5 Most Undervalued Biotech Stocks To Buy According To Hedge Funds

In this article, we discuss 5 most undervalued biotech stocks to buy according to hedge funds. If you want to read our discussion on the biotech industry, head directly to 12 Most Undervalued Biotech Stocks To Buy According To Hedge Funds. 

5. Halozyme Therapeutics, Inc. (NASDAQ:HALO)

Number of Hedge Fund Holders: 28

PE Ratio as of February 29: 18.90

Halozyme Therapeutics, Inc. (NASDAQ:HALO) is a biopharmaceutical technology platform company based in San Diego, California, with operations worldwide. The company focuses on researching, developing, and commercializing proprietary enzymes and devices. Halozyme offers a range of treatments for breast cancer, multiple sclerosis, primary immunodeficiency disorders, and others. Halozyme Therapeutics, Inc. (NASDAQ:HALO) is one of the most undervalued stocks to buy. 

On January 16, Halozyme Therapeutics, Inc. (NASDAQ:HALO) announced the approval of two therapeutic formulations utilizing its Enhanze drug delivery technology in the US and Europe. In the US, Takeda Pharmaceutical Company Limited (NYSE:TAK) received FDA approval for Hyqvia, a treatment for adults with chronic inflammatory demyelinating polyneuropathy (CIDP), co-formulated with Halozyme’s Enhanze.

According to Insider Monkey’s fourth quarter database, 28 hedge funds were bullish on Halozyme Therapeutics, Inc. (NASDAQ:HALO), compared to 23 funds in the last quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a prominent stakeholder of the company, with 646,168 shares worth $23.8 million. 

Bernzott Capital Advisors US Small Cap Value Fund stated the following regarding Halozyme Therapeutics, Inc. (NASDAQ:HALO) in its fourth quarter 2023 investor letter:

“Halozyme Therapeutics, Inc. (NASDAQ:HALO): Despite an inline quarter and solid outlook, the stock underperformed. We believe there are several potential licensing agreement catalysts heading into 2024 that should add to their highly predictable and cash flow generating royalty revenue streams.”

4. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY)

Number of Hedge Fund Holders: 29

PE Ratio as of February 29: 15.62

Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is a pharmaceutical company based in Pennsylvania, that specializes in the development and commercialization of therapies for rare neurological diseases in the United States. Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) is one of the most undervalued stocks. 

On February 20, Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY) obtained orphan drug designation from the FDA for its drug pitolisant in treating Prader-Willi syndrome (PWS). The biotech company intends to initiate a Phase 3 registrational study in Q1 focusing on excessive daytime sleepiness and behavioral disturbances in PWS patients aged six years and older.

According to Insider Monkey’s fourth quarter database, 29 hedge funds were long Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), compared to 24 funds in the prior quarter. Vivo Capital is the leading stakeholder of the company, with 2.60 million shares worth over $84 million. 

3. Royalty Pharma plc (NASDAQ:RPRX)

Number of Hedge Fund Holders: 38

PE Ratio as of February 29: 12.10

Royalty Pharma plc (NASDAQ:RPRX) ranks 3rd on our list of the most undervalued biotech stocks. The company operates as a buyer of biopharmaceutical royalties and a supporter of innovations in the biopharmaceutical industry in the United States. Royalty Pharma plc (NASDAQ:RPRX)’s portfolio encompasses royalties on commercial products and development-stage product candidates addressing therapeutic areas such as rare diseases, cancer, neuroscience, immunology, respiratory, infectious diseases, hematology, and diabetes. 

On January 19, Royalty Pharma plc (NASDAQ:RPRX) declared a $0.21 per share quarterly dividend, a 5% increase from its prior dividend of $0.20. The dividend is payable on March 15, to shareholders on record as of February 16. 

According to Insider Monkey’s fourth quarter database, 38 hedge funds were bullish on Royalty Pharma plc (NASDAQ:RPRX), compared to 31 funds in the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is the largest stakeholder of the company, with 10.8 million shares worth $306 million. 

