Large Biotech Stock Holder Slashes Stake, but Insiders Are Buying:
Photograph by Louis Reed
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As a battered biotechnology stock continued to reel to a record low in the new year after an awful 2018, buyers faced off against a big seller, essentially pitting the company’s chairman against the top holder.
The brakes gave out on La Jolla Pharmaceutical (ticker: LJPC) stock in 2018. Shares plunged 71%, ending in the single digits from more than $32 in January last year. In comparison, the SPDR S&P Pharmaceuticals ETF (XPH) and the SPDR S&P Biotech ETF (XBI) both dropped about 17% in 2018. The iShares Nasdaq Biotechnology ETF (IBB) fell nearly 10%.
La Jolla stock took a marked turn for the worse after Aug. 8, when the San Diego-based biotech disclosed fiscal-second-quarter numbers. SunTrust Robinson Humphrey analyst Yatin Suneja noted in a research report that La Jolla’s launch of Giapreza, a treatment for low blood pressure in adults with septic or other distributive shock, was “off to a very slow start.” Suneja reiterated a Buy rating, but cut the target price to $45 from $57.
This year, before the market opened Jan. 7, the company again provided disappointing guidance for Giapreza, and La Jolla stock tanked. Shares set an intraday low of $5.01 on Jan. 8, their lowest since a 50-for-one reverse stock split in January 2014.
That was enough for the company’s top holder, hedge-fund sponsor Perceptive Advisors, which cut its stake almost in half over Jan. 7 and 8, according to forms it filed to the Securities and Exchange Commission. Perceptive sold 2.06 million shares for a total of $11.7 million, an average of $5.69 each. That selling price is about 40% down from the end of 2018.
Perceptive now has a stake of only 2.3 million La Jolla shares, or 8.6%, down from 4.3 million shares, or 16.5%. Perceptive is now La Jolla’s fifth-largest shareholder, according to S&P Capital IQ.
La Jolla’s new top shareholder is Chairman Kevin Tang, who went on a buying binge that coincided with Perceptive’s selling. A limited partnership that Tang controls bought 1.3 million shares for $7 million, an average of $5.37 each, from Jan. 7 through Jan. 9, according to a filing. Tang now has an overall ownership of 5.2 million shares, a 19.9% stake.
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Other La Jolla insiders also bought stock. CEO George Tidmarsh bought 2,000 shares on Jan. 7 for $11,700. Chief Operating Officer Jennifer Carver bought 5,000 shares on Jan. 9 for $31,000. James Rolke, chief scientific officer, bought 1,600 La Jolla shares for $9,750, also on Jan. 9.
Perceptive CEO and portfolio manager Joseph Edelman wasn’t available to comment on the sales of La Jolla stock. La Jolla declined to comment on the stock purchases by its insiders.
One observer of insider purchases wasn’t moved by the La Jolla stock buyers.
“This is a tricky situation with La Jolla,” David Miller, co-founder and chief investment officer of Catalyst Capital Advisors and senior portfolio manager of the Catalyst Insider Buying fund, told Barron’s in an email.
“The main reason we aren’t buying the stock in spite of the insider buying is that the executives at La Jolla have had a bad track record of buying heavily into their stock at much higher prices,” he said.
The news hasn’t all been bad for Tang. La Jolla stock closed Thursday at $6.25, which is more than 16% higher than the average price he paid earlier this month.
Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.
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