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- Despite the S&P 500’s year-to-date gain of 24%, biotech stocks are down more than 22%.
- That big divergence in performance has led to a rough year for biotech-focused hedge funds.
- These 5 hedge funds have suffered big losses on their biotech investments this year, according to The Wall Street Journal.
Biotech stocks were all the rage last year after COVID-19 vaccine breakthroughs from mRNA companies like Moderna and BioNTech helped illustrate to investors the potential of betting on innovative drug companies.
But fast forward to 2021, and an ongoing decline in the biotech sector has led to a terrible year of returns for some hedge funds that solely invest in the space, according to a report from The Wall Street Journal.
The SPDR S&P Biotech ETF is down more than 22% year-to-date, representing nearly the exact opposite of the S&P 500’s 24% gain over the same time period. Regulatory concerns surrounding Congress limiting drug pricing, combined with a surge in supply of early stage biotech IPOs has outweighed the successes seen by other successful drug companies.
Shares of BioNTech and Moderna are up 270% and 160% year-to-date, respectively, but those gains have done little to boost the performance of these five biotech-focused hedge funds, according to The WSJ.
1. Perceptive Advisors
Year-to-date gains through November for its main fund: -30%
Total Firm AUM: ~$9 billion
Perceptive Advisors’ largest position as of the third quarter of 2021 is LianBio, which has dropped 39% over the past week. Mirati Therapeutics is the hedge fund’s second largest position, according to its 13F filing. Mirati is down 41% year-to-date.
2. OrbiMed Partners
Year-to-date gains through November for one of its hedge funds: -40%
Total Firm AUM: ~$18 billion
OrbiMed’s largest position is SpringWorks Therapeutics, according to its 13F filing. SpringWorks is down 11% year-to-date. OrbiMed’s second largest position, Prelude Therapeutics, is down 81% year-to-date.
3. Logos Capital
Year-to-date gains through November for one of its hedge funds: -25%
Total firm AUM: ~$1.4 billion
Logos’ largest position is ALX Oncology, according to its 13F filing. ALX Oncology is down 65% year-to-date, while its second largest position, Olema Pharmaceuticals, is down 79% year-to-date.
4. Cormorant Asset Management
Cormorant Asset Management lost 10% in the month of November, adding to double digit losses it has already seen earlier in the year, according to the report.
Total Firm AUM: ~$2.5 billion
Cormorant’s largest position is Erasca, according to its 13F filing. Erasca is down 31% year-to-date, while its second largest position, Turning Point Therapeutics, is down 71% year-to-date.
5. Consonance Capital
Consonance Capital decided to close one of its billion-dollar hedge funds in October after suffering heavy losses, according to the report. A spokesman for Consonance told The WSJ that a healthcare private-equity fund it operates has been unaffected by the sell-off in biotech stocks.
Top holdings in Consonance Capital, according to its 13F filing, included SpringWorks Therapeutics and Tandem Diabetes Care.
“It’s been a very challenging year,” Cormorant founder Bihua Chen said, according to The WSJ report.
But there have been some bright spots in the biotech hedge fund sector, with EcoR1 Capital delivering positive returns for its clients so far this year. The $2.9 billion hedge fund has been calling in cash from clients to buy newly cheap biotech stocks, according to the report.