Bellevue Obesity Solutions

Global equities continued to recover in June 2025, with the MSCI World Index ending the month up 4.3%. While remaining a laggard, Healthcare also started recovering (MSCI World Healthcare up +1.4%) from what had been a significant (perhaps peak) level of fear around US drug pricing reform in May. The Bellevue Obesity Solutions Fund (I-shares: +1.4%, in USD) underperformed its healthcare index benchmark by 1 bps, driven by allocation.

US President Trump released an Executive Order (EO) calling for most-favored-nation (MFN) drug pricing on May 12. This called for the HHS to propose drug price targets within 30 days, with the industry being given 180 days to show signs of progress (deadline November 8, 2025). Alongside this, there remains the 232 investigation on pharmaceuticals related to national security and potential tariffs. We are therefore within the middle of these two processes, with a lack of clear direction at present. The potential for a pilot program around MFN appears to have waned. In addition, we have not seen MFN enter the reconciliation bill (big beautiful bill) negotiations in congress. This lack of information and slowing momentum has provided a support to pharmaceutical valuations.

Beyond US politics, June was a busy month of healthcare conferences. In June, we attended the American Diabetes Association (ADA) conference in Chicago. This year’s ADA spotlighted the next generation of obesity and metabolic therapies. While nuanced differences exist across the pipeline, one thing is clear: the space is ripe for further innovation. Oral GLP-1 alternatives, muscle-sparing regimens, and combination hormone therapies all gained traction, pointing toward a maturing market still rich in unmet needs. The industry is beginning to pivot from "how much weight can we lose" to "how can we lose it better" - with quality of weight loss, patient convenience, and long-term durability now taking center stage. For investors, this evolution opens the door to a second wave of innovation and value creation. Across both therapeutic areas, we have been impressed by the innovation now coming from China, including some of the stocks we hold in our portfolio.

Within the portfolio, there were strong contributions from a mixture of mid-sized companies which had some good clinical and commercial progress (Innovent, Scholar Rock, Galderma). 

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 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 2025. On the regulatory front, innovation that helps to address the obesity crisis is being encouraged and promoted. Besides clinical trial data readouts and today’s attractive valuations, share prices will also be driven by ongoing M&A activity. In the second half of 2025, we are anticipating important data from Eli Lilly for its oral GLP-1, non-peptide based orforglipron in obese patients. Pipeline updates that could unlock further market potential for GLP-1s are anticipated from the high-risk readout of Novo Nordisk’s Phase III EVOKE study in patients with early Alzheimer’s disease. Demand is currently much greater than supply, so increasing production levels is crucial for the GLP-1 market. We are also closely monitoring whether this class of therapeutics could be approved for the treatment of other indications based on its clinical success.