Trump Election Win Drives Huge Biotech Rally

NASDAQ up over 1% to 5248

The Trump biotech rally began at today’s opening up (IBB) 20 points to $280 then held to close  up 8.9% to $285. The XBI soared 10.4% to close at $63.8 near highs of day. The cloud of drug pricing concerns vanished because of the perception that with Trump elected regulations would be eased and government mandated pricing would not happen. Voting in California against Proposition 61 (53.8 %to 46.2%) also helped drug and biotech stocks as voters defeated the measure to rein in drug prices.

Before this rally biotech stocks were at the lowest levels of the year because of populist sentiment against high drug prices and concerns about top line growth after earnings were reported last week. We reviewed six large cap growth biopharma companies and felt they offered good long-term value. Many of these stocks soared today:

Abbvie (ABBV) up 6.5%.

Amgen (AMGN) up 5.76%.

BristolMyers (BMY) up 5.9%.

Celgene (CELG) up 10.7%.

Gilead Sciences (GILD) up 5.98%.

XLV up 3.4%.

Moreover smaller cap more speculative biopharmaceutical companies soared in a totally green screen. Notable mid-cap movers were: Alnylam (ALNY) up 10%, Incyte (INCY) up 12% and Seattle Genetics (SGEN) up 16.4%. Mid-cap biotechs are the usual suspects for M&A.

This is not the end of the drug pricing rhetoric and with Trump promising to repeal the Affordable Care Act (ACA) volatility in the sector will continue.The healthcare sector will have winners and losers under Trump. Hospital stocks were down across the board 10-20% with the realization that government support for ACA to hospitals will diminish. However it is likely that ObamaCare (ACA) will not be completely repealed rather unravelled by changes over time.

M&A will soon be back in the news because of a softer regulatory environment and the need for larger biopharma companies to create growth. The potential of higher interest rates should move  M&A deals sooner.

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