| Joseph Edelman, chief executive officer of Perceptive Advisors LLC (Photo Credit: Chris Goodney/Bloomberg) |
The Perceptive Life Sciences Fund is off to another strong start after taking a pause last year.
This is the health care and biotech fund headed by Perceptive Advisors’ Joseph Edelman, who made his debut on the Rich List a year ago after posting a 52 percent gain that year, personally earning $300 million.
In the first four months of this year, Edelman’s fund is up more than 10 percent. Last year, the fund posted a 3.8 percent gain, its first single-digit gain in five years and only the third single-digit gain since Edelman launched the fund in 1999.
In fact, after losing 24 percent in 2008 — which, by the way, was a much smaller loss than that of the Standard & Poor’s 500 stock index — Perceptive has mostly posted double-digit gains, including a 52 percent return in 2015 and 48 percent in 2013. Looked another way, Perceptive has compounded at more than 29 percent a year since its inception, compared with 10.8 percent for the Nasdaq Biotech Index and 4.5 percent for the Nasdaq Index.
The fund is highly volatile due to the nature of its stock holdings. It emphasizes life science companies, especially biotechnology and what it deems to be smaller, more inefficiently priced companies. It also devotes some of its assets to private companies.
This type of portfolio can lend itself to a stomach-churning ride, as demonstrated over the past couple of years, when drug companies and the prices they charge have been in the cross-hairs of politicians. For example, early last year the fund had fallen nearly 17 percent before rallying back to finish up nearly 4 percent for the year. Edelman, however, generally runs a highly diversified portfolio.
Perceptive was managing $1.7 billion as of the end of February. At year-end, it had $1.4 billion in its U.S. stock portfolio, spread over nearly 200 individual stocks as well as put and call options. It turns over more than 20 percent of the portfolio in a quarter.
However, nearly half of the U.S. assets were invested in the top ten holdings. And only one of those ten stocks was purchased in 2016. The rest of the positions were established between 2010 and 2015.
For example, the firm initially invested in Neurocrine Biosciences, its largest individual long position, in the second quarter of 2010. The biotech stock surged 38 percent in the first four months of this year, driven in part by its announcement in April that it received regulatory approval for its drug for a movement disorder. The stock has swelled nearly ten-fold since Edelman initiated his position.
Tesaro, a Waltham, Massachusetts, biopharmaceutical company that specializes in developing cancer drugs and Perceptive’s second-largest long holding, gained nearly 10 percent in the first four months of this year. In March, the company received Food and Drug Administration approval for a drug that will treat recurrent ovarian cancer. The stock has risen more than six-fold since the firm took its first stake in the first quarter of 2013.
Amicus Therapeutics, Perceptive’s third-largest publicly traded long position, is up more than 54 percent this year. Sarepta Therapeutics, a Cambridge, Massachusetts, medical research and drug development company, has surged 32 percent so far this year. This is a highly volatile stock and Perceptive’s fourth-largest holding. It surged 119 percent in September alone after reports that the Food and Drug Administration approved the company’s drug to treat Duchenne muscular dystrophy, the first drug to treat the disease. After that, the stock more than halved, bottoming at year-end. It seems the insurance company, Anthem, refused to pay for the drug, demanding additional clinical studies.
That’s life in the fledgling biotech world — and Perceptive’s portfolio.
