This Biotech Investor’s Picks Returned 31% in Q1; Here Are Its New Bets

Peter Kolchinsky is one of the best biotech investors and many of his stock picks generate strong returns. We calculate a fund’s returns by taking into account the long positions in companies with a market cap above $1.0 billion and Kolchinsky’s RA Capital Management was the best performing fund among those in our database in the first quarter, with his picks posting a weighted average return of 31.4%. This is impressive especially if we take into account that RA Capital usually invests in small-cap companies, so the actual results of his stock picks are even higher. With this in mind, let’s take a look at some of Kolchinsky’s largest new positions added to RA Capital Management’s equity portfolio during the first quarter, including TG Therapeutics Inc (NASDAQ:TGTX), Solid Biosciences Inc (NASDAQ:SLDB), and Clearside Biomedical Inc (NASDAQ:CLSD).

Following biotech investors can be very helpful, because biotech is a very complex industry and requires a lot of expertise. Many companies have one or two products under development and do not generate any sales for years, therefore it’s important to understand how the company’s products work and what is their market potential. Dr. Kolchinsky has a lot of expertise in this field, having obtained a Ph.D in virology from Harvard in 2001. As a grad student at Harvard, he was doing research in HIV and in his spare time was looking online at biotechnology companies and learning about their ecosystem. After getting his Ph.D., Kolchinsky teamed up with Rich Aldrich, one of the founders and former Chief Business Officer of Vertex Pharmaceuticals. Aldrich was in the process of launching an investment company and Kolchinsky’s technical knowledge fitted well with Aldrich’s business expertise.

To reduce the risk of following a single investor, it’s a good idea to take into account the picks of a group of investors. The Insider Monkey best-performing hedge fund strategy identifies the best stocks that 100 best-performing hedge funds are collectively bullish on. Since the strategy was launched in May 2014 and through May 2018, it has gained 90.7%, beating the S&P 500 ETF (SPY) by 54.9%. We have recently shared our latest stock picks and you can still profit from them by subscribing to our quarterly premium newsletter.

RA Capital Management holds a large portfolio, but the bulk of it is usually allocated towards 2-3 companies. At the end of March, these companies were Wave Life Sciences Ltd (NASDAQ:WVE), and Ascendis Pharma A/S (NASDAQ:ASND), whose stocks surged by 133% and 207% in the last 12 months, and AveXis, which has recently been acquired by Novartis AG (ADR) (NYSE:NVS).

And while Wave Life Sciences Ltd (NASDAQ:WVE) and Ascendis Pharma A/S (NASDAQ:ASND) have been in RA Capital’s equity portfolio since 2015, the companies that we are going to discuss in the next paragraphs were added to the portfolio in the first three months of the year.

In TG Therapeutics Inc (NASDAQ:TGTX), RA Capital acquired 2.47 million shares valued at $35.11 million. So far this year, TG Therapeutics Inc (NASDAQ:TGTX)’s shares have surged by 55.43%. The main catalyst that boosted the stock was the announcement of updated data from a Phase 2 study of TG Therapeutics Inc (NASDAQ:TGTX)’s lead candidate ublituximab in patients with relapsing forms of multiple sclerosis. The data showed that 97.5% of patients were relapse free at week 24 and the infusion was well tolerated. In addition, TG Therapeutics has several other studies evaluating ublituximab, including a phase 3 trial of the drug in combination with umbralisib (another candidate) in front line and relapsed Chronic Lymphocytic Leukemia.

Solid Biosciences Inc (NASDAQ:SLDB) went public in January and RA Capital was one of the company’s early backers. Following the IPO, RA Capital disclosed a $20.17 million stake containing 2.69 million shares. RA Capital also has appointed its portfolio manager and managing director Rajeev Shah to the company’s board. The stock took a hit in March after the FDA suspended Solid Biosciences Inc (NASDAQ:SLDB)’s clinical trial of Duchenne muscular dystrophy candidate SGT-001 following the hospitalization of the first patient. However, the shares quickly regained ground and are currently 52% in the green since started trading. Solid Biosciences Inc (NASDAQ:SLDB) said that it addressed the issues leading to the hold.

RA Capital also purchased 1.53 million shares of Clearside Biomedical Inc (NASDAQ:CLSD) between January and March, the stake being valued at $16.36 million. At the beginning of March, Clearside Biomedical Inc (NASDAQ:CLSD) announced positive results from a Phase 3 study of suprachoroidal CLS-T in patients with macular edema associated with non-infectious uveitis. The study reached the primary endpoint, as 47% of the patients that received the treatment every 12 weeks saw an improvement in sight. The stock quickly jumped as investors cheered the positive results, but it took a hit a couple of months later on the back of underwhelming results from a Phase 2 study of CLS-TA in combination with EYLEA in patients with diabetic macular edema.

Catalyst Biosciences Inc (NASDAQ:CBIO) saw RA Capital buy 514,917 shares worth $13.29 million during the first quarter. The stock of the clinical-stage biopharmaceutical company focused on hematology indications has surged by 62% since the beginning of 2018. Catalyst Biosciences Inc (NASDAQ:CBIO) is currently conducting a number of studies involving the treatment of hemophilia. Its marzeptacog alfa (MarzAA) has orphan drug designation in the US for routine prohylaxis in hemophilia A or B and in January the company launched the Phase 2 portion of a Phase 2/3 trial evaluating the drug. The preliminary result from the study are expected next month.

Catalyst is followed by Iovance Biotherapeutics Inc (NASDAQ:IOVA) in RA Capital’s equity portfolio, as the fund acquired an $11.14 million position containing 659,059 shares. Iovance Biotherapeutics Inc (NASDAQ:IOVA) is focused on developing Tumor Infiltrating Lymphocyte Therapies (tumor infiltrating lymphocytes are extracted from the patient, expanded in a laboratory and then reinfused to attack and kill cancer cells) and it currently has three mid-stage studies that are examining the treatment of metastatic melanoma in head, neck and cervical cancer. Earlier this month, Iovance Biotherapeutics said that it the first patient had been dosed in a Phase 2 trial assessing the candidate LN-144 in metastatic melanoma patients. The primary endpoint of the study is objective response rate at the sixth month and the trial is expected to be completed by March 2019.

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