Bellevue Digital Health

Global stocks delivered another good return in June (MSCI World Net Index +4.5%). Stock markets headed north thanks to a temporary easing of geopolitical tensions and weaker-than-expected inflation data led bond yields in the US lower. 10-year US Treasury yields declined by 17 bps to 4.2%. Lower bond yields gave growth stocks in particular a boost but also extended the dollar's weakness (DXY dollar index -2.5%). Against this backdrop the non-cyclical, broader healthcare sector (MSCI World Healthcare Net +1.4%) performed as expected. The Bellevue Digital Health Fund (+1.5%) also closed the month in positive territory. 
 24 of the 34 stocks in the fund's portfolio made a positive contribution to performance in June. There was hardly any relevant company news flow, given that the latest quarterly reporting season had just ended the month before. Top performance drivers were 10X Genomics (+21.5%), Illumina (+16.0%), Phreesia (+16.2%), Natera (+7.1%), TransMedics (+5.4%), Align (+4.6%) and Veeva (+3.0%).    

The life sciences tools (LST) companies 10X Genomics and Illumina benefited from initial positive outcomes in the ongoing negotiations between the White House and the National Institutes of Health (NIH), the leading US federal agency for biomedical health research. Phreesia marched higher, fueled by its strong first-quarter results. As in preceding quarterly earnings announcements, Phreesia met expectations at the top line, clearly beat expectations with respect to operating profit and, consequently, management raised its guidance for fiscal year 2026 (ending in January 2026).  

Performance detractors included Penumbra (-3.9%), Exact Sciences (-3.6%), Insulet (-3.3%), Intuitive Surgical (-1.6%), Kestra (-26.4%) and Omada (-3.7%). Penumbra was weak after the FDA approved Medtronic’s Liberant, a peripheral catheter-based thrombectomy device for treating venous vascular thrombosis. An announcement from the CMS (Centers for Medicare & Medicaid Services) led to some volatility at the end of the month: The CMS has proposed that insulin pumps be subject to competitive bidding and that pump costs be reimbursed on a monthly basis only. With its unique Omnipod 5 patch pump, Insulet is in a better position than all other insulin pump manufacturers. We assume that the objective behind the CMS’ proposed rule change is, as already observed in China, to lower the profit margins of distributors (“middlemen”). Intuitive Surgical experienced a slight correction after Restore Robotics announced the commercial launch of remanufactured robotic instruments (scissors) for da Vinci surgical robotic systems (FDA clearance received in March 2025). We believe the risks associated with remanufactured instruments are currently low and should be well-contained over the long term. Kestra went public in March and was hit by profit-taking during the month under review, while trading in Omada after its June IPO was marked by high volatility. We consider both companies very promising investments whose weightings in the portfolio could increase over time. All performance data is in USD / B shares.

Looking at the fundamentals, digital health companies are on a stable, above-average growth trajectory which is expected to be sustained throughout 2025. This scenario is supported by above-average growth in surgical procedure volumes and in hospital capital expenditure. 
  
The approval and subsequent launch of relevant new products will continue to bolster sales growth, too. Examples here are the new da Vinci 5 robotic surgical system from Intuitive Surgical; Veeva's Vault CRM Suite for highly efficient marketing of medicines; Dexcom’s two continuous blood glucose sensors Stelo and G7; Procept BioRobotics' Hydros robotic system for removal of prostate tissue in males with prostate cancer; Insulet’s Omnipod 5 automated insulin delivery system; Penumbra's computer-assisted vacuum thrombectomy system Thunderbolt; and Globus Medical’s Excelsius Flex, a surgical robotic navigation system.   

We expect some tailwind for our investment solution in 2025: In addition to innovation as the key driver of value, other factors such as attractive valuation levels (price/sales multiples are near historical lows) and an anticipated increase in both M&A and IPO activity are likewise sound arguments for investing in the Bellevue Digital Health (Lux) Fund.