Bioverge Biotech Intelligence – Q2'25 Edition

Exclusive Insights for Biotech Investors, Issue: Q2 2025

Disclaimer: This content is provided for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. It was prepared with the assistance of AI and may contain inaccuracies or unintended errors that were not identified during the final review and editing process. Bioverge, or individuals affiliated with Bioverge, may hold positions in the securities mentioned. All referenced positions and model scenarios and portfolios should be considered illustrative and hypothetical. Always conduct your own due diligence before making investment decisions.

Introduction

Welcome to the inaugural edition of the Bioverge Biotech Intelligence Newsletter. After debuting this to our LPs in April, we’re now making it available to a broader audience. All portfolio allocations reflect positions taken in early Q2 2025, giving you transparency into our conviction bets ahead of market catalysts.

We’ll publish a comprehensive issue at the start of each quarter, with select interim updates as news, performance, or portfolio shifts warrant.

1. Market Pulse: Biotech Performance & Sector Trends

The Last Five Years in Biotech: A Test of Conviction

Biotech has been one of the most unforgiving corners of the market over the past half-decade. After a historic run-up in 2020–2021 driven by COVID-era enthusiasm and record-breaking IPO activity, the sector was met with a harsh reversal. Capital dried up, valuations collapsed, and the SPDR S&P Biotech ETF (XBI) gave back nearly all of its pandemic-era gains. From peak to trough, many early-stage names declined 70–90%.

5-Year Performance: SPY vs. QQQ vs. XBI vs. IBB vs. XLV

Over the last five years, biotech has significantly underperformed the broader market — and yet, under the surface, innovation hasn’t slowed. In fact, it’s accelerating. Gene editing, RNA therapeutics, and precision oncology are making real clinical progress. Big pharma is back on the M&A trail.

For investors with patience and a long-term view, this moment may mark the most attractive entry point since 2018. Despite headwinds in the broader market, biotech continues to present rare dislocations—more than 100 public companies now trade below cash. Selective buying and a long-term lens are key.

Key Takeaway: The setup for alpha has rarely been better—especially as M&A reaccelerates and innovation cycles deepen.

Key Developments:

• M&A Activity: The industry is witnessing a resurgence in mergers and acquisitions. Notably, Johnson & Johnson's $14.6 billion acquisition of Intra-Cellular Therapies and GSK's $1 billion purchase of IDRx highlight big pharma's strategy to bolster pipelines amid looming patent expirations.

• FDA Approvals: Amgen's Uplizna received FDA approval as the first treatment for Immunoglobulin G4-related disease (IgG4-RD), a rare immune disorder affecting approximately 20,000 Americans. This approval is projected to significantly impact Amgen's portfolio, with analysts estimating potential global annual sales of $1.3 billion by 2030.

2. Developing A Biotech Hedge Fund Strategy: Optimizing Risk-Adjusted Returns Over 5 Years

Executive Summary

We have constructed a diversified biotech portfolio that maximizes risk-adjusted returns over a 5-year horizon. This strategy combines public market exposure with a curated venture sleeve to harness both compounders and asymmetric return opportunities, while minimizing downside risk.

Designing the Optimal Biotech Portfolio for Risk-Adjusted Returns

Overview

In a field as volatile as biotech, success demands more than chasing the next 10-bagger. It requires a portfolio construction strategy that thoughtfully balances upside potential with downside protection, especially across longer time horizons. We set out to design a portfolio that maximizes risk-adjusted returns over a 5-year horizon, blending public equities and venture-stage exposure.