Bellevue Digital Health

The broader equity market (-0.8%) closed slightly lower in October, while the US technology sector, represented by the Nasdaq 100 (-6.6%), declined significantly. The long-awaited rotation back into the digital health sector appears to support this trend: the Bellevue Digital Health fund (+3.6%) outperformed the Nasdaq 100 by more than 10 percentage points. Share price movements suggest a more critical assessment of the risks associated with AI stocks. The healthcare sector could benefit from the Democrats’ election victory. At the same time, stricter environmental and investment requirements could delay the construction of new data centers in the US and increase costs.

During the month, 23 of the 35 portfolio companies contributed positively to performance, including Glaukos (+44.7%), EssilorLuxottica (+24.5%), Phreesia (+20.4%), Ambu (+15.9%), Waystar (+10.5%), Veeva (+9.6%), Abbott (+8.1%), Intuitive Surgical (+6.2%) and Stryker (+6.0%). This was primarily driven by the start of the Q3 2026 earnings season, with several companies exceeding analyst expectations. Despite weaker consumer sentiment, EssilorLuxottica reported strong revenue growth in both its core business and AI glasses. Strength in the core business has continued into Q4 2026. In addition to Glaukos’s better-than-expected Q3 2026 results, the more significant positive surprise was the substantial increase in its full-year 2026 guidance. Its initial outlook for 2027 was also well above analyst expectations. The main driver was a sharp increase in demand for its keratoconus treatment Epioxa, supported by new reimbursement arrangements effective since July.
After expressing some caution about procedure volume trends during its Q2 2026 reporting, Intuitive Surgical largely met analyst expectations in Q3 2026 and reaffirmed its full-year 2026 guidance. Although Abbott reported disappointing Q3 2026 results, it also announced the spin-off of its Nutrition division, which should strengthen the group’s profile. The division grows more slowly than the rest of the company and is less profitable. Stryker’s Q3 2026 results also fell short of expectations, but the company announced a CEO transition and appointed COO Spencer Stiles as its next CEO. Investors expect Ambu to report strong Q4 2026 results in November (its financial year ends in September), followed by accelerating growth in the new 2026/27 financial year, and positioned themselves accordingly during the month. Investor sentiment towards healthcare IT companies such as Phreesia and Veeva continued to improve, as integrating AI into their own solutions reduces the competitive threat from AI companies outside the sector. Waystar announced that it was considering strategic options, including a sale.

Profit-taking in life sciences tools companies 10X Genomics (-22.4%) and Illumina (-13.8%) was the main drag on fund performance. This sentiment also affected the smaller holdings Metis TechBio (-37.5%) and XtalPi (-25.2%). Publicly available flight data also indicated lower flight activity at TransMedics (-20.9%) in October. Dexcom (-4.6%) lost its contract with US pharmacy chain CVS in October, while competitor Abbott reported disappointing Q3 2026 results in its diabetes business and lowered its targets for the coming quarters.

All performance figures are in USD; fund performance refers to B shares.

From a fundamental perspective, digital health companies remain on a steady path towards above-average growth, which we expect to continue through the remainder of the year. Positive sector momentum and renewed investor interest in healthcare underpin our confidence in the outlook for the remainder of 2026 and the coming year. Inflows into the broader healthcare sector should also benefit the digital health sector.

The approval and launch of relevant new products should support continued strong revenue growth. Alongside innovation as the key value driver, factors such as attractive valuations and an expected acceleration in M&A and IPO activity support the investment case for the Bellevue Digital Health Fund.