In this article, we will discuss: 12 Best Biotech Stocks To Invest In According To Hedge Funds.
As we have mentioned in our article, “10 Best Penny Stocks to Buy Under $1,” the size of the global biotechnology industry was assessed to be worth $1.38 trillion in 2023 and is expected to grow at a CAGR of 11.8% from 2024 to 2033, predicted to be worth around $4.25 trillion.
Specifically, the U.S. biotechnology market was forecast to be $246.18 billion last year, and at a CAGR of 11.6% from 2024 to 2034, it is expected to be worth approximately $830.31 billion as per Precedence Research. North America’s revenue share was 37.79%, while Asia Pacific produced a revenue share of 23.99%. In terms of revenue share by application, the biopharmacy segment had 41.73% in 2023, and the application segment for bioindustries accounted for 24.33% of total revenue. In terms of technology, the tissue engineering and regeneration market has projected a 19.26% revenue share for 2023.
According to stock analysis, there are 665 stocks in the biotechnology industry, with a combined market value of $1,559.75 billion and total sales of $127.6 billion.
However, the U.S. Food and Drug Administration and other drug authorities’ clearance decisions and research data have a significant impact on the future of these occasionally volatile equities.
It has always been necessary to have a high risk tolerance and the ability to wait years or even decades for results when investing in biotechnology stocks. The resilience of biotech investors has been put to the test by inconsistent results in recent years and thus far this year. According to Morningstar strategist Karen Andersen, biotech had a strong start to 2024, driven by an uptick in M&A and every indication that interest rates would begin to decline. However, the second quarter of 2024 has been more mixed for the industry, with rates appearing to be stabilizing rather than falling, despite ongoing (but improving) inflation. Higher rates typically deter investors from waiting for hazy returns on their biotech investments.
Andersen sees a lot of promising things in biotech as well as room for expansion, despite the recent mixed outcomes, stating:
“We still see tailwinds for the industry going forward. Smaller-cap names are still targets for acquisitions by bigger biopharma firms, and a wave of acquisitions has continued since late last year, particularly focused on oncology and immunology,” “We think obesity acquisitions are likely going forward, as big biopharma can bring development and commercialization expertise to multiple programs in midstage trials at small biotechs. Second, on a more fundamental level, new technologies and launches in new therapeutic areas are poised to boost productivity and drive biotech performance.”
Moreover, the report “Future of Biotech AI-driven Drug Discovery” states that artificial intelligence may drastically speed up drug research, cutting down on development timeframes from many years to a matter of years. Through the integration of artificial intelligence AI with drug development and biology, scientists can build customized therapies for patients. Instead of replacing scientists, AI will improve their skills by enabling them to automate repetitive operations and produce fresh insights. Companies need to go from isolated pilots to a complete, data-driven approach, integrating analytics into decision-making, and emphasizing quick, observable results that help patients and the scientific method in order to properly utilize AI.
Currently, more than 450 life sciences companies, classified as “startups” or “scaleups,” are actively utilizing machine learning and deep learning-based predictive and generative capabilities to enhance their research strategies, as per the findings of BioPharmaTrend’s report, “The State of Artificial Intelligence (AI) in the Biopharma Industry.”
Fitch Ratings also continues to maintain a neutral outlook on the global biotech industry for 2024. Despite rising interest rates, it expects growth driven by demographic trends and innovation. Although they are confronting difficulties with investment and regulation, Fitch highlights that companies are concentrating more on research and development as well as strategic changes that improve drug pricing.
With that said, here are the 12 Best Biotech Stocks To Invest In According To Hedge Funds.
A scientist in a laboratory holding a vial of medication developed by the biotechnology company.
Methodology:
We sifted through holdings of biotech ETFs and online rankings to form an initial list of 20 biotech stocks. Then we selected the 12 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
12. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Number of Hedge Fund Holders: 44
Jazz Pharmaceuticals is a biopharmaceutical company with its headquarters in Ireland that specializes in cancer and sleeping problem treatments. It offers nine licensed drugs in neurology and oncology; these include Xyrem and Xywav for narcolepsy, Rylaze for acute lymphoblastic leukemia, Zepzelca for metastatic small-cell lung cancer, and Vyxeos for acute myeloid leukemia.
