Your browser is out-of-date!

Update your browser to view this website correctly.

To continue, please select your country of domicile and investor type. Depending on your domicile and the investor type that you select, you will have full or restricted access to the information due to legal reasons.

Retail clients: according to Art. 4 Abs. 2 FinSA

Professional/Institutional investors: according to Art. 4 paragraph 3-5 and Art. 5 paragraph 1 and 3-4 FinSA and Art. 10 paragraph 3 and 3ter CISA in conjunction with Art. 6a CISO

Important Principles

By using the website, you confirm that you have read, understood and accepted the general information provided by the Bellevue Group AG as well as these legal provisions. These may be subject to change and the use of the site may be restricted or terminated at any time without prior notice.

The information, products, data, services, tools and documents contained or described on this site ("website content") are for information purposes only and constitute neither an advertisement or recommendation nor an offer or solicitation (to buy) or redemption (sell) investment instruments, to effect any transaction or to enter into any legal relations.

The financial products mentioned on this site are not suitable for all investors. The information contained on this site does not constitute a financial, legal, fiscal or any other recommendation. Investment or other decisions should not be made solely on the basis of this document. In particular, you should not enter into any investment before you have read the corresponding fund agreement or legal prospectus, the annual and semi-annual reports, the articles of association (as far as they are applicable), as well as all other documents, as required in accordance with local legislation or the regulations applied in the legal jurisdictions or countries in which the corresponding investment fund has been licensed or approved for public offer or sale to the public.

In order to determine whether the investment in shares of a certain investment fund meets your specific requirements and matches your envisaged risks, we recommend that you contact an independent financial adviser. Furthermore, we recommend that you consult an independent tax adviser in order to obtain information on the tax regulations relating to a specific investment in your legal jurisdiction and with regard to your personal circumstances. In particular tax treatment depends on individual circumstances and may be subject to change.


Past performance is not an indication or guarantee of the future performance of the investment. The value of investments may be subject to fluctuations and, under certain circumstances, investors may not get back the full amount invested. Changes in foreign-exchange rates may also cause the value of investments to go up or down.

For a full explanation of risks and the overall risk profile of financial products mentioned on this site, please refer to the relevant Key Investor Information Documents (KIDs) and Prospectuses.

Data protection

By accessing this website you state that you agree with the data protection statement. If you do not agree with this statement you should refrain from accessing any further pages of this website. This statement may be updated at any time. We therefore recommend that you check this statement regularly.


By clicking on "Accept", you confirm that you agree to the legal provisions. Alternatively, you can select "I don't accept" if you wish to leave the website.

Paul and Brett's Alpha

February 2023

Good versus Evil

It is a truism that as we age, we often look to the younger generation with a mixture of fear and pity. As Orwell famously said: “each generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it”.

A common refrain from those of us who are now on the wrong side of the hill of life is that young people seem overly keen to reduce things to simplistic binary outcomes; good or bad, acceptable or unacceptable. Worse, they seem to think that people must be protected from potential offence, ‘cancelling’ that which some arbiter deems too much and editing things from prior times to fit today’s mores or values.

This is very difficult for many of us dinosaurs to understand. You don’t have to be a Nazi sympathiser to study Hitler and his ideas, but if students of history and politics do not examine how a very ordinary man managed to rise to power and subsequently bend an entire nation into a war machine to support abominable objectives, then society will not be equipped to monitor current political trends and history risks doing what it does all too often and repeating itself. You have to engage with uncomfortable topics, it’s an inevitable part of life.

We see this manifest in some extreme interpretations on ESG investing. For example, some people want to stop any further oil and gas extraction. We understand the basis of this view from a climate impact perspective. However, the problem with this is that we cannot replace the energy infrastructure of modern life overnight and, in the meantime we are overly reliant on a few ‘swing producer’ countries (Saudi Arabia, Russia and Qatar) for current supply in geo-politically unstable regions.

The geo-political consequences of concentrated supply played out in the 1970s oil crisis and again today with respect to Russia’s war against Ukraine. The clean energy transition will take decades and oil and gas are also the feedstocks for many chemicals and materials that we need to feed us, clothe us and keep us well. We need surety of supply which means supporting extraction from friendly allies and our own shores. This is the realpolitik

“Just Stop Oil” thus serves to our minds as a classic example of an overly simplistic and reductive interpretation of a complex area, and one where protest actions are often carried out by people displaying glaring levels of cognitive dissonance (cf. the likes of Harry Windsor flying about on a private jet whilst lecturing the proletariat on climate change); googling the work and travel backgrounds of some of the arrested protesters is quite enlightening.

