Trump Is the Best Thing for Biotech Stocks Despite Market Denial
Should You Buy Biotech Stocks in 2017?
The relationship between Donald Trump and biotech stocks is fraught with complications, but it doesn’t mean that biotech stocks are doomed. In fact, the opposite may be true.
The biotech stocks index could surge under a Trump Administration. Forget what the bears are saying. They aren’t hunting for the best biotech stocks under Trump. Many of them are living in the past, focusing on what President Trump said at a January press conference.
“Our drug industry has been disastrous, they’re leaving left and right,” he said. “They supply our drugs but they don’t make them here, to a large extent. And the other thing we have to do is create new bidding procedures for the drug industry, because they’re getting away with murder.” (Source: “Trump’s Comments Are Big Pharma’s Nightmare,” Forbes, January 11, 2017.)
This quote sent biotech stocks into a tailspin.
Chart courtesy of StockCharts.com
“Disastrous” and “getting away with murder” are not positive statements. Bears continually bring these quotes up as evidence that Trump is against biotech stocks. But they completely ignore Trump’s actions, which are often friendly to the biotech industry.
I’ll take actions over words any day of the week.
Does it really matter if Trump gave a populist speech to voters? At the end of the day, he is a “corporate” president. The policies he advocates are more likely to favor businesses than individuals, because he believes in top-down economics. He wants corporations to succeed.
If you want proof, look no further than his pick to run the U.S. Food & Drug Administration: Dr. Scott Gottlieb. Gottlieb is our big indicator for the best biotech stocks under Trump.
Gottlieb lives for deregulation. He wants to streamline FDA approvals by speeding up the clinical trials and review processes that biotech stocks need to go to market. This should be music to investors’ ears.
Investing in biotech is often about events such as regulatory decisions or the result of clinical trials. The uncertainty of these events can drag down share prices and increase volatility. But if the Donald Trump policies loosen the FDA process, we could see those risks diminish.
Politics aside, Trump may spark a massive bullish run on biotech stocks in 2017.
Who Is Scott Gottlieb?
As a trained physician, Gottlieb is fluent in medical jargon. He also served as Deputy Commissioner for the FDA under President George W. Bush, meaning that he’s familiar with the agency’s day to day activities. He’s not a nobody from nowhere.
Gottlieb has even ventured out of the relatively safe waters of government to work in the private sector. He sits on the boards of five different companies.
It may not surprise you to know that all five are pharmaceutical companies.
He’s also made $400,000 in consulting work between 2013 and 2015. Consulting for whom, you ask? Well, big pharma of course. We know this because of an Obamacare provision that tracks financial dealings between physicians and pharmaceutical companies.
Here’s a list of the companies that paid him.
|
SCOTT GOTTLIEB — FINANCIAL DEALINGS |
||
|
2013 |
2014 |
2015 |
|
Vertex Pharmaceuticals Incorporated |
GlaxoSmithKline plc |
Vertex Pharmaceuticals Incorporated |
|
Novo Nordisk A/S |
Vertex Pharmaceuticals Incorporated |
GlaxoSmithKline plc |
|
Pfizer Inc. |
Astrazeneca Pharmaceuticals |
Daiichi Sankyo Inc. |
|
Salix Pharmaceuticals, Ltd. |
Baxter Healthcare |
E.R. Squibb & Sons LLC |
| — |
E.R. Squibb & Sons LLC |
Valeant Pharmaceuticals |
|
$53,840.29 |
$159,932.53 |
$199,951.12 |
(Source: “Scott Gottlieb, Allopathic & Osteopathic Physicians,” Open Payments, last accessed March 14, 2017.)
Everything to do with Gottlieb is golden for biotech stocks.
He is the best friend I could imagine them having in government. A Mizuho Securities USA Inc. survey polled 53 drug companies to gauge their impression of Gottlieb—72% think he’s great.
The icing on the cake is that his confirmation path looks smooth. Even the staunchest of Democrats think he’s qualified to do the job, so they won’t fight his confirmation as hard as they did Betsy DeVos or Scott Pruitt. This means an easing of FDA policies is all but guaranteed.
What Are the Biotech Stocks to Buy Under Trump?
Do you know how much it costs to make a new drug in the U.S.?
Approximately $2.6 billion and 10 years of your life. That is the average time needed for a biotech company to satisfy FDA guidelines.
Can you imagine the rally in biotech stocks in 2017 if those numbers were squeezed down to, say, $1.3 billion and five years? Because that is quickly becoming reality.
We are literally on the cusp of a triple-digit bull market for biotech stocks.
