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10 Best Pharmaceutical Stocks to Buy According to Billionaire Joseph Edelman

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·12 min read
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In this article, we will discuss the 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman. If you want to skip our detailed analysis of Edelman’s history, investment philosophy, and hedge fund performance, go directly to the 5 Best Pharmaceutical Stocks to Buy According to Billionaire Joseph Edelman.

Joseph Edelman was born in 1955 to Isidore Edelman, a famous scientist from a Jewish family. To sharpen his skills in business and investment, Joseph Edelman pursued a Master of Business Administration from New York University. In 1999, Joseph founded Perceptive Advisors, one of the leading investment firms in biotech and life sciences. Through Perceptive Advisors company, Joseph Edelman has been successful in stock investments, and today he is one of the top American billionaires with a net worth of $3.3 billion.

The Perceptive Advisors hedge fund mainly focuses on buying stakes in small and middle-size biotechnology stocks. Using investment analytic skills, the fund identifies and invest in viable small to large biotechnology companies.

Over the years, Perceptive Advisors biotech hedge fund has been performing well and has about $15 billion under managed 13F securities as of Q1 2021. Perceptive Advisors posted returns of 129% and 155%, in 1999 and 2000 respectively. During the early five years between 1999 to 2003, the hedge recorded positive returns except in 2002 when it lost 10%.

Notably, the hedge fund posted returns of 24% and 16% in 2009 and 2010, respectively. However, in 2008, the Perceptive Advisors lost 24%. Later in 2019 and 2020, Perceptive Advisors hedge fund returned 52% and 29% returns, respectively.

Among the notable holdings of Edelman as of the first quarter of 2021 include Exact Sciences Corporation (NASDAQ: EXAS), Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR) and Neurocrine Biosciences, Inc. (NASDAQ: NBIX).

The fund owns 353,523 shares worth $46.58 million in Exact Sciences Corporation (NASDAQ: EXAS). On May 4, the company declared its quarterly revenue of $402.1 million, up 15.6% YoY, beating the estimates by $13.46 million. On June 15, Raymond James analyst Andrew Cooper initiated coverage on Exact Sciences (NASDAQ: EXAS) with a “Strong Buy” rating and set a price target at $160.00.

With 409,341 shares worth $27.14 million, Perceptive Advisors is the biggest stakeholder in Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR). On June 23, the company announced positive results from the early-stage trial of ARO-HSD, which is being developed as a treatment for patients with liver diseases. On June 21, Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR) and Horizon Therapeutics declared an international collaboration and authorized agreement for ARO-XDH, a possible treatment for people with severe gout conditions, for as much as $700 million. In June 4, Baird’s analyst Joel Beatty initiated a coverage on Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR) and rated it as “Neutral,” giving it a price target of $85.00.

Neurocrine Biosciences, Inc. (NASDAQ: NBIX) is also part of Edelman’s portfolio. On April 26, Sentia Medical Sciences Inc. entered into a research partnership with Neurocrine Biosciences, Inc. The collaboration will strengthen Sentia’s exclusive peptide-based platform and Neurocrine’s drug development expertise in CRF biology to develop and commercialize medicines, with the possibility to treat a variety of hypothalamic-pituitary-adrenal (HPA) axis regulated diseases. On May 18, Goldman Sachs analyst Chris Shibutani initiated a coverage on Neurocrine Bio. (NASDAQ: NBIX) with a “Neutral rating” and a price target of $108.00.

10 Best Pharmaceutical Stocks to Buy According to Billionaire Joseph Edelman
10 Best Pharmaceutical Stocks to Buy According to Billionaire Joseph Edelman

Joseph Edelman of Perceptive Advisors

Average investors have to tread the financial markets with extreme caution. Even experts are having a hard time making sense of the rapidly changing world. The hedge fund industry's reputation has been tarnished in the last decade, during which its hedged returns couldn't keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey's research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26, 2021, our monthly newsletter's stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16. That's why we believe hedge fund sentiment is a handy indicator that investors should consider. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

With this context and industry outlook in mind, let’s start our list of the 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman. We used Edelman's hedge fund's Q1 data for this analysis.

Best Pharmaceutical Stocks to Buy According to Billionaire Joseph Edelman

10. PLx Pharma Inc. (NASDAQ: PLXP)

Edelman’s Stake Value: $2,006,000 Percentage of Joseph Edelman’s 13F Portfolio: 0.02% Number of Hedge Fund Holders: 9

PLx Pharma Inc. (NASDAQ: PLXP) is an America based pharmaceutical company. The company was founded in 2002 and ranks tenth on the list of 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman. PLx Pharma currently has a $303.54 million market capitalization and was able to deliver a 355.24% return in the past 12 months.