Rules aside, we support the imposition of ESG reporting criteria for investment funds. We agree that companies should, in the words of Google, “not be evil” and “do the right thing”. Both of these phrases have been official mottos of Google/Alphabet at various time points. You can decide on how appropriate you think those slogans are for yourselves, but few companies have done so much to shape modern life that their brand becomes a distinct verb in its own right.

Despite its ubiquity, many people seem to resent Google, because it collects data in order to be able to offer its widely-used services for free. This illustrates how deciding what constitutes morally ‘good’ and ‘bad’ corporate behaviour is rarely clear cut and is highly subjective; the whole concept of the modern internet is built on services that are both valuable to the user and yet also free to use because of data mining.

It is ironic that half the people ranting about the evils of Google and big Tech more generally will be doing so using a free, ad-driven app like Twitter, Facebook or Instagram that gives them a global voice and venting their spleen via a smartphone using an Android operating system created by, er, Google.

We are more than happy to hold management teams to account and vote against them when we don’t think they are doing the best they can (indeed, we have already done so in respect of one of the portfolio companies during 2023).

We also agree that corporations should be publicly held to account for their behaviour if it is unlawful. Beyond this, everything else is, by definition, a relative and personal judgement. Your managers do not support the approach of ‘Just Stop Oil’ for example, whilst being supportive of action on climate change and net zero over time in the broader sense. There is no dissonance in this.

If no laws are being broken, then an opinion is just an opinion, in the same way that one person’s hilarious joke can be another person’s trigger for taking offence. We hold no position of legal authority and are thus not the moral arbiters of anything.

Since you cannot please all of the people all of the time and, in all probability, any of the people any of the time these days, we will be keeping much of the detail regarding our voting decisions and the related discussions with management teams behind closed doors because we believe this approach will help to maintain a constructive dialogue and open lines of communication.

Is Healthcare a special case?

If you think Google is evil, you can elect to use an alternative like DuckDuckGo, a VPN and an Ad-Blocker to maintain your online privacy (“never accept a cookie from anyone”). Healthcare is clearly very different. Oftentimes, you cannot chose which products are used and it is highly unwise not to take up these services when needed and offered. We are not aware that alternative browser choices imperil anyone’s wellbeing.

Neither are reductive utopian fantasies solely a youthful pursuit. Jeremy Corbyn and Bernie Sanders (both have pretty useless records in the putting forward of workable legislative proposals) are feted by that same youth for their ‘capitalism is evil’ schtick.

Sanders has a new book out called “it’s okay to be angry about capitalism” and it inevitably covers profiteering and inequality of access in the US healthcare system. Of course, the solution is the ‘Medicare for All’ proposal (not his idea, but taken up by Sanders in later years and but one of many universal healthcare proposals going back to the 1970s) that has singularly failed to gain traction in part because whilst it may solve the access issue, it has never been demonstrated that it would save money or improve care.

As we have noted before, no politician wants to be remembered for supporting the bill that made the US healthcare system even worse (we have discussed US healthcare reform in previous factsheets).

Like all good political books, the author lays out various unarguable facts that are pointless to debate to support the latter arguments and policy suggestions which follow. The US system is far from perfect. At the same time though, the US dominates healthcare innovation and has done so for decades. This is partly due to the higher education system, government science funding and the ‘can-do’ spirit of the US that supports a vibrant venture capital scene. Would the latter really exist if the profit motive were not so evident?

This is a very complex question to answer. Since we manage an Investment Trust that seeks to make money for you, the shareholders, by investing in the healthcare sector, we are going to assume that everyone reading this agrees with the principle that making a profit from the provision of healthcare is morally acceptable. At this point, some members of the “Guardian-reading, tofu-eating wokerati” might be squirming a bit, which is fine. We respect your right to that opinion, even if we disagree.

If you are of this alternative view, you might want to ponder the contribution of the once-mighty USSR to current medical practice, especially in the fields of novel pharmaceuticals and medical devices. They seemed very good at finding novel nerve agents to kill people, but not so good at the medicines-to-save-them bit.

The problem with the totalitarian regimes that seem to inevitably emerge from collectivist systems is that they abhor disagreement (rather like these latter-day students who want to cancel alternative opinions), whereas scientific knowledge advances through the testing of competing theories.

