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DAFNA Capital Management Return, AUM and Holdings

Liliana De la Torre

DAFNA Capital Management, LLC is a Los Angeles-based hedge fund launched by Dr. Nathan Fischel, back in 1999. Dr. Fischel is an experienced Pediatric Hematologist-Oncologist, who graduated from the Technion School of Medicine in Israel and completed his residency at the Children's Hospital and Dana-Farber Cancer Institute, Harvard Medical School, Boston. For his post-graduate studies in Molecular Genetics, he chose England and one of the world’s leading universities - Oxford University. His professional experience includes working as attending physician in Pediatric Hematology-Oncology at Cedars-Sinai Medical Center. Aside from being Chief Executive Officer at DAFNA Capital Management, Dr. Fischel is also Professor Emeritus at the UCLA. His participation in public equity markets goes back to more than 20 years ago. In 1993, he co-founded a venture capital-backed genomics biotechnology company where he served as Chief Scientific Officer and a member of the Board of Directors. Later, Warner-Lambert (Pfizer) purchased this company.

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The fund uses fundamental analysis and event-driven strategies to make long and short investments. It primarily invests in small to middle capitalization companies dedicated to innovative biotechnology and the development of medical devices — most of these companies are located in the United States and other developed countries. DAFNA Capital Management attempts to balance the long and short positions investing in a considerable number of entities and avoiding leverage. It diversifies its investments following the various market size, business model and other financial and trading criteria. In spite of having a diversified portfolio, at the end of the third quarter, the fund didn't have a single stock from 30 most popular stocks among hedge funds in Q3 of 2018 in it.

Its long-standing track record is noticeable in the performance of its funds. For example, its DAFNA LifeScience Fund has achieved positive returns over the past years. In 2013, the fund reached an annual return of 28.61%. It dropped in 2014 to 6.54% and then went up in 2015 when it reached 12.08%. In 2016 the fund's performance fell compared to the previous year as it delivered a return of 8.44%. The fund's best annual return was in 2017 when it obtained an impressive 29.25%. As per 2018, from January through October DAFNA LifeScience fund has gained 25.54%. The fund's total return amounted to 5321.64% for a compound annual return of 22.41%. Its worst drawdown was at 25.02. According to DAFNA Capital Management’s Form ADV from October 25th 2018, it has around $264.76 million in regulatory assets under management on a discretionary basis.

At the end of Q3 2018, the firm's 13F portfolio was valued at $243.52 million. Its most valuable stake was in Loxo Oncology Inc (NASDAQ:LOXO), counting 169,675 shares worth $28.99 million. These holdings represented 11.9% of the fund's portfolio. Loxo Oncology Inc is a company dedicated to developing and commercializing medicines for cancer patients. Its second largest holding was in Sage Therapeutics Inc (NASDAQ:SAGE) where its stake counted 99,306 shares with a value of $14.03 million. More about similar changes and the fund's third quarter investments can be read on the next page.

During the third quarter, DAFNA Capital Management added four positions to its equity portfolio and boosted its investment in some of its previous holdings. The biggest acquisition in this quarter was Spero Therapeutics Inc (NASDAQ:SPRO), whose 70,000 shares with a value of $736,000 the fund obtained. Spero Therapeutics is a clinical-stage biopharmaceutical company located in Cambridge, Massachusetts. The company focuses on developing and commercializing treatments for multi-drug resistant bacterial infections. Another addition was Sutro Biopharma Inc (NASDAQ:STRO) whose 27,494 shares worth $412,000 the fund purchased during the third quarter.

DAFNA Capital Management enhanced its enthusiasm for twenty companies and decided to boost its stakes in those. The biggest increase was in Translate Bio Inc (NASDAQ:TBIO) in which the fund raised its stake by 659% acquiring a total of 151,739 shares worth $1.52 million. The next in line, was Bluebird Bio Inc (NASDAQ:BLUE) in which the fund upgraded its position by 413%, attaining 20,500 shares valued at $2.99 million.

On the opposite side, the fund seems to have lost interest in several companies. It decided to reduce its stakes in a considerable number of them and let go a few others. A significant decrease was made to its position in Minerva Neurosciences Inc (NASDAQ:NERV) in which it lowered its stake by 80% to 26,907 shares valued at $338,000. Also, its stake in Dermira Inc (NASDAQ:DERM) was reduced by 79% to 5,000 shares worth $55,000. DAFNA Capital Management decided to dump its positions in Galmed Pharmaceuticals LTD (NASDAQ:GLMD) where it held 50,000 shares and in Forty Seven Inc (NASDAQ:FTSV) selling the total of its 10,000 shares.

Disclosure: None

This article was originally published on Insider Monkey