Bellevue Asia Pacific Healthcare (Lux)

The MSCI World retreated almost 3% in October in USD. Mega caps were virtually unable to curb the general market losses for a change. The escalation of hostilities in the Middle East led to heightened uncertainty on every front. Stock and bond prices came under pressure while commodities and precious metals rose. The latest quarterly earnings announcements did not help to calm investor nerves either. Many of the companies that reported results were able to meet street expectations but they gave a guarded outlook and lowered their guidance, which was often blamed on an increase in input costs. Both labor and energy costs have been increasing at a fast pace lately. Stocks in the Asia Pacific region were also caught in the general downdraft and ended the month under review about 4% lower. Healthcare stocks in this region showed a mixed performance. While Japanese names retreated due to the weak yen and disappointing quarterly results, Chinese healthcare stocks advanced on increased buying fueling by their low valuations. In addition, the reported quarterly results of Chinese healthcare companies were surprisingly good, which eased doubts about the recent anti-corruption campaign.

Novo Nordisk announced that it was discontinuing its Phase III FLOW study of Ozempic (GLP1/semaglutide) in patients with type 2 diabetes (T2D) and chronic kidney disease (CKD) one year earlier than scheduled following an interim analysis because of the strong signals of efficacy in meeting its primary endpoint. FLOW is a special kidney study evaluating semaglutide in patients at high risk of developing kidney disease. The study was assessing the effects of subcutaneous semaglutide administered once a week on the progression of renal impairment and on the risk of renal and cardiovascular mortality in patients with type 2 diabetes and CKD compared to placebo. The decision by the study’s independent data monitoring committee to discontinue the study early due to its high efficacy is another success for the incretin-based drugs. Our portfolio companies Innovent, Wuxi Apptec and Chugai are leading players in this drug class. Innovent just published impressive Phase II trial data in late October. Enrolled patients lost 18% of their weight following 48 weeks of treatment. The data on liver fat reduction was also promising.

A position in Mindray was opened during the past month and we added to our shareholdings of Chongqing Zhifei. We closed out the position in Divi’s Lab and reduced our positions in Aier Eye Hospital, CSL and Sun Pharma.

Asia is the most dynamic growth region in the world and it accounts for more than half of the world's population. Asian emerging markets are forecast to account for more than 50% of global GDP by 2050. As household incomes rise, the economic growth model of Asian countries will shift from manufacturing to the services sector. A growing middle class fuels demand for modern medicine. Healthcare ranks increasingly high on their wish list. Billions are being invested in infrastructure, technology and research to modernize the healthcare systems in emerging market countries. This is giving a greater swath of the population access to better healthcare. Meanwhile rapid population aging is also stoking demand for healthcare. In 30 years’ time there will be 400 to 500 million people over 60 in China alone, and they will have a growing need for modern health services and medicines.

Japan, which has been referred to as “the world's demographic laboratory”, has championed cutting-edge innovation for decades. The Land of the Rising Sun boasts technology leadership in numerous fields, ranging from therapeutic antibody technology, immunotherapy and robotics to digitalization, diagnostics and medical imaging systems. The fund offers defensive access to Asian emerging markets as well as exciting investment opportunities in technology leaders throughout the entire region. It invests in the entire healthcare system value chain, from generic drug producers and biotechnology companies to medical device manufacturers and digital health specialists.