Bellevue Biotech (CH)

Stock markets mostly traded lower in December. The S&P index declined 2.08% in USD, the Nasdaq gained 1.27% and the Nasdaq Biotech Index corrected 7.66%.

Market news in December was dominated by much stronger readings on the US economy and less disinflation. Comments from the US Federal Reserve strengthened expectations that there might be fewer rate cuts than expected in 2025 and that interest rates could stay high for longer. This had a particularly negative effect on the biotech sector, whereas tech stocks and some consumer names benefited. Most of the headlines in the biopharmaceutical sector were positive. Vertex received FDA approval for Alyftrek, its latest combination pill for the treatment of cystic fibrosis (CF) that is administered only once per day; Novo received approval for concizumab, a therapeutic drug for patients with hemophilia A or B with autoantibodies; and Neurocrine received approval for crinecerfont in patients with congenital adrenal hyperplasia (CAH). Crinecerfont is the first new treatment for this rare disease in 70 years. Data from Novo’s Phase III trial of Cagrisema had been eagerly awaited. The combination of GLP-1 receptor agonist semaglutide and the amylin analog cagrilintide achieved significantly greater weight loss of 22.7% from baseline after 68 weeks compared to semaglutide alone, but this was significantly below the market expectation of a 25% reduction in body weight. However, only 57% of the patients were on the highest dose. Therefore, the market is now keenly awaiting the more detailed full results from this trial later in 2025 as well as from another trial of Cagrisema in patients with type 2 diabetes who are either obese or overweight.

The following stocks made the best contributions to portfolio performance in the month under review: Uniqure shares soared after the FDA said the company’s ongoing Phase I/II trial of AMT-130 in Huntington's disease (HD) could serve as the basis for an accelerated approval pathway for this gene therapy. There is currently no effective treatment for HD, which affects approximately 70000 people in the US and Europe. Verona Pharma sustained its strong trend on the improved outlook for its COPD treatment ensifentrine. Ensifentrine is a novel dual phosphodiesterase 3 (PDE3) and 4 (PDE4) that reduces airway scarring and obstruction. Scholar Rock extended its upward trajectory in expectation of Phase II data for its myostatin inhibitor antibody apitegromab in obesity, scheduled for publication during the second quarter of 2025, and of the drug’s anticipated launch in spinal muscular atrophy (SMA) during the fourth quarter of this year.
 
The following stocks detracted from fund performance: Revolution Medicines was weak despite its strong pipeline of RAS inhibitors, due to a stock offering that raised USD 862.5 mn for the company; Krystal Biotech corrected despite encouraging initial data from its HSV-1 gene therapy platform targeting respiratory diseases such as cystic fibrosis (CF), alpha-1 antitrypsin deficiency (AATD) and lung cancer (NSCLC). Arvinas was marked down after a competing company presented good data at the San Antonio Breast Cancer Symposium.
 
Shareholdings of Natera, Teva and other companies were reduced and the proceeds reinvested in NewAmsterdam, Vaxcyte and other stocks.
 
Our stance towards the biotech sector remains positive in view of its strong fundamentals and enticing valuations (average 2025 P/E of 13x and PEG of 1.1 for large caps). These are very attractive multiples compared to historical valuations, and especially when compared to the current valuations for the pharma sector (P/E 17x, PEG 2.3) or the S&P Index (P/E 22x, PEG 2.5).

The companies in our portfolio are working on technologies or products for novel treatment solutions. We are also invested in selected specialty pharma companies that offer high growth rates and moderate valuations. The Bellevue Biotech (CH) Fund is well-positioned to profit from the milestones that are expected to be reached in 2024. The regulatory environment favors the innovation coming out of biotech labs and the coronavirus crisis burnished the image of drug developers. Looming patent expiries coupled with large piles of cash suggest large pharma companies will continue to hunt biotech companies over the next 18 months. Inexpensive small and mid caps with attractive pipeline candidates are obvious takeover targets.