The 25 day quiet period on underwriter research reports following the November 5 IPO of Karyopharm Therapeutics Inc (NASDAQ:KPTI), a clinical-stage pharmaceutical company focused on the development of treatments for cancer, will come to an end on Saturday, November 30.
The expiration of the quiet period will permit the many IPO underwriters to release research reports into the market and that may lead to a short-term increase in the price of KPTI shares.
The firm debuted at $16, the high end of its expected price range, but has since shown little movement, fluctuating between $15.50 and $19.09; the stock closed at its initial price of $16.00 on November 20. At the close of the quiet period, the underwriters of the IPO, including Leerink Swann LLC, BofA Merrill Lynch, JMP Securities LLC, and Oppenheimer & Co, will try to shake the stock out of its relatively stagnant performance with the release of positive research reports. See prior IPO article.
Recent academic studies and our past two years' research have offered empirical evidence of a correlation between the number and reputation of underwriters and rising share prices at the ending of the quiet period. Prices generally will begin to increase a few days before the quiet period expiration as experienced investors begin to buy up shares under the assumption that the underwriters will release positive reports-they would have little reason to do otherwise. These purchases create the perception of increased demand and drive prices upwards as the quiet period expiration approaches.
Karyopharm Therapeutics has developed multiple Selective Inhibitors of Nuclear Export compounds designed to slow the nuclear export protein XPO1. Selinexor, KPTI's lead candidate, has seen some trial patients with preliminary evidence of anti-cancer activities who have been able to tolerate the treatment for lengthy time periods.
KPTI competes with biopharmaceutical firms attempting to create and commercialize cancer treatments. Although we aren't aware of another firm seeking to use XPO1 inhibitors related to cancer research, there are many seeking alternative treatments.
Major competitors include Pfizer Inc (NYSE:PFE), Onyx Pharmaceuticals (NASDAQ:ONXX), Roche Pharmaceuticals, and Aveo Pharmaceuticals (NASDAQ:AVEO), some of which have resources superior to KPTI and have income available from prior successful treatments.
Michael G. Kauffman, M.D., Ph.D., a co-founder of KPTI, has been KPTI's CEO and President since 2011 and its Chief Medical Officer since late 2012. He was previously Chief Medical Officer at Proteolix Inc and Onyx Pharmaceuticals Inc. Dr. Kauffman holds his B.A. in Biochemistry from Amherst College and his M.D. and Ph.D. from Johns Hopkins Medical School. He trained in rheumatology and internal medicine at Massachusetts General and Beth Israel Hospitals.
Until KPTI has a major success or setback with one of its treatment candidates, the value of the firm is unlikely to change significantly, so this quiet period expiration is probably best treated as an aggressive long opportunity. The firm is more or less dependent on the success of its lead product candidate, Selinexor, making it a somewhat risky buy, but an effective cancer treatment could make this a true grand slam of an investment.
Disclosure: I am long KPTI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.