Macquarie Healthcare Fund Q2 2025 Commentary: Global Healthcare Stocks Fall Amid Regulatory Uncertainty

Macquarie Healthcare Fund Q2 2025 Commentary: Global healthcare stocks declined during 2Q25 due to ongoing regulatory uncertainty and investor rotation out of defensive sectors. The fund underperformed the broader equity market.

Global healthcare stocks experienced a decline during the second quarter of 2025, underperforming the broader equity market. This trend was driven by ongoing regulatory uncertainty and a shift in investor flows away from defensive sectors, including healthcare. The Macquarie Healthcare Fund Institutional Class shares, however, outperformed the Fund’s benchmark, the Russell 3000 Healthcare Index, during the same period.

Key contributors to the Fund's relative performance included strong stock selection in the blue-chip medical products sector. Chugai Pharmaceutical Co. Ltd. (OTCPK:CHGCF) and UCB SA (OTCPK:UCBJF) performed particularly well. Chugai shares rose following positive Phase III data for orforglipron, an oral GLP-1 agonist for obesity, and robust sales of anti-inflammatory drug ACTEMRA and hemophilia treatment HEMLIBRA. UCB outperformed due to growing BIMZELX prescriptions for skin condition hidradenitis suppurativa and a positive investor response to plans for manufacturing investments in the US. Boston Scientific Corp. (BSX) also contributed to performance, as the stock rose following strong 1Q results and guidance.

The Fund's underweight position in Stryker Corp. (SYK) detracted from performance during the quarter. Shares of Stryker rose following strong 1Q results, despite the Fund’s underweight position. The biotechnology sector also contributed to performance, driven by both allocation and selection. Shares of UniQure N.V. (QURE) and GRAIL Inc. (GRAL) outperformed, rising sharply after the US Food and Drug Administration granted Breakthrough Therapy Designation for AMT-130 gene therapy and positive data from its Galleri cancer screening study, respectively. Viking Therapeutics Inc. (VKTX) and Neurocrine Biosciences Inc. (NBIX) also rebounded, with shares rising following positive developments in their respective drug candidates.

Conversely, Regeneron Pharmaceuticals Inc. (REGN) and Tarsus Pharmaceuticals Inc. (TARS) underperformed during the quarter. Regeneron faced pricing and volume pressures on Eylea, while Tarsus Pharmaceuticals continued to consolidate following a strong 2024. The healthcare services sector added modestly to relative returns, with the Fund’s underweight position to UnitedHealth Group Inc. (UNH) adding to performance. UnitedHealth struggled as rising Medicare Advantage costs and coding challenges forced a cut to guidance. An overweight position to CVS Health Corp. (CVS) supported performance, as the stock rose on solid results.

Out-of-benchmark investments, such as Federal National Mortgage Association and Federal Home Loan Mortgage Corp, also contributed to performance. The largest drag on relative performance came from the small/mid-cap medical products sector, which the Fund maintained an underweight to. The Fund’s lack of exposure to Intuitive Surgical and Abbott Laboratories detracted from relative returns as both companies showed strong sales trends.

The Fund's overweight in Halozyme Therapeutics Inc. (HALO) was another key detractor, as the company’s financial results were overshadowed by negative draft guidance from the Centers for Medicare and Medicaid Services. Conversely, the Fund’s overweight in Illumina Inc. (ILMN) was partially offsetting these headwinds, as the stock rose following stronger-than-expected earnings results and a positive reception to its announced acquisition of SomaLogic.

For global healthcare investors, there are risks that short-term legislative and judicial action could overshadow the positive long-term fundamentals of the healthcare sector and of specific companies. However, the potential for long-term opportunities within the global healthcare asset class remains. American Baby Boomers are aging, implying expanding demand for healthcare products and services for decades to come. Additionally, middle class populations in countries with emerging economies, notably India and China, are growing rapidly, creating appetites for Western-style medicine.

The Fund remains overweight the biotechnology sector, particularly in small-to-mid-cap companies, where technological breakthroughs are expected. The Fund continues to put a premium on disciplined, intensive research when analyzing investment opportunities. Companies with proven competitiveness, seasoned management teams, and stock valuations discounted from estimates of intrinsic value are favored.

References:
[1] https://seekingalpha.com/article/4814735-macquarie-healthcare-fund-q2-2025-commentary