Bellevue Obesity Solutions (Lux)

March was a good month for stock markets. The S&P advanced 3.1%, the MSCI World Healthcare Index 2.1%, and the Bellevue Obesity Solutions (Lux) Fund 2.5% (in USD / I shares).

Solid economic data put investors in good spirits; reported upturns in commodity prices and labor costs were only minor disturbances. Central banks continued to flag interest rate cuts at some point this year. In the healthcare sector, news flow was mostly positive and more acquisition deals were announced. Novo Nordisk published more positive clinical trial data for semaglutide. The company stopped its FLOW trial in diabetes patients (T2D) with kidney problems (CKD) early due to efficacy. Treatment with semaglutide reduced the risk of kidney-disease progression and the risk of death from heart or kidney failure by 24%. Novo also announced that the FDA approved a label expansion for the drug for the indication of reducing risks of major adverse cardiovascular events (MACE). According to some forecasts, GLP-1 drugs will be the best-selling class of drugs in 2024, overtaking the class of PD-L1 checkpoint antibodies in cancer immunotherapy.
 
The following stocks made the best contributions to portfolio performance in March: At its Capital Markets Day 2024, Novo Nordisk drew attention to the tremendous growth potential of its GLP-1 franchise in the areas of diabetes and obesity. Particular emphasis was placed on the promising profile of its amycretin pill, which led to a 13% reduction in body weight after 12 weeks of treatment. If efficacy is confirmed, amycretin could become a leading oral product in the obesity market. Dexcom received regulatory approval for Stelo, the first over-the-counter integrated continuous glucose monitoring system (iCGM) for adults not on insulin. In addition, a verdict from a district court in Delaware in a patent dispute with Abbott was relatively mild for Dexcom, and Dexcom was not held liable for damages, which investors viewed as a victory for now in the still ongoing dispute. Shockwave shares surged after an article appeared in the Wall Street Journal claiming that Johnson & Johnson was in talks to acquire the company.
 
The following stocks detracted from fund performance: Biotech companies Crispr Therapeutics and Verve drifted lower during the past month without any company-specific triggers. Both companies are focused on gene therapies and suffered above-average losses compared to the overall biotech sector. Lululemon corrected on news of slower growth in the fourth quarter and a downward revision of management guidance for the first quarter.

The companies in the fund's portfolio are working on technologies or products for novel treatment solutions and holistic treatment approaches. Selected healthcare companies with relevant exposure to the obesity care market can also be found in the portfolio, and up to 20% of the fund's assets can be invested in fitness and nutrition companies that have a strong growth profile and a modest valuation. The Bellevue Obesity Solutions (Lux) Fund is well-positioned to profit from the milestones likely to be reached in 2024. Policy frameworks are supportive of solutions that will help to alleviate the obesity crisis. Besides trial readouts and attractive valuation metrics, M&A activity, especially in the drug discovery and development space, will be a relevant factor going forward.

We expect positive catalysts for our investment strategy during the current year. Supportive factors include anticipated interest rate cuts in the US, which would favor growth stocks in particular, attractive stock valuations with price-to-sales multiples approaching historical lows (especially in the biotech sector), forecasts of continued high M&A activity, and growing interest in the high-quality investment opportunities that the healthcare sector offers. 2024 promises to be an exciting year in obesity therapeutics with several significant trial readouts on the agenda. Early in the year, we are expecting initial data readouts from Phase I trials of amylin analogs from both Zealand Pharma and Novo Nordisk. Viking and Structure Therapeutics will publish new data from their trials of oral GLP-1 drugs around the same time. Updates on experimental treatments that preserve muscle mass are also anticipated, for instance from Roche, Regeneron or Scholar Rock to name a few. In view of current demand, which far exceeds available supply, an increase in production is crucial for the GLP-1 market, which is currently dominated by Eli Lilly and Novo Nordisk. We are also closely monitoring whether this class of therapeutics could be approved for the treatment of other diseases such as cardiovascular disorders, obstructive sleep apnea and/or chronic kidney disease.