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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 2/14/2024. The 13F portfolio value decreased from $17.35B to $8.79B. Although there are ~120 positions in the 13F portfolio, the holdings are concentrated among a few large stakes. There are 21 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 Incyte, BeiGene, ACADIA Pharma, Madrigal Pharma, and Rhythm Pharma. They add up to ~72% of the portfolio. Please visit our Tracking Baker Brothers Portfolio series to get an idea of their investment philosophy and our previous update for the fund’s moves during Q3 2023.
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), ChemoCentryx (acquired by Amgen), and Seagen (acquired by Pfizer).
Cerevel Therapeutics (CERE): CERE is a small 0.77% of the portfolio merger-arbitrage stake purchased this quarter at prices between ~$20.25 and ~$42.50 and the stock currently trades at $41.22. AbbVie (ABBV) is acquiring Cerevel Therapeutics in a $45 per share cash transaction announced in December.
Seagen Inc. (SGEN): SGEN was the largest position by far at ~55% of the entire portfolio. It was a very long-term stake that had 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. Last March, Pfizer (PFE) agreed to acquire Seagen in a $229 per share all-cash deal that closed this quarter.
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. 2017 saw a ~60% stake increase at prices between ~$80 and ~$95. Q1 2023 saw the position reduced by ~50% at prices between ~$88 and ~$117. The disposal this quarter was at prices between ~$76 and ~$99. The stock is now at ~$86.
Madrigal Pharmaceuticals (MDGL): The last major activity in MDGL was a ~30% stake increase in Q1 2020 at prices between ~$65 and ~$90. This quarter saw a similar increase at prices between ~$120 and ~$237. The stock is now at ~$249.
Mirati Therapeutics (MRTX): The MRTX stake saw a ~190% stake increase this quarter. Last October, Bristol Myers Squibb (BMY) agreed to acquire Mirati for $58 per share cash and a CVR worth up to $12 per share. That transaction closed in January.
Kymera Therapeutics (KYMR): The 1.74% KYMR stake was built during H1 2023 at prices between ~$14 and ~$35. This quarter saw a ~26% stake increase at prices between ~$11 and ~$27. The stock currently trades at $41.90.
Revolution Medicines (RVMD): the 1.68% RVMD stake was increased by ~90% this quarter at prices between ~$18 and ~$34. The stock is now at $29.94.
AbCellera Biologics (ABCL): ABCL had an IPO in December 2020. Shares started trading at ~$49 and currently go for $4.81. Baker Brothers’ stake goes back to funding rounds prior to the IPO. There was a ~60% stake increase during Q2 2023 at prices between $5.66 and $7.60. That was followed by a ~25% increase in the last quarter at prices between $4.60 and $7.95. This quarter also saw a ~10% stake increase.
Note: they have an ~8% ownership stake in ABCL.
Replimune Group (REPL): The 0.92% REPL stake saw an ~18% increase during Q4 2022 at prices between ~$17 and ~$28. This quarter saw the position doubled at prices between ~$7 and ~$17. The stock is now at $8.61.
Note: they have a ~10% ownership stake in the business.
Ultragenyx Pharma (RARE), Immatics NV (IMTX), and Denali Therapeutics (DNLI): These small (less than ~1% of the portfolio each) stakes were increased this quarter.
Note: they have a ~7% ownership stake in Immatics NV.
BeiGene Limited (BGNE): The large (top three) ~22% BGNE stake has been in the portfolio since their US listing in Q1 2016. Shares started trading at ~$24 and currently go for ~$160. 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. There was a ~9% trimming this quarter.
Note: Baker Brothers controls ~10.2% of the business.
Rhythm Pharma (RYTM): The 3.35% 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 $41.24. The last three quarters saw minor increases while this quarter there was a ~5% trimming.
Note: They have an ~11% ownership stake in Rhythm Pharma.
Roivant Sciences (ROIV): The small ~1% of the portfolio ROIV stake was built during the last two quarters at prices between ~$7 and ~$13. This quarter saw a ~36% selling at prices between ~$8.50 and ~$12. The stock currently trades at $11.60.
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 0.69% of the portfolio. Q2 to Q4 2019 saw a one-third selling at prices between ~$1.60 and ~$8.70. That was followed by a ~20% selling this quarter at prices between ~$5 and ~$7. The stock currently trades at $5.41.
Note: Baker Brothers controls ~5% of BioCryst Pharmaceuticals.
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 $58.90, and it is now the top stake at ~26% of the portfolio. There was a marginal increase in the last three quarters.
Note: Baker Brothers controls ~16.3% of the business.
ACADIA Pharmaceuticals (ACAD): The 15.27% 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 $23.81.
Note: They have a ~26% ownership stake in the business.
Immunocore Holdings plc (IMCR): IMCR is a ~2% of the portfolio position that was kept steady this quarter. They have a ~10% ownership stake in the business.
Entrada Therapeutics (TRDA): The very small 0.84% stake in TRDA was kept steady this quarter.
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. Q3 2022 saw a ~75% reduction at prices between ~$343 and ~$396. That was followed by a ~45% selling in the last quarter at prices between ~$369 and ~$548. The stock currently trades at ~$389 and the stake is at 0.65% of the portfolio.
Akero Therapeutics (AKRO): AKRO is a 0.63% of the portfolio stake built during Q3 2022 at prices between ~$10 and ~$34. The stock currently trades at $30.52.
Note: They have a ~4.3% ownership stake in the business.
Kodiak Sciences (KOD): KOD is now a small 0.60% 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 $5.87. 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.
Note: Baker Brothers has significant ownership stakes in the following businesses – 2seventy Bio (TSVT), Adaptimmune (ADAP), Achilles Therapeutics (ACHL), Athira Pharma (ATHA), Aerovate (AVTE), Aligos (ALGS), Aravive Inc., Biomea Fusion (BMEA), Bicycle Therapeutics (BCYC), Cabaletta Bio (CABA), Cerus Pharma (CERS), Heron Therapeutics (HRTX), HOOKIPA Pharma (HOOK), Kala Baio (KALA), Monte Rosa (GLUE), Nurix Therapeutics (NRIX), Opthea Ltd. (OPT), Sagimet Bio (SGMT), and Zymeworks (ZYME).
The spreadsheet below highlights changes to Baker Brothers’ 13F holdings in Q4 2023:
Baker Brothers Portfolio - Q4 2023 13F Report Q/Q Comparison (John Vincent (author))
Source: John Vincent. Data constructed from Baker Brothers’ 13F filings for Q3 2023 and Q4 2023.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.