| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.5% | 13.0% | 10.0% |
| 2025 |
|---|
| 10.3% |
Baron Health Care Fund delivered strong Q4 2025 performance, gaining 13.10% versus 11.92% for the Russell 3000 Health Care Index, driven primarily by exceptional stock selection in biotechnology. Key contributors included Cidara Therapeutics, acquired by Merck for $9.2 billion, and Eli Lilly, benefiting from continued GLP-1 adoption in diabetes and obesity markets. The Fund maintains focus on competitively advantaged growth companies solving health care problems through cost reduction, efficiency enhancement, and improved patient outcomes. Portfolio positioning emphasizes biotechnology (33.2% allocation), pharmaceuticals (19.8%), and medical devices (17.6%). The manager sees positive sector momentum entering 2026, supported by surging biotechnology funding (up 94% year-over-year), accelerating M&A activity driven by pharmaceutical patent cliffs, and reduced regulatory uncertainty. Long-term outlook remains optimistic given aging demographics, rising chronic diseases, and continued advances in biotechnology and medical technology. The Fund's bottom-up stock selection approach targets secular growth opportunities with durable competitive advantages.
The Fund focuses on identifying competitively advantaged growth companies in health care that solve problems by reducing costs, enhancing efficiency, and improving patient outcomes, with a long-term investment approach targeting businesses with secular growth opportunities and strong management teams.
The manager remains optimistic about the long-term outlook for health care given favorable secular growth drivers, including the aging population, rising chronic diseases, advances in biotechnology, medical technology and diagnostics, and increased health care spending. After two and a half years of underperformance, the Health Care sector bounced back in the second half of 2025 and has positive momentum heading into 2026.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 23 2026 | 2025 Q4 | ABBV, ACLX, ARGX, ARQT, AZN, BSX, DHR, DSXY, EHC, ELAN, INSM, ISRG, LLY, MASI, MTD, PEN, RDNT, RGEN, SYK, TEVA, TMO, WELL | Biotechnology, GLP1, healthcare, Life Sciences, M&A, Medical Devices, Pharmaceuticals |
LLY ARGX TEVA ARQQ DOCS EHC TMO ARQT WELL ELAN RGEN |
Strong stock selection in biotechnology contributed the vast majority of relative gains, with main drivers being Cidara Therapeutics and Abivax. Biotechnology funding surged 94% year-over-year in December, making it the strongest month in the last three years. The Fund maintains 33.2% allocation to biotechnology companies. Eli Lilly's Mounjaro and Zepbound GLP-1/GIP therapies are viewed as transformational for diabetic and non-diabetic obese patients. The manager expects this drug class to become the standard of care for both diabetes and obesity, ultimately representing a $150 billion-plus market opportunity. M&A activity has been accelerating, with notable deals including Cidara Therapeutics acquired by Merck for $9.2 billion and Penumbra acquired by Boston Scientific for $14.5 billion. Large pharmaceutical companies will lose patent protection on products generating $400 billion of sales over the next eight years. The Fund maintains 14.2% allocation to life sciences tools & services. End markets are improving with strong biotechnology funding, stable biopharmaceutical R&D investment, and reduced risk of industry disruption following drug pricing agreements with the Trump Administration. |
| Sep 30 2025 | 2025 Q3 | - | - | - | |
| Mar 31 2025 | 2025 Q1 | - | - | - | |
| Dec 31 2024 | 2024 Q4 | - | - | - | |
| Sep 30 2024 | 2024 Q3 | - | - | - | |
| Jun 30 2024 | 2024 Q2 | - | - | - | |
| Mar 31 2024 | 2024 Q1 | - | - | - | |
| Dec 31 2023 | 2023 Q4 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Biopharma M&AM&A activity has been accelerating, with notable deals including Cidara Therapeutics acquired by Merck for $9.2 billion and Penumbra acquired by Boston Scientific for $14.5 billion. Large pharmaceutical companies will lose patent protection on products generating $400 billion of sales over the next eight years. |
Acquisitions Patent Cliff Consolidation |
BiotechnologyHealthcare industry positioned for catch-up growth after several years of below-trend performance. Government spending expected to increase relative to feared cuts, with companies signaling improvement in revenue growth. Focus on 'picks & shovels' businesses serving the industry. |
Life Science Tools Pharmaceuticals CRO & CDMO Healthcare Research | |
GLP1Eli Lilly represents the fund's exposure to the GLP-1 obesity and diabetes treatment market, which continues to show exceptional growth. Mounjaro and Zepbound sales more than doubled year-over-year, with demand continuing to outpace supply. The fund sees this as a multi-decade growth opportunity with expanding indications and sustained competitive advantages. |
