Market commentary of July 5, 2024
New blockbuster markets in the medtech sector
The current wave of innovation in the medical technology sector has created new blockbuster markets and given sector sales and profit growth a sustained acceleration. The most attractive areas include surgical robotics, diabetes treatment and minimally invasive procedures for structural heart disease.
Commentary by Stefan Blum and Marcel Fritsch, Portfolio Managers of the Bellevue Medtech & Services Fund, Bellevue Asset Management
The latest surgical robot system also a platform for AI applications
The latest generation of the da Vinci 5 (dV5) surgical robot from Intuitive Surgical has 10,000 times more computing power than its predecessor, which will enable the launch of new AI-based applications. AI capability could soon make robot-assisted surgery standard practice in the operating room. New, advanced sensors allow the dV5 to simulate haptic feedback, which helps surgeons to perform with greater confidence and accuracy. During an operation, data is collected through sensors and images that can then be used for objective performance feedback or to create individual training plans. In the long term, this data could conceivably enable complex AI applications that, for example, recognize different types of tissue or offer surgeons recommendations during surgery. Hardware upgrades include AR glasses for image transmission and the integration of an insufflator. These enhancements improve surgical precision and reduce operation time.
Intuitive Surgical will continue to market its predecessor system da Vinci Xi, enabling them to establish different price segments for surgical robots in the process. The dV5 was launched in the US in the first quarter of 2024 and will be launched in other countries during the course of 2025. Intuitive Surgical offers its customers flexible leasing agreements that allow them to upgrade from an older to a newer generation product, so the roll-out of dV5 should not result in a temporary dip in growth for Intuitive Surgical. Xi systems returned by customers upgrading to dV5 can be placed in more price-sensitive markets, which will expand Intuitive Surgical’s installed base and thus strengthen the main sales engine of its business, which is selling robotic instruments and accessories. The dV5 is expected to lead to an acceleration in sales growth, higher unit selling prices, and better profit margins. At the same time, Intuitive Surgical’s launch of its next-generation surgical robot extends its lead over competitors such as Medtronic and Johnson & Johnson. The market potential is huge: In the US alone, 3.8 million general surgery procedures, 3.3 million cardiothoracic procedures, and 2.5 million urology and gynecology procedures are performed every year. We estimate that the surgical robots market for soft tissue surgery will double in size from USD 7.5 bn in 2024 to approximately USD 15 bn in 2028.
Continuous glucose monitors: A USD 20 billion market thanks to new products from Abbot and Dexcom
Completely new customer target groups have emerged in the field of diabetes. Dexcom, for example, recently brought Stelo, a glucose biosensor approved by the FDA in March, to the market. This sensor is designed for people with diabetes who do not use insulin to better understand how diet and exercise may impact blood sugar levels. Abbott followed suit in June when the FDA approved its Lingo biosensor. Both sensors can be bought over the counter, i.e., without a prescription. We expect the global market volume for continuous glucose monitoring systems in 2028 to be well above USD 20 bn (2023: USD 10 bn) and that Abbott and Dexcom will have a combined market share of about 90%. Insulin pump manufacturers such as Insulet could also benefit from the rapid growth of glucose biosensors. This is because at some point in the future, most people with type 1 diabetes will be wearing a biosensor, making it easier for them to transition to a fully integrated insulin delivery system, i.e., there will be less need for information and education on how to use the new product.
New procedure for cardiac arrhythmias with high growth potential
Structural heart disease, especially faulty heart valves, is also a major growth driver in the medical technology market. Minimally invasive surgical procedures are already standard for aortic heart valve replacement. The global market volume for transcatheter aortic valve replacement is forecast to reach USD 10 bn in 2028. The recent US approval of Evoque from Edwards Lifesciences, the world’s first transcatheter tricuspid valve replacement system, has opened up an entirely new market whose long-term potential is comparable to that of aortic valves. Mitral valve surgery, which is currently dominated by repair procedures such as the MitraClip (Abbott) or the Pascal Precision system (Edwards Lifesciences), is another area where an alternative solution could soon be cleared for marketing. Breakthrough data from Edwards Lifesciences’ trial of its M3 transcatheter mitral valve replacement system is expected in early 2025.
