Four Hot Biotechs Among The Day’s Big Winners

On a day when Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is deep in the red following the release of its third quarter earnings, four other biotech stocks are making strong gains. Of note is the fact that two of them are small-cap stocks we covered on Friday as being ones that had the support of both Goldman Sachs and the elite investors we track at Insider Monkey, making them intriguing investments.

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, over two-times greater returns than the S&P 500 (read the details here).

Let’s start with Keryx Biopharmaceuticals (NASDAQ:KERX), which is up by a symmetrical 15.51% in early-afternoon trading today. Today’s performance expands on the stock’s strong surge to end last week, pushing its gains to over 33% over the past three trading sessions. The big gains for Keryx Biopharmaceuticals (NASDAQ:KERX) today appear to be a continuation of that momentum, as there has been no notable news come out today concerning the company. Last week, Keryx agreed to a private placement of $125 million in Convertible Senior Notes due 2020 with funds managed by Seth Klarman’s Baupost Group. Keryx Biopharmaceuticals (NASDAQ:KERX) also announced plans to implement a revamped expense structure that is expected to significantly reduce its annual expenses beginning next year. Maxim reiterated its ‘Buy’ rating on Keryx in a research report published on Friday.

Northwest Biotherapeutics, Inc (NASDAQ:NWBO) is next on our list, having registered gains of 15.63% so far today. That followed what was deemed “highly unusual” trading activity late in Friday’s session that sent shares down by over 29% for the day. Northwest Biotherapeutics, Inc (NASDAQ:NWBO) issued a statement in regards to the trading activity, asserting that it was unaware of any fundamental reason for the burst of selling in the stock. The company further divulged that it is investigating the trading activity and believes it to be an orchestrated campaign by short sellers to drive the stock lower. Most recently, Northwest Biotherapeutics, Inc (NASDAQ:NWBO) released positive data from a Phase I trial of DCVax-Direct in 13 forms of cancer, with survival rates exceeding the expected outcome. Northwest Biotherapeutics had two new investors in Hal Mintz’s Sabby Capital and Andy Redleaf’s Whitebox Advisors during the second quarter.

On the following page we’ll check out the gains the two stocks from the aforementioned Friday article are making today.

Let’s start with Pacira Pharmaceuticals Inc (NASDAQ:PCRX), which is up by 5.85% today. As covered in the aforementioned article, Pacira Pharmaceuticals Inc (NASDAQ:PCRX) was one of eight small-cap stocks pegged by Goldman Sachs as having double-digit top-line growth potential over the next two years, while also doubling its operating earnings between 2014 and 2017. Of those eight stocks, we focused on five which also had very strong sentiment among the elite investors that we track. By that criteria, Pacira ranked fourth on the list, with 25 investors holding over $367 million of the company’s shares, over 14% of its outstanding stock. Goldman Sachs has a ‘Buy’ rating and $90 price target on the stock, while Nomura reiterated its own ‘Buy’ rating and identical $90 price target on Sunday. That price target represents nearly 125% upside potential. John Lykouretzos’ Hoplite Capital Management is one investment firm that would surely be pleased with such gains, holding over 1.26 million shares of Pacira Pharmaceuticals Inc (NASDAQ:PCRX) on June 30.

Lastly is Zeltiq Aesthetics Inc (NASDAQ:ZLTQ), which ranked third on the aforementioned list. 26 investors we track held nearly 31% of the company’s common shares on June 30, worth over $352 million. The developer of CoolSculpting, a non-invasive fat reduction system, Zeltiq Aesthetics Inc (NASDAQ:ZLTQ) is up by 7.17% in trading today. The company will release its third quarter earnings next Tuesday, with the market expecting an earnings per share loss of $0.03, after it earned $0.03 per share in the second quarter. Steve Cohen, Israel Englander, and Ken Griffin are a few of the elite investors we follow that hold long positions in Zeltiq Aesthetics Inc (NASDAQ:ZLTQ).

Disclosure: None