Biotech Market Update – October 2, 2015

| October 2, 2015

Biotech Market Update

It’s been an ugly week for biotech companies.

You may have heard Hillary Clinton’s now infamous tweet, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on” that sent the market into a tailspin.

Overnight, Biotech ETFs were down more than 8%.  And biotech heavyweights like Regeneron REGN, Biogen $BIIB, and Celegene $CELG took heavy hits as well.

The Democratic presidential nominee front runner was outraged by a ridiculous overnight 5,000% price hike on a drug used by HIV patients.  Needless to say, investors didn’t like politicians putting restrictions on pricing and limiting profits for Biotech companies.

So, just what kind of restrictions are we talking about here?

Politicians have said that they want to place a limit on the price of certain pharmaceuticals making drug companies unable to raise the price for needed medications. Clinton unveiled a plan to reform the pharma business.  She wants to stop drug makers from spending Federal grant monies on advertising.   Essentially they are putting more restrictions on companies that take money from the Federal government to fund their research.

Under Clinton’s plan, drug companies would have to redirect their profits back to research and development of new treatments rather than spending it on marketing and advertising of their drug.

That’s not such a bad thing…  But investors took this negative event as a sign to take profits on biotech stocks.

You even might be thinking, “How are we going to profit from biotech stocks if companies aren’t seeing the profits they used to?”

Keep in mind, before a biotech company can spend money on marketing a drug, it must be approved by the FDA.  And the majority of the small-cap developmental stage biotech stocks are still working toward an FDA approval.

In other words, the biotech stocks currently in the clinical research phase aren’t going to be impacted by these Federal government changes.  Make no mistake, these stocks will soar higher when they have a successful clinical trial or get a new drug or treatment approved by the FDA.

We can still make a killing investing in clinical stage biotech stocks. 

The political rhetoric is sure to create some volatility in the price of biotech stocks.   But this is just noise that needs to be ignored or used as a buying opportunity.

Category: BST Update

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