×

Sarepta investor: High drug prices are a good thing

If you can't charge "hundreds of thousands" of dollars a year for drugs, there will be no drugs for orphan diseases, Joe Edelman, Perceptive Advisors CEO, told CNBC's "Fast Money: Halftime Report."

"I think high drug prices are actually good," Edelman said Thursday. "And the reason they're good is, let's say you have a disease. I'll use an example of Alzheimer's. Very risky to develop a drug. You want the reward to be great. ... You're not going to spend a billion dollars and take all these risks to charge the typical $10,000 a year on a drug."

Edelman's firm manages $1.3 billion in assets and was the best performing hedge fund last year, seeing a return of more than 51 percent.

Edelman is optimistic on the sector at a time when its major players are facing unprecedented pressure. Shares of IBB, a fund that tracks the biotech sector, are down more than 23 percent so far this year, coming off its worst quarterly performance since 2002 as presidential candidates from both sides have bashed the industry's high prices.

"I think people generally know that whoever's the president, they're not going to destroy the [sector]. ... It hasn't impacted the drug stocks that much," Edelman said.

Still, Edelman says he's staying away from Valeant Pharmaceuticals, and doesn't know it well enough to be buying it. Valeant has gotten regulatory scrutiny for its pricing practices, and has now considered rolling them back, according to activist investor Bill Ackman.

"Valeant does not, in fact, invest that much in R&D, so if you wanted to make an exception, unfortunately it would have to be Valeant," Edelman said.

Still, Edelman sees at least one bright opportunity in another battered biotech name: Sarepta. His firm is the fifth largest shareholder of Sarepta.

The stock is down more than 56 percent so far this year as the approval of its flagship treatment is hotly debated among regulators. Analysts at JMP Securities model just a 10 percent chance of approval for the drug and estimate that the company will run out of cash by the end of the year if the drug does not get first pass approval.

Three analysts downgraded the company to "sell" Thursday, including JMP.

Edelman remains bullish on Sarepta Therapeutics and believes its Duchenne muscular dystrophy drug, eteplirsen, will be approved. Although the Food and Drug Administration reviewers took a negative stance on the drug, the people above the reviewers have the power to overrule them and approve the drug.

"I think it's extremely likely, as a matter of fact, to get approved," Edelman said. "It easily meets the standard of accelerated approval. ... It's not certain that the drug works, but it's certain that it's reasonably likely that it's working."

Disclosure: Sarepta is among the top holdings in Perceptive Advisors' funds.

— Reuters and CNBC's Christine Wang and Bree Kelly contributed to this report.