"Tracking Baker Brothers Portfolio – Q2 2021 Update"
"Baker Brothers’ 13F portfolio value decreased from $23.07B to $22.77B this quarter.The InVitae stake was reduced this quarter while increasing Apellis Pharma and Heron Therapeutics.The top three positions are Seagen, BeiGene, and Incyte Corporation and they add up to almost ~62% 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  filed on 08/16/2021. The 13F portfolio value decreased marginally from $23.07B to $22.77B this quarter. Although there are 120 positions in the 13F portfolio, the holdings are concentrated among a few large stakes. There are 19 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, BeiGene, Incyte, Kodiak Sciences, and ACADIA Pharmaceuticals. They add up to ~73% of the portfolio. Please visit our  series to get an idea of their investment philosophy and for the fund’s moves during Q1 2021.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 thru 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), and Alexion (acquired by AstraZeneca).Note: Regulatory filings since the quarter ended show them owning 1.425M shares of TScan Therapeutics (TCRX) from an IPO allocation at $15 per share. They also have ~4.4M shares from a non-voting series C convertible preferred that they held prior to the IPO.New Stakes:None.Stake Disposals:Alexion Pharmaceuticals (ALXN): ALXN was a 2.65% of the portfolio stake. The position came about as a result of Alexion’s acquisition of Synageva in May 2015. The deal called for $115 cash and 0.6581 shares of Alexion stock for each share of Synageva held. Baker Brothers had ~11.7M share stake in Synageva for which they received Alexion shares. Q2 2017 saw a roughly one-third stake increase at prices between ~$98 and ~$144. There was a ~55% selling last quarter at prices between ~$148 and ~$162 and the remainder was sold this quarter. The elimination followed the announcement of AstraZeneca’s cash-and-stock deal ($60 cash and 2.1243 AZN per ALXN held) for Alexion last December. The deal closed in July.Stake Increases:Seagen Inc. (SGEN): SGEN is currently the largest position by far at almost one-third 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 ~$173.Note: Baker Brothers controls ~26% of the business.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. Since then, the activity has been minor. The stock currently trades well below their latest purchase price ranges at $66.32.Note: Baker Brothers controls ~15% of the business.Kodiak Sciences (KOD): KOD is a large (top five) ~6% 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 $98.49. Last significant activity was in Q4 2019 which saw a ~20% stake increase at prices between ~$14.50 and ~$76.Note 1: Regulatory filings since the quarter ended show them owning 14.72M shares (28.5% of the business). This is compared to 11.57M shares in the 13F report. The increase happened at prices between ~$84 and ~$96.Note 2: In December 2019, Baker Brothers stuck a deal for a capped 4.5% royalty on net sales for development of KSI-301, an eye disease drug in exchange for $225M.Apellis Pharma (APLS) and Heron Therapeutics (HRTX): These two positions saw substantial increases this quarter. The small 0.63% APLS stake saw a ~36% increase at prices between ~$41 and ~$65 and the stock currently trades well below that range at $33.01. HRTX is a 0.55% of the portfolio position that saw a ~36% stake increase at prices between ~$13.25 and ~$18.50. The stock is now well below that range at $10.55.Note: Baker Brothers has a ~8% ownership stake in Heron Therapeutics.Stake Decreases:InVitae Corporation (NVTA): Baker Brothers’ original investment in NVTA goes back to funding rounds prior to the Feb 2015 IPO. Shares started trading at ~$20 and