By holding steady, Idera could be setting itself up for a strong run over the rest of the year, and a huge pop if any more positive data on IMO-8400 hits the market.

Certainly, at the moment, Idera seems to be suffering for reasons not entirely related to the company itself. Only time will tell if Idera’s got what it takes to soar, but there’s certainly plenty of evidence indicating that it’s more than possible.