Strong commercial launches continue to be a major factor in Jazz Pharmaceuticals’ (NASDAQ: JAZZ) growth.
Jazz’s main product, Xyrem, which it acquired in 2005 for $123 million, became a huge success in treating narcolepsy. Nevertheless, Xyrem’s sales have suffered since generic versions were available in January 2023, even though the biopharmaceutical company continues to make some profits through royalties and distribution deals.
The company is concentrating on Xywav, a low-sodium Xyrem variant that was approved in 2020, in an effort to mitigate this decline. Although Xywav is anticipated to increase modestly, the narcolepsy market is becoming more competitive, increasing the risks associated with clinical development and commercialization for the company.
Jazz has been expanding its range of products with the recent approval of Rylaze for leukemia and Zepzelca for small-cell lung cancer. The firm’s aim to reduce its need for Xyrem depends on the successful introduction of these drugs.
Epidiolex was added to the firm’s portfolio in 2021 when it paid $7.2 billion to purchase GW Pharmaceuticals. Epidiolex, a cannabidiol treatment for serious seizures, added $865 million to Jazz’s revenue in 2023, supporting the company’s diversification strategies and long-term growth potential.
Jazz Pharmaceuticals plc (NASDAQ:JAZZ)’ price goal was lifted by JPMorgan to $202 from $190, citing excellent business endurance and an appealing entry position. Baird, on the other hand, decreased the price target to $154 from $160, citing worse Rylaze performance despite the robust rise in Epidiolex sales in Q2 2024. The solid Q2 2024 earnings with 6.95% growth in revenue YoY matched Wall Street expectations but resulted in a minor narrowing of the 2024 projection. Rylaze appeared to be the weak spot in revenue. However, both firms kept their bullish ratings on the stock.
Ryan Wilder’s Vestal Point Capital is the largest shareholder in the company, with 1,500,000 shares worth $160.09 million.
11. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)
Number of Hedge Fund Holders: 48
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) focuses on treatments for uncommon diseases. Through their joint venture, Genzyme and BioMarin market Aldurazyme, while BioMarin alone markets Brineura, Vimizim, and Naglazyme. Additionally, Kuvan and Palynziq are marketed by the company to treat the uncommon metabolic disease PKU.
In 2021, vosoritide, or Voxzogo, was approved for use in achondroplasia. Hemophilia A gene therapy developed by BMRN called Roctavian received approval in the US and Europe in 2023.
The biopharmaceutical firm, specializing in genetic treatments, reported a 20% revenue rise to $712 million over the previous year in Q2 2024. BioMarin had a great Q2 2024 overall, driven by robust product performance and sound financial management. Furthermore, the management raised its forecast for the total revenue for 2024 from $2.7 billion to $2.8 billion to between $2.75 billion and $2.825 billion. The non-GAAP diluted EPS increased from $2.75–2.95 to $3.10–$3.25, a considerable increase.
The authorized medications from BioMarin have been given orphan-drug designation in the US and the EU, giving them a minimum of 7 and a maximum of 10 years of market exclusivity, respectively.
However, rare genetic illnesses can be challenging to diagnose, and the firm may have trouble finding enough patients to cover the costs of development and production.
Nonetheless, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is building a portfolio of genetic-disease treatments, making historical analogies with Genzyme (which was acquired by Sanofi) impossible to resist. Even though the company has had several drugs authorized, the company has been losing cash for years due to commercialization and R&D costs. However, analysts are optimistic about the long-term profitability of its present product line. BioMarin is well-positioned with a robust internal pipeline and the capacity to boost growth through well-timed acquisitions.
Andreas Halvorsen’s Viking Global is the largest shareholder in the BMRN, with 7,063,564 shares worth $581.54 million.
10. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY)
Number of Hedge Fund Holders: 53
One of the Best Biotech Stocks to Invest In According to Hedge Funds, a biopharmaceutical company, Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), has five commercial products and a broad pipeline, including liver infectious, genetic, cardio-metabolic, and CNS/ocular illnesses. The company is backed by substantial capital reserves as well as potential partnership milestones.
ALNY is leading the way in developing drugs based on RNA interference (RNAi). Alnylam’s vast intellectual property in RNA interference and Nobel-prize-winning technologies enabled the company to develop a completely new class of treatments for diseases that are challenging to treat.
