Less stringent requirements in pharmaceuticals and biotechnology could help by prompting accelerated drug approvals.
The SPDR S&P Biotech ETF ($XBI) has gained 9.2% for the year-to-date period compared to the 25%+ gain for the S&P 500 Index. The iShares Biotechnology ETF ($IBB), which has a relatively higher proportion of mid- and large-cap stocks, has also added under 10% so far this year.
The underperformance takes away the sheen of the industry’s defensive credentials.
R&D momentum slowed during the year, as is evident from the new molecular entity approvals, which number 38 so far this year compared to 47 for the same period last year.
Most biotech companies operate deep in the red for a very long time until they could begin commercializing products. They rely on debt financing which came to be expensive in an elevated interest rate environment.
Morgan Stanley Head of Policy Monica Guerra said in a recent note that deregulation is likely to be a major theme expected during the second term. “Less stringent requirements in pharmaceuticals and biotechnology, meanwhile, could help those industries by prompting accelerated drug approvals,” she said.
BMO Capital Markets analyst Evan Seigerman said the election results are “modestly positive” for the biopharma sector, according to FiercePharma. The analyst sees potential deprioritization of the Internal Revenue Service, likely less Federal Trade Commission interference, and lower corporate taxes.
Jefferies analysts does not expect the proposed drug pricing reforms to pass as the Republican legislators are divided over the proposals.
Moderna, Inc. ($ MRNA): 107,109 watchers
Novavax, Inc. ($NVAX): 101,846
Pfizer, Inc. ($PFE): 99,425 watchers
iBio, Inc. ($IBIO): 93,617 watchers
Inovia Pharma, Inc. ($INO): 93,414 watchers
Jaguar Health ($JAGX): 81,859 watchers
Gilead Sciences, Inc. ($GILD): 77,094 watchers
Vaxart, Inc. ($VXRT): 75,807 watchers
Tonix Pharmaceutical Holding Corp. ($TNXP): 72,666 watchers
Sorrento Therapeutics, Inc. ($SRNE): 68,474 watchers
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