To say Kevin Kotler’s Broadfin Capital had exceptional Q1 returns from its 11 long positions in companies valued at $1 billion or more would be a gross understatement. The weighted average returns of said positions was a massive 60.3% during the first quarter, easily outpacing all other hedge funds in our database. In fact only one of the more than 650 other funds we track that filed a 13F for the quarter was even within 15 percentage points of Broadfin, that being Nathan Fischel’s DAFNA Capital Management, which had returns of 51.4% from its 11 qualifying long positions using the same metric.
Broadfin’s actual returns may be quite different from our estimated returns, given the fact that it invests in numerous companies with market caps that fall below the $1 billion threshold. In fact, Broadfin had 72 long positions in its equity portfolio at the end of 2014, and as mentioned, just 11 of those were in billion dollar companies. That makes it a relative rarity among the funds we track, which for the most part are majority invested in larger companies (and for which our returns metric is much more accurate as a result).
Broadfin’s latest move is just another example of the emphasis it puts on micro-cap companies, as it revealed in a recent filing a new 5.2% passive position in Carbylan Therapeutics Inc (NASDAQ:CBYL), a $139 million clinical stage pharmaceutical company. The position consists of 1.25 million shares and makes Broadfin the first investor to file a position on Carbylan Therapeutics Inc (NASDAQ:CBYL) since its IPO a few days ago. Carbylan announced on Tuesday that it had closed its IPO of 14.95 million shares, at a price of $5.00 per share. Carbylan Therapeutics Inc (NASDAQ:CBYL) is focused on developing novel treatment methods that address unmet clinical needs. The company’s leading drug candidate is Hydros-TA, a proprietary treatment for the treatment of join pain that cross-links a combination of a low dose corticosteroid and a hyaluronic acid viscosupplement.
Let’s run through some of Broadfin’s top healthcare picks now, which helped it achieve those massive Q1 returns. Its top pick was Horizon Pharma PLC (NASDAQ:HZNP), in which it held 8.92 million shares. Horizon Pharma PLC (NASDAQ:HZNP) is also involved in the treatment of pain, as well as medicines for athritis and inflammatory diseases. Broadfin had 9.99% exposure to Horizon and that paid big dividends as the stock returned a monumental 101.47% during the first quarter, making it one of the huge gainers of Q1. Shares are now up 130.47% year-to-date, and 166.25% over the past six months. James Flynn’s Deerfield Management also had a large position and good exposure to Horizon Pharma PLC (NASDAQ:HZNP), of over 5%, which helped contribute to that fund’s own solid returns of 29.8% during the first quarter.