Who Are Perceptive Advisors and Why Are They Important to Biotech Investors?

Posted on December 24, 2019 by Medtech[y] Staff


Anyone who knows biotech investing has heard of the major hedge funds who invest in the biotechnology and life sciences sectors. Aside from Baker Brothers Advisors, potentially the most famous fund in the space is Perceptive Advisors, which was founded by Joseph Edelman in 1999.

According to their website, they employ a long/short equity strategy as a hedging technique and focus their investments in biotechnology and life sciences. The firm manages approximately $4.2 billion+ across their strategies.

Those are great buzz words and marketing speak, but let’s be real here, they are focused on making money for the fund and themselves. And they do it very well based on their history.

Ok, great, I’m not a client of their fund and probably never will be so why does that matter?

Well, the most savvy investors follow the smart money, and Perceptive Advisors are some of the smartest money in biotech and life sciences investing.

Once you know who the smart money is, you can use one of the numerous websites that post funds positions online based on their SEC filings.

One of my personal favorites is WhaleWisdom. Why would someone use a site like WhaleWisdom? For one, it gives you a chance to replicate the portfolios of some of the best investors in the world.

That’s where the term smart money comes from.

There are thousands of biotech and life sciences companies to choose from when investing, and most of them aren’t worth owning a share.

How do you sift through all the garbage and potentially find the next blockbuster stock?

If you go to WhaleWisdom (or search SEC filings on your own), you can see what companies funds like Perceptive Advisors own, when they acquired the shares, and the estimated share price where they acquired the shares.

It’s always important to do your own due diligence but I would bet following and learning from investing legends like Joseph Edelman, and his analysts, would be considered following the smart money.

Additionally, with this strategy, you have a chance to find promising biotech startups and not just the big biotechnology companies who have much lower growth potential.

A recent example of how I used WhaleWisdom to find a promising biotech stock that Perceptive Advisors has invested in is VBI Vaccines (VBIV).

In my research, I was able to find out that Perceptive Advisors and Joseph Edelman own 25% of VBI Vaccines, which is a substantial position for such a small biotech company. Would one of the most successful funds and investors in the space invest that much in a company if they didn’t truly believe in the story?

With the help of WhaleWisdom, I was able to see that Perceptive Advisors currently holds 45,951,556 shares after adding an additional 20 million shares as of their most recent filing. For one, that shows an insane conviction in the stock and company.

I was also able to find out that Perceptive has owned VBIV since Q1 2015 and paid an estimated average price of $1.61.

Ok, let’s take that a step further and see where VBIV has been trading at. In September, VBIV hit a 52-week low of .47, which happened to be when Perceptive added to their position. They very easily could have cut their losses and moved on. But they didn’t.

Is this enough to buy stock in a company, especially one trading in the .47-.55 range? No, but it is easily a great starting point to do your own due diligence and potentially start building a position.

I ended up acquiring a sizeable position (for me) in the low .80s and plan on holding long-term unless the story changes, or I see that Perceptive Advisors closes out their position, or even reduces it.

While it’s always important to do your own research, the strategy of following the smart money should always be part of your research. Finding biotech startups worth investing in is hard enough. Using some of the best biotech and life sciences hedge funds to aid in your research and investing strategy is worth the time. Additionally, it’s always good to go on a biotech company’s website and find their most recent corporate presentation to help learn about the science, company, investors and a timeline of important events. For VBIV, you can checkout their most recent investor presentation here.

Check out the rest of Perceptive Advisors investment positions on WhaleWisdom and see if you can find the next big biotech investment with the help of the smart money.