Encouraging Phase II Trial Data Supported Zenas BioPharma, Inc. (ZBIO) in Q4

Meridian Funds, managed by ArrowMark Partners, released its fourth-quarter 2025 investor letter for “Meridian Small Cap Growth Fund”. A copy of the letter can be downloaded here. U.S. equity markets navigated a quarter supported by optimism about potential monetary easing and caution regarding economic growth and valuations. Early gains were driven by strong AI-related earnings and the US Federal Reserve’s rate cut in October, which improved expectations for financial conditions. However, market sentiment cooled later in the quarter. Despite this moderation, the quarter contributed positively to robust annual results. Small caps delivered an annual return of 12.8% with a 2.2% Q4 gain. Value outperformed growth as per the Russell family of indices. In Q4 2025, The Meridian Small Cap Growth Fund returned 0.90% (net) compared to the Russell 2000 Growth Index’s 1.22% return. In addition, please check the Fund’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Meridian Small Cap Growth Fund highlighted stocks such as Zenas BioPharma, Inc. (NASDAQ:ZBIO). Zenas BioPharma, Inc. (NASDAQ:ZBIO) is a clinical-stage biopharmaceutical company. The one-month return of Zenas BioPharma, Inc. (NASDAQ:ZBIO) was 30.78%, and its shares gained 241.61% of their value over the last 52 weeks. On February 18, 2026, Zenas BioPharma, Inc. (NASDAQ:ZBIO) stock closed at $26.68 per share, with a market capitalization of $1.432 billion.

Meridian Small Cap Growth Fund stated the following regarding Zenas BioPharma, Inc. (NASDAQ:ZBIO) in its fourth quarter 2025 investor letter:

"Zenas BioPharma, Inc. (NASDAQ:ZBIO) is a clinical-stage global biopharmaceutical company focused on developing transformative therapies for patients with autoimmune diseases. Its lead drug, Obexelimab, is in Phase 3 clinical trials and, while results are still pending, appears on track for potential approval and launch in 2027. During the quarter, the stock exhibited strong performance, buoyed by encouraging Phase II trial data. While we acknowledge that near-term share price fluctuations in clinical-stage companies often hinge on individual data releases, our focus remains on Zenas BioPharma's long-term revenue potential. With multiple indications in development, there is a prospect of achieving annual revenues exceeding $1 billion, contingent upon successful development and regulatory approval."

Zenas BioPharma, Inc. (NASDAQ:ZBIO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 13 hedge fund portfolios held Zenas BioPharma, Inc. (NASDAQ:ZBIO) at the end of the third quarter, the same as in the previous quarter. While we acknowledge the potential of Zenas BioPharma, Inc. (NASDAQ:ZBIO) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Zenas BioPharma, Inc. (NASDAQ:ZBIO) and shared Meridian Small Cap Growth Fund's views on the company during the previous quarter. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.