10 Best Biotech Stocks To Buy According To Hedge Funds

In this article, we discuss 10 best biotech stocks to buy according to hedge funds.

In 2023, digitalization will increase in the biotech industry as the possibility of online and remote assessment, diagnosis, and treatment of patients around the world heightens. The Nasdaq Biotech Index has gained over 15% in the last six months as of November 25. However, the U.S. Food and Drug Administration (FDA) has authorized 26 novel drug approvals to date in 2022, moving significantly slower than 2020 and 2021, which generated 53 and 50 approvals, respectively. 

According to Precedence Research, the global biotech market size in 2020 stood at $733.5 billion, and the revenue projection for 2030 came in at $1,683.52 billion, with a CAGR of 8.7% over the forecast period of 2022 to 2030. North America is the largest biotech market, whereas the Asia Pacific is the fastest growing region. 

In this uncertain market backdrop, investors are looking up to elite hedge funds and Wall Street money managers in hopes of replicating their market moves and loading up on safe stocks. Some of the best biotech stocks to buy according to hedge funds include Pfizer Inc. (NYSE:PFE), Illumina, Inc. (NASDAQ:ILMN), and United Therapeutics Corporation (NASDAQ:UTHR). 

Our Methodology 

We selected the biotech stocks that are most popular amongst elite hedge funds. We have mentioned the analyst ratings, business fundamentals, and future growth prospects for each firm. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. 

Photo by National Cancer Institute on Unsplash

Best Biotech Stocks To Buy According To Hedge Funds

10. Intellia Therapeutics, Inc. (NASDAQ:NTLA)

Number of Hedge Fund Holders: 36

Intellia Therapeutics, Inc. (NASDAQ:NTLA) is a Massachusetts-based clinical-stage biotechnology company that develops novel therapeutics using CRISPR and genome editing technologies. On November 3, Intellia Therapeutics, Inc. (NASDAQ:NTLA) reported a Q3 GAAP loss per share of $1.49, falling short of market estimates by $0.21. The revenue of $13.27 million climbed 84.0% year-over-year, beating Wall Street forecasts by $2.43 million. Intellia Therapeutics, Inc. (NASDAQ:NTLA) concluded the third quarter of 2022 with a strong cash position of $848.7 million. 

On November 14, Chardan analyst Geulah Livshits raised the price target on Intellia Therapeutics, Inc. (NASDAQ:NTLA) to $129 from $121 and kept a Buy rating on the shares after the company discussed updated phase I dose escalation data on in vivo gene editing asset NTLA-2002 in hereditary angioedema. The analyst continues to “be impressed with the translatability of Intellia’s in vivo editing program” and thinks the results “bode well” for NTLA-2003. 

According to Insider Monkey’s Q3 data, 36 hedge funds were long Intellia Therapeutics, Inc. (NASDAQ:NTLA), compared to 27 funds in the prior quarter. Cathie Wood’s ARK Investment Management is the largest position holder in the company, with 9.65 million shares worth $540.40 million. 

In addition to Pfizer Inc. (NYSE:PFE), Illumina, Inc. (NASDAQ:ILMN), and United Therapeutics Corporation (NASDAQ:UTHR), Intellia Therapeutics, Inc. (NASDAQ:NTLA) is one of the best biotech stocks to invest in. 

Carillon Tower Advisers discussed its stance on Intellia Therapeutics, Inc. (NASDAQ:NTLA) in its Q2 2021 investor letter.

“Intellia Therapeutics is a clinical-stage genome editing company focused on the development of proprietary, potentially curative therapeutics. The company’s stock soared after announcing positive interim data from an ongoing phase 1 clinical study of its in vivo gene editing candidate, which is being developed as a single-dose treatment for hereditary transthyretin (ATTR) amyloidosis. This specific form of therapy would be the first of its kind resulting in the precision editing of a gene in a target tissue in the human body.”

