The shares of both Receptos Inc (NASDAQ:RCPT) and Celgene Corporation (NASDAQ:CELG) are trading 10% higher after the two pharmaceutical companies entered into a definitive merger agreement after the close of trading yesterday. Celgene Corporation will acquire Receptos for $7.32 billion, paying $232.00 for every share of the latter. This acquisition will improve the Inflammation & Immunology (I&I) portfolio of Celgene and help the company capitalize on its stronger position in inflammatory bowel disease (IBD) treatment. This is another example of the pharmaceutical company’s strategy to grow through acquisitions and mergers. One of the recent ones includes its partnership with Juno Therapeutics Inc (NASDAQ:JUNO) for $1 billion, making its cancer immunotherapy portfolio accessible to Celgene Corporation (NASDAQ:CELG) along with a 30% stake in Juno for the next ten years.
The acquisition of Receptos will allow Celgene to get its hands on Ozanimod, which is known to provide relief in ulcerative colitis and relapsing multiple sclerosis. While discussing the acquisition, Bob Hugin, Chairman and CEO of Celgene, said, “This acquisition enhances our I&I portfolio and allows us to leverage the investments made in our global organization to accelerate our growth in the medium and long-term.” Faheem Hasnain, President and CEO of Receptos Inc (NASDAQ:RCPT) called Celgene an excellent partner for the growth of Ozanimod. He further added, “In Celgene, we have found the ideal partner to maximize the potential of Ozanimod and our promising pipeline in order to improve the lives of patients worldwide.”
The shares of Receptos Inc (NASDAQ:RCPT) have grown by 86.77% year-to-date along with a 15.26% growth in the second quarter. Smart money was wrong about the pharmaceutical company as it turns out, as the majority of the hedge fund managers that we track bet against the company by withdrawing their investments during the first quarter. Only 34 hedge fund managers held a position in the company with investments worth $764.83 million compared to investments of $893.13 million from 38 investors. That overall holdings declined despite the stellar performance of the stock in the first quarter shows that hedge fund managers were taking profits from the position in droves and likely felt the ceiling had been reached, at least short term.
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In addition to the hedge fund managers, it might be safe to say that the insiders didn’t see this deal coming earlier in 2015, as multiple insider sale transactions have been processed year-to-date. Edward S. Torres, Director at Receptos Inc, was among the major sellers in the past few months, as he sold 220,000 shares in June and a total of 301,506 shares in 2015.
Let’s analyze the hedge fund activity surrounding Receptos Inc (NASDAQ:RCPT) at the end of the first quarter.
Hedge fund activity in Receptos Inc (NASDAQ:RCPT)
As pointed out earlier, hedge fund sentiment was negative, with only 34 hedge fund positions in the stock at the end of the first quarter. There were 38 hedge funds with positions in the stock at the end of fourth quarter of 2014. This indicates that many hedge funds partially sold their stakes in the stock and some hedge funds even bid good bye to the stock completely by selling their entire stake in the company.
Among the hedge funds tracked by Insider Monkey, Viking Global, managed by Andreas Halvorsen, held the largest position in Receptos Inc (NASDAQ:RCPT). Viking Global held 951,078 Receptos shares valued at $156.8 million as of March 31, which accounted for 0.6% of Viking Global’s total 13F portfolio at that time. The second-largest holding in Receptos was by Phill Gross and Robert Atchinson of Adage Capital Management, with 482,979 shares at $79.6 million. This accounted for 0.2% of its 13F portfolio. Other hedgies that were bullish comprise Israel Englander‘s Millennium Management, Bihua Chen’s Cormorant Asset Management, and Jacob Gottlieb’s Visium Asset Management.
Declining interest in the stock by hedge funds might suggest that some hedge funds decided to bid good bye to the stock by selling their entire stake in the company. It’s worth mentioning that Zach Schreiber’s Point State Capital dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey. Zach Schreiber’s hedge fund sold all 385,000 shares of Receptos it previously. Jason Karp of Tourbillon Capital Partners also sold all of his 385,000 Receptos shares in the first quarter, which were valued at $47.2 million as of the end of 2014.
Disclosure: None