currently goes for $26.52. Recent activity follows. Q4 2018 saw a ~55% selling at prices between ~$9.50 and ~$15. The position was rebuilt in Q3 2019 at prices between ~$18.50 and ~$27. Q2 & Q4 2020 saw a two-thirds stake increase at prices between ~$12.50 and ~$57.50. There was a ~35% reduction this quarter at prices between ~$26 and ~$40.50. The position is now at 1.52% of the portfolio.Note: Baker Brothers controls ~6% of the business.Kept Steady:BeiGene Limited (BGNE): The large (top three) 17.59% BGNE stake has been in the portfolio since their US listing in Q1 2016. Shares started trading at ~$24 and currently goes for ~$354. 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.ACADIA Pharmaceuticals (ACAD): The 4.49% ACAD stake was established in the 2012-2013 timeframe at very low prices. 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 $16.79.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. Last major activity was a ~60% stake increase in 2017 at prices between ~$80 and ~$95. The stock is now at $75.88 and the stake is at 2.78% of the portfolio.Ascendis Pharma A/S (ASND): The bulk of the current ~2% of the portfolio stake in ASND was built in 2017 at prices between ~$20 and ~$40. Last major activity was a ~20% stake increase in Q1 2019 at prices between ~$62 and ~$129. The stock currently trades at ~$162.Note: Baker Brothers controls 6.6% of the business.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 last quarter at prices between ~$268 and ~$380. The stock currently trades at ~$297 and the stake is at 1.48% of the portfolio.Prelude Therapeutics (PRLD): PRLD is a 1.90% of the portfolio position. The stake goes back to funding rounds prior to their IPO last September. Shares started trading at ~$33 and currently goes for $31.61. There was  a marginal increase last quarter.Note: Baker Brothers controls ~29% of the business. Julian Baker joined the board in January 2021.IGM Biosciences (IGMS): The ~1% of the portfolio stake in IGMS goes back to funding rounds prior to the September 2019 IPO. The position has remained almost steady since. There was a marginal increase last quarter. Shares started trading at ~$18 and currently goes for $63.26.AbCellera Biologics (ABCL): ABCL had an IPO in December 2020. Shares started trading at ~$49 and currently goes for $16.43. Baker Brothers’ stake goes back to funding rounds prior to the IPO.BioCryst Pharmaceuticals (BCRX): BCRX is a very long-term stake that has been in the portfolio since 2004. It is still a very small position at 0.88% of the portfolio. 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 $13.31.Note: Baker Brothers controls ~10% of BioCryst Pharmaceuticals.Madrigal Pharmaceuticals (MDGL) and Mirati Therapeutics (MRTX): These two small (less than ~1% of the portfolio each) stakes were kept steady this quarter. Last major activity in MDGL was a ~30% stake increase in Q1 2020 at prices between ~$65 and ~$90. The stock is now at $78.83. Last major activity in MRTX was a ~50% selling in Q3 2019 at prices between ~$76 and ~$106. The stock currently trades at ~$170.Note: Baker Brothers controls ~10% of Madrigal Sciences.Amarin Corp plc (AMRN): The original AMRN stake was built in Q3 2016 at prices between ~$2.15 and ~$3.15. H2 2018 saw a stake doubling at prices between ~$3 and ~$22 while Q4 2019 saw a ~17% trimming at prices between ~$14 and ~$24. That was followed with a similar reduction over the last two quarters  at prices between ~$3.60 and ~$8.80. The stock currently trades at $4.99.Note: Baker Brothers controls ~7% of Amarin Corp.Global Blood Therapeutics (GBT): GBT is a small 0.49% of the portfolio position built over the last two quarters at prices between ~$37.50 and ~$74.50. The stock currently