9. argenx SE (NASDAQ:ARGX)

Number of Hedge Fund Holders: 36

argenx SE (NASDAQ:ARGX) is a Netherlands-based biotechnology company focused on developing therapies for the treatment of autoimmune diseases in the United States, the Netherlands, Belgium, Japan, Switzerland, Germany, and France. On November 22, The U.S. Food and Drug Administration approved an urgent review of argenx SE (NASDAQ:ARGX)’s application seeking approval of subcutaneous efgartigimod to treat adult patients with generalized myasthenia gravis (gMG). The FDA authorized argenx SE (NASDAQ:ARGX)’s biologics license application and will make a decision by March 20, 2023. 

On November 14, JPMorgan analyst James Gordon raised the price target on argenx SE (NASDAQ:ARGX) to EUR 480 from EUR 470 and kept an Overweight rating on the shares.

According to Insider Monkey’s data, 36 hedge funds were long argenx SE (NASDAQ:ARGX) at the end of September 2022, compared to 35 funds in the prior quarter. Kurt Von Emster’s VenBio Select Advisor held the largest position in the company, comprising 1.26 million shares worth $446.80 million. 

Here is what Baron Funds specifically said about argenx SE (NASDAQ:ARGX) in its Q3 2022 investor letter:

“argenx SE (NASDAQ:ARGX) is a biotechnology company focused on autoimmune disorders. Shares gave back some gains in the quarter following strong stock performance relative to the broad market and biotechnology indexes. Sales of newly launched drug Vyvgart have tripled consensus expectations, and global approvals are coming earlier than guided. With numerous anticipated catalysts in the months ahead, including readouts in chronic immune demyelinating polyneuropathy and myositis and their subcutaneous formulation launch, we expected solid performance through the rest of 2022 and 2023.”

8. GSK plc (NYSE:GSK)

Number of Hedge Fund Holders: 37

GSK plc (NYSE:GSK) is a British multinational pharmaceutical and biotechnology company that manufactures and markets pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products worldwide. GSK plc (NYSE:GSK) is one of the premier biotech stocks backed by elite hedge funds. On November 2, GSK plc (NYSE:GSK) reported a Q3 non-GAAP EPS of 46.90p and a revenue of £7.8 billion, up 17.6% year-over-year. The company raised its guidance for 2022, and expects to deliver growth in sales of between 8% to 10% CER and growth in 2022 adjusted operating profit of between 15% to 17% CER. 

On November 11, UBS analyst Michael Leuchten downgraded GSK plc (NYSE:GSK) to Sell from Neutral, slashing the price target to 1,300 GBp from 1,820 GBp. The analyst sees “uncertain times ahead still” as well as an “unattractive earnings scenario” after 2026. GSK plc (NYSE:GSK)’s primary growth driver, the shingles vaccine Shingrix, will reach peak penetration mid-decade, and the forecasted sales slowdown is presently not factored into consensus estimates, the analyst told investors. The company’s other vaccine projects are “operating in more competitive fields or are too uncertain at this point,” the analyst contended.

According to Insider Monkey’s data, GSK plc (NYSE:GSK) was part of 37 hedge fund portfolios at the end of Q3 2022, compared to 34 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the largest position holder in the company, with more than 12 million shares worth $358.2 million. 

7. Moderna, Inc. (NASDAQ:MRNA)

Number of Hedge Fund Holders: 44

Moderna, Inc. (NASDAQ:MRNA) is a Massachusetts-based biotechnology company that develops and commercializes messenger RNA therapeutics and vaccines for the treatment of infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases worldwide. On November 14, Moderna, Inc. (NASDAQ:MRNA) announced that its COVID-19 boosters updated for Omicron sub-variants resulted in a superior neutralizing antibody response compared to its original vaccine. 

On November 15, BofA analyst Geoff Meacham raised the price target on Moderna, Inc. (NASDAQ:MRNA) to $182 from $160 and maintained a Neutral rating on the shares, citing the success of its Omicron-targeting COVID-19 booster candidate against Omicron BA.4/BA.5 compared to a booster dose of mRNA-1273. However, he was “surprised” by Moderna, Inc. (NASDAQ:MRNA)’s strength given “the open questions on the durability of COVID-19 vaccine revenue” and he continues to believe that demand for COVID-19 boosters is “likely to continue waning”. 

