Q&A Series: Positioning for the next wave of biotech breakthroughs with Janus Henderson

Janus Henderson is a global active asset manager with capabilities spanning equities, fixed income, multi-asset and alternatives. Through differentiated insights, disciplined investment processes and world-class service, the firm helps clients achieve their financial objectives. As at 30 June 2026, Janus Henderson managed approximately USD 500 billion on behalf of clients worldwide and employed more than 350 investment professionals globally.

The Janus Henderson Horizon Biotechnology Fund is managed by biotechnology specialists Andy Acker CFA, Daniel Lyons PhD, CFA and Agustin Mohedas PhD, and Vish Sridharan MD, bringing deep scientific expertise across immunology, drug development, medical engineering and clinical medicine. This research-intensive approach is further enhanced by Janus Henderson's broader healthcare platform, providing specialist insights across pharmaceuticals, medical technology and healthcare services.

1. June was the strongest month of relative biotech outperformance versus the broader equity market in over a decade, with the fund (A2 USD share class) returning 12.20% against its benchmark, NASDAQ Biotechnology Total Return Index's 9.65%. What drove this?

June was a standout month for biotechnology, with the sector posting its strongest relative outperformance versus the broader equity market in more than a decade. The Horizon Biotechnology Fund capitalised on this strength, outperforming its benchmark over both the month and quarter.

The rally reflected a combination of improving fundamentals and improving sentiment. Strong clinical progress, a more constructive regulatory backdrop, a reopening IPO market and growing recognition of AI's potential role in drug discovery have all helped support the sector.

M&A provided further evidence of the value being created across biotechnology. Vertex's acquisition of Crinetics, following GSK's acquisition of Nuvalent and AbbVie's acquisition of Apogee, highlights the strong demand for innovative biotech assets. With large pharmaceutical companies seeking to replenish pipelines and offset future patent expiries, we believe M&A will remain an important tailwind for the sector.

2. Which sub-sectors are the fund currently overweight, and what's driving that positioning?

The fund is tilted towards the most innovative areas of biotechnology, particularly small- and mid-cap companies where we see differentiated science, significant unmet medical needs and compelling clinical catalysts. As a result, the portfolio has a meaningful allocation to development-stage and early-commercial companies, which we believe offer the greatest potential for long-term value creation as therapies advance through clinical development and commercialisation. While we also invest in profitable biopharma companies with established franchises, our strongest conviction remains in innovative Small Mid-cap biotechnology businesses, where we see the most attractive investment opportunities across the sector.                                   

3. M&A activity has been a persistent theme. How does the fund position around buyout risk versus standalone growth?

M&A remains a powerful tailwind for the sector, with a dozen portfolio companies acquired in past year. However, acquisitions are an outcome, not an investment thesis. Our focus remains on identifying innovative companies with differentiated science, significant unmet medical need and substantial long-term growth potential.

Importantly, these are the same qualities sought by large pharmaceutical companies facing patent expiries and a need to replenish growth. As a result, we believe the portfolio is well positioned to benefit whether value is realised through clinical and commercial success or strategic acquisition.

4. Given the inherently volatile nature of the biotechnology sector, how do you approach portfolio risk? What are the primary sources of tracking error and how do you determine an appropriate level relative to the benchmark?

Biotechnology is a sector where breakthrough successes and setbacks are part of the journey. The team's "90/90 rule" reflects this dynamic: around 90% of drugs entering human clinical trials never reach the market, while market expectations for successful new treatments are often wide of the mark. The challenge is identifying which scientific innovations can become tomorrow's medical breakthroughs before their potential is fully recognised.

To navigate these dynamics, the team combines deep scientific expertise with disciplined risk management. Every investment is assessed for both upside potential and downside risk, with position sizes calibrated to limit the impact of individual setbacks on the portfolio. This approach allows the team to maintain exposure to breakthrough innovations while managing the inherent risks of biotechnology investing. In our view, it also reinforces the importance of a long-term perspective, as short-term volatility is often an inevitable part of capturing the value created by scientific innovation.

5. The fund has also stated preference for small- and mid-cap names with newly launched products or late-stage pipelines. How do you manage the resulting concentration?

As mentioned above, the fund's preference for small- and mid-cap biotechnology companies with newly launched products or late-stage pipelines is intentional, as this is often where we believe the most attractive mispricing and innovation-led return opportunities can be found. However, concentration risk is managed through a combination of portfolio construction, position sizing and a disciplined risk framework.

6. One of the fund’s top ten holdings, Praxis Precision Medicines, hurt performance in June after its trial results fell short of expectations. What are the key things you'll be watching in the next studies?

Praxis is a developer of treatments for neurological disorders. Shares declined after one of the company's epilepsy studies failed to deliver the positive results investors had hoped for. In our view, the outcome was largely related to the dose of the treatment used in the trial, which may have been too low to fully demonstrate its potential benefits. While disappointing in the near term, we believe this issue could be addressed in ongoing and future studies.

7. IPO momentum has picked up, with Parabilis and Kardigan as recent examples. Does the fund participate in new listings, and how do you balance these against established holdings?

Yes, Biotechnology’s initial public offering (IPO) momentum continued, highlighted by oncology-focused Parabilis, and Kardigan, a cardiovascular therapeutics company developing treatments for heart disease.

The portfolio comprises approximately 70 holdings diversified across therapeutic areas, stages of development and revenue profiles. All new investments, including IPOs, are assessed against the same investment criteria and rigorous bottom-up research process. We only invest where we see differentiated science, attractive commercial potential and a clear fit within the broader portfolio.

8. How does this fund differ from a broader healthcare fund and what investor profile is this fund best suited for?

A broad healthcare fund, such as the Janus Henderson Global Life Sciences Fund, invests across pharmaceuticals, biotechnology, MedTech and healthcare services, reflecting diversified benchmarks such as the MSCI World Health Care Index, where biotechnology represents only around 15% of the index. By contrast, Horizon Biotechnology is focused primarily on biotechnology and R&D-driven biopharmaceutical companies, providing targeted exposure to one of healthcare's most innovative, higher-growth, but more volatile segments.

While this is true of all equity investing, biotechnology investing typically requires a longer-term investment horizon, reflecting both the sector's elevated volatility and the lengthy development timelines associated with bringing new therapies to market. As such, the Fund may not be suitable for investors with short-term investment objectives. The Fund is designed to form one component of a diversified investment portfolio, and investors should carefully consider the proportion of their assets allocated to the strategy.

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