Can Fite Biopharma Ltd (ADR) (NYSEMKT:CANF) and WaferGen Bio-systems, Inc. (NASDAQ:WGBS) are among the hot stocks of the current trading session, booking gains of 34.52% and 10.96%, respectively. Let’s find out the primary reasons behind the bullish investor activity as well as the hedge fund sentiment surrounding these biopharmaceutical companies.
We’ll start with Can Fite Biopharma, which according to a press release from the company, has received Fast Track Designation from the U.S. Food and Drug Administration (FDA) for its drug CF102, for use as a second line treatment for hepatocellular carcinoma, which is the most common form of lung cancer. Fast Track Designation is granted to new medical drugs that answer unmet medical requirements of patients and the approval is likely to speed up the development of CF102, which was already given an Orphan Drug designation by the institution.
Can Fite Biopharma Ltd (ADR) (NYSEMKT:CANF)’s treatment is currently in phase 2 testing and the company is likely to complete the patient enrollment process in the first half of 2016. It already received the European Medicines Agency’s approval for dosing patients in its global phase 2 study of CF102 in May of this year. If the company succeeds in its upcoming study and approval phase, it could open a $2 billion market for the company, which is primarily dominated by Nexavar, a drug co-developed and marketed by Bayer AG (ADR) (OTCMKTS:BAYRY) and Onyx Pharmaceuticals (NASDAQ:ONXX). Nexavar reported annual sales of $874 million in 2014. Can Fite Biopharma Ltd (ADR) (NYSEMKT:CANF) filed its semi-annual report on August 27 for the six months ended on June 30, posting a net loss of $2.19 million and cash assets worth $7.75 million.
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 118% over the last 36 months and outperformed the S&P 500 Index by 60 percentage points (see the details here).