Bellevue Digital Health

Global stocks (MSCI World Net Index +2.6%) gained ground in August, as did US tech stocks (NASDAQ 100 Index +0.9%). Healthcare stocks as a whole (MSCI World Healthcare Net Index +5.1%) delivered a clearly better performance, thanks in no small measure to US health insurers, which recovered most of the ground they had lost during the previous month (S&P Managed Care Index +21.0%). Their rebound was triggered by the news that Warren Buffet’s investment company Berkshire Hathaway had invested USD 1.6bn in UnitedHealth. We note that investor sentiment toward the healthcare sector in general has become less negative. This is also reflected in the Bellevue Digital Health (Lux) Fund’s performance during the month under review (+5.4%). The anticipated loosening of Fed monetary policy is likely to generate additional momentum for digital health growth stocks in particular.?

Overall, 24 of the 34 stocks in the fund’s portfolio made a positive contribution to performance in August. The Q2 reporting season ended during the month under review. Omada (+35.2%), GN Store Nord (+26.3%), Natera (+25.9%), Privia Health (+18.0%), Insulet (+17.9%), and Globus Medical (+16.4%) beat consensus expectations by a wide margin. Omada had a strong start in its first quarter as a public company, and membership in its virtual care programs jumped +52%. The company is benefiting from employer demand for alternative digital programs and supportive solutions for employees on GLP-1 medications. We expect demand to remain strong throughout the H2 sales cycle. Natera reported excellent Q2 results and beat the consensus sales estimate by 15 percentage points. Its top-line growth was driven by a sharp increase in Signatera testing volumes (20,000 versus a consensus estimate of 16,000). In addition, recently presented positive study data for Signatera, Natera’s cancer recurrence detection test, could lead to its application as a companion diagnostic in muscle-invasive bladder cancer. Insulet reported strong Q2 sales and earnings that clearly beat expectations, and management raised its full-year growth target for 2025. In addition, Insulet reported a record >40% increase in new patient starts, which is a good indicator of fast sales growth going forward.?

Portfolio performance in August was held back by Procept BioRobotics (-17.2%), Dexcom (-6.7%), and Veeva Systems (-5.3%), companies that actually reported good Q2 results but did not beat high investor expectations. Procept BioRobotics’ Q2 sales were in line with pre-announced key figures, and management raised its full-year guidance, but the announced change in sales and distribution management on top of the pending change of CEO led to investor worries about short-term sales and distribution issues and potentially slower sales growth. Dexcom beat analyst expectations for Q2, but investors were not entirely satisfied. While Dexcom performed well in the US, its sales growth there continued to lag the growth rates reported by its competitor Abbott, which can be traced to negative pricing dynamics. This effect should subside over the next few quarters.

All performance data is in USD / B shares

Looking at the fundamentals, digital health companies are on a stable, above-average growth trajectory that should be sustained throughout 2025. This scenario is supported by above-average growth in surgical procedure volumes and in hospital capital expenditure.?

The approval and subsequent launch of relevant new products will continue to bolster sales growth, too. Examples here are Intuitive Surgical’s da Vinci 5 robotic surgical system; Veeva Systems’ Vault CRM Suite for highly efficient marketing of medicines; Dexcom’s two continuous blood glucose sensors, Stelo and G7; Procept BioRobotics’ Hydros Robotic System for the removal of benign prostate tissue; Insulet’s Omnipod 5 automated insulin delivery system; Penumbra’s computer-assisted vacuum thrombectomy system, Thunderbolt; and Globus Medical’s ExcelsiusFlex, a surgical robotic navigation system.?

We expect some tailwinds for our investment vehicle during H2. Besides strong innovation – the key driver of value creation in the digital health space – other factors such as attractive valuation levels (price/sales multiples are near historical lows) and an anticipated increase in both M&A and IPO activity are sound arguments for investing in the Bellevue Digital Health (Lux) Fund.