An initial public offering (IPO) has a special allure: It draws in speculative investors eager to see stocks soar in the initial days of trading. In weak markets, only the strongest candidates pull off an IPO. Lesser-quality companies delay or withdraw the offering, typically citing market conditions.

Since the beginning of March, these three biotechs successfully raised money and began trading. Let's take a look at them now.

Blocks spelling IPO in front of stacks of coins sitting on stock chart

Image Source: Getty Images.

1. Imara

Completing its IPO on March 11 -- right before the first shelter-in-place orders related to the coronavirus emerged -- Imara (IMRA) raised $75.2 million to advance its drug IMR-687 for rare, genetic disorders involving hemoglobin, the iron-containing protein in red blood cells. The stock is essentially flat, trading right around the $16 IPO price.

Imara plans to start a Phase 2b clinical trial of IMR-687 in the first half of 2020 for sickle cell disease, a genetic condition that causes red blood cells to become misshapen, leading to aggregation of those cells and blockage of arteries. IMR-687 provides an oral treatment for the 100,000 U.S. patients and 134,000 European patients living with the disease. The company expects interim results in the first half of 2021.

In addition, Imara believes IMR-687's mechanism can also positively affect patients with beta-thalassemia. Roughly 19,000 patients in the U.S. and Europe live with this disease, which impairs red blood cells' ability to transport oxygen to vital organs.

Backed by prominent healthcare investors including New Enterprise Associates, Orbimed, the venture arm of Pfizer, and RA Capital, Imara faces competition from Global Blood Therapeutics (GBT), which gained approval this year for its oral sickle cell disease drug, Oxbryta. IMR-687 works by a different mechanism, but it's too early to tell if one is superior to the other. The U.S. Food and Drug Administration (FDA) may require a head-to-head clinical trial between IMR-687 and Oxbryta.

On the competitive front, CRISPR Therapeutics (CRSP -7.06%) and Vertex Pharmaceuticals (VRTX -0.05%) teamed up to develop a gene therapy approach that, while still in very early stages, could effectively cure both sickle cell disease and beta-thalassemia.

There's unlikely to be a ton of news this year as Imara ramps up its phase 2 trials, and I'm not expecting any big binary events. Next year's results will be critical to allow the company to raise additional financing to support future clinical trials.

Investors should note Imara's risk as a single-drug company. All its eggs are in the IMR-687 basket, meaning an unexpected safety issue could kill the drug and take the company down with it.

2. Zentalis Pharmaceuticals

Zentalis Pharmaceuticals (ZNTL -7.92%) raised $190 million in its IPO on April 3. The stock trades at about $25.50 per share, a gain of more than 40% from its $18 IPO price. The company's platform technology has generated four anti-cancer drug candidates, all of which are in or soon to begin early-stage human testing.

Rather than reinventing the wheel, Zentalis set out to design drugs with greater efficacy, fewer side effects, and better pharmaceutical properties than currently used cancer drugs. Its Zn-c5 takes aim at Faslodex, a hormone therapy that generated over $1 billion annually for AstraZeneca before it went generic. A phase 1/2 trial in combination with Pfizer's Ibrance could produce results in the second half of this year.

Another drug from Zentalis, Zn-d5 ,has Abbvie and Roche's leukemia treatment, Venclexta, in its crosshairs. Venclexta generated $792 million in global sales in 2019. Zentalis thinks Zn-d5's improved potency and selectivity could prove superior. Clinical trials will not start until 2021, so results are a ways off. 

A third drug, Zn-e4, hopes to be an improved version of Tagrisso, AstraZeneca's cancer drug that achieved $3.2 billion in revenue in 2019. Again, Zentalis thinks its drug's better selectivity and improved solubility make it a potential next-generation Tagrisso. An initial phase 1/2 clinical trial in patients with non-small cell lung cancer, the most common form of lung cancer, is underway. Zentalis licensed the rights to the drug in China, South Korea, Taiwan, and Vietnam to SciClone Pharmaceuticals in 2014.

Potential investors need to consider the potential for COVID-19-related delays to Zentalis' clinical programs. Biotech stocks like this jump or drop on clinical results, which are expected later this year and next. However, Zentalis' prospectus mentions COVID-19 55 times and warns it could impact the timelines.

3. Keros Therapeutics

Keros Therapeutics (KROS -3.44%) debuted a few days after Zentalis on April 7. Raising $110.4 million at $16 per share, the stock now trades just below $28. That's a hefty 75% gain in its first two weeks.

Keros focuses on a family of proteins called "transforming growth factor betas," which function as master regulators of red blood cell and platelet production, as well as growth and repair of muscle and bone. Later this year, KER-050, the most advanced drug in the pipeline, will begin a phase 2 clinical trial to treat patients with a blood malignancy called myelodysplastic syndrome (MDS) with cytopenia (a medical term for low blood cell counts). Approximately 90% of patients with MDS will have cytopenia. 

Next year, Keros plans to initiate a phase 2 trial in myelofibrosis (MF)-associated cytopenias (blood cell shortages associated with bone marrow cancer). MF is rare, with fewer than 18,500 patients in the U.S., but 38% of patients are dependent on red blood cell transfusions within one year of diagnosis, according to Keros.

Keros' second drug, KER-047, is currently in phase 1 testing in healthy volunteers. If all goes well, phase 2 trials will begin next year in patients with iron-refractory iron-deficient anemia (IRIDA) and fibrodysplasia ossificans progressiva (FOP, a disease of the connective tissues). The rare nature of these diseases makes it challenging to determine how many patients exist. For example, an estimated 3,500 patients worldwide have FOP, but only 800 have been diagnosed.

Patience required

The success if these IPOs during one of the most volatile markets in history clearly demonstrates significant investor interest in Imara, Zentalis, and Keros -- likely from specialist healthcare funds. While clinical results, a key driver of stock movement, will likely be limited in the coming months, next year should bring more activity. These high-risk, high-reward opportunities could take a few years to generate significant returns for patient biotech investors.