Leading healthcare fund manager RA Capital launches biotech ETFs
April 1, 2024
BOSTON, Apr. 1st, 2024 — As part of a systematic growth strategy aimed at attracting capital to the biotechnology sector, RA Capital Management, LP, is announcing the launch of a set of Exchange Traded Funds (ETFs) to be marketed to discerning retail and institutional investors.
The first ETF that RA Capital will begin trading today is RABB (RA Best Biotech ETF). This fund is composed of what RA Capital has termed “core” development-stage biotech companies held by at least one biotech specialist peer fund.
In 2023, Core biotech stocks dramatically outperformed those not owned by specialists (known as “peripheral” stocks) and represented 100% of the holdings of healthcare specialists. Partially explaining that outperformance is the fact that over 98% of M&A dollars flowed to Core biotechs.
“Basically, specialists have a nose for what pharma wants to buy,” summarized Alex Martinez-Forte, Associate Director of Strategic Finance, who together with Senior Associate Jacqueline Rhuda applied advanced artificial intelligence algorithms to the largest finance set ever compiled to inform the composition of RA Capital’s ETF portfolio.
“We were inundated with requests from retail investors and others asking for a way to take advantage of the stark performance differences between core and peripheral biotech stocks,” explained Tess Cameron, a Principal on the RA Capital investment team and co-author of the groundbreaking data-rich report “Semper Maior: Spirits Rising” that first detailed these observations in RApport, a widely-read international healthcare and finance journal.
“What’s long been missing from the menu of biotech ETFs is a fund constructed strictly based on borrowed conviction,” said Peter Kolchinsky, a virologist and Managing Partner of the firm.
RABB is weighted by market cap attributable to specialists and will be rebalanced monthly. RABB also attempts to give extra weight to companies that went public via a Series I IPO, even though RABB will always get cut out of them because management teams know that RABB will just buy in the aftermarket and would be a forced seller the moment the Fed issues a warning.
For those who think that specialists have it wrong, RA Capital is also launching the RA Peripheral Portfolio, which will trade under the symbol RAPP.
“We have to acknowledge the skeptics out there,” said Raj Shah, also a Managing Partner of the firm. “After all, there was a time we weren’t specialists and we thought we knew better. So we created this ETF for anyone trying to be like us. Give it a go, you’ll do fine, and I’m sure no one will be shorting these shares to you.”
RAPP will be composed of “peripheral” development-stage biotech stocks (those lacking in specialist holders) and will be weighted for those companies that specialists think are most likely to lose your money but with just the right chance of an occasional up-day due to a misleading Reddit thread or typo in an 8-K.
After careful examination, Eric Rose, RA Capital’s Chief Compliance Officer, granted his full-throated consent. “I’m probably not going to talk you guys out of this, so whatevs,” he said, as he crossed himself, crossed his fingers, and crossed out any hope he ever had of being taken seriously by his peers.
Because biotech isn’t risky enough for some, RA Capital got its most risk-averse people in one room, enrolled them in a single-arm ketamine trial, told them it was “Opposite Day,” and asked them to come up with an ETF that would be guaranteed to give every endowment CIO a heart attack. They concocted the RA Biotech Inverse Extended Series, or RABIES.
“RABIES is perfect for people who have nothing to lose or would like to have nothing to lose,” said Mike Saulnier, RA Capital’s CFO, shaking off the last of his cognitive dissociation.
RABIES is composed of the same adversely-selected stocks as RAPP but with 3x leverage and some VIXX shorts to top it off. It can only be purchased if you are lucky enough to get bitten by a current owner.
“The actual rabies virus is nothing compared to the godforsaken instrument of horrors y’all are unleashing on the world,” said Mario Barro, yet another virologist on the RA Capital team (“the only real one”, who actually worked at BARDA on US biodefense, developed actual vaccines, and leads the firm’s infectious disease unit). “Anyone infected with this ETF has essentially lost their mind and will likely be trying to spread it to others. Is this even legal?”
