In two separate filings today Kevin Kotler‘s Broadfin Capital has revealed increasing its passive stake in Zogenix, Inc. (NASDAQ:ZGNX) to 10.74 million shares from 6.24 million and its activist stake in Derma Sciences Inc (NASDAQ:DSCI) to 2.13 million from 1.86 million. This effectively means that Broadfin now has ownership of 7% of Zogenix’s outstanding shares and 8.3% of Derma’s.
Kotler founded Broadfin Capital in 2005 after having worked for The Galleon Group, ABN AMRO, and ING Barings. The New York based firm manages three accounts with the help of 10 employees and provides investment advisory services to 10 clients. The fund is highly concentrated in the health care sector and 92% of its holdings account for it. The sector has performed particularly well over the last year, outperforming S&P500 by nearly 5 percentage points. Broadfin’s portfolio value towards the end of 2014 stood at $1.15 billion. From a total of 79 positions, the top 10 holdings constituted 49.21% of Broadfin’s portfolio value.
Both Zogenix, Inc. (NASDAQ:ZGNX) and Derma Sciences Inc (NASDAQ:DSCI) are microcaps with market capitalizations of $204.72 million and $205.87 million respectively. The most popular stock picks of hedge funds, on the other hand are all large cap companies. However, our research has shown that these large cap stocks do not provide the highest returns. Instead, our small cap strategy, which is based on the favourite picks of hedge funds in this category is clearly a better performer in comparison. It beat the S&P 500 ETF (SPY) by a staggering 76.7 percentage points since August 2012 through March 2015 and returned 132%. We have also been sharing these stock picks in our newsletters since 2012.
Zogenix, Inc. (NASDAQ:ZGNX) is a pharmaceutical company that commercializes and develops products for the treatment of central nervous system disorders and pain. Its lead product candidate, Zohydro (hydrocodone bitartrate), an agonist, is used for the treatment of chronic pain requiring opioid therapy. The stock is down by about 61% over the last 52 weeks. The latest drivers of this dive have been the company’s fourth quarter financial results, which included net per share loss of $0.14, that missed estimates by $0.03 and revenues of $14.9 million which beat expectations by $2.16 million, and the sale of its painkiller drug Zoyhydro to Pernix Therapeutics Holdings Inc (NASDAQ:PTX) for about $400 million last week. The intention with the sale was to cut costs since Zoyhdro couldn’t fare well in the U.S market owing to the its classification among the opiod class of drugs, the abuse of which is a growing problem in U.S. Zogenix, Inc. (NASDAQ:ZGNX) now plans to focus two other drugs in its pipeline , brabafen, to treat Dravet syndrome, and relday, to fight schizophrenia.