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5 Drug Stocks to Avoid as Trump Vows to Lower Drug Prices
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For those who thought that the pharma/biotech sector is in for an extraordinary run after Donald Trump’s unexpected victory, his latest vow to crack down on excessive drug price hikes comes as a bolt from the blue.
This year has been fraught with headwinds for the pharma/biotech sector. Global efforts toward health care cost containment created pricing pressure on drugs and market access. Notably, U.S. health care reforms under ‘Obamacare’ (officially known as the Affordable Care Act, or ACA) significantly increased the number of patients in the Medicaid program, which offers drugs at substantial discounts.
In many markets outside the U.S., government-mandated pricing actions led to the lowering of generic and patented drug prices. These factors had a material adverse impact on the sales and profits of pharma companies.
Meanwhile, democratic presidential candidate Hillary Clinton had pledged to find ways to curb rising drug prices and lower prescription drug costs for all Americans. As a result, Mylan Inc. drew immense flak for overpricing its popular allergy treatment, EpiPen. Valeant Pharmaceuticals International, Inc. was also hit hard by the pricing controversy, after its strategy of acquiring smaller companies and selling their drugs at higher prices became apparent. Many others like Horizon Pharma and Endo International would have been equally impacted if Clinton was elected and her proposal realized.
However, with Trump’s victory last month, the pharma/biotech industry saw a ray of hope. During his campaign, Trump was not as vocal as Clinton regarding drug pricing issues and the surging cost of treatments. It was naturally assumed that a Republican administration would be significantly lenient toward drug manufacturers’ pricing practices.
Thus, November saw the pharma/biotech stocks recover from the sharp selloff witnessed in the past one year. The Zacks classified Drugs industry gained 2% during the month, compared with a decline of 17.2% in the year-to-date period.
A similar trend was witnessed in the share price movement of companies like Celgene, Merck, Pfizer, Amgen, Bristol-Myers, Endo and Regeneron, all of which were in the green after the elections despite a year-to-date decline for most.
Notably, Trump’s publicly revealed intentions of dismantling and replacing Obamacare and freeing up cash currently held overseas for tax reasons made him immensely popular in the industry. However, he doesn't seem to like price hikes as much.
In a recent interview with Time magazine, the President-elect clarified that he plans to lower drug prices, suggesting some stock analysts may have “misread his intentions.”
This dealt a significant blow to the shares of almost all pharma/biotech stocks on Wednesday. iShares Nasdaq Biotechnology ETF (IBB - Free Report) , which had gained 9% on the day after the elections, was down almost 3.0%.
Big names like Celgene, Biogen, Mylan and Vertex Pharmaceuticals declined around 4%, while Amgen, Regeneron, Bristol-Myers and AbbVie, lost in the range of 1–3%.
Steer Clear of These 5 Stocks
Although most pharma/biotech stocks saw their share prices slipping yesterday, here are five stocks that should definitely be avoided for now.
Shares of the Indianapolis, IN-based healthcare company dipped around 1% on Wednesday. Recently, the company’s shares took a hit after its high-profile investigational Alzheimer’s disease drug, solanezumab, failed to meet the primary endpoint in a late-stage study. The Zacks Rank #4 (Sell) company has seen its share price tumble 20% so far this year and 9% post elections.
Mylan N.V.
Shares of the generic-focused pharmaceutical company crashed 3.8% on Wednesday. The company has a Zacks Rank #5 (Strong Sell) as it continues to face headwinds related to the pricing of EpiPen. Its share price has slumped 36.2% so far this year and 7% post-elections.
Valeant Pharmaceuticals International, Inc.
Shares of this Zacks Rank #5 company dropped 3.5% on Wednesday. The specialty pharmaceutical and medical device company has been in the spotlight for all the wrong reasons in recent times like the price hike of specialty drugs, erroneous financial reporting, and termination of important contracts. Valeant’s share price has plunged 85.2% so far this year despite a turnaround post elections.
This Dublin, Ireland-based biopharmaceutical company saw its shares fall 4.7% yesterday. The Zacks Rank #4 company’s share price has tanked 30% year to date, even though the elections spurred a recovery.
Shares of the Zacks Rank #5 company declined 4.5% on Wednesday. This specialty biopharmaceutical company’s share price has plummeted 33.7% so far this year and 4.6% post elections.
Irrespective of Trump’s subsequent actions, pricing and affordability of prescription drugs will remain a topic of discussion among policymakers, the media and the general public. Thus, for obvious reasons, we expect continued volatility in this sector in 2017.
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5 Drug Stocks to Avoid as Trump Vows to Lower Drug Prices
For those who thought that the pharma/biotech sector is in for an extraordinary run after Donald Trump’s unexpected victory, his latest vow to crack down on excessive drug price hikes comes as a bolt from the blue.
