Bellevue Medtech & Services (CH)

Despite an explosive mix of renewed escalation and stalled diplomacy in the Middle East, a weaker-than-expected US labour market and subdued consumer sentiment, core inflation was in line with expectations.

The broader equity market gained 2.5% during the reporting month, with the information technology sector recovering somewhat. The healthcare sector advanced 3.6%, broadly supported by biopharma, medtech and life science tools. The Bellevue Medtech & Services Fund gained 1.3% and underperformed its benchmark (+1.7%). Medtech companies contributed 1.9% to performance, while healthcare services detracted 0.6%.

Veeva Systems (+40.1%), Tenet Healthcare (+4.3%), McKesson (+3.3%) and HCA Healthcare (+2.9%) contributed positively to performance. Veeva benefited from strong quarterly results, an increased full-year outlook and progress in AI applications and Vault CRM, which strengthened confidence in sustainable growth. McKesson exceeded expectations thanks to its North American pharmaceutical distribution and oncology businesses and raised its full-year guidance.

US health insurers delivered mixed performance. Humana (+5.2%), Elevance Health (+4.4%) and Centene (+3.3%) gained, while CVS Health (-10.2%), UnitedHealth (-6.1%) and Cigna (-1.1%) weighed on fund performance. At CVS, cautious comments regarding Caremark and the earnings outlook for 2027 overshadowed strong quarterly results. Caremark is a Pharmacy Benefit Manager (PBM) that manages prescription drug benefits for health insurers and negotiates prices with manufacturers and pharmacies. As UnitedHealth also operates a significant PBM business through OptumRx, its shares came under pressure as well. Elevance, Centene and Humana, by contrast, benefited from their lower exposure to this business, with Humana additionally benefiting from the recovery in the Medicare Advantage market.

The rotation into the medtech sector is gaining momentum. Historically low valuations, underperformance over the past 18 months and persistently high procedure volumes have attracted investor interest, particularly in large-cap companies. Becton Dickinson (+13.5%), Dexcom (+9.0%), Intuitive Surgical (+6.6%), Medtronic (+6.1%) and Abbott (+4.2%) contributed positively to performance, while Insulet (-10.2%) and Stryker (-0.6%) detracted. Becton Dickinson benefited from strong quarterly results, which strengthened confidence in the targeted acceleration in growth. Dexcom gained ahead of the expected broad US reimbursement coverage for glucose sensors for patients with type 2 diabetes who are not treated with insulin. The approval of Abbott’s Libre Duo glucose and ketone sensor raised few competitive concerns, as only modest sales are expected in 2027. Insulet shares suffered following a guidance cut due to weak new customer numbers and high attrition among patients with type 2 diabetes. Given slowing growth, increasing competition and potential reimbursement risks, we exited the position entirely.

Life science tools companies Danaher (+9.4%) and Thermo Fisher (+7.4%) performed well and contributed positively to performance.

All performance data in CHF, AA shares.

Within healthcare services, hospitals and US health insurers offer further upside potential. Hospitals should benefit from persistently high treatment volumes and moderately rising personnel costs. For health insurers, we expect margins to recover in 2027 and 2028, particularly in the Medicare Advantage and Medicaid segments. Persistently high market interest rates could provide additional support for earnings growth.

Based on the Q2 reports of medtech companies and our discussions with numerous management teams, we expect robust growth in procedure volumes in 2026. Economies of scale and refunds of US tariffs should also support solid earnings growth.

The approval and launch of important new products should further support revenue growth in the medtech sector and stabilise valuations. Examples include Abbott’s Volt PFA catheter, Medtronic’s Affera and Boston Scientific’s Farapulse, the da Vinci 5 robotic-assisted system from Intuitive Surgical, Hugo from Medtronic and Ottava from Johnson & Johnson, as well as Medtronic’s Symplicity Spyral catheter. Numerous publications of clinical data and new reimbursement policies should not only strengthen investor confidence but also increase revenues over the medium term.