Treatment options for cardiac arrhythmia, atrial fibrillation in particular, have been enhanced with the emergence of a new non-thermal ablation procedure known as pulsed field ablation (PFA). This innovative technology is likely to supplant conventional cryoablation (extremely cold temperatures) or radiofrequency ablation (heat) procedures because it is safer and faster. Thanks to the advantages of PFA, market volume could grow from currently zero to USD 6 bn in 2028. Boston Scientific and Medtronic are both marketing PFA products backed by excellent clinical trial data. Two other industry heavyweights, Johnson & Johnson and Abbott, are about to enter the market with new products of their own.
Tailwinds for investors
These developments illustrate the impressive range of groundbreaking innovation typical of the medtech sector, along with the attractive investment opportunities that it offers. The Bellevue Medtech & Services Fund (ISIN B-EUR LU0415391431) invests in precisely these high-growth areas through a portfolio of 40 to 60 stocks with a high 90% large-cap weighting that enhances portfolio stability.
Contact
Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht/Zurich,
Tanja Chicherio, tel. +41 44 267 67 07, tch@bellevue.ch, www.bellevue.ch
Bellevue – Excellence in Specialty Investments
Bellevue is a specialized asset manager listed on the SIX Swiss Exchange with core competencies covering healthcare strategies, entrepreneur strategies, alternative and traditional investment strategies. Established in 1993, Bellevue, a House of Investment Ideas staffed by 100 professionals, generates attractive investment returns and creates value added for clients and shareholders alike. Bellevue managed CHF 6.9 bn in assets as of December 31, 2023.
Disclaimer
This press release is issued by Bellevue Asset Management AG, which is an authorized asset manager subject to the supervision of the Swiss Financial Market Supervisory Authority (“FINMA”) and acts as an Investment Manager of the Bellevue Funds (Lux) SICAV. Bellevue AI Health Fund is a subfund of Bellevue Funds (Lux). The information and data presented in this press release are not to be considered as an offer to buy or sell or an invitation to subscribe any securities or financial instruments. For potential investors in Singapore Investment returns may increase or decrease due to exchange rate fluctuations. The fund(s) is not authorised or recognised by the Monetary Authority of Singapore (the “MAS”) and its shares are not allowed to be offered to the retail public. The Sub-Fund is a restricted scheme under the Sixth Schedule to the Securities and Futures (Offers of Investments) (Collective Investment Schemes) Regulations of Singapore. This press release is not a prospectus as defined in the SFA and accordingly, statutory liability under the SFA in relation to the content of prospectuses does not apply. The MAS assumes no responsibility for the contents of this Information Memorandum. You should consider carefully whether the investment is suitable for you and whether you are permitted (under the SFA, and any laws or regulations that are applicable to you) to make an investment in the Shares. If in doubt, you should consult your legal or professional advisor. This Information Memorandum has not been registered as a prospectus with the MAS. Accordingly, this Information Memorandum, the Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Shares may not be circulated or distributed, nor may Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to any persons in Singapore except in accordance with the restrictions and conditions under the SFA. By subscribing for Shares pursuant to the exempt offer under this Information Memorandum, you are required to comply with restrictions and conditions under the SFA in relation to your offer, holding and subsequent transfer of Shares.”
Hongkong: This section has been prepared solely for Hong Kong investors who invest or propose to invest in Shares of Bellevue Funds (Lux) (the “Company”) in Hong Kong. Investors in Hong Kong should read this supplement in conjunction with the Prospectus for the Company (the “Prospectus”). References to the Prospectus are to be taken as references to that document as supplemented hereby. In addition, words and expressions defined in the Prospectus, unless otherwise defined below, shall bear the same meaning when used herein.
Prospectus, Key Information Document (“PRIIP-KID”), the articles of association as well as the annual and semi-annual reports of the Bellevue Funds under Luxembourg law are available free of charge from Bellevue Asset Management AG, Seestrasse 16, CH-8700 Küsnacht.
