Biotech Hedge Funds' High-Risk, High-Reward Play on Abivax: A 580% Win in 2025

In the volatile world of biotech investing, few stories in 2025 captured the imagination—and wallets—of hedge funds like Abivax’s meteoric rise. The French biotech’s July 2025 public offering and Phase 3 trial results for its lead drug, obefazimod, created a perfect storm of catalysts, propelling its stock up 580% in a single day and delivering over $1.4 billion in gains to institutional investors [1]. This case study reveals how niche biotech investors leveraged scientific breakthroughs, capital-raising prowess, and regulatory momentum to turn a high-risk bet into a blockbuster win.

The Catalyst: A $747.5M Lifeline for Obefazimod

Abivax’s July 2025 public offering was nothing short of historic. The company raised $747.5 million by issuing 11.7 million American Depositary Shares (ADSs) at $64.00 each, with underwriters including Leerink Partners and Piper Sandler [2]. This influx of capital extended the company’s runway to the fourth quarter of 2027, ensuring funding for Phase 3 trials in ulcerative colitis and Crohn’s disease, as well as regulatory submissions [3]. The offering’s success was a vote of confidence in obefazimod, a first-in-class oral miR-124 enhancer, which had just delivered groundbreaking data.

Phase 3 Triumph: A New Standard in IBD Treatment

The ABTECT-1 and ABTECT-2 trials for obefazimod in ulcerative colitis were the linchpin of Abivax’s resurgence. The 50 mg once-daily dose achieved a 16.4% placebo-adjusted clinical remission rate at Week 8, with all key secondary endpoints met, including endoscopic improvement and histological healing [4]. These results outperformed existing therapies like biologics (e.g., adalimumab) and small molecules (e.g., tofacitinib), which often require frequent dosing or carry safety risks such as infections [5]. The 25 mg dose also showed promise, particularly in long-term maintenance, with 54.8% of patients in a phase 2b trial achieving remission at 48 weeks [6].

The safety profile further bolstered investor optimism. Obefazimod’s adverse events were mild (e.g., headache, UC flare), with no new safety signals observed [7]. This contrasted sharply with current treatments, which often require extensive pre-treatment monitoring for immunogenicity or malignancy risks [8].

Hedge Fund Playbook: Capitalizing on Catalysts

Biotech hedge funds, known for their appetite for high-conviction, event-driven plays, pounced on Abivax’s momentum. Firms like Caligan Partners LP and Citadel Advisors LLC increased their holdings in Q1 2025, betting on the Phase 3 readout and subsequent public offering [9]. The strategy was twofold:
1. Pre-announcement Positioning: Investors anticipated a surge after the July 23 trial results, which materialized with a 554% premarket jump [10].
2. Capital-Raising Leverage: The $747.5M offering not only funded development but also signaled strong institutional backing, reducing short-term liquidity risks [11].

Analysts amplified the momentum, with Morgan Stanley and Piper Sandler upgrading Abivax to “Overweight” and setting price targets as high as $112.00 [12]. This created a self-reinforcing cycle of institutional buying and retail FOMO.

Valuation Rationale: A $665M Market Cap on the Edge of Approval

Despite Abivax’s negative EPS (-$3.43) and free cash flow (-$87.2M), its valuation soared to $665M post-announcement [13]. The logic? Investors priced in obefazimod’s potential as a first-in-class therapy in a $10B+ IBD market. With a projected NDA submission in late 2026 and a maintenance trial (ABX464-107) underway, the path to commercialization appeared clearer than ever [14].

Implications for Biotech Hedge Funds

Abivax’s story underscores the power of catalyst-driven investing in biotech. Hedge funds that correctly identified the Phase 3 readout and public offering as inflection points reaped outsized rewards. However, the play also highlights the risks: obefazimod’s success hinges on the ongoing maintenance trial and regulatory approval. For now, though, Abivax has proven that a well-timed bet on scientific innovation can yield stratospheric returns—even in a market skeptical of speculative biotech plays.

Source:
[1] Abivax Announces Closing of $747.5 Million Public Offering [https://ir.abivax.com/news-releases/news-release-details/abivax-announces-closing-7475-million-public-offering]
[2] Abivax Announces Pricing of $650M (€554M) Public Offering of American Depositary Shares [https://ir.abivax.com/news-releases/news-release-details/abivax-announces-pricing-650m-eu554m-public-offering-american]
[3] Abivax Announces Positive Phase 3 Results from Both ABTECT 8-Week Induction Trials Investigating Obefazimod, its First-in-Class Oral miR-124 Enhancer, in Moderate to Severely Active Ulcerative Colitis [https://ir.abivax.com/news-releases/news-release-details/abivax-announces-positive-phase-3-results-both-abtect-8-week]
[4] Obefazimod in patients with moderate-to-severely active ulcerative colitis: efficacy and safety analysis from the 96-week open-label maintenance phase 2b study [https://academic.oup.com/ecco-jcc/article/19/5/jjaf074/8149142]
[5] Obefazimod Induces Clinical Remission in Ulcerative Colitis Trials [https://www.gastroenterologyadvisor.com/news/obefazimod-induces-clinical-remission-in-ulcerative-colitis-trials/]
[6] Abivax SA (ABVX) Stock Analysis: A Biotech Gem With A 36.75% Potential Upside [https://www.directorstalkinterviews.com/abivax-sa-abvx-stock-analysis-a-biotech-gem-with-a-36-75-potential-upside/4121212263]
[7] Abivax Announces Positive Phase 3 Results from Both ABTECT 8-Week Induction Trials Investigating Obefazimod, its First-in-Class Oral miR-124 Enhancer, in Moderate to Severely Active Ulcerative Colitis [https://www.globenewswire.com/news-release/2025/07/22/3119843/0/en/Abivax-Announces-Positive-Phase-3-Results-from-Both-ABTECT-8-Week-Induction-Trials-Investigating-Obefazimod-its-First-in-Class-Oral-mir-124-Enhancer-in-Moderate-to-Severely-Active-.html]
[8] 2 Logical Mid-Cap Biotech Buyout Targets [https://seekingalpha.com/article/4817186-2-logical-mid-cap-biotech-buyout-targets]
[9] Abivax Stock (ABVX) Opinions on Positive Phase 3 Trial Results [https://www.nasdaq.com/articles/abivax-stock-abvx-opinions-positive-phase-3-trial-results]
[10] Obefazimod Phase III Success Pushes Abivax Stock to Record Highs [https://xtalks.com/obefazimod-phase-iii-success-pushes-abivax-stock-to-record-highs-4349/]
[11] Abivax Announces Closing of $747.5 Million Public Offering [https://www.morningstar.com/news/globe-newswire/1001120142/abivax-announces-closing-of-7475-million-public-offering]
[12] Abivax SA Sponsored ADR (NASDAQ:ABVX) Sees Large Changes in Short Interest and Analyst Ratings [https://www.marketbeat.com/instant-alerts/short-interest-in-abivax-sa-sponsored-adr-nasdaqabvx-grows-by-287-2025-08-21/]
[13] Abivax Stock Soars Following Positive Phase 3 Trial Results [https://www.timothysykes.com/news/abivax-sa-abvx-news-2025_07_23-2/]
[14] Abivax Announces Closing of $747.5 Million Public Offering [https://ir.abivax.com/news-releases/news-release-details/abivax-announces-closing-7475-million-public-offering]