Hedge Fund DAFNA Capital Management, LLC, based in Los Angeles, invests in publicly traded biotechnology and medical device companies. The firm was founded in January, 1999, and it uses fundamental and event-driven analysis to employ long and short investment strategies in constructing its portfolio. The investment strategies capitalize on its core expertise in the discovery, development and clinical use of drugs and devices, exploiting market inefficiencies resulting from the complexity of these companies’ technologies and the clinical marketplace. The event-driven analysis is based on a fundamental analysis of the future outcomes of key events, which in the case of biotech and medical device companies includes clinical trial results, regulatory decisions, unexpected side effects, additional indications for a drug or device, market adoption, and strategic partnerships or joint ventures.
The firm currently utilizes three different long/short investment strategies including the following three hedge funds, DAFNA LifeScience Select Ltd., DAFNA LifeScience Ltd., and DAFNA LifeScience Market Neutral Ltd, which have returned 12%, 24% and 6% compounded annual returns respectively since inception seven, twelve and eight years ago respectively. The firm has total assets under management under the three hedge fund vehicles of approximately $90 million. Although the fund is not necessarily focused on any equity capitalization, its top picks are all small-capitalization biotech and medical device companies as shown in the following Table, which summarizes the new and increased positions in the three biotech and medical device hedge funds for the March 2011, quarter:
- Pharmacyclics Inc. (PCYC), a developer of small molecule drugs to treat cancer by disrupting biochemical pathways in cancer cells.
- Sonosite Inc. (SONO), a developer of hand-carried ultrasound imaging systems for use in point-of-care settings such as the bedside or exam table.
- YM Biosciences Inc. (YMI), developer of products primarily for the treatment of cancer and cancer-related conditions.
- Stereotaxis Inc. (STXS), a developer of cardiology instrument control systems to treat coronary artery disease and arrhythmias.
- Theragenics Corp. (TGX), a developer of implantable radiation devices for the treatment of prostate cancer and various surgical products.
- Threshold Pharmaceuticals (THLD), a developer of cancer therapies targeting the micro-environment of solid tumors, which is resistant to chemotherapy and radiation.
- Protalix Biotherapeutics (PLX), an Israeli developer of recombinant proteins indicated for various disorders using plant cell-based expression technology.
- Discovery Laboratories Inc. (DSCO), a developer of therapies utilizing proprietary surfactant replacement technology to treat respiratory disorders and diseases.
- Spectranetics Corp. (SPNC), a developer of single-use medical devices used with proprietary laser system in minimally invasive cardiovascular surgeries.
New or Increased Position
Top Increased Positions
$ 4.5 million
$ 4.4 million
YM Biosciences Inc.
$ 2.9 million
$ 2.3 million
$ 1.4 million
Top New Positions
Threshold Pharmaceutical Inc.
$ 2.9 million
Protalix Biotherapeutics Inc.
$ 1.9 million
Discovery Laboratories Inc.
$ 1.4 million
$ 0.9 million
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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