The World Health Organization defines genomics as the study of genes and their functions and related techniques. Some may confuse genomics with genetics, the main difference between the two is that genetics focuses on a single gene where as genomics addresses all genes and their relationship with each other.
COVID-19 virus made the power of genomics more visible. Rene Hendriksen, Professor, and Researcher at the Technical University of Denmark mentioned,
“You can see if the continent has been infected with different clones [mutations of COVID-19] or the same clone and then track those to the point of entry,”
Gene sequencing stocks have been a bright spot for investors, as lower costs and added urgency from the pandemic for biotech solutions have created long-term growth in the industry.
With technological advancement, genomics does not only have the capability to allow billions of people to live longer and healthier lives but it will also transform healthcare as we know it.
In a study conducted by Zion Market Research, the global genomics market was valued at approximately $16.4 billion in 2018 and is expected to generate around $41.2 billion by 2025 at a CAGR of 14.2% between 2019 to 2025.
According to research from BMC Genomics, the United States spent more than any other country on genomics research, corresponding to 35% of the overall worldwide public funding.
The growth of the genomics market has been evident with the growing government support. In 2016, the project Genomic Data Commons was launched where $70 million funding was allocated to the National Cancer Institute for cancer genomic projects under the precision medicine initiative. Right now investors are piling into technology stocks like Tesla (TSLA) or speculative software-as-a-service (SaaS) stocks that trade at 20 to 50 times revenues, however, they have been mostly avoiding the genomic stocks until a couple of weeks ago. Editas Medicine (EDIT) shares returned more than 150% over the last month, but there are other genomic stocks that investors can buy at still relatively cheap prices.
In order to identify the 12 best genomic stocks to buy now, we narrowed down the 40 holdings in the Global X Genomics & Biotechnology ETF (GNOM) as of December 21, 2020, to the 20 biggest positions and we were able to sort them using the hedge fund sentiment scores. Editas Medicine didn't make our list because hedge funds thought there are 18 other genomic stocks that are better values in this market.
Our in-house research shows that by using the hedge fund sentiment results, we can identify in advance a small group of stocks that can outperform the S&P 500 index on average by double digits annually. For instance, the portfolio of our monthly newsletter's stock picks has beaten the market by over 78 percentage points since March 2017 (see the details here). We have also publicly posted some portfolio holdings of our monthly newsletter. In October we shared this real estate stock idea and it's been up more than 50 percent since then.
Based on our hedge fund sentiment data, we present to you, the 12 best genomic stocks to buy now among the 800+ hedge funds tracked by Insider Monkey:
12. PTC Therapeutics, Inc. (NASDAQ:PTCT)
No of HFs: 25
Total Value of HF Holdings: $209 Million
We start our list of 12 best genomic stocks to buy now with PTC Therapeutics, Inc. The company provides biopharmaceutical products and develops orally administered drugs for genetic disorders, oncology, and infectious diseases. During the third quarter of 2020, the company reported total revenue of $118.4 million.
Recently, the company announced an expanded partnership with Centogene NV. The companies will work together to provide genetic testing and 3-O-Methyldopa biomarker analytics to help identify patients with Aromatic L-Amino Acid Decarboxylase deficiency. Centogene’s Senior Vice President of Business Development mentioned that the partnership will help widen the geographical scope of the no-cost testing program.
We are pleased to expand our partnership with PTC to support the REVEAL CP study, a global screening study designed to determine the prevalence of AADC deficiency in patients with cerebral palsy of an unknown cause. Together, we will offer genetic testing and 3-OMD biomarker analytics and widen the geographical scope of the no cost testing program, all of which are critical steps as we work together to bring hope to patients living with this rare genetic disorder.
11. Caredx, Inc. (NASDAQ:CDNA)
No of HFs: 25
Total Value of HF Holdings: $228 Million
Caredx, Inc. is a leading precision medicine solutions company that is focused on the discovery, development, and marketing of clinically differentiated healthcare solutions for transplant patients. During the third quarter of 2020, CDNA reported revenue of $53.4 million, an increase of 58% compared the same period of 2019.
