It's been a few years since these biotech stocks made their debut on the public markets, but they're more popular than ever right now. Investors who held on since Day One have outperformed, and those just hearing about these drugmakers now want to know if they can keep climbing.
|Company (Symbol)||Stock Performance Since IPO||Market Cap|
|Scholar Rock (NASDAQ:SRRK)||194%||$1.46 billion|
|Replimune (NASDAQ:REPL)||180%||$1.99 billion|
Let's look at what these companies have done with cash raised in their initial public offerings (IPOs) to see if their shares can continue to outperform for investors.
Scholar Rock: How to retain muscle mass
This company raised $86.3 million in its initial public offering to pursue a potential new line of therapy for patients with a rare inherited disorder called spinal muscular atrophy (SMA). Today's SMA treatments tackle the motor neuron death responsible for SMA, but they can't prevent already weakened muscles from breaking down naturally.
Scholar Rock's lead candidate, SRK-015, is an experimental antibody that targets myostatin, a protein that plays an important role naturally restraining muscle growth. Shares of Scholar Rock surged recently because interim results from the Topaz trial strongly suggest pumping the brakes on myostatin activity with SRK-015 improves outcomes for SMA patients. A majority of ambulatory SMA type 3 patients given SRK-015 showed measurable motor skill improvements after six months of treatment, and 71% of patients with more severe forms of the muscle-wasting disorder showed some improvement.
Among 58 patients given SRK-015, none have had a serious event related to the treatment so far. Plans for a pivotal study designed to support a new drug application are still up in the air, but the company should report 12-month data from Topaz in the second quarter of 2021.
Replimmune: Oncolytic viruses are back
We've known there are certain viruses that selectively infect tumor cells, but using this knowledge to battle cancer hasn't worked out as well as hoped. Imlygic is an oncolytic viral therapy that Amgen launched in 2015 for the treatment of melanoma, but sales have been hampered by the lack of evidence it provides a long-term survival benefit.
Like Imlygic, Replimunne's lead candidate RP1 uses a modified herpes virus to deliver genetic blueprints for an immune response inducing protein called GM-CSF. Replimmune's candidate also includes a fusogenic protein that appears to make a big difference for patients with certain forms of hard to treat skin cancer when combined with Opdivo from Bristol Myers Squibb (NYSE:BMY).
Among 52 heavily pretreated patients with different forms of skin cancer, treatment with RP1 plus Opdivo shrank tumors 38% of the time at an interim assessment and some groups performed incredibly well. Among eight patients with cutaneous squamous cell carcinoma (CSCC), seven responded to treatment and five achieved complete remission.
The company's next experimental oncolytic virus to begin clinical trials, RP2, includes instructions for an anti-CTLA-4 antibody that resembles the active ingredient in another cancer immunotherapy from Bristol Myers Squibb, Yervoy. During an ongoing trial with RP2, three out of six advanced-stage cancer patients had smaller tumors after treatment with RP2 monotherapy.
Time to buy
If Scholar Rock can prove SRK-015 prevents muscle wasting for SMA patients in a larger pivotal study with a control group, an FDA approval and annual sales in excess of $1 billion would be likely to follow. The company's SMA program makes the stock look like a bargain at recent prices before adding in the company's experimental cancer immunotherapy. In addition to SRK-015, Scholar Rock's testing an experimental TGFB1 inhibitor called SRK-181 in a trial with a variety of advanced-stage cancer patients. Add them up, and this biotech looks like a buy right now.
Replimunne's clinical-stage pipeline also appears underappreciated by the stock market. It's still early in the development of RP1 and RP2, but the dramatic tumor responses we've seen so far suggest this company's next-generation oncolytic viruses will give investors more reasons to get excited over the next couple of years.