Activist hedge funds, including Tang Capital Management, are zeroing in on the biotech sector, targeting nearly $30bn in underutilised capital tied up in early-stage drug developers, according to a report by Bloomberg.
With roughly one in six companies in the Nasdaq Biotechnology Index trading below their cash reserves, investors are pressuring firms to return capital instead of continuing high-risk R&D efforts.
The sector has become ripe for activist intervention, as many companies struggle to advance therapies through the FDA pipeline amid shifting regulatory dynamics, rising tariffs, and a pullback in US public health funding. Bloomberg data shows that healthcare-focused activist campaigns surged 61% year-on-year in the first half of 2025, with one in nine targeting biotech firms.
Tang has led campaigns to liquidate or acquire struggling biotechs such as Allakos, Cargo Therapeutics, and iTeos Therapeutics. Other firms, including Acelyrin, have resisted but eventually conceded to M&A under shareholder pressure.
New entrants are also joining the fray, with Alis Biosciences, a recently launched hedge fund, targeting cash-heavy biotechs with a strategy that balances liquidation pressure and scientific turnaround support. Founder Nicholas Johnston said the firm sees over 300 listed life sciences companies sitting on some $30bn in underutilised capital.
While venture investment in drug discovery has held steady — $27.6bn was deployed in 2024 – public market biotech stocks remain under pressure, with the Nasdaq Biotech Index down 8% over the past year. That underperformance has opened the door for activist strategies, especially among smaller hedge funds aiming for fast returns from forced sales or liquidations.
