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Stonepine Capital Management Reveals 5.5% Stake in Vanda Pharmaceuticals Inc. (VNDA)

In a new filing with the Securities and Exchange Commission, Stonepine Capital Management disclosed a passive stake in Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) that contains 2.32 million shares. The position amasses 5.5% of the company’s outstanding common stock. The stock of Vanda is down by almost 2% on Monday.

Vanda Pharmaceuticals Inc. (NASDAQ:VNDA)

Stonepine Capital Management is a healthcare-focused fund that was founded by Jon M. Plexico in 2006. In 2008, Mr. Plexico was joined by Timothy P. Lynch, who serves as a Managing Member. According to filings from its affiliate, Cornerstone Capital LP, the fund also holds positions in Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR), in which it recently has disclosed holding 1.50 million shares, Viveve Medical Inc (OTCMKTS:VIVMF), and PhotoMedex Inc (NASDAQ:PHMD), in which it owns around 15.54 million shares and 1.21 million shares respectively, according to the latest filings. Stonepine also appeared in the news back in 2013, when it sent a letter to the board of Cornerstone Therapeutics, arguing that a takeover proposal from Chiesi Farmaceutici S.p.A, was too low and undervalued Cornerstone.

One of the main reasons that we follow the activity of the various funds is because an everyday investor does not have the time or the required skill-set to carry out an in-depth analysis of equities and identify companies with the best future prospects. However, it is also not a good idea to pay the egregiously high fees that investment firms charge for their stock picking expertise. Thus a retail investor is better off to monkey the most popular stock picks among hedge funds by him or herself. But not just any picks mind you. Our research has shown that a portfolio based on hedge funds’ top stock picks (which are invariably comprised entirely of large-cap companies) falls considerably short of a portfolio based on their best small-cap stock picks. The most popular large-cap stocks among hedge funds underperformed the market by an average of seven basis points per month in our back tests, whereas the 15 most popular small-cap stock picks among hedge funds outperformed the market by nearly a percentage point per month over the same period between 1999 and 2012. Since officially launching our small-cap strategy in August 2012 it has performed just as predicted, beating the market by over 80 percentage points and returning over 135%, while hedge funds have collectively underperformed the market (read more details here).

With this in mind, let’s take a closer look at Vanda Pharmaceuticals Inc. (NASDAQ:VNDA). It is a small-cap pharmaceutical company that is engaged in the development of products for the treatment of central nervous system disorders, its portfolio containing names such as HETLIOZ, Fanapt, and VLY-686. Last week, Vanda Pharmaceuticals revealed that a patent for HETLIOZ was listed in the US FDA Orange Book publication that includes Approved Drug Products with Therapeutic Equivalence Evaluations. Meanwhile, the company’s stock has dropped by more than 13% since the beginning of the year, although in the latest financial results, for the first quarter of 2015, Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) disclosed revenue of $22 million and a net loss of $0.22 per share, versus $9.0 million in revenue and a loss of $0.79 per share posted a year earlier. In addition, in the last couple of months, Canaccord Genuity and Piper Jaffray reiterated ‘Buy’ ratings on the stock and set price targets at $18.00 and $15.00 respectively.

Among the funds we track, Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) enjoys a relatively strong level of popularity for a small-cap company. A total of 23 funds held $226.50 million worth of stock at the end of March, which account for slightly less than the half of the company’s outstanding stock. However, at the end of the previous quarter, 20 investors held $331.03 million worth of stock. The largest shareholder of Vanda among the funds we track, is James Flynn‘s Deerfield Management, which owns 4.13 million shares as of the end of the first quarter. It is followed by John Paulson‘s Paulson & Co  and William Leland Edwards’ Palo Alto Investors, which held 3.95 million shares and 3.80 million shares at the end of March respectively.

Disclosure: none

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