Bellevue Obesity Solutions

World stocks were mixed in February. The S&P retreated 1.3% in USD, the MSCI World Healthcare Index advanced 1.1%, and the Bellevue Obesity Solutions (Lux) Fund gained 0.9% (USD / I shares).

The general trend on equity markets observed in January continued into February. European equities outperformed their US counterparts again, supported by positive revisions of earnings estimates after the publication of strong fourth-quarter reports, waning US exceptionalism, increased capital flows to Europe, and hopes that the current tariffs Trump is threatening to impose will eventually be watered down. In the healthcare sector, attention focused on the approx. 25% tariff on foreign-made pharmaceutical and medical products that Trump has floated. If the US does impose this steep tariff on these imports, it could push up US healthcare cost even more, disrupt supply chains and jeopardize patient care. In other news, staff at various departments within the FDA were fired in mid-February, although the exact number of dismissed employees and their roles are still unclear. The long-term consequences of these job cuts are still subject to speculation, but investors worried that regulatory processes would be weakened. Pharmaceutical companies could be affected more than other companies because slower inspection and review processes at the FDA could delay or prevent new drugs from getting market approval. After coming under selling pressure towards the end of 2024, healthcare stocks generally sustained their recovery trend in February, supported by strong 2024 results announcements/guidance for 2025 and the general rotation into quality on a global scale.

The following stocks were the best portfolio performers during the month under review: Shares of Japanese pharmaceutical manufacturer Chugai surged during the month under review, driven by management's strong guidance for FY 2025 and the good outlook for orforglipron, an oral weight-loss medication. Chugai’s development partner for orforglipron, Eli Lilly, plans to announce top-line Phase III data from the ACHIEVE trial by the end of June. Shares of the two heavyweights Eli Lilly and Novo Nordisk also closed higher. Investors were particularly pleased with the news that the FDA had removed Novo Nordisk’s GLP-1 medicines Ozempic and Wegovy from its “shortage list”. This entitles Novo Nordisk to take action to prevent compounded versions of its semaglutide medicines from being taken off the US market.

The following stocks detracted from fund performance: UnitedHealth traded sharply lower after the Wall Street Journal alleged that the Department of Justice (DOJ) had in recent months initiated a “new civil fraud investigation” into UnitedHealth's Medicare billing practices. Thermo Fischer was weak although the general market environment for the life science tools company is slowly improving. Its management’s guidance of 3-4% organic sales growth for the current fiscal year is achievable and there is even room for upside. Rhythm Therapeutics was likewise weak although there was no change in its business fundamentals. Top-line data from a Phase III trial evaluating setmelanotide in patients with acquired hypothalamic obesity scheduled for release within the next few months will be market-moving.

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 and from another trial assessing CS as a weight-loss medication in patients with type 2 diabetes. 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.