| Joseph Edelman, Perceptive Advisors (Bloomberg) |
Now, this is what you call a comeback.
The Perceptive Life Sciences Fund, managed by Joseph Edelman’s New York–based Perceptive Advisors, suffered a 12 percent loss in January and was down 17 percent through February, its low point. But it is now solidly back in the black.
The biotechnology and health care fund posted an 18.13 percent gain in September alone. As a result, it is up 13.2 percent for the year.
This is truly remarkable for a variety of reasons, even in the volatile world of biotechnology stocks. For one thing, this works out to a 30-percentage-point swing in just seven months. The fund’s gains for the year are also more than 27 percentage points better than those of the Nasdaq Biotechnology Index, which is down about 14.4 percent — even after its huge rally since June. The upshot: Perceptive went from being among the worst-performing hedge funds to among the top performers in just seven months.
Edelman launched Perceptive Advisors in 1999. It invests in health care but mostly in biotechnology companies.
Last year Edelman made his debut on Alpha’s Rich List of the world’s top-earning hedge fund managers after his fund generated a 51.8 percent gain in 2015, the best performance among the 25 top earners. For that performance, he made a total of $300 million.
The firm’s portfolios manage about $1.5 billion, which is heavily diversified, a good idea given the inherent volatility of many of the firm’s investments.
Several of the stocks that have led the fund’s recovery this year were responsible for the early-year losses in the first place. By far the fund’s best performer this year is Sarepta Therapeutics, a Cambridge, Massachusetts, medical research and drug development company. It was up 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.
“Many, including sell-side analysts, thought it would not be approved,” said Edelman in a phone interview.
The stock also gained more than fivefold since its early February low and was also one of Perceptive’s biggest winners last year, when it gained 167 percent. Shares of Sarepta had more than halved in value in one day in mid-January after the company heard bad news from the FDA.
Tesaro, a Waltham, Massachusetts, biopharmaceutical company that specializes in developing cancer drugs, surged more than 17 percent last month. The company, which was Perceptive’s second-largest publicly traded stock at the end of the second quarter, has nearly doubled this year. (Perceptive makes private investments from time to time.)
Medivation’s stock has been roughly flat since Pfizer announced plans in late August to acquire for $14 billion the San Francisco biopharmaceutical company, which is known for a significant cancer drug. However, the stock is up nearly 70 percent for the year. Perceptive also did extremely well with Celator Pharmaceuticals, which was recently acquired by Jazz Pharmaceuticals.
Looking forward, Edelman still likes Sarepta. He also singles out Neurocrine Biosciences, his fund’s largest individual long position and also one of his best performers last year. Shares of the San Diego biopharmaceutical company gained 4 percent in September, but it is down more than 12 percent for the year.
Edelman calls Cranbury, New Jersey–based Amicus Therapeutics, his fund’s third-largest publicly traded long position, “a great long-term bet.” He says it has FDA applications for two genetic diseases, for which there is a larger market outside the U.S.
Edelman also likes Versartis. On Wednesday, Perceptive disclosed in a 13G regulatory filing that it had lifted its stake in the Menlo Park, California–based company to 13.1 percent. It is developing a long-acting growth hormone drug.
