Julie Lamb, Senior Editor

About the Author Julie Lamb, Senior Editor

Julie joined Smarter Analyst across the world- all the way from Louisville, Kentucky- where she graduated with a Bachelor of Arts in English with a focus on creative writing from the University of Louisville.

Polar Capital Steps Into Aurinia Pharmaceuticals Inc (AUPH), Kite Pharma Inc (KITE), But Gives bluebird bio Inc (BLUE) the Axe

A First Glance at This Hedge Fund Firm's Strategic Q2 Moves in Biotech Sector

Polar Capital’s key trading strategy hinges upon valuing stocks showcasing palpable growth down the line over just collecting assets. Former JO Hambro Capital Management (JOHCM) leader Gavin Rochussen has since taken the reigns over from previous CEO Tim Woolley to stand at the helm of Polar Capital, with the hedge fund selecting Rochussen back in January. This marks a wise leadership transition for the assets management team, considering that in Rochussen’s eight years at JOHCM, the man took his team’s assets from £1.5 billion to £23.9 billion by last year. When sizing up the biotech-verse, under Rochussen’s expert hand, Polar Capital has opted to initiate positions in Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) and Kite Pharma Inc (NASDAQ:KITE), all while scratching bluebird bio Inc (NASDAQ:BLUE) completely from the table.

Let’s take a closer look:

Ante Up for Aurinia

Aurinia is glimmering with solid potential from where Rochussen surveys from Polar Capital, inciting the hedge fund to seize a new holding of 1,183,272 shares worth $7,253,000.

A lot of the stock’s value rests on Aurinia’s lead drug candidate Voclosporin, developed to treat Lupus Nephritis. Aurinia recently dosed its first patient in the drug’s Phase III study and Rochussen could be evaluating a crucial long-term investment opportunity.

Voclosporin is a drug to watch in the biotech-verse, having recently exhibited a promising Phase IIB data read-out, successfully achieving statistically significant efficacy against the placebo arm at both 24 as well as at 48 weeks. Likewise, the safety profile looks good for this LN drug candidate, which sustained stable serum magnesium, potassium and blood pressure levels in the study. It is worthy of note that in the 48 weeks study, patients experienced a remission period that was roughly double that shown in the control arm. This could bode excitingly for Voclosporin if the drug candidate can bring to the table another impressive showcase in the forthcoming AURORA trial.

Keep in mind the new CEO, Dr. Richard Glickman, has been guiding the firm since February- a man known for his prowess in the Lupus Nephritis arena. Polar Capital sees fit to trust that this was the ideal time to pull the trigger on investing in Aurinia.

Additionally, in the last 3 months, according to TipRanks, Elemer Piros of Cantor rates a Buy on AUPH stock with a price target of $10, which implies a just under 56% from where the stock is currently trading.

Kite Gets a Bullish Vote

Of Polar Capital’s biotech plays, Kite is garnering quite a bit of confidence from Rochussen, who initiated a stake of 360,000 shares worth $37,321,000. This quarterly move preceded an exciting takeover, where Gilead will be swallowing up Kite in a $11.9 billion deal, spicing up the CAR-T cancer therapy market with some M&A waves.

Kite caught Gilead’s eye thanks to its chimeric antigen receptor T-cell therapy candidate Axi-Cel, targeted to treat aggressive Non-Hodgkin’s Lymphoma (NHL). This is a possible blockbuster Kite (and now Gilead) has on its hands, and some peak sales projections are circling $2 billion a year, making Kite quite valuable in the oncology world. Rochussen could be throwing a bullish parade on the heels of the firm’s alliance with biotech giant Gilead.

Gilead CEO Dr. John Milligan weighs in: “The acquisition of Kite establishes Gilead as a leader in cellular therapy and provides a foundation from which to drive continued innovation for people with advanced cancers. The field of cell therapy has advanced very quickly, to the point where the science and technology have opened a clear path toward a potential cure for patients.”

How does Polar Capital’s holding gamble match up against Wall Street? TipRanks analytics reveal KITE as a Buy. Based on 10 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on Kite stock while 7 maintain a Hold. The 12-month average price target stands at $156.86, marking a nearly 12% downside from where the stock is currently trading.

Throwing in the Towel on Bluebird

There is no hope left for Bluebird as far as Rochussen values the biotech firm, leading his hedge fund to ditch all positions entirely in a bearish second-quarter play. However, did Polar Capital sell Bluebird too soon? Shares are rising 9% today after fellow biotech firm Novartis secured a green light for its chimeric antigen receptor T-cell (CAR-T) therapy Kymriah in the indication of pediatric acute lymphoblastic leukemia (ALL).

BMO Capital analyst Matthew Luchini takes this FDA approval as a “de-risking event for the entire CAR-T space,” and subsequently reiterates an Outperform rating on shares of BLUE while boosting the price target from $108 to $134, which represents a 9% increase from where the stock is currently trading. (To watch Luchini’s track record, click here)

On back of Novartis’ FDA win for a drug that uses the same CAR-T technology to reprogram immune cells to attack cancer cells, Luchini believes this is a big positive for Bluebird. In reaction, the analyst now has bumped up his probability of success on Bluebird’s bb2121, the firm’s anti-BCMA CAR T cell therapy designed to treat relapsed/refractory multiple myeloma, from 45% to 60%. “We have also updated our assumed price to $300k ($225k EU) from $225k ($175k EU) based on Novartis’s decision to price Kymriah at $475k in the smaller pediatric ALL indication. We see ASH as next catalyst with updates across BLUE’s pipeline,” contends Luchini.

Most of the Street have not given up on the company just yet, as TipRanks analytics showcase BLUE as a Buy. Out of 14 analysts polled by TipRanks in the last 3 months, 9 are bullish on Bluebird stock, 3 remain sidelined, and 2 are bearish on the stock. With a loss potential of 15%, the stock’s consensus target price stands at $104.78.