Esperion Therapeutics Inc (ESPR) Jumps Then Slumps after ETC-1002 Update; Are Hedge Funds Bullish on the Stock?

Shares of Esperion Therapeutics Inc (NASDAQ:ESPR) jumped by over 9% before dropping by 10% on Tuesday after the firm announced that the U.S. Food and Drug Administration (FDA) has confirmed that the low-density lipoprotein cholesterol (LDL-C) remains an acceptable clinical surrogate endpoint for the approval of an LDL-C lowering therapy such as ETC-1002. The firm also announced that ETC-1002 (bempedoic acid), the firm’s lead drug, is also scheduled to begin a Phase 3 program in the last months of this year.

“After an informative and collegial meeting with the FDA, we are pleased that LDL-C remains an accepted clinical surrogate endpoint for the approval of an LDL-C lowering therapy such as ETC-1002 in patients with heterozygous familial hypercholesterolemia (HeFH), and/or patients with atherosclerotic cardiovascular disease (ASCVD),” said President and Chief Executive Officer Tim M. Mayleben, adding, “We have a clear regulatory path forward for development and approval of ETC-1002, an oral, once-daily treatment option for these patients that require additional LDL-C lowering.”

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The announcement today comes after Esperion Therapeutics Inc (NASDAQ:ESPR) saw very enthusiastic hedge fund support during the first quarter. We think that hedge fund sentiment surrounding a stock like Esperion is important, because these investors generally pull in strong returns from their top small-cap picks and invest a lot of their resources into analyzing these stocks. They simply don’t take large enough positions in them relative to their portfolios to generate strong overall returns because their large-cap picks underperform the market. We share the top 15 small-cap ideas favored by the best hedge fund managers every quarter and this strategy has managed to outperform the S&P 500 every year since it was launched in August 2012, returning 123.1% and beating the market by 66.5 percentage points (read more details).

Esperion Therapeutics Inc (NASDAQ:ESPR) is an example of a small-cap stock and its announcement today about ETC-1002 coupled with how hedge funds have been treating the stock can give insight as to how good an investment the stock is. The FDA’s confirmation about ETC-1002’s status, means that this drug now has a better chance of coming on the market, which may include up to 9 million people in the U.S., as the company stated. According to Esperion, the approval of ETC-1002 in the HeFH and ASCVD patient populations will not require the completion of a cardiovascular outcomes trial (CVOT) due to the FDA feedback it received. However, to pursue broader label indications related to cardiovascular disease risk reduction, the pharmaceutical firm announced that it continues to plan and initiate a CVOT prior to its NDA filing.

It appears that hedge funds may have anticipated the good news about ETC-1002 in the first quarter as they increased their stakes in Esperion Therapeutics Inc (NASDAQ:ESPR) by a whopping 199% quarter-over-quarter by the end of March. Even considering the meteoric 128.98% increase of the stock’s value in the first quarter, this still means hedge funds poured capital into the stock in the said period. Moreover, as the first quarter ended, there were 24 hedge funds from our database that were long this stock, up from 14 at the end of 2014. Furthermore, hedge funds were overweight the stock as they held 28.40% of the firm’s shares were owned by hedge funds we track in the first three months of the year.

At the end of the second quarter Dennis Purcell’s Aisling Capital held the largest stake in Esperion, which contained 1.64 million shares worth about $133.85 million. Andreas Halvorsen’s Viking Global came in second, owning about 1.4 million shares worth about $114.06 million. Viking Global also bought the most shares in the second quarter among the hedge funds we track, acquiring about 1.26 million shares between April and June. As hedge funds are bullish on Esperion Therapeutics Inc (NASDAQ:ESPR), we think that so should you.

Disclosure: None