The top hedge fund holder of this stock is D.E. Shaw’s DE Shaw which had $48 million invested in the stock at the end of September.
10. Pacific Biosciences (NASDAQ:PACB)
No of HFs: 25
Total Value of HF Holdings: $380 Million
PACB ranks 10th in our list of the best genomic stocks to buy now. Pacific Biosciences is an American biotechnology company that was founded in 2004. The company develops and produces systems for gene sequencing. The company’s first instrument was called the “PacBio RS” and was selected by GATC Biotech as its first European service provider in late 2010. During the third quarter of 2020, the company reported total revenue of $19.1 million.
In an article, we mentioned Baron Discovery Fund’s comments on PACB
“Pacific Biosciences of California, Inc. (“PacBio”) offers a differentiated long-read DNA sequencing platform for genetic analysis. We initiated a position in August when the company did a $100 million secondary share offering with proceeds to be used to support the company’s organic growth. Its proprietary SMRT cells and chemistries enable longer strands to be read at a time, which can capture lengthy genomic variations that may be missed by short-read sequencers such as those made by market leader Illumina. PacBio’s “HiFi” reads are based on circular consensus sequencing, which not only enable long reads, but also achieve high-read accuracy (a critical deficiency in early long-read technologies). The total addressable market for long-read analyzers is estimated at $2.5 billion by 2022, and with just single-digit penetration, we believe PacBio has room for significant growth as it commercially executes on its innovative platform. Cost has historically been a barrier to adoption, but the company has been investing in significantly improving throughput and cost per sample. In September 2015, it announced the Sequel System with SMRT Cell 1M, which improved throughput 7-fold relative to the legacy RS system. Then, in April 2019, it introduced the Sequel II system with SMRT Cell 8M to improve the throughput a further 8-fold (15-fold when taking into consideration chemistry and software upgrades released in the fourth quarter of 2019). Furthermore, PacBio recently appointed Christian Henry as its new CEO. Christian was previously Chief Commercial Officer at Illumina, and we believe his expertise can help guide PacBio to a commercial inflection point. We are excited to be able to own a company of this quality that is still a small cap.”
9. Crispr Therapeutics AG (NASDAQ:CRSP)
No of HFs: 26
Total Value of HF Holdings: $405 Million
CRSP ranks 9th in our list of the best genomic stocks to buy now. CRISPR Therapeutics AG is a bio-technology company that operates in Switzerland. The company focuses on the manufacturing and marketing of biological transformative gene-based medicines and other related products. During the third quarter, the company reported a total collaboration revenue of $0.1 million.
The top hedge fund holder of this stock is Joseph Edelman’s Perceptive Advisors, which had over $112 million invested in the stock at the end of September.
8. Qiagen NV (NYSE:QGEN)
No of HFs: 29
Total Value of HF Holdings: $580 Million
Qiagen NV is a provider of sample and assay technologies for molecular diagnostics, applied testing, academic and pharmaceutical research. The company provides its workflows to customers in molecular diagnostics, applied testing, pharma, and academia. During the third quarter of 2020, the company’s sales rose 26% at actual rates and constant exchange rates to $483.88 million as compared to $382.7 million in the same period of 2019.
Recently, Qiagen NV mentioned that they would be expanding their Germantown manufacturing facility as they ramp up Covid testing. Chief Executive Officer of Qiagen NV mentioned
2020 has demonstrated QIAGEN employees worldwide stepping up to deal with demanding changes. We have responded to the demands of the COVID-19 pandemic by launching novel testing solutions and ramping up production capacity.
As we finish 2020 with an improved outlook, we have confidence in our future and in the benefits of our unwavering focus on our five pillars of growth. We expect another strong performance in 2021, balancing investments in our portfolio to create new organic long-term growth opportunities with improved near-term earnings to deliver significant value creation
7. Blueprint Medicines Corp (NASDAQ:BPMC)
No of HFs: 34
Total Value of HF Holdings: $1.2 Billion
BPMC ranks 7th in our list of the best genomic stocks to buy now. Blueprint Medicines Corp is a biopharmaceutical company that focuses on the distribution and development of treatments for patients with genomically defined diseases driven by abnormal kinase activation. During the third quarter of 2020, the company reported a revenue of $745.1 million.
