The Baker Brothers Advisors LP were busy adding to their portfolio in the fourth quarter, while most investors were dumping stocks. The fund was aggressively adding to existing holding while also initiating several new positions. However, despite significant additions, the fund sold a substantially low number of holdings.
The stark contrast between the buying and selling throughout the quarter would at least suggest that the fund was taking advantage of the falling prices in the equity market. Biotech stocks were one of the hardest hit sectors during the market downturn, with the SPDR S&P Biotech ETF (XBI) dropping 25% versus the SPDR S&P 500 ETF (SPY) decline of 14%.
During the quarter the Baker Brothers added 11.3 million shares to their already significant stake in Acadia Pharmaceuticals, Inc. (ACAD). The Bakers raised the total number of shares held to 39.7 million shares or 31.7% of the company. The dollar value of the holding is now worth $650 million, and it places the stock amongst the fund’s top-10 holdings. Acadia held a secondary offering in November, of which the Bakers acquired many of the newly issued shares.
The Baker Brothers also increased their stake in Amarin Corp. PLC ADR (AMRN) by 25%, buying an additional 8.5 million. The Baker Brothers now own about 13.2% of the company, or 42.6 million shares, a value of about $579.7 million that places it right behind Acadia in the portfolio. Amarin’s shares rocketed higher in November after data showed its drug Vascepa reduced the number of cardiovascular events.
During the fourth quarter, the Baker Brothers started a new position in an initial public offering Kodiak Sciences Inc. (KOD), which is working on treatments for retinal diseases. The fund bought 9.1 million shares of the stock, a value worth about $65 million. It gives the Baker Brothers a massive 24.4% stake in the company.
Despite all the additions to the portfolio, the Baker Brothers did very little selling during the quarter. The most prominent position they sold during the quarter was their stake in Sage Therapeutics, Inc. (SAGE), which had a value of $80 million at the end of the third quarter. Additionally, they sold out of their $9.3 million holding in Erytech Pharma SA (ERYP) at the end of the third quarter, as well as holdings for Momenta Pharmaceuticals, Inc. (MNTA) and Ovid Therapeutics Inc. (OVID).
It seems that the steep pullback in the equity market in the fourth quarter had a minimal impact on the Baker Brothers’ psychology. It even looks as if they may have used that volatility in the market to opportunistically buy stocks. Only time will tell if it was the right call.