OrbiMed Advisors 13F Stock Holdings & Strategy

Published on November 6th, 2020 by Nikos Sismanis

Founded in 1989, OrbiMed Advisors is an investment firm with approximately $15 billion of assets under management (AUM). The company invests in a wide spectrum of healthcare businesses: from private start-ups to large multinational companies. Scouting the world for innovations that will assist in making human lives healthier, the company’s team has helped nurture and commercialize some of today’s most successful healthcare companies. OrbiMed was founded in New York City but has also expanded its operations in San Francisco, Shanghai, Mumbai, Herzliya, and Hong Kong.

Investors following the company’s 13F filings over the last 3 years (from mid-August 2017 through mid-August 2020) would have generated annualized total returns of 8.27%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 11.9% over the same time period.

Note:  13F filing performance is different than fund performance.  See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of OrbiMed Advisors’ current 13F equity holdings below:

 

Keep reading this article to learn more about OrbiMed Advisors.

Table Of Contents

OrbiMed Advisors’ investment strategies

OrbiMed focuses solely on investing in the healthcare sector, leveraging its team’s life-long expertise in the industry to identify the most promising companies and help them on their journey to commercialize a new, revolutionary product in the market.

To separate its operations based on its different types of investments, OrbiMed allocates capital by embodying three different strategies:

Public Equity:

OrbiMed manages numerous public-equity funds, including both long and short event-driven funds, and various investment trusts. This segment focuses on all types of publicly traded healthcare companies, such as biopharmaceuticals, medical devices, and healthcare services stocks. We have included some of OrbiMed’s largest public-equity holdings down below.

Private Equity

OrbiMed’s second investment strategy revolves around seeking the most promising private start-ups, to which the fund is usually a leading investor, intending to have an active role in the company’s journey towards success.

OrbiMed’s expertise in identifying the future winners in the healthcare sector has been well-established, considering that the company numbers more than 140 successful exits. Some of them include:

Galecto (GLTO):

Galecto is a clinical-stage biotech firm that develops molecules to treat fibrosis, cancer, inflammation, and various other related diseases. OrbiMed’s managers participated in Galecto’s Series C round back in October of 2018 when the company raised $79 million. Exactly 2 years after, the company IPOed on the NASDAQ, currently valued at around $373 million. Considering that shares are missing from the fund’s latest f13 filing, it’s more than likely that management sold its position, booking a quick profit in a relatively short period of time.

Invitae (NVTA): 

One of OrbiMed’s most successful early picks was its participation in Invitae’s Series F private round, helping the company raise $120 million. Today, Invitae is one of the most hyped DNA-processing companies, growing revenues at 35% year-over-year and boasting a market cap of $7.7 billion, clearly displaying OrbiMed’s auspicious investment intuition.

Arrowhead Pharmaceuticals (ARWR):

Arrowhead Pharmaceuticals develops medicines that treat intractable diseases by silencing the genes that cause them. In 2016, the company announced a private offering with a select group of investors, including Orbimed, RA Capital Management, Perceptive Advisors, raising $45 million at a price of $5.90 per share. Today, shares are trading at $64, implying a 10-fold increase of OrbiMed’s funds within just a few years. To mitigate its risk OrbiMed has been gradually trimming its position, booking some profits, and currently only holding around $2.8 million worth of equity stake.

We have previously covered OrbiMed’s co-investors mentioned like Ra Capital and Perceptive advisors, which you can find here, and here, respectively.

Private Credit/Royalty

OrbiMed’s third investment strategy is providing healthcare firms with non-dilutive structured debt in exchange for royalty rights on their product sales. For the fund to minimize the risk of a company defaulting, management will only loan to commercial-stage companies to ensure its royalties will start flowing in from the get-go. By making sure that OrbiMed’s debt is non-dilutive, it also ensures that its investment’s original shareholders are also incentivized to perform well, as they retain their original equity, therefore creating a win-win situation for all.

OrbiMed’s portfolio and top holdings

The fund’s public-equity portfolio is well-diversified, comprising of 114 individual stocks, which, as we mentioned, are all operating in the healthcare sector. No holding accounts for more than 5% of its portfolio, while its top 10 largest holdings collectively occupy only around 1/3 it, which makes quite a spread out list of equities.