Among the hedge funds tracked by Insider Monkey, 44 funds reported owning stakes in Moderna, Inc. (NASDAQ:MRNA) at the end of September 2022, compared to 45 funds in the prior quarter. Patrick Degorce’s Theleme Partners held the largest position in the company, with 6 million shares worth $710 million. 

Here is what Baron Funds said about Moderna, Inc. (NASDAQ:MRNA) in its Q3 2022 investor letter:

“Within biotechnology, underperformance of Moderna, Inc. (NASDAQ:MRNA) and lower exposure to this better performing sub-industry weighed the most on relative performance. Shares of Moderna, a leader in the emerging field of mRNA-based vaccines and therapeutics, declined due to increasing uncertainty around what a booster market could look like as COVID shifts away from pandemic status and becomes an increasingly commercial market rather than government funded.”

6. AstraZeneca PLC (NASDAQ:AZN)

Number of Hedge Fund Holders: 44

AstraZeneca PLC (NASDAQ:AZN) is a British-Swedish multinational pharmaceutical and biotechnology company focused on the discovery, development, and commercialization of prescription medicines and vaccines. On November 16, AstraZeneca PLC (NASDAQ:AZN)’s rare disease unit Alexion concluded the acquisition of genomic medicine company LogicBio Therapeutics. The tender offer of $2.07 per share expired on November 15. 

Citi analyst Andrew Baum on November 4 opened a “positive catalyst watch” on AstraZeneca PLC (NASDAQ:AZN) shares. He estimates more than a 60% probability that the company can conclude its ongoing proton-pump inhibitors multidistrict litigation in New Jersey prior to the first bellwether case, recently delayed until March 2023. This would be “materially positive” to AstraZeneca PLC (NASDAQ:AZN)’s “depressed share price,” contended the analyst.

According to the third quarter database of Insider Monkey, 44 hedge funds held stakes worth $3 billion in AstraZeneca PLC (NASDAQ:AZN), compared to 47 in the prior quarter worth $4.8 billion. Rajiv Jain’s GQG Partners held the biggest stake in the company, consisting of 18.3 million shares valued at $1 billion. 

Like Pfizer Inc. (NYSE:PFE), Illumina, Inc. (NASDAQ:ILMN), and United Therapeutics Corporation (NASDAQ:UTHR), AstraZeneca PLC (NASDAQ:AZN) is one of the biotech stocks favored by elite hedge funds. 

ClearBridge Investments made the following comment about AstraZeneca PLC (NASDAQ:AZN) in its Q3 2022 investor letter:

“AstraZeneca PLC (NASDAQ:AZN), a multinational biopharmaceutical company, represents a good addition to the value defense side of our portfolio. We believe AstraZeneca’s durable double-digit earnings growth potential and benign patent expiration risk profile is not reflected in its current valuation, which is at a substantial discount to other “growth” pharmaceutical companies. Combined with the company’s high-potential drug pipeline, particularly in oncology, and management’s history of solid execution, we expect to see the stock rerate higher as the potential of its pipeline materializes.”

5. United Therapeutics Corporation (NASDAQ:UTHR)

Number of Hedge Fund Holders: 47

United Therapeutics Corporation (NASDAQ:UTHR) is a biotechnology company engaged in the development and commercialization of medical products and therapies to address the unmet needs of patients with chronic and life-threatening diseases in the United States and internationally. On November 2, United Therapeutics Corporation (NASDAQ:UTHR) reported a Q3 GAAP EPS of $4.91 and a revenue of $516 million, outperforming Wall Street estimates by $1.10 and $22.54 million, respectively. 

On November 3, Wedbush analyst Andreas Argyrides raised the price target on United Therapeutics Corporation (NASDAQ:UTHR) to $305 from $250 following Q3 results. The analyst maintained an Outperform rating on the shares.

