Biotechnology investors will often look to piggyback the positions of hedge funds in an attempt to take advantage of the latter's due diligence resources. A hedge fund doesn't take a position in a company without instigating a large and resource intensive due diligence program – a program that the vast majority of retail investors couldn't hope to replicate in their own time.
One of the most widely piggybacked fund in the sector is Perceptive Advisors. Perceptive has grown from launch back in 1999 to manage more than $1 billion in assets today, and along the way, it's founder and long-time manager, Joseph Edelmen, has developed into something of a household name among retail biotechnology traders and investors.
Edelmen has taken positions in some of biotech's biggest names – Perceptive's three lead holdings by dollar amount are Neurocrine Biosciences Inc (NASDAQ:NBIX), Sarepta Therapeutics Inc (NASDAQ:SRPT) and TESARO Inc (NASDAQ:TSRO), but he's not afraid to pick up an exposure to a smaller, development stage company in anticipation of it reaching commercialization with one or more of its development assets.
In fact, this approach is at the core of his allocation strategy.
With this in mind, here are three companies in which Edelmen has increased or taken a stake in the last few months, with a look at what we think he sees in each.
VBI Vaccines Inc (NASDAQ:VBIV) Ordinary Shares – latest filing here.
Shares held at March 31, 2017: 8,602,824
Value at last close (May 9, $28.85): $35.35 million
Portion of company represented by shares: 20.50%
First up, VBI Vaccines. This company has developed a technology that allows it to create vaccines that are both able to target infectious diseases for which preventative and combative vaccinations are not yet available and to improve on the current standard of care vaccinations in the sector. The technology is called the Envelope Virus Like Particle (eVLP) platform, and it harnesses mammalian cells (as opposed to the plant cells used in the vast majority of available vaccines) and specifically, the ability of these cells to closely mimic the viruses they are targeting, to introduce rapid and strong immunogenicity.
The technology has spawned a number of assets, which are currently under investigation across a range of target indications: cytomegalovirus (CMV), glioblastoma multiforme (GBM) and Zika, to name just three.
The real value driver right now, however, and the one we think Edelmen had his eye on when he first picked up an exposure to VBI, is called Sci-B-Vac. It's a hepatitis B vaccine that differentiates itself from the current standard of care vaccine in the space (Engerix) through its expressing of a range of hepatitis B antigens. Antigens are the part of a virus (or in this instance, the vaccine that's trying to mimic a virus) that the immune system is trained to recognize. Once this recognition takes place, the signal goes out instructing the body to attack the virus in question.
The higher the degree of recognition, the quicker and stronger the response. By incorporating three separate hepatitis B associated antigens into its Sci-B-Vac asset, VBI seeks to take advantage of this improved response concept.
The drug is already approved in fifteen countries globally, but the real return for shareholders will come when it picks up approval in Europe, the US and Canada. VBI needs to conduct a phase III study, the data from which it can use to underpin registration applications in these three markets, and recent management communication has detailed a pretty clear path forward in both Europe and Canada. We expect similar progress in the US near term (before the end of the year) and, subsequently, for the phase III study to get underway.
Once the phase III study up and running, milestones and catalyst should stack up, contributing to value appreciation as and when they are hit.
Global Blood Therapeutics Inc (NASDAQ:GBT) – latest filing here.
Shares held at March 31, 2017: 3,128,978
Value at last close (May 9, $28.85): $90.20 million
Portion of company represented by shares: 8.38%
Next, Global Blood Therapeutics. This one is a California-based biotechnology company that is working to develop treatments within two specific target indications – sickle cell disease (SCD) and idiopathic pulmonary fibrosis (IPF). The drug under investigation, in both instances, is an asset called GBT440 – a so-called anti-sickling hemoglobin modifier.
The SCD indication is the lead right now, and Global Blood Therapeutics is currently putting the drug through its paces as part of a phase 3 program designed to investigate safety and efficacy of GBT440 in the SCD population. Data to date has been strong, and, as Edelemen will be well aware, this is a patient population that very much needs a fresh treatment option.
The current standard of care therapies in the space are symptom-targeted and, in a large portion of the population, don't work particularly well, if at all. If Global Blood Therapeutics can get its asset through phase 3 with a successful topline readout, and beyond that, if it can pick up a green light for commercialization from the FDA, there's a peak sales target for the drug of $2.7 billion.
When taken against the company's current market capitalization of $1.3 billion, there's clear potential for upside revaluation on a GBT440 approval in SCD, even if the IPF program falls flat.
Buyout rumors have fueled speculative attention recently, with a $3 billion price tag the most widely acknowledged as representative of the company's value ahead of its phase III completion.
Amicus Therapeutics Inc (NASDAQ:FOLD) – latest filing here.
Shares held at March 31, 2017: 17,296,672
Value at last close (May 9, $28.85): $115.02 million
Portion of company represented by shares: 12.10%
This one is a biotechnology company that focuses on the development of rare diseases in the US. It is based out of New Jersey and its principal product is what's called migalastat HCl, or Galafold. The drug is an orally administered small molecule pharmacological chaperone for the treatment of Fabry disease and it is currently the center of a commercialization effort in Europe. The European Medicines Agency (EMA) approved the asset last year and the majority of the last 12 months have been spent preparing for (and more recently executing on) a sales push across major regions in Europe.
The UK, Italy and France just converted to full reimbursement (which is the target aim for a launch in the most of the various regions that comprise the European Union) and Germany looks set to follow suit near term. With these four regions in place, the lion's share of the European market will be accessible (and realistic from a revenues generation perspective).
Japanese approval should come next, with the company targeting the second quarter of this year (so, at some point within the next month or two at the outside) for New Drug Application (NDA) submission in the region. There's a big market for the drug in Japan and any feedback on the submission has the potential to inject some upside momentum into the company's market capitalization as and when it hits press, assuming it's positive.
Beyond Europe and Japan, Amicus is trying to push for approval in the US, although this is likely more of a long-term catalyst. The drug is available as part of some expanded access programs right now, but the path to FDA approval is not yet 100% clear and near-term value for Amicus is going to derive from the above-mentioned regions primarily.
The company just put out some numbers, and has reported that over 300 patients are taking the drug right now (this is a relatively strong number given population size) based on sales of the drug during the first quarter of this year came in at $4.2 million – a sequential increase of close to 50% on the $2.8 million recorded during the final quarter of 2016.