Biopharma and life sciences hedge funds saw yet another month of stunning gains in what is shaping up to be one of the best years for any sector outside artificial intelligence. At least a half-dozen funds surged by double-digit rates in November alone, putting them among the top-performing hedge funds overall for 2025 heading into the final month of the year.
Gains in the sector are being driven by interest rate cuts and mergers and acquisitions, among other things.
Morgan Stanley expects the rally to extend for several years. In a 41-page report on small and midcap companies, entitled “The Stars Are Aligning for Moves in SMID Cap Biotech,” the investment bank cites at least three “unappreciated factors” that will continue to propel the sector’s outperformance. It points out that commercial-stage small and midcap biotech companies have $325 billion in net cash and asserts that investors overreacted to DOGE cuts at the FDA.
In addition, large-cap pharmaceuticals companies face what Morgan Stanley calls a looming patent cliff, with an estimated $176 billion worth of drugs coming off patent in the near future. This could fuel an M&A boom as these big pharma companies look to acquire the next blockbuster drugs.
Against this backdrop, at least two biopharma hedge funds have each surged more than 75 percent for the year.
RTW Investments jumped a further 12.96 percent in November and is up 75.94 percent in 2025, according to two sources, including an investor. It was boosted by its largest long position, Madrigal Pharmaceuticals, whose stock increased by 42 percent in November alone. Investors were optimistic about its third-quarter earnings results and news about its cirrhosis drug. The shares accounted for 11.5 percent of RTW’s U.S. long positions at the end of the quarter.
No. 3 long position PTC Therapeutics rose more than 26 percent last month. Perceptive Advisors, meanwhile, is up 75.2 percent for the year after gaining 9.2 percent last month, according to an investor. In November, No. 4 long position Celcuity climbed more than 31 percent.
Soleus Capital was perhaps the best performer in November, gaining 23 percent. The company is now up 47 percent for the year, say two investors. It was driven by Terns Pharmaceuticals, whose stock more than tripled last month after the company reported positive drug trial results for its chronic myeloid leukemia drug and subsequently was upgraded by Wall Street. It has risen even more this month and is up more than fivefold since the end of October.
Janus Henderson Biotech Innovation Fund gained about 20 percent in November and is up 56 percent for the year, per an investor. Avoro Capital Advisors picked up more than 15 percent last month and more than 40 percent in 2025, an investor says. RA Capital Advisors added 11.8 percent in November and is up 38.6 percent for the year.
Averill, meanwhile, gained 0.7 percent last month and is up “just” 14.7 percent in 2025, according to someone who saw the results. The fund is known for aggressive shorting, a tough strategy when stocks are soaring. Averill Madison, its long-biased health care fund, climbed 7.4 percent last month and is up 24.5 percent for the year.
Casdin Capital is now up in the 20 percent range, reveals an investor who declined to provide November results.
