Bellevue Asia Pacific Healthcare (Lux)

Stocks as measured by the MSCI World staged a strong comeback in October after giving up some ground in September and advanced almost 6% in USD mom. Despite the continued upward pressure on prices and consequently on nominal bond yields in the wake of supply chain constraints, at the end of the day robust quarterly results announcements led to the positive market sentiment. Year to date, the MSCI World Index is now showing a remarkable 20% return. Stocks in the Asia Pacific region closed the month of October unchanged. Regional healthcare stocks were hit by profit-taking as well as profit warnings from Ping An Healthcare and Ali Health, two Chinese digital health firms. In this context, the regional healthcare sector shed about 5% of its value in USD over the past month.

Takeda reported a major setback in one of its crucial R&D programs, TAK-994, an investigational therapy for patients with narcolepsy. It had to suspend two Phase II trials of TAK-994 due to a “safety signal”. Since the safety signal was so serious that it led to the suspension of the trial, it could even bring the entire narcolepsy program to a premature end. This is the second setback in Takeda's R&D pipeline within the space of a few months and it will have a significant impact on the company's mid-term growth prospects.

Ping An Healthcare and Ali Health slashed their medium-term growth targets with the release of their latest quarterly results. Recently introduced Chinese regulations concerning data privacy, patient-related data in particular, have forced these companies to adjust their business models. Their management also said that capital expenditure to fuel future growth would be higher than expected. The announcements put the share prices of both companies under pressure.

Kyowa Kirin presented detailed data from its successful Phase II trial of KHK4083 in patients with moderate to severe atopic dermatitis. Kyowa's therapeutic option may be superior to Dupixent (Sanofi/Regeneron), the current standard of care, which generates annual sales of close to USD 4 bn.

The US pharmaceutical giant Merck demonstrated that its antiviral COVID-19 pill molnupiravir reduces the risk of hospitalization in patients with mild to moderate cases of COVID-19 by 50%. This could represent a huge business opportunity for several Indian pharmaceutical companies. Divi's Laboratories is one of Merck's API (Active Pharmaceutical Ingredient) suppliers and licensing partners in India.

Jiangsu Hengrui, Bangkok Dusit and Pro Medicus were added to the portfolio last month and existing positions in Hygeia, Aier Eye Hospital, Dr. Reddy's and Kyowa Kirin were increased. Takeda, Ping An Healthcare, Glenmark and Cansino Biologics are no longer in the portfolio. Shareholdings of Eisai and Innovent 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.