Investors looking for stocks that can put up dramatic gains in short time frames found what they were looking for from the biopharmaceutical industry last month. At least three drugmaker stocks more than doubled in November.
Can last month's highfliers soar even further in the new year? Let's weigh the opportunities ahead of them against the challenges they face to measure the odds that they'll produce more big gains down the road.
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Korro Bio
On Nov. 3, Korro Bio (KRRO 7.52%) used Frequency Therapeutics' Nasdaq listing to reverse merge into U.S. public markets. Korro's stock price soared around 171% in November because, in addition to a new stock market listing, the company received a cash infusion of $170 million from a who's who list of private investors.
Korro will use its newfound cash pile to advance an RNA-editing platform that could produce heaps of new drugs, starting with a treatment for alpha-1 antitrypsin deficiency (AATD). A lack of AAT can lead to lung damage at a young age, and there are no treatments that address the root cause of this rare inherited disorder.
The company thinks its new cash cushion will last into 2026. Unfortunately, this could be how long it takes to find out whether its AATD candidate has a future. The company still hasn't begun clinical trials.
Korro Bio sports a small market cap of around $335 million at recent prices, about half of which is comprised of cash it received from the new private placement. This stock could soar if its AATD program succeeds in its first clinical trial. However, without existing clinical data to parse, betting on success is an extremely risky shot in the dark.
Gyre Therapeutics
At the end of October, the company formerly known as Catalyst Biosciences took on a controlling interest in a commercial-stage pharmaceutical company in China. The company renamed itself Gyre Therapeutics (GYRE 4.78%), and its stock price shot 246% higher in November.
Gyre now markets pirfenidone, a treatment for idiopathic pulmonary fibrosis (IDF), in China under the brand name Etuary.
The stock soared in November in response to positive news for a new anti-fibrotic drug candidate called Hydronidone. Gyre Therapeutics is developing Hydronidone in the U.S. and China for the treatment of metabolic dysfunction-associated steatohepatitis (MASH). Until just a few months ago, this condition was known as nonalcoholic steatohepatitis (NASH).
MASH is a condition that threatens the liver function of millions of Americans, and there are no treatments approved by the U.S. Food and Drug Administration (FDA) to stop or slow its progression. If Hydronidone succeeds, it could drive Gyre's recent market cap of around $1.8 billion several times higher.
Gyre is already finished enrolling chronic hepatitis B patients into a phase 3 trial in China following a phase 2 proof of concept trial that showed encouraging liver fibrosis reductions. Before getting too excited, though, investors should know that the FDA is generally unwilling to approve drugs without a successful phase 3 trial that includes mostly U.S. patients.
Success in Hydronidone's ongoing phase 3 trial with hepatitis B patients in China would suggest future success in upcoming U.S. studies with MASH patients and drive the stock much higher. The company expects phase 3 data in 2024 that could make its stock price rocket even higher.
With commercial sales and encouraging clinical data, Gyre Therapeutics is far less dangerous than Korro Bio. That said, this stock is appropriate only for investors with a high tolerance for risk.
Incannex Healthcare
Shares of Incannex Healthcare (IXHL -3.48%) rocketed 661% higher in November. Nearly all of the gain occurred immediately after the company redomiciled from Australia to the U.S. near the end of the month.
The company is developing cannabinoids and psychedelic compounds for the treatment of obstructive sleep apnea, traumatic brain injury, an array of inflammatory disorders, and several neurological conditions.
Incannex Healthcare is targeting dozens of indications with a global market size of more than $420 billion. All this activity would be great if it had adequate resources to pursue all those indications, but it doesn't. In fact, Incannex still has no source of product revenue.
Incannex's lead candidate, IHL-42X, is a combination of dronabinol, a synthetic form of THC (the psychoactive compound in cannabis), and acetazolamide, an old diuretic. The company is developing the combo to treat obstructive sleep apnea, and results from a phase 2 trial conducted in Australia showed significant improvement compared to a placebo.
Incannex still hasn't announced the start of clinical studies with IHL-42X in the U.S. While it could soar further, it's probably best to keep this stock on a watch list until it can report success in a large phase 3 study.