The biotech sector is well known for its M&A activity, but billionaire fund managers don’t seem to be attracted by the frenzy. They seem to prefer biotech giants that buy up smaller innovative companies or products, develop them, squeeze all the juice and then they are back in the market looking for new acquisitions. Last year M&A activity in the sector reached the $200 billion mark and analysts believe this year could be even better, as some of the companies that have already bolstered their portfolio are still hungry for more, while other cash-rich companies have not yet even entered the market. If you are looking to add some biotech giants to your portfolio, it would be a good idea to have a clue what billionaire fund managers think of them.
We begin with Exelixis Inc. (NASDAQ:EXEL), a company that focuses on cancer treatment solutions. At the end of the 2017 third quarter, the stock could be found in the equity portfolios of 7 billionaire fund managers, unchanged compared to the previous quarter. The largest stake in Exelixis Inc. (NASDAQ:EXEL) was held by Jim Simons’ Renaissance Technologies, which indicated ownership of 3.79 million shares in its latest 13F filing. David E Shaw’s D E Shaw is also betting big on Exelixis, having amassed a little over 2.07 million shares.
Together with IPSEN (OTCMKTS:IPSEY), Exelixis Inc. (NASDAQ:EXEL) has recently announced positive results in late-stage study of Cabometyx (cabozantinib). Although the drug has already been approved in the United States for the treatment of patients with advanced renal cell carcinoma (RCC), Exelixis and IPSEN have found that it can help patients suffering from advanced hepatocellular carcinoma survive an average of 2.2 months longer. The companies announced plans to submit a supplemental New Drug Application with the FDA by the end of the current quarter.
On par with Exelixis is Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), which was also held by 7 billionaire fund managers at the end of the third quarter. Israel Englander’s Millennium Management stepped up its interest in Vertex Pharmaceuticals, having increased their stake by 114% to 1.67 million shares. Jim Simons’ Renaissance Technologies has also loaded up on Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), having amassed 1.37 million shares by the end of September.
On Wednesday, Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) issued its fourth quarter financial results, managing to surpass analysts’ expectations. The company reported adjusted earnings of $0.61 per share on the back of $651.6 million in revenue, ahead of analysts’ estimates of $0.58 in earnings per share and $596.1 million in revenue. The stock is touted mainly as a Buy with a consensus price target of $175.75, which represents and upside potential of 8.8%.
Jim Simons’ Renaissance Technologies is betting big on Gilead Sciences Inc. (NASDAQ:GILD) as well. Have the fund’s mathematical models fallen in love with biotech stocks? According to RenTech’s latest 13F filing, the fund held approximately 10.2 million shares of Gilead Sciences. Billionaire Kerr Neilson is also keeping an eye on Gilead Sciences Inc. (NASDAQ:GILD), with his fund, Platinum Asset Management, reportedly holding 2.89 million shares. Overall, 8 of the billionaires followed by Insider Monkey had a stake in Gilead Sciences at the end of the 2017 third quarter.
Citigroup has recently upgraded Gilead Sciences Inc. (NASDAQ:GILD) from Neutral to Buy, citing the impact of tax reform and Hepatitis C Virus stabilization. The company’s sales of hepatitis C treatments have been squashed by competition, but it has an ace up its sleeve. Gilead’s hope reside in its HIV treatment candidate which is expected to bring in sales of $5 billion by 2022. The company expects an answer from the FDA by February 12.
In the case of Illumina Inc. (NASDAQ:ILMN), billionaire Ken Griffin leads the way with his fund, Citadel Investment Group, reportedly holding 335,533 shares. Israel Englander’s Millennium Management is very bullish on the stock and has increased its holding to 184,902 shares by the end of September. In general, 9 of the billionaires tracked by Insider Monkey were invested in Illumina Inc. (NASDAQ:ILMN), up from just 5 a quarter before.
Illumina Inc. (NASDAQ:ILMN) released fourth quarter financial results on Tuesday, managing to surprise investors. The company reported revenue of $778 million and adjusted earnings of $1.44 per share, easily beating analysts’ expectations of $1.22 in earnings per share and $753.3 in revenue. Looking ahead, Illumina said it expects revenue to grow by 13-14% in 2018 and has projected earnings in the range of $4.50-$4.60 per share.
Biogen Inc (NASDAQ:BIIB) and Celgene Corporation (NASDAQ:CELG) are the joint leaders of this top. At the end of September 2017, both companies could be found in the equity portfolios of 10 billionaire fund managers followed by Insider Monkey. Steve Cohen’s family office Point72 Asset Management has reduced its exposure to Biogen Inc (NASDAQ:BIIB) by 44% during the third quarter and reported ownership of 507,922 shares in its latest 13F filing, while David E Shaw’s D E Shaw, dumped more than half of its position and was left holding 609,933 shares at the end of the third quarter.
Biogen Inc (NASDAQ:BIIB) has recently announced the acquisition of an experimental brain disorder drug in a deal worth up to $217 million, but analysts believe the company could be in for other deals as well, given recent acquisitions by competitors Celgene and Sanofi. “Biogen most definitely needs to do another deal, optimally a large one,” commented Geoffrey Porges, a senior biotech analyst at Leerink Partners, adding that he sees potential candidates in the range of $3 billion to $15 billion.
Among the billionaire fund managers we follow, David E Shaw’s D E Shaw held the largest stake in Celgene Corporation (NASDAQ:CELG) at the end of the third quarter, having indicated ownership of 1.66 million shares in its latest quarterly filing. Jim Simons’ Renaissance Technologies also held a sizable position, although the fund had its position reduced by 65% to 410,238 shares. Having given up on “mongersen”, an anti-inflammation candidate designed for the treatment of Crohn’s disease, Celgene Corporation (NASDAQ:CELG) is now betting on Ozanimod, another anti-inflammation candidate for which the company paid $7.2 billion. Investors should be wary though, as Ozanimod faces competition from Novartis’ Gilenya.
Disclosure: none.
