Bellevue Digital Health

The broad stock market advanced 3.2% in the month under review, with tech stocks accounting for about two percentage points of the gain. The healthcare sector advanced 1.0%, driven primarily by US health insurers and biopharmaceuticals while medtech stocks were soft.

Looking at small- and mid-cap performance in the healthcare space, the divergence was even greater: Health insurers and biopharma made outsized gains, while medtech stocks suffered disproportionately greater losses. The good performance of health insurers can be traced to improved fundamentals, and biopharma stocks rose on hopes of a speedy solution to the issue of US drug prices. Their gains were fueled by an outflow of funds from the medical technology sector. Bellevue Digital Health closed the month 3.9% lower.

Kestra Medical (+47.2%), Exact Sciences (+15.4%), Veeva Systems (+10.7%) and Privia Health (+8.1%) were the fund's top performers in September. Kestra published a good set of results for the first quarter of its 2026 fiscal year and beat revenue expectations. The reported increase in the percentage of its in-network patients, up 10 percentage points to 80%, was particularly pleasing. As a result, management increased its full-year 2026 guidance. Exact Sciences announced the launch of Cancerguard, a new blood-based multi-cancer detection test. This is the first cancer test that analyzes multiple biomarker classes and can detect cancers that otherwise went undetected for a long time. In addition, rival Guardant Health (-7.3%, not in the portfolio) published disappointing clinical results for a stool-based cancer test, which likewise helped lead Exact Sciences shares higher. Veeva Systems announced that two more top 20 biopharma firms, Gilead Sciences and Bristol-Myers Squibb, had signed on to its new Vault CRM platform. Further positive performance contribution came from our Chinese holdings XtalPi (+38.2%), Ali Health (+22.2%) and JD Health (+6.1%), as well as Abbott (+1.0%).

Phreesia’s (-25.7%) reported second quarter results which were in line with analyst expectations in terms of sales and margins, but revealed a shift in the company’s growth drivers: Quarterly growth was driven by Network Solutions, which is a more volatile and cyclical business, while the previously dominant Subscriptions segment had a disappointing quarter. In addition, Phreesia announced an acquisition in its Payment Solutions business, a segment that had not been a priority up to now and where sales growth and profitability are below the company’s average levels. However, this transaction is expected to have a positive impact on the consolidated margin right from the start and it could facilitate the acquisition of new customers who could subsequently buy other solutions from Phreesia. We therefore think the acquisition is net positive. The diabetes management companies Dexcom (-10.7%) and Insulet (-9.2%) also detracted from the performance. Insulet raised its third-quarter sales guidance, however without providing any further details. Meanwhile, worries about new competitors entering the market with patch pumps for insulin delivery caused some investors to sell the stock. The cost-effective mass production of such systems is often underestimated, which is why we think the recent selling was an overreaction. Dexcom sold off on rumors of lacking accuracy of its G7 CGM, which we think is unjustified.

All performance data is 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 capital expenditure. 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 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 Excelsius Flex, a surgical robotic navigation system. We expect some tailwinds for our investment vehicle during H2 2025: Besides strong innovation – the key driver of value creation in the digital health space – other factors such as attractive valuation levels (price/sales multiples are near historical lows) and an anticipated increase in both M&A and IPO activity are sound arguments for investing in the Bellevue Digital Health Fund.