One way to play this trend is by investing in a biotech stocks index fund. There are a lot of great biotech ETFs on the market, like the iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), that will serve you well. But if you’re looking for equities, check out our biotech stocks list below.
|
BIOTECH STOCKS LIST |
||
|
Symbol |
Company |
Share Price |
|
SRPT |
Sarepta Therapeutics Inc |
$30.16 |
|
CARA |
Cara Therapeutics Inc |
$14.71 |
|
ARRY |
Array Biopharma Inc |
$11.00 |
All three of these stocks are in the later stages of clinical trials. If their path to commercialization is greased by a friendlier FDA, then so be it. It only means they will start to earn shareholders back their money several times over. Wouldn’t that be amazing?
1. Sarepta Therapeutics Inc
According to several reports, there was a major disagreement within the FDA about Sarepta Therapeutics Inc (NASDAQ:SRPT). The company was testing a drug that could treat Duchenne muscular dystrophy, a debilitating disease that targets children.
Some within the FDA wanted to grant approval, while others were reluctant. Eventually the “yays” won the vote, sending SRPT stock soaring by 90%. The share price has since pared those gains, but a faster and more lenient FDA could reignite a bullish run. (Source: “Sarepta shares surge 90% on FDA approval,” Financial Times, September 19, 2016.)
Chart courtesy of StockCharts.com
This chart reeks of market denial. How can a stock’s fortunes drop so dramatically a week after it gains FDA approval? It simply doesn’t make sense. We are keeping a close eye on this stock to see whether its momentum turns one more time.
2. Cara Therapeutics Inc
Opioid drug abuse is rampant across the United States. The situation is so bad that Maryland Governor Larry Hogan declared a state of emergency. Cara Therapeutics Inc (NASDAQ:CARA) might, in some small way, help solve this emerging crisis.
Its “CR845” drug is unlike traditional painkillers. Rather than giving the user a high to distract from their suffering, it actually targets the source of the pain. This makes it much less addictive and more likely to help patients live full and happier lives.
There are still a few kinks to work out, but what’s more important is that three million Americans in desperate need of help. Since the entire point of the Donald Trump policies is to cut away the red tape, we could see CR845 slip onto an FDA fast track.
I should add that CARA stock has been on fire during the last year. It racked up 192% gains in just 52 weeks, which is impressive by any standard. That said, the company’s market cap is still modest. We wouldn’t be surprised if CARA stock continued its winning streak through 2017.
Chart courtesy of StockCharts.com
3. Array Biopharma Inc
Need another big winner in your portfolio? Array Biopharma Inc (NASDAQ:ARRY) delivered 279.31% growth to its very lucky shareholders over the last 12 months.
However, none of its drugs are available to the public yet. The rise in ARRY stock was entirely due to clinical trials that showed its amazing success against standard chemotherapy. Oh, perhaps I forgot to mention that Array is in the business of treating cancer.
It is trying to extend and improve the quality of life for melanoma patients, which I’m sure we can agree is a noble cause. Right now, patients don’t have access to its drugs, despite the fact that it halted tumor progressions 3.4 times longer than those on traditional chemotherapy.
It’s easy to imagine a free-choice-loving Gottlieb changing the rules. Why shouldn’t people get access to experimental treatments? That would be the logic behind such a shift. If this transition happens for biotech stocks in 2017, we could see more triple-digit gains in ARRY stock.
Chart courtesy of StockCharts.com
Conclusion
Some people might look suspiciously on Trump’s policies towards biotech stocks, because they appears to contradict his past statements. But as I said before: Trump is a capitalist. He usually lands on the free-market side of the argument, which is also where Gottlieb happens to be.
Gottlieb’s plan for faster and flexible FDA approvals has biotech companies in the driver’s seat.
He believes that open competition, with a minimal amount of government intervention, yields the best result. Trump is mostly in the same camp, despite what he says to rooms full of voters.
Don’t forget that he cut his teeth in New York City construction. He hates red tape, which is why the best biotech stocks under Trump hinge on FDA approval.
Trump’s comments about “new bidding procedures” were just a publicity stunt. The media speculated that he would try to negotiate a deal for lower drug prices. But Trump’s healthcare plan, the American Health Care Act, doesn’t deal with drug prices.
Once again, Trump’s actions speak much louder than his words. There is no attempt to curtail the profitability of biotech stocks. Quite the contrary, in fact. The biotech industry is getting a massive tailwind from Donald Trump policies, yet no one seems to be paying attention.
But that’s nothing to complain about biotech stocks in 2017. More gains for the rest of us, I suppose.
