Bellevue Biotech (CH)

Global stock markets were muted in February, Europe’s blue chips being the one exception. The S&P 500 Index closed 1.42% lower, the Nasdaq 100 fell 2.76% and the Nasdaq Biotech Index edged 0.32% lower (all figures in USD).

The US economy continued to show signs of strength and inflation numbers came in higher than expected. American industrial policy and national security emerged as key issues. Peace talks with Russia were initiated, import tariffs were introduced or increased as announced, and the first round of government employee terminations were issued (DOGE). The latter also affected the FDA. Many of the terminations were quickly rescinded though. On February 13 Robert F. Kennedy Jr. was sworn in as the new US health secretary and that same day President Trump issued an executive order establishing a “Make America Healthy Again” commission that will set new government priorities for medical research and the food system in the US, addressing in particular the root causes of numerous lifestyle-related diseases as well as the availability of affordable and nutritious food. In the field of vaccines, the influence of RFK Jr. is already obvious. A vaccination campaign by the Center for Disease Control has been stopped, a vaccine advisory committee meeting scheduled for March to discuss the composition of recommended vaccines for the next flu season was canceled, and government contracts for COVID-19 vaccines are under review. The Senate confirmation hearing for Marty Makary as FDA Commissioner nominee is scheduled for March 6. News flow from the biopharmaceutical sector was positive. Most quarterly earnings reports were positive and Regeneron announced what could be a breakthrough in the treatment of congenital deafness. 10 of the 11 patients treated with Regeneron's gene therapy experienced an improvement in hearing, and two of the previously deaf children now hear sound at near-normal levels.

The following stocks made the best contributions to portfolio performance in the month under review: Verona benefited from the impressive post-launch commercialization of its COPD inhaler Ohtuvayre (ensifentrine), which gained more momentum in early 2025 and could become the industry's most successful COPD drug launch to date. Beigene shares also performed well, driven by reported sales growth of 55% to USD 3.8 bn for 2024. Sales of Beigene’s top-selling product, the BTK inhibitor Brukinsa (zanubrutinib), soared 105% to USD 2.6 bn. Axosome also reported stellar sales growth of 88% and announced positive data from its Phase III trial evaluating its migraine medication Symbravo (meloxicam and rizatriptan) in patients who didn’t respond to prior treatment with oral CGRP inhibitors. Akeso was marked up on positive pipeline updates and talk of regulatory improvements in China.
 
The following stocks detracted from fund performance: Illumina headed south after being classified by Chinese officials as an unreliable business partner; Denali traded lower despite having reported clinical progress in a Phase I/II trial of its enzyme transport vehicle platform in patients with Hunter syndrome (MPS II). Vaxcyte corrected for no apparent reason.
 
Shareholdings of Bristol-Myers-Squibb and other companies were reduced and the proceeds were reinvested in Amgen, Biomarin 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 15x and PEG of 1.0 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 19x, PEG 2.3) or the S&P Index (P/E 22x, PEG 2.6).

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 2025. 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 biopharma 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. By 2030, products generating USD 183 bn in annual sales will lose their patent protection.