IMCR - Tracking Baker Brothers Portfolio - Q4 2022 Update

2023-04-04 22:01:45 ET

Summary

• Baker Brothers’ 13F portfolio value increased from $15.27B to $16.65B this quarter.
• Replimune Group stake was substantially increased this quarter.
• The top three positions are Seagen, Incyte Corporation, and BeiGene, and they add up to almost ~69% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Baker Brothers' 13F stock portfolio on a quarterly basis. It is based on Baker Brothers' regulatory 13F Form filed on 2/14/2023. The 13F portfolio value decreased from $15.27B to $16.65B. Although there are ~120 positions in the 13F portfolio, the holdings are concentrated among a few large stakes. There are 17 positions that are significantly large (more than 0.5% of the portfolio each) and they are the focus of this article. The largest five stakes are Seagen, Incyte, BeiGene, BioMarin Pharma, and ACADIA Pharma. They add up to ~78% of the portfolio. Please visit our Tracking Baker Brothers Portfolio series to get an idea of their investment philosophy and our previous update the fund's moves during Q3 2022.

Baker Brothers, a biotech investment firm, was founded by Julian & Felix Baker in 2000. Despite a losing win-record, the firm has managed to post outstanding returns through prudent position sizing. As a percentage of AUM, allocation to the highest conviction picks can be very high at over 30%. Over the years, the firm had a number of home runs as the invested firms got acquired at huge premiums. Recent M&A winners include Pharmacyclics (acquired by AbbVie), Synageva (acquired by Alexion), Salix (acquired by Valeant), Alexion (acquired by AstraZeneca), Global Blood Therapeutics (acquired by Pfizer), and ChemoCentryx (acquired by Amgen).

Stake Disposals:

Global Blood Therapeutics and ChemoCentryx Inc.: In August, Pfizer ( PFE ) agreed to acquire Global Blood Therapeutics in a $68.50 per share all-cash deal. The transaction closed in October. Amgen ( AMGN ) acquired ChemoCentryx in a $52 per share all-cash deal that closed in October.

Stake Increases:

Ascendis Pharma A/S ( ASND ) : The bulk of the current 3.63% of the portfolio stake in ASND was built in 2017 at prices between ~$20 and ~$40. Q3 2021 saw a ~28% stake increase at prices between ~$113 and ~$177. The stock currently trades at $71.20. There was a minor ~2% stake increase this quarter.

Note: Baker Brothers controls ~8.7% of the business.

Madrigal Pharmaceuticals ( MDGL ) : The last major activity in MDGL was a ~30% stake increase in Q1 2020 at prices between ~$65 and ~$90. The stock is now at ~$241. There was a minor ~3% stake increase this quarter.

Note: Baker Brothers controls ~9% of Madrigal Sciences.

Rhythm Pharma ( RYTM ) : The 1.11% of the portfolio stake in RYTM saw a ~47% stake increase during Q2 2022 at prices between $4.30 and $30.85 and the stock is now at ~$18. This quarter saw a minor ~5% further increase.

Note: They have a ~11.3% ownership stake in Rhythm Pharma.

Replimune Group ( REPL ): The very small 0.75% REPL stake saw a ~18% increase this quarter at prices between ~$17 and ~$28. The stock is now at $16.91.

Note: they have a ~10% ownership stake in the business.

Kept Steady:

Seagen Inc. ( SGEN ) : SGEN is currently the largest position by far at ~36% of the entire portfolio. It is a very long-term stake that has been in the portfolio for over fifteen years. The position was built to ~20.5M shares in the 2004-2011 timeframe at prices between low-single-digits and low-20s. Q1 2014 to Q1 2016 saw another stake doubling at prices between ~$30 and ~$55. Since then, the activity has been minor. The stock currently trades at ~$205.

Note: They have ~25% ownership stake in the business. Last month, Pfizer agreed to acquire Seagen in a $229 per share all-cash deal.

Incyte Corporation ( INCY ) : INCY was already a 1.67M share stake in their first 13F filing in Q2 2003. The stake had roughly doubled by 2006. The 2007-2008 timeframe saw the position increased from ~3.2M shares to ~11.1M shares at prices in the high single digits. Major activity in the last decade follows. Q3 2015 saw a ~30% stake increase at prices between ~$105 and ~$130. Q1 2016 saw another ~20% stake increase at prices between ~$65 and ~$100. That was followed with a ~45% stake increase in Q1 2017 at prices between ~$100 and ~$150. There was a ~13% stake increase over the two quarters through Q1 2022 at prices between ~$63 and ~$80. The stock currently trades at $72.65, and it is a top-three stake at 17.44% of the portfolio.

Note: Baker Brothers controls ~16.3% of the business.

