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.
The shares of Recro Pharma have skyrocketed by over 440% since the beginning of the current year and there is not a single sign that the stock might stop rising in the upcoming months. On July 7, the company announced that it closed its private placement of 1.38 million shares of common stock, which generated gross proceeds of roughly $16 million. The purchase price for Recro Pharma’s common stock was $11.60 per share, which implies that Kevin Kotler has already achieved a gain of over 33% from the additional investment of 646,553 shares he purchased of the pharmaceutical company. Recro Pharma plans to use the net proceeds from the private placement to fund the clinical development of its lead candidates mentioned above, IV/IM meloxicam and Dex-IN, as well as covering some general corporate expenses. The Pennsylvania-based pharmaceutical company acquired a DEA-approved manufacturing facility in Gainesville, GA, along with a number of pain drugs, including the aforementioned IV/IM meloxicam, from the Irish drug maker Alkermes plc (NASDAQ:ALKS) a few months ago. Recro Pharma paid $50 million in cash and will also pay up to $120 million in milestone payments upon the achievement of certain regulatory and net sales milestones related to IV/IM meloxicam. Clearly, the progress has been very impressive for Recro Pharma Inc. (NASDAQ:REPH) and its future outlook remains very strong.
The pharmaceutical company has had a very strong start to 2015 and is in a good position to boost its growth in the upcoming months and years. When it comes to the financial performance of Recro Pharma, we can clearly state that the company has been very active and the achievement of its goals is around the corner. The company disclosed a net loss of $4.1 million or $0.53 per share for the fiscal first quarter of 2015, compared to a net loss figure of $6.4 million for the same quarter a year ago. At the same time, Recro Pharma reported research and development expenses of $1.8 million for the quarter, compared to $0.2 million for the first quarter of 2015, which might indicate that the company is moving in the right direction as it pushes its lead candidates towards the finish line. In the meantime, Dov Gertzulin’s DG Capital Management represents one of the largest investors in Recro Pharma Inc. (NASDAQ:REPH), with 314,718 shares.
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