Christopher Medlock James‘ Partner Fund Management recently initiated a position in Heron Therapeutics Inc (NASDAQ:HRTX), together with its affiliated funds, according to a 13G form filed with the Securities and Exchange Commission. The holding comprises over 2.01 million shares valued at $65.30 million based on the June 10 closing price, and represents about 5.7% of the $1.14 billion biotechnology company’s outstanding shares.
Founded in 2004, Partner Fund Management currently has about $5.44 billion worth of regulatory assets under its management. The San Francisco-based investment firm combines fundamental analysis with a bottom-up approach to make its investment choices, and complements its in-house research with external research. At the end of March the market value of the fund’s public equity portfolio stood at $3.63 billion and the healthcare sector represented about 55% of these holdings.
Follow Christopher Medlock James's Partner Fund Management
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 135% over the ensuing 34 months, outperforming the S&P 500 Index by nearly 80 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Heron Therapeutics Inc (NASDAQ:HRTX) is focused on improving the therapeutic profile of injectable pharmaceuticals. Its main product candidate, SUSTOL is being developed to prevent chemotherapy-induced nausea and vomiting (CINV). The company announced successful results for its Phase 3 study of SUSTOL at the end of May, and plans to re-submit its New Drug Application to the FDA. The drug met its primary endpoint of a statistically significant proportion of patients achieving a Complete Response as compared to the Comparator Group. The Complete Response was defined as no vomiting or rescue medications during a 24 to 120-hour period after administration of highly emetogenic chemeotherapy agents, which are responsible for causing vomiting. Moreover, Heron Therapeutics Inc (NASDAQ:HRTX) has also recently initiated a mid-stage study of HTX-011, which helps with the prevention of post-operative pain.