However, changes in healthcare drug policy may have an impact on the company’s valuation, which is based on its capacity to sustain six-figure pricing and payers’ willingness to continue paying.
More than a minor Q4 revenue shortfall, Alnylam’s alteration to a critical clinical trial design earlier this year alarmed investors and caused a decline in the company’s stock price. However, the company’s second-quarter 2024 earnings report exceeded forecasts in terms of both sales and profit due to a milestone payment from a licensing deal with Regeneron and the expansion of Alnylam’s TTR franchise. The revenue grew by 107.00% YoY in Q2 2024.
Carillon Eagle Mid Cap Growth Fund Explained Why Alnylam Pharmaceuticals (ALNY) Surged in Q2 in its Q2 2024 investor letter:
“Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY) develops gene-silencing technologies to address significant unmet medical needs. The company’s main growth product, Vitrusiran, is currently approved for patients who have the polyneuropathy manifestation of transthyretin (TTR) amyloidosis. The company recently unveiled positive phase 3 results for its HELIOS B trial that tested Vitrusiran in TTR patients with the cardiomyopathy manifestation of the disease. The stock traded higher during the quarter as this readout is believed to increase the potential market for the drug dramatically.”
The firm has revised its revenue projections for 2024 and now projects that product sales will fall between $1.575 billion and $1.65 billion.
Patrick Trucchio of H.C. Wainwright recently reaffirmed his buy rating on the biopharmaceutical company with a $400 price target. He did this by noting the stock’s recent decline as a buying opportunity and pointing to AMVUTTRA’s (vutrisiran) great promise in treating ATTR amyloidosis with cardiomyopathy (ATTR-CM). Robust clinical evidence and a risk-adjusted pipeline study of Alnylam justify his valuation.
William B. Gray’s Orbis Investment Management is the largest shareholder in the ALNY, with 721,053 shares worth $175.22 million.
9. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)
Number of Hedge Fund Holders: 55
One of the top biopharmaceutical companies, Sarepta Therapeutics, Inc. (NASDAQ:SRPT), focuses on creating precision genetic treatments to treat rare disorders.
With over 40 products in various stages of development, the company is a leader in the field of Duchenne muscular dystrophy (DMD) and limb-girdle muscular dystrophies (LGMDs). The multi-platform Precision Genetic Medicine Engine of Sarepta powers its gene therapy, RNA, and gene editing pipeline. The company manufactures its potential products through outside contractors.
Several considerations, including the promising future revenue outlook for SRPT and the potential of its product pipeline, have led Joseph Schwartz to award the company a Buy rating. Elevidys sales during the second quarter of 2024 fell short of projections, but Schwartz is still upbeat about the big ramp-up that is anticipated in the second half of the year after the drug’s prescription was expanded. It appears that a crucial factor in his study is the significant growth that is expected to result from this expansion. Schwartz has maintained his Outperform rating for the stock despite the revised price target, given the overall prospect Elevidys presents and the pipeline of the firm.
Moreover, while the management’s forecast for net product revenue in 2025 is marginally lower than earlier projections, it still shows rapid growth, indicating strong demand and reducing worries about production limitations.
The positive long-term outlook for Sarepta Therapeutics, Inc. (NASDAQ:SRPT)’s pharmaceutical portfolio is further supported by the planned talks with the FDA about vesleteplirsen, another promising medication.
It is one of the Best Biotech Stocks To Invest In According To Hedge Funds. SRPT has hedge fund sentiments of 55 in Q2 2024. Eli Casdin’s Casdin Capital is the largest shareholder in the company, with 1,073,500 shares worth $169.61 million.
8. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN)
Number of Hedge Fund Investors: 57
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), a leading biotechnology company, discovers, produces, and sells products that combat inflammation, cancer, cardiovascular disease, and eye disease.
The company sells a number of drugs, such as Praluent, which lowers LDL cholesterol, Dupixent, which is used in immunology; Libtayo, which is used in cancer, and Kevzara, which is used to treat rheumatoid arthritis. Eylea is approved to treat wet age-related macular degeneration and other eye conditions.
