Baron Health Care Strategy

Eli Lilly and Company (LLY) is a multinational pharmaceutical company developing drugs in diabetes, oncology, immunology, and neuroscience. Its top-selling drugs include Mounjaro/Zepbound, Trulicity, Humalog, Alimta, Taltz, Humulin, and Jardiance.
We are investors in Lilly given its focus on industry-leading growth categories like diabetes, obesity, and oncology. Leading GLP-1 drugs Mounjaro/Zepbound offer superb blood sugar control for diabetics, can drive 20%-plus weight loss in obese patients, and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients. We think GLP-1 drugs will become the standard of care for both diabetes and obesity, representing a $150 billion-plus market. We believe Lilly could triple revenues and achieve double-digit EPS growth by 2030.

UnitedHealth Group Incorporated (UNH) is a diversified health and well-being company with almost $400 billion in revenue that operates across four segments: United Healthcare, Optum Health, OptumInsight, and OptumRX. The company serves 134 million individuals in all 50 states and more than 125 countries.
At twice the size of the next largest health maintenance organization by revenue, UnitedHealth is the leading health care franchise in the U.S. We believe it should continue to see strong growth and profitability, driven by positive demographic trends and its ability to manage costs by leveraging its size and scale, continuing its industry-leading technology investments, expanding its expertise in population health, and growing its portfolio of providers, all of which enables it to keep and effectively manage more of its health care spending in-house.

Intuitive Surgical, Inc. (ISRG) manufactures and markets the da Vinci Surgical System, a robotic surgical system used for minimally invasive surgical procedures.
We believe a large number of medical procedures that are currently performed using open surgery will eventually be performed using Intuitive Surgical’s da Vinci System. Robotic surgery is less invasive than open surgery, and patients experience less blood loss, less nerve damage, reduced pain, and faster recovery. Intuitive generates a large and expanding portion of its revenue from recurring procedures. We expect revenue and earnings to grow at attractive rates as procedure volumes increase.

Argenx SE (ARGX) is a biotechnology company developing antibodies for the treatment of autoimmune disorders. The company is in the early years of the commercial launch of its drug Vyvgart, which promises to change the treatment paradigm for a host of autoantibody immune disorders.
Argenx's main product, efgartigimod, which treats a rare muscle weakness disorder, has potentially broad applicability in ameliorating overactive antibody-based diseases. Efgartigimod is a true "pipeline in a product," where the product itself is the platform, as it has the potential to be used against a diverse range of diseases – something that is rarely achieved in the biotechnology space. We expect the share price to increase as argenx proves its product’s effectiveness in multiple autoantibody disorders.

Boston Scientific Corporation (BSX) is a global developer, manufacturer, and marketer of medical devices used in a broad range of interventional medical specialties.
We believe Boston Scientific's organic revenue growth rate will accelerate to high single digits, driven by new product launches, which, in turn, should allow it to expand margins by 50 to 100 basis points per year and earnings by double digits. We think the combination of top-tier, accelerating revenue growth and double-digit earnings growth will drive attractive returns in the years ahead.

Vertex Pharmaceuticals Incorporated (VRTX) is the leader in cystic fibrosis (CF) treatment. Vertex has three approved and marketed drugs, each for treatment of differing subsets of CF. These drugs represent paradigm shifts for CF patients hoping to extend their lives beyond their 30s or 40s.
We believe Vertex can grow revenue and earnings in the double digits upon approval of expanded access to its drugs in Europe. Vertex has been in the enviable position of growing its balance sheet every year. It recently completed a $4.9 billion acquisition of Alpine Immune Sciences and its BAFF/APRIL inhibitor in a kidney disorder named IgAN, materially increasing its addressable market. Longer-term success will depend on its development of a novel pipeline targeting sickle cell anemia and similar diseases, pain, rare kidney diseases such as APOL1, or cell therapies for Type 1 diabetes.

Thermo Fisher Scientific Inc. (TMO) is the world's largest life sciences tools company. Thermo Fisher provides analytical instruments, laboratory equipment, software, services, consumables, and reagents for life sciences research, manufacturing, analysis, discovery, and diagnostics.
Thermo Fisher's $240 billion addressable market is growing 4% to 6% due to favorable demographics, scientific advances, new technology, and increased regulations. Management expects to grow revenue on an organic basis by 7% to 9% annually, driven by share gains and exposure to high-growth segments of the market. Competitive advantages include industry-leading scale, commercial infrastructure, an e-commerce platform, supply chain capabilities, and R&D investment. The market is fragmented, offering opportunities to create shareholder value through M&A.

Arcellx, Inc. (ACLX) is a biotechnology company focused on cellular therapy. The company has a partnership with Kite, Gilead's cellular development/distribution unit that is widely considered state of the art in the industry.
Arcellx is developing a next-generation BCMA-targeted cell therapy (CAR-T) for multiple myeloma. We believe BCMA CAR-Ts could successfully transform treatment of this disease, which we estimate represents a $10 billion-plus market. Legend Biotech's competitive drug, Carvykti, sets a high efficacy bar but has some neurological side effects. Arcellx's drug has the potential for similar or better efficacy with a cleaner side-effect profile. We expect to see initial pivotal data in late 2024, and we could see first approval as early as year-end 2025.

Stryker Corporation (SYK) is one of the world's leading medical technology companies, well known for its orthopedic implants and the Mako robotic system. It also offers a portfolio of medical, surgical, and neurovascular products.
We see Stryker as a high-quality compounder and anticipate long-term high-single-digit revenue growth and double-digit EPS growth. It is a leading innovator, with new product launches including the 1788 camera for enhanced endoscopy imaging, System 9 power tools, and Insignia muscle-sparing implants. We believe Stryker is poised to benefit from the growing shift of orthopedic procedures from hospitals to ambulatory surgical centers, where it is well positioned to leverage its unique Mako robotic system.

Danaher Corporation (DHR) is a leading manufacturer in the life sciences and diagnostics markets.
The company's key advantage is the Danaher Business System (DBS), designed to continuously improve performance in the areas of quality, delivery, cost, growth and innovation. Through acquisitions, Danaher has built the leading business in bioprocessing, with a broad and diverse portfolio spanning the entire workflow. On the diagnostics side, Cepheid has become a gold standard for molecular testing at the point of care. We think Danaher is well positioned for growth as a pure-play life sciences and diagnostics company following the 2023 spin-off of an unrelated segment.

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