Kevin Kotler’s Broadfin Capital LLC, one of the leading healthcare-focused hedge funds, disclosed its ownership of nearly 1.48 million shares in Medgenics Inc. (NYSE:MDGN) in a recent Securities and Exchange Commission filing, which corresponds to 5.92% of the company’s outstanding common stock. Therefore, this transaction increases Broadfin Capital’s position in Medgenics by 450,200 shares since its most recent 13F filing and strengthens the fund’s position as the largest shareholder in the medical technology and therapeutics company.
Broadfin Capital LLC is a healthcare-focused hedge fund established by the seasoned investor in medical technology companies, Kevin Kotler, in 2005. The investment management firm employs a value-oriented investment strategy based on thorough proprietary fundamental research. Kevin Kotler is able to evaluate medical technologies and devices at all stages of development as he has been engaged in analyzing and investing in medical technology companies for more than 20 years. Kotler is also backed up by a very experienced team of professionals that has valuable research and investment experience in the medical technology, pharmaceutical, and biotechnology sectors. Broadfin Capital is primarily focusing on companies that develop products intended to improve healthcare outcomes and lower costs. It is also worth mentioning that Kotler’s hedge fund ranked as the third-best performing fund in our database in the second quarter, and as 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. The fund’s most recent 13F filing reveals that Broadfin Capital manages a public equity portfolio with a market value of $1.28 billion, while its top ten holdings represent 51.02% of that portfolio.
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Medgenics Inc. (NYSE:MDGN) is the developer of a proprietary platform for the sustained production and delivery of therapeutic proteins and peptides in patients using ex vivo gene therapy and their own tissue for the treatment of rare and orphan diseases. Specifically, the company is developing the TARGT (Transduced Autologous Restorative Gene Therapy) system, and currently focusing on its lead product MDGN-201, which not so long ago was only in a Phase 1/2 clinical trial. Stirringly, Medgenics announced on July 15 that the first patient had been enrolled in the Phase 2 clinical trial for MDGN-201 (TARGTEPO), so the company is a step closer towards the commercialization of its lead candidate. For those with a medical background, this product is an investigational gene therapy for the treatment of anemia in end stage renal disease (ESRD) patients undergoing peritoneal dialysis. Having said that, the enrollment of the first patient in the Phase 2 clinical trial represents a noteworthy milestone for Medgenics. Even though the company cannot anticipate when its candidates will hit the market and when they will start generating profits, it seems that Medgenics is getting closer and closer to its moment of glory.
The shares of Medgenics have grown by over 35% since the beginning of the current year despite suffering a few substantial slumps throughout the last three months. There has been a lot of positive news about Medgenics lately. Just recently, Medgenics Medical Israel Ltd., a wholly-owned subsidiary of Medgenics, was awarded a government grant of roughly $3.4 million by the Office of the Chief Scientist (OCS) at the Ministry of Economy of Israel. The grant is intended to cover the company’s Research and Development expenses from December 2014 to December 2015. Specifically, the grant will fund further research and clinical development of Medgenics’ TARGT system. Although the subsidiary will have to fully repay the grant plus interest as soon as the developed technology starts commercializing, the $3.4 million figure will definitely be quite handy for its R&D department. In addition to that, the grant is not reimbursed in case Medgenics does not generate any revenues from its system, so there is no downside risk for the company at all.
Let’s take a moment and review the financial health of the company in order to assess whether Medgenics will be able to develop its candidates without financial constraints. Medgenics Inc. posted losses of $8.92 million for the first quarter of 2015 and the company expects to generate further losses until the commercialization of its candidates sets off. The company reported research and development expenses of $3.90 million for the recent quarter, compared to $2.14 million for the same quarter a year ago, which is a strong indicator that the company is on the right path. Moreover, Medgenics reported cash and cash equivalents of $25.16 million as of March 31, compared to a figure of $33.29 million as of December 31, 2014. Hence, the company still has a huge pile of cash to spend on the development of its products, though the future capital requirements of the company still represent a subject worthy of consideration. Medgenics stated that its cash on hand will be sufficient to cover all its expenses through the third quarter of 2016 and as a result, the company is planning to seek additional investments and capital to continue its operations without disturbances. Within our database of over 700 hedge funds, James A. Silverman’s Opaleye Management represents the second-largest shareholder in Medgenics Inc. (NYSE:MDGN), owning 850,000 shares, tailing only Broadfin Capital.
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