A Schedule 13G is a public filing that must be submitted with the SEC by every hedge fund manager or other investor who acquires ownership of more than 5% in a publicly-traded company. An ownership stake of over 5% is relatively significant, which is the reason why the SEC requires investors to report these ownership positions to the public. Most of the stocks revealed in 13G filings represent high-conviction ideas of hedge fund firms and other institutional investors, so these filings may reveal numerous potential winners. Having said that, this article will discuss three recent healthcare-related 13G filings submitted by several hedge fund investors tracked by Insider Monkey.
We track hedge funds and prominent investors 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 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated ten percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. the S&P 500’s 48.7% gain) over the last 38 months (see the details here).
In a Schedule 13G filing, Glenn Russell Dubin’s Highbridge Capital Management reported owning 6.05 million shares of Synergy Pharmaceuticals Inc. (NASDAQ:SGYP), of which 5.70 million shares are issuable upon the conversion of convertible notes and 9,400 shares are issuable upon the exercise of warrants. The freshly-disclosed stake accounts for 5.1% of the company’s outstanding stock. Highbridge Capital owned a mere 338,014 shares of the company at the end of the third quarter.
The biopharmaceutical company is currently preparing its first new drug application (NDA) for plecanatide in the chronic idiopathic constipation (CIC) indication and plans to file with the U.S. Food and Drug Administration (FDA) in January 2016. This leading product candidate is also being studied in two ongoing phase III clinical trials for irritable bowel syndrome with constipation (IBS-C). Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) intends to file its second NDA with plecanatide in the IBS-C indication by the end of 2016. This drug has great potential if considering that anti-constipation drug Linzess, marketed by Allergan PLC (NYSE:AGN), is among the fastest-growing drugs in the nation. The biopharmaceutical company has seen its shares advance by 105% since the beginning of the year.
The smart money sentiment towards the stock did not change during the third quarter, as the number of investors with positions in the company remained unchanged at 31 during the three-month period. These hedge fund investors held 22.60% of the biopharmaceutical company’s stock, though the value of their investments declined to $134.64 million from $180.43 million quarter-over-quarter. Billionaire John Paulson of Paulson & Co. holds a 9.0 million-share position in Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) as of September 30.
Let’s now move on to the next page of this article, where we reveal Deerfield Management’s position in a struggling biopharmaceutical company and Visium Asset Management’s upped stake in a medical technology company.