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Broadfin Capital Discloses New Stake in This Canadian Biotechnology Company

Broadfin Capital, led by Kevin Kotler, has initiated a new position in QLT Inc. (USA) (NASDAQ:QLTI). In a new filing with the U.S. Securities and Exchange Commission, the fund has disclosed ownership of 4.45 million shares of QLT Inc. (USA) (NASDAQ:QLTI). The passive stake represents 8.7% of the company’s outstanding common stock. QLT Inc. (USA) (NASDAQ:QLTI) is a $219.40 million market cap biotechnology company engaged in the development and commercialization of ocular products.

Kevin Kotler

New York City-based Broadfin Capital is a global equity healthcare fund that was founded in 2005. The fund uses a fundamental, value-oriented investment strategy, and likes to invest in all the major subsectors of the healthcare industry. In its latest 13F with the SEC, Broadfin Capital revealed a public equity portfolio mainly consisting of healthcare stocks (over 85% of its value was in these stocks). The value of the funds’ public portfolio totaled $1.28 billion. As of March 31, Broadfin Capital’s top holdings, in terms of value, were Horizon Pharma PLC (NASDAQ:HZNP), Flamel Technologies S.A. (ADR) (NASDAQ:FLML), and Retrophin Inc (NASDAQ:RTRX), which we’ll also look at later.

Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group, their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and that they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and found that by imitating hedge funds’ best stock picks independently, we don’t have to pay them a dime, while still getting the benefits of their stock-picking expertise. Our research has shown that hedge funds’ long stock picks generate strong risk-adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. These 15 stocks managed to return more than 145% over the last 34 months and outperformed the S&P 500 Index by 85 percentage points (see the details here).

Kevin Kotler
Kevin Kotler
Broadfin Capital

Canada-based QLT Inc. (USA) (NASDAQ:QLTI) is a maker of ocular products. The company, headquartered in Vancouver, British Columbia, develops a synthetic retinoid program for the treatment of certain inherited retinal diseases. In the second week of June, QLT Inc. (USA) (NASDAQ:QLTI) announced that it signed multiple agreements which would allow the company to return capital to its shareholders. QLT Inc. (USA) (NASDAQ:QLTI) inked a deal to acquire InSite Vision Inc. in an all-share transaction for $0.178 per share. This transaction, according to the company, will create a pure-play, late-stage ophthalmic pharmaceutical company to advance QLT’s existing Phase III-ready Retinoid Program. In addition, QLT agreed to a $45 million equity investment in Aralez Pharmaceuticals plc. Under the agreement, QLT will receive ordinary shares in Aralez representing about a 9% ownership stake. Further, QLT Inc. announced that it plans to issue redeemable convertible notes, returning an additional $25 million to its shareholders. The notes are expected to be issued by way of a reduction of the paid-up capital on the company’s common shares, and will provide QLT’s shareholders with an additional option of near-term liquidity or the potential for future capital investment in the company, according to a statement. Shares of QLT’s stock have declined 17.86% during the past year. Mark Lampert’s Biotechnology Value Fund is one of the largest shareholders of QLT Inc. (USA) (NASDAQ:QLTI), with ownership of 4.15 million shares.

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