Is part of the reason that the Soviet Union collapsed due to agricultural failure compounded by the discredited and fraudulent theories of Lysenkoism beloved by Stalin? How many biologists were executed for suggesting there might be some merit in that crazy Western idea of cross-breeding plants for enhanced yield? How many Russians starved as a consequence? Feel free to check this using the “not evil” resources provided to you free-of-charge by Google.

China has yet to make much of a mark in the healthcare innovation arena either, but is fast picking up speed now that it allows private enterprise. Now there’s an interesting observation…

So much for socialism then. To quote a fictitious person who might actually be further to the right politically than tofu-hating Suella Braverman: “Greed, for lack of a better word, is good… Greed captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind".

If it wasn’t for ‘greedy’ venture capitalists, most of the companies in the Trust’s portfolio would never have got off of the ground and Western healthcare systems would feel more like that of the Soviet Union.

If any younger readers want to understand what the Soviet system was like, the salad aisle of any major UK supermarket currently offers an immersive demonstration. If you are even more of a masochist, you could try to book a face-to-face appointment with your GP. Yes Bernie, come over here and check out how well our version of “Medicare for All” is going 70 years in. Welcome to the country where patients really do die waiting for treatment (Sanders pooh-poohs this notion in his book, admittedly referencing Canada rather than the UK).

Let us come back to the premise of this month’s Musings: Can a corporation really be determined to be ‘good’ or ‘bad’? Is anything easily reducible to such binary outcomes, especially in healthcare?

This is not merely an abstract moral question for personal judgement anymore. Most external ESG ratings take account of access to medicines as part of the “S” assessment. How well these rating agencies understand the complexities of these topics could have significant implications for the support of future innovations. As noted in previous missives, we often find ourselves disagreeing with the conclusions made in ESG reports.

We are going to illustrate the moral complexities inherent in what we do using a practical example from the portfolio. The company in question is Vertex Pharmaceuticals, which a journalist might describe either as “the company that has revolutionised therapy for a previously untreatable fatal disease” or as “an aggressive monopolist intent on preserving profits and IP at any human cost”, depending on the angle of their story.

We will take the same approach as Sanders, by first laying out some unarguable facts.

The sad part

Cystic fibrosis (CF) is an autosomal recessive genetic condition (i.e. you typically inherit the disease when both parents are carriers) that results from mutations to a protein known as the cystic fibrosis transmembrane conductance regulator (CFTR). Patients with one working gene copy for this protein generally exhibit no overt symptoms.

However, those with two defective copies can suffer from a range of symptoms that affect multiple organ systems. The most overt of these are in the lung, where defective CFTR results in viscose mucous secretions. This leads to a build-up of mucus that impairs breathing and can result in frequent and potentially serious lung infections. Respiratory failure is the cause of death in 80% of people with CF.

CF is prevalent across the world, but most prevalent in people of Northern European heritage, a grouping where one in 25 people carry one mutated copy of the CFTR gene. There are many known CFTR mutations (CF is classified into six types) and these convey different levels of protein function and thus disease severity and prognosis, but one mutation known as ‘F508del’ is far and away the most common and important from a functional perspective.

In addition to CFTR-correcting drug therapy (more on this below), management of the disease includes reducing risk of infections through environmental measures and use of antibiotics, anti-inflammatories, airway clearance and bronchodilator therapies to improve oxygen uptake. Some patients may also receive treatments for pancreatic dysfunction. Although CF is widely known as a lung disease its name actually comes from the fibrotic lesions seen in the pancreas of some patients;  liver failure can be a fatal complication in CF.

CF was first described in the late 1930s and a child born with the disease back then would have a life expectancy of 5-10 years. Improvements in sanitation to reduce infection risks and antibiotics to treat bacterial infections, allied with the therapy techniques described previously improved life expectancy for someone living in the developed world to the late 20s or early 30s by the millennium. Then came Vertex…

The happy part

In early 2012, Vertex launched Kalydeco, the first CFTR-targeting therapy for CF, in the US. This drug targeted a sub-set of patients (~4-6%) with a mutation called G551D and works as a potentiator of chloride release that helps to overcome the poor function of mutated CFTR in CF patients. Next followed Orkambi in 2015, which combined the first drug with a new ‘gene corrector’ that targeted patients at least one copy of the F508del mutation. The combination is significantly synergistic.

An alternative potentiator/corrector combination called Symdeko followed in 2018, targeted at those with only one copy of the F508del mutation. It has higher tolerability with respect to certain side effects that had proven to be dose limiting for Orkambi. Finally, a triple combination that included a new and additional corrector called Trikafta launched in 2019. This has further synergistic potential in overcoming the impact of the F508del mutation leading to even higher levels of CFTR functionality. Tolerability aside, these drugs can address ~90% of CF cases. The remaining 10% are caused by so-called nonsense mutations that will require an alternative approach.

