Even as multiple plans have been put forth by federal lawmakers to address drug pricing, including the legislation passed by the House earlier this month, some analysts do not think biotech stocks will be as volatile heading into the 2020 election.
With lawmakers debating government control of pricing on some prescription plans and the White House proposing the allowance of certain prescription drugs to be imported from Canada, investors are carefully watching the stock market ahead of the 2020 election to see if drug companies will take a hit.
The 2016 presidential elections sent biotech stocks on a roller-coaster ride. It began in 2015 when Democratic candidate Hillary Clinton tweeted during her bid for the White House that she would lay out a plan to address price gouging in pharma. Her statement, announced on Twitter, was in response to Martin Shkreli’s Turing Pharmaceuticals 5,000% price hike for Daraprim, a treatment for toxoplasmosis. Then, the next year following his electoral victory, Donald Trump sent stock prices reeling when he said he did not like what he was seeing with drug prices and intended to do something about it. His comments, a little more than three years ago, sent the iShares Nasdaq Biotechnology exchange-traded fund down nearly 3%.
Even as multiple plans have been put forth by federal lawmakers to address drug pricing, including the legislation passed by the House earlier this month, some analysts do not think biotech stocks will be as volatile heading into the 2020 election. An analysis from The Wall Street Journal points out that the Nasdaq Biotechnology Index grew about 25% over the past year, with the majority of the gains coming in the last three months of 2019. The index outperformed the market by 13 percentage points over the past three months, the Journal said.
That growth is likely to continue into the new year, in part due to the number of novel drugs approved by the U.S. Food and Drug Administration over the past year – 48 so far. Another indication that the sector should continue to flourish is the M&A activity that has been seen over the past year. That activity was highlighted by a number of mega-deals, including Bristol-Myers Squibb’s $74 billion acquisition of Celgene and AbbVie’s $63 billion purchase of Allergan. Not to mention a number of other smaller deals, including Merck’s recent deal for ArQule and Sanofi’s acquisition of Synthorx. As the Journal notes, those two deals represented a premium of at least 100% from the previous trading day.
With the J.P. Morgan Healthcare Conference on the horizon, it’s likely more deals will be announced to start the new year, the analysis reminds.
