Bellevue Obesity Solutions

Global equities were volatile in April 2025, although the MSCI World Index ended the month in positive territory (+0.9%). The S&P 500 fared worse, ending the month down 0.7%, despite a significant second-half of the month rally. Maximum fear regarding US trade tariffs peaked early in the month shortly after “Liberation Day” (April 2nd). Delay and walking-back of the tariffs helped drive a reflex rally through the middle of the month. This was supported by largely positive Q1 earnings and guidance updates from key corporates. Most soft- and hard-measures (consumer sentiment data; Q1 GDP) of US economic have started to show signs of slowdown, although the employment data remain robust.

Healthcare (MSCI World Healthcare) underperformed global equities (MSCI World) in April by 278 bps (after outperforming by 213 bps in March). Multiple sector-specific risks emerged during the month. For biopharma, we have seen three risks emerge. While initially exempt from tariffs, the Trump Administration initiated a Section 232 investigation on drugs, citing national security risks. Through the month we have also seen increasing uncertainty around drug approvals at the FDA given significant layoffs and evolving policy. Thirdly, towards the end of the month, the most-favored-nation (MFN) policy has remerged in law makers commentary.

Despite the above risks, pharmaceuticals (+0.6%) was the best performing healthcare GICs industry in the month. The leading companies highlighted their broad geographic manufacturing footprint and robust margins during earning calls, which helped the stocks towards the end of the month, but we wait to see what is next from a drug tariff or pricing perspective. Similarly to pharmaceuticals, larger-cap biotech performed solidly in the month (NBI; +0.4%) driven by Q1 earnings and relative safety, but we note further significant underperformance for the higher-growth smaller companies (XBI Biotech ETF; -4.9%).

Medtech (0.0%) rebounded rapidly from tariff concerns earlier in the month driven by positive Q1 sales, continued strong utilization, and reassuring 2025 guidance. The leading medtech companies did a good job of framing the potential impact from tariffs, in our view. However there were some concerns, with the likes of GE Healthcare (-12.8%) and Becton Dickinson (-9.6%) particularly exposed. Life science tools (-6.0%) underperformed in the month, with a relatively high potential exposure to US-China tariffs and dependency on NIH spending. Healthcare services (-8.0%) was the worst performing healthcare GICs industry, driven by weak earnings and guidance from the subsector bellwether of UnitedHealth.

From a geographical point of view, Asian healthcare (+4.9%) performed best in April, followed by emerging markets (+3.0%) and Europe (+1.9%). US healthcare (-3.6%) was disappointing in the month, driven by the aforementioned risks.

The Bellevue Obesity Solutions Fund (I-shares: -1.6%, in USD) outperformed its healthcare index benchmark by 25 bps. Among the portfolio holdings, the strongest relative performance came from Encompass Health presenting strong earnings and a solid outlook for 2025. Notable positive contributions also came from US biotech Rhythm Therapeutics (+23.1%) following strong Phase III data in hypothalamic obesity with a meaningful -19.8% placebo-adjusted reduction in BMI at one year.

The companies in the fund's portfolio are working on technologies or products for novel treatment solutions and holistic treatment approaches. Selected healthcare companies with relevant exposure to the obesity care market can be found in the portfolio, and up to 20% of the fund's assets can be invested in fitness and nutrition companies that have a strong growth profile and a modest valuation. The Bellevue Obesity Solutions (Lux) Fund is well positioned to profit from the milestones likely to be reached in 2025. On the regulatory front, innovation that helps to address the obesity crisis is being encouraged and promoted. Besides clinical trial data readouts and today’s attractive valuations, share prices will also be driven by ongoing M&A activity.

In the first half of 2025, we are anticipating important data from Eli Lilly, Novo Nordisk and Zealand Pharma at the ADA conference in Chicago. Novo Nordisk will publish additional data for CagriSema (CS) in the first half, too, including from a trial comparing CS with Lilly's tirzepatide. Pipeline updates on therapeutics that preserve muscle mass are also expected, for instance from Eli Lilly, Scholar Rock and Regeneron. Demand is currently much greater than supply, so increasing production levels is crucial for the GLP-1 market. We are also closely monitoring whether this class of therapeutics could be approved for the treatment of other diseases such as cardiovascular disorders, obstructive sleep apnea and chronic kidney disease.