Patient Capital Management stated the following regarding Royalty Pharma plc (NASDAQ:RPRX) in its fourth quarter 2023 investor letter:

“We built up a position in Royalty Pharma plc (NASDAQ:RPRX) during the quarter. Royalty Pharma is the largest buyer of biopharmaceutical royalties. The stock traded down throughout 2023 hitting a low of $26.21 in October below its IPO price of $28 in 2020 despite revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) being materially higher. The company is in the business of buying royalties, originally funded by debt with profits recycled into new opportunities. As interest rates rose throughout the year, the stock came under pressure as fears of a smaller spread between royalty deal IRRs and the cost of capital hit the stock. This fear looks overblown with only 21% of current debt being variable and the majority of its fixed rate debt not due until after 2030. With an average cost of debt of 5% and 2023 deal internal rates of return (IRRs) averaging low teens, we believe the model still works. This environment has only served to grow the total addressable market. Run by a proven business leader, we believe the company can continue to invest at attractive spreads. Trading at just 8x earnings, we believe you are getting an attractive entry point to own a leader in the space.”

2. United Therapeutics Corporation (NASDAQ:UTHR)

Number of Hedge Fund Holders: 51

PE Ratio as of February 29: 11.47

United Therapeutics Corporation (NASDAQ:UTHR) is a biotechnology company that focuses on developing and commercializing products to address unmet medical needs for patients with chronic and life-threatening diseases. On February 21, United Therapeutics Corporation (NASDAQ:UTHR) reported a Q4 GAAP EPS of $4.36 and a revenue of $614.7 million, outperforming Wall Street estimates by $0.17 and $38.83 million, respectively. It is one of the most undervalued stocks to invest in. 

According to Insider Monkey’s fourth quarter database, 51 hedge funds were bullish on United Therapeutics Corporation (NASDAQ:UTHR), compared to 48 funds in the preceding quarter. Kurt Von Emster’s VenBio Select Advisor is the largest stakeholder of the company, with 2.85 million shares worth $628.6 million. 

1. Roivant Sciences Ltd. (NASDAQ:ROIV)

Number of Hedge Fund Holders: 55

PE Ratio as of February 29: 2.22

Roivant Sciences Ltd. (NASDAQ:ROIV) ranks 1st on our list of the most undervalued biotech stocks. It is a commercial-stage biopharmaceutical company specializing in the development and commercialization of medicines for inflammation and immunology. On February 13, Roivant Sciences Ltd. (NASDAQ:ROIV) reported its financial results for the third quarter ended December 31, 2023. The company posted a Q3 GAAP EPS of $6.03 and a revenue of $37.14 million, beating market estimates by $7.32 million. Revenue for the quarter rose 117.8% on a year-over-year basis. 

According to Insider Monkey’s fourth quarter database, 55 hedge funds were bullish on Roivant Sciences Ltd. (NASDAQ:ROIV), compared to 44 funds in the earlier quarter. Daniel Gold’s QVT Financial is the biggest stakeholder of the company, with 112.5 million shares worth $1.26 billion. 

Tourlite Capital Management made the following regarding Roivant Sciences Ltd. (NASDAQ:ROIV) in its fourth quarter 2023 investor letter:

“During the fourth quarter, the fund initiated a significant position in Roivant Sciences Ltd. (NASDAQ:ROIV), a biotech company specializing in consolidating promising drug patents, known as ‘vants’. Our thesis is based on the following framework:

Cash value: ROIV’s strategic acquisition of Televant (85% ownership) from Pfizer for $45 million in December 2022, followed by the sale of this asset to Roche for $5.2 billion in Q4 2024, showcases management’s ability for value creation Adjusting for the sale proceeds, Roivant has a net cash position of ~$8 per share…” (Click here to read the full text)

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