Sequenom, Aclaris, and Xenoport Making Waves Among Elite Healthcare Investors

Three prominent healthcare-focused funds that we track at Insider Monkey submitted filings with the SEC today, disclosing new or bulked up positions in three different healthcare stocks. Given their focus and expertise on the healthcare sector, the stocks at the heart of these funds’ moves should be given consideration as potential investments. In this article we’ll find out what those stocks are and who is investing in them.

Firstly, let’s check in on James Flynn’s (pictured) healthcare fund Deerfield Management, which filed today on biopharmaceutical company XenoPort Inc. (NASDAQ:XNPT). Deerfield’s filing revealed a 6.29 million-share position in Xenoport, representing 9.97% of its common shares. Deerfield is not the only fund we track that has made a move on XenoPort recently, as just last week, Steven Boyd’s Armistice Capital reported upping its holding to 2.6 million shares. Unlike Armistice however, which held 1.6 million shares on June 30, Deerfield’s position in the stock is a new one for the firm.

Both investors believe they have caught XenoPort Inc. (NASDAQ:XNPT) at the right price given its sharp decline in the middle of September. Its precipitous drop of over 37% during a span of four trading sessions beginning on September 14 followed the revelation that its psoriasis treatment XP23829 was causing frequent gastrointestinal-related side effects in testing, which led to nearly one-third of the trial subjects prematurely dropping out of the study. On the other hand however, the study did meet its primary endpoint, exhibiting efficacy for reducing lesions in psoriatic patients.

Hedge funds in our database held 27.80% of XenoPort Inc. (NASDAQ:XNPT)’s shares on June 30, before the latest purchases, which would push the total to nearly 40% barring other as-yet-unreported moves. Thus, elite investors are quite bullish on the stock and the product candidates of the company. In addition to Boyd’s position, Julian Baker and Felix Baker’s Baker Bros. Advisors was another noteworthy shareholder of XenoPort’s as of June 30, owning 6.51 million shares.

A reader might question our decision to focus on the small-cap category, considering that it’s mostly the larger counterparts of these companies that head the portfolios of most hedge funds. The reason for our focus is simple. Our research has shown that in the period between 1999 and 2012 the top small-cap picks of hedge funds outperformed the broader market by nearly one percentage point per month, whereas the top overall picks (mostly large-caps) underperformed by seven basis points per month during the same period. Why pay high fees to own a glut of low-performing stocks when you can invest on your own in hedge funds’ best stock picks? Since its launch in August 2012, Insider Monkey’s small-cap strategy has outperformed the S&P 500 every year, returning 102% since then, nearly two-times greater returns than the S&P 500 (read the details here).

Check out the following page to get the lowdown on the other two healthcare filings of note, including one concerning a newly-public company.

Let’s move on to Sequenom Inc. (NASDAQ:SQNM), which Camber Capital Management, managed by Stephen Dubois, is as bullish as ever on. It’s been about 16 months since we reported that Dubois’s healthcare-focused firm had built its stake in the genome-focused life sciences company to 6.3 million shares. Since then it had gradually added even more shares to its haul, owning an even 9.0 million shares on June 30 of this year. However, it’s made its biggest move yet since then, reporting ownership of 15.4 million shares in today’s filing, giving it a 13% stake in the company.

Camber clearly feels very strongly about the work Sequenom Inc. (NASDAQ:SQNM) is doing, even if the broader market isn’t so sure yet. Sequenom’s shares have been cut in half over the past 16 months. Shares are also down by 49% this year, having strongly trended down from May 7 onward, after the company released its first quarter financial results. In addition to the results coming in below analysts’ expectations, Wedbush also downgraded the stock to ‘Neutral’, which led to shares diving by 15% on May 7.

The investors in our database largely maintained their Sequenom Inc. (NASDAQ:SQNM) holdings during the second quarter, with 13 investors long Sequenom at the start and end of the quarter, and the value of their holdings falling at about an equal pace as the stock, meaning there was limited collective movement of shares. Funds we track held 22.30% of its shares. Atop that list was William Leland Edwards’ Palo Alto Investors with 10.02 million shares, which has now been surpassed by Camber’s enhanced position.

Lastly is RA Capital Management’s filing on Aclaris Therapeutics Inc (NASDAQ:ACRS), a company which went public last Wednesday and is off to a strong start, gaining 13.82% across its first five trading sessions. RA Capital, a strong healthcare fund managed by Peter Kolchinsky, has taken a big stake in the newly-listed company, whose initial public offering consisted of 5.75 million shares, as it has snatched up 2.24 million of those shares, giving it an 11.5% stake in the company. There are no other known shareholders of Aclaris Therapeutics Inc (NASDAQ:ACRS) within our database at this time.

Headquartered in Malvern, Pennsylvania, Aclaris Therapeutics Inc (NASDAQ:ACRS) is focused on the development of novel treatments for skin conditions, including non-cancerous tumors, and common warts. Aclaris’ lead product is A101, which is being tested for the treatment of both seborrheic keratosis and common warts. The former indication, which affects as many as 83 million people in the U.S, is through phase 2 testing, while the latter has completed phase 1 testing. Aclaris also has two clinical-stage trials for Alopecia Areata, using a topical treatment in one, and an oral alternative in another.

Disclosure: None