Perceptive Advisors Stock Holdings & Investment Analysis

Published on September 1st, 2020 by Nikolaos Sismanis

Perceptive Advisors is a New York-based hedge fund/micro VC, specializing in identifying opportunities and directing financial resources towards the most promising technologies in modern healthcare. The company is unique in that it holds public companies in its portfolio while also offering both and debt and equity financing to smaller, private companies, as a VC fund. Perceptive Advisors was founded in 1999 and currently has around $7.3 billion worth of assets under management.

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 19.4%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 13.1% over the same time period.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.  Perceptive Advisors’ investment performance has a larger than normal amount of lookback bias as the type healthcare companies it invests in are often acquired or fail.

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

Keep reading this article to learn more about Perceptive Advisors.

Table Of Contents

Perceptive Advisors’ Investment Philosophy

The fund’s investment philosophy revolves around being part of major healthcare breakthroughs. With the fund’s investment team primarily consisting of molecular biologists, MDs, and PhDs, Perceptive understands the massive potential and blockbuster impact of medical discoveries. By investing and helping to lead an idea from discovery to distribution, the company strives to positively impact both the fund’s bottom line and society in general.

Investment Strategy

The company’s investment strategy is quite simple, divided into two segments: Life Sciences, and Credit Opportunities.

Life Sciences:

Over its lifetime, the fund has been allocating its funds in both public and private equities, whose operations involve developing biotechnology products, drugs, medical devices, and diagnostics. Perceptive invests throughout different stages of a company’s life cycle, in which its team believes it can add the most value in its journey.

The fund actively assists and advises companies from their early-stage investment rounds until their final stages towards an IPO. Its investment team has been historically using a fundamentally scientific approach to develop proprietary research, enabling Perceptive to make investments with conviction and achieve market-beating returns. Post-IPO, the fund may continue holding shares, or successfully exit its early investment in a company.

Credit Opportunities:

The second division of the fund’s total investment portfolio is Credit Opportunities since Perceptive launched its first closed-end fund in 2013. It now approximately holds $1 billion worth of capital committed to private credit, providing customized debt financing solutions to innovative healthcare companies. Perceptive seeks to lend anywhere from $10 to $100 million in both private-held and public companies, consisting of minimally-dilutive capital.

Therefore, the fund can leverage its sector expertise to capture profitable debt opportunities by minimizing the risk in what would otherwise be an all-equity portfolio. Its due diligence process in a very niche and techno-scientific sector provides a unique advantage compared to mainstream hedge funds, which lack the talented scientists to identify such investments.

Public and Private Investments

While Perceptive’s sector-specific portfolio may not be industry-diversified, its funds are well-split between its public and private equities, as well as its credit offerings.

Public Investments:  More than half of Perceptive’s total funds are allocated in public equities, currently valued at around $3.6 billion, spread across 109 individual investments. The medical sector is a high risk/high reward one, and as a result, no stock takes up more than 8% of the fund’s portfolio, in order for management to maintain a meaningful margin of safety. What’s important to note is that because the majority of its holdings are micro-cap stocks, Perceptive can hold a substantial stake in a company with a relatively humble investment. Despite the fund’s numerous holdings, its individual equities’ stake is primarily anywhere from 5% to 25%.

As a result, Perceptive’s team can have an active, influential role in the company’s operations, utilizing its expertise throughout its commercialization journey. By holding a substantial percentage of shares, Perceptive can get excited about a potential success and thus happy to allocate resources while reflecting on the underlying risks. This is quite a unique characteristic, as most funds hardly end up owning more than a single-digit stake in their public-equity holdings.

Private Investments: The fund’s private equity segment is equally significant, with Perceptive having participated in numerous funding rounds for more than 100 private companies. Its team’s expertise is well-reflected in the fund’s impressive success-ratio, with 55 victorious exits.

Some of these include:

Perceptive Advisors Private Investments

Relay Therapeutics (RLAY)

Relay Therapeutics is the creator of an allosteric drug-discovery platform designed to apply computational procedures to protein motion. Perceptive participated in the company’s $400 million C round back in 2018. In July of 2020, the company completed its IPO, with shares having almost doubled in just a couple of months. Perceptive has exited its stake in the company, booking a multi-bagger return.

Invitae Corporation (NVTA)

Invitae is a genetic information company whose purpose is to carry genetic information into routine medical practice to enhance the quality of healthcare for everyone. Perceptive took part in its series F round back in 2014, in efforts to raise $120 million. A year later the company successfully entered the public markets and has since become a leader in the field, boasting a $4.3 billion market cap. The fund exited its position in early 2020, marking another example of its team’s expertise to identify long-term winners, from early on.

Poseida Therapeutics (PSTX)

Poseida Therapeutics is a clinical-stage bio-pharmaceutical company devoted to leveraging its proprietary gene engineering platform technologies to design next-generation cell and gene therapeutics, with the potential to cure. Perceptive helped the company raise $142 million in its second-to-last C round. Poseida successfully IPOed in July 2020, in which time Perceptive successfully exited its position, before shares took the downturn.

Final Thoughts

Perceptive Advisors is a uniquely structured hedge fund specializing in assisting healthcare companies through different stages in their journey towards commercialization. By deploying its team’s extensive set of skills in the different niche sub-sectors, the fund has been able to both produce market-beating returns in its public-equities portfolio and make numerous successful exits in its private investments.

We encourage readers to understand the risks and perform their own due diligence before attempting to simulate some of Perceptive’s holdings, as its sector of operations holds various risks, and is highly volatile, and requires a deep understanding of the individual corresponding business models.