Biopharma-focused hedge funds got off to a rocky start this year, with most funds lagging the broader market in January and some reporting losses. Few were able to beat the S&P 500’s 2.7 percent gain, and the Nasdaq Biotechnology Index rose about 7.5 percent for the month.
Investors have grown concerned about the sector amid reports — which became reality — that President Trump would tap Robert F. Kennedy Jr., a notorious antivaccine advocate and a serial suer of pharmaceuticals companies, as secretary of Health and Human Services.
Investors, however, remain hopeful that a deregulation-minded administration will lead to an increase in mergers between large pharmaceuticals and health care companies and fledgling biopharmaceuticals companies with attractive potential new-drug pipelines. Still, one company’s positive or negative news about a drug in development could have a huge impact on its stock and any hedge fund that counts it as a major holding.
One hedge fund that beat the broader market last month was RTW Investments, which climbed 3.1 percent, according to someone who has seen the results. It was up 10 percent last year. The hedge fund got a big boost from Madrigal Pharmaceuticals, which gained about 8.5 percent in January. The stock is RTW’s No. 1 long, accounting for more than 9 percent of U.S. assets.
Averill also got off to a good start, posting a 2.6 percent gain for the month, the source says. Averill Madison, a longer-biased health care–focused long-short equity fund, increased by 5.7 percent. It appears to have gotten a huge boost when Johnson & Johnson in January agreed to buy Intra-Cellular Therapies for $14.6 billion. Intra-Cellular surged about 50 percent on the news.
Avoro Capital Advisors was up 2 percent. Shares of No. 2 long Argenx SE, a Dutch immunology company, rose 6.5 percent in January. It made up nearly 11 percent of Avoro’s assets at year-end.
Other funds posted more modest gains. For example, Perceptive Advisors rose 1.3 percent in January. An 8 percent loss in December led to a 2.4 percent downturn for 2024. The Janus Henderson Biotechnology Innovation fund rose just 25 basis points in January, according to a hedge fund database. Last year, it jumped 29.6 percent, one of few biopharma funds to beat the S&P 500.
Several funds, however, suffered losses in January.
They were led by EcoR1 Capital, which is clearly in a funk. It was down 5.7 percent in January after losing 19.6 percent in 2024. It continues to be badly hurt by Apellis Pharmaceuticals, which is developing therapeutic compounds to inhibit the complement system for autoimmune and inflammatory diseases. At year-end, the stock was EcoR1’s largest long, accounting for more than 14 percent of assets. The stock fell 9 percent in January after dropping nearly 50 percent in 2024.
Elsewhere, Soleus Capital lost 3.1 percent in January, RA Capital Management fell 2.6 percent, and Casdin Capital dropped 2 percent.
