Arcellx (ACLX) Declined Despite Positive Clinical Trial Results

Core Insights - Baron Health Care Fund reported a 13.10% gain in Q4, outperforming the Russell 3000 Health Care Index's 11.92% and the Russell 3000 Index's 2.40% [1] - For the full year, the Fund returned 10.28%, while the benchmarks gained 14.56% and 17.15% respectively [1] - Strong stock selection in biotechnology was a key contributor to the Fund's relative performance in the quarter [1] - The Fund focuses on businesses with secular growth opportunities, sustainable competitive advantages, and strong management [1] - The healthcare sector is viewed as a strong investment opportunity in the U.S. economy, with positive momentum expected through 2026 [1] Company-Specific Insights - Arcellx, Inc. (NASDAQ:ACLX) was identified as a performance detractor in the Fund's Q4 2025 letter [2] - Arcellx develops immunotherapies for cancer and other incurable diseases, with a market capitalization of $3.87 billion as of February 5, 2026 [2] - The stock had a one-month return of 1.01% and a 52-week gain of 0.04% [2] - Arcellx is developing cell therapies for multiple myeloma, including the lead candidate anito-cel in partnership with Gilead [3] - Anito-cel is a BCMA-targeted CAR-T therapy, showing comparable efficacy to competitors but with a more favorable side-effect profile [3] - Despite positive clinical results, Arcellx's performance was impacted by competition from Johnson & Johnson's Tecvayli plus Darzalex combination [3] - Industry experts believe BCMA CAR-T will remain the preferred treatment for many patients in the second-line setting [3] - The company expects Arcellx's drug to be meaningfully differentiated on safety and anticipates share appreciation ahead of a potential 2026 launch [3]