Since the new president of the United States has been elected, it is time for the insiders of the biotech industry – both decision-makers and scientists – to begin their process of the possible fallout after the election. Up until November 9th, the next president-elect had been determined, the concession speech by Senator Hillary Clinton had been delivered, and the stock markets have stabilized slightly amid the initial fluctuations in the morning.
While Mr. Trump is well known, especially in the community of scientific research, for his scepticism on climate changes (which will not be discussed here), it may not be that easy to present a rudimentary glimpse into his general attitudes on biotech and related industries.
Here, I will summarize the recent and immediate responses from biotech and related industries on Trump’s presidency, using data and information that are publicly available. We have to assume that Mr. Trump is going to follow his claims and promises (which is, conceivably, not guaranteed regardless of whom is in the White House).
For Mr Trump’s first day as president-elect, the biotech and healthcare-related stock market gave out mixed signals.
How the Biotech and Pharmaceutical Industry Reacted
In the field of the biotech and pharmaceutical industry, the iShares Nasdaq Biotechnology ETF (IBB) and iShares US Pharmaceutical ETF (IHE) both gave out strong positive signals, soaring up 7% and 5.3% respectively in a single day. Such a leap could, at least partially, contribute to the Trump Contract with America that promises to speed up new drug approval process and “cutting the red tape” of over 4,000 drugs awaiting approval at the FDA.
In addition to the industry, drug wholesalers such as McKesson (MCK) and Amerisource Bergen (ABC) also enjoyed more than 5% in the increase, a stark response to the support of high drug prices and repeal of branded drug taxes that forms part of the Republican campaign messages. Moreover, biotech companies such as Celgene (CELG.O) also sprinted 10.4%, reflecting a positive effect on both R&D as well as the retail market.
The Healthcare Service Industry Suffering From Day One
However, such benefits are not shared with the healthcare service sector, such as hospitals and a portion of health insurers, for their practical concern of an anticipated Obamacare repeal. Health service providers such as Tenet Healthcare (THC) had a massive 27% drop in their share value and LifePoint Health (LPNT) a 12% drop. Healthcare insurers, in particular those with broad market focus on Medicaid, also suffered significant losses, as Centene (CNC) and Molina Healthcare (MOL) suffered an 18% reduction each.
What Can the Biotech Industry Expect After Such a Difficult Year?
In retrospect, the whole election season has been brutal to biotech stocks as well as their associated companies. Seeking recovery from a steep bear market, they have reduced the total market value of approximately 25% within the last year. Such a harsh winter for the biotech industry, to a significant extent, reflects the concerns of investors on the potential measurements that a Clinton Administration may impose, including, but not limited to, further regulations on limiting drug approvals and the ability of pharmaceutical companies to set drug prices, and additional branded drug tax.
The branded drug tax is assumed to be exceptionally harmful to start-up biotech companies, for their reliance on patent protection and setting a higher price tag to recover R&D costs. By contrast, as mentioned above, the Trump campaign pledged to simplify regulations imposed on biotech/pharmaceutical industries. At the very least, Mr. Trump’s business background (as well as his rhetoric claims during the election campaign) imply that when making policies for the biotech industry, his administration could be more amiable than Senator Clinton would have been.
In sum, this divisive, muddled, and nevertheless surprising election will not be the end of the world. Rather, opportunities lurk in chaos and calmly wait for the right person and timing to sprint forward.
