info on baker bros

would love to hear insight into how they operate since they're in a very wild sector                

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Comments (6)

Apr 21, 2021 - 8:16pm

The trend over the last few years among the "biotech mafia" funds (e.g. Baker Bros, Orbimed, Perceptive, RA, etc.) has been to allocate capital earlier in a company's lifecycle via crossover and earlier-stage private rounds. These funds essentially run an arbitrage strategy that is dependent on large step-up valuations between private rounds through IPO, and importantly on the strength of the biotech IPO market. It was especially successful in 2020 when smid cap biotech broadly traded in a manner that was entirely detached from fundamental valuations. I've heard anecdotally that some of the top biotech funds are down in the neighborhood of -(15-20%) YTD as smid cap valuations have come in a fair amount since February. I think that biotech crossover investing will continue to be a a high reward/low risk strategy in at least the near to medium term, but don't believe this trend will last indefinitely.

  • Analyst 3+ in HF - EquityHedge
Apr 27, 2021 - 10:11pm

Its been working for longer than that. RA had extremely poor to mediocre performance up until the last 6 years or so when they reorganized their strategy. When the funding dries up for the explosive IPOs we're seeing a lot of these funds are going to be hurt. Perceptive is more diversified and has a strong L/S book but the others (and I would include Deerfield here too) have exploited the private rounds quite aggressively. When these mature startups cannot go public then they will carry huge positions in illiquid private names.

I actually don't think the public markets book for RA is all that special. Orbimed is now huge and has investments across many funds and stages and I hesitate to even call them a L/S hedge fund anymore.

What I think is going to be very interesting are all the SPACs that are life science focused hunting for targets.

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