With a 349% increase in stock price since its June debut on U.S. markets, Boston-based Karuna Therapeutics Inc. secures the title of best IPO performer so far in 2019.

The stock skyrocketed in November following positive top-line phase II data of Karxt in acute psychosis in patients with schizophrenia, providing a potential read-through to larger indications such as Alzheimer’s disease and pain.

An analysis of 53 IPOs completed on U.S. exchanges so far this year shows an overall average increase of 26% in stock price. In all, 36 are trading above their IPO prices, while 17 are trading below them. By removing the top three and bottom three performers, the remaining 47 IPOs show an overall average increase of 17%.

Globally, a total of 62 biopharma IPOs have raised $8.4 billion so far in 2019, placing the year behind the $10.7 billion raised in 2018 but ahead of all other years in the BioWorld database going back to 2000. The year has set records for the most IPO proceeds in the months of February, June and September, and it can also boast of having the best second quarter on record.

Analyst Michael Yee and his team at Jefferies said they expect companies to test the market into the first quarter of 2020, but that investors may become more selective moving closer to the U.S. presidential election.

“IPO activity is still generally strong even though the environment has been volatile” partially due to Medicare-for-all and drug pricing rhetoric, said the Jefferies research note. “However, we wouldn't be surprised to see a continued slowdown in Q4:19, as the expectation for volatility in 2020 is putting investors on edge.”

Top performers

The Karuna story involves positive phase II results reported in November for Karxt, an oral formulation of muscarinic receptor agonist xanomeline and muscarinic receptor antagonist trospium, which demonstrated a statistically significant and clinically meaningful 11.6-point mean reduction in total Positive and Negative Syndrome Scale score compared to placebo (p<0.0001). It was also well-tolerated, showing no weight gain, metabolic effects and extrapyramidal side effects.

“As someone who has been involved in developing antipsychotic drugs for a number of years, the prospect of having a drug that’s as effective as this drug, working mechanistically uniquely and one that doesn’t produce these really serious tolerability side effects and adverse events associated with the current standard of care,” said Steve Paul, Karuna’s president, CEO and chairman during a conference call, “that would be an extraordinary advance, in my view, for patients with this debilitating disease. We’ll be spending a lot more time thinking about commercialization later but for now what we think this can provide patients is a real breakthrough.”

Karuna raised $102.6 million in its IPO, pricing 6.41 million shares at $16 each. Its stock (NASDAQ:KRTX) closed out November at $71.88, following the completion of a $250 million secondary offering a little more than a week earlier.

In addition to Karuna, two other standout performers are Nextcure Inc. and Turning Point Therapeutics Inc.

Beltsville, Md.-based Nextcure has experienced a 219% stock surge since its May IPO, which raised $86.25 million through the offering of 5.8 million shares at $15 each. Its stock (NASDAQ:NXTC) closed at $47.81 on Nov. 29.

“The market had a massive positive reaction to Nextcure’s report of a second partial response (PR) and a conversion of a PR to a complete response with their novel anti-Siglec-15 checkpoint in non-small-cell lung cancer,” wrote analyst Daina Graybosch of SVB Leerink Research, in a November research note, referring to NC-318. “Clearly, there is thirst for clear signals of activity in immune-oncology after years of disappointing data from next-generation checkpoints and difficult-to-interpret combination data.”

Following a $150 million secondary offering completed by Nextcure in November, Piper Jaffray & Co. reiterated an overweight rating to the stock.

San Diego-based Turning Point’s stock (NASDAQ:TPTX) has climbed 212% since its April IPO in which it raised $191.5 million through the offering of 10.63 million shares at $18 each. It closed at $56.22 at the end of November.

According to H.C. Wainwright & Co. analyst Raghuram Selvaraju, there is a “significant commercial opportunity for Turning Point’s novel ALK-selective inhibitor, which retains high potency in the face of many ALK resistance mutations … especially when we take into account the forecasted global sales of those ALK inhibitors that have already achieved FDA approval.”

Sales of approved ALK inhibitors crizotinib, ceritinib, alectinib, brigatinib and lorlatinib are expected to rise above $4.5 billion by 2030, according to Selvaraju.

Turning Point’s lead candidate is repotrectinib, a next-generation kinase inhibitor that targets genetic drivers of non-small-cell lung cancer and advanced solid tumors. The company initiated a phase I/II trial in November for pediatric patients with ALK-, NTRK- and ROS1-positive solid tumors. It is also in a phase II trial for adult patients.

Bottom performers

At the bottom of the 17 IPO stocks trading below their 2019 IPOs are Anchiano Therapeutics Ltd., Axcella Health Inc. and Trevi Therapeutics Inc.

Cambridge, Mass.-based Anchiano raised $30.5 million in its IPO in February, offering 2.65 million American depositary shares at $11.50, but its stock (NASDAQ:ANCN) has fallen steadily over the past nine months by 88%, signifying the worst performance for any biopharma IPO stock this year. Its last trade on Nov. 29 was $1.41.

In its third quarter, the company discontinued its phase II Codex study of gene therapy inodiftagene vixteplasmid for patients with BCG-unresponsive non-muscle-invasive bladder cancer due to the unlikelihood of reaching the futility threshold of 10 complete responses in 35 patients. It also entered a licensing agreement with ADT Pharmaceuticals LLC to develop small-molecule pan-RAS inhibitors and PDE10/β-catenin inhibitors to treat genetically defined cancers.

Also experiencing a significant stock tumble in 2019 is Cambridge, Mass.-based Axcella (NASDAQ:AXLA), which priced its May IPO at $20 a share and raised $71.4 million. The stock closed at $4, down 80% since its debut, on Nov. 29.

Jefferies’ analyst Jessica Fye and team gave Axcella a price target of $11 by December 2020, lowering it from $20. Axcella is developing AXA candidates that have potential in correcting dysfunctional metabolic pathways. Management expects numerous catalysts in 2020, including data readouts from four non-IND clinical studies and the first investigational new drug (IND) submission to the FDA. Jefferies projects 2037 worldwide sales of $1 billion for AXA-1665 in cirrhotic overt hepatic encephalopathy and sarcopenia combined, and $2.5 billion for AXA-1125 in adult nonalcoholic steatohepatitis.

A third low performer this year, Trevi, of New Haven, Conn., has lost 65% of its value since raising $55 million in a May IPO. The stock (NASDAQ:TRVI) has dropped from $10 to $3.52.

In November, the company announced a delay to its phase IIb/III Prism trial for nalbuphine ER to treat severe pruritus in prurigo nodularis patients, having enrolled only 30% of the targeted number of patients. The pace of enrollment is slower due to competition from other clinical trials and slower site startups in Europe. The top-line data are now expected for the second half of 2020, instead of the first quarter.

“While the delay in timelines are disappointing, we maintain our outperform rating as we believe management can address the high discontinuation rate seen in the Phase 2 study, and we are optimistic on the clinical meaningfulness of nalbuphine ER should it get approved,” wrote analyst Ami Fadia and team from SVB Leerink Research.

Other significant movers in the 2019 IPO class include San Francisco-based Rapt Therapeutics Inc., which had a 116% stock price increase from $12 to $25.91 since its October IPO that raised $36 million, and Foster City, Calif.-based Mirum Pharmaceuticals Inc., which had a stock price decline from $15 at its July $75 million debut to $7.21 at the end of November, a drop of 52%.

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