December was a tough month for equity markets, as angst over the outlook for 2023, an upsurge in long-term interest rates and year-end positioning led to volatile markets. Healthcare lived up to its defensive reputation and clearly outperformed broader markets, cementing 2022 as a year with a great relative performance for the sector. There were some shifts within the sector: big cap biotechnology succumbed to profit taking, although big pharma did well again, especially in Europe. Medical technology had a second good month, with names like Boston Scientific doing well. Hospital supply names like Becton Dickinson were also amongst the winners. It all felt a bit like the year-end squaring of positions. Amongst large pharma, Gilead, Merck and AstraZeneca put in impressive performances in 2022. We think this trend could be maintained in 2023. As for small-mid caps, the year-end was positive for Arcellx (ACLX) and Replimune (REPL), but there were no other winners. Ahead of ASHs meeting, ACLX announced: 1. a key partnership with Gileads Kite to co-promote its lead programme in r/r multiple myeloma, and 2. positive/competitive data. The stock was up 50%. December was a busy month, with multiple companies releasing datasets. ASH 2022 was the main meeting, with two main winners, ACLX and SNDX. Conversely, stocks like MRTX, RCUS, ACET and KURA were sold off following mixed data. Of note, initial clinical data from MRTXs Adagrasib in 1L mNSCLC were ok, but the stock was sold off as investors were expecting even better data. This negative sentiment on MRTX had not changed even following two positive pieces of news: 1. Adagrasib was approved as KRAZATI in the refractory NSCLC setting, and 2. KRAZATI got BTD in combination with Cetuximab in mCRC. Outside medical meetings, potentially game-changing data/news were released by Moderna (MRNA) for its cancer vaccine in adjuvant melanoma in collaboration with Merck & Co (MRK), which recently licensed the programme. In short, this new cancer vaccine candidate on top of the approved PD-1 inhibitor Keytruda (MRK) cut the risk of metastatic recurrence or death by a whopping 44% in high-risk patients, making these data clinically relevant. This could open the door to a broader use of adjuvant drugs and vaccines, lessening the risk of cancer recurrence after surgical removal (there are often micro metastasis that cause recurrence). Moderna initially gained, but in the end the rally faded. After ASH, Kymera (KYMR) presented some data with their 474 IRAK4 PROTAC; although the data were positive, it is still early to judge the merit of this mechanism of action. Overall, 4Qs uptick in M&A could continue into 2023 as small/mid caps continue to generate more mature as well as de-risked datasets. Horizon was finally acquired by Amgen in an all-cash transaction. After a great year of relative performance, where is the sector heading in 2023? There are many imponderables and moving parts to the economic outlook for 2023, but what we can say is that uncertainty is rife. A sector like healthcare looks well placed, with structural growth in demand due to demographics and only a minor economic impact on the demand side. Many stocks within the healthcare sector can be classified as GARP (growth at a reasonable price), and again as a style we would suggest this sits well with the uncertain outlook and rather high interest rates going into 2023. And, with all the hiccups that are part of the high tech innovation drive, new drugs and technologies will continue to emerge.