Bellevue AI Health

Data on the US economy in May was a bit better than expected: Jobs data and consumer confidence surprised to the upside while core inflation remained stable despite higher import tariffs. Progress in the tariff negotiations conducted in Geneva by the US and China also helped to take some tension out of financial markets.

Against this backdrop large-cap indexes such as the MSCI World (+5.9%), the S&P 500 (+6.3%) and the Nasdaq 100 (+9.1%) closed the month sharply higher. The broad healthcare sector, on the other hand, was unable to keep up with those indexes and retreated -3.6%. The introduction of most-favored-nation (MFN) drug pricing in the US created uncertainty in the biopharma segment and negative news at UnitedHealth weighed on US health insurers.

Biopharma (52.3% weighting at the end of the month) contributed -2.6% to absolute performance and -0.4% to relative performance. Positive contributors to performance in this segment were Zoetis (+7.8%), Novo Nordisk (+3.8%) and Gilead (+3.3%), while Regeneron (-18.0%), Eli Lilly (-17.8%) and Merck (-5.1%) were performance detractors. Zoetis beat consensus sales and profit estimates despite slack Librela sales, a veterinary medicine that is used in dogs to alleviate pain associated with osteoarthritis. It reported impressive sales growth for its ex-US livestock business and for Simparica Trio (canine parasiticide). CVS Caremark, one of the largest drug purchasers in the US, announced that it would be partnering more closely with Novo Nordisk from July 2025. Novo Nordisk's Wegovy, a weight-loss drug for people living with obesity, will then become the preferred medication for its members, rather than Eli Lilly's Zepbound. Regeneron reported mixed results for itepekimab in the treatment of former smokers with inadequately controlled chronic obstructive pulmonary disease (COPD). While the AERIFY-1 study showed a statistically significant reduction in exacerbations (acute worsening of lung disease), AERIFY-2 failed to meet this primary endpoint. Regulatory approval is now probably contingent on another successful Phase III study, which would push market launch back by 2-3 years. The drug candidate’s overall effectiveness was also inferior to Dupixent (Sanofi), indicating a more limited market potential.

Medtech stocks (29.6% weighting) contributed +0.5% to the fund’s absolute performance and +0.4% to its relative performance. Beta Bionics (+56.0%), Dexcom (+20.2%) and Intuitive Surgical (+7.1%) made the best contributions to fund performance, while Kestra Medical (-6.4 %), Thermo Fisher (-6.1%) and Danaher (-4.7%) detracted. Beta Bionics is marketing the first insulin pump with insulin-dosing algorithms that can deliver corrected insulin doses based on each user’s CGM readings. Thanks to the strong increase in new patient starts, the company beat investor sales expectations for the first quarter and raised its sales guidance for 2025. Dexcom beat investor sales expectations but left its 2025 forecast unchanged. Intuitive Surgical was marked up on the news of the US-China tariff deal.

Healthcare services providers (8.9%) contributed -1.7% to absolute performance and -0.2% to relative performance. Ramsay Health (+15.7%), HCA Healthcare (+10.5%) and Labcorp (+3.6%) were performance drivers, while UnitedHealth (-26.6%) and Elevance (-8.7%) detracted. UnitedHealth weighed on performance again, this time after replacing its CEO Sir Andrew Witty with Chairman Steve Hemsley and suspending its 2025 earnings forecast. We see this as a company-specific problem and consider Hemsley, who had already successfully led UnitedHealth as CEO from 2006 to 2017, to be a strong choice to lead the company. The sell-off in other health insurance stocks such as Elevance was unjustified in our opinion.

The technology segment (5.9%), which includes tech companies from both the healthcare and information technology industries, contributed +0.8% to absolute and +0.6% to relative performance for the month. Nvidia (+24.1%), Veeva Systems (+19.7%) and Oracle (+17.6%) had a positive impact on fund performance. Veeva surprised investors with better-than-expected first-quarter sales and it upped its guidance for FY 2026 sales.

All performance data in USD / B shares.

The rapid development of generative artificial intelligence (GenAI) is ushering in an unprecedented technology-driven transformation that ranks right next to other key milestones such as the Internet, cloud computing and the smartphone.

GenAI is creating tremendous opportunities for businesses and investors, especially in the health sector. According to a number of studies, the health sector will be one of the industries that will benefit the most from the deployment of GenAI. This forecast is mainly based on the considerable potential for efficiency gains in healthcare systems, on the large, readily available amounts of data in healthcare systems, and on the considerable financial resources available for healthcare needs.

Already today medications are being developed more quickly and with better rates of success, for example, new diagnostic and treatment methods are producing better clinical outcomes, and GenAI is helping medical professionals make better and more informed decisions.
We focus on healthcare companies that have made GenAI a core element of their business strategy and that are investing substantial resources in this technology to gain a lasting competitive advantage and achieve superior value growth. The technology risk here is more calculable than in other industries because healthcare is such a heavily regulated industry.