Hedge fund manager Mitchell J. Blutt of the $1.5 billion Consonance Capital fund has made some intriguing portfolio shifts in the last quarter, including boosting his position in biopharma firm Catalyst Pharmaceuticals (NASDAQ:CPRX) and initiating stakes in drug makers Verastem (NASDAQ:VSTM) and Sesen Bio (NYSE:SESN).
Dr. Blutt is one of the first physicians to play a major role on Wall Street by drawing on his medical knowledge to reveal investment opportunities in healthcare firms. Through Consonance Capital, Blutt manages two collaborative funds--a healthcare private equity fund and a healthcare hedge fund. Now let’s turn from the general to the specific with three of the fund’s key Q2 trades:
Pushing the Pedale on Catalyst Pharmaceuticals
Blutt is seizing the opportunity with Catalyst, dialing up his hedge fund firm’s stake in the company to the tune of a 22% boost up. With 1,050,000 shares purchased, Citedel now holds a total position of 6,044,719 shares worth $18.19 million in the drug maker.
The next key catalyst for Catalyst is Firdapse’s Prescription Drug User Fee Act (PDUFA) on November 28, 2018 for the treatment of patients with lambert-eaton myasthenic syndrome (LEMS).
If SunTrust analyst Edward Nash is right, a great deal of upside potential hangs in the balance for this biotech player ahead of the upcoming FDA decision. Specifically, Nash rates CPRX a Buy with an $8.00 price target, which implies an upside of 166% from current levels. (See Stock Recommendations from Edward Nash)
Nash noted, "We continue to expect an approval on or by the PDUFA date given the two successful Phase III studies demonstrating robust efficacy on Quantitative Myasthenia Gravis (QMG) score, Subject Global Impression (SGI) score and Clinician's Global Impression of Improvement (CGI-I) with a benign safety profile. We also note that Firdapse has been approved for the treatment of LEMS and commercialized in the EU by BioMarin since 2009."
"Catalyst continues its pre-commercialization activities for a potential launch of Firdapse in LEMS in early 2019 as the company recently added a Chief Commercial Officer and expanded the commercial leadership team with key hires. Catalyst has also added three senior medical science liaisons (MSL), bringing the total of its MSLs to five. In addition, management noted an initiation of Firdapse production to ensure sufficient supply and a smooth launch. We estimate the total Firdapse revenue for LEMS to be approximately $375M in 2025, the out-year of our model," the analyst added.
Stepping into Verastem
Verastem is glimmering with compelling value from where Blutt is standing, as under his strategic leadership, Consonance Capital initiated a holding in the biotech firm in a second quarter move that saw a purchase of 7,166,666 shares worth $69.18 million. This is a move that is handsomely paying off this month (up 29%).
Verastem’s lead product, duvelisib, is under FDA review for the treatment of chronic lympocytic leukemia (CLL) and follicular lymphoma (FL) with a PDUFA date of October 5, which could be a major catalyst for the stock.
"With the pending PDUFA in early October, the near and long-term picture for the shares looks bright, in our view," says Cantor analyst Mara Goldstein. "The Street has been struggling with the commercial potential for duvelisib, which we believe is larger than the current valuation suggests."
As such, Goldstein rates Verastem shares an Overweight with a price target of $17.00, which implies about 70% upside potential from today's closing price.
A New Bite into Sesen Bio
Sesen must have exhibited new compelling potential to Blutt in the second quarter. After all, the hedge fund guru guided his firm to initiate a fresh stake of 7,523,296 shares in the biotech firm worth $14.6 million.
How does this measure up against the word on the Street? Quite on point, it seems, considering TipRanks analytics exhibit SESN as a Strong Buy. Out of 4 analysts polled in the last 4 months, all 4 are bullish on Sesen stock. With a return potential of 144%, the stock’s consensus target price stands at $5.00. (See SESN's price targets and analyst ratings on TipRanks)
Canaccord analyst John Newman recently wrote, "We are expecting strong 12-month response rate data in mid-2019 from the ongoing Phase 3 VISTA trial in recurrent, post-BCG non-muscle invasive bladder cancer (NMIBC). Previously, SESN reported strong three-month efficacy, wherein the carcinoma in situ (CIS) subpopulation, all of whom were refractory within 12 months of last Bacillus Calmette-Guerin (BCG) treatment, showed a 42% complete response rate. We believe the patients in the trial met the FDA guidance on NMIBC approval, thus the data should be sufficient and suitable for FDA review and approval. Furthermore, the trial showed an acceptable safety profile, especially when compared to valrubicin. We expect to see similar strong response and safety data in mid-2019. We currently model $317M in US peak sales by 2025."
"We maintain our BUY rating with a $5 price target based on continued positive outlook to the ongoing VISTA trial and expectation for strong response and safety data update in mid-2019. We believe SESN’s Vicinium could effectively address critical unmet need for effective post-BCG NMIBC treatment aside from radical cystectomy and old therapy," the analyst concluded.