Additionally, Regeneron is working alone, with Sanofi, and other partners to create monoclonal and bispecific antibodies. It has also entered into earlier-stage partnerships that are bringing novel technologies to market, such as RNA interference (RNAi) and CRISPR-based gene editing (Intellia).
In an attempt to improve the quality of weight loss while maintaining lean muscle mass, REGN is making headway in the obesity market using a combination of incretin-based therapies and muscle-conserving antibodies.
The biotechnology company has used its monoclonal antibody research and development platform to become one of the few biotechs to achieve profitability and maintain a narrow moat. Lead medication Eylea is licensed for wet age-related macular degeneration and other eye-related purposes, with annual global sales nearing $10 billion. The drug is still in a good position because of its high dosage formulation, which should help it maintain a significant market share over biosimilars and Roche’s recently launched branded medication, Vabysmo.
Due to its effectiveness and ease of dosage, Eylea is the market leader in wet AMD; but, starting in 2027, it will face competition from Vabysmo from Roche as well as possible biosimilar and Medicare issues.
The stock has risen since its launch due to its varied pipelines and collaborations. Regeneron had a difficult start to 2024, missing Q1 targets primarily because of a decline in REGEN-COV and Ronapreve sales. However, in Q2 2024, revenue grew by 12.32% to $3.547 billion YoY, driven by a 2% increase in Eylea and Eylea HD sales in the US, reaching over $1.5 billion, and a 27% increase in Dupixent sales, which helped to drive a 21% increase in Sanofi’s collaboration revenue.
Piper Sandler lifted Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN)’s price objective from $1,166 to $1,242, citing Dupixent’s market dominance in atopic dermatitis but also pointing to Galderma’s nemolizumab as a possible rival and an increasingly crowded market.
Nonetheless, it is one of the Best Biotech Stocks To Invest In According To Hedge Funds. Israel Englander’s Millennium Management is the largest shareholder in the company, with 267,032 shares worth $280.66 million.
7. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)
Number of Hedge Fund Holders: 59
Global biotech company Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is widely recognized for its broad portfolio of products, which includes gene-editing, non-opioid painkillers, and potential drugs for renal and type 1 diabetes in addition to its treatments for cystic fibrosis.
The biotechnology company is best known for creating the hepatitis C medicine Incivek, a blockbuster that is now eclipsed by the company’s successful cystic fibrosis (CF) franchise. If worldwide and pediatric clearances are obtained for Vertex’s licensed cystic fibrosis drugs, Orkambi, Symdeko, Kalydeco, and Trikafta, the company will be able to treat approximately 90% of the CF population.
Given the long patents, the solid efficacy of its treatments, and the lack of competition in the CF market, the firm is anticipated to continue to dominate the market while pursuing portfolio candidates in other rare indications to drive revenue.
Additionally, VRTX has introduced Casgevy, the first CRISPR gene-editing therapeutic approved by the FDA for the treatment of sickle cell disease and beta-thalassemia. Suzetrigine (VX-548), a promising non-opioid painkiller that has significant commercial potential, is awaiting FDA approval.
However, Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)’s ability to diversify may be hampered if its other pipeline candidates fail, as the company is heavily reliant on the success of its cystic fibrosis trademark.
The results of the company’s second quarter in 2024 missed analysts expectations. Overall, Vertex continues to make success with its diversified pipeline candidates, as evidenced by its $2.65 billion in product revenue, which was 6% higher than the same quarter last year. Trikafta/Kaftrio, the biotech company’s triple-combination cystic fibrosis medication, saw strong demand and brought in $2.45 billion in sales.
VRTX is one of the Best Biotech Stocks To Invest In According To Hedge Funds, and it has hedge fund sentiments of 59 in Q2 2024. Derrick Tang’s Kynam Capital is the largest shareholder in the company, with 330,000 shares worth $154.68 million.
6. Gilead Sciences, Inc. (NASDAQ:GILD)
Number of Hedge Fund Holders: 62
The biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD) finds, develops, and markets drugs in areas of unmet medical need in the US, Europe, and internationally.
The company’s’ HIV and hepatitis C virus, or HCV, portfolio yields high-profit margins while requiring only a small salesforce and low-cost production. Gilead has a large moat supported by its portfolio and pipeline, but in order to grow again, it will require the HCV market to stabilize, strong HIV innovation to continue, reliable data from its oncology pipeline, and wise acquisitions in the future.
