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Akorn, Inc. (AKRX), United Therapeutics Corporation (UTHR) Among Consonance Capital’s Winning Bets in Healthcare

The $5.50 billion pharmaceutical company Akorn, Inc. (NASDAQ:AKRX) was one of the top gainers on Wednesday, closing the session with an almost 10% gain. The appreciation came on the back of the company filing its 10-K report with the Securities and Exchange Commission. However, Akorn filed the report with a small delay after it discovered an error that overstated chargeback reserve in connection with applying the acquisition method of accounting at the closing of the purchase of Hi-Tech Pharmacal. Nevertheless, the stock jumped on the back of strong revenue growth and was supported by the previously disclosed optimistic outlook for the current year. Investors also seem to be bullish on Akorn, as the number of funds holding the stock (among over 700 funds that we track) went up to 27 from 23 a quarter earlier. Moreover, investors have been piling more capital into the company and at the end of 2014, they held $275.94 million worth of shares, versus $146.16 million a quarter earlier. Among the funds that we track, the largest shareholder of Akorn, Inc. (NASDAQ:AKRX) is Mitchell Blutt‘s Consonance Capital Management, which holds 1.68 million shares as of the end of 2014. up by 44% on the quarter. The position valued at $60.94 million amasses 7.85% of the fund’s equity portfolio.

Akorn, Inc. (NASDAQ:AKRX)

Akorn, Inc. (NASDAQ:AKRX) posted revenue of around $593 million for the last year, a significant growht from $318 million in the previous year. However, the company’s diluted EPS declined to $0.33 from $0.46 posted for 2013. Nevertheless, for the current year, the company expects its revenue to grow further to up to $980 million, while EPS is expected in the range between $1.88 and $1.98. Akorn manufactures and sells a full line of diagnostic and therapeutic ophtalmic pharmaceuticals, as well as hospital drugs and injectable pharmaceuticals. Recently the company launched four new products, including Adenosine Injection and Dexmedetomidine Hydrochloride Injection.

Consonance Capital Management initiated a stake in Akorn, Inc. (NASDAQ:AKRX) during the first quarter of 2014 and initially held 295,000 shares of the company. The stock more than doubled in value since the end of March, 2014. As it has been mentioned earlier, the company has gained the attention of investors as of late and some billionaire fund managers such as Ken Griffin of Citadel Investment Group and Israel Englander of Millennium Management boosted their stakes in the company during the fourth quarter. Citadel disclosed ownership of 570,700 shares, up by 500% on the quarter, and Millennium more than doubled its stake to 121,900 shares.

Aside from Akorn, Inc. (NASDAQ:AKRX), we should also take a look at some other investments of Consonance Capital Management. Mr. Blutt manages an equity portfolio valued at around $776.33 million, which is primarily invested in healthcare stocks, which amass in aggregate around 90% of the total value. The fund also invests in many small-cap stocks, which is one more reason why we should follow closer its activity. Our research has showed that immitating the hedge fund’s activity among small-cap stocks can help beat the market by around 1.0 percentage point per month. Based on this research, we have been sharing 15 most popular small-cap picks among hedge funds in our newsletters since August 2012. Since then, our strategy returned 132%, beating the market by around 79 percentage points.

Among the top three largest stocks in Consonance’s equity portfolio, two holdings are represented by small-cap stocks. On the first spot is Enanta Pharmaceuticals Inc (NASDAQ:ENTA), a $654 million biotech company, whose stock gained 86% during last year. The fund initiated a stake during the fourth quarter of 2013 and during the last year, the position was increased to 1.70 million shares from 851,300 shares, the value of the stake amounting to $86.25 million. Another healthcare-focused fund that owns shares of Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is Julian Baker and Felix Baker‘s Baker Bros. Advisors, although it holds only 75,400 shares as of the end of 2014. As Enanta Pharmaceuticals Inc (NASDAQ:ENTA) lost around 32% since the beginning of the year, two analysts provided updates on the stock; JPMorgan lowered its price target to $47.00 from $53.00, maintaining ‘Overweight’ rating, while Barclays initiated coverage at the beginning of March, setting ‘Equal Weight’ rating and a price target of $35.00.

In United Therapeutics Corporation (NASDAQ:UTHR), Consonance reported an $85.49 million stake that contains 660,200 shares. United Therapeutics is another biotech stock that has a market cap of $8.0 billion and whose stock surged by 70% in the last 52 weeks, beating the industry average of 33%. Last week United Therapeutics Corporation (NASDAQ:UTHR) received the approval from the Food and Drug Administration for a drug to treat a rare childhood cancer. Morover, the company also obtained a rare voucher that allows it to speed through the regulatory process. The company now has to make a decision whether it will pursue the regulatory process, or it could sell the voucher for a significant amount of cash (the last similar transaction was valued at over $65 million). According to the terms of the voucher, the FDA needs to come to a decision regarding the drug within six months (but it is not obliged to approve it). In any case, this voucher is a big win for United Therapeutics. Matt Sirovich and Jeremy Mindich‘s Scopia Capital is one of the largest shareholders of United Therapeutics Corporation (NASDAQ:UTHR), holding 2.96 million shares as of the end of 2014.

The third largest holding in the fund’s equity portfolio is represented by Cardiovascular Systems Inc (NASDAQ:CSII). Consonance disclosed holding 2.14 million shares of the medical technology company, with an aggregate value of $64.23 million. Billionaire Steven Cohen‘s Point72 Asset Management is another shareholder of Cardiovascular Systems Inc (NASDAQ:CSII), which holds 426,000 shares, according to its last 13F filing. For the last year, Cardiovascular Systems Inc (NASDAQ:CSII), which produces devices for the treatment of vascular diseases, posted strong revenue of $45 million, versus $43 million a year earlier. Moreover, the company’s net loss narrowed to $0.17 per share from $0.23.

Disclosure: none