What happened

Shares of Deciphera Pharmaceuticals (NASDAQ:DCPH) lept over 31% last month, according to data from S&P Global Market Intelligence. The monthly run-up topped 45% at one point before shares cooled off in the final days of the decade. Despite that, the stock erupted for a 196% gain in 2019.

There wasn't any company-specific news to send the pharma stock soaring, but investors have kept Deciphera Pharmaceuticals near the top of the list for potential buyout candidates. As such, when merger and acquisition activity picks up in the industry, shares are likely to become a little volatile. The speculation isn't entirely unwarranted. 

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Image source: Getty Images.

So what

Deciphera Pharmaceuticals boasts a pipeline of checkpoint inhibitors that have delivered impressive results in clinical trials. They're also wholly owned, which could attract a potential suitor now or later, especially if late-stage clinical trials continue to back up results from smaller studies.

The lead drug candidate, ripretinib, is an inhibitor of KIT and PDGFR-alpha proteins that are common in solid tumors. In the phase 3 Invictus study in gastrointestinal stromal tumors (GIST), ripretinib reduced the risk of disease progression or death by 85% compared with individuals who received a placebo. The experimental therapy achieved a median progression free survival of 6.3 months, compared with one month for placebo. All patients in the clinical trial had advanced stages of disease and had received three prior treatments. 

Those solid results earned ripretinib the coveted Breakthrough Therapy designation from the U.S. Food and Drug Administration. Deciphera Pharmaceuticals expected to file a new drug application for the drug candidate in the first quarter of 2020, but submitted the paperwork in mid-December. That, together with Breakthrough Therapy label, should help it get to market even more quickly than investors had been expecting. 

Now what

The market for advanced GIST isn't very large, but Deciphera Pharmaceuticals is studying ripretinib as a second-line and above treatment for GIST. If the drug candidate eventually earns a supplemental approval as an earlier-line treatment option, then it could earn peak annual sales of over $1 billion, according to Nomura Instinet analyst Christopher Marai. That optimism explains how the pre-revenue business boasts a current market cap of $2.9 billion. 

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