The top hedge fund holder of this stock is Eric Bannasch’s Cadian Captial, which had over $249 million invested in the stock at the end of September.
6. Sarepta Therapeutics, Inc. (NASDAQ:SRPT)
No of HFs: 35
Total Value of HF Holdings: $880 Million
SRPT ranks 6th in our list of the best genomic stocks to buy now. Sarepta Therapeutics, Inc. is a biotechnology company that focuses on research and drug development for treating rare, infectious, and other diseases.
Recently the company announced the results of their ongoing MOMENTUM study, a global Phase 2 clinical trial of the next-generation treatment for patients with Duchenne muscular dystrophy. Doug Ingram, President and Chief Executive of Sarepta mentioned,
“Sarepta’s PMO RNA technology is a vital platform on which we design therapies to treat those with Duchenne muscular dystrophy. Our next-generation PPMO technology is designed to increase cell penetration with the goal of offering significantly improved efficacy with more convenient dosing in Duchenne patients amenable to exon skipping, While patient numbers in each dose arm are small, the higher tissue concentration, exon skipping and dystrophin production in the 20 mg/kg dosing group were observed at an early 12-week timepoint and with far less cumulative drug exposure when compared to our current PMO technology. We know from our experience with PMOs that exon-skipping and dystrophin increase over time, and these results along with our preclinical experience, give us confidence as we dose escalate and continue to advance our PPMO exon-skipping therapies for Duchenne, including another five potential therapies that have already been designed, and explore the utility of the PPMO RNA platform for new disease indications.”
5. Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY)
No of HFs: 35
Total Value of HF Holdings: $902 Million
Alnylam Pharmaceuticals, Inc. is ranked as the fifth-best genomic stock to buy now. The company is a biopharmaceutical company that focuses on the production and development of RNA interference therapeutics for genetically defined diseases.
Recently, the company announced the appointment of Tolga Tanguler formed Senior Vice President of Alexion as their Chief Commercial Officer where he will be leading the global marketing, sales, market access, commercial operations, and strategy for the company. John Maraganore, Ph.D., Chief Executive Officer of Alnylam mentioned,
“After an in-depth and comprehensive search, we have selected Tolga Tanguler, a dynamic and highly skilled commercial leader to join Alnylam. With over 20 years of global pharmaceutical and biotech experience, most recently at Pfizer and Alexion, Tolga’s considerable success commercializing multiple rare, specialty and common disease products positions him as an excellent choice for this key role. With Tolga, Kasha, Salil and Aggie joining Alnylam, we have now rounded out our world-class leadership team across our commercial, medical and compliance expertise areas. Together, these outstanding leaders stand poised to support the ongoing global launches of our three marketed products and promising pipeline of innovative medicines addressing a range of patient needs, while we continue on our path towards profitability.”
4. Agilent Technologies, Inc. (NYSE:A)
No of HFs: 39
Total Value of HF Holdings: $3.2 Billion
Agilent Technologies Inc. is a producer and developer of core bio-analytical and electronic measurement solutions to the communications, electronics and life sciences, and chemical analysis industries. During the third quarter of 2020, the company reported revenue of $1.26 million.
In an article, we mentioned Pershing Square Capital Management’s comments on A,
Agilent’s fiscal third quarter results were demonstrative of the company’s high-quality, resilient business model and significant margin expansion opportunity. In what the company expects to be its most challenging quarter of the year, organic revenue declined only 3%, supported by stable performance in its CrossLab service and consumables segment, which grew 1%. While the pace of recovery throughout the quarter varied by region depending on when each region faced the brunt of the pandemic, the company exited July with positive growth across all of its regions. Notably, even with a modest revenue decline, the company was able to expand operating margins by 90 basis points year-over-year by effectively managing its cost structure. Agilent’s stock has increased 16% year-to-date.
