5 Best Biotech Stocks To Buy According To Hedge Funds

In this article, we discuss 5 best biotech stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 10 Best Biotech Stocks To Buy According To Hedge Funds. 

5. United Therapeutics Corporation (NASDAQ:UTHR)

Number of Hedge Fund Holders: 47

United Therapeutics Corporation (NASDAQ:UTHR) is a biotechnology company engaged in the development and commercialization of medical products and therapies to address the unmet needs of patients with chronic and life-threatening diseases in the United States and internationally. On November 2, United Therapeutics Corporation (NASDAQ:UTHR) reported a Q3 GAAP EPS of $4.91 and a revenue of $516 million, outperforming Wall Street estimates by $1.10 and $22.54 million, respectively. 

On November 3, Wedbush analyst Andreas Argyrides raised the price target on United Therapeutics Corporation (NASDAQ:UTHR) to $305 from $250 following Q3 results. The analyst maintained an Outperform rating on the shares.

According to Insider Monkey’s third quarter database, 47 hedge funds were bullish on United Therapeutics Corporation (NASDAQ:UTHR), compared to 49 funds in the prior quarter. Kurt Von Emster’s VenBio Select Advisor is the leading stakeholder of the company, with approximately 3 million shares worth $612.75 million. 

4. Illumina, Inc. (NASDAQ:ILMN)

Number of Hedge Fund Holders: 49

Illumina, Inc. (NASDAQ:ILMN) is an American biotechnology company that provides sequencing and array-based solutions for genetic and genomic analysis. On November 3, Illumina, Inc. (NASDAQ:ILMN) posted a Q3 non-GAAP EPS of $0.34 and a revenue of $1.12 billion, topping analysts’ estimates by $0.04 and $10 million, respectively. Illumina, Inc. (NASDAQ:ILMN) is one of the top biotech stocks favored by smart investors. 

On November 14, Piper Sandler analyst David Westenberg reiterated an Overweight rating on Illumina, Inc. (NASDAQ:ILMN) but trimmed the price target on the shares to $300 from $320. The analyst updated his model to factor in the Q3 earnings report.

According to Insider Monkey’s Q3 data, Illumina, Inc. (NASDAQ:ILMN) was part of 49 hedge fund portfolios, compared to 44 in the last quarter. Select Equity Group held the largest stake in the company, comprising 1.5 million shares worth about $298 million. 

Polen Capital made the following comment about Illumina, Inc. (NASDAQ:ILMN) in its Q3 2022 investor letter:

“Illumina, Inc. (NASDAQ:ILMN) has had a very difficult year on what we believe are transitory issues. First, the company closed its acquisition of Grail, a startup early-stage cancer testing business it re-acquired (Grail was founded inside Illumina originally) for $8 billion without regulatory approval. Illumina management believes that European regulators have no jurisdiction over the transaction as Grail had no European presence or revenue and member states did not complain within the timeframe specified in applicable regulations. The regulators have challenged these assertions and are likely to try to require Illumina to divest Grail subject to Illumina’s appeal. In the meantime, Grail has already been very dilutive to Illumina’s earnings, and Illumina may have to sell the asset at the end of it all. It is unknown how much Grail could be sold for in this environment if Illumina is forced to divest.

Second, Illumina’s core sequencing business has also slowed. This is not unusual as the business has always been a bit lumpy, but there are new competitors trying to prove that they can sequence genomes cheaper than Illumina without sacrificing accuracy. Our research here suggests: 1) competitor technologies do not seem to be as cost-effective or accurate in the real world as advertised, providing limited risk to Illumina’s core business; 2) Illumina has unveiled its own next-generation technology, which lowers the cost of sequencing the human genome to only $200, including data processing costs with world-class accuracy; 3) the slowdown in the core business is more macroeconomic as customers are looking to reduce consumables inventory levels in tough times and should pass quite quickly considering customers are continuing to use their sequencers at high levels; and 4) even if Illumina were forced to divest Grail, we think they would likely be able to sell it for above what it purchased it for as all of the clinical data on the company’s Galleri cancer screen is now publicly available (it is very positive in our view). Grail has made significant commercial progress since its acquisition, and the company should only be closer to U.S. regulatory approval. We believe we can buy the shares today at an extremely cheap valuation for the core business of a company that we view as having an unmatched position in a market that should be multiples of its current size in the years to come.”

3. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)

Number of Hedge Fund Holders: 62

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is an American biotechnology company that focuses on enzyme replacement therapies for life-threatening rare diseases and medical conditions. On November 23, after CSL Limited (OTC:CSLLY) announced that the FDA approved Hemgenix for the treatment of adults with Hemophilia B with a “clean” label with no black box warning or restrictions on some patient groups, Morgan Stanley analyst Matthew Harrison said he views the approval as “a clear sentiment positive” for BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) due to investor concern around FDA approvals of gene therapy products and potential risks about Roctavian. The analyst, who forecasts the Hemgenix news to drive BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) higher, has an Overweight rating and a $113 price target on the shares.

According to Insider Monkey’s data, 62 hedge funds were long BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) at the end of Q3 2022, compared to 59 funds in the preceding quarter. Julian Baker and Felix Baker’s Baker Bros. Advisors is the biggest position holder in the company, with 7.6 million shares worth $646 million. 

Here is what Carillon Tower Advisers specifically said about BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) in its Q2 2022 investor letter:

“BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) rose as the company announced a new approval in Japan for its drug to treat achondroplasia (dwarfism), and investors may have become more optimistic regarding its therapy for hemophilia following a positive opinion from European drug regulators. The drug is pending approval and has been delayed by the U.S. Food and Drug Administration to collect more data.”

2. Biogen Inc. (NASDAQ:BIIB)

Number of Hedge Fund Holders: 70

Biogen Inc. (NASDAQ:BIIB) is a Massachusetts-based biotechnology company that develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. On October 25, Biogen Inc. (NASDAQ:BIIB) reported its Q3 results, posting a GAAP EPS of $7.84 and a revenue of $2.51 billion, outperforming Wall Street estimates by $4.16 and $40.74 million, respectively. Biogen Inc. (NASDAQ:BIIB) is one of the most popular biotech names among elite hedge funds. 

On November 15, Truist analyst Robyn Karnauskas raised the price target on Biogen Inc. (NASDAQ:BIIB) to $350 from $265 and kept a Buy rating on the shares. The analyst raised her view of Biogen Inc. (NASDAQ:BIIB)’s Alzheimer’s drug penetration to 25% from 15% following the Roche trial failure. 

Among the hedge funds tracked by Insider Monkey, Biogen Inc. (NASDAQ:BIIB) was part of 70 public stock portfolios at the end of September 2022, compared to 54 funds in the prior quarter. Steve Cohen’s Point72 Asset Management held the largest stake in the company, comprising 1.67 million shares worth $448 million. 

ClearBridge Investments made the following comment about Biogen Inc. (NASDAQ:BIIB) in its Q3 2022 investor letter:

“Biogen Inc. (NASDAQ:BIIB) was the leading contributor among several biopharma names, boosted by positive, pivotal clinical data for its next-generation Alzheimer’s treatment Lecanemab. In a pivotal trial, the drug proved safe and efficacious in slowing progression of Alzheimer’s disease.”

1. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 77

Pfizer Inc. (NYSE:PFE) is one of the best biotech stocks to buy according to hedge funds. The company produces medicines and vaccines for immunology, oncology, cardiology, endocrinology, and neurology. On November 1, Pfizer Inc. (NYSE:PFE) reported a Q3 non-GAAP EPS of $1.78 and a revenue of $22.6 billion, outperforming Wall Street estimates by $0.38 and $1.5 billion, respectively. The company raised 2022 revenue guidance for Comirnaty by $2 billion to approximately $34 billion and reaffirmed revenue guidance for Paxlovid of nearly $22 billion, despite foreign exchange headwinds. 

On November 17, Credit Suisse analyst Trung Huynh initiated coverage of Pfizer Inc. (NYSE:PFE) with an Outperform rating and a $55 price target. Pfizer Inc. (NYSE:PFE) has been “impacted adversely” following its COVID vaccine success, but the analyst said his Outperform thesis does not reflect a single asset, but a combination of pipeline advances that will drive growth.

According to Insider  Monkey’s data, 77 hedge funds were long Pfizer Inc. (NYSE:PFE) at the end of September 2022, compared to 70 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the biggest position holder in the company, with 10.6 million shares worth $467.5 million. 

Diamond Hill Capital made the following comment about Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter:

“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”

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