“You dixit dude, res ipsa loquitor and other Latin stuff,” said Sarah Reed, the firm’s General Counsel, the only attorney in the world to practice corporate law in plain English (when she wants to).
Because the SEC offers a package deal on ETF funds (“We take bitcoin!”), RA Capital banged out a few more.
RABBIT - The RABB Indifferent to Technology fund variant focuses on the untapped value of “vaporware” programs that will never be developed, often using TSMLADEH (The Same Machine Learning Algorithms and Data Everyone Else Has). Do you want returns that are correlated not with value and probability of success but with number of programs? Then this is the ETF for you – where Gantt charts breed like, well…
There’s also the RA Governance Exempt fund, or RAGE, focused on those companies that, in accordance with Rage Against the Machine’s business mantra “F*** you, I won’t do what you tell me!,” refuse to do anything their lawyers and board members tell them a properly run company should do.
“Sometimes those teams are right,” admitted Josh Resnick, MD, a very senior member of RA Capital’s venture team who serves on an incalculable number of boards, adding, “Now, before I enter the boardroom, I’ll check to see if that company has been added to RAGE. If it’s on there, I’ll generally pop two Xanax. If it’s not, I’ll just take one.”
For fans of the San Jose Sharks (“Hey, a hockey reference!” Tess jumps in again, because she’s Canadian), there’s now RABBLE – the RABB Lower Echelon fund, which seeks to generate true inverse alpha by mirroring the investment portfolios of the most consistently poorly performing funds. Some believe consistent underperformance year after year is just bad luck, but for those who believe that it’s a lost art, this is your fund.
Also, for those who want to add a low- or no-liquidity bias exposure to their investment, consider the RABBLE Restricted Opportunities and Under-appreciated Securities for Exceptional Returns ETF. The RABBLEROUSER ETF focuses on the subset of the RABBLE portfolio that the market doesn’t and never will care about – at all.
“Many will think that’s bad, like dad-joke bad,” observed Laura Tadvalkar, Managing Director on RA Capital’s Venture team. “But it’s about to get a lot worse, so buckle up.”
For those seeking to bet on insurance to continue to screw patients with excessive out-of-pocket costs, thereby deterring utilization of novel medicines, there is RA Biotechs Under Constant Krush of Existential Threat of Payer Out-Of-Pockets causing a Slow-launch, now trading under the symbol RA BUCKET OF POOPS.
To which all the four- and five-year-old children of every member of the RA Capital team responded in a chorus of “Poop! You said poop!”
One child, Val, then stood to soliloquy, “Indeed, what’s with high out-of-pocket costs? It’s not like anyone fakes cancer to freeride chemo! When will Congress recognize that the solution to making medicines affordable is not price-controlling every new medicine that comes to market but capping the out-of-pocket costs that insurance is allowed to impose on patients before making appropriate treatments available to them? Yet OOP costs keep inflating. We must Pop OOP costs! Let’s POOP! Say it with me!”
To which a bipartisan Congress stood to attention, shouting “Let’s POOP!”
If only.
About RA Capital Management, LP
RA Capital Management, LP, is a sort-of Boston-based fund manager (‘cause we have offices in San Fran and NYC, and even people in Los Angeles, Pennsylvania, and Virginia) best known for investing all over the place in healthcare and recently getting into other hard tech with the launch of our Planetary Health strategy. Among other core values, we take fun seriously, especially today.
RA CAPITAL’S FEVER DREAM DISCLAIMER: Nothing contained in this preposterous press release constitutes investment advice, and the views expressed herein should be taken as advice to buy, sell, or hold any security only if you are an April Fool. In preparing the information contained herein, RA Capital has not taken into account anything that is factual – much less the investment needs, objectives, and financial circumstances of any particular investor. The investments referenced are suitable only for your worst enemy. We guarantee that the information is unreliable, inaccurate, and incomplete. By reading this press release, you acknowledge and agree that you have squandered five minutes of your life that you can never get back. Meanwhile, we lost only the five seconds it took to prompt ChatGPT with “cucumber salad recipe.”
Contact:
Jessica Sagers, PhD, Head of Engagement
itwasajoke@racap.com
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