Since the onset of the pandemic, Agilent has outperformed its comparable peer group with meaningfully lower revenue declines than peers. Despite the ongoing disruption from the pandemic, the company remains highly focused on product innovation and sales efforts to drive market share gains. For example, in its service business, Agilent introduced new workflow solutions to capitalize on the trend of labs outsourcing multiple services to a single vendor. The company has recently won several large, lab-wide, enterprise service contracts. Likewise, in its instrument portfolio, Agilent launched two new mass spectrometry product lines aimed at increasing testing throughput and reducing downtime. We expect these initiatives to drive long-term sales growth as they expand the installed base of Agilent instruments, and increase the penetration of its service and consumables off erings.”
3. Natera, Inc. (NASDAQ:NTRA)
No of HFs: 43
Total Value of HF Holdings: $932 Million
Natera, Inc. is a genetic testing company that focuses on providing DNA testing across multiple areas. The company offers Panorama, a non-invasive prenatal test.
The top hedge fund holder of this stock is Samuel Isaly’s OrbiMed Advisors, which had over $152 million invested in the stock at the end of September.
2. Illumina, Inc. (NASDAQ:ILMN)
No of HFs: 44
Total Value of HF Holdings: $1.3 Billion
Illumina, Inc. is a developer and producer of integrated systems that focus on the analysis of genetic variation and biological function. During the third quarter of 2020, the company announced a revenue of $794 million, an increase of 26% compared to the second quarter of 2020. We wrote an article on the 12 best large biotech stocks to buy now and ILMN was one of them.
In a separate article, Baron Asset Fund’s mentioned comments on ILMN
Illumina, Inc. is the leading manufacturer of DNA sequencing systems for genetic analysis. Shares fell as lower utilization of the company’s systems during COVID-19 led to disappointing second quarter financial results. Illumina also announced the acquisition of Grail, which is developing a blood test for early stage cancer detection. Investors responded negatively to the acquisition because of substantial near-term earnings dilution and concerns about competition with Illumina’s customers. Although we appreciate these concerns, we believe the Grail investment offers the potential for significant long-term value creation in the rapidly growing market for early cancer screening.
In a separate article, RiverPark Advisors, LCC mentioned that ILMN is the clear innovation leader in sequencing and array-based solutions for genetic analysis.
Illumina: ILMN shares were our top detractor for the quarter, as the market viewed negatively its $8 billion purchase of liquid biopsy leader GRAIL. The acquisition marks a shift in strategy for Illumina from its highly profitable selling of tools to the liquid biopsy market (among other markets) to actively participating in the development of tests themselves. This market (earlystage cancer screening via blood samples), however, is a massive long-term opportunity that can dramatically change the face of healthcare. GRAIL is a leader and should have a commercial product as early as next year.
We continue to view the company’s core genomics industry as offering one of the larger total addressable markets that we cover, and ILMN is the clear innovation leader in sequencing and array-based solutions for genetic analysis. With less than 0.02% of humans having been sequenced and 99% of the variants discovered in the genome having not yet been deciphered, Illumina, at only $3.4 billion of TTM revenue, is still in its infancy in what is potentially a greater than $50 billion genetics analysis tools market opportunity. With Illumina’s entrance into the potentially larger liquid biopsy market, we believe that the company has a significantly larger growth opportunity ahead.
1. Biomarin Pharmaceutical, Inc. (NASDAQ:BMRN)
No of HFs: 44
Total Value of HF Holdings: $1.5 Billion
The top genomic stock to buy now is Biomarin Pharmaceutical, Inc. The company is headquartered in San Rafael, California. They are known to be one of the world’s leaders in developing and marketing innovative biopharmaceuticals for rare disease driven genetic causes.
The top hedge fund holder of this stock is Julian Baker and Felix Baker’s Baker Bros. Advisors, which had over $577 million invested in the stock at the end of September.