Kevin Kotler’s Broadfin Capital has filed a 13D with the Securities and Exchange Commission regarding its stake in Recro Pharma Inc. (NASDAQ:REPH). Specifically, the newly-amended filing disclosed the fund’s new ownership of 2.06 million shares, which represent 22.34% of the company’s outstanding common stock. Hence, Broadfin Capital increased its position size by 646,553 shares since its most recent 13F filing. As for the purpose of the transaction, the filing discloses that the hedge fund holds the securities for investment purposes only and that it can make proposals to Recro Pharma concerning changes to the capitalization, ownership structure or operations of the company, among other things.
Broadfin Capital LLC is a New York-based hedge fund founded by its current Managing Partner and Portfolio Manager, Kevin Kotler, in June 2005. The firm is a global equity healthcare-focused asset manager with 82.63% of its entire public equity portfolio invested in healthcare companies. Broadfin Capital employs a fundamental, value-oriented investment strategy with a focus on the long-term investment horizon. Kevin Kotler has been primarily engaged in analyzing and investing in medical technology companies throughout his career. Prior to launching Broadfin Capital, Kevin Kotler had acted as the Managing Director at Galleon Management LP, being in charge of the medical technology industry. He also served as a Medical Technology Analyst at ABN Amro, ING Barings, and UBS Securities, so it is no surprise that Kotler has been successfully running his healthcare-focused hedge fund. As for the fund’s performance, it ranked as the third-best performing fund in our database in the second quarter, and the top performing fund in 2015 through the end of June. However our figures do not represent the actual returns of the fund, and are only an estimate of its stock picks’ performance/ Broadfin Capital manages a public equity portfolio worth $1.28 billion as of March 31, 2015.
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We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 81 percentage points (139.7% return vs. S&P 500’s 58.7% gain) over the last 34 months (see the details here).
Recro Pharma Inc. (NASDAQ:REPH) is a revenue generating specialty pharmaceutical company that is developing multiple non-opioid therapeutics for the treatment of acute post-operative pain. The pharmaceutical company has been recently working on developing IV/IM meloxicam, which is a proprietary, Phase III-ready, long-acting preferential COX-2 inhibitor, and Dex-IN, a proprietary intranasal formulation of dexmedetomidine currently being tested in Phase II, for the treatment of acute post-operative pain. Recro Pharma’s competitive edge lies in the fact that its products are not in the opioid class of drugs, so they are not expected to have any side effects associated with commonly prescribed opioid therapeutics including addiction, constipation, and respiratory distress.
