Bellevue Biotech (CH)

Global equities recovered in August 2025, with the MSCI World Index rising 2.6% (in US dollars). Healthcare outperformed broader equities, with the MSCI World Health Care Index up 5.1% (in US dollars) on the back of improved operating certainty and rebounds in several megacaps, bringing the sector back into positive territory ytd at 2.8% (in US dollars). The Nasdaq Biotechnology Index (NBI) had another strong month (+5.0% in US dollars; +3.3% in Swiss francs). The Bellevue Global Biotech (CH) Fund (AA shares: +2.1%; in Swiss francs) underperformed its NBI benchmark (–118 bps) for the month.

Policy developments provided support to sector performance for the first time in many months, as the US and EU clarified that tariffs on imported EU-manufactured drugs will begin at zero and be capped at 15% regardless of any 232 investigation outcomes. At the Jackson Hole Symposium, Fed Chair Powell signaled support for September rate cuts, which lifted sentiment in biotechnology.

Within the portfolio, Madrigal Pharmaceuticals rose 44% (in US dollars) after the successful launch of Rezdiffra, which is used to treat metabolic disfunction–associated steatohepatitis (MASH; i.e. fatty liver disease). Tempus AI gained 34% thanks to strong Q2 results, and Zealand Pharma climbed 30% on the back of mixed competitor obesity data leaving room for new entrants.

President Trump’s July 31 letters highlighted frustration with the lack of progress on his most-favored nation (MFN) Executive Order, pressing for Medicaid pricing alignment, MFN guarantees on new drugs, revenue returns to US taxpayers, and direct MFN pricing from biopharma. While the focus on Medicaid rather than Medicare points to a possible compromise, significant uncertainty remains. The importance of Section 232 drug investigations has diminished following the US-EU tariff agreement capping drug tariffs at 15%, in our view. A potential policy outcome could involve industry guarantees of essential medicine supplies, limited MFN adoption, and US CapEx commitments – measures that can be presented politically as victories but would have relatively modest earnings implications for the sector.

The performance of biotechnology stocks is closely linked to interest rates because of how the sector is structured. Biotechnology valuations rely heavily on future cash flows being discounted back to establish current valuations. In addition, financing costs matter for capital-hungry biotech, risk appetite shifts during rate-cutting cycles, and M&A activity tends to be sensitive to interest rates. We would view a rate-cutting cycle as supportive of biotechnology sector valuations.

We remain focused on high-quality biotechnology/biopharmaceutical companies that are leading the way in terms of innovation and have already demonstrated clinical trial feasibility.