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Healthcare Hedge Fund Orbimed’s Top Picks and New Move

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According to a Schedule 13D form filed yesterday with the Securities and Exchange Commission, Samuel Islay‘s Orbimed Advisors has slashed its stake in Intercept Pharmaceuticals Inc (NASDAQ:ICPT) by about 14%. The fund now owns 1.28 million shares of the biopharmaceutical company. The stake represents 5.64% of the company’s outstanding common stock. Intercept Pharmaceuticals Inc (NASDAQ:ICPT) received ‘breakthrough therapy designation’ from the FDA in late January for its lead product obeticholic acid (OCA), which cures a variety of chronic liver diseases including nonalcoholic steatohepatitis (NASH), which is set to become the leading cause for liver transplants in the next few years. Besides Orbimed, other shareholder of the company include Steve Cohen’s Point72 Asset Management which held some 300,200 shares valued at $46.83 million at the end of the fourth quarter.

Samuel Isaly Orbimed Advisors

Orbimed has been investing in such healthcare related private equities since 1993. The firm invests in pharmaceutical and medical device companies in all stages of development. Besides North America and Europe, Orbimed also focuses on healthcare related opportunities in India, China and Israel. The fund’s team is comprised of 80 professionals who have extensive experience in the healthcare sector and it manages nearly $14 billion in capital. The market value of Orbimed’s equity portfolio stood at $10.46 billion at the end of 2014. The top three holdings consisted of Biogen Inc (NASDAQ:BIIB), Bristol-Myers Squibb Co (NYSE:BMY) and Amgen, Inc. (NASDAQ:AMGN). The fund is relatively well-diversified with its top 10 holdings representing just 36.27% of the its portfolio’s value.

The healthcare sector is up nearly 20% over the last year as compared to the S&P 500’s gain of  9.1% during the same period. For investors it might be puzzling to decide if the sector is due for a correction or if it will still trend higher this year, however we have formulated a strategy from our research which has a more concrete chance of success. Our research have shown that hedge funds’ top small-cap stock picks outperformed the market by double digits per year in our back tests and forward test. The 15 most popular small-cap picks of hedge funds have outperformed the S&P 500 in 13 of the past 16 years, between 1999 and 2014. We have been sharing these stock picks in our newsletters since August, 2012 (read the details here), and this strategy returned 134% over the past 2.5 years. That’s why we believe it is a good idea to focus on hedge funds’ small-cap stock picks. Orbimed is one of the hedge funds we like.

Moving on to the fund’s top three holdings now, Orbimed acquired an additional 304,600 shares of Biogen Inc (NASDAQ:BIIB) during the fourth quarter, raising its stake in the company to 1.49 million shares valued at $507.38 million. The stake constituted 4.85% of the fund’s portfolio value and was its largest holding. Biogen’s Avonex, Tysabri, and Tecfidera dominate the market for drugs that treat multiple sclerosis. Moreover the company recently announced  positive interim results of a Phase 1b study evaluating BIIB037 (aducanumab) for the treatment of patients with early-stage Alzheimer’s disease. The stock is up about 39% over the past calendar year. Biogen Inc (NASDAQ:BIIB) was also among the five hottest biotech picks of billionaires that we track. Israel Englander was one of them, as his fund Millennium Management held some 452,700 shares valued at $153.67 million at the end of 2014.

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