What Do The World’s Greatest Investors Think of These Hot Biotech Stocks?

Sarepta Therapeutics Inc (NASDAQ:SRPT), Pacific Biosciences of California (NASDAQ:PACB), and Evoke Pharma Inc (NASDAQ:EVOK) are trending today as their shares are up by 22%, 44%, and 11.8% respectively on abnormally strong volumes. The news that sparked the rallies involve analyst upgrades, new products and positive study data. Let’s take a closer look at the upside catalysts and see if the world’s greatest investors agree with the market on any of them.

In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of the past. While there are more than 8,000 funds in operation at present, Hedge fund experts at Insider Monkey look at the aristocrats of this group, around 700 funds. Contrary to popular belief Insider Monkey’s research revealed that hedge funds lagged the market in recent years because of their short positions as well as the huge fees that they charge, while they managed to outperform the market on the long side of their portfolios. In fact, the 15 most popular small-cap stocks among hedge funds have returned 118% since the end of August 2012 and beat the S&P 500 Index by some 60 percentage points (see more details here).

Shares of Sarepta Therapeutics Inc (NASDAQ:SRPT), a biotech developer of RNA-targeted therapeutics, are up after the company released additional safety and efficacy data concerning its phase 2b program of Eteplirsen. Eteplirsen is the company’s treatment candidate for Duchenne muscular dystrophy. Around 13% of people with Duchenne muscular dystrophy have a mutation amenable for Eteplirsen/Exon 51 skipping. According to the presentation:

“Eteplirsen provided a statistically significant 6 minute walk test advantage of 151 meters at three years compared to an external control.”

and

“Fourth muscle biopsy results confirm increased dystrophin production in nearly all eteplirsen-treated patients and exon skipping in 100 percent of patients.”

The efficacy results were better than expectations and the drug’s safety profile was consistent with prior studies. Shares of the Sarepta Therapeutics had appreciated by 121% year to date before the news.

Hedge funds are bullish on Sarepta Therapeutics Inc (NASDAQ:SRPT). Of the around 730 elite funds we track, 14 funds owned $231.36 million worth of the company’s shares (representing 18.40% of the float) on June 30, up from 15 funds and $105.13 million respectively a quarter earlier. Joseph Edelman‘s Perceptive Advisors increased its position by 28% to 2.81 million shares, while D E Shaw upped its stake by 101% to 516,376 shares.

Shares of Pacific Biosciences of California (NASDAQ:PACB) are up after the company launched a better version of its sequencing platform. CEO Michael Hunkapiller commented:

“We are extremely proud to introduce the Sequel System, which provides access to the existing benefits of SMRT Sequencing, including long reads, high consensus accuracy, uniform coverage, and integrated methylation information a set of core attributes first pioneered with the PacBio RS. The system’s lower price and smaller footprint represent our continued commitment to leveraging the scalability of our technology and the unique characteristics of SMRT Sequencing. Moreover, with its lower cost of goods (approximately a quarter of that of the PacBio RS II) we expect to be able to achieve substantial gross margin improvement and move more quickly toward profitability.”

Hedge funds think highly of Pacific Biosciences of California (NASDAQ:PACB) as 15 funds from our database held in aggregate $106.24 million worth of stock (representing 24.70% of the float) at the end of the second quarter, up from 10 funds with stakes valued at $87.93 million three months earlier. Lee Ainslie‘s Maverick Capital kept its position unchanged at 7.06 million shares, while Mitchell Blutt’s Consonance Capital Management raised its stake by 170% to 5.4 million shares.

Shares of Evoke Pharma Inc (NASDAQ:EVOK) are up after HC Wainwright initiated coverage with a ‘Buy’ rating and a $27 price target. Evoke Pharma initially surged on September 15 after the company announced its Phase 3 clinical trial design for EVK-001 “aligns with the US Food and Drug Administration’s recommendations”. We’re not quite sure why that is positive news and we would stay on the sidelines on this one.

Hedge funds were not that interested in Evoke Pharma during the second quarter, as only 3 funds held positions worth a cumulative $1.71 million at the end of June. Of the three, James A. Silverman‘s Opaleye Management is the largest shareholder with a stake of 259,100 shares. Jim Simons’ Renaissance Technologies has a stake of 13,000 shares as well.

Disclosure: None