Hedge Funds Won Big on an Obscure Drugmaker Abivax

 It had been an anemic year for hedge funds that trade biotech stocks, thanks in part to moves by the Trump administration. A little-known French drugmaker provided a shot in the arm.

The market value of Abivax hovered around $500 million early this summer. But when the Paris biotech company released results in July of a late-stage trial of its oral drug for inflammatory bowel disease, Abivax’s U.S.-listed shares skyrocketed by over 580% in one day. Abivax is now worth more than $6 billion.

That gave a major performance boost to a handful of healthcare-focused hedge funds. ADAR1 Capital Management and Deep Track Capital, two of the largest owners of Abivax’s U.S.-listed shares, gained about 18% and about 8%, respectively, in July, people familiar with their performance said.

After spending the first half of 2025 in the red, ADAR1 is now up nearly 16% on the year through July, while Deep Track is slightly positive. In contrast, the total return of the S&P 500 index was 8.6% this year through July after a 2.2% gain that month.

Founded in 2013 by the French immunologist Philippe Pouletty, Abivax went public in Europe two years later and added a U.S. listing in 2023. It had unsuccessfully explored using its main drug, obefazimod, to treat HIV before it homed in on ulcerative colitis.

The company remained off Wall Street’s radar for a while. Markets assigned obefazimod an estimated 16% probability of success ahead of the readout of its trial results, ADAR1 told investors in a June letter.

But the Austin, Texas, hedge-fund firm had developed its own hypothesis on how the drug worked and tested it itself in experiments on mice. After that, it raised the odds of a successful readout to 50% to 60%. It predicted that the stock could surge up to 500% if it was right, or slump 90% if it was wrong. ADAR1 shared its proprietary research with clients on June 28—a few weeks before the trial results came out.

“We believe that victory laps after the fact are cheap,” ADAR1 founder Daniel Schneeberger, a medical doctor and former McKinsey consultant, wrote in the letter.

The data from the Phase 3 trial showed that obefazimod was a safe and effective treatment for patients with moderately to severely active ulcerative colitis.

ADAR1, named for an enzyme, manages around $850 million.

Many biotech hedge funds were in a funk in 2025 until recently. Changes under Health and Human Services Secretary Robert F. Kennedy Jr. at the Food and Drug Administration and a White House order attempting to lower prescription-drug prices weighed on the stocks of experimental pharmaceutical companies.

A healthcare hedge-fund index compiled by the research firm PivotalPath lost 5% in the first half of 2025, a period during which PivotalPath’s broad hedge-fund index gained 4%.

Few sectors are as boom-and-bust as biotech, and investors in the sector notched a handful of recent wins.

Hedge funds rode the 167% rally in shares of Celcuity on July 28, the day the company announced a successful late-stage trial of its breast-cancer therapy. Baker Brothers Advisors and Soleus Capital, two of Celcuity’s largest shareholders as of the end of June, each gained about 11% in July, people familiar with their performance said.

On July 9, Merck agreed to buy Verona Pharma, a drugmaker focused on respiratory disease, for roughly $10 billion, representing a 23% premium to Verona’s closing price a day earlier.

Caligan Partners, an activist hedge-fund firm that counts Verona and Abivax among its top holdings, was up about 14% in July, bringing its year-to-date gains to 38%, people familiar with the matter said.

Hedge funds collectively gained at least $1.4 billion on their Abivax positions in July, according to Old Well Labs, which analyzes hedge-fund filings to estimate returns. Five of the 10 best-performing funds Old Well Labs followed in July owned sizable stakes in Abivax at the end of June.

https://www.msn.com/en-us/money/markets/how-hedge-funds-won-big-on-an-obscure-drugmaker/ar-AA1LwT8V