In August, the NAV per share total return was +3.1%, the share price total return was +3.6% and the return of the MSCI World Health Care Index on a net total return, sterling adjusted basis (Company's Benchmark) was +3.7%. The broad market rallied early in the month, and healthcare stocks also rebounded in August supported by strong 2Q earnings, positive clinical catalysts, continued M&A activity, and broader sector rotation. Biotechnology stocks were the standout, reversing the sharp declines seen in July (and despite weakness at month-end). Top individual contributors in the month were diverse. The AI-driven diagnostics company, Caris Life Sciences, was the top contributor after a solid "beat and raise" 2Q result. The mid-cap biotech company, Argenx, rose >20% after the company's blockbuster product, Vygart (efgartigimod), reported positive clinical data in a rare form of severe muscle inflammation. Finally of note, Merck was also a top contributor after it's partner Moderna reported the top line results of a landmark trial for a personalized cancer vaccine (intismeran) that demonstrated statistically significant and clinically meaningful improvements in a deadly form of skin cancer (metastatic melanoma). There were few material detractors in July. UnitedHealth was down in August despite a solid 2Q print in July, as investors took profits and perhaps de-risked against future cost trends and margin recovery. Weakness in AstraZeneca was notable as media reports surfaced of unexpected merger talks between the UK-based company and US-based Bristol-Myers Squibb. Relative gains in small/mid-cap biotechnology stocks were partially offset by our underweight positioning in large-cap biotechnology stocks that were also strong in August, creating a drag on relative performance. Finally of note was the loss of absolute gains in biotechnology on the last Friday of the month as U.S. Federal Chairman Kevin Warsh made public hawkish comments on interest rates. These comments triggered a 3.5% (local currency) sell-off in the XBI and clipped approximately 1.5% from the absolute performance of the Trust whilst the benchmark corrected only -0.1% (sterling). This headline news clearly had an outsized impact on the Trust's performance for August. Looking ahead, "back-to-school" September brings with it several healthcare specific broker conferences that will be heavily scrutinized by investors. Of interest: commentary on the potential for further M&A, continued changes at the FDA, pipeline developments (including obesity, oncology, and cardiovascular), and the latest innovation and deal flow coming out of China.
