Mariner Investment Group is a New York-based investment advisory firm founded by William Michaelcheck in 1992. Apart from its headquarters in New York, the firm operates nine additional offices worldwide and boasted of assets under management of $13.4 billion, as of January 2015. According to the recently submitted 13F filing by the fund with the Securities and Exchange Commission (SEC), Mariner Investment Group’s US equity portfolio at the end of September was worth almost $495.6 million. The filing also revealed that the fund had a very high quarter over quarter turnover in its portfolio during the July-September period of 62.24% and stocks from the financial and healthcare sector accounted for 49% and 30% respectively of the value of the fund’s equity portfolio, as of September 30. Since healthcare and, particularly, biotech stocks constitute such a significant portion of the fund’s equity portfolio, in this article we are going to take a closer look at Mariner Investment Group’s top five biotech stock picks at the end of the third quarter.
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 6 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 10 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. S&P 500’s 48% gain) over the last 37 months (see the details here).
#5 Medivation Inc (NASDAQ:MDVN)
Shares Owned by Mariner Investment Group (as of September 30): 123,400 shares
Value of Holding (as of September 30): $5.245 Million
After rising by almost 30% during the first quarter of the year, shares of Medivation Inc (NASDAQ:MDVN) have been on a steady decline since then and currently trade down nearly 19% year-to-date. It seems this decline in Medivation Inc (NASDAQ:MDVN)’s stock made the company even more lucrative for Mariner Investment Group as the fund increased its stake by 83% or 56,000 shares during the second quarter. On November 5, Medivation Inc reported its fiscal 2015 third-quarter earnings, declaring EPS of $0.35 on revenue of $260.70 million, compared to EPS of $0.96 on revenue of $200.48 million posted for the same quarter last year. Following the earnings release, on November 10, analysts at Maxim Group reiterated their ‘Buy’ rating on the stock, but lowered their price target on it to $54 from $74. Phill Gross and Robert Atchinson‘s Adage Capital Management reduced its stake in the company by 11% to 1.54 million shares during the third quarter.
#4 Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)
Shares Owned by Mariner Investment Group (as of September 30): 39,400 shares
Value of Holding (as of September 30): $6.162 Million
Mariner Investment Group increased its stake in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) by purchasing an additional 89% or 18,600 shares of the company during the third quarter. On November 4, the company disclosed in a SEC filing that the U.S. Justice Department has joined a Foreign Corrupt Practices Act investigation of the company. For the third quarter of fiscal 2015, Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) reported EPS of $1.16 on revenue of $666.60 million, while analysts had expected the company to deliver EPS of $1.01 on revenue of $668.33 million. Julian Baker and Felix Baker‘s Baker Bros. Advisors initiated a huge stake in the company by purchasing over 6.5 million shares during the second quarter and became the largest shareholder of the company at the end of that period among the hedge funds tracked by Insider Monkey.
#3 Gilead Sciences, Inc. (NASDAQ:GILD)
Shares Owned by Mariner Investment Group (as of September 30): 77,300 shares
Value of Holding (as of September 30): $7.59 Million
Mariner Investment Group reduced its stake in Gilead Sciences, Inc. (NASDAQ:GILD) by 20% during the April-June period. However, during the third quarter the fund bought an additional 14% or 10,000 shares of the biopharmaceutical giant and purchased Call options underlying another 40,000 shares of the company. Shares of Gilead Sciences, Inc. (NASDAQ:GILD) witnessed a straight rise during the second quarter, but have cooled off since then and currently trade with year-to-date gains of 9.61%. A major controversy surrounding Gilead Sciences, Inc. (NASDAQ:GILD)’s latest HIV treatment, ‘Genovya’, seems to be brewing right now as on Tuesday the world’s largest AIDS organization, AIDS Healthcare Foundation (AHF), questioned the motives behind the development and approval of the drug. On November 5, analysts at Piper Jaffray upgraded the stock to ‘Overweight’ from ‘Neutral’. D. E. Shaw, founded by billionaire David E. Shaw, increased its stake in the company by 586% to nearly 4.4 million shares during the second quarter.
#2 Celgene Corporation (NASDAQ:CELG)
Shares Owned by Mariner Investment Group (as of September 30): 79,000 shares
Value of Holding (as of September 30): $8.545 Million
Moving on, Celgene Corporation (NASDAQ:CELG) was one of the most volatile biotech stocks during the third quarter. However, that volatility didn’t seem to deter Mariner Investment Group, which increased its stake in the company by 25% or 16,000 shares during the July-September period. The stock of Celgene Corporation (NASDAQ:CELG) has fallen more than 12% in the last four trading sessions since it reported its fiscal 2015 third quarter results on November 5. While the EPS of $1.23 that the company reported beat managed to beat analysts’ expectation of EPS of $1.22 by $0.01, the revenue of $2.33 billion the company reported was slightly lower than the $2.40 billion figure analysts had expected. Following the earnings release, on November 6, analysts at Canaccord Genuity reiterated their ‘Buy’ rating on the stock, but lowered their price target on it to $156 from $190. With ownership of over 3.8 million shares of the company Samuel Isaly‘s Orbimed Advisors was the largest shareholder of the company at the end of June among the hedge funds we cover.
#1 Biogen Inc (NASDAQ:BIIB)
Shares Owned by Mariner Investment Group (as of September 30): 30,082 shares
Value of Holding (as of September 30): $8.778 Million
Finally, by increasing its stake in Biogen Inc (NASDAQ:BIIB) by 218% or 20,643 shares during the third quarter, Mariner Investment Group made the company its largest biotech holding at the end of September. After remaining range bound during most part of the first half of the year, shares of Biogen Inc (NASDAQ:BIIB) suffered a drastic fall in July from which they haven’t been able to recover till now and currently trade down more than 14% year-to-date. For the third quarter of fiscal 2015 Biogen reported mixed results on October 21. While the Street had estimated that it will report EPS of $3.80 on revenue of $2.65 billion, the company declared EPS of $4.48 on revenue of $2.39 billion. The same day it reported earnings, Biogen also announced that it would be laying off 880 of its employees. On October 22, analysts at Leerink Swann reiterated their ‘Outperform’ rating and $425 price target on the stock. Andreas Halvorsen‘s Viking Global initiated a stake in the company during the third quarter of the year by purchasing 513,444 shares.