This year has been fraught with headwinds for the pharma/biotech sector. Global efforts toward health care cost containment created pricing pressure on drugs and market access. Notably, U.S. health care reforms under ‘Obamacare’ (officially known as the Affordable Care Act, or ACA) significantly increased the number of patients in the Medicaid program, which offers drugs at substantial discounts.
In many markets outside the U.S., government-mandated pricing actions led to the lowering of generic and patented drug prices. These factors had a material adverse impact on the sales and profits of pharma companies.
Meanwhile, democratic presidential candidate Hillary Clinton had pledged to find ways to curb rising drug prices and lower prescription drug costs for all Americans. As a result, Mylan Inc. drew immense flak for overpricing its popular allergy treatment, EpiPen. Valeant Pharmaceuticals International, Inc. was also hit hard by the pricing controversy, after its strategy of acquiring smaller companies and selling their drugs at higher prices became apparent. Many others like Horizon Pharma and Endo International would have been equally impacted if Clinton was elected and her proposal realized.
However, with Trump’s victory last month, the pharma/biotech industry saw a ray of hope. During his campaign, Trump was not as vocal as Clinton regarding drug pricing issues and the surging cost of treatments. It was naturally assumed that a Republican administration would be significantly lenient toward drug manufacturers’ pricing practices.
Thus, November saw the pharma/biotech stocks recover from the sharp selloff witnessed in the past one year. The Zacks classified Drugs industry gained 2% during the month, compared with a decline of 17.2% in the year-to-date period.
A similar trend was witnessed in the share price movement of companies like Celgene, Merck, Pfizer, Amgen, Bristol-Myers, Endo and Regeneron, all of which were in the green after the elections despite a year-to-date decline for most.
Notably, Trump’s publicly revealed intentions of dismantling and replacing Obamacare and freeing up cash currently held overseas for tax reasons made him immensely popular in the industry. However, he doesn't seem to like price hikes as much.
In a recent interview with Time magazine, the President-elect clarified that he plans to lower drug prices, suggesting some stock analysts may have “misread his intentions.”
This dealt a significant blow to the shares of almost all pharma/biotech stocks on Wednesday. iShares Nasdaq Biotechnology ETF (IBB - Free Report) , which had gained 9% on the day after the elections, was down almost 3.0%.
Big names like Celgene, Biogen, Mylan and Vertex Pharmaceuticals declined around 4%, while Amgen, Regeneron, Bristol-Myers and AbbVie, lost in the range of 1–3%.
Steer Clear of These 5 Stocks
Although most pharma/biotech stocks saw their share prices slipping yesterday, here are five stocks that should definitely be avoided for now.
Eli Lilly and Company (LLY - Free Report)
Shares of the Indianapolis, IN-based healthcare company dipped around 1% on Wednesday. Recently, the company’s shares took a hit after its high-profile investigational Alzheimer’s disease drug, solanezumab, failed to meet the primary endpoint in a late-stage study. The Zacks Rank #4 (Sell) company has seen its share price tumble 20% so far this year and 9% post elections.
Mylan N.V.
Shares of the generic-focused pharmaceutical company crashed 3.8% on Wednesday. The company has a Zacks Rank #5 (Strong Sell) as it continues to face headwinds related to the pricing of EpiPen. Its share price has slumped 36.2% so far this year and 7% post-elections.
Valeant Pharmaceuticals International, Inc.
Shares of this Zacks Rank #5 company dropped 3.5% on Wednesday. The specialty pharmaceutical and medical device company has been in the spotlight for all the wrong reasons in recent times like the price hike of specialty drugs, erroneous financial reporting, and termination of important contracts. Valeant’s share price has plunged 85.2% so far this year despite a turnaround post elections.
Alkermes plc (ALKS - Free Report)
This Dublin, Ireland-based biopharmaceutical company saw its shares fall 4.7% yesterday. The Zacks Rank #4 company’s share price has tanked 30% year to date, even though the elections spurred a recovery.
Emergent BioSolutions Inc. (EBS - Free Report)
Shares of the Zacks Rank #5 company declined 4.5% on Wednesday. This specialty biopharmaceutical company’s share price has plummeted 33.7% so far this year and 4.6% post elections.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conclusion
Irrespective of Trump’s subsequent actions, pricing and affordability of prescription drugs will remain a topic of discussion among policymakers, the media and the general public. Thus, for obvious reasons, we expect continued volatility in this sector in 2017.
Confidential from Zacks
This week, Zacks researchers have named 7 other stocks that look to break out even sooner than today's Bull of the Day. You can see these time-sensitive tickers free, and access additional trades that are not available to the public. Simply click here>>