Bellevue Obesity Solutions

Global equities performed poorly in March 2025, with the MSCI World Index down 4.5%. Uncertainty regarding US trade tariffs, and fear that austerity could drive an economic slowdown, contributed to a negative equity market environment as investors were quick to price in a potential slower earnings growth environment. While some soft-measures have been supportive of a slowing US economy thesis (such as consumer sentiment data), there are limited hard-data to confirm this. US tech stocks (Nasdaq 100; -7.6%) and small-cap US stocks (Russell 2000; -7.0%) came under significant pressure, while European indexes (e.g. Dax in USD; +2.2%) performed better. 

Healthcare (MSCI World Healthcare) outperformed global equities (MSCI World) in March by 213 bps. While the sector declined on an absolute basis (-2.3%), it proved to be a relatively safe haven. We see this as being in line with the sectors fundamentals, such as high margins, innovation, and inelastic demand for its products and services. While the defensive names in the sector remained solid, caution is leaving the more innovative names on the sidelines. Biotech performed poorly in the month (NBI; -6.0%), with further underperformance for the higher-growth smaller companies (XBI Biotech ETF; -8.6%). This subsector has suffered from increased regulatory risk driven by changes in leadership at the FDA.   

Healthcare services (+7.8%) was the best performing healthcare GICS industry, driven by supportive earnings commentary (Elevance Health), and a lack of tariff exposure. Pharmaceuticals (-4.3%) started the month as a safe haven, before tariff concerns accelerated and GLP-1 agonist prescriptions disappointed (Novo Nordisk, -23% in March). We saw several licensing deals, with Roche and AbbVie announcing amylin drug class deals with Zealand pharma (deal size USD 5.3 bn) and Gubra (USD 2.2 bn), respectively. Amylin agonism is a different mode of action from the currently marketed GLP-1 agonist obesity drugs, and could become an important new drug class. Medtech was also weak (-4.4%) in the month, with increasing fear regarding slowing economic activity and tariffs driving down multiples. Cost saving initiatives within the National Institute of Health has created some uncertainty regarding life science tools (-4.5%) earnings, although we see only a minor risk for the diversified names (e.g. Thermo Fisher).

From a geographical point of view, Asian healthcare (+1.2%) performed best in March, followed by emerging markets (+1.1%). US (-1.8%) and particularly European (-4.5%) healthcare were disappointing in the month, with the difference being the strength of services in the US and the aforementioned weakness in Novo Nordisk shares. 

The Bellevue Obesity Solutions Fund (I-shares: -3.8%, in USD) underperformed its healthcare index benchmark by 152 bps, largely due to a tilt towards momentum and growth names. Among the portfolio holdings, the strongest relative performance came from the drug distributors. Notable positive contributions also came from US biotech firm Alnylam (+9.4%) following the FDA approval of Amvuttra for cardiomyopathy, as well as from Swiss pharmaceutical company Novartis (+5.9% in USD).

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 Phase III data from Eli Lilly for its oral weight-loss drug orforglipron. 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.