Endologix, Inc. (ELGX): Deerfield Management Upping its Game

It seems the recent decline in Endologix, Inc. (NASDAQ:ELGX)’s stock by around 20% has made it more lucrative for hedge funds. As a recent filing with Securities and Exchange Commission (SEC) shows, James E. Flynn’s Deerfield Management has increased its stake in the company to over 4.48 million shares from over 1.48million shares that it owned previously. Deerfield now owns a total of 6.7% stake in the company as a passive investor.

Deerfield Management is life sciences-focused hedge fund that invests in both publicly traded and private companies. From its humble beginnings in 1994 with $17 million in assets under management, it has now grown to managing over $5 billion. Deerfield invests in companies across the healthcare spectrum from early state drug research start-ups to mature healthcare services and device companies. In the second quarter of 2014, the fund increased its stake significantly in Allergan, Inc. (NYSE:AGN), shares of which are up more than 45% in the last 6 months, and Keryx Biopharmaceuticals (NASDAQ:KERX), which is up more than 10% in last six months and more than 70% year over year. Most of the large holdings of Deerfield have outperformed the market significantly in the last one year, generating returns in excess of 50%.

Apart from Deerfield, Justin John Ferayorni’s Tamarack Capital Management is also bullish on Endologix, Inc. (NASDAQ:ELGX). In the second quarter of 2014, it increased its stake in the company by 67% to 2.38 million shares. Endologix, Inc. (NASDAQ:ELGX) also features as a prominent pick of Donald Chiboucis’ Columbus Circle Investors, which as of June 30, 2014 owns 1.35 million shares.

Endologix, Inc. (NASDAQ:ELGX) is a $760 million market cap company that manufactures minimally invasive treatments for aortic disorders. The company expects global revenues for the fiscal year 2014 of in the range of $145 million to $148 million, which represents a growth of  10% to 12% over the revenues it reported for 2013. It also expects the net loss per share to be in the range of $0.37 to $0.43. Most analysts and brokerages are positive on the stock with average recommendation being ‘Overweight’ and average target price amounting to $15.17 per share.

Deerfield Management is life sciences focused fund, which means it watches closely any development in that sector and bets its money only when it is thoroughly convinced. A hedge fund with $5 billion in management has several resources, which an average investor doesn’t. However, an average investor can make similar returns, if they track the activity of these funds and emulate their strategies.

Disclosure: None