Source: OrbiMed’s f13 filing, Author       

Some of its top holdings include:

Springworks Therapeutics, Inc. (SWTX)

Springworks is OrbiMed’s largest holding, with the fund holdings around 17.2% of the company’s shares. Unlike Galecto and Invitae, which the fund sold upon their IPOs, Springworks equity was held upon its transition from a private to a public company, hence the fund’s large stake. Since the company’s initial listing price of around $23 around a year ago, shares have surged to a current all-time high of $65, reaffirming the fund’s decision to hold on to the stock. Considering that OrbiMed’s participation in both of the company’s two funding for around a few 100s of millions, the stock’s current market cap of $3.1 billion means that the fund is sitting on massive unreleased gains, marking Springworks as one of its most successful investments ever.

Alexion Pharmaceuticals (ALXN)

The fund’s second-largest investment is allocated in Alexion. Unlike its smaller investments, the company is a mature large-cap, generating billions in profits. Proving some widely used treatments, Alexion has generated around $957 million of net income during the last twelve months and has also bought back around $466 million of stock to reward its shareholders tangibly.

Source: Company filings, Author

OrbiMed has been holding Alexion since 2011, periodically adding to its position, therefore being a long-term believer of Alexion’s success, which has been indeed delivering robust returns over the decades.

Merck & Co (MRK)

Another mega-cap pharma in the fund’s portfolio is Merck & Co, which accounts for around 3.5% of its holdings. The company has been enriching its treatment portfolio by executing various acquisitions, such as its recent one of vaccine developer Themis. The company has been a stable investment for OrbiMed, consistently raising its distributions and currently yielding a solid 3.17%.

Source: Company filings, Author

The fund has been holding shares since early 2016, having enjoyed some low volatility, predictable returns from this pharma behemoth. Shares are currently trading at a decade-low P/E of around 18, which, combined with Merck’s robust focus on shareholder returns, could signal a great buying opportunity for new investors to jump in.

Biogen (BIIB)

At a market cap of nearly $53 billion, Biogen is another example of OrbiMed strengthening its portfolio by allocating its largest holdings in trustworthy, reliable free cash flow generators. The company has increased its net income by five times over the past decade and has multiple its Eps by more than 10 times during the same period due to its aggressive buybacks. On November 4th, the company’s shares rallied by nearly 40%, as the FDA intends to discuss Biogen’s marketing application seeking approval of “aducanumab” for the treatment of Alzheimer’s disease.

Source: Company filings, Author

OrbiMed increased its stake in the company by around 50% as of its latest f13 filing, which has clearly paid off big time based on the company’s potential success to treat Alzheimer’s. Considering that shares are currently valued at a P/E in the low teens despite the company’s aggressive capital returns, current investors may still be looking at a fruitful investment opportunity, despite the recent massive rally.

Boston Scientific Corp (BSX)

Prudently setting its risk-adjusted returns by adding another blue-chip to its top holdings, Boston Scientific accounts for around 3% of OrbiMed’s public-equity portfolio and is an entirely new position for the fund, initiated during Q2 of 2020. The company recently achieved FDA approval for its Ranger Drug-Coated Balloon to treat patients with peripheral artery disease, which should add to the company’s top line over time.

Shares are currently trading a forward P/E of 32 currently. While the stock is definitely not cheap, analysts expect an EPS increase of 50%+ next year, likely justifying the current premium.

Final Thoughts

OrbiMed’s choice to separate its investment strategies into three different categories has allowed its experienced team to scout and identify some of the healthcare sector’s current superstars from early on. While the company’s public-equity portfolio has not outperformed the overall market, it’s important to remember that the fund’s multi-bagger investments are not included in our estimates returns, as they were private investments.

Considering that OrbiMed’s know-how in healthcare sector is well-proven, investors can utilize its public-equities portfolio to be provided with some potentially very attractive investment cases.

At the same time, we recommend that retail investors perform their own due diligence and be warry of their capital allocation in OrbiMed’s holdings, as several of those remain very speculative, featuring negative free cash flows, and generally require industry-related knowledge in order to understand their business models adequately.