Biotech-Focused VHCP Management’s Bullish Moves and New Picks

Biotech stocks pop and drop on the smallest whims and whispers, which makes the biotechnology sector one of the most rewarding and volatile sectors out there. Retail investors interested in high-potential biotech stocks should definitely have a look at the pool of holdings managed by Baker Bros. Advisors, run by Julian Baker and Felix Baker, or Peter Kolchinsky’s RA Capital Management. In 2009, venture capital firm Venrock Associates formed Venrock Healthcare Capital Partners (VHCP) to invest in public and late-stage private healthcare companies. The VHCP team at Venrock Associates, overseen by Anders Hove and Bong Koh, seeks to leverage their venture expertise and in-depth data analysis to locate promising biotech companies within the public markets. Thus, we decided to lay out several noteworthy moves executed by VHCP Management during the first quarter of 2016 in an attempt to discover high-potential biotech companies.

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Beigene Ltd (ADR) (NASDAQ:BGNE)

 – Number of shares owned by VHCP (as of March 31): 51,000 ADSs

 – Value of VHCP’s holding (as of March 31): $1.50 Million

The healthcare arm of venture capital firm Venrock Associates acquired a new stake of 51,000 American Depositary Shares (ADSs) of Beigene Ltd (ADR) (NASDAQ:BGNE) during the January-to-March period, which were valued at nearly $1.50 million at the end of the period. In early February, the clinical-stage biopharmaceutical company completed its initial public offering on the NASDAQ stock exchange by selling 6.60 million ADSs at $24.00 per ADS. Each ADS represents 13 ordinary shares. Beigene seeks to become a leader in the discovery and development of innovative, molecularly-targeted and immuno-oncology drugs for the treatment of cancer. The company is working on four clinical-stage drug candidates that have the potential to be best-in-class or first-in-class treatments. The ADSs of Beigene have declined by nearly 2% since the beginning of 2016, but are trading 15% above their IPO price. A total of 15 hedge funds monitored by Insider Monkey were invested in Beigene at the end of the March quarter, with the aforementioned Baker Bros. Advisors LP being one of them, owning 1.91 million ADSs of Beigene Ltd (ADR) (NASDAQ:BGNE) as of March 31.

BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX)

 – Number of shares owned by VHCP (as of March 31): 562,943

 – Value of VHCP’s holding (as of March 31): $1.59 Million

VHCP added a 562,943-share position in BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) to its pool of holdings during the March quarter. The new position was valued at $1.59 million and accounted for 1.4% of the value of the fund’s portfolio. However, it should be noted that in a 13G filing reporting its holding as of March 16, Venrock reported aggregate ownership of 5.24 million shares, 473,101 of which were held by the main fund, with the rest of the shares being held by affiliated funds, so it’s likely that Venrock’s position remains much larger than that reported in its latest 13F filing.

BioCryst, which designs and develops small molecule drugs to block key enzymes involved in the pathogenesis of diseases has seen its shares plummet by 68% year-to-date. The huge decline in the shares of the company are mainly attributable to disappointing results from the OPuS-2 trial of orally-administered avoralstat for the treatment of hereditary angioedema (HAE) attacks. On the other hand, BioCryst revealed in early March that a preclinical study showed one of the company’s experimental antiviral drugs improved survival rates in mice infected with the Zika virus. RA Capital Management had 2.99 million shares of BioCryst Pharmaceuticals Inc. (NASDAQ:BCRX) in its portfolio at the end of March.

We’ll take a look at three more big moves made by VHCP Management during the first quarter on the next page.

Axovant Sciences Ltd (NYSE:AXON)

 – Number of shares owned by VHCP (as of March 31): 184,110

 – Value of VHCP’s holding (as of March 31): $2.11 Million

VHCP Management initiated a position in Axovant Sciences Ltd (NYSE:AXON) during the first quarter of 2016, which comprised 184,110 shares at the end of March. The newly-acquired stake was worth $2.11 million at the end of the quarter. Axovant Sciences is a clinical-stage biopharmaceutical company that develops novel therapeutics for the treatment of dementia. The company is currently focused on developing its lead product candidate RVT-101 for the treatment of Alzheimer’s disease and dementia with Lewy bodies, or DLB. In late April, the U.S. Food and Drug Administration approved ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD)’s Nuplazid tablets, the first approved drug for the treatment of hallucinations and delusions associated with psychosis experienced by some people suffering Parkinson’s disease. While ACADIA’s Nuplazid is designed to treat Parkinson’s disease psychosis, Axovant is focusing on a separate form of dementia called DLB that affects 1.4 million Americans. Shares of Axovant are down by 37% year-to-date. Jacob Gottlieb’s Visium Asset Management reported ownership of 4.2 million shares of Axovant Sciences Ltd (NYSE:AXON) during the latest 13F filing period.

Ocera Therapeutics Inc. (NASDAQ:OCRX)

 – Number of shares owned by VHCP (as of March 31): 796,550

 – Value of VHCP’s holding (as of March 31): $2.34 Million

VHCP upped its stake in Ocera Therapeutics Inc. (NASDAQ:OCRX) by 92,820 shares during the first three months of the year, ending the March quarter with 796,550 Ocera shares. The shares of the clinical-stage biopharmaceutical company focused on acute and chronic orphan liver diseases have dropped by 18% since the start of 2016. The company’s main possible pillar of growth is represented by its clinical candidate OCR-002 for the treatment of hepatic encephalopathy (HE), which is a serious complication of liver cirrhosis or liver failure. Ocera Therapeutics is currently conducting a randomized, placebo-controlled Phase 2b clinical trial to evaluate the efficacy and safety of OCR-002 in reducing the severity of HE symptoms. There were ten smart money investors tracked by Insider Monkey with stakes in the biopharmaceutical company at the end of March. Israel Englander’s Millennium Management owns 531,131 shares of Ocera Therapeutics Inc. (NASDAQ:OCRX) as of March 31.

Zafgen Inc. (NASDAQ:ZFGN)

 – Number of shares owned by VHCP (as of March 31): 602,114

 – Value of VHCP’s holding (as of March 31): $4.02 Million

In the first quarter of 2016, VHCP Management also increased its exposure to Zafgen Inc. (NASDAQ:ZFGN), by 60,634 shares. The increased position was worth $4.02 million at the end of the first quarter and represented 3.5% of VHCP’s portfolio. The shares of the biopharmaceutical company, which is focused on improving the health of patients suffering with obesity and other complex metabolic disorders are 7% in the green year-to-date. Earlier this year, hedge fund Kerrisdale Capital voiced bearish views on the company, asserting that the FDA is not likely to approve its obesity drug beloranib. While the hedge fund believes the drug has a positive impact on the reduction of body weight, Kerrisdale believes that is outweighed by the fact that the drug has been shown to increase the risk of death four-fold. In late 2015, the FDA put a full clinical hold on the company’s Investigational New Drug Application for beloranib after two patients died while being evaluated in a clinical trial of the drug. James E. Flynn’s Deerfield Management was the owner of 3.06 million shares of Zafgen Inc. (NASDAQ:ZFGN) at the end of March.

Disclosure: None