Are you a successful asset manager who has already amassed more than $1 billion in personal wealth? If not, there are probably a few things you can learn from the small list of folks who have.
Luckily for us everyday investors, the Securities and Exchange Commission makes everyone who manages more than $100 million report their trades every three months.
A look at the latest round of disclosures from Baker Bros. Advisors shows the billionaire brothers who manage the firm, Julian and Felix, made bets on more than a dozen biopharmaceutical stocks during the first three months of 2024.
Two of the biggest bets the brothers made this year have been for AbCellera Biologics(NASDAQ: ABCL) and Fate Therapeutics(NASDAQ: FATE). Despite the endorsement, shares of these stocks are down more than 40% from the peaks they reached in the first quarter.
Could following billionaire investors who know the biopharmaceutical industry inside and out be a smart move for your portfolio? Here's what you should know.
AbCellera Biologics
AbCellera Biologics is a drug discovery business with partners that include Eli Lilly, Merck, and Pfizer. It has a hand in 13 clinical-stage new drug candidates. This number could swell because, during the year that ended March 31, its partners initiated 15 new programs.
While its partners fund clinical trials, AbCellera retains rights to milestone payments and royalties should a drug it discovered succeed. With the industry's biggest players paying for clinical trials, the company spent just $162 million on research and development over the past year despite a hand in 13 clinical-stage programs.
Perhaps sensing a big payday around the corner, the Baker brothers acquired 4.6 million shares of AbCellera Biologics in the first quarter. This purchase raised the firm's stake to 27.5 million shares.
ABCL Research and Development Expense (TTM) data by YCharts
AbCellera's stock price has been beaten down because its only significant source of royalty revenue has dried up. The company discovered antibodies that Eli Lilly developed into an authorized COVID-19 treatment. Unfortunately, the Food and Drug Administration rescinded that authorization a couple of years ago, and there are no other sources of royalty payments on the horizon.
AbCellera stock is getting hammered, but it has enough cash to keep operating at its present burn rate for at least a couple of more years.
This stock is too risky for most investors. That said, folks with an enormous risk tolerance, such as Felix and Julian Baker, could come out miles ahead over the long run if just one of its programs under development becomes a blockbuster drug.
Fate Therapeutics
Fate Therapeutics is a clinical-stage biopharmaceutical company developing stem-cell-derived immunotherapies. In 2021, the company briefly achieved a market capitalization above $10 billion but fell on hard times. It's down about 96% from its all-time peak and by about 49% from a peak it set in the first quarter, when the Baker brothers were buying shares left and right.
In the first quarter, Baker Bros. Advisors opened a new Fate Therapeutics position by acquiring over 1.8 million shares. The billionaire investors are probably encouraged by the progress the revamped company is making with an entirely new slate of cellular therapy candidates.
In the first quarter, Fate Therapeutics treated its first lupus patient with FT819 in a phase 1 trial. The new candidate is an off-the-shelf T-cell therapy that could prevent lupus patients' immune systems from attacking healthy tissues and blood cells.
In collaboration with Ono Pharmaceuticals, Fate is testing FT825. This is an experimental T-cell therapy for patients with HER2-positive tumors, and the first patient was dosed in the first quarter.
Over the next year or so, we'll learn a lot more about Fate Therapeutics' new clinical-stage lineup. Now that its market cap is only about $480 million, positive trial results could cause the stock to soar. Success is such a long way from guaranteed, though, that this stock is appropriate only for investors with an enormous risk tolerance.
Should you invest $1,000 in AbCellera Biologics right now?
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbCellera Biologics, Fate Therapeutics, Merck, and Pfizer. The Motley Fool has a disclosure policy.
