Worldwide Healthcare (WWH) has posted its best first half performance in two decades as the £1.5bn investment trust managed by Orbimed in New York looks to make a decisive break from the bear market and hostile politics that have afflicted its sector in the past three years.
The diversified 49-stock portfolio, which is designed to benefit from all aspects of the global advance in healthcare spending, made a 5% return in the six months to 30 September.
That was impressive given its benchmark, the MSCI World Health Care index, fell 5.3% and weakness in the dollar, in which most of its investments are based, crimped the return in sterling to UK investors.
Shareholders did even better, enjoying a 10.9% total return as the company ramped up buybacks of its cheap shares, purchasing £273.8m compared to £99.8m a year ago. The discount – or gap between the share price and the value of its assets – finally narrowed from 11% towards the board’s 6% target after activist hedge fund Saba Capital emerged with a 5% stake in late May.
The main factor in the underlying investment performance was a basket of 60 biotech stocks that managers Trevor Polischuk and Sven Borho thought could be bid targets as merger and acquisition activity resumes and “animal spirits” return to the sector. This leaped 24.9% beating the 15.9% gain in the S&P Biotechnology index and now represents the trust’s top holding at 10.5% of the fund.
Emerging markets stocks also did well, in particular Jiangsu Hengrui Pharmaceutical, a blue-chip biotech with China’s “largest, best-in-class clinical pipeline”, a top 10 holding that accounts for 4.2%.
The managers timed a purchase of Belgium’s UCB well, snapping up stock when the shares were knocked in the tariff sell-off earlier this year. Shares in the company, whose lead treatment helps patients with plaque psoriasis and an inflammatory skin disease, subsequently recovered strongly.
Another boost came from Caris Life Sciences, a precision medicine company using molecular profiling and artificial intelligence to target personalised cancer treatments. Its shares have rallied 40% since floating on the Nasdaq exchange in June.
Gearing, or borrowing, also helped, rising from 12% to 16.4%, as the managers deployed more money into a rising market.
However, there were fallers in the portfolio, notably US insurer UnitedHealth Group, which slumped 60% in dollar terms on the back of rising health costs and changes in Medicare, a federal health insurance scheme. The managers sold out believing the risks of further falls were too high.
Trading has continued to be positive with the portfolio advancing 8.6% in October and the shares notching up a 9.6% return, again ahead of the MSCI benchmark which rose 5.7%.
Longer term, the company says that under Orbimed since launch 30 years ago its investments have generated an annual return of 13.4%, ahead of the MSCI benchmark which delivered 10.9% up to 30 September.
Doug McCutcheon, the trust’s chair who will retire next July after 13 years on the board, said: “Our portfolio manager believes that long-term growth will be underpinned by strong innovation and demographic tailwinds. Nearer-term, it is also expected that additional policy clarity in the U.S. and continuing high levels of merger and acquisition activity, will be important investment drivers.”
Other healthcare trusts have enjoyed a relief rally since April, including Biotech Growth (BIOG), which is also run by Orbimed, and International Biotechnology (IBT), RTW Biotech Opportunities (RTW) and Polar Capital Global Healthcare (PCGH).
WWH also declared an unchanged interim dividend of 0.7p per share.
Our view
Matthew Read, senior analyst at QuotedData, said: “These are a good set of interim results for Worldwide Healthcare. In a period when global healthcare materially lagged wider equity markets, WWH has strongly outperformed its benchmark benefiting from its long-standing tilt away from large, policy-exposed pharmaceuticals and towards higher-growth areas such as emerging biotechnology, medical technology, life science tools and emerging markets. The strong contribution from WWH’s proprietary basket of M&A-targeted biotech names – accounting for more than half of the trust’s total return in the period – highlights the value that’s been available in the sector.
“We think that one of the more interesting features of the update is the managers’ assessment of the policy backdrop. In their view, healthcare has spent the best part of a decade climbing a ‘wall of worry’ around US drug pricing, with 2025 adding tariff threats and additional political noise. However, the managers think that the recent ‘TrumpRx’ deals struck with Pfizer and AstraZeneca appear to resolve many of the worst-case fears on both tariffs and pricing, while still allowing the industry to earn an acceptable return.
“If this reading is correct, the sector could be moving past a major overhang at the same time as innovation in biotech, medtech and Asian healthcare appears to be gathering pace.”
