Bellevue Sustainable Healthcare

Global equities recovered strongly in May 2025, with the MSCI World Index ending the month up 5.9%, and the S&P 500 and Nasdaq posting their best month since November 2023. In contrast, healthcare continued to struggle, with the MSCI World Healthcare Index down 3.6%. The Bellevue Sustainable Health Fund (I-shares: +0.3%, in USD) outperformed its healthcare index benchmark by 389 bps, benefiting from overweight positioning in Asian and emerging market healthcare. We conducted the 6-monthly rebalance of the fund in May, changing 19 of 45 stocks. 

US President Trump released an Executive Order (EO) calling for most-favored-nation (MFN) drug pricing on May 12. This added considerable uncertainty regarding future US drug pricing. HHS has 30 days (from May 12) to propose drug price targets, with the industry being given 180 days to show signs of progress. There is an expectation in the market that CMS will announce the start of a pilot program around MFN. While the EO stated all branded drugs, it is likely that this will need to be narrowed to specific government channels, especially in the context of a pilot study. Should the scope narrow, we could see a clearing event for biopharma. 

Alongside this, there remains the 232 investigation on pharmaceuticals related to national security and potential tariffs. Should this be narrowed to drugs produced exclusively in China which do actually hold a national security risk (antibiotics and Ibuprofen, for example) in the coming months, we could see this also acting as a clearing event for the biopharma. It is possible that the US biopharma industry will volunteer to leave manufacturing capacity spare to fill any gap in supply should China tensions raise.  

The conference seasons kicked off in May, with the team attending the Bank of America conference in Las Vegas, where the large-cap US medtech players such as Boston Scientific and Stryker gave encouraging commentary around current trends and utilization. Late in the month, we attended the American Society of Clinical Oncology (ASCO) annual meeting. During the meeting we gained a growing picture of the potential new modalities and mechanisms that are emerging in early/mid-stage studies (ADCs, bispecifics, etc.).

We expect the current uncertainty surrounding US healthcare-related policy to moderate as more details emerge. We expect the final outcome of MFN and tariffs will be less damaging than feared. With high-margins, considerable room for cost cutting, and diverse revenue streams, we would expect the final earnings growth impact to be more modest than the market is currently discounting for most quality companies in the sector. Moving forward towards the July reciprocal tariff deadline for all countries (and most industries), healthcare could start to look attractive from a risk perspective on a relative basis.