Is it time to buy?
That’s the number-one question facing investors as the stock indices sink ever deeper into bear market territory.
One group of investors who have been aggressively making big bets, however, are the managers who specialize in biopharma and life sciences stocks. Over the past few weeks, four different life sciences hedge funds have taken stakes greater than 5 percent in more than a half dozen stocks.
Granted, it’s not hard to build large positions in these kinds of stocks, since their market capitalizations are generally very small, especially after the sharp selloff of the last few months. But these big bets would appear to reflect strong conviction among biopharma and life sciences managers, many of whom have rallied in recent months after posting large losses in the first five months of the year.
And despite the stock market’s huge decline in September, many of the stocks that they’ve been scooping up in the past month remarkably rose in price through the end of the month, since the managers disclosed their positions even as the major stock indices were posting double-digit declines.
For example, Deerfield Management disclosed in a filing that as of September 22 it owned 5.81 percent of the shares of Phathom Pharmaceuticals, which is attempting to develop treatments for patients suffering from acid-related gastrointestinal disorders. From that date through Friday, the stock rose more than 10 percent, although it could have been a larger gain if Deerfield had bought shares earlier in the month, when they were even cheaper.
In a separate filing, Deerfield said that as of September 20 it had boosted its stake in Merus NV by more than 20 percent, to more than 2.5 million shares, or 5.5 percent of the shares outstanding. Since that time, through Friday, the shares of the Dutch company — which is trying to develop treatments to address the unmet needs of patients with various types of cancer — were flat, although the stock has surged more than 40 percent from its mid-May low. Deerfield previously disclosed that it had more than quadrupled its stake in the company in the second quarter.
Elsewhere, Perceptive Advisors recently increased its stake in Relmada Therapeutics by more than 17 times, making the company a major holding for the hedge fund firm. From the September 16 filing date through Friday, the stock rose nearly 9 percent. Relmada is a late-stage biotechnology company addressing diseases of the central nervous system, with a focus on major depressive disorder.
RA Capital Management, meanwhile, has disclosed at least three new sizable investments in recent weeks. On Monday, the firm disclosed in a regulatory filing that as of September 21, it had established a new position exceeding 4.3 million shares of Alpine Immune Sciences, or 9.91 percent of the total outstanding. From the filing date through Friday, the stock was flat. Alpine is a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies.
RA Capital also recently disclosed that it owns 8.62 percent of the shares of Third Harmonic Bio, instantly making that company the hedge fund firm’s fourth-largest long position.
Third Harmonic, which is a clinical-stage biopharmaceutical company working to develop allergy and inflammation medicines for the treatment of dermal, respiratory, and gastrointestinal diseases, went public on September 15 at $17 per share. RA Capital had previously invested in the company when it was private, although it wasn’t a major shareholder at the time of the IPO. Through Friday, the stock was up about 11 percent since the IPO date.
RA Capital also recently disclosed that it has established a new position of nearly 3.6 million shares in Magenta Therapeutics, which is trying to develop drugs to treat patients with blood cancers, genetic diseases, and autoimmune diseases. The stock is down 19 percent since the disclosure, but it’s only a very tiny part of the RA Capital portfolio. Nevertheless, the company is a clear bottom-fishing bet, as the stock closed Friday at $1.41, way down from its high of $8.33 last November.
EcoR1 Capital also made several big bets in the past couple of weeks. For example, the firm headed by Oleg Nodelman disclosed in a regulatory filing that it had boosted its stake in Edgewise Therapeutics — a company that is attempting to create novel precision medicines for the treatment of rare muscle disorders — by nearly 50 percent as of September 14. The stock is down roughly 6 percent since that date.