According to Insider Monkey’s third quarter database, 47 hedge funds were bullish on United Therapeutics Corporation (NASDAQ:UTHR), compared to 49 funds in the prior quarter. Kurt Von Emster’s VenBio Select Advisor is the leading stakeholder of the company, with approximately 3 million shares worth $612.75 million. 

4. Illumina, Inc. (NASDAQ:ILMN)

Number of Hedge Fund Holders: 49

Illumina, Inc. (NASDAQ:ILMN) is an American biotechnology company that provides sequencing and array-based solutions for genetic and genomic analysis. On November 3, Illumina, Inc. (NASDAQ:ILMN) posted a Q3 non-GAAP EPS of $0.34 and a revenue of $1.12 billion, topping analysts’ estimates by $0.04 and $10 million, respectively. Illumina, Inc. (NASDAQ:ILMN) is one of the top biotech stocks favored by smart investors. 

On November 14, Piper Sandler analyst David Westenberg reiterated an Overweight rating on Illumina, Inc. (NASDAQ:ILMN) but trimmed the price target on the shares to $300 from $320. The analyst updated his model to factor in the Q3 earnings report.

According to Insider Monkey’s Q3 data, Illumina, Inc. (NASDAQ:ILMN) was part of 49 hedge fund portfolios, compared to 44 in the last quarter. Select Equity Group held the largest stake in the company, comprising 1.5 million shares worth about $298 million. 

Polen Capital made the following comment about Illumina, Inc. (NASDAQ:ILMN) in its Q3 2022 investor letter:

“Illumina, Inc. (NASDAQ:ILMN) has had a very difficult year on what we believe are transitory issues. First, the company closed its acquisition of Grail, a startup early-stage cancer testing business it re-acquired (Grail was founded inside Illumina originally) for $8 billion without regulatory approval. Illumina management believes that European regulators have no jurisdiction over the transaction as Grail had no European presence or revenue and member states did not complain within the timeframe specified in applicable regulations. The regulators have challenged these assertions and are likely to try to require Illumina to divest Grail subject to Illumina’s appeal. In the meantime, Grail has already been very dilutive to Illumina’s earnings, and Illumina may have to sell the asset at the end of it all. It is unknown how much Grail could be sold for in this environment if Illumina is forced to divest.

Second, Illumina’s core sequencing business has also slowed. This is not unusual as the business has always been a bit lumpy, but there are new competitors trying to prove that they can sequence genomes cheaper than Illumina without sacrificing accuracy. Our research here suggests: 1) competitor technologies do not seem to be as cost-effective or accurate in the real world as advertised, providing limited risk to Illumina’s core business; 2) Illumina has unveiled its own next-generation technology, which lowers the cost of sequencing the human genome to only $200, including data processing costs with world-class accuracy; 3) the slowdown in the core business is more macroeconomic as customers are looking to reduce consumables inventory levels in tough times and should pass quite quickly considering customers are continuing to use their sequencers at high levels; and 4) even if Illumina were forced to divest Grail, we think they would likely be able to sell it for above what it purchased it for as all of the clinical data on the company’s Galleri cancer screen is now publicly available (it is very positive in our view). Grail has made significant commercial progress since its acquisition, and the company should only be closer to U.S. regulatory approval. We believe we can buy the shares today at an extremely cheap valuation for the core business of a company that we view as having an unmatched position in a market that should be multiples of its current size in the years to come.”

3. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)

Number of Hedge Fund Holders: 62

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is an American biotechnology company that focuses on enzyme replacement therapies for life-threatening rare diseases and medical conditions. On November 23, after CSL Limited (OTC:CSLLY) announced that the FDA approved Hemgenix for the treatment of adults with Hemophilia B with a “clean” label with no black box warning or restrictions on some patient groups, Morgan Stanley analyst Matthew Harrison said he views the approval as “a clear sentiment positive” for BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) due to investor concern around FDA approvals of gene therapy products and potential risks about Roctavian. The analyst, who forecasts the Hemgenix news to drive BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) higher, has an Overweight rating and a $113 price target on the shares.

