The U.S stock market seems to be heading for a second day of losses, as the morning rally has not lasted. A mixture of poor earnings and sluggish retail sales data are putting pressure on investors, as oil trades lower as well. Not all shareholders are gloomy today however, as several biotech stocks managed to head the opposite way. CASI Pharmaceuticals Inc (NASDAQ:CASI), Intrexon Corp (NYSE:XON), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP) and Zafgen Inc (NASDAQ:ZFGN) each made waves in early trading, although the latter’s surge was short lived. Let’s have a look at the factors that are pushing (or had pushed, in Zafgen’s case) these stocks higher today.
Shares of CASI Pharmaceuticals Inc (NASDAQ:CASI) have surged by more than 50% in the opening hour following reports that its oncology drug candidate, ENMD-2076, has received the go-ahead from the European Medicines Agency. Designed for the treatment of hepatocellular carcinoma, the drug received Orphan Drug designation, which implies ten years of market exclusivity in the European Union. Last year CASI Pharmaceuticals managed to secure the Orphan Drug designation from the US Food and Drug Administration (FDA) as well, which provides the company with seven years of market exclusivity in the United States.
None of the hedge funds that we track reported owning a stake in CASI Pharmaceuticals Inc (NASDAQ:CASI) as of the end of the second quarter. This is a nano-cap stock, as the company has a market cap of $46 million and has only recently reported revenues. Its 2015 second quarter report showed revenues of $20,000 and a loss per share of $0.06. For the current quarter, analysts expect revenues to stay the same and the loss to widen to $0.09 per share.
Moving on, news of a successful cloning process has pushed Intrexon Corp (NYSE:XON)’s shares up as well. ViaGen Pets, one of the company’s subsidiaries, has delivered two litters of healthy, cloned kittens for its clients. The subsidiary offers preservation services for pets and is preparing to go global in 2016 following the completion of a new, state-of-the-art lab.
“As the largest global provider of genetic preservation services for companion animals, we look forward to expanding the life-enriching connections that people form with their pets. Our goal is to bring this opportunity to all pet owners and their families,” said Blake Russell, President of ViaGen Pets.
Intrexon Corp (NYSE:XON) gained more popularity among elite hedge funds during the second quarter, with the number of funds invested in the stock rising to 21, from 20 at the end of March. Their combined holdings account for 7.3% of the company’s common stock and were valued at $387 million, up by 13.7% during the quarter. Dan Loeb‘s Third Point is the largest holder of Intrexon shares among the funds we follow. In its latest 13F filing, Third Point reported ownership of 2.7 million shares, the same as three months prior to that point. David Cohen and Harold Levy have stepped up their interest in the company as well, increasing their stake by one-quarter to 2.25 million shares by the end of June.
Hedge funds have been underperforming the market for a very long time. However, this was mainly because of the huge fees that hedge funds charge as well as the poor performance of their short books. Hedge funds’ long positions performed actually better than the market. Small-cap stocks, activist targets, and spin offs were among the bright spots in hedge funds’ portfolios. For instance, the 15 most popular small-cap stocks among hedge funds outperformed the market by more than 53 percentage points since the end of August 2012 (read the details here), returning 102%. This strategy also managed to beat the market by double digits annually in our back tests covering the 1999-2012 period.
On the next page, we will discuss the latest developments related to ZIOPHARM Oncology and Zafgen.