Bellevue Asia Pacific Healthcare

The MSCI World Index shed about 2% of its value in USD during the month under review. The negative return can largely be blamed on the cautious management guidance given by index heavyweights Microsoft and Meta Platforms. Investors also hugged the sidelines as the toss-up race for the White House entered its final days. Health stocks were again somewhat weaker than the overall market. The MSCI World Healthcare Index closed about 5% lower month-on-month. Weak earnings announcements from healthcare insurers and a poor quarterly result from Eli Lilly dragged the entire sector down. Eli Lilly reported lower-than-expected sales because of heavy wholesaler stockpiling of its GLP-1 drugs during the preceding quarter. Demand for its weight-loss shots was still very high, though. Equities in the Asia-Pacific region underperformed the MSCI World, ending the month about 4% lower. Emerging-market healthcare stocks could not escape the downward pressure. After a very strong performance in September, Chinese stocks in particular were hit by profit-taking.

The Chinese biotech company Innovent was in the headlines towards the end of the month. It announced that its founder and chairman, together with another company manager, had acquired a stake of approximately 20% in Fortvita. All of Innovent’s foreign business operations are consolidated at Fortvita. The disclosed value of the transaction was said to be just over USD 20 mn. This news triggered considerable concern about Innovent's corporate governance practices within the international investment community. Investors also questioned the valuation of the subsidiary. Innovent shares plunged about 20% within the space of two days. Innovent’s board convened during the first weekend of November and then announced on November 4 that the transaction was being called off. It also announced excellent sales figures for the third quarter. Sales were up 40% year-on-year, driven by a booming domestic market. Innovent shares recovered somewhat on this news.

Japanese pharma company Otsuka published excellent quarterly results. Sales rose by 17% year-on-year, while operating profit surged 43%, lifting the operating profit margin from 18.1% to 23.9%. A diversified product portfolio is Otsuka’s strongest point. The latest quarterly results were fueled for example by drugs used to treat central nervous system disorders, renal disease and cancer.

Shareholdings of Legend Biotech, SK Biopharma, Hoya and Summit Therapeutics were increased during the past month. Positions in Chugai, Samsung Biologics, Takeda, Celltrion and Astellas were reduced and Cipla and Sinopharm were removed from the portfolio.   

Asia is the most dynamic growth region in the world and it accounts for more than half of the world's population. Asian emerging markets are forecast to account for more than 50% of global GDP by 2050. As household incomes rise, the economic growth model of Asian countries will shift from manufacturing to the services sector. A growing middle class fuels demand for modern medicine. Healthcare ranks increasingly high on their wish list. Billions are being invested in infrastructure, technology and research to modernize the healthcare systems in emerging market countries. This is giving a greater swath of the population access to better healthcare. Meanwhile rapid population aging is also stoking demand for healthcare. In 30 years’ time there will be 400 to 500 million people over 60 in China alone, and they will have a growing need for modern health services and medicines.

Japan, which has been referred to as “the world's demographic laboratory”, has championed cutting-edge innovation for decades. The Land of the Rising Sun boasts technology leadership in numerous fields, ranging from therapeutic antibody technology, immunotherapy and robotics to digitalization, diagnostics and medical imaging systems. The fund offers defensive access to Asian emerging markets as well as exciting investment opportunities in technology leaders throughout the entire region. It invests in the entire healthcare system value chain, from generic drug producers and biotechnology companies to medical device manufacturers and digital health specialists.