Posted on March 25th, 2021 by Nikolaos Sismanis
Perceptive Advisors is a New York-based hedge fund / micro-VC that specializes in identifying opportunities and aligning financial resources with the most promising technologies in modern healthcare. The company is unique in that it holds public companies in its portfolio and offers both debt and equity financing to smaller private companies as VC funds. Perceptive Advisors was founded in 1999 and currently manages 13F assets valued at approximately $ 9.3 billion.
Investors who filed the company’s 13F filings over the past three years (mid-February 2018 through mid-February 2021) would have earned an annualized total return of 13.55%. For comparison: the S&P 500 ETF (SPY) achieved an annualized total return of 12.50% over the same period.
Note: The 13F filing performance differs from the fund performance. See here how we calculate the 13F storage capacity.
Perceptive Advisors’ investment performance exhibits above-average review bias, as the type of healthcare companies they invest in are often bought or fail.
You can download an Excel spreadsheet of metrics relevant to Perceptive Advisors’ current 13F stock holdings:
Keep reading this article to learn more about Perceptive Advisors.
Perceptive Advisors’ investment philosophy
The fund’s investment philosophy is to be part of major healthcare breakthroughs. With the fund’s investment team comprised primarily of molecular biologists, MDs and PhDs, Perceptive understands the tremendous potential and blockbuster implications of medical discoveries. Perceptive invests and helps guide an idea from discovery to distribution, and seeks to have a positive impact on both the bottom line of the Fund and the society in general.
The company’s investment strategy is fairly straightforward and divided into two segments: Life Sciences and Credit Opportunities.
During its life, the fund has invested its resources in both public and private stocks, whose activities include the development of biotechnology products, pharmaceuticals, medical devices and diagnostics. Perceptive invests at different stages in a company’s lifecycle where the team believes they can add the most value along their journey.
The fund actively supports and advises companies from their early investment rounds through to their final stages of an IPO. The investment team has historically used a fundamentally scientific approach to develop proprietary research that enables Perceptive to invest with conviction and generate market returns. After the IPO, the fund can continue to hold stocks or successfully end its early investment in a company.
The second division of the fund’s overall investment portfolio has been credit opportunities since Perceptive launched its first closed-end fund in 2013. The company now has approximately $ 1 billion worth of capital tied up for personal loans and provides innovative healthcare companies with tailored debt financing solutions. Perceptive endeavors to provide loans of $ 10 million to $ 100 million to both private and public companies consisting of minimally dilutive capital.
Therefore, the fund can leverage its industry expertise to capitalize on profitable debt opportunities by minimizing risk in what would otherwise be an all-equity portfolio. The due diligence process in a very niche and technoscientific sector offers a unique advantage over the mainstream hedge funds that lack the talented scientists to identify such investments.
Public and private investment
While Perceptive’s industry-specific portfolio may not be industry-wide diversified, the funds are well balanced between public and private stocks and loan offerings.
Public investment: More than half of Perceptive’s total funds will be distributed in public shares, currently valued at around $ 7 billion, spread across 81 individual investments. While the medical sector is high risk, Perspective’s top two positions account for 16.2% of the fund’s portfolio and have some compelling recommendations. It’s important to note that Perceptive can own a significant stake in a company with a relatively modest investment, as the majority of its holdings are made up of micro-cap stocks. Despite the fund’s numerous holdings, the fund’s stake in a company can range from 5% to 25%.
As a result, the Perceptive team can play an active and influential role in the company’s operations, leveraging their expertise throughout the marketing journey. By holding a significant percentage of stocks, Perceptive can look forward to potential success and thus happily allocate resources while reflecting the underlying risks. This is quite a unique feature as most funds hold little more than a single digit stake in their public holdings.
Private investments: The fund’s private equity segment is also important. Perceptive has participated in numerous financing rounds for more than 150 private companies. The know-how of the team is reflected in the impressive success rate of the fund with 75 winning exits.
Some of them are:
Relay Therapeutics (RLAY)
Relay Therapeutics is the developer of an allosteric drug discovery platform that can be used to apply computational techniques to protein movements. Perceptive participated in the company’s $ 400 million round in 2018. In July 2020, the company completed its IPO, with shares nearly doubling in just a few months. Perceptive has given up its stake in the company and booked a multi-excavator return.
Invitae Corporation (NVTA)
Invitae is a genetic information company whose aim is to translate genetic information into routine medical practice to improve the quality of health care for all. Perceptive entered its Series F Round in 2014 to raise $ 120 million. A year later, the company successfully entered the public markets and has since led the field with a market cap of $ 4.3 billion. The fund abandoned its position in early 2020, another example of its team’s expertise in identifying long-term winners from the start.
Poseida Therapeutics (PSTX)
Poseida Therapeutics is a clinical-stage biopharmaceutical company dedicated to leveraging its proprietary genetic engineering platform technologies to develop next generation cell and gene therapeutics with the potential to cure. Perceptive helped the company raise $ 142 million in its penultimate C round. Poseida successfully went public in July 2020. During this time, Perceptive successfully exited its position before stocks hit the downturn.
Perceptive Advisors is a uniquely structured hedge fund that specializes in helping healthcare companies at various stages on their commercialization journey. Leveraging the extensive skills of its team in the various niche subsectors, the fund has been able to achieve both market returns on its public equity portfolio and numerous successful exits on its private investments.
We encourage readers to understand the risks and do their own due diligence before attempting to simulate some of Perceptive’s holdings as the business area carries different risks, is very volatile, and requires a deep understanding of each of the business models involved.
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