Baker Brothers is a company based in the city of San Francisco, CA, and has a long history of advisor work.
The company has been involved with some of the most successful drugs that are currently on the market.
About Baker Brothers
Baker Brothers Investments is a private fund that invests in primarily biotechnology companies. They are the largest shareholder of the Dublin-based company. Their portfolio consists of over 109 individual stocks.
Founded by Julian and Felix Baker in 2000, Baker Brothers Investments is a biotech focused investment advisor. Since its inception, the firm has grown rapidly. Today, the firm’s assets under management have risen to over $15 billion.
The firm’s top holdings include BioMarin Pharmaceutical, Synageva, Incyte, and Seagen. As of April 25, 2016, the fund had around $15.2 billion in assets under management. However, the company is not interested in diversifying its portfolio. Instead, the fund’s investments are held for a period of three years or more.
Baker Brothers has been involved in numerous public life science companies, including Versant Ventures, Genomic Health, and Relevare Pharmaceuticals. In 2012, Felix was named to the board of Genomic Health. He has also served on the board of Notch Therapeutics and Kiniksa Pharmaceuticals, Ltd.
The Baker Bros’ portfolio has been largely centered on the health care sector, with no exposure to industrial or consumer sectors. Though the firm has made a few holdings outside of the healthcare sector in the past, it does not intend to do so anytime soon.
The firm has a solid pipeline of therapeutics and drugs, many of which are in the preclinical stage. This includes a number of drugs known to alleviate pain.
ACADIA Pharmaceuticals Inc.
Acadia Pharmaceuticals (NASDAQ:ACAD) has seen declining sentiment from hedge fund investors as of late. The stock has retreated 45% from its recent highs. It also has seen a drop in total hedge fund interest. But despite the downturn, the stock has managed to maintain a 5-year CAGR of 40.6%.
BioMarin Pharmaceutical
The BioMarin Pharmaceutical Company’s portfolio is brimming with both pre- and clinical-stage product candidates. Its commercial products include Vimizim (elosulfase alpha), Brineura, and Voxzogo.
The company has a well-developed development pipeline, but its stock has sputtered in recent months, as a loss of nearly half a billion dollars in Q4 2016 compressed previously unrealized gains. On the plus side, the company recently received a positive opinion from the CHMP in Europe for its ValRox therapy for hemophilia A patients.
The Baker Bros’ fund has a surprisingly large position in this biotech darling. It holds 109 shares of the stock. This stake is a combination of 4.14% of the outstanding shares, or around 25.5% of the company’s total holdings. During the previous quarter, it held a similar proportion.
The firm’s other notable holding is its 4.69 million shares of IMCR. These shares are the highest-conviction pick in the portfolio. They are also the smallest of the lot, but the one with the most weight.
BeiGene
Another high-flying stock in the portfolio is BeiGene, a US-listed company that produces miniature revenues against a $18.7 billion market cap. With operations in the United States, China, and Australia, the firm has a promising pipeline of innovative drugs.
While the company has a small-scale presence in the industrial sector, it still has a healthy amount of cash on hand, and should be able to produce the next big drug.
As you can see, the fund isn’t particularly interested in diversification, so its stock portfolio remains concentrated in companies with a good chance of success. In particular, its top-ten holdings make up nearly 86.4% of the fund’s capital, and the company deems the aforementioned top ten a worthy investment.
Genomic Health
While it is a well-known fact that the hedge fund industry has been on fire of late, there is one firm that is particularly well-positioned to take advantage of this trend: Baker Bros. This family of funds specializes in trading in public life science companies and is backed by major university endowments.
The company boasts a $350 million portfolio of biotechnology stocks. They’ve been a fan of BioMarin Pharmaceutical for several years, holding 11.3% of the company’s shares. Earlier this year, they announced a positive CHMP opinion for ValRox, a treatment for hemophilia type A.
Although the company has been quiet on the acquisition front, they’ve been known to make some interesting financial moves. They participated in a $29 million Series B round for Genomic Health in 2001. That one made the cut, as well as a $20 million investment in a new subsidiary that will focus on commercial applications of the human genome.
Incyte
In 2000, Julian and Felix Baker founded a biotech investment firm. Since then, the Baker Brothers have grown their assets under management to over $15 billion. They have a focus on identifying and trading in publicly traded life science companies.
The fund is backed by major university endowments. It currently holds 115 holdings. These include BioMarin Pharmaceutical, Inc., Synageva Biopharma Corporation, and InterMune.
Incyte is a biotechnology company that focuses on the development of therapeutics. It has a portfolio of products, including Iclusig, a kinase inhibitor, and ruxolitinib, a cancer drug.
However, its stock has dropped substantially since the hopes for baricitinib went up. Although it remains near the same price as five years ago, the company’s top line has continued to grow.
Seagen
Seagen is a healthcare company that develops drugs for metastatic HER2-positive breast cancer. It also offers therapies for Hodgkin lymphoma and other rare diseases. As of September, the company’s revenue grew by over 60% over the past four quarters. Earlier this year, Seagen’s stock value jumped after it received positive Phase III data.
BioMarin Pharmaceutical
BioMarin Pharmaceutical is a biotechnology company that formulates and markets therapeutics for patients with severe and life-threatening rare diseases. The company has a strong development pipeline, with many indications for its therapies. But the company has encountered delays with the FDA’s approval of its lead product.
The company also has operations in the United States, China, Europe, and Australia. It is a fully integrated, global biotechnology company. A recent CHMP opinion in Europe for ValRox is encouraging.
The company’s two Swiss sites are in compliance with environmental regulations. It has an Environmental, Health, and Safety team that works to identify waste minimization.
InterMune
There’s been an enormous run on shares of InterMune (ITMN) this year. The company has skyrocketed nearly 400% in just a few months. While the stock is up by a large margin, it isn’t enough to make Baker Bros’ position the top biotech winner.
Synageva Biopharma Corporation
One of Baker Brothers’ top holdings is Synageva Biopharma Corporation. This is a pharma company that focuses on autoimmune diseases. During the past quarter, its stake in the company doubled from 3.8 million shares to 12. million. In the meantime, its market cap has been boosted by positive Phase III data earlier this year.
Another stock that has seen a significant surge in price is Amicus Therapeutics. This is a company focused on treatments for orphan diseases. At the time of its IPO in 2014, it had a market cap of over $2 billion.
As mentioned earlier, the company also has a sizable holding in BeiGene Limited (BGNE). The stock has gained over 80% this year, and the Baker Bros fund has around 11.4% of its shares.
Takeaway
With an impressive portfolio of biotechnology stocks, Baker Brothers is well positioned to take advantage of the next wave in health care. Their portfolio contains the likes of Synageva, Incyte and Gentrix among others.
Currently, the firm’s investments have an approximate market cap of $28 billion.
They are known for their use of big data in their portfolio management and trading strategies. The company has a long-standing track record of outperforming the market. For instance, they managed to outperform the SP 500 by a staggering 35% in the second quarter of 2016. As of the time of writing, they have a hefty $11.5 billion in assets under management.
