Bellevue Digital Health

Stocks advanced +2.0% in the month under review despite the government shutdown in the US. Major health players opened the Q3 reporting season in October, and the many positive earnings reports reawakened investor interest in the healthcare sector. Together with the improved political framework for drug makers, the healthcare sector handily beat the broad equity market with a monthly performance of +5.2%. The reporting season has also begun for large-cap digital health companies, and the Bellevue Digital Health Fund closed the month clearly in the positive range with a return of +2.1%.

Q3 results from Illumina (+30.1%) exceeded expectations, mainly thanks to better-than-expected sales in China and its instruments portfolio. Illumina also raised its full-year targets for 2025. Recently listed companies Beta Bionics (+37.0%), Kestra Medical (+15.2%), and Omada Health (+11.1%) were likewise strong performance drivers. Beta Bionics released strong Q3 figures that beat analyst expectations by 14%. The percentage of new patient starts through the pharmacy channel was particularly pleasing. Beta Bionics also increased its full-year targets for 2025. Kestra Medical had already released good quarterly results in September, and the positive sentiment sustained the stock’s upward trend in October. Transmedics (+17.2%) quarterly results narrowly missed expectations. Sales volumes were already trending higher at the end of the quarter though, and continued to climb early in Q4, which prompted an upward revision of management’s outlook for the full year. Intuitive Surgical (+19.5%) published a very strong set of Q3 results with surgical procedures up 19%, clearly beating the 16%–17% consensus forecast, and sharply higher margins (gross margin +3%, EBIT margin +4.5%). Management consequently raised its full-year guidance for procedure growth sharply higher.

Clinical data readouts also helped the fund’s performance in October. Exact Sciences (+18.2%) published a study in October confirming that its ColoGuard Plus is the best noninvasive test for early detection of colorectal cancer. Natera (+23.6%) released clinical data on its Signatera test at the ESMO Congress for medical oncology that puts the test in a good position to be included in the American Cancer Society’s screening recommendations. Shares of 10x Genomics (+16.7%) were marked up on the news of its AI partnership with Anthropic.

Although Dexcom’s (-13.5%) results beat analyst estimates, its management’s 2026 sales growth guidance came as a disappointment. Its forecast of 11%–13% sales growth in 2026 clearly fell short of the consensus expectation of 15%. That said, the company’s sales target for 2026 could be overly conservative in order to give the new CEO Jack Leach a smoother start. Investors sold off Penumbra (-10.2%) as it waits for FDA approval for its Thunderbolt device. Resmed’s (-9.8%) Q1 results (calendar year Q3) released at the end of the month were in line with expectations, mainly thanks to its US business, but non-domestic sales were weaker than expected. Meanwhile it is the company’s third quarter of sequentially weaker organic growth. Although Abbott’s (-7.3%) Q3 results were largely in line with analyst expectations, the company did not meet the high expectations of the broader investment community. Reported sales growth in medical devices was very strong but somewhat weak in its diagnostics and nutrition segments.

All performance data in USD/B shares.

Looking at the fundamentals, digital health companies are on a stable, above-average growth trajectory that should remain intact going forward. This scenario is supported by above-average growth in surgical procedure volumes and in hospital CapEx. The approval and subsequent launch of relevant new products will continue to bolster sales growth, too. Examples here are Intuitive Surgical’s da Vinci 5 robotic surgical system; Veeva’s Vault CRM Suite for highly efficient marketing of medicines; Dexcom’s two continuous blood glucose sensors, Stelo and G7; Procept BioRobotics’ Hydros Robotic System for the removal of affected tissue in men with prostate cancer; Insulet’s Omnipod 5 automated insulin delivery system; Penumbra’s computer-assisted vacuum thrombectomy system, Thunderbolt; and Globus Medical’s ExcelsiusFlex, a surgical robotic navigation system. We expect good tailwinds for our investment solution: besides strong innovation – the key driver of value creation in the digital health space – other factors such as attractive valuation levels and an anticipated increase in both M&A and IPO activity are sound arguments for investing in the Bellevue Digital Health Fund.