EcoR1 Capital is on a buying spree of beaten-down, biotechnology companies as it nears the end of 2019 with big returns.
In November, the hedge fund firm established sizable stakes in Pieris Pharmaceuticals, AnaptysBio, and X4 Pharmaceuticals, according to regulatory filings. This month, the firm won a board seat in its activist bet targeting Prothena Corp., whose shares have surged since EcoR1 bought a large stake in the neuroscience company a few months ago.
EcoR1, which focuses on biopharmaceuticals, has been one of the hottest hedge funds since its founding by Oleg Nodelman in 2012. The San Francisco-based firm managed a little more than $1 billion at the end of last year, according to a regulatory filing.
Nodelman’s main hedge fund is up 23.24 percent this year through November, according to a document sent to clients and obtained by Institutional Investor. Since inception, the fund has gained 685 percent, compared with 138 percent for the S&P 500.
In early November, EcoR1 established a stake of more than five million shares in Pieris, or an 8.8 percent interest in the clinical-stage biotech company, according to a regulatory filing.
The investment in Pieris, which seeks to develop novel biotherapeutics for the treatment of health problems such as respiratory diseases and cancers, was part of a larger private placement led by BVF Partners. Other participants included Aquilo Capital Management, Surveyor Capital — a Citadel company — and Samsara BioCapital, a separate filing shows.
In the private placement, each unit was priced at $3.55 and consisted of a share of common stock plus one immediately-exercisable warrant to purchase one share of common stock at $7.10. Shares of Pieris closed December 20 at $3.32, down one percent for the day.
As part of its biotech buying spree, EcoR1 recently disclosed that on November 8 it purchased a 6.3 percent stake in AnaptysBio, a clinical-stage developer of therapeutic antibody products for unmet medical needs in inflammation. The stake was established the same day the company’s stock sank more than 70 percent, to about $10, on its statement that a key treatment failed Phase 2 trials.
AnaptysBio’s shares have since risen, closing at $15.89 on December 20.
In a more recent biopharma investment, EcoR1 disclosed to regulators that on November 26 it bought 1.2 million shares of X4 Pharmaceuticals for a 7.2 percent stake in the clinical-stage biopharma business. X4 seeks to develop novel therapeutics and oral medicines that treat primary immunodeficiency diseases and rare cancers, such as lymphomas.
EcoR1 bought the common shares in a public offering that priced at $12 and included warrants to purchase stock. X4’s shares fell 3 percent on December 20 to close at $10.40.
The firm’s recent biotech investments preceded a positive development in Nodelman’s rare, activist campaign as a hedge fund manager.
Nodelman, named a Hedge Fund Rising Star by II in 2015, took what appeared to be an activist stake in biotech company Prothena on August 23. The clinical-stage developer of treatments for neurological disorders — currently EcoR1’s largest holding accounting for more than 13 percent of its assets — announced early this month that it appointed Nodelman to its board of directors.
“His broad biotechnology experience and network will help Prothena to advance an innovative neuroscience based portfolio,” said Lars Ekman, the company’s chairman, in the announcement. Prothena’s stock price has more than doubled since Nodelman established his stake in the company, surging 23.5 percent on December 20 to close at $15.85.
