- Longtime healthcare, pharmaceutical, and biotech investor Perceptive Advisors sees a future where a vaccine for the coronavirus is being mass-produced and distributed in the next 12 to 18 months — and believes many different companies will have a chance to make some serious money off of it.
- Even though many coronavirus programs will ultimately fail, Adam Stone — the CIO for the $7 billion manager — told Business Insider that the vaccine opportunity is “vast.”
- For hedge fund managers and allocators becoming more interested in the pharmaceutical space, Stone recommends that don’t forget about the opportunity that is China.
- Visit Business Insider’s homepage for more stories.
Perceptive Advisors — the $7 billion healthcare-focused hedge-fund manager founded by billionaire Joseph Edelman — is not solely focused on the coronavirus.
Adam Stone, the Manhattan-based firm’s chief investment officer, told Business Insider that despite the ongoing global health crisis, Perceptive’s portfolio “is fairly limited” in its exposure to companies whose future success is riding on a COVID-19 related product. The firm’s more-than-$2-billion flagship Life Sciences fund returned more than 50% last year, but is down roughly 1% through the end of July this year, according to HSBC’s Hedge Weekly report. Hedge Fund Research’s index of healthcare-focused hedge funds returned 23.14% in 2019 and is up 3.4% through the end of July.
But that doesn’t mean the firm has not taken bets in the space, where a rush of funding and interest has accumulated thanks to governments across the world pushing desperately to end the pandemic and restart global economies. The firm bought more than 9 million shares of VBI Vaccines in the second quarter, and the Massachusetts-based company just received a more than $50 in Canadian dollars from the Canadian government for potential vaccine trials.
For investors without much training in the tricky healthcare space — where smaller companies’ fortunes can swing on the approval of a single drug — it can be near-impossible task to pick the winners, and even a trained eye like Stone says “there’s a lot of noise.”
“There’s an overwhelming number of programs trying to treat the disease, cure the disease, prevent the disease,” he said.
“Most of these programs will never amount to anything.”
The promising thing though is there is bound to be more than one winner in the race for a vaccine, Stone says. He foresees a mass-produced and distributable vaccine coming in the next 12 to 18 months, and that the opportunity for companies is “vast.”
Smaller companies and the massive drugmakers will be able to get a piece of the opportunity, Stone said, as he expects there to be a booster vaccine needed to be produced for 2022 and 2023. Because billions of doses will be needed, no single company — not matter how big — will be able to dominate the market.
“There’ll be many vaccines that are approved and marketed and distributed ultimately,” he said, noting that smaller companies and start-ups have “a real opportunity here.”
Perceptive’s advice for first-time healthcare investors
The hedge-fund industry has struggled to not only add new entrants over recent years, with launches lagging, but also retain the assets that it already had thanks to underperformance and pricey fees.
But healthcare-focused managers have been a bright spot, with investor appetite for the sector reaching a fever pitch during the pandemic.
Stone’s advice to managers wading into the space is to not ignore China, which he believes many in his field already have.
“They don’t understand the opportunity in China,” he said. He described it as “solidly number two as far as markets for pharmaceuticals in the world.”
Two years ago, Stone and his team realized they needed to address a “pretty significant hole” in their portfolio, and sought to add more exposure to China and its markets. Originally, they planned to do what they do in their flagship, and invest in public pharmaceutical companies based in China.
But they eventually launched and funded their own company LianBio, which partners with diagnostic and healthcare-technology companies to bring their products to the Chinese population. The China-based firm tapped Dr. Bing Li to run the new company, which has already signed on four different partnerships in roughly eight months.
“This company has already moved beyond concept, and proven the business model,” Li told Business Insider.
So far, the company has partnered with BridgeBio Pharma, heart-health-focused Myokardia, Navire Pharma, and QED Therapeutics, according to LianBio’s website. Perceptive’s flagship fund owns stock in BridgeBio and Myokardia, filings show, while QED and Navire are both affiliates of BridgeBio.
Stone says the life sciences industry has mostly been spared in the US-China trade war, and Li believes China has made progress in protecting intellectual property in the space.
The pandemic, which originated in China, has not slowed LianBio’s start too much, according to Stone. The firm’s office in Shanghai is “fully functioning” right now, and Stone and his team have been able to close deals over video chats in the US.
“We look at this company as giving the largest population in the world access to drugs they should have access to.”
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