Donald Trump is back at it again via Twitter and once again he has ignited the political tug-of-war between potential policy changes and Wall Street. The overall healthcare sector has become volatile on the heels of any statement or tweet from Donald Trump. Shortly after the inauguration, Trump held a press conference and stated that drug companies are “getting away with murder” when speaking to the drug pricing debate. Now he’s come out and stated that he’s working on a “new system where there will be competition in the drug industry.” Every time any of these remarks are tweeted, they immediately result in a downtrend across the entire biotech cohort, this time was no exception. The iShares Biotechnology Index ETF (NASDAQ:IBB) traded down 1.7% or $5 per share once tweeted. The healthcare sector has been faced with an uncertain and volatile political backdrop. The overall healthcare umbrella has become sensitive to any tweet from President Trump as he vows to bring down drug prices. Although he’s pursuing his agenda against drug pricing, IBB has become resilient as many of these threats may have already been priced-in as seen in many healthcare-related stocks that have seen sharp and sustained sell-offs. Ostensibly, many of these stocks are trading at multiyear low P/E ratios and as a cohort (gauged via the IBB proxy) looks to be less sensitive to tweets/threats and continues to test the $300 barrier.

Figure 1 – IBB price activity and resilience over the previous 6 months with pronounced volatility that coincides with political rhetoric against drug pricing

The Drug Pricing Transparency Coalition

Many large-cap pharma companies have created an unofficial drug pricing coalition to provide transparency in an effort to separate themselves from a handful of egregious price increases to contend with Trump’s aim at the drug companies. Continue reading "IBB - The Political Tug-Of-War Rages On" →