Just like Exact Sciences Corporation (NASDAQ: EXAS), Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR), and Neurocrine Biosciences, Inc. (NASDAQ: NBIX), PLx Pharma Inc. (NASDAQ: PLXP) is one of the best stocks to buy according to Joseph Edelman. On March 1, PLx announced that the U.S. Food and Drug Administration sanctioned supplemental new drug applications for its main products, VAZALORE 325 mg and VAZALORE 81 mg. It is the first-ever novel, fluid-filled aspirin capsule. On April 9, Oppenheimer analyst Leland Gershell initiated a coverage on the stock, rating it as "Outperform," with a price target of $20.00.

The stock is a new arrival on Joseph Edelman’s portfolio, as his hedge fund bought about 222,180 shares of the company, worth $2.01 million. In Q1 2021, 9 hedge funds in Insider Monkey’s database held stakes in PLx Pharma Inc. (NASDAQ: PLXP), compared to 4 funds in Q4 2020.

9. TherapeuticsMD, Inc. (NASDAQ: TXMD)

Edelman’s Stake Value: $3,685,000 Percentage of Joseph Edelman’s 13F Portfolio: 0.04% Number of Hedge Fund Holders: 14

TherapeuticsMD, Inc. (NASDAQ: TXMD) is a women's healthcare company. It was incorporated in 2008 and is placed ninth on the list of 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman.

On May 6, TherapeuticsMD, Inc. (NASDAQ: TXMD) declared quarterly revenue of $19.87 million, up 62.2% YoY, beating market predictions by $0.1 million. In April, TherapeuticsMD and Theramex announced the approval of BIJUVE capsules advisable for hormone replacement therapy in the United Kingdom and in Belgium.

Billionaire Joseph Edelman initiated a new stake in TherapeuticsMD in the first quarter of 2021, buying 2.75 million shares of the company, worth $3.69 million. In the first quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $27.83 million in TherapeuticsMD, Inc. (NASDAQ: TXMD), up from 12 the preceding quarter worth $27.89 million.

Just like Exact Sciences Corporation (NASDAQ: EXAS), Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR), and Neurocrine Biosciences, Inc. (NASDAQ: NBIX), TherapeuticsMD, Inc. (NASDAQ: TXMD) is one of the best stocks in Joseph Edelman's Q1 portfolio. In its Q4 2020 investor letter, Baron Discovery Fund highlighted a few stocks and TherapeuticsMD Inc. (NASDAQ:TXMD) is one of them. Here is what the fund said:

"TherapeuticsMD, Inc. is a developer of hormone-based drugs for women’s health. It has three FDA approved drugs, all of which are being launched. Shares were down in the fourth quarter as the COVID-19 crisis hampered the company’s early launch efforts for all three drugs (similar to Esperion and other pharmaceutical companies that had the bad luck to gain product approval during the pandemic). Because the health crisis is merely delaying the product launches, we believe shares are drastically undervalued.”

8. Viatris Inc. (NASDAQ: VTRS)

Edelman’s Stake Value: $14,032,000 Percentage of Joseph Edelman’s 13F Portfolio: 0.17% Number of Hedge Fund Holders: 58

Viatris Inc. (NASDAQ: VTRS) manufactures and distributes generic medicines globally. The company was incorporated in 1961 and is ranked eighth on the list of 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman.

Just like Exact Sciences Corporation (NASDAQ: EXAS), Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR), and Neurocrine Biosciences, Inc. (NASDAQ: NBIX), Viatris Inc. (NASDAQ: VTRS) is one of the best stocks to buy according to Joseph Edelman. On June 16, Citi initiated coverage on Viatris with a "Neutral" rating and a $16.00 price target. On May 10, Viatris Inc. (NASDAQ: VTRS) posted earnings for the first quarter of 2021, reporting earnings per share of $0.92, beating market predictions by $0.12. The revenue for the first three months of 2021 was $4.4 billion, up 69.9% YoY, beating the estimates by $200 million. The company also declared its quarterly dividend of $0.11 per share.

Joseph Edelman’s hedge fund owns more than 1 million shares of the company, worth over $14 million. There were 58 hedge funds in our database that held stakes in Viatris Inc. (NASDAQ: VTRS) in the first quarter of 2021, compared to 67 funds in the previous quarter.

