Life sciences hedge funds snapped their winning streak last month.
Most lost money, including several that fell by high-single-digit or low-double-digit rates after posting sharp gains for five straight months. This compares with a roughly 7.5 percent loss for the iShares Biotechnology ETF.
Many of the stocks in the portfolios of the exchange-traded fund and the hedge funds are of fledgling companies with little or no revenues. They were more vulnerable to the market’s overall sharp decline in April, the worst monthly performance since September 2023 as investors were spooked by rising interest rates and the realization that the Federal Reserve won’t be cutting rates anytime soon, if at all in 2024.
The biggest April loser among the biopharma and life sciences funds appears to be EcoR1 Capital, which dropped 14 percent and is now in the red for the year by 12.8 percent.
The losses were led by No. 1 long Apellis Pharmaceuticals, whose stock plunged 25 percent in April. A developer of therapeutic compounds for autoimmune and inflammatory diseases, it accounted for more than 15 percent of EcoR1’s U.S.-listed assets at year-end.
No. 3 long Prothena Corp. declined by nearly 18 percent last month. It made up nearly 10 percent of EcoR1’s assets at year-end. The late-stage clinical biotech company creates novel therapies for neurodegenerative and rare peripheral amyloid diseases.
Affinity Asset Advisors, which had been off to a torrid start in 2024, dropped 11 percent last month, cutting its gain for the year to 16 percent. Madrigal Pharmaceuticals, one of Affinity’s largest longs, plummeted by about 24 percent in April. It is a clinical-stage biopharmaceuticals company focused on therapeutics for non-alcoholic steatohepatitis.
Elsewhere, Redmile Group lost 10.7 percent in April and is down 7 percent for the year. Top holdings Krystal Biotech and Amicus Therapeutics fell more than 11 percent and nearly 13 percent, respectively, last month. Both companies are developing drugs for rare diseases.
In April, RTW Investments was down about 10 percent, putting it in the red by about 20 basis points, and Rocket Pharmaceuticals, the hedge fund’s largest long, lost nearly 14 percent. Rocket is a late-stage biotech company that creates gene therapies for rare diseases.
Several funds that dropped last month are still in the black for the year.
Avoro Capital Advisors lost more than 9 percent last month but is up 3 percent for the year. It too was greatly hurt by the April downturn of Apellis, Avoro’s largest long position. The stock accounted for more than 9 percent of U.S.-listed longs at year-end.
Soleus Capital, meanwhile, dropped about 6.5 percent for the month, cutting its 2024 gain in half. Casdin Capital declined by 6 percent in April but is still up 10 percent for the year. Cormorant Asset Management was also down about 6 percent. It remains one of the top performers in the strategy, up about 18 percent for the year.
Other funds posted smaller losses. RA Capital Management fell a little less than 4 percent in April and is up 9 percent for the year. And Averill Partners, part of Suvretta Capital Management, was down just 1 percent for the month. As a result, it is still up 9.7 percent for the year. It is well known for its shorting prowess.