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 initiated new positions in Beigene and RadNet and we did not exit any position.

Performance review: The largest attributors vs. the index were Ambu (+23 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), Danaher (+19 bps / Not invested) and Abbott (+16 bps / Q4 results in-line with expectations, while the 2025 is considered to be conservative).
The largest detractors vs the index were Edwards (-17 bps / Fear of increased competition in the core TAVR franchise), CVS (-16 bps /: Not invested) and Biomarin (-14 bps / Announced legal action against Ascendis Pharma (patent covering long-acting variants of C-Type Natriuretic Peptide)).

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

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 initiated positions in Essilor Luxottica and Humana and we exited GSK.

Performance review: The largest attributors vs. the index were Abbvie (+44 bps / Not invested), Globus Medical (+31 bps / Reported better than expected revenues and EBITDA and talked about encouraging integration situation on NuVasive) and Amgen (+22 bps / Not invested).
The largest detractors vs the index were McKesson (-22 bps / Not invested), Lantheus (-18 bps / Reported a beat on EPS, while sales were in-line. More importantly, key product Pylarify missed expectations due to seasonality and price impact (made price concessions to secure long-term contracts and maintain market share)) and Ambu (-16 bps / Reported lower than estimated sales and operating profit).

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