Market review: January was an eventful start to the year for healthcare. First, companies gave a 360° overview of key topics at the JP Morgan healthcare conference, with many pre-announcing full-year results or giving 2025 guidance. Second, the Trump inauguration and RFK confirmation hearings provided some reassurance regarding the future policy landscape, though headline risk remains high. Third, the kick-off of Q4 reporting confirmed the trend seen at the conference, namely that the sector continues to benefit from rising utilization rates driven by the aging population. This demographic trend is expected to sustain robust sales growth. Medtech companies have specifically pointed out that this is not pent-up demand, but the “new normal”. Demand for therapeutics is strong, in particular in areas where age is a major risk factor, such as oncology and chronic autoimmune diseases. Overall, we see aligned fundamentals and sentiment providing a strong backdrop for 2025 in healthcare.

Portfolio changes: We did not initiate a new position and no position was exited.

Performance review: The largest contributors were Intra-Cellular (+182 bps / J&J aims to acquire Intra-Cellular for a total equity value of USD 14.6bn), Ambu (+100 bps / Reported preliminary fiscal Q1 revenue above consensus and the full year guidance was raised. Ambu showed continued strong growth in both pulmonology and urology, ENT and GI within Endoscopy Solutions. Anaesthesia & Patient Monitoring was positive, too) and Axsome (+68 bps / Releases preliminary results, which were in-line with consensus and Auvelity prescriptions continuing to do well).

The largest detractors were RadNet (-20 bps / Momentum from December continued into January (profit taking following a 101% return in 2025). Later, various brokers adjusted 2025 EBITDA estimates, driven by management pointing to 1) planned new sales-and infrastructure investments to support expected growth in their Digital Health unit and 2) higher than average wage inflation), New Amsterdam (-17 bps /  No news since strong positive phase 3 Broadway data mid-December) and Novo Nordisk (-8 bps / Obesity-related firms sold-off after Eli Lilly preannounced Q4 revenues below consensus. Later, CMS published the next 15 drugs for Medicare price negotiations (including Ozempic, Wegoy, Rybelsus). Novo Nordisk recouped some of the losses after announcing topline results from a phase 1B/2a trial with amycretin in people with overweight/obesity).

ESG: Firms in the portfolio did not report any material ESG issues in January.

Market review: In December, the stream of unfavorable news continued, with MCOs and large biopharma particularly struggling to catch a break amid an ongoing cycle of negative headlines. Health insurance stocks faced significant pressure following the fatal shooting of UnitedHealthcare CEO Brian Thompson. The incident, coupled with rising public frustration toward the industry and sustained media scrutiny, has intensified negative sentiment. Additionally, media reports indicate that Senators Warren and Hawley are preparing to introduce legislation requiring companies that own health insurers or pharmacy benefit managers (PBMs) to divest their pharmacy businesses within three years. Later, PBMs took another hit when Trump reiterated his commitment to targeting healthcare "middlemen" to lower costs.
In large biopharma, news from Novo Nordisk and Vertex disappointed. Novo Nordisk reported long-awaited topline results from the Phase III REDEFINE 1 trial evaluating CagriSema in adults with obesity or overweight. The treatment achieved 22.7% weight loss, falling short of market expectations (~25% target). Full data will be presented at ADA 2025, with results from the REDEFINE 2 trial in type 2 diabetes expected in H1 2025. Novo also plans to launch an additional Phase III obesity trial in 2025 with an updated titration protocol and remains on track to file for regulatory approval by the end of 2025. For Vertex, topline results from its Phase 2 trial of suzetrigine, a non-opioid pain medication, for lumbosacral radiculopathy (LSR; also known as sciatica), were announced. The study results were impacted by an unexpectedly high placebo response. Despite this, Vertex plans to proceed with a pivotal Phase 3 trial for LSR after consulting with the FDA on study design and regulatory requirements. Insights from Phase 2 post-hoc analyses will guide the Phase 3 trial structure.

Portfolio changes: We did not initiate a new position and no position was exited.

Performance review: The largest contributors were Tandem (+79 bps / Positive broker commentary for 2025. Additionally, the recently issued ADA Standards of Care for 2025 (emphasizing the importance of CGMs and insulin pumps) helped diabetes tech stocks. Later, Novo Nordisk's newsflow on CagriSema has sparked a relief rally across diabetes tech stocks), NewAmsterdam (+34 bps / Announced positive Phase 3 topline results for obicetrapib in adults with atherosclerotic cardiovascular disease and/or heterozygous familial hypercholesterolemia whose LDL-C remains uncontrolled despite maximally tolerated lipid-lowering therapy. The data demonstrated a robust safety profile in a larger patient population and an unexpected 21% reduction in MACE events versus placebo, with early curve separation seen after 1 year. These results reinforce confidence ahead of the Phase 3 PREVAIL cardiovascular outcomes data expected in H2 2026) and Hikma (+28 bps / No specific news).
The largest detractors were Teladoc (-73 bps / No specific news), Novo Nordisk (-68 bps / Reported topline results from the Phase III REDEFINE 1 trial evaluating CagriSema in adults with obesity or overweight (see above)) and RadNet (-49 bps / No specific news, profit taking following a 135% return through November 2024).

ESG: Firms in the portfolio did not report any material ESG issues in December.

Market review: The main event of the month was the American election and the many waves it generated across countries and sectors. In the healthcare sector, the unexpected nomination of Robert F. Kennedy Jr.'s (RFK) as head of the HHS was widely negatively received. Known for his opposition to the FDA, childhood vaccination, and the pharmaceutical and agricultural industries, RFK has focused his discourse on addressing chronic diseases linked to modern lifestyles, frequently criticizing the food and agriculture sectors as contributors. RFK’s team is reportedly collaborating with Trump to select leaders for key agencies like the FDA, NIH, CDC, and CMS. However, both his appointment and those of agency heads require Senate confirmation, which, despite a Republican majority, may necessitate compromises. The sector has reacted negatively to RFK’s nomination, reflecting uncertainty about his policy priorities and potential shifts in regulatory focus. However, the long-term impact on earnings is expected to be modest. Amid this uncertainty, market dislocations present opportunities for value creation through active management.
Looking forward, we see a strong setup for healthcare in 2025. Despite the year-to-date underperformance and intense headline pressure on the sector in the past few weeks, we look into the coming new year with optimism. The sector’s fundamental earning profile is strong with annualized earnings expected to grow on aggregate 6% faster than the market in the mid-teens. Despite this, sector valuations are at a discount following two years of underperformance and the recent headline volatility. Finally, structural drivers of increasing disease burden and healthcare costs globally are unchanged. We therefore see an attractive setup for the sector in 2025.

Portfolio changes: We did not initiate a new position and we exited Nightingale.

Performance review: The largest contributors were Natera (+137 bps / Delivered a strong beat and raise in Q3, with Signatera MRD posting very strong numbers (now overtook Panorama NIPT)), RadNet(+92 bps / Signed a first customer commitment to deploy a suite of DeepHealth OS solutions. Later, RadNet reported strong Q3 numbers and a strategic collaboration together with GE HealthCare was announced) and Teladoc (+78 bps / Positive broker comment).
The largest detractors were Ambu (-54 bps / Reported lower than estimated sales and operating profit), Hypera (-41 bps / Negative momentum from October carried into November. Mid of November, Hypera reported weak results, which were in-line with the company's pre-announcement in October) and Aspen (-30 bps / No specific news).

ESG: Firms in the portfolio did not report any material ESG issues in November.