Bellevue Obesity Solutions

Global equity markets posted modest gains in December 2025, with the MSCI World Index rising 0.8%. The healthcare sector underperformed over the month, with the MSCI World Health Care Index declining 0.8%, following strong performance in November. For the full year, global equities advanced 21.1%, driven primarily by Communication Services (+32.0%), reflecting continued strength in AI-related themes. Healthcare lagged the broader market but still delivered a solid positive return of 14.8% in 2025.

Notably, healthcare has been the best-performing MSCI sector since the announcement of the Pfizer–US administration drug pricing agreement on September 30, generating a return of 12.8% over this period (to year-end), compared with 3.6% for the MSCI World Index. Against this backdrop, the Bellevue Obesity Solutions (Lux) Fund (I shares) returned 14.1% in 2025, modestly underperforming its benchmark by 73 bps in 2025 (51 bps outperformance in December).

Subsector performance was mixed. Pharmaceuticals gained 1.9% in December, while other subsectors detracted, most notably medtech, which declined 3.8% over the month. From a regional perspective, Europe led performance with a gain of 2.4%, while the United States and Asia declined by 1.8% and 3.7%, respectively.

Sector news flow remained constructive. In mid-December, an additional ten pharmaceutical companies – including Merck & Co., Bristol-Myers Squibb, Sanofi, Roche, and Novartis – reached drug pricing agreements with the US administration. On December 22, the FDA approved Novo Nordisk’s oral semaglutide (Wegovy pill) for obesity, marking the first oral GLP-1 therapy approved for this indication in the US. CVS Health raised its full-year 2025 guidance at an investor day and highlighted positive momentum heading into 2026. In corporate activity, L’Oréal announced plans to increase its stake in Galderma to 20%, while Sanofi agreed to acquire hepatitis B vaccine specialist Dynavax for USD 2.2 bn.

Within the portfolio, Structure Therapeutics (+94.2%), Teva Pharmaceuticals (+16.1%) and Bristol-Myers Squibb (+9.6%) were the strongest absolute performers in December, benefiting from strong Phase II clinical trial data for an oral GLP-1, continued momentum following Inflation Reduction Act-related pricing clarity, and policy developments under the US administration, respectively.

The healthcare sector is entering a new and durable phase of growth following several years of structural and policy-related headwinds. Policy and regulatory uncertainty has materially eased, valuations remain close to decade lows, and investor confidence is returning as fundamentals stabilize across biopharma. Despite contributing roughly 18% of US GDP, healthcare equities still account for only around 10% of the S&P 500, highlighting a meaningful disconnect between economic importance and market representation. Multiple industry overhangs – pricing reform, FDA restructuring, and the implementation of the Inflation Reduction Act – have either cleared or proven manageable, allowing companyfundamentals to regain prominence.

Within this recovery, biotechnology has emerged as the primary growth engine, transitioning from binary R&D outcomes toward more cash-generative, launch-driven business models supported by premium drug pricing, leaner cost structures, and disciplined capital allocation. At the same time, large pharmaceutical companies face an upcoming biologic patent cliff between 2029 and 2032 and hold strong balance sheets with over USD 200 bn in aggregate acquisition capacity, underpinning a multi-year M&A cycle focused on rare disease, CNS, nephrology, and RNA-based innovation. Investor participation is broadening, with specialists investors remaining active and generalist investors selectively returning via large-cap value, structural growth, and commercial-stage biotechnology opportunities.

Against this backdrop, the fund maintains a selective, high-conviction strategy with diversified exposure across obesity-, metabolism-, and fitness-related thematics, emphasizing biotechnology and life-science tools as core overweight positions to target structural and cyclical outperformance.