Medivation Inc (MDVN), Amarin Corporation plc (ADR) (AMRN), Abbott Laboratories (ABT): Adage Capital Management Owns 5.4% of This Company

According to a 13G filed with the SEC, Adage Capital Management, a large hedge fund managed by Phil Gross and Robert Atchinson, owns just over 4 million shares of Medivation Inc (NASDAQ:MDVN), a $3.6 billion market cap biotechnology company. Our database of 13F filings shows Adage with a position of 2.1 million shares as of the beginning of January, so in the last three months the fund has roughly doubled the size of its position. Find more of Adage’s stock picks. Biotechnology stocks have generally been strong this year, though Medivation Inc (NASDAQ:MDVN) is actually an exception having fallen year to date. Currently, Medivation Inc (NASDAQ:MDVN) primarily markets Xtandi, a cancer drug, to post-chemotherapy prostate cancer patients; the company is also studying the use of the drug in other contexts.

Xtandi launched last year and as a general rule the drug has been found to be more effective than competing drugs with some question as to the prevalence of side effects in some groups of patients (which may lead to it being a second-choice drug). Still, revenue numbers have been good and there is at least a prospect of the drug finding wider use if it is approved in other markets (including pre-chemotherapy prostate cancer). As a development stage company Medivation is unprofitable, and cash flow from operations was negative in 2012 as well at a net of about $100 million in cash used. At the end of the year there was about $300 million in cash, cash equivalents, and short term investments on the balance sheet so at least in the short term there should be few cash concerns.

Andreas Halvorsen

Analyst consensus is for earnings per share of 41 cents in 2014, with a wide range of estimates (from $1.93 per share to a loss of 50 cents per share). Billionaire and Tiger Cub Andreas Halvorsen’s Viking Global had been selling shares of Medivation Inc (NASDAQ:MDVN) between October and December of last year, but still closed 2012 with 3.4 million shares in its portfolio (see Halvorsen’s favorite stocks). Orbimed Advisors, a healthcare-focused fund managed by Sam Isaly, reported owning 1.4 million shares at the end of the fourth quarter (check out more stocks Isaly likes).

Other development stage biotechnology companies include Dendreon (NASDAQ:DNDN) and Amarin Corporation plc (ADR) (NASDAQ:AMRN). Consensus is that both of these companies will be unprofitable this year as well as in 2014, so any investment in them is at least as speculative as buying Medivation Inc (NASDAQ:MDVN). Dendreon’s lead product Provenge is also a prostate cancer drug, with the company working on other cancer treatments as well. The stock price has fallen 55% in the last year, and the most recent data shows that 34% of the float is held short so there continues to be a sizable bearish community. Amarin Corporation plc (ADR) (NASDAQ:AMRN) is also down considerably from its levels a year ago, and is also a popular short target; Amarin Corporation plc (ADR) (NASDAQ:AMRN)’s lead product is designed to reduce triglyceride levels.

We can also compare Medivation Inc (NASDAQ:MDVN) to larger biotech companies including Abbott Laboratories (NYSE:ABT) and Biogen (NASDAQ:BIIB). These companies both generated positive earnings in 2012, though in Biogen’s case the trailing P/E is quite high at 34. While its recent financial performance has not been particularly encouraging- in the fourth quarter of 2012, revenue increased only 7% versus a year earlier and earnings were actually down slightly- the sell-side is expecting improvements in net income over the next couple years and so the forward P/E is only 20. We still think that we would avoid the stock for now. Abbott Laboratories (NYSE:ABT), meanwhile, carries a forward P/E of 16. It’s also not been in a particularly good situation, with earnings falling 35% in its most recent quarterly report compared to the fourth quarter of 2011.

We do expect earnings of these biotech companies to be a bit noisy but at this point it looks to us that Abbott Laboratories (NYSE:ABT) is too speculative to treat as a value stock as well as Biogen. The other three companies we’ve covered here, including Medivation, are yet to be profitable as well and so we’d advise against buying them as well. We do think that Medivation looks to be an unwise short given the emerging success of its drug and the sizable cash on the company’s balance sheet as it attempts to bring Xtandi into additional markets.

Disclosure: I own no shares of any stocks mentioned in this article.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!