According to Insider Monkey’s data, 62 hedge funds were long BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) at the end of Q3 2022, compared to 59 funds in the preceding quarter. Julian Baker and Felix Baker’s Baker Bros. Advisors is the biggest position holder in the company, with 7.6 million shares worth $646 million. 

Here is what Carillon Tower Advisers specifically said about BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) in its Q2 2022 investor letter:

“BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) rose as the company announced a new approval in Japan for its drug to treat achondroplasia (dwarfism), and investors may have become more optimistic regarding its therapy for hemophilia following a positive opinion from European drug regulators. The drug is pending approval and has been delayed by the U.S. Food and Drug Administration to collect more data.”

2. Biogen Inc. (NASDAQ:BIIB)

Number of Hedge Fund Holders: 70

Biogen Inc. (NASDAQ:BIIB) is a Massachusetts-based biotechnology company that develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. On October 25, Biogen Inc. (NASDAQ:BIIB) reported its Q3 results, posting a GAAP EPS of $7.84 and a revenue of $2.51 billion, outperforming Wall Street estimates by $4.16 and $40.74 million, respectively. Biogen Inc. (NASDAQ:BIIB) is one of the most popular biotech names among elite hedge funds. 

On November 15, Truist analyst Robyn Karnauskas raised the price target on Biogen Inc. (NASDAQ:BIIB) to $350 from $265 and kept a Buy rating on the shares. The analyst raised her view of Biogen Inc. (NASDAQ:BIIB)’s Alzheimer’s drug penetration to 25% from 15% following the Roche trial failure. 

Among the hedge funds tracked by Insider Monkey, Biogen Inc. (NASDAQ:BIIB) was part of 70 public stock portfolios at the end of September 2022, compared to 54 funds in the prior quarter. Steve Cohen’s Point72 Asset Management held the largest stake in the company, comprising 1.67 million shares worth $448 million. 

ClearBridge Investments made the following comment about Biogen Inc. (NASDAQ:BIIB) in its Q3 2022 investor letter:

“Biogen Inc. (NASDAQ:BIIB) was the leading contributor among several biopharma names, boosted by positive, pivotal clinical data for its next-generation Alzheimer’s treatment Lecanemab. In a pivotal trial, the drug proved safe and efficacious in slowing progression of Alzheimer’s disease.”

1. Pfizer Inc. (NYSE:PFE)

Number of Hedge Fund Holders: 77

Pfizer Inc. (NYSE:PFE) is one of the best biotech stocks to buy according to hedge funds. The company produces medicines and vaccines for immunology, oncology, cardiology, endocrinology, and neurology. On November 1, Pfizer Inc. (NYSE:PFE) reported a Q3 non-GAAP EPS of $1.78 and a revenue of $22.6 billion, outperforming Wall Street estimates by $0.38 and $1.5 billion, respectively. The company raised 2022 revenue guidance for Comirnaty by $2 billion to approximately $34 billion and reaffirmed revenue guidance for Paxlovid of nearly $22 billion, despite foreign exchange headwinds. 

On November 17, Credit Suisse analyst Trung Huynh initiated coverage of Pfizer Inc. (NYSE:PFE) with an Outperform rating and a $55 price target. Pfizer Inc. (NYSE:PFE) has been “impacted adversely” following its COVID vaccine success, but the analyst said his Outperform thesis does not reflect a single asset, but a combination of pipeline advances that will drive growth.

According to Insider  Monkey’s data, 77 hedge funds were long Pfizer Inc. (NYSE:PFE) at the end of September 2022, compared to 70 funds in the prior quarter. Cliff Asness’ AQR Capital Management is the biggest position holder in the company, with 10.6 million shares worth $467.5 million. 

Diamond Hill Capital made the following comment about Pfizer Inc. (NYSE:PFE) in its Q3 2022 investor letter:

“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”

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Disclosure: None. 10 Best Biotech Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.