trades well below those ranges at $26.12.The rest of the stakes are very small. Positions that are between 0.10% and 0.50% of the portfolio are Achilles Therapeutics plc (ACHL), Adaptimmune Therapeutics plc (ADAP), ADC Therapeutics SA (ADCT), Aeglea BioTherapeutics (AGLE), Aerovate Therapeutics (AVTE), Aligos Therapeutics (ALGS), Alkermes plc (ALKS), Allakos (ALLK), Atreca (BCEL), Axsome Therapeutics (AXSM), BioAtla (BCAB), Cerus Corporation (CERS), DBV Technologies SA (DBVT), Design Therapeutics (DSGN), Forma Therapeutics (FMTX), Fulgent Genetics (FLGT), Horizon Therapeutics (HZNP), Immatics NV (IMTX), Immunocore Holdings plc (IMCR), Insmed Incorporated (INSM), Instil Bio (TIL), Kiniksa Pharmaceuticals (KNSA), Kymera Therapeutics (KYMR), Krystal Biotech (KRYS), Legend Biotech (LEGN), Merus NV (MRUS), Neoleukin Therapeutics (NLTX), Neurocrine Biosciences (NBIX), Novavax (NVAX), Nurix Therapeutics (NRIX), Opthea Limited (OPT), Pacific Biosciences (PACB), Reata Pharmaceuticals (RETA), Rhythm Pharmaceuticals (RYTM), Talis Biomedical Corporation (TLIS), Ultragenyx Pharmaceutical (RARE), Verastem (VSTM), Verve Therapeutics (VERV), and Zymeworks (ZYME).Note: Baker Brothers has significant ownership stakes in the following businesses – Aeglea BioTherapeutics (AGLE), IGM Biosciences (IGMS), Immunocore (IMCR), Kystal Biotech (KRYS), Mereo Biopharma (MREO), Neoleukin Therapeutics (NLTX), Opthea Ltd. (OPT), Otonomy (OTIC), Rhythm Pharma (RYTM), Talis Biomedical (TLIS), Verastem (VSTM), and Zymeworks (ZYME).The spreadsheet below highlights changes to Baker Brothers’ 13F holdings in Q2 2021:Source: John Vincent. Data constructed from Baker Brothers’ 13F filings for Q1 2021 and Q2 2021.Regulatory filings through 7/5/2021: 13D – 5/20 – Immunocore – IMCR – 3.35M shares – 7.7% of business. Also 13G – 2/16. 13D/A – 5/18 – INCY – 32.16M shares – 14.6% of business. 13D/A – 5/18 – SGEN - 47.37M shares – 26.1% of business. 13G/A – 5/10 – Verastem – VSTM – 18.69M shares – 10.9% of business. 13G – 4/12 – Otonomy – OTIC – 7.22M shares – 14.9% of business. 13G/A – 4/9 – Idera Pharma – IDRA – 2.07M shares – 4.9% of business. 13G/A – 1/29 – 4.6M shares – 12% of business. 13D/A – 4/2 – Talis Biomedical – TLIS – 37.43M shares – 67.5% of business, 13D – 2/26 - similar. 13D/A – 3/19 – Aeglea BioTherapeutics – AGLE – 4.9M shares – 9.9% of business, 13D – 3/5 – similar, 13G/A – 2/16 - similar. 13D/A – 3/5 – KOD – 14.05M shares – 27.4% of business. 13D/A – 11/24 – similar. 13G/A – 2/16 – Ascendis Pharma – ASND – 3.54M shares – 6.6% of business. 13G/A – 2/16 – Heron Therapeutics – HRTX – 8.06M shares – 8.7% of business. 13G/A – 2/16 – Invitae – NVTA – 15.77M shares – 8.9% of business. 13G/A – 2/16 – Rhythm Pharma – RYTM – 2.31M shares – 5.2% of business. 13G/A – 2/16 – Madrigal Pharma  – MDGL – 1.5M shares – 9.7% of business. 13G – 2/16 – Mereo Biopharma – MREO – 39.63M shares – 11.4% of business. 13G/A – 2/16 – AMRN - ~28M shares - 7.2% of business. 13G/A – 2/16 – BCRX – 18.1M shares – 9.95% of business. 13G/A – 2/16 – InflaRx NV – IFRX – 856K shares – 3% of business. 13G – Opthea Ltd. – OPT – 33.96M shares – 9.8% of business. 13G/A – 2/16 – Cerus Corp – CERS – 13.71M shares – 8.2% of business. 13G/A – 2/16 – Krystal Biotech – KRYS – 699K shares – 3.5% of business. 13G – 2/5 – ZYME – 4.9M shares – 9.99% of business, 13D/A – 1/29 - similar. 13D/A – 1/29 – IGMS – 3.16M shares – 12.4% of business. 13D/A – 1/5 – similar. 13D/A – 12/11/2020 – similar. 13D/A – 1/29 – Prelude Therapeutics – PRLD – 10.13M shares – 28.8% of business. 13D/A – 12/23/2020 – Neoleukin Therapeutics – NLTX – 4.23M shares – 9.98% of business. 13D/A – 12/4/2020 – BGNE – 153.9M ordinary shares (each ADS is 13 ordinary shares) – 13% of business."