SGH Medical Technology Fund – Quarterly Update
March quarter 2024, Rory Hunter
Key performance drivers*
The SGH Medical Technology Fund delivered a flat return for the quarter.
The small medical device exposures in the portfolio continued to drag on performance as, our investors would know, the hospital budgets have been significantly constrained since the onset of the pandemic. We’re still waiting to see a recovery in this area as that’s really pushing out procurement times for medical device companies.
Offsetting that, we had strong performance from a number of the individual small biotechnology exposures in the fund, to name a few – Dimerix (ASX: DXB) which has an asset that treats kidney inflammation disease. They had an interim readout of their phase three trial and that data was positive. The stock performed strongly on the back of that.
Another example is Botanix Pharmaceuticals (ASX: BOT). Botanix has an asset which treats hyperhidrosis, which is the medical term for excessive sweating. They are running into an DA decision on the approval of that asset mid-year. And the market is starting to pay attention to the significant opportunity that may become available to them as a result of positive decision.
Our investors will recall that we raised some cash in the portfolio, following a strong couple of quarters of returns and this increased our cash position to about 15%.
We’ve now started to reallocate some of that capital to opportunities we’re seeing at the smaller end of the market.
We’ve seen some quite positive market sentiment in the broader market over the month, which led to increased capital markets activity and some of those smaller stocks in the healthcare sector have started to look to patch up their balance sheet and looking to raise capital on some quite favourable returns. We see some quite good opportunities as a result and we’re starting to allocate some of that capital into those opportunities.
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*The text has been edited for clarity.
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