Given that lower clinical trial expenditures helped the biopharmaceutical company ‘s second-quarter 2024 results surpass bottom-line forecasts, Morningstar analysts continue to assess the company’s fair value at $97. The three main drivers of revenue growth were oncology (15%), liver disease (17%), and HIV (3%). Gilead’s top HIV drug, Biktarvy, soared by 8% and continues to be a major source of earnings, making about 46% of product sales.
The long-term patent of Biktarvy, which expires in 2033, and the potential for HIV advances support Gilead Sciences, Inc. (NASDAQ:GILD)’s wide moat. Analysts believe that shares are cheap, particularly in light of recent positive findings about the HIV preventive medication lenacapavir.
Parnassus Value Equity Fund stated the following regarding Gilead Sciences, Inc. (NASDAQ:GILD) in its first quarter 2024 investor letter:
“Gilead Sciences, Inc. (NASDAQ:GILD), a global biopharmaceutical company, saw its shares decline as a cancer drug failed to expand into additional lung indications, denting investor faith in the company’s oncology franchise. We maintain confidence in Gilead’s core HIV franchise and ability to expand into cancer treatment portfolios.”
The firm offers several HIV single-tablet regimens, and the company’s market share is increasing due to its next-generation drugs, which include Biktarvy and have better long-term safety profiles. However, Biktarvy’s effectiveness creates a patent cliff in 2033, making it difficult to improve this daily HIV treatment regimen.
Nonetheless, the company is one Best Biotech Stocks To Invest In According To Hedge Funds. John Overdeck and David Siegel’s Two Sigma Advisors is the largest shareholder in the company, with 6,255,700 shares worth $429.20 million.
5. Cytokinetics, Incorporated (NASDAQ:CYTK)
Number of Hedge Fund Holders: 64
Cytokinetics, Incorporated (NASDAQ:CYTK) is a clinical-stage biopharmaceutical company focused on the discovery and development of therapeutic medicines that alter muscle function to treat diseases and medical conditions.
The company announced that Aficamten, a medication targeted at the muscles for symptomatic obstructive hypertrophic cardiomyopathy, had completed clinical studies. Investors appear enthusiastic about this medication’s future, as it may prove to be a more effective and safer substitute for the leading product on the market.
Riley Financial analyst Mayank Mamtani maintained the $92.00 price objective and Buy rating on the biopharmaceutical company due to many factors, such as the potential of cardiac myosin inhibitors (CMIs) made by Cytokinetics in the treatment of hypertrophic cardiomyopathy (HCM).
The data from the European Society of Cardiology Congress 2024 (ESC’24) preview highlights the CMI franchise of the firm, which includes Aficamten and CK-586, as having long-term worth in breaking into the market for oHCM treatments.
Mamtani’s prospects are enhanced by the anticipation that these medications may considerably broaden their indications to include 1L oHCM, nHCM, and HFpEF in the upcoming years, consequently propelling CYTK’s revenue growth.
Despite some patients receiving less than ideal therapeutic exposure, investors’ confidence is further supported by long-term trial findings and real-world data that demonstrate the practice-changing effects of CMIs. For example, among patients treated with mavacamten, the incidence of a left ventricular ejection fraction (LVEF) falling below 50% was significantly lower in the real world than in trial settings.
Furthermore, CAMZYOS’s (mavacamten) better sales trajectory points to a positive market reaction that might encourage the use of aficamten. These elements are crucial to the firm’s expansion.
Financially speaking, Cytokinetics and Royalty Pharma have entered into a strategic fundraising partnership that entails a $575 million investment and a $500 million follow-on offering. It is anticipated that this partnership will help the business’s future regulatory filings and product launches.
In terms of product development, Aficamten is the subject of a Phase 1 clinical trial by Cytokinetics, Incorporated (NASDAQ:CYTK), which has yielded encouraging findings in a pivotal Phase 3 clinical trial. In the third quarter of 2024, the company plans to file a new drug application with the FDA. This experimental heart medication has a greater-than-average probability of eventually becoming a blockbuster-level product.
Abhishek Trehan’s Darwin Global Management is the largest shareholder in the company, with 4,575,558 shares worth $246.07 million.
