Palo Alto Rejoicing at ABIOMED, Inc. (ABMD)’s 18% Spike

ABIOMED, Inc. (NASDAQ:ABMD) spiked as high as 21% in Tuesday’s intraday trading to eventually close at 18% in the green at $72.48. The rise came on the heels of FDA’s pre-market approval (PMA) of Abiomed’s Impella 2.5 system, which is the world’s smallest heart pump and is designed to be used in certain high risk coronary procedures, including stenting and angioplasty. It helps to maintain a stable heart function and circulation among patients during these procedures. One hedge fund that celebrated Abiomed’s victory was William Leland Edward‘s Palo Alto Investors. The fund holds 2.46 million shares of ABIOMED, Inc. (NASDAQ:ABMD), valued at $93.63 million, according to its latest 13F filing.


The provider of breakthrough heart support technologies is up by a massive 177% over the last year. In comparison, the advanced medical equipment & technology industry is up by 30.7% and S&P 500 by 12.6% over the same time period. ABIOMED, Inc. (NASDAQ:ABMD)’s $13 million acquisition of Germany-based ECP Entwicklungsgesellschaft mbH (ECP) last year, whose lead product was a percutaneous expandable catheter pump that increases blood circulation from the heart with an external drive shaft must have proved vital in Impella’s development. Among the billionaires that we track, Israel Englander’s Millennium Management had the highest stake in ABIOMED, Inc. (NASDAQ:ABMD) with about 947,200 shares valued at $36.05 million.

William Leland founded Palo Alto Investors in 1989 along the philosophy of investing in companies for a long term horizon which entails a research intensive process for which the firm has hired 12 employees including five research professionals. The portfolios are both concentrated, with 20 to 30 holdings per fund, and tax efficient, as average holding period for investments is between one to three years. As of the end of last year, the market value of the fund’s portfolio stood at $1.7 billion, with 99% of the holdings in the healthcare sector. Among the fund’s top five health care picks were United Therapeutics Corporation (NASDAQ:UTHR), Clovis Oncology Inc (NASDAQ:CLVS) and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN).

Palo Alto Investors’ focus on small cap stocks with market capitalizations of less than $3 billion falls in line with the strategy that we have developed at Insider Monkey. Our research has shown that investing in small cap picks of hedge funds is more profitable than investing in a portfolio comprised of the most popular stock picks among them, which are invariably large cap companies. Our small cap strategy, the stock picks of which we have been sharing in our newsletters since 2012, outperformed the S&P 500 ETF (SPY) by 79.4 percentage points since August 2012 through March 2015 and returned 132% during that period.

With 1.4 million shares valued at $181.69 million, United Therapeutics Corporation (NASDAQ:UTHR), represents the most valuable of Palo Alto’s holdings. The fund inched up its stake by some 8% during the fourth quarter in the company focused on  the development and commercialization of unique products to address the unmet medical needs of patients. The stock has appreciated by nearly 90.4% over the last 52 weeks. The $8.83 billion company recently received FDA’s approval for its Unituxin injection for the treatment of children with high-risk neuroblastoma, which is most common extracranial solid cancer in children and the most common cancer in infancy. Among the hedge funds that we track Matt Sirovich and Jeremy Mindich’s Scopia Capital hold the largest stake in United Therapeutics Corporation (NASDAQ:UTHR), which contains about 2.96 million shares, valued at $382.97 million as of the end of 2014.

Palo Alto’s stake in Clovis Oncology Inc (NASDAQ:CLVS) represents 6.91% of the fund’s portfolio value, according to its latest 13F filing. The fund increased its stake in the company by 22% during the fourth quarter to 2.1 million shares valued at $117.76 million. The biopharmaceutical company is up by about 2% over the last year. The bio therapeutic drugs industry on the other hand has gained some 58% during the same period. Christopher Medlock James’ Partner Fund Management is another significant shareholder of Clovis Oncology Inc (NASDAQ:CLVS) with 1.73 million shares valued at $96.6 million.

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is also one of Palo Alto’s investments that has paid off really well over the last year, as the stock is up by about 70.8%. Earlier this month it was announced that Myriad Genetics, Inc. (NASDAQ:MYGN) and BioMarin are extending their partnership which began in 2013 and involves the use of Myriad’s myChoice HRD companion diagnostic test to prospectively identify patients with metastatic breast, ovarian, and other cancers that may be sensitive to talazoparib. John Griffin’s Blue Ridge Capital owned some 2.23 million shares of BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) at the end of the fourth quarter. The company is also one of the top new picks of the healthcare-focused Visium Asset Management.

 Disclosure: none