Bellevue Digital Health

The broad stock market (+2.6%) closed higher in August, as did the US technology sector (Nasdaq 100 +4.2%). The broad healthcare sector (+3.7%) and the medtech sector (+4.0%) also performed within this range. The Bellevue Digital Health Fund (+8.4%) performed significantly better and benefited from the long-awaited rotation back into the medtech sector. Given its technology focus and high proportion of growth stocks, the digital health sector looks particularly attractive to technology investors seeking an opportunity to reinvest profits taken in the AI sector. Low valuation levels and the sector’s relative underperformance over the past 18 months offer attractive entry points. Since the beginning of H2 2026, the Bellevue Digital Health Fund has outperformed the US technology sector by more than 17%. The broader investment community is also beginning to recognize the investment opportunities in the digital health sector.

In the month under review, 23 of the fund’s 35 portfolio companies made a positive contribution to performance, including Veeva (+40.2%), 10X Genomics (+32.1%), Waystar (+24.0%), Natera (+20.2%), Dexcom (+9.1%), as well as smaller holdings such as Beta Bionics (+55.5%) and Omada Health (+23.7%).

Veeva reported better-than-expected results and raised its sales and earnings guidance, supported by robust demand for its AI portfolio. 10X Genomics delivered strong results across the board and raised its sales guidance for fiscal year 2027. Stable demand for consumables and continued strong orders for Atera (market launch planned for Q4 2026) strengthened investor confidence in the company’s growth outlook. At its Capital Markets Day, Waystar convinced investors that AI does not pose a threat to its business model but should instead help the company gain market share. Easing investor concerns that AI could render software companies’ business models obsolete helped both Waystar and Veeva’s share price. Natera reported record Signatera test volumes and raised its guidance, which was well received by investors. Dexcom continues to benefit from the expected imminent broad reimbursement in the US for continuous glucose monitoring sensors for patients with type 2 diabetes who do not yet require insulin. In addition, the Q2 results showed that profit margins could increase significantly more than the company had previously indicated.

Insulet (-10.1%), Align (-5.5%), EssilorLuxottica (-1.4%), as well as smaller holdings such as BillionToOne (-34.6%) and Privia (-13.4%), detracted from portfolio performance. Insulet reported disappointing Q2 results, lowered its growth outlook for the current fiscal year and suspended its guidance for subsequent years. Operational weaknesses in expanding into the type 2 diabetes patient population have led to high patient churn. These self-inflicted problems have emerged even before competing insulin pump manufacturers launch their own tubeless patch pumps. This prompted us to sell our position in Insulet.

All performance data is in USD/B shares.

Looking at the fundamentals, digital health companies are on a stable path to above-average growth, which we expect to remain intact throughout the year. Positive sector momentum and renewed investor interest in healthcare make us very confident about the remainder of 2026 and the coming year. Inflows into the broader healthcare sector should also benefit the digital health sector.

The approval and subsequent launch of relevant new products should continue to support strong sales growth. Besides innovation as the key driver of value, other factors such as attractive valuation levels and an anticipated increase in M&A and IPO activity also speak in favor of an investment in the Bellevue Digital Health Fund.