Bellevue Obesity Solutions

Global equities recovered strongly in May 2025, with the MSCI World Index ending the month up 5.9%, and the S&P 500 and Nasdaq posting their best month since November 2023. In contrast, Healthcare continued to struggle, with the MSCI World Healthcare Index down 3.6%. The Bellevue Obesity Solutions Fund (I-shares: -3.4%, in USD) outperformed its healthcare index benchmark by 28 bps, driven by asset allocation. As we will explain in more detail below, US regulatory uncertainty and some stock specific issues drove the sector underperformance in the month. 

US President Trump released an Executive Order (EO) calling for most-favored-nation (MFN) drug pricing on May 12. This added considerable uncertainty regarding future US drug pricing. HHS has 30 days (from May 12) to propose drug price targets, with the industry being given 180 days to show signs of progress. There is an expectation in the market that CMS will announce the start of a pilot program around MFN. This would involve a consulting period, which would be an opportunity for the industry to respond. While the EO stated all branded drugs, it is likely that this will need to be narrowed to specific government channels, especially in the context of a pilot study. Should the scope narrow, we could see a clearing event for biopharma. 

Alongside this, there remains the 232 investigation on pharmaceuticals related to national security and potential tariffs. Should this be narrowed to drugs produced exclusively in China which do actually hold a national security risk (antibiotics and Ibuprofen, for example) in the coming months, we could see this also acting as a clearing event for the biopharma. It is possible that the US biopharma industry will volunteer to leave manufacturing capacity spare to fill any gap in supply should China tensions raise.

The conference season kicked off in May, with the team attending the Bank Of America conference in Las Vegas, where the large-cap US medtech players such as Boston Scientific and Stryker gave encouraging commentary around current trends and utilization. Late in the month, we attended the American Society of Clinical Oncology (ASCO) annual meeting. This is the largest medical conference on the calendar. We were on the ground talking to doctors about new innovation in cancer treatment. During the meeting we gained an growing picture of the potential new modalities and mechanisms that are emerging in early/mid-stage studies (ADCs, bispecifics, etc.).

Within the portfolio, there were strong contributions from a mixture of mid-to-large-sized companies which had reported strong Q1 earnings results (Insulet, Sandoz, Encompass Health, Galderma, Dexcom). 

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 first half of 2025, we are anticipating important data from Eli Lilly, Novo Nordisk and Zealand Pharma at the ADA conference in Chicago. Novo Nordisk will publish additional data for CagriSema (CS) in the first half, too, including from a trial comparing CS with Lilly's tirzepatide. Pipeline updates on therapeutics that preserve muscle mass are also expected, for instance from Eli Lilly, Scholar Rock and Regeneron. 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 diseases such as cardiovascular disorders, obstructive sleep apnea and chronic kidney disease.