Alcobra Ltd (ADHD): Broadfin Capital and Deerfield Initiate Passive Stakes Following Public Offering

Kevin Kotler’s Broadfin Capital and James Flynn’s Deerfield Management have both initiated passive stakes in Alcobra Ltd (NASDAQ:ADHD). As a new filing with the Securities and Exchange Commission, Broadfin disclosed ownership of around 1.38 million shares, which represent 6.8% of the company’s outstanding stock. Deerfield Management reported a 7.0% stake, which contains 1.41 million shares of the company.

Kevin Kotler

Alcobra Ltd (NASDAQ:ADHD) is a micro-cap Israel-based biopharmaceutical company that is engaged in the development and distribution of a proprietary drug, called MG01CI, which is designed to treat Attention Deficit Hyperactivity Disorder (ADHD). In October 2014, the company announced topline results from the Phase III study of Metadoxine Extended Release (MDX) designed for adults with ADHD. The study showed a statistically significant improvement in ADHD symptoms, versus placebo. The trial was in line with the company’s announced plan to commence Phase III study in the US in 2013, while this year Alcobra plans to commence Phase III trial in 2015.

In addition, Alcobra Ltd (NASDAQ:ADHD) has recently conducted a public offering of ordinary shares in which it sold around 7.48 million shares, including 975,000 shares issued as over-allotment options to underwriters. The offering was priced at $4.00 per share, resulting in total net proceeds of $27.9 million. Both Deerfield and Broadfin Capital were among the investors that participated in the offering, along with biotech-focused fund Venrock and Great Point Partners.

Meanwhile, as the company has been developing the drug, it has not reported any revenues over the last several years. Moreover, its net loss expanded to $0.77 per share in the third quarter of 2014 from $0.28 per share a year ago. In addition, its stock declined by more than 65% over the last year. Nevertheless, analysts have a mixed sentiment regarding the stock, as Roth Capital has a $10.00 price target on the stock, even though it has been decreased from $30.00 in November, with a ‘Buy’ rating maintained. Zacks, however, downgraded the stock in November to ‘Neutral’ from ‘Outperform’ with a price target of $3.90. Both Roth and Zacks issued their updates after the company announced its results from the Phase III trial.

Another fund that owns shares of Alcobra Ltd (NASDAQ:ADHD) is Fred Knoll’s Knoll Capital Management, which disclosed holding 687,000 shares in its latest 13F filing. Noam Gottesman’s GLG Partners reported a stake that contains some 240,200 shares as of the end of September.

Both Broadfin Capital and Deerfield Management are hedge funds that are focused on the healthcare stocks. Broadfin owns an equity portfolio valued at close to $1.0 billion as at the end of the third quarter, and among its latest bullish moves aside from initiating a stake in Alcobra Ltd (NASDAQ:ADHD), is boosting the holding in Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR). In November, Broadfin surged its stake to 2.35 million shares from 810,000 shares, the new stake amassing 7.95% of Aegerion’s outstanding stock. In addition, last year Broadfin went activist on Cardica, Inc. (NASDAQ:CRDC) and is trying to reshuffle the board by nominating three directors to be elected to the company’s board. The fund holds 8.8 million shares of Cardica, which represent 9.98% of the company.

Deerfield Management holds around $2.7 billion in equities and a couple of weeks ago it disclosed raising its stake in Vanda Pharmaceuticals Inc (NASDAQ:VNDA) by 1.90 million shares to 4.13 million shares, equal to 10.44% of the company’s outstanding stock.

Disclosure: none