Birchview Capital’s Top Healthcare Stock Picks

Birchview Capital is a Vermont-based biosciences-focused long/short equity hedge fund founded by Dr. Matthew Strobeck in 2014. Dr. Strobeck holds a Ph.D. from the University of Cincinnati (Ohio) and,, prior to founding Birchview Capital, served as a Partner at Westfield Capital Management and also worked as  a consultant for Thomas Weisel Asset Management. The fund recently submitted its 13F filing with the Securities and Exchange Commission (SEC), revealing a US equity portfolio worth $140.26 million at the end of March. Though the fund’s portfolio consisted of 40 positions at that time, its top 10 holdings alone accounted for over 90% of the value of its portfolio. The filing also revealed that unlike most other hedge funds that reshuffled their portfolio considerably amid a volatile broader market in the first quarter, Birchview Capital’s equity portfolio had a quarterly turnover of only 15%. This low turnover points towards the fund having a strong conviction on the majority of its stock picks. Keeping that in mind, in this article we will go through the top five healthcare stocks that Birchview Capital was betting on while entering the second quarter.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 ContraFect Corp (NASDAQ:CFRX)

– Shares Owned by Birchview Capital (as of March 31): 475,082

– Value of Holding (as of March 31): $1.62 million

From the fifth spot at the end of last year, ContraFect Corp (NASDAQ:CFRX) dropped to the seventh spot in Birchview Capital’s equity portfolio at the end of March despite the fund making no changes to its stake in the company during that period. Shares of the small biotechnology company spiked up in December after its lead drug CF-301 completed Phase 1 trials with no clinical adverse safety signals. However, they have lost almost 54% of their value so far this year. For the first quarter, ContraFect posted a net loss of $0.32, missing analysts’ estimates of a loss of $0.25. On the same day, analysts at Maxim Group reiterated their ‘Buy’ rating on the stock, but lowered their price target on it to $7 from $8.

#4 BIOLASE Inc (NASDAQ:BIOL)

– Shares Owned by Birchview Capital (as of March 31): 1.28 million

– Value of Holding (as of March 31): $1.68 million

Though Birchview Capital didn’t make any changes to its stake in BIOLASE Inc (NASDAQ:BIOL) during the first quarter, owing to a 56% rise in its stock during that period the company jumped seven spots to become the fund’s sixth largest holding at the end of March. BIOLASE Inc (NASDAQ:BIOL)’s stock has continued its rally this quarter too and currently trades with year-to-date gains of over 40%. Better-than-expected fourth quarter numbers that the medical device company released on March 9 is the main reason why its stock is flying high this year, although for the first quarter, Biolase posted a net loss of $0.07, lower than the expected loss of $0.03, while the revenue of $11 million was below expectations of $11.90 million. Stephen Dubois‘ Camber Capital Management was the largest shareholder of BIOLASE Inc among funds covered by us at the end of December, it owned 5.33 million shares of the company at that time.

#3 Vermillion, Inc. (NASDAQ:VRML)

– Shares Owned by Birchview Capital (as of March 31): 2.72 million

– Value of Holding (as of March 31): $4 million

With Birchview Capital not making any changes to its stake in Vermillion, Inc. (NASDAQ:VRML) during the first quarter, the company continued to remain its third largest equity holding at the of that period. Vermillion, Inc. (NASDAQ:VRML)’s stock has seen on a gradual decline since mid-2013, when it made a high above the $4 mark, and is currently trading down by 37% year-to-date. For its fiscal 2015 fourth quarter, the company managed to beat the earnings estimate by $0.01 by declaring a per share loss of $0.10, but missed the Street’s revenue projection of $0.36 million by $0.04 million. Its first quarter results are scheduled to be reported on May 16. Following the earnings release, on March 29, analysts at Canaccord Genuity reiterated their ‘Buy’ rating on the stock, but lowered their price target on it to $2.50 from $4.00. Among the notable investors that trimmed their stake in the company during the last quarter of 2015 was Jim Simons‘ Renaissance Technologies, which brought its holding down by 3% to 320,800 shares.

#2 Accelerate Diagnostics Inc (NASDAQ:AXDX)

– Shares Owned by Birchview Capital (as of March 31): 2.17 million

– Value of Holding (as of March 31): $3.78 million

Moving on, Birchview Capital upped its stake in Accelerate Diagnostics Inc (NASDAQ:AXDX) marginally by 1% during the first quarter. Apart from being an investor in the company, Dr. Strobeck also serves as Independent Director at the company. Among all the stocks mentioned in this article, Accelerate Diagnostics Inc (NASDAQ:AXDX) has suffered the worst fate this year, losing over 42% of its value since the beginning of 2016. The decline of the stock started in December itself once the company completed its secondary offering of approximately 5.59 million shares of common stock priced at $17. Despite the dismal performance of its stock in the past few months, several prominent analysts remain bullish on Accelerate Diagnostics Inc. On April 11, analysts at Piper Jaffray reiterated their ‘Buy’ rating on the stock. On the same day analysts at BTIG Research also reiterated their ‘Buy’ rating on the stock along with their price target of $26, which represents a potential upside of 107% from the stock’s current trading price. Stewart Strawbridge‘s Selkirk Management increased its stake in Accelerate Diagnostics Inc by 32% to 322,517 shares during the fourth quarter.

#1 Celgene Corporation (NASDAQ:CELG)

– Shares Owned by Birchview Capital (as of March 31): 886,995

– Value of Holding (as of March 31): $3.78 million

Celgene Corporation (NASDAQ:CELG) continued to remain Birchview Capital’s top healthcare pick and its largest equity holding at the end of March. During the first quarter, the fund increased its holding in the company by 1% and this position alone amassed 55.6% of the value of Birchview Capital’s portfolio at the end of that period. Like the stock of most other biopharmaceutical companies, Celgene Corporation (NASDAQ:CELG)’s stock has also fallen considerably this year, by 16%. However, over a five year period, Celgene Corporation is still one of the best performing stock in the biotech space, returning over 230%. For its fiscal 2016 first quarter the company recently declared EPS of $1.32 on revenue of $2.51 billion, compared to EPS of $1.07 on revenue of $2.08 billion it had reported for the same quarter last year. Along with the earnings release the company also updates its 2016 full year guidance. While it increased revenue guidance for the year to the range of $10.75 billion to $11 billion from the range of $10.50 billion to $11.00 billion, it lowered its EPS guidance to between $4.26 and $4.54 from the $4.26-$4.64 range it had announced earlier. On April 29, analysts at Morgan Stanely reiterated their ‘Hold’ rating and $129 price target on the stock. Charles Paquelet‘s Skylands Capital also increased its stake in the company during the first quarter, by 8% to 28,400 shares.

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