In its Q1 2021 investor letter, the fund highlighted a few stocks and Viatris Inc (NASDAQ:VTRS) is one of them. Here is what the fund said:

"Our other new position in Q1 (in addition to AMA Group) is Viatris (VTRS), which is the old stock of the generic drug manufacturer Mylan Labs after it merged with Pfizers’s Upjohn unit late last year, via a tax-efficient Reverse Morris Trust. VTRS’s current market capitalization of ~$17B is less than 6x its estimated FCF of $3B (before restructuring costs) estimated for 2022, and the current enterprise value of $40B is only 6.4x EBITDA of $6.25B. Consider that Mylan Labs stock (MYL, predecessor to VTRS) was nearly $67/share on a $40B buy-out offer from Teva in 2015. Mylan rejected that seemingly very reasonable bid. In merging with Pfizer’s spin-off of Upjohn, Viatris became an equal (in sales, about $17B for each company) to the largest player in generic pharmaceuticals globally, Teva, Mylan’s former suitor. Viatris is an orphan, but its pedigree is tarnished (the reputation of Mylan’s management in rejecting the Teva bid, and other mistakes, still lingers), even though the new CEO and CFO come from Pfizer, the Chairman and President from Mylan remain. Also, ETFs that owned Pfizer had to sell the VTRS shares that they received, which added considerable forced selling.”

7. Aclaris Therapeutics, Inc. (NASDAQ: ACRS)

Edelman’s Stake Value: $16,380,000 Percentage of Joseph Edelman’s 13F Portfolio: 0.20% Number of Hedge Fund Holders: 30

Aclaris Therapeutics, Inc. (NASDAQ: ACRS) is a pharmaceutical company that develops small molecule therapeutics to meet the needs of patients with immune-mediated inflammatory disease. The company was founded in 2012 and is placed seventh on the list of 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman. Aclaris Therapeutics, Inc. (NASDAQ: ACRS) currently has a $1.06 billion market capitalization and was able to deliver a 1,033.55% return in the past 12 months.

On June 10, Aclaris Therapeutics, Inc. (NASDAQ: ACRS) priced its 7.04 million common shares public offering at $17.75 per share, expecting the gross proceeds to be ~$125 million. The company intends to use a portion of the net proceeds to invest in additional businesses or technologies. On May 7, the company declared its first quarter 2021 revenue of $1.78 million, up 26.2% YoY, beating the estimates by $0.3 million. Last week, Piper Sandler analyst Christopher Raymond initiated a coverage on the stock, rating it as “Overweight” with a price target of $30.00.

Just like Exact Sciences Corporation (NASDAQ: EXAS), Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR), and Neurocrine Biosciences, Inc. (NASDAQ: NBIX), Aclaris Therapeutics, Inc. (NASDAQ: ACRS) is one of the best stocks in Joseph Edelman's Q1 portfolio.

There were 30 hedge funds in our database that held stakes in Aclaris Therapeutics, Inc. (NASDAQ: ACRS) in the first quarter of 2021, compared to 23 funds in the previous quarter. Rock Springs Capital Management is the most significant stakeholder in Aclaris Therapeutics, Inc. (NASDAQ: ACRS), with 3.57 million shares worth $89.94 million.

6. Verona Pharma plc (NASDAQ: VRNA)

Edelman’s Stake Value: $24,151,000 Percentage of Joseph Edelman’s 13F Portfolio: 0.3% Number of Hedge Fund Holders: 12

Verona Pharma plc (NASDAQ: VRNA) is a pharmaceutical company that concentrates mainly on the development and commercialization of remedies for treating respiratory diseases. The company was incorporated in 2005 and is placed sixth on the list of 10 best pharmaceutical stocks to buy according to billionaire Joseph Edelman. Verona Pharma plc (NASDAQ: VRNA) stock has offered investors returns of 29.55% over the course of the past 12 months.

Verona Pharma plc (NASDAQ: VRNA) posted quarterly earnings results on April 29, reporting earnings per share of -$0.05 for the first three months of 2021, beating market predictions by $0.43. On June 10, Verona Pharma and Shanghai-based Nuance Pharma entered into an agreement. Under the agreement Nuance Pharma will develop and commercialize ensifentrine in Greater China. Verona Pharma will receive a down payment of $25 million in cash and an equity capital valued at $15 million in Nuance Biotech.

Just like Exact Sciences Corporation (NASDAQ: EXAS), Arrowhead Pharmaceuticals, Inc. (NASDAQ: ARWR), and Neurocrine Biosciences, Inc. (NASDAQ: NBIX), Verona Pharma plc (NASDAQ: VRNA) is one of the best stocks to buy according to Joseph Edelman.

Perceptive Advisors holds 2.89 million shares of the company worth $24.15 million. In the first quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth $182.30 million in Verona Pharma plc (NASDAQ: VRNA), same as the preceding quarter worth $147.13 million.

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Disclosure: None. 10 Best Pharmaceutical Stocks to Buy According to Billionaire Joseph Edelman is originally published on Insider Monkey.