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12:00 AM
Jun 15, 2009
 |  BioCentury  |  Finance

Ebb & Flow

A trio of Swedish asset management veterans is taking advantage of the fact that "healthcare valuations have never been so compelling" to establish a new long-short, open-ended hedge fund, according to Henrik Rhenman, co-founder and chief investment office of the new firm, Rhenman & Partners Asset Management.

Rhenman Healthcare Equity L/S Fund has attracted about €20 million ($27.8 million) from high net worth individuals, but is looking to raise €500 million to €1 billion ($694.6 million to $1.4 billion) from institutions, funds of funds and family offices.

"This is an extremely exciting time to launch a new fund. When I started the Carnegie Medical Fund in 1998, the P/E ratio of pharma companies was on average about 28; now it's about 9. Morgan Stanley has just upgraded the pharma sector from 'in-line' to 'attractive'," Rhenman told Ebb & Flow.

Rhenman intends to invest in up to 70-80 cash-positive publicly quoted healthcare companies with market caps in excess of $200 million across the globe. He expects to have positions across the pharmaceutical, biotech, medical technology, service, specialty pharma and generics sectors.

"My vision is to have a third of the portfolio in small caps from $200 million to $2 billion, a third in the mid-cap range and a third in the $10 billion-plus large cap space. The U.S. will account for 50-55% of the portfolio, while European companies will make up 25-30%. About a quarter of the fund will be invested in biotech," he told Ebb & Flow.

Rhenman will trade actively and anticipates turning over the portfolio by some 200% a year.

In addition to Rhenman, who was the main portfolio manager of the Carnegie Global Healthcare Fund from 1998 to 2008, the fund's other founders are Göran Nordström, former CEO of Carnegie Asset Management, and Carl Grevelius, former portfolio strategist at Fidelity Investments.

Skandinaviska Enskilda Banken (SEB) will act as the fund's custodian and prime broker, as well as being responsible for its administration. The fund will start trading on June 22.

Roche play on Israel

Growing Israeli biotech companies, rather than exporting the science coming from Israeli universities, is a goal of the venture firm Pontifax in its new deal with Roche (SIX:ROG), according to Managing Partner Ran Nussbaum.

"Our goal is to establish real companies in Israel and we have the right partner to do so," he told Ebb & Flow.

Roche and Pontifax will co-invest in companies or projects within undisclosed areas of interest to the pharma company. The partners will invest in seed-stage companies in an incubator setting as well as later-stage biotechs.

Israel's Office of the Chief Scientist will be contributing almost $500,000 to invest alongside the partners in the first two years.

Seed-stage companies will join Biomedix Incubator Ltd. (TASE:BMDX), which is controlled by Pontifax. Biomedix is the parent company of two incubators, Meytav, based in Kiryat Shmona, andATI, located in Ashkelon, which together house more than 50 companies.

Nussbaum said he expects that negotiating an interest for Roche would likely be part of any investment in a later-stage company.

Nussbaum anticipates the first investment in the next few months.

Pontifax portfolio companies include metabolic play Protalix Biotherapeutics Inc. (NYSE-A:PLX) and oncology company Aposense Ltd.

Protalix's prGCD, a plant cell-expressed recombinant form of human glucocerebrosidase (GCase), is in a Phase III trial to treat Gaucher's disease. Data are anticipated in 2H09, with an NDA filing expected before year end. Aposense's [18F]-ML-10, a malonic...

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