Market review: June was another tough month for the healthcare space, which lagged the broader market. The lack of newsflow regarding any potential tariffs on pharmaceutical, as well as clarity on new pricing measures continue to weigh on the sector.
As we near the end of the 90-day pause on tariffs announced in April, there is still no definitive guidance on whether pharmaceuticals will be affected. While drugs were initially exempt under the original executive order, the continued threat of additional measures from President Trump has created lingering uncertainty. In addition, there is still little clarity regarding how the «Most-Favored Nation» pricing announced in May should apply, and if that is at all possible. The deadline for CMS to announce its price targets was set for June, but it passed without any announcement. We believe the likelihood of these events is low, but if any of them occur, earnings will be negatively impacted.
On top of this, the administration changes at the FDA are increasingly seeming to be disruptive to the approval process.
In June, two major medical conferences took place, both in Chicago: the American Society of Clinical Oncology annual meeting (ASCO) and the American Diabetes Association Scientific Sessions (ADA). At ASCO, highly expected Phase III data from Summit’s bispecific antibody PD1xVEGF, ivonescimab, demonstrated promising data in progression-free survival (PFS) but disappointed market expectations as the co-primary endpoint of overall survival (OS) was not met. The FDA has a stricter stance regarding approvability, now requiring OS. This is a change from previous approvals in the same setting and may hint at a changing bar for oncology drugs. At ADA, the main highlights were the number of GLP-1 agents coming from China, as well as the potential of amylin and muscle-sparing agents.
Overall, we remain confident despite the headwinds, which we see mostly as noise. Such conditions of market dislocation are supportive for active management, and we stick to our process.

Portfolio changes: No new positions were initiated and we exited Lantheus and RadNet.

Performance review: The largest attributors vs. the index were Bachem (+9 bps / two positive broker notes in June), Cigna (+8 bps / No specific news) and ResMed (+7 bps / No specific news).
The largest detractors vs the index were Eli Lilly (-14 bps / Lilly standout at the ADA: 1) orforglipron showed a favourable safety profile, 2) the next generation amylin analog eloralinitide showed promising results with a competitive profile Phase II data is expected to be presented at EASD Vienna and 3) the myostatin inhibitor bimagrumab showed strong data evidencing both muscle preservation and muscle building effects in monotherapy. The stock returned 5.7% in June, and we are underweight versus the reference index), AstraZeneca (-13 bps / News has emerged that RFK Jr. is exploring ways to tighten regulations on pharmaceutical advertising) and Zoetis (-9 bps / The European Medicines Agency’s Committee for Medicinal Products for Veterinary Use (CVMP) issued positive opinions recommending marketing authorization for Zenrelia (Elanco) and Numelvi (Merck), both JAK inhibitors indicated for treating atopic dermatitis in dogs. Later, a broker downgraded Zoetis).

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

Market review: May was a turbulent month for the healthcare sector, marked by underperformance and intense policy scrutiny. Managed Care and biopharma were hit hardest, while Medtech, hospitals and drug distributors saw relative resilience. The rotation out of healthcare was driven primarily by escalating policy risks, particularly around drug pricing and Medicaid funding, with investor conversations overwhelmingly focused on these themes.

The biggest headline came on May 12, when President Trump signed an executive order aiming to cut drug prices by “30–80%” through a Most Favored Nation (MFN) pricing model. While the order initially spooked markets, its vague structure and lack of immediate enforcement brought some short-term relief. The US Department of Health & Human Services (HHS) is tasked with negotiating discounts over 30 days, with broader legislative options deferred for up to six months. Biopharma stocks fell on the news, compounded by uncertainty around the US Centers for Medicare & Medicaid Services (CMS)’s draft rules on Medicare drug negotiations.

A surprise FDA leadership change added to volatility, with RFK Jr. naming Vinay Prasad to lead the Center for Biologics Evaluation and Research (CBER), triggering the biotech sector’s largest one-day drop this year.

The month also saw high-profile leadership changes. UNH replaced its CEO after a 50% stock decline since December, Novo Nordisk’s chief stepped down following steep losses, and Intuitive Surgical announced a smooth succession after years of strong performance.

Sentiment stabilized late in the month after Trump delayed a 50% tariff on EU imports to July 9, following a positive call with EU Commission President von der Leyen. While a trade breakthrough remains uncertain, the delay briefly lifted broader risk appetite and boosted consumer confidence.

Overall, May underscored persistent investor anxiety around healthcare policy, with little resolution expected in the near term.

Portfolio changes: No new positions were initiated and we exited Humana and Icon.

Performance review: The largest attributors vs. the index were Eli Lilly (+44 bps / The stock returned -17.8% in May and we are underweight versus the reference index), Veeva (+38 bps / The stock rose 19% after a strong top-and bottom-line beat and guidance raise) and Dexcom (+26 bps / Solid Q1 results and guidance confirmed, driven by strong US. Further, a USD 750mn share buyback was announced).

The largest detractors vs the index were Lantheus (-23 bps / Small miss and guidance cut led to oversized share price move), Globus (-14 bps / Lower-than-expected Q1 results, mainly driven by one-time challenges) and J&J (-11 bps / Not invested).

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

Market review: The key news items this month were the US tariffs. This led to a major sell-off which has mostly recovered since. The healthcare sector underperformed during the month, but this was not only due to tariffs: UnitedHealth, the second largest company in the index, cut guidance due to higher healthcare utilization. While negative for that company, we see it as confirmation of our core view of accelerating healthcare demand. During Q1 earnings, almost all commented on the tariff situation. In general, companies expect revenues to be affected by amounts ranging from 1.3% to less than a tenth of a percent of current-year sales. This is small enough that it can be absorbed by sales growth without impacting guidance. However, this impact only factors in the tariffs which were announced around mid-April, i.e. very high tariffs on Chinese imports as well as 10% tariffs globally until July 1st, with the original, high global tariffs afterwards. Many companies have started to move around inventory and to shift their supply chains to be able to withstand further shocks.

Rumors around plans for pharma-specific tariffs as well as the possibility of introducing MFN pricing remain the biggest overhang for the sector Company executives have been outspoken regarding the negative impact of such policies, which could lead to drastic access issues for patients in the US.

Overall, our confidence in the sector is unchanged, but this example reinforces our commitment to rigorous stock selection.

Portfolio changes: We initiated new positions in Danaher and Quest and we exited Beigene.

Performance review: The largest attributors vs. the index were Bristol-Myers Squibb (+25 bps / Not invested), Johnson & Johnson (+21 bps / Not invested) and Abbvie (+20 bps / Not invested).

The largest detractors vs the index were Eli Lilly (-32 bps / The stock returned 8.8% in April and we are underweight versus the reference index), Thermo Fisher (-14 bps / Overall weakness of Life Sciences Tools & Services stocks after tariff announcements. Later, the company reported solid Q1 results, but reduced the 2025 outlook due to tariffs and US policy changes) and Biomarin (-11 bps / No specific news. Overall weakness after tariff announcements).

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