Kevin Kotler‘s Broadfin Capital has disclosed raising its passive stake in the micro-cap oncology biotechnology company Ignyta Inc (NASDAQ:RXDX). As a new filing with the Securities and Exchange Commission showed, Broadfin currently owns 1.52 million shares of the company, which represent 6.4% of its outstanding common stock. In its latest 13F filing, Broadfin stated that it held 641,700 shares of Ignyta, up from 225,000 shares held a quarter earlier.
Broadfin’s latest increase in its stake in Ignyta Inc (NASDAQ:RXDX) came on the back of the company disclosing its financial results for the last year and announcing the acquisition of four R&D assets from Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). The company has received orphan drug designation from the FDA for its entrectinib, a drug for the treatment of neuroblastoma, several types of non-small cell lung cancer and colorectal cancer. Moreover, Ignyta’s net loss widened in 2014 to $40.0 million from $14.2 million a year earlier and the company has not recorded any revenues since going public at the end of 2013. On the back of positive news, Ignyta’s stock has jumped by 30% since the beginning of the year.
Mr. Kotler’s fund initiated a stake in Ignyta Inc (NASDAQ:RXDX) during the first quarter of 2014, holding 641,700 shares at the end of March. However, in the following quarter the position was cut by 416,700 shares and then increased by the same amount during the last three months of the year. The stock, meanwhile, lost 16% in the last nine months of 2014, amid high volatility that oscillated the price from lows of $5.36 to highs of $10.36 per share. Investors, however, seem to be bullish on Ignyta amid the significant interest that the biotech industry has gained in the last couple of years. Another large shareholder of the company is Steven Boyd’s Armistice Capital, which disclosed holding 1.51 million shares in its 13F filing for the fourth quarter of 2014. On the other hand, Israel Englander‘s Millennium Management trimmed its stake in Ignyta by 48,100 shares to 748,800 shares held as of the end of 2014. Moreover, in the last couple of days, Ignyta has seen some bullish insider activity as the company’s Chairman, CEO, and Co-founder Jonathan Lim purchased 20,000 shares, raising his holding to 25,000 shares.
Investing in biotechnology stocks seems has been a lucrative strategy for the last couple of years as we see more and more investors acquiring shares of big and small companies operating in the industry. Moreover, even though many experts have voiced the opinion that biotech is another bubble that might burst soon, investors are still buying shares of small-cap companies that have significant losses and little or no revenue. Many of these stocks rewarded investors with great returns, since small-cap companies have a lot of room to grow, but they also bear a significant level of risk. Mr. Kotler, who has over 90% of Broadfin’s equity portfolio invested in healthcare stocks, has a lot of exposure to the biotech industry. However, he is hedging against risk by diversifying the fund’s $1.15 billion equity portfolio. According to the fund’s latest 13F filing, Broadfin holds 70 long positions, with the largest amassing 10%, and the top five holdings accounting for 33% of the total portfolio value.
