Israel “Izzy” Englander kick-started Millennium Management 28 years ago, taking the firm from $35 million to now $34 billion in assets. In the third quarter, Englander made some unusual decisions, boosting stocks like Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) that have a cautious or even bearish sentiment from the rest of the market while cutting shares in ‘Strong Buy’ stock ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD).
The son of Polish immigrants, Englander boasts managed to bring in a 13% return for Millennium seven years ago, and achieving a 6% rise one year later. The billionaire’s firm has since outperformed a great deal of its competitors. The funds philosophy involves a global multi-strategy investment approach, which it says is “opportunistically engaged in a broad array of trading and investing strategies across a wide group of diversified managers.
Let’s explore his key moves further:
Most investors are no doubt fleeing Teva following its jaw-droppingly bad second quarter performance that saw shares almost half. But not Englander. With share prices so depressed, Englander no doubt saw an opportunity with the purchase of 1,888,189 TEVA shares. The purchase represents an increase of 30,632% and takes the fund’s holding of the stock to 1,894,353 shares valued at $33.3 million.
However, JP Morgan analyst Chris Schott is moving in the opposite direction. The analyst downgraded his Hold rating on Teva to Sell on November 13. His $11 price target suggests the stock could fall by another 11% from the current low share price of just $12.51 (down almost 70% since the start of the year). Schott was disappointed by Teva’s just-released third quarter earnings results, even bearing in mind that expectations were already very depressed following the second quarter performance.
And now Schott has decided that Teva will have a long and difficult path to recovery without any “clear fundamental inflection in sight” to lighten the mood. There are no “quick fixes” and given this the stock is “fairly valued,” despite the “robust” valuation of Teva’s peers, the analyst concluded. The situation is worse because with such a limited cash position Teva has very little room to develop a new strategy. Particular woes for Teva include generic competition which is set to worsen, already tight expenses with limited room for further cuts and profitability erosion in 2018 and 2019 going into the Austedo and CGRP launches. The silver light in the cloud is the new CEO Kare Schulz says Schott.
Overall, TipRanks shows that Teva has a Hold analyst consensus rating from the Street. In the last three months, analysts have been very divided about this stock with 3 Buy, 12 Hold and 4 Sell ratings. The average analyst price target: $15.21, which works out at 21% upside from the current share price.
In the third quarter, Englander made a bullish move on this controversial pharma stock in Q3 with the addition of 1,129,663 VRX shares. Following this 148% stock increase, the fund now owns a total of 1,891,070 shares valued at over $27 million.
Four-star BMO analyst Gary Nachman is more cautious. He reiterated his hold rating with a $17 price target (18% upside) on November 13. However, Nachman did concede that Valeant impressed with better-than-expected earnings results for the third quarter. Indeed, VRX reported revenue for the quarter of $32 million, boosted by success in its Bausch & Lomb eye division as well as Branded Rx (notably Salix and dentistry). Nachman says: “VRX appears to have made some headway generating respectable growth in the B&L/Intl. and Branded Rx businesses, delivering better-than-expected cost savings, executing on some asset divestitures, and pushing out debt to 2020 and beyond.”
However, he chooses to remain on the sidelines due to ongoing concerns about “durability of growth in key franchises and continued headwinds with US Dermatology and US Diversified.” Nachman is also cautious about the extent of uptake from planned new launches which include the ongoing Siliq (psoriasis) launch, upcoming Vyzulta (glaucoma) launch in 4Q, and potential approvals/launches of Luminesse for ocular redness. At the same time, it is hard to forget that Valeant is still sitting on a massive debt pile of roughly $27 billion. From TipRanks we can see that Nachman has a reasonable track record on VRX with a 67% success rate and 4% average return across his 21 Valeant ratings.
Overall, analysts in general appear less than convinced about VRX’s prospects. Valeant has a Hold analyst consensus rating on TipRanks with 4 buy, 7 hold and 3 sell ratings over the last three months. These analysts have an average price target on the stock of $19 which stands at an upside of 33% from the current share price.
However, Englander displayed a more bearish sentiment on ACADIA Pharmaceuticals- slashing the holding of this stock by a whopping 90%. In the third quarter he sold 527,253 ACAD shares leaving the fund with 61,669 shares valued at $2.32 million.
Five-star Cowen & Co analyst Ritu Baral has a somewhat different approach to this stock- which specializes in treatments for central nervous system disorders. She reiterated her buy rating on ACAD on November 13 with a $50 price target up from $46 previously due to the stock’s “multiple positive commercial indicators.”
This bullish estimate works out at 80% upside from the current share price. Baral was impressed by the company’s strong earnings beat for the third quarter. In particular, ACAD enjoyed a beat and raise for its Parkinson’s disease psychosis (PDP) drug Nuplazid, and now Baral is confident that this drug’s “solid” commercial growth will continue to surge in the coming months. ACAD is planning to launch a single 34mg capsule in 2018 for Nuplazid which she believes will also help increase sales and compliance.
Baral concludes: “Management continues to execute on its commercial efforts and plans to roll out DTC ads in 4Q17. Next clinical data from ACAD will be from the Ph2 MDD trial in 2H18. We also note an ongoing Ph3 trial in DRP and Ph2 trials in schizophrenia.” Note, however, that while this analyst has a very strong track record across all her recommendations combined- on ACAD specifically she has seen limited success with a 35% success rate and -2% average return across her 24 ratings.
Nonetheless, the majority of analysts are displaying a bullish sentiment on the stock. In the last three months, ACAD has received 6 Buy ratings versus just 1 Hold rating giving it a ‘Strong Buy’ rating from the Street. Meanwhile the average analyst price target of $52.83 now suggests upside potential of over 90% from the current share price.