Worldwide Health swaps Lilly for Merck

Worldwide Health swaps out Lilly for Merck

OrbiMed-managed Worldwide Healthcare Trust (WWH) appears to have boosted its shareholding Merck & Co at the expense of Eli Lilly over the last few weeks, according to its latest update (see factsheet).  Merck, which was outside the trust’s top 10 holdings in December, now ranks as the trust’s largest investment at 4.3% of NAV, while Lilly – previously in fourth place – has now dropped out of the top 10, as of end-January. Both changes are of a magnitude that can not be explained by short-term share price movements.

Meanwhile, Biogen is another new entry into the Worldwide Health’s top 10 at eighth position, although this may have come about as a result of the good performance of the stock. The trust also seems to have taken some profit on its stake in Intuitive Surgical, whose relative position has declined, despite a very strong ~18% – share price appreciation in the month.

Orbimed’s commentary highlighted BeiGene, a US-listed Chinese biotech, as the top contributor to performance in January. BeiGene stock was up by 42% in January on the back of growing appreciation of its pipeline assets, particularly the anti-PD-1 antibody tislelizumab, the BTK inhibitor zanubrutinib and PARP inhibitor pamiparib. All three candidates are now entering – or have recently entered – pivotal trials. The largest detractor in the month was Puma Biotechnology,  which saw an EU rejection of its breast cancer drug, Nerlynx (neratinib). Puma stock fell by 34% in January, an impact that was also felt in the OrbiMed-managed Biotech Growth Trust (BIOG).

The swaping out of Lilly for Merck in the month presumably reflects OrbiMed’s assessment of the relative prospects for these two stocks and their valuation. Merck’s shares fell heavily in October and after a brief recovery in January are still at trading around 15% below the $63-66/share range established over the past year. Lilly’s by contrast were at a high until late January, but have since fallen. However, in addition to price changes, the decision is likely to reflect a bullish assessment by for the prospects for Merck’s high-profile anticancer drug Keytruda, which is largely driving the company’s investment case.

Merck has the leading agent among the five approved anti-PD-1 checkpoint inhibitors, with Keytruda used for melanoma, non small cell lung (NSCLC), head and neck, urothelial, gastric and microsatellite instability-high cancers as well as Hodgkin’s lymphoma. The drug is under regulatory review for renal cell carcinoma and in multiple registration trials alone and in various combination with approved and unapproved drugs. Merck last year seized the dominant position in NSCLC, the largest indication of any solid tumour type, with a surprise early regulatory approval for Keytruda in first line setting in the US. However, its failure to obtain a similar approval in the EU weighed heavily on its stock price last year. Nevertheless, in January this year, Merck disclosed that it had obtained a positive result in a confirmatory study, Keynote-189, in NSCLC, giving it a basis to file in the EU again. Among a host of pivotal study readouts due this year, Merck will also see the outcome of a separate Phase III study with a different chemo combination with Keytruda in the first line setting (Keynote-407).


Overall, the trust’s NAV was up 0.9% in January, while the share price declined 1.1%. Unusually, the shares currently trade at a small ~0.3% premium to NAV and the trust has been issuing shares to meet demand from investors. The trust’s benchmark MSCI World Health Care Index rose by 0.7% in January. The top ten holdings, as of end January, and the share price change of these stocks over the month and in the period from 1 -24 February is shown in the table below.


% NAV % Change, January % change, 31/1-24/2
Merck & Co 4.30% 5.3% -7.4%
Novo Nordisk 3.80% -7.6% -4.2%
Wright Medical 3.20% 4.2% -11.7%
Regeneron 3.20% -8.0% -6.3%
Boston Scientific 3.20% 12.8% -2.7%
Alexion 2.90% -0.2% -0.3%
Celgene 2.90% -3.1% -5.5%
Biogen 2.90% 9.2% -15.4%
Intuitive Surgical 2.70% 18.3% 0.4%
Cigna 2.60% 2.5% -5.0%


Worldwide Health swaps out Lilly for Merck

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