Julie Lamb

About the Author Julie Lamb

Julie graduated with a Bachelor of Arts in English with a focus on creative writing from the University of Louisville.

Taking a Page Out of David Shaw’s Investment Book: MannKind Corporation (MNKD), Valeant Pharmaceuticals Intl Inc (VRX), Gilead Sciences, Inc. (GILD)

David E. Shaw, quant genius and hedge fund manager billionaire extraordinaire founded DE Shaw as a sharp mathematical models-meets-algorithms dual-powered firm. DE Shaw in fact was on of the first of its kind, with Shaw generating his billionaires from a unique slant of quantitative savvy. It is a method that seems to be working fluidly for the hedge fund manager, whose firm collected roughly $400 million just last year alone. This kind of quant cleverness and high financial performance have landed Shaw on the LCH Investments’ top 20 hedge fund managers list thanks to DE Shaw’s $25.3 billion in impressive net gains.

When taking a gander at the biotech sector, what does a numbers master whose billions are rooted in keen numbers know-how think of players like MannKind Corporation (NASDAQ:MNKD), Valeant Pharmaceuticals Intl Inc (NYSE:VRX), and Gilead Sciences, Inc. (NASDAQ:GILD)? Let’s dive in to Shaw’s latest up-and-down moves in the biotech world:

MannKind Corporation

MannKind’s cash flow is continuing to dry up the well, and investors are starting to question whether there is enough staying power behind Afrezza, the biotech firm’s rapid acting inhaled insulin approved to improve glycemic control in adult patients with diabetes mellitus. With sales buried beneath 300 weekly prescriptions and looming quarterly revenue results that stand to be the weakest since the drug launched more than two years prior, uncertainty swims around MNKD’s prospects.

Why is MNKD’s cash footing so dire? Let’s not forget that the firm has $20 million in debt payments hanging with a four-month deadline pressing overhead. Less than a year ago, MannKind turned to dilution as a Plan B, offering approximately 50 million shares in its stock at a discount of 30% to where the shares were trading at the time. Afrezza sales have subsequently sunk even further since the dilution, and cash does not look much better.

However, when glancing at the most recent SEC filing, DE Shaw not only bets on MannKind, but does so in a big way, lifting 347% of its holding in MNKD to 5,275,095 shares worth $3,359K. Perhaps Shaw sees M&A potential that has him daring to risk the numbers.

Valeant Pharmaceuticals Intl Inc

Valeant has always been a tricky bird, vacillating between strength in assets and hawkish legal woes that hoist along with them a murky financial canvas at best.

When it comes to Valeant, numbers master David Shaw understands the risky financial boat the troubled biotech giant is attempting to commandeer, subsequently pulling back on 24% of his holding in the stock, leaving 1,661,460 shares left worth $24,124k.

But is there hope for the giant yet? Just two days ago, Bausch & Lomb, leading global eye health company and Valeant’s wholly owned subsidiary revealed it had been granted 510(K) clearance from the FDA for its next generation phacoemulsification cataract platform: the Stellaris Elite Vision Enhancement System.

Shaw still keeps his holding in VRX, but in reducing his hedge funds’ exposure by 24%, the brilliant quant guru awaits to see Valeant’s numbers match its clinical vision.

TipRanks analytics demonstrate VRX as a Hold. Out of 14 analysts polled by TipRanks in the last 3 months, 3 are bullish on Valeant stock, 9 remain sidelined, and 2 are bearish on the stock. With a return potential of nearly 59%, the stock’s consensus target price stands at $15.40.

Gilead Sciences, Inc.

Gilead sent exciting waves today through the biotech sphere upon revealing the FDA has approved supplemental indications of its tables for Harvoni and Sovaldi, designed to treat chronic hepatitis C virus (HCV) infection in adolescents without cirrhosis or with compensated cirrhosis, 12 years older and up.

Gilead’s prospects clearly show promise to Shaw, whose hedge fund just upped its holding in GILD 280% to 4,629,123 shares worth $331,491k. Though both drugs carry a boxed warning highlighting a risk for reactivation of the hepatitis B virus in HCV and HBV co-infected patients, Shaw seems to see more advantage than disadvantage.

Dr. Karen Murray, a professor of pediatrics at the University of Washington School of Medicine and Seattle Children’s commends this one-two drug approval punch as a clinical stride for a patient population in need, noting, “The approvals of Sovaldi and Harvoni for pediatric patients will enable adolescents to finally benefit from interferon-free treatment for HCV infection,” adding, “These therapies address a significant unmet medical need and represent an important advance for HCV-infected adolescents.”

Spotlighting a long-term vision to prospectively cure suffering HCV patients, Dr. Norbert Bischofberger, Executive Vice President of Research and Development as well as Chief Scientific Officer at Gilead notes, “Gilead’s goal is to develop and deliver treatments that provide all patients with HCV the potential to be cured.”

Why is this so significant? “For the first time, children 12 and older in the United States with genotypes 1 through 6 chronic HCV infection now have options of two direct-acting antiviral regimens that offer high cure rates while eliminating the need for interferon injections,” asserts Bischofberger.

With the approval of not just one, but two key Gilead regimens, Shaw looks forward with soaring confidence on the biotech giant’s massive potential.

TipRanks analytics exhibit GILD as a Buy. Based on 18 analysts polled by TipRanks in the last 3 months, 12 rate a Buy on Gilead stock while 6 maintain a Hold. The 12-month average price target stands at $81.75, marking a 22% upside from where the shares last closed.

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