Bellevue Medtech & Services (CH)

Global equities advanced in June (MSCI World Net Index +0.8%). Stock markets were buoyed by a momentary easing of tension on the geopolitical stage. Meanwhile lower-than-expected inflation readings in the US pushed down bond yields. 10-year US Treasury yields declined by 17 bps to 4.2%. Lower bond yields gave growth stocks the biggest boost but also kept the US dollar under pressure, which shed another 3.6% of its value against the Swiss franc. In this context, the defensive and US-heavy healthcare sector (MSCI World Healthcare Net -2.0%) was unable to keep up with the broader market’s gains. The medtech & services sector (MSCI World Healthcare Equipment & Services -1.3%) and the Bellevue Medtech & Services Fund (-1.3%) performed somewhat better than the all-share healthcare sector, as  expected. Healthcare services made a slightly positive contribution to fund performance (+0.1%), while medtech exposure had a negative contribution of -1.4%.   

UnitedHealth (+0.5%) staged an initial technical rebound (+4.1% in USD) after its big sell-off in the previous month (-26.6%), as did Cigna (+1.3%) and CVS (+4.0%). Elevance (-1.7%), Molina (-5.7%) and Centene (-7.1%) traded lower. The live Senate debate over OBBB (One Big Beautiful Bill) put pressure on the shares of Molina and Centene, two insurers with a significant focus on Medicaid plans. This can be traced to the obviously negative impact of Senate amendments to the bill that cut government funding for Medicaid and the Affordable Care Act/Health Exchanges (ACA) while also reducing Medicaid eligibility. The market responded to the legislative action, which poses a direct threat to the revenues and membership numbers of both companies. In the large-cap medtech space, only Medtronic (+2.3%) and Stryker (+0.1%) made a positive contribution to fund performance, along with Align (+1.1%) and Idexx (+0.9%), which gained in the wake of positive consumer confidence readings. Medtronic was marked up after the FDA approved Liberant, a peripheral catheter-based thrombectomy device for treating vascular venous thrombosis, which led to selling pressure on Penumbra (-7.1%), the market leader in thrombectomy. Intuitive Surgical (-5.0%) and Abbott (-1.6%) detracted the most from fund performance in June. Intuitive Surgical shares sold off after Restore Robotics announced the commercial launch of remanufactured robotic instruments (scissors) for da Vinci surgical robotic systems (FDA clearance received in March 2025). We believe the risks associated with remanufactured instruments are currently low and should be well-contained over the long term. This is because the remanufactured instruments approved by the FDA are for use with Intuitive Surgical’s older systems such as Xi and Si. Intuitive Surgical is already marketing newer-generation systems (da Vinci 5) with enhanced features that are much more complex, such as Force Feedback technology.  

Life sciences tools companies Danaher (+0.6%) and Thermo Fisher (-2.7%) had a negative impact on performance.
   
All performance data is in CHF / AA shares. 

We see considerable upside potential in the healthcare services segment, specifically for hospital operators, health tech companies, and US health insurers. Hospital operators should benefit from high patient volumes and an only moderate increase in payroll costs. We expect health insurers to report solid member growth and better margins in 2026, particularly in their Medicare Advantage business lines. Continued high US Treasury yields could also have an accretive effect on earnings. 

Based on the better-than-expected quarterly reports of medtech companies and our numerous talks with company executives in May, we expect strong growth in surgical procedure volumes for the current year, which could even increase slightly from the current levels as the year progresses. The resulting operating leverage and the weak US dollar should cushion the negative impact of tariffs on earnings per share growth.  

The approval and subsequent launch of relevant new products will continue to bolster sales growth, too. Examples here are Abbott’s Lingo, Libre Rio, Libre 3, TriClip and AVEIR products, Boston Scientific’s Farapulse PFA system and Watchman FLX Pro device, and the new da Vinci 5 surgical robot from Intuitive Surgical. We believe the sector's pricing power will remain above historical levels in 2025, too. Margins are expected to improve in the wake of the fast sales growth.