Biotech rout in 2021 has led to some massive hedge-fund losses

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Biotech stocks have tumbled in 2021 after rising last year amid enthusiasm over the development of COVID-19 vaccines, with some hedge funds tackling big losses.

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The sector is riddled with concerns Congress will take steps to put a lid on the drug’s pricing and as one of the early-stage biotech stocks boom in ipo market,

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Perceptive Advisors, a leading biotech hedge fund that manages about $9 billion, lost about 30% of its core fund during November this year, investors say. A hedge fund managed by OrbiMed Partners, which invests more than $18 billion in healthcare in the public and private markets, lost more than 40% during November of this year, people familiar with the fund say. Both the funds have posted huge gains in the last two years.

Meanwhile, a hedge fund operated by San Francisco-based Logo Capital, which manages about $1.4 billion, is down more than 25% for the period, others say. Cormorant Asset Management reported a 10% decline in November alone, after posting double-digit losses in the year before.

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“It’s been a very challenging year,” said Bihua Chen, founder of Cormorant, which focuses on smaller biotech companies.

An expanded version of this report appears on WSJ.com.

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