Bellevue Biotech (CH)

Global equity markets continued to grind up, with the MSCI World Index rising 0.7% in February, supported by resilient earnings momentum, despite a negative thesis building on the impact of artificial intelligence (AI) on software companies. The healthcare sector outperformed the broader market, with the MSCI World Health Care Index up 2.9% in the month. A positive development was also seen in the biotechnology sector, with the Nasdaq Biotechnology Index (NBI) increasing by 3.3% in USD (+2.9% in CHF). The Bellevue Biotech (CH) Fund (ADGLBII shares; +1.0% in CHF) underperformed its NBI benchmark by 192 bp. The underperformance was driven by a weak month for SMID-cap commercial stage companies where the fund is overweight.

Subsector news flow remained constructive. While M&A deals have not yet started for the year (despite strong media speculation), we have seen initial public offering (IPO) activity in the space re-emerge, with Aktis Oncology, Eikon Therapeutics, AgomAb Therapeutics, and Spyglass Pharma. We participated in the AgomAb Therapeutics IPO, which is a clinical-stage biotechnology company focused on developing novel disease-modifying therapies for immunology and inflammatory diseases, with an initial focus on chronic fibrotic indications with high unmet medical need.

Among portfolio holdings, Oric Pharmaceuticals (+31.1%; confidence building in the rinzimetostat data), Moderna (21.6%; FDA changes its mind and accepts the COVID-flu combination vaccine filing), and CRISPR Therapeutics (20.4%; Casgevy launch is gaining momentum). On the negative side, uniQure (-31.2%; doubts about approvability of AMT-130 based on comparison to natural history), Structure Therapeutics (-28.8%; weakening M&A narrative), and IQIA (-22.3%; negatively impacted by the AI narrative).

The most important clinical trial readout in the month was the REDEFINE-4 Phase-III trial, in which Novo Nordisk’s CagriSema produced meaningful weight loss (23 % at 84 weeks) but failed to meet its primary endpoint of non-inferiority versus Eli Lilly’s Zepbound/tirzepatide (25.5 % weight loss), reinforcing Lilly’s superiority in the obesity drug market.

We believe the biotechnology sector may be entering a new, more durable phase of growth after several years of structural, regulatory, and capital-market headwinds. The sector is transitioning from a speculative and capital-intensive model to one increasingly sustainable, cash-generative growth, driven by premium drug pricing, leaner cost structures, and disciplined capital allocation. After years of pricing uncertainty and policy overhang, fundamentals are stabilizing, and investor confidence is returning as the industry demonstrates consistent profitability and operational efficiency.

Long-term structural drivers continue to reinforce the sector’s trajectory. Aging populations, increased access to healthcare in emerging markets, and accelerating innovation in areas such as AI-enabled drug discovery, precision medicine, and advanced biologics are expanding the opportunity set. Biotech innovation is increasingly central to healthcare system efficiency – reducing chronic-care burdens, extending quality of life, and containing long-term costs through curative or one-time interventions.

Against this backdrop, the fund maintains a selective, high-conviction strategy focused on biotechnology. The portfolio is oriented toward companies with late-stage, de-risked assets, proven pricing power, and scalable platforms capable of generating sustainable free cash flow. This approach aims to capture both the structural re-rating underway in biotechnology and the sector’s cyclical outperformance potential within a normalizing policy and macroeconomic environment.