Bellevue Biotech (CH)

Global equities recovered strongly in May 2025, with the MSCI World Index ending the month up 5.9%, and the S&P 500 and Nasdaq posting their best month since November 2023. In contrast, healthcare continued to struggle, with the MSCI World Healthcare Index down 3.6%. The Bellevue Biotech Fund (I-shares: -3.4%, in USD) outperformed its healthcare index benchmark by 28 bps, driven by asset allocation. As we will explain in more detail below, US regulatory uncertainty and some stock specific issues drove the sector underperformance in the month.

US President Trump released an Executive Order (EO) calling for most-favored-nation (MFN) drug pricing on May 12. This added considerable uncertainty regarding future US drug pricing. HHS has 30 days (from May 12) to propose drug price targets, with the industry being given 180 days to show signs of progress. There is an expectation in the market that CMS will announce the start of a pilot program around MFN. This would involve a consulting period, which would be an opportunity for the industry to respond. While the EO stated all branded drugs, it is likely that this will need to be narrowed to specific government channels, especially in the context of a pilot study. Should the scope narrow, we could see a clearing event for biopharma.

Alongside this, there remains the 232 investigation on pharmaceuticals related to national security and potential tariffs. Should this be narrowed to drugs produced exclusively in China which do actually hold a national security risk (antibiotics and Ibuprofen, for example) in the coming months, we could see this also acting as a clearing event for the biopharma. It is possible that the US biopharma industry will volunteer to leave manufacturing capacity spare to fill any gap in supply should China tensions raise.

The Bellevue Global Biotech CH Fund (AA-shares: -3.9%, in CHF) outperformed its biotech index benchmark by 24 bps, benefiting from positive clinical trial readouts and security selection. Among the portfolio holdings, the strongest relative performance came from Verona (+12.7%, in CHF) based on additional Phase III data and competitor setback, as well as from Merus (+23.2%, in CHF) following strong Phase II trial results for peto in head and neck cancer.

The companies in our portfolio are working on technologies or products for novel treatment solutions. We are also invested in selected specialty pharma companies that offer high growth rates and moderate valuations. The Bellevue Biotech (CH) Fund is well-positioned to profit from the milestones that are expected to be reached in 2025. The regulatory environment favors the innovation coming out of biotech labs and the coronavirus crisis burnished the image of drug developers. Looming patent expiries coupled with large piles of cash suggest large biopharma companies will continue to hunt biotech companies over the next 18 months. Inexpensive small and mid caps with attractive pipeline candidates are obvious takeover targets. By 2030, products generating USD 183 bn in annual sales will lose their patent protection.