Obesity Diabetes Pharmaceuticals Growth Innovation | |
Life Science ToolsThe Fund maintains 14.2% allocation to life sciences tools & services. End markets are improving with strong biotechnology funding, stable biopharmaceutical R&D investment, and reduced risk of industry disruption following drug pricing agreements with the Trump Administration. |
Research Tools Bioprocessing Equipment |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 23, 2026 | Fund Letters | Neal Kaufman | TMO | Thermo Fisher Scientific Inc. | Health Care | Life Sciences Tools & Services | Bull | New York Stock Exchange | Bioprocessing, Lifesciencestools, Margins, recovery, research | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | ARQT | Arcutis Biotherapeutics, Inc. | Health Care | Biotechnology | Bull | NASDAQ | Biotech, dermatology, growth, innovation, Margins | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | WELL | Welltower Inc. | Health Care | Health Care REITs | Bull | New York Stock Exchange | cashflow, Demographics, realestate, REITs, Seniorhousing | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | ELAN | Elanco Animal Health Incorporated | Health Care | Animal Health | Bull | New York Stock Exchange | Animal Health, deleveraging, growth, innovation, Margins | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | RGEN | Repligen Corporation | Health Care | Life Sciences Tools & Services | Bull | NASDAQ | AI, Bioprocessing, Consumables, lifesciences, Margins | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | LLY | Eli Lilly and Company | Health Care | Pharmaceuticals | Bull | New York Stock Exchange | Diabetes, GLP-1, growth, Obesity, pharmaceuticals | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | ARGX | argenx SE | Health Care | Biotechnology | Bull | NASDAQ | Autoimmune, biologics, Fcrn, growth, pipeline | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | TEVA | Teva Pharmaceutical Industries Limited | Health Care | Pharmaceuticals | Bull | New York Stock Exchange | Brandeddrugs, innovation, Margins, pharma, turnaround | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | ARQQ | Arcellx, Inc. | Health Care | Biotechnology | Bull | NASDAQ | Biotech, CART, Differentiation, Myeloma, Oncology | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | DOCS | Doximity, Inc. | Health Care | Health Care Technology | Bear | New York Stock Exchange | advertising, Budgets, Competition, guidance, Healthtech | Login |
| Jan 23, 2026 | Fund Letters | Neal Kaufman | EHC | Encompass Health Corporation | Health Care | Health Care Facilities | Bull | New York Stock Exchange | Demographics, Healthcarefacilities, Margins, recovery, Rehabilitation | Login |
| TICKER | COMMENTARY |
|---|---|
| ABBV | Other increasers included AbbVie |
| ACLX | Arcellx, Inc. is developing cell therapies for multiple myeloma, including lead candidate anito-cel in partnership with Gilead. Despite encouraging clinical results for anito-cel, Arcellx detracted from performance following Johnson & Johnson's announcement of strong data for its Tecvayli plus Darzalex combination in previously treated, Darzalex-naïve patients, suggesting increased competition for BCMA CAR-T therapies. |
| ARGX | Shares of argenx SE contributed to performance, rising 14.0% during the fourth quarter and finishing 2025 up 37.8%. Argenx is a leading biotechnology company best known for developing Vyvgart, the leading FcRn inhibitor for the treatment of autoimmune conditions. Sales of Vyvgart continue to progress well in Generalized Myasthenia Gravis (Generalized MG) while the Chronic Inflammatory Demyelinating Polyneuropathy (CIDP) launch is also off to a strong start. |
| ARQT | Arcutis Biotherapeutics is a pharmaceutical company specialising in the treatment of common dermatological conditions. We believe that the company's product differentiation, expanding market access and commercial execution create durable advantages to drive sales growth and profitability. |
| AZN | World-class pharmaceutical and medical products manufacturer |
| BSX | However, Boston Scientific has fallen sharply following an earnings report on February 4 that missed expectations. |
| DHR | After lagging through the first three quarters of 2025, Danaher's stock rebounded during Q4 as bioprocessing, life science, and diagnostics demand continued to recover from a cyclical trough. On the 3Q25 call, management established conservative 2026 growth expectations. Revenue is expected to continue to lag long-term trends at 3-6% but improve throughout the year. |
| DSXY | Doximity, Inc. is a leading digital platform and professional network for U.S. health care professionals. The stock detracted from performance as the company issued disappointing guidance for the next two quarters. Client discussions indicated uncertainty around how recent policy changes may affect annual budgets, prompting management to take a more measured approach to revenue yet to be booked. |
