Billionaire investor Steven Cohen (Trades, Portfolio) disclosed earlier this week his firm, Point72 Asset Management, established a 14.37% stake in Regulus Therapeutics Inc. (RGLS, Financial) and a 7.96% position in Allena Pharmaceuticals Inc. (ALNA, Financial) on Dec. 4.
In order to generate superior risk-adjusted returns, the guru's Stamford, Connecticut-based firm invests in a wide range of asset classes worldwide. Its long-short strategy is based on bottom-up research processes focusing on fundamentals and macroeconomic conditions.
According to GuruFocus Real-Time Picks, a Premium feature, Cohen invested in 5.63 million shares of Regulus Therapeutics, allocating 0.02% of the equity portfolio to the stake. The stock traded for an average per-share price of 76 cents on the day of the transaction.
He previously sold out of the stock in the third quarter of 2018, when it traded around $3.37 per share.
The Carlsbad, California-based biopharmaceutical company, which focuses on developing first-in-class drugs that target microRNAs to treat a broad range of diseases, has a $49.64 million market cap; its shares were trading around $1.26 on Friday with a price-book ratio of 5.96 and a price-sales ratio of 9.17.
According to the GF Value Line, the stock appears to be a potential value trap.
On Nov. 5, Regulus Therapeutics reported its third-quarter results, posting a net loss of 4 cents per share on $5 million in revenue. It also had $17.8 million in cash and cash equivalents as of Sept. 30.
In a statement, CEO Jay Hagan said he is pleased with the company's progress.
"Next year is shaping up to be an important one for Regulus, with data from the first cohort anticipated by end of Q1 2021," he said. "We also achieved $10 million in milestones from our collaboration with Sanofi enabling us to reduce our outstanding debt to $4.7 million and extend the interest-only period through the end of 2021."
The company also announced a $19.4 million private placement of equity on Dec. 1 to existing institutional and other accredited investors as well as new institutional investors. The investors agreed to purchase approximately 24.3 million shares of Regulus' common stock along with accompanying warrants to purchase up to an aggregate of around 18.2 million shares at a combined purchase price of 71.58 cents per share. The offering closed on Dec. 8.
GuruFocus rated Regulus' financial strength 2 out of 10. In addition to debt ratios that are underperforming versus other industry players, the extremely low Altman Z-Score of -21.06 warns the company could be in danger of bankruptcy if it does not improve its liquidity. It has also recorded a decline in revenue per share over the last five years.
The company's profitability fared even worse with a 1 out of 10 rating. In addition to a declining operating margin, Regulus has negative returns that underperform a majority of its competitors and a low Piotroski F-Score of 3, which suggests business conditions are in poor shape.
The guru picked up 4 million shares of Allena Pharmaceuticals, dedicating 0.03% of the equity portfolio to the stake. Shares traded for an average price of $1.29 each on the day of the transaction.
The late-stage, clinical biopharmaceutical company headquartered in Newton, Massachusetts, which develops oral enzyme therapeutics to treat metabolic and kidney disorders, has a market cap of $64.32 million; its shares were trading around $1.28 on Friday with a price-book ratio of 2.55.
The price chart shows the stock is trading slightly below its median price-book ratio.
Allena reported its third-quarter financial results on Nov. 9. It posted a net loss of $8 million, or an earnings loss of 22 cents per share. This was an improvement from a net loss of $13.3 million, or 57 cents per share, in the year-ago quarter.
The company recorded cash and cash equivalents of $30.1 million, while research and development expenses were $5 million and general and administrative costs totaled $3 million.
On Dec. 1, Allena also announced a $13 million bought deal offering with H.C. Wainwright & Co. LLC. Under the terms of the agreement, the underwriter purchased 10.4 million shares of common stock for an average price of $1.25 per share. It also has the 30-day option of purchasing up to an additional 1.56 million shares at the public offering price.
Allena's financial strength was rated 4 out of 10 by GuruFocus, while its profitability scored a 1 out of 10 rating. In addition to negative returns that underperform a majority of industry peers, the company is being weighed down by a low Piotroski F-Score of 3, which suggests business conditions are in poor shape.
Since Simons' firm sold out of Allena in the third quarter, Cohen is currently the only guru with a position in the stock.
Cohen's $19.52 billion equity portfolio, which was composed of 894 stocks as of the three months ended Sept. 30, is most heavily invested in the health care, technology and consumer cyclical sectors.
Other biotech companies Cohen owned as of the end of the third quarter included Alexion Pharmaceuticals Inc. (ALXN, Financial), Arena Pharmaceuticals Inc. (ARNA, Financial), Macrogenics Inc. (MGNX, Financial), Biomarin Pharmaceutical Inc. (BMRN, Financial), Novavax Inc. (NVAX, Financial) and Arrowhead Pharmaceuticals Inc. (ARWR, Financial).
Disclosure: No positions.
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