Bellevue Healthcare Strategy

MSCI World Healthcare outperformed MSCI World in January 2025 by 287 bps (MSCI World Healthcare +6.4% vs MSCI World +3.5%). The sector rebounded somewhat in January 2025 after two very weak prior months, driven by strong early full year 2024 preannouncements/ reports, and supported by some positive clinical development news flow. The Bellevue Healthcare Strategy (Lux) Fund (I-shares: +5.2%, in USD) underperformed (by 120 bps) its healthcare index benchmark. This was driven by the funds above benchmark exposure to emerging market and Asian healthcare.

As in prior months, there was a large dispersion of performance across MSCI sectors. Communication services (+8.8%) was once again strong, followed by financials (+6.6%) and healthcare (6.4%). Consumer staples (+1.9%) was the weakest sector over the first month of 2025. Healthcare performed better than the median monthly performance for MSCI sectors in January (which was 3.6%).

Within the MSCI World Healthcare Index, there was also a considerable dispersion of monthly performance between subsectors. Medtech (+9.5%) was the best performing subsector in the month, followed by healthcare services (+8.7%), life science tools (+7.3%), biotech (+5.0%), and pharmaceuticals (+4.4%). We saw some positive earnings reports from medtech, with healthcare serves rebounding after a very difficult November and December of last year. From a geographical point of view, European healthcare performed best (+6.9%), closely followed by the US (+6.8%). The performances of emerging market (-0.6%) and Asian (0.0%) healthcare were disappointing in January.

During the month there were several key developments in the sector. Novo Nordisk presented Phase I obesity data with amylin class drug Amycretin (subcutaneous) which surprised on the positive side (up to 22% weight loss), and Vertex Pharmaceuticals announced that the FDA had approved its new non-opioid pain medicine late in the month. In terms of early full year 2024 results preannouncements and reporters, signs have been strong across medtech (ISRG; ABT; BSX) and biopharma (NOVN; SAN; ABBV), but more mixed in life science tools (DHR negative; TMO positive).

Within the fund, strong absolute performances were reported during the month from Sandoz (+17.2%; Stelara biosimilar PBM deal), Recordati (+16.6%; reaffirmed 2025 target of >EUR 2.6 bn), and Rede D'Or Sao Luiz (+16.3%; stock rebound). On the other hand, negative absolute performances were seen for Peptidream (-17.6%; Pull-back after disappointing December R&D day), Max Healthcare (-7.0%; correction after strong prior month), and Regeneron (-5.5%; Eylea biosimilar launch and disappointing Dupixent sales reported by partner). 

We see the sell-off and de-rating of healthcare stocks in late 2024 as reflective of maximum fear around potential US healthcare reform. The healthcare sectors current discounted relative valuation (MSCI World Healthcare is trading at an 11% discount to MSCI World on blended 1-year forward P/E versus a 10-year average of 3% premium) presents a good entry opportunity, in our view. While it is too early to quantify and far from certain, we expect an manageable impact to sector earnings from any tariffs put in place by President Trump. Across the sector, relatively high gross margins should protect any impact on the bottom-line. Biopharmaceutical manufacturing supply chains are complex, but now largely regional, and may be except from tariffs.