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Deerfield Management Bets Big On Company It Polished Ahead Of IPO, Nivalis Therapeutics Inc (NVLS)

Following the initial public offering of Nivalis Therapeutics Inc (NASDAQ:NVLS) today, James E. Flynn‘s Deerfield Management, which was a stakeholder of the company back in its private days, now holds about 404,000 common shares, 2.29 million series 1 convertible preferred stock, and 789,400 series 2 convertible preferred stock of Nivalis Therapeutics Inc (NASDAQ:NVLS), according to a filing with the Securities and Exchange Commission.

Sergey Nivens/

Sergey Nivens/

Professional investors like Flynn spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 142% and beaten the market by more than 83 percentage points since the end of August 2012, and by 4.6 percentage points in the first quarter of this year (see the details).

Deerfield Management takes care of a wide variety of financing challenges that companies in the healthcare sector face. Be it funding an acquisition, the development and launch of a new product, improving balance sheet flexibility, or limiting equity dilution, Deerfield has enough experience in the sector to take care of these issues. Currently, the fund has more than $5 billion worth of assets under management and the market value of its public equity portfolio stood at $3.09 billion. A total of 45 new stakes were initiated by the fund during the first quarter including stakes in AbbVie Inc (NYSE:ABBV), and Spark Therapeutics Inc (NASDAQ:ONCE), which we’ll get to later.

James E. Flynn
Deerfield Management

Deerfield’s total stake in the company including all asset classes amounts to 10.06 million shares. Another prominent stockholder that has already filed on the clinical-stage pharmaceutical company that is developing a treatment for cystic fibrosis, is Julian Robertson’s Tiger Management, which disclosed having an indirect ownership of 650,915 shares of common stock earlier today. The current public offering is aiming to raise $77 million in gross proceeds for Nivalis Therapeutics Inc (NASDAQ:NVLS). The company’s only product candidate, N9115 is nearing completion of a phase 1b clinical trial.

Deerfield initiated a position in AbbVie Inc (NYSE:ABBV) of some 1.53 million shares valued at $89.80 million during the first quarter. The holding represents 2.91% of the fund’s portfolio value. The stock price of Deerfield’s third-largest equity holding has appreciated by 3.47% so far this year. In comparison, the major drug manufacturers industry is up by 8.56% in the same time period. In order to enhance its oncology portfolio, AbbVie Inc (NYSE:ABBV) recently acquired Pharmacyclics for $21 billion. The company’s product Imbruvica is a market leader in hematological oncology, which has a global market of $24 billion. Among the funds that we track, the interest in AbbVie Inc (NYSE:ABBV) has significantly increased over the quarter as 72 firms had invested a total of $3.29 billion in the company at the end of March as compared to 61 funds with $2.66 billion in shares at the end of the previous quarter. Cliff Asness‘ AQR Capital Management is the largest stockholder of AbbVie Inc (NYSE:ABBV) among these, holding about 6.72 million shares valued at $393.78 million.

During the first quarter, Deerfield acquired some 631,200 shares of Spark Therapeutics Inc (NASDAQ:ONCE) valued at $48.92 million. The holding represented 2.57% of the company’s outstanding shares and 1.58% of Deerfield’s portfolio value. After holding its initial public offering in February this year, Spark Therapeutics Inc (NASDAQ:ONCE)’s stock has cruised upwards, by 36.08% so far. The $1.72 billion company is involved in developing products related to gene therapy. Its lead candidate, SPK-RPE65, treats rare blindness conditions known as inherited retinal dystrophies (IRDs) and it is in Phase III clinical trial stage testing. At the end of March, a total of 15 funds had invested $211.56 million in the company. Ken Griffin‘s renowned managed futures fund, Citadel Investment Group is one of them as it holds about 2,400 shares of Spark Therapeutics Inc (NASDAQ:ONCE) valued at $184,000.

Disclosure: None

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