Hedge Funds Win Big on Obscure French Biotech Firm

“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.” [1]

 

While hedge fund ADAR1 conducted its own mouse experiments to confirm the mechanism of obefazimod, the specific researchers or facility they used have not been publicly disclosed. ADAR1 privately tested its hypothesis on how the drug worked before clinical trial results were released.

However, other researchers have conducted mouse studies to investigate obefazimod's mechanism of action:

 

    In a 2023 study published in Clinical and Translational Gastroenterology, researchers from Abivax, the developer of obefazimod, and French institutions reported on experiments involving both in-vitro cell cultures and a murine model of inflammatory bowel disease. These tests showed that obefazimod upregulates micro-RNA-124 (miR-124), which reduces pro-inflammatory markers and lessens the effects of inflammation in the mice. The abstract for this study lists several authors, including Cécile Apolit, Noëlie Campos, and Audrey Vautrin.

    In 2024, Abivax announced preclinical studies combining obefazimod with another drug, etrasimod, in a mouse model of inflammatory bowel disease. The experiments showed a synergistic effect in reducing inflammation, but the specific individuals who conducted the experiments were not named in the press release.

 

 

1. Hedge Funds Win Big on Obscure French Biotech Firm. Rudegeair, Peter.  Wall Street Journal, Eastern edition; New York, N.Y.. 03 Sep 2025: B5.