Bellevue Asia Pacific Healthcare (Lux)

Global equity markets quickly bounced back from their minor correction at the end of November. Data indicating that Omicron causes much less severe illness than the Delta variant breathed a sigh of relief into the stock market and led prices higher. Rising US bond yields were unable to cast a shadow over the positive sentiment either. The MSCI World index ended the month with a pleasing return of 4.3%, which lifted its full-year performance to more than 22% in USD. The MSCI Asia-Pacific index delivered a somewhat weaker monthly return of 1.7%. Health stocks were sold off because of – ultimately false – rumors that some Chinese biotech companies would be blacklisted by the US and they lost about 2.7% of their value mom.

Several of China's largest healthcare companies experienced heavy selling on speculation that they would be included on President Biden’s blacklist. After a corresponding report in the Financial Times, investors and traders feared that Chinese biotechs would be targeted by new US sanctions. That turned out to be mere speculation. The updated list of companies sanctioned by the US did not include any Chinese healthcare stocks. We therefore believe the sell-off was an overreaction and that the fundamentals of the companies affected are the same as before.

Legend Biotech published impressive, updated data for its cell therapy for multiple myeloma at the annual gathering of the American Society of Hematology (ASH). The clinical trial data showed a stunning 98% overall response rate. The first patients enrolled in the trial were treated about 22 months ago. More than 60% of those patients were still progression-free and 74% were still alive, which is without precedent in this indication. The data is even more exciting considering that all the trial participants were diagnosed with late-stage cancer prior to treatment, and they had not responded to various other kinds of treatment. FDA approval is expected in late February.

Shionogi made several positive announcements in December. Its COVID-19 medication still in the pipeline appears to also be effective against the Omicron variant. ViiV, an HIV joint venture that Shionogi has formed, announced that it had received regulatory approval for its long-acting injectable Apretude for adults and adolescents at risk of acquiring HIV. It also initiated a Phase III clinical trial of a protein-based COVID-19 vaccine.

We opened positions in Sonic Healthcare, Osstem and JD Health last month and bought more shares of Legend Biotech, Wuxi Biologics and ZaiLab. Sun Pharma, Shandong Weigao and Venus Medtech are no longer in the portfolio. Shareholdings of Cipla, CSL and Hoya were reduced.

Asia is the most dynamic growth region in the world and it accounts for more than half of the world's population. Asian emerging markets are forecast to account for more than 50% of global GDP by 2050. As household incomes rise, the economic growth model of Asian countries will shift from manufacturing to the services sector. A growing middle class fuels demand for modern medicine. Healthcare ranks increasingly high on their wish list. Billions are being invested in infrastructure, technology and research to modernize the healthcare systems in emerging market countries. This is giving a greater swath of the population access to better healthcare. Meanwhile rapid population aging is also stoking demand for healthcare. In 30 years’ time there will be 400 to 500 million people over 60 in China alone, and they will have a growing need for modern health services and medicines.

Japan, which has been referred to as “the world's demographic laboratory”, has championed cutting-edge innovation for decades. The Land of the Rising Sun boasts technology leadership in numerous fields, ranging from therapeutic antibody technology, immunotherapy and robotics to digitalization, diagnostics and medical imaging systems.

The fund offers defensive access to Asian emerging markets as well as exciting investment opportunities in technology leaders throughout the entire region. It invests in the entire healthcare system value chain, from generic drug producers and biotechnology companies to medical device manufacturers and digital health specialists.