The happy conclusion of this story is that a child born in the developed world with dual F508del CF (the vast majority of CF patients) in 2020 is expected to live beyond the age of 50. Because Trikafta is now approved for the treatment of children as young as 6 (it was only 12+ in 2020), it was recently suggested that today in 2023, life expectancy is north of 60 years.

Simply put, Vertex has doubled the life expectancy for CF patients in about 20 years. We would challenge anyone to disagree that is an amazing accomplishment and one that is undoubtedly to the benefit of humanity – score one for the good guys.

The closest analogy that we can think of is in the treatment of the HIV virus. Triple anti-retroviral therapy is now so effective that progression to AIDS is very rare, thus life expectancy is widely viewed to be normal (we cannot know yet, because the cohort of patients taking this therapy are nicely ageing away and are not yet at the point where one would expect them to die of natural causes).

However, the incredible story of HIV includes a lot more government funding and a multiplicity of drug companies over time. Today, it is largely a duopoly between GSK’s Viiv and Gilead but Roche, Merck, J&J and Bristol all played a pivotal role in the past.

In contrast, Vertex continues to occupy a monopoly position in CF treatment and leads on further innovations (a second-generation triple is in late stage clinical trials and it is also developing an MRNA therapy for the ~10% of CF patients with nonsense mutations) and has managed to see off all attempts from other companies to develop competing potentiator/corrector therapies by simply having best-in-class molecules and strong IP (AbbVie being the most notable recent protagonist).

Medicine access

Vertex was formed in 1994 and had product revenues of zero in 2010 (excluding royalty and collaboration payments – these used to come from HCV and HIV drugs developed by Vertex and sold by other companies). The CF products have been transformational financially, generating gross revenues in excess of $300,000 per patient per year in the US. Since 2012, the CF franchise has gone on to generate total revenues of $36 billion and we estimate gross profits in excess of $31 billion. Over that same decade, Vertex has invested $17bn (i.e. around half of those gross profits) into R&D and >$2.6bn into the business itself through capital deployment.

Whilst its CF products are sold in >50 countries world-wide and reimbursed in >40, there have been significant battles over access and it has been estimated that only a teens percentage of globally eligible patients are on the triple therapy option according to the Journal of Cystic Fibrosis (although we would agree this analysis is rather simplistic and uses some highly uncertain data. It is also now out of date as Trikafta is approved in more countries and for a wider age range than was the case at the time).

Notably in the UK, it took Vertex some time to reach an agreement with the NHS over access. It apparently offered Orkambi and Symdeco at a price of ~£100,000 per annum, but the NHS argued this was too expensive and negotiations  continued through 2019. However, in June 2020, NHS England signed a four-year agreement allowing patients to be prescribed Trikafta (or its predecessors if applicable).

This was but one week after the EMEA approved the drug (the UK MHRA piggy-backed on this process for the UK approval). The final price is unknown but is believed to be below the £100,000 level initially discussed a few years previously.

At the end of four years, the NHS expects to renegotiate this deal. We suspect this will be a very one-sided conversation. Even if a reassessment using NICE criteria suggests the NHS should not continue to fund treatment at this price, they will not take it off the market because there simply is no alternative.

The current debate

Vertex’s battles to secure reimbursement from recalcitrant governments have attracted negative press commentary, usually up to the point where access is agreed, after which the praise becomes effusive. It was ever thus. More recently, the company has seen negative publicity around access in less developed countries (e.g. the 8 February 2023 article in the New York Times).

A coalition of patient advocacy groups in various countries have come together to demand equitable access to CFTR inhibitors. Under the banner “VertexSaveUs” (again, Google can help you find them), their manifesto makes five demands (and our comments in response to them are in brackets):