| EHC | Although the fundamentals for EHC are steady, EHC is both a defensive business and a defensive stock in a market that wants offense |
| INSM | Insmed Inc., a biopharmaceutical company focused on developing and commercializing therapies for patients with rare diseases, advanced 21% over the quarter. We have been pleased with the launch of Brensocatib, a first-in-class oral medication that treats non-cystic fibrosis bronchiectasis. The reception has been positive from physicians, patients, and payers. |
| ISRG | ISRG shares appreciated in the fourth quarter after the company delivered strong Q3 results highlighting continued procedure growth and accelerating system placements. Procedure volumes rose in the mid-teens globally, with notable strength in general surgery and urology, while recurring instrument and accessory revenue grew faster than expectations. Management also reported that the early rollout of its next-generation robotic platform was tracking ahead of schedule, with utilization metrics trending positively across beta sites. |
| LLY | Eli Lilly shares were a top performer in 4Q25 after delivering strong Q3 2025 earnings in October. Revenue rose 54% year-over-year to $17.6 billion, and adjusted EPS of $7.02 beat consensus of $6.02. Growth was driven by its GLP-1 franchises, Mounjaro and Zepbound, where sales more than doubled year-over-year, alongside strength in other therapeutic areas. Management raised full-year guidance for both revenue and earnings, reinforcing investor confidence in the company's growth outlook. |
| MASI | Offsetting these gains were negative returns from Masimo |
| MTD | Mettler-Toledo's stock rebounded in the fourth quarter reflecting the company's ability to successfully navigate substantial tariff and research budget pressures while maintaining strong growth and margin expansion in key segments. We believe Mettler should be well positioned to capitalize on global trends in automation, digitalization, and nearshoring which should drive mid-single digit revenue and low teens EPS growth through 2030. |
| PEN | Other strong performers in the quarter, primarily driven by strong earnings results, included Penumbra |
| RGEN | Other strong performers in the quarter, primarily driven by strong earnings results, included Repligen |
| SYK | Stryker (SYK) is a leading global medical technology company with strong franchises across orthopedics, surgical equipment, and neurotechnology. The company has consistently gained market share due to its first-to-market robotic surgery platform and strong execution in ambulatory surgery centers. Furthermore, growth expectations are boosted by secular tailwinds from an aging population and a long runway for international growth. |
| TEVA | Teva has historically been known for its large generics business but is increasingly focused on growing its innovative pharmaceutical business, which now represents roughly half of the company's profits. Austedo continues to see strong adoption in a significantly underpenetrated and underdiagnosed tardive dyskinesia market, Ajovy has gained share in chronic migraine, and Uzedy has launched successfully in schizophrenia. |
| TMO | Thermo Fisher Scientific was a strong contributor with 8.69% ending weight and 1.47% contribution. |
| WELL | During the height of COVID, Welltower and other healthcare real estate stocks were battered. In the span of two years Welltower's earnings dropped by a third as occupancy in its properties plummeted. Its valuation fell in sympathy and to our eye went too far. Welltower was a small position in the fund as the pandemic hit its peak, and we began adding to our position. When the pandemic receded Welltower began to show tremendous growth as it rebuilt occupancy, albeit off a very low base. Nevertheless, investors were cheered and the company began to experience multiple expansion. As its cost of equity dropped, the capital markets opened and Welltower began raising capital to purchase senior housing assets that, for all practical purposes, no one else wanted to own. That fueled even better earnings growth above and beyond what it was getting from occupancy growth. A virtuous cycle began where Welltower parlayed positive spread investing to become one of the biggest public real estate companies in existence. It is now the single largest company in our benchmark at almost 9% of its total market capitalization. This compares to 2022 when it was the fifth largest in the benchmark and only 4% of its total market capitalization. But like all good things, there are limits. Welltower has long been and still is the most expensive stock in our universe by a considerable margin, and that's after accounting for robust growth expectations. Unfortunately for us, we had completely exited the stock by January 2025. |
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