Call it the Kennedy effect.
The Nasdaq Biotechnology Index fell 12.4 percent from November 8 through December 30. So it’s not surprising that most biopharma and life sciences hedge funds posted sharp losses in December, the second straight losing month for many of these funds. As a result, most of the group finished the year significantly lagging the overall stock market when the S&P 500 was up 25 percent.
The late-year losses coincided with the election of Donald Trump.
“In a surprise twist late in the U.S. election cycle, health care stocks — which for much of 2024 avoided the political spotlight — have been hit by growing worries over the potential for significant changes to health care policy under the incoming Trump administration,” wrote Andy Acker and Dan Lyons, who head the Janus Henderson Biotechnology Innovation strategy, in a report last month. “The turning point was when president-elect Donald Trump nominated Robert F. Kennedy Jr. to head the Department of Health and Human Services. Kennedy is known for radical views — including skepticism of vaccines and the biopharmaceuticals industry — and news of the nomination caused health care stocks to sell off.”
That sell-off did not spare the Janus Henderson fund, which dropped a further 6.2 percent last month. It finished the year up 29.6 percent, one of few biopharma funds to beat the broad stock market benchmark, after being up more than 42 percent at the end of October.
One outlier was Averill, which rose 2.7 percent in December and 14.6 percent for the year. This is not surprising; Averill, which operates under the Suvretta Capital umbrella, generally performs independently of the group given its deft ability to short stocks.
Otherwise, most biopharma funds lost money in December.
RTW Investments lost about 8 percent for the month and finished the year up 10 percent. Avoro Capital Advisors was down 8.7 percent but climbed about 10.3 percent for the year. RA Capital dropped 5 percent in December but finished 2024 up 12.7 percent. Cormorant Capital fell 5.7 percent and rose just 7.5 percent for the year. Soleus Capital declined 3.3 percent to finish 2024 up 11 percent.
Several funds not only lost money in December but also finished the year in the red. For example, Perceptive Advisors dropped 8 percent last month, closing 2024 down 2.4 percent. One of the worst performers was EcoR1 Capital: It fell 8.2 percent in December and 19.6 percent for the year.
How is 2025 shaping up? The Nasdaq Biotechnology Index has rebounded by more than 5 percent since bottoming out on January 14, providing some hope the worst is behind the group.
“Health care investors face questions around potential policy changes heading into 2025 and should prepare for volatility over the near term, in our view,” stated the Janus Henderson report. “We believe investors should stay focused on the sector’s biggest drivers of long-term performance — innovation and demand — which now appear deeply discounted.”
There is also hope that a less regulation-focused administration will spark a surge in merger deals between big pharma and fledgling biopharma companies with attractive drug pipelines.