BeiGene Limited ( BGNE ) : The large (top three) 15.41% BGNE stake has been in the portfolio since their US listing in Q1 2016. Shares started trading at ~$24 and currently goes for ~$215. Q4 2016 saw a stake doubling at prices between ~$28 and ~$36. H1 2018 saw the stake built from ~3.8M shares to ~12M shares at prices between ~$100 and ~$215. Since then, the activity has been minor.

Note: Baker Brothers controls ~13% of the business.

BioMarin Pharmaceutical ( BMRN ) : A small stake in BMRN was first purchased in 2006 but was eliminated the following year at higher prices. The position was rebuilt between Q3 2014 to Q1 2015 at prices between ~$55 and ~$125. The last major activity was a ~60% stake increase in 2017 at prices between ~$80 and ~$95. The stock is now at $95.43, and the stake is at 4.74% of the portfolio.

ACADIA Pharmaceuticals ( ACAD ) : The ~4% ACAD stake was established in the 2012-2013 timeframe at very low prices. The last major activity was in Q4 2018 when there was a ~40% stake increase at prices between ~$14 and ~$22. The stock currently trades at $18.48. There was a marginal increase in Q2 2022.

Note: They have a ~26% ownership stake in the business.

BioCryst Pharmaceuticals ( BCRX ) : BCRX is a very long-term stake that has been in the portfolio since 2004. It is still a small position at 0.88% of the portfolio. The last major activity was in 2019 when Q2 to Q4 saw a roughly one-third selling at prices between ~$1.60 and ~$8.70. The stock currently trades at $8.30.

Note: Baker Brothers controls ~10% of BioCryst Pharmaceuticals.

Immunocore Holdings plc ( IMCR ): IMCR is a very small 0.86% of the portfolio position that was kept steady this quarter. They have a ~10% ownership stake in the business.

Akero Therapeutics ( AKRO ) : AKRO is a 0.78% of the portfolio stake built last quarter at prices between ~$10 and ~$34. The stock currently trades at $37.78.

Note: They have a ~5% ownership stake in the business.

Kodiak Sciences ( KOD ) : KOD is now a small 0.74% of the portfolio position. The original stake goes back to funding rounds prior to its Q4 2018 IPO. Shares started trading at ~$10 and currently goes for $4.97. The last significant activity was in Q4 2019 which saw a ~20% stake increase at prices between ~$14.50 and ~$76. They have a ~30% ownership stake in the business. Q2 2022 saw a ~9% stake increase.

Note: In December 2019, Baker Brothers struck a deal for a capped 4.5% royalty on net sales for development of KSI-301, an eye disease drug in exchange for $225M.

Horizon Therapeutics ( HZNP ) : HZNP is a small 0.66% of the portfolio stake that saw a ~50% stake increase in Q1 2022 at prices between ~$86 and ~$110. That was followed with a ~28% increase next quarter at prices between ~$80 and ~$116. The stock currently trades at ~$108. There was a ~15% trimming this quarter.

Note: In December, Amgen agreed to acquire HZNP for $116.50 per share in cash.

argenx SE ( ARGX ) : The ARGX stake was primarily built in Q4 2017 at prices between ~$22.50 and ~$63. There was a ~10% stake increase in Q1 2021 at prices between ~$268 and ~$380. The last quarter saw a ~75% reduction at prices between ~$343 and ~$396. The stock currently trades at ~$367 and the stake is at 0.64% of the portfolio.

AbCellera Biologics ( ABCL ) : ABCL had an IPO in December 2020. Shares started trading at ~$49 and currently goes for $7.21. Baker Brothers' stake goes back to funding rounds prior to the IPO.

Mirati Therapeutics ( MRTX ) : The last major activity in MRTX was a ~50% selling in Q3 2019 at prices between ~$76 and ~$106. The stock currently trades at $37.34.

Note: Baker Brothers has significant ownership stakes in the following businesses - 2seventy bio ( TSVT ), Achilles Therapeutics ( ACHL ), Aeglea BioTherapeutics ( AGLE ), Aerovate ( AVTE ), Aravive Inc. ( ARAV ), Biomea Fusion ( BMEA ), Cabaletta Bio ( CABA ), Cerus ( CERS ), Cyteir Therapeutics ( CYT ), HOOKIPA Pharma ( HOOK ), Immatics ( IMTX ), Inozyme Pharma ( INZY ), Kala Pharma ( KALA ), Kymera Therapeutics ( KYMR ), Mereo BioPharma ( MREO ), Nurix Therapeutics ( NRIX ), Opthea Ltd. ( OPT ), Surrozen ( SRZN ), Talis Biomedical ( TLIS ), Verastem ( VSTM ), and Zymeworks ( ZYME ).

The spreadsheet below highlights changes to Baker Brothers' 13F holdings in Q4 2022:

For further details see: