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Adage Capital Management acquires a 5% stake in HeartWare

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A Boston money manager with a growing appetite for medical device companies is now taking a bite at HeartWare International Inc.

Adage Capital Management LP owns 514,599 HeartWare shares, equal to 5 percent of the Framingham, Mass.-based maker of miniature heart pumps. All of the purchases were made since July 1, while HeartWare was trading between $22 and $26 a share, meaning a likely outlay by the fund of $11.3 million to $13.4 million.

The new HeartWare stake was reported Tuesday in an institutional ownership filing with the U.S. Securities and Exchange Commission. Adage Capital primarily invests for foundations and college endowment funds, including Harvard University, Dartmouth College and the American Red Cross. The fund had about $15.4 billion in assets under management as of June 30, according to recent regulatory documents.

Adage has been stocking up on device companies in recent months, adding at least 10 firms to its portfolio during the second quarter and buying additional stock in 11 others during the period. Its biggest bet was on Thermo Fisher Scientific Inc., a Waltham, Mass.-based lab equipment manufacturer; Adage’s spend topped $60 million when it bought more than 1.9 million Thermo Fisher shares.

Overall, the fund had about $870 million invested in device companies at the end of the second quarter, up about 22 percent from $713 million on Dec. 31, 2008.

The renewed interest in medical devices fits well with the professional background of Adage co-founder and managing director Phill Gross. Gross began his career as a healthcare and retail analyst at Harvard Management Company, later advancing to become equity research director during an 18-year stint with the university’s wholly-owned investment subsidiary.

Gross launched Adage Capital with several other HMC colleagues in 2001.

Other significant device stock purchases by Adage this spring include Johnson & Johnson and Baxter International Inc. And it cashed in during the quarter on large portions of its stock in Varian Medical Systems Inc. and Cambridge, Mass.-based Genzyme Corp.

But Adage made the biggest move in its device portfolio when it unloaded nearly 2.7 million shares of stock in Thoratec Corp., HeartWare’s one-time merger suitor. It began the second quarter holding 3.2 million Thoratec shares, worth $114 million, and cut that stake to about 112,000 shares by June 30, generating gross proceeds of roughly $100 million.

HeartWare and Thoratec called off their proposed merger July 31 after federal regulators moved to block the $282 million deal on anti-trust concerns.

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