Few corners of the market saw the kind of whiplash biopharma investors felt in 2025. What began as another dispiriting year of losses flipped in April, unleashing a rally so strong that leading funds finished with some of their best annual returns.

Perceptive Advisors led the way with an 82 percent return. Many others generated gains between 50 and 70 percent. This all comes after a period of several years when many funds posted losses and others generated only meager gains.

In an interview earlier this year with Institutional Investor, RTW Investments founder Rod Wong explained that the sector had been hurt by an increased number of fledgling companies going public too early following a big wave of innovation. This led to a long consolidation phase. The sector, like many small-capitalization companies, was also adversely impacted by rising interest rates. Regulatory uncertainty added to the woes in the first part of the year.

The sector turned in early April, however, and went on a ferocious rally. Since then, the Nasdaq Biotechnology Index has climbed about 54 percent. Janus Henderson is confident that 2025 was the beginning of a longer rally for the sector.

“For much of the past year, policy uncertainty has dominated the health care sector, leading to a period of underperformance that has resulted in some of the lowest relative price-to-earnings ratios in the sector’s history,” wrote Andy Acker and Daniel Lyons, portfolio managers for the Janus Henderson Biotechnology Innovation strategy, in an early-December report that was posted on the firm’s website.

“But,” they added, “as we turn the page on a new year, some regulatory risks have started to ease. Investors, for one, now see a way around onerous pharmaceutical tariffs and have better clarity on drug pricing reform. The Food and Drug Administration has also proven its support for a strong U.S. biopharma industry, having largely met review deadlines in 2025 and introduced new programs for accelerating drug approvals.”

What’s more, medical advances have continued, benefiting from innovative new drug modalities and technologies, they noted. “It’s a setup that we believe could lead to strong risk-reward opportunities for certain areas of health care in 2026.” Janus Henderson’s fund finished the year up 55 percent.

Through the first five months of the year, Perceptive was down nearly 15 percent. It has since picked up nearly 100 percentage points of performance. It was led by Celcuity, which swelled more than sevenfold last year alone after seeing strong results in its Phase 3 trials for a breast cancer drug. The stock was the firm’s fifth-largest long at the end of the third quarter. No. 2 long Rhythm Pharmaceuticals roughly doubled in price last year.

Affinity Healthcare Fund ended 2025 up 66.4 percent after gaining nearly 2 percent in December. In October, Merck acquired Verona Pharma, which had been Affinity’s largest long position, for about $10 billion.

RTW Investments surged 64.5 percent for the year even after dropping 6.5 percent in December, one of the few funds to lose money last month. II previously reported that in a September 2 client letter detailing August results, Wong said he believes biopharma’s five-year bear market is finally coming to an end. “We are increasingly optimistic that a biotech recovery could gain momentum,” he wrote. “We continue to see a large number of asymmetric opportunities and are excited for a number of development-stage events and key new product launches this fall.”

Elsewhere, Nantahala Capital Partners jumped 57.4 percent for the year. It invests in larger-cap and small-cap biopharma and health care stocks. Unlike most other funds, it was in the black all year.

Despite being down 14 percent through May, Soleus Capital added 54 percent for the year, including 5.2 percent in December. Avoro Capital Advisors rose 51 percent in 2025 after climbing 6.5 percent in December. It was off more than 17 percent through June. RA Capital Advisors was up 37 percent last year after having lost more than 15 percent through May.

Cormorant Asset Management staged one of the biggest turnarounds this year, finishing 2025 up 34 percent after dropping 29 percent in the first quarter alone. Averill posted a more modest 18.6 percent gain in its main fund and a 22 percent gain in Averill Madison.

EcoR1 Capital, however, wound up 2025 in the red, down 57 basis points. Yet even this performance was a victory of sorts given that the fund had been down as much as 30 percent at the end of June.