BB Biotech Jumps as Paul Singer Invests More in Fund

BB Biotech AG jumped to its highest ever after activist investor Paul Singer increased his stake in the fund, the best-performing health-care portfolio in the world last year.

Singer, who runs hedge-fund firm Elliott Management, raised his stake in the Kuesnacht, Switzerland-based company to 5.47 percent as of Dec. 23 from 3.11 percent previously, according to a filing with Swiss Six Exchange.

The investment may be a prelude to a campaign by Singer to close the 19 percent discount between BB Biotech’s share price and the value of the investments it owns. The fund in the past has bought back shares to reduce the discount to less than 15 percent. Elliott and BB Biotech declined to comment when asked about the rationale behind Singer’s investment.

“My guess is that Elliott will press the company for a share buyback or something else to address the persistent discount,” Phil Goldstein, a principal at activist fund Bulldog Investors, said by phone today. “Based on past experience I’d say some action by Elliott is likely.”

BB Biotech rose 3 percent to 251.25 Swiss francs at the 5:30 p.m. close of trading in Zurich, the highest since its initial public offering in 1993. More than 77,000 shares exchanged hands, almost double the three-month daily average. That values the company at 2.98 billion francs ($2.9 billion).

The fund, whose management team is headed by Daniel Koller, returned 75 percent last year, the best performance of any health-care fund in the world, according to data compiled by Bloomberg. BB Biotech’s largest holdings as of Sept. 30 included Celgene Corp., Gilead Sciences Inc. and Actelion Ltd.

Singer and BB Biotech have crossed paths before. The hedge fund manager is best-known in Switzerland for his attempt to replace Actelion’s board and seek a buyer for that company in

2011. Back then BB Biotech supported Actelion to fight off Elliott’s approach.

Regardless of Singer’s intentions, his purchase of shares is encouraging investors.

“The increase is a positive signal to the market,” said Navid Malik, an analyst at Cenkos Securities. He has a buy recommendation on BB Biotech. “We expect a spectacular year for small and midcap biotechs, and BB Biotech will have exposure to this.”

BB Biotech has gained about nine-fold since Switzerland’s Bank am Bellevue listed the biotechnology fund.

Before it's here, it's on the Bloomberg Terminal.