  • A global compassionate use program allowing the sickest patients to access the drug. (Vertex does have compassionate usage programmes, but not everywhere because the drug is not approved, sold or distributed everywhere. The scale of these programmes are not disclosed by the company. However we are in no doubt that Vertex is committed to expanding access more broadly and has detailed plans in place to do so).
  • Make the drugs available in all countries by seeking a formal regulatory approval (this is presumably to address the point made by us above. However, this is inevitably a slow and complex process; several of these drugs have only existed for a few years. Furthermore, a formal approval or even pricing are not necessarily the only reasons for access issues in certain markets – diagnosis, patient registries, specialist physician access, etc.).
  • Price the drugs according to the affordability in each country
    (this is very difficult to achieve. Governments are wise to such schemes and take advantage using ‘reference pricing’ that caps relative cost to the lowest cost in the reference group. It’s not just drug companies that can be viewed as self-interested).
  • Publish a global access to medicines strategy (this is a bit meaningless in our view. People publish pointless documents all the time. Actions are what matter. Vertex has been running a small donation programme with a charity since last year as a way to permit access in countries where reimbursement is unrealistic and is actively exploring how  to expand this, but doing so slowly and carefully to ensure that everything is working for the patients is clearly the right approach).
  • Allow licensing/authorised generics in countries where Vertex does not wish to supply at a locally affordable cost (this is feasible only if the relevant countries agree not to allow export of the drugs to third countries and this has often proven to be difficult to manage).

It is not unreasonable at all to conclude that Vertex could and should be doing more to facilitate access to its life-changing therapies in low income countries. We fully understand the desperation of the CF patients unable to access these life changing therapies and their public advocacy to hasten this. Vertex itself could probably do a better job in highlighting both the efforts that it is making in this direction and the complexities around it which make this a slow process.  

On the other side, it is surely equally reasonable to conclude that what the company has achieved on behalf of the CF patient community thus far is amazing. No-one else has yet come close and the world is demonstrably a better place with Vertex in it. It is also entirely fair to conclude that the New York Times could have explained all of the issues raised by its article in a more balanced way, but there again one could cynically observe that “big pharma is evil” stories have always sold well.

In all likelihood, your ultimate view on all of this will come down to local access to the drugs. Try telling the parent of a child in, say, India, where children with CF still die at a young age that Vertex is “a good company”. Equally, try telling a parent in the US or the UK that it is “an evil company”.

So what should we do as responsible investors? Should we “cancel” Vertex and refuse to own the shares until the demands of this group are met? Whilst the “Guardian-reading, tofu-eating wokerati” would doubtless applaud, we think this would be a ridiculous stance to take.

The correct one is to engage with the company when appropriate to emphasise our wish that they do more on medical access, whilst also recognising that we (Bellevue) own only 1% of the share capital so our voice is but one of many at the table and also recognising that many of the concerns Vertex expresses around subjects like compulsory licensing and pricing are valid.

Whilst we would not ordinarily comment on our ESG interactions with investee companies, in this case we will confirm that we have spoken with Vertex about the VertexSaveUs campaign, the NY Times article and its ongoing progress around improving medical access and how all of this is (or rather is not) captured in third party ESG analyses.

The future is bright

Let us come back to an earlier part of this debate. Vertex exists. It is an American company, funded by that academia-to-VC gravy train that keeps churning out cutting edge healthcare solutions. Would this have happened elsewhere? We will never know, but the odds seem short and lest we forget, CF was well characterised for decades before these drugs came to market.

Nobody else got there. If the incentives were different, would the results be different? This is more than an idle thought experiment, it is one that could have profound consequences for the future of medicine.

As noted previously, Vertex has invested a huge proportion of the profits from these drugs into R&D. Regular readers will know our sceptical views on the scalability and reproducibility of pharmaceutical R&D and we are happy to admit that we were cautious on the outlook for the company beyond CF in the early years of the Trust.

We are also happy to admit that we changed our mind some time ago and have been impressed at the considerable progress the company seems to be making in some really socially important areas of unmet need (non-opioid post operative pain relief and functional cures for Type 1 diabetes, sickle-cell anaemia and some types of severe kidney disease). It really is quite difficult not to admire its approach and, given the success-to-date, its demonstrable capabilities.

As a final comment, readers may be wondering what those oh-so-valuable ESG reports make of the controversy around global access to Vertex’ products. The answer is very little. The company gets an ‘A’ ESG rating and a few comments around the lack of plans to expand into emerging markets and no board level representation on “access to healthcare issues” and “engagement in non-exclusive voluntary licensing”, which is pretty common across the biotechnology sector.

As we have noted many times, there is no substitute for real analytical work and management engagement on such complex issues. You cannot outsource your way to a genuinely sustainable and responsible portfolio. Score one for the active fund managers.

We always appreciate the opportunity to interact with our investors directly and you can submit questions regarding the Trust at any time via:

As ever, we will endeavour to respond in a timely fashion and we thank you for your continued support during these volatile months.

Paul Major and Brett Darke