Bellevue Emerging Markets Healthcare (Lux)

World stock markets tacked on more gains in April. The MSCI World closed the month 1.8% higher in USD. Macro data played an only minor role for a change, although the economy could take center stage again already in early May when the next inflation readings are published. Instead, investor attention in April was captured by quarterly earnings reports. Strong earnings from mega tech stocks led markets to higher ground. April was also a very pleasing month for the healthcare sector. Takeover deals in the biotech sector and strong quarterly results from numerous medtech names helped the sector to outperform the broader market and close 3.5% higher mom in USD. That was also the case for healthcare stocks in emerging markets, which closed the month of April with a gain of 3.2%, clearly outperforming the broad emerging stock market index (-1.1%).

The Chinese biotech company Legend Biotech and its partner Johnson & Johnson published exciting Phase III data on their cell therapy Carvykti in multiple myeloma. In the CARTITUDE-4 study, in which 419 patients had been enrolled, 208 were treated with Carvykti and 211 received standard of care treatments after having received one to three prior lines of standard therapy. Legend’s cell therapy slashed the risk of tumor progression or death by a 74% compared to standard of care (hazard ratio of 0.26). This represents an entirely new playing field in the early treatment of multiple myeloma compared to both standard therapy and the only other approved fifth-line myeloma treatment (Abecma from Bristol-Myers Squibb). This news report was based on information from an interim analysis as of November 1, 2022, so conclusive data regarding progression-free survival was not available. Calculations of median PFS are around 35-40 months. Some doctors have said the drug might even be able to cure patients with multiple myeloma. It seems very likely that Carvykti will be approved as a second-line treatment by the end of this year and will then establish a high penetration rate in this indication. Its high price tag of more than USD 400000 per treatment should not be a problem because most patients will not need any other treatment for three or more years. The side effect profile was also favorable. Although 76% of patients experienced cytokine release syndrome, the vast majority of these episodes were mild.

This news is also very encouraging for Legend's ongoing studies of Carvykti (CARTITUDE-5 and 6) as a first-line treatment for myeloma. Carvykti’s peak sales potential is projected at above USD 5 bn. We are staying invested in the stock.

Wuxi AppTec's quarterly results were weaker than expected, which primarily reflects the effects of a slump in biotech funding. Wuxi AppTec maintained its full-year guidance but will now have to deliver much faster growth in the following quarters. We sold the entire position on the news and in view of the still high expectations going forward.

New positions were opened in Genscript und Medanta during the past month and existing positions in Aier Eye Hospitals and Hypera were increased. Positions in Ali Health, JD Health, Beigene, Sinopharm and Samsung Biologics were reduced. CSPC, Yifeng Pharmacy, Wuxi AppTec and Jinxin Fertiliy are no longer in the portfolio.

The fastest growing countries in the world can be found in emerging markets and they contain more than half of the world's population. Asian emerging markets are also forecast to account for more than 50% of global GDP by 2050. It is known that the economic growth model of countries shifts from manufacturing to the services sector as household incomes rise. 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. Outside Asia, Brazil’s rapidly expanding private-sector healthcare market offers a range of interesting investment opportunities. The quality and long waiting times of the country’s public health system are no longer acceptable to many higher-income Brazilian households and they are increasingly embracing these new services offered by private-sector healthcare providers. Hospital chains embedded in a fully-integrated ecosystem are but one example of the beneficiaries of this structural change. The fund serves as a defensive vehicle for capturing the above-average growth potential emerging markets offer. It invests in the entire healthcare system value chain, from hospital chains, drug developers and device manufacturers to medical research specialists and digital health companies.