Biotech Stocks Jump as Donald Trump Clinches Presidency in Major Upset

November 9, 2016
By Alex Keown, BioSpace.com Breaking News Staff

WASHINGTON – The reality of a President-elect Donald Trump has been a shot in the arm for some biotech stocks as prices surged in European markets while election results were being digested in the United States. Healthcare investors seemed buoyed by a Trump presidency, which is not seen as likely to mandate drug pricing controls as a Clinton presidency would likely have done.

While the prospect of a Trump presidency sent Dow futures down hundreds of points Tuesday night, individual biotech stocks jumped, as did the iShares Nasdaq Biotechnology exchange-traded fund. Shares of Roche and Novo Nordisk jumped about 4 and 6 percent respectively, while the iShares, which includes stocks like Gilead Sciences, Celgene and Biogen, was up about 4 percent, although it remains down about 20 percent over the year. Shares of other pharma companies, such as AstraZeneca and GlaxoSmithKline rose between 2.5 and 4 percent, Reuters reported.

In an early morning research note, RBC biotech analyst Michael Yee told The Street that a Trump presidency, backed by a Republican-controlled Congress, is likely not to focus on drug pricing, but also less likely to reform Medicare prescription programs. All of that said though is with a caveat because biotech investors could feel a negative impact if Trump and the GOP Congress attempt to repeal the Affordable Care Act (ACA). The Street’s Adam Feuerstein said a repeal of the ACA, more commonly known as Obamacare, would lead to fewer insured Americans and fewer prescription drugs being prescribed as a result. Trump has said his plans included a “repeal and replace” of Obamacare, which will leave the industry guessing what that means.

It wasn’t just a Clinton loss that helped biotech stocks. A California ballot initiative that would cap the amount California state agencies pay for prescription drugs was also defeated by 54 percent of voters. That initiative, called the “Drug Price Relief Act Initiative, was a voter-led initiative that would apply to “any program where the state is the ultimate payer for a drug, even if the state does not purchase the drug directly,” according to the language of the ballot initiative. It was an initiative that drug companies like Merck, Pfizer and Johnson & Johnson opposed, spending millions in opposition.

A Novo Nordisk spokesperson told Reuters that the company was pleased that the California ballot initiative was defeated, but said a Trump presidency at this point it still unpredictable when it comes to the future of the pharma industry.

Over the past year, the high cost of prescriptions has taken on a greater role in the public forums as Clinton and some of her colleagues, such as U.S. Sen. Bernie Sanders, have decried the rising costs of drugs. During the Democratic primary race, Clinton said if elected she would look at capping the price of prescription drugs, which sent stocks tumbling at the time.

Trump was not as vocal about capping prices, but has called for the federal government-supported prescription programs to negotiate drug prices. He said such a maneuver could save up to $300 billion, annually.

While investors may be happier about a Trump presidency, a number of pharma executives were solidly behind Clinton. A recent survey of 100 biotech executives conducted by Endpoints revealed that 65 percent of the executives expressed support for Clinton, saying that despite her calls for price controls, she was preferable for the industry. While not openly endorsing a Clinton presidency, executives seemed to think she would have a greater grasp of the issues and challenges facing the industry as a whole.

Throughout the last months of the campaign Trump did have some inside support from a pharma executive. Rich Bagger, executive vice president of corporate affairs and market access at Celgene, left the company to work for the Trump campaign in July. Bagger has extensive history in both the political arena and life sciences industry and it seems likely that his role with the Trump transition team will be to devise policies that may impact the industry.