Mid and large-cap biotech companies, especially the large-caps, generally have products in the marketplace that generate revenues, and in many cases the companies have reached sustained profitability. This contrasts with the world of small-cap biotech companies that generally have no commercial products, but rather a pipeline of product candidates being tested in early- to late-stage clinical trials for a variety of disease conditions.
The small-cap biotech companies are speculative by definition, with potential revenues often being many years in the future, and hence they attract a less risk-averse investor. Mid- and large-cap biotech companies in contrast often are more attractive to conservative investors that look for revenues and sustained profitability in constructing their value. Hence, we have broken down the companies in the biotech group into these separate categories, in discussing the investments of legendary or guru fund managers in the biotech industry.
In this article, we identify mid- and large-cap biotech companies, based on our research of their latest available Q3 institutional 13-F filings, that are being accumulated and those being distributed by legendary or guru fund managers such as Warren Buffet, George Soros, Carl Icahn, Steven Cohen and Mario Gabelli. Previously, we examined the investing activities of guru fund managers in small-cap biotech companies and micro-cap biotech companies in separate articles, that can be accessed by clicking on the hyperlinks above.
Also, separately, in our series on the world's largest or mega fund managers, we have examined the investing activities of mega funds in the biotech group in separate articles focused on micro-cap biotech companies, small-cap biotech companies, and mid-cap biotech companies that can also be accessed by clicking on the above hyperlinks.
Most of the information is based on the latest available Q3 filings, but we have updated our data with Q4 filings from guru fund manager Yacktman Asset Management that filed earlier this month. Taken together, these guru managers were bearish on the mid- and large-cap biotech group, cutting a net $187 million from their $3.13 billion prior quarter position in the group.
The following are the mid- and large-cap biotech companies that guru fund managers are bullish about, that are also trading at a discount to their peers (see Table):
Biogen Idec Inc. (NASDAQ:BIIB): BIIB is engaged in the research, development and commercialization of therapies for the treatment of multiple sclerosis (MS), cancer and auto-inflammatory diseases. Guru funds more than doubled their $185 million prior quarter position, adding a net $209 million. The top buyer was Viking Global Investors ($135 million), and the top holders were Viking ($298 million) and SAC Capital Advisors ($46 million). BIIB reported its Q4 almost two weeks ago, on January 31st, beating analyst earnings estimates ($1.51 v/s $1.49) on the back of strong sales growth of TYSABRI and AVONEX, but guided earnings lower for FY2012. The stock has been a long-term performer, having almost tripled in the last three years; it currently trades at all-time highs at a discount 17 forward P/E and 4.5 P/B compared to averages of 43.2 and 10.9 for its (large-cap) peers in the biotech group.
Celgene Corp. (NASDAQ:CELG): CELG develops therapies to treat cancer and immune-inflammatory related diseases by regulating cells, genes and proteins. Guru funds added a net $5 million to their $37 million prior quarter position, with the top holders being Fisher Asset Management ($19 million), Kingdon Capital Management ($11 million), and Balyasny Asset Management ($10 million).
CELG reported its Q4 just over two weeks ago, on January 26th, missing analyst earnings estimates and guiding FY2012 revenue and earnings in-line. Its shares continue to trade near all-time highs, up over 45% in the past year, and trading at 12-13 forward P/E and 5.7 P/B compared to averages of 43.2 and 10.9 for its (large-cap) peers in the biotech group, while earnings growth is projected to be stellar from $3.79 in 2011 to $5.65 in 2013 at an annual 22.1% growth rate.
Alexion Pharmaceuticals (NASDAQ:ALXN): ALXN is a commercial-stage biotech focused on serving patients with severe and ultra-rare disorders. Guru funds added a net $95 million to their $552 million prior quarter position, and together they hold 4.2% of the outstanding shares, far greater than their 1.3% weighting in the group. The top buyers were Viking Global Investors ($59 million) and Balyasny Asset Management ($26 million), and the top holder is Columbia Wanger Asset Management ($519 million).
ALXN shares were up strongly at the end of last week, after it reported a strong Q4 on Thursday morning, beating analyst revenues ($228 million v/s $221 million) and earnings (41c v/s 33c) estimates. The stock trades at a discount 37-38 forward P/E and 14.6 P/B compared to averages of 43.2 and 10.9 for its (large-cap) peers in the biotech group, while earnings are projected to rise from $1.38 in 2011 to $2.49 in 2013 at an annual rate of 34.3%.
The following are mid- and large-cap biotech companies that guru funds are bullish about, but that are not trading at discounts compared to their peers (see Table):
Ariad Pharmaceuticals Inc. (NASDAQ:ARIA): ARIA is engaged in the development of drugs that treat aggressive and advanced-stage cancer by regulating cell signaling with small molecules. It is also developing small-molecule drugs that block signal transduction pathways in cells responsible for osteoporosis, and immune and inflammatory diseases. Guru funds added a net $9 million to their $19 million prior quarter position, with the top buyers being Soros Fund Management ($7 million) and Driehaus Capital Management ($3 million). ARIA stock has been in a strong rally since mid-December, up almost 50%, bolstered by recent broker upgrades based on the potential of its ponatinib treatment and other drugs in its pipeline.
Biomarin Pharmaceuticals (NASDAQ:BMRN): BMRN develops enzyme replacement therapies and oral solutions to treat debilitating, life-threatening, chronic genetic disorders and other diseases and conditions. Guru funds added a net $4 million to their $302 million prior quarter position in the company, and together they hold 7.3% of the outstanding shares, significantly higher than their 1.3% weighting in the group. The top buyer was RS Investment Management ($5 million), and the top holders were Columbia Wanger Asset Management ($264 million) and RS Investment Management ($21 million).
Alkermes Plc (NASDAQ:ALKS): Alkermes, an integrated biotech company, develops injectable and oral products for the treatment of central nervous system disorders, addiction, diabetes and autoimmune disorders. Guru funds added a new $8 million position in the company, and the sole buyer was Capital Growth Management ($8 million).
The following are the mid- and large-cap biotech companies that guru fund managers are most bearish about (see Table):
- Dendreon Corp. (NASDAQ:DNDN), a developer of targeted therapeutics to treat cancer using active immunotherapies, monoclonal antibodies and small molecules, and probably best known as the maker of Provenge® for Prostate Cancer, in which guru funds cut a net $167 million from their $173 million prior quarter position;
- Gilead Sciences Inc. (NASDAQ:GILD), a developer of therapeutics to treat viral, fungal, respiratory and cardiovascular diseases, in which guru funds cut a net $115 million from their $406 million prior quarter position;
- Amylin Pharmaceuticals (AMLN), a developer of drugs for the treatment of diabetes, obesity and other diseases, in which guru funds cut a net $73 million from their $373 million prior quarter position;
- Ironwood Pharmaceuticals Inc. (NASDAQ:IRWD), a developer of medicines that treat upper gastro-intestinal disorders, pain and inflammation, respiratory diseases, and cardiovascular diseases, in which guru funds cut a net $1 million from their $33 million prior quarter position;
- Pharmacyclics Inc. (NASDAQ:PCYC), a development stage biotech company that is focused on discovering and developing innovative small-molecule drugs for the treatment of cancer and immune mediated diseases, in which guru funds cut $6 million from their $13 million prior quarter position; and
- Human Genome Sciences (HGSI), a developer of gene-based protein and antibody drugs to treat cancer and immunological and infectious diseases, in which guru funds cut $3 million from their $7 million prior quarter position.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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