Hedge funds that invested in these companies made solid gains.

One corner of the IPO market during 2019 made tidy returns in 2019, particularly during the last quarter of the year. Consider these Pharma and biotech IPOs:

• Karuna Therapeutics, focused on developing novel therapies to address disabling neuropsychiatric conditions – up 372% since its IPO
• NextCure, which is developing novel immuno-medicines to treat cancer and other immune-related diseases – up 291%
• Cortexyme, which is developing a disease-modifying therapeutic approach to treat a key underlying cause of Alzheimer’s disease – up 253%.

Only one hedge fund was an investor in all of these three companies – Surveyor Capital, a Citadel company, according to Institutional Investor.

Another example is Monopar Therapeutics, which is developing innovative drugs and drug combinations to improve clinical outcomes in advanced cancer. Since its IPO on December 18, the stock is up 147%, though hedge funds were missing in action as investors during the days the company was private.

Hedge funds and biotech IPOs

Nevertheless, lesser-known hedge funds such as Perceptive Advisors, Deerfield Management, RTW Investments, EcoR1 Capital, and Rock Springs Capital participated in the healthcare and biotech IPOs during 2019.

And it showed in their valuations. Through November 2019, Perceptive gained more than 40 percent, RTW was up 32 percent, and EcoR1 rose more than 23 percent.

According to data from Renaissance Capital, 69 healthcare IPOs raised $ 9.2 billion in 2019. On average, stocks which held above their IPO price gained 46%.

If you looked at biotech, the largest sub industry among the above IPOs, 50 IPOs raised $ 5.3 billion. Of these, IPOs in the green netted an average of 51% return.

Indeed, the NASDAQ Biotechnology Index is up more than 25 percent for 2019. But its up 360% over the last 10 years to the S&P 500’s 190%.

And the last quarter sprint in the index in 2019 may augur well for biotechs in 2020 too. Savvy hedge funds could be right in the midst of that action.

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