The Healthcare Gurus at Baker Bros. Advisors Were Buying These Stocks in Q3

Baker Bros. Advisors has arguably been the most successful healthcare-focused hedge fund on the Street in recent years. Founded by brothers Julian Baker and Felix Baker in 2000, the New York-based hedge fund was managing around $250 million in assets back in 2003. However, in the last few years the fund has grown exponentially, scoring some major wins in the meantime, and as of April 25, 2016 managed regulatory assets north of $11.5 billion. According to the fund’s latest 13F filing, at the end of September, over 90% of that capital was invested in publicly traded healthcare companies in the United States.

As per the filing, Baker Bros. Advisors’ U.S equity portfolio was worth $11.02 billion at the end of the third quarter, which was 15% more than the $9.54 billion it was worth at the end of second quarter. The filing also revealed that the fund’s equity portfolio had a low quarterly turnover rate of only 12.88% during the third quarter and consisted entirely of healthcare stocks. Furthermore, the top-10 equity holdings of the fund accounted for almost 85% of the value of its portfolio at the end of September. In this article, we’ll take a look at the five major bullish moves made by the fund during the third quarter and will discuss how these stocks have performed recently.

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#5 ContraFect Corp (NASDAQ:CFRX)

– Shares Held By Baker Bros. Advisors (as of September 30): 76,473

– Value of The Holding (as of September 30): 4.36 Million

ContraFect Corp (NASDAQ:CFRX) was a new entrant into Baker Bros. Advisors’ equity portfolio during the third quarter. ContraFect Corp (NASDAQ:CFRX) is a small-cap biotech company that focuses on developing therapeutic protein and antibody products for life-threatening and drug-resistant infectious diseases. The company had its IPO in September 2014 and has lost almost 60% of its market capitalization so far in 2016. For its most recent quarter, ContraFect Corp reported a loss of $0.28 per share, missing analysts’ EPS estimate by $0.07.

#4 Advanced Accelerator Application SA (ADR) (NASDAQ:AAAP)

– Shares Held By Baker Bros. Advisors (as of September 30): 76,473

– Value of The Holding (as of September 30): 4.36 Million

Baker Bros. Advisors  upped its stake in Advanced Accelerator Application SA (ADR) (NASDAQ:AAAP) by 23% during the third quarter. Since being listed in the U.S in November of last year, shares of the France-based radiopharmaceutical company have appreciated by almost 40%. In September, Advanced Accelerator Application SA (ADR) (NASDAQ:AAAP) announced that the European Medicines Agency (EMA) had issued a positive opinion on the Marketing Authorization Application for its drug SomaKit TOC 40µg, for Positron Emission Tomography (PET) imaging of somatostatin receptor overexpression in adult patients with gastroenteropancreatic neuroendocrine tumors. Last month, analysts at Wells Fargo initiated coverage on the stock with an ‘Outperform’ rating.

We’ll check out three more of the fund’s Q3 stock purchases on the next page.

#3 Exelixis, Inc. (NASDAQ:EXEL)

– Shares Held By Baker Bros. Advisors (as of September 30): 76,473

– Value of The Holding (as of September 30): 4.36 Million

Moving on, Baker Bros. Advisors sold all the convertible debt securities it held of Exelixis, Inc. (NASDAQ:EXEL) during the third quarter, but increased its long position in the company by 91% during that time. Since the end of the first quarter, when Baker Bros. Advisors initiated its stake in the company, Exelixis, Inc. (NASDAQ:EXEL) has rallied by over 300%. Most of the gains that the stock has seen have come after the FDA approved its flagship drug CABOMETYX for the treatment of patients with advanced renal cell carcinoma (RCC) in April. Since its launch, CABOMETYX has had phenomenal sales in the U.S. and has been aggressively taking market share from competing drugs like nivolumab and axitinib. For its most recent quarter, Exelixis reported a $0.04 loss per share on revenue of $62.19 million, beating analysts’ estimates by $0.09 and $19.33 million, respectively.

#2 Amarin Corporation plc (ADR) (NASDAQ:AMRN)

– Shares Held By Baker Bros. Advisors (as of September 30): 76,473

– Value of The Holding (as of September 30): 4.36 Million

The nearly 25-fold increase that Baker Bros. Advisors made to its stake in Amarin during the third quarter coupled with an over 50% rise in the company’s stock during that time pushed Amarin Corporation plc (ADR) (NASDAQ:AMRN) to the 18th-spot in the fund’s portfolio at the end of that period in terms of value. Amarin Corporation plc (ADR) (NASDAQ:AMRN)’s stock has appreciated by 83% so far in 2016, but is still down by more than 75% from the highs it made in mid-2011. Following the better-than-expected third quarter results that the company reported earlier this month, analysts at Jefferies Group reiterated their ‘Buy’ rating and $4.50 price target on the stock on November 4, suggesting potential upside of 27.47%.

#1 Aquinox Pharmaceuticals Inc (NASDAQ:AQXP)

– Shares Held By Baker Bros. Advisors (as of September 30): 76,473

– Value of The Holding (as of September 30): 4.36 Million

With Baker Bros. Advisor upping its stake in Aquinox Pharmaceuticals Inc (NASDAQ:AQXP) by 36% during the third quarter, the company jumped nine spots in the fund’s portfolio during that time to become its 11th-most valuable holding at the end of September. Baker Bros. Advisors has held a stake in Aquinox Pharmaceuticals Inc (NASDAQ:AQXP) since its IPO in the first quarter of 2014. Shares of the clinical-stage pharmaceutical company have skyrocketed in the past two weeks and are now trading up by 15.87% year-to-date. On November 3, Aquinox reported its third quarter financial figures, declaring a loss of $0.46 per share versus analysts’ estimate of a loss of $0.58 per share. Last week, analysts at Leerink Swann reiterated their ‘Buy’ rating and $24 price target on the stock.

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