Many traders know of Bruce Kovner, the cab driver turned multi-billionaire, from his interview with Jack Schwager in the classic investment book Market Wizards. As founder and Chairman of Caxton Associates from 1983 to 2011, Kovner reportedly averaged 21% annual returns. Kovner managed as much as $14 billion in global macro strategies. So when Kovner’s family office Caxton Corp added to its Strongbridge Bio stake, it caught my eye.
In a Form 4 filing after market hours yesterday, Caxton disclosed buying 1.48M shares of Strongbridge Biopharma plc (SBBP). The purchases were made at an average price of $2.25. The buying represented a 22% increase in the fund’s previous position.
Caxton Corp files quarterly 13F reports, despite being a private entity. However, Kovner’s family office reported just $94.7M in long stock positions as of Q2. That’s only a fraction of Kovner’s reported $5.3B net worth.
Nonetheless, after Caxton Corp added to its Strongbridge Bio stake, SBBP was the fund’s #2 position. Kovner’s family office holds 8.06M shares of SBBP, making it the stock’s top holder with about a 14.80% position. Kovner’s family office first purchased SBBP shares in June of 2016. The recent buying represented the fund’s first purchases since Dec. of 2018.
Caxton Corp added to its Strongbridge Bio stake, buying $3.3M of shares in a secondary offering.
Strongbridge Biopharma plc is a commercial biotechnology company, founded in 1996, that is focused on developing treatments for rare diseases. SBBP has three drugs in its portfolio, however interest is highest in Recorlev, a drug for the treatment of Endogenous Cushing’s Syndrome. The company estimates that 25,000 patients in the US are currently diagnosed with Cushing’s disease, a rare endocrine disorder characterized by sustained elevated cortisol levels.
On September 9, 2020 SBBP held a conference call to announce positive results of Recorlev’s Phase 3 trial. SBBP management guided investors to expect $250MM-$350MM/year in peak Recorlev sales. This Seeking Alpha analysis concludes that SBBP’s estimate of Recorlev sales “appears very reasonable.” If such revenues are realized, SBBP, with a current market cap of $149MM, looks to be significantly undervalued.
News of Strongbridge Bio’s $25M offering knocked SBBP down over 21% to $2.25. But with investing legend Bruce Kovner’s fund a buyer at that level, the stock may indeed be a bargain.
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