Healthcare Business

Trump's Drug Price Comments Weigh on Biotech and Pharma ETFs and Shares

After Time named President-Elect Donald Trump Person of the Year, calling him President of the Divided States of America, there was one more ebb and flow for the state of business in America. Many issues have been changing under Trump’s transitional period. Some of them are very similar to what was expected in the election, and some are different.

One such issue that was tracked was the big hit on the pharmaceutical and biotech sector took. Trump was deemed to be quite more friendly to the drug industry from pharmaceuticals and biotechs than rival Hillary Clinton and from the sidebar comments made by Bernie Sanders. Trump told Time that he wants to lower drug prices, a move that has hit the drug and biotech segments due to his comments.

One issue brought in the Time person of the year article is that Trump suggested that some stock analysts may have misread his intentions. They addressed the value of biotechnology stocks having risen 9% alone on the day after Trump’s victory over Clinton.

Time’s report says that Trump’s goal has not wavered. He was quoted in Time as saying, “I’m going to bring down drug prices. I don’t like what has happened with drug prices.”

That is all it took for the sellers to come back into pharma and biotech, but also in health care stocks in general. After all, it is not just biotech that has enjoyed high margins for their research and development intensive outfits.

24/7 Wall St. has tracked the price action of the key exchange traded funds that track biotech, pharmaceuticals and health care. As you will notice, there is a large overlap among many of the names.

Health Care Select Sector SPDR Fund (NYSEMKT: XLV) had almost $13.7 billion in total net assets, and it was last seen trading down 1.8% at $67.25. Its volume of almost 7 million shares at 11:30 a.m. on Wednesday was about two-thirds of a normal daily trading volume. Its top holdings were listed as follows: Johnson & Johnson (11.7%), Pfizer (7.3%), Merck (6.3%), UnitedHealth Group (5.7%), Amgen (4.1%), AbbVie (3.8%), Medtronic (3.8%), Gilead (3.6%), BMS (3.6%) and Celgene (3.5%).

iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) was last seen down 3.9% at $263.60, and the volume of 2.4 million shares as of 11:30 a.m. was already 150% of a normal day’s worth of volume. What matters about this ETF is that it has more than $7.7 billion in assets. Its top 10 holdings: Celgene (9.2%), Biogen (8.0%), Gilead (7.8%), Amgen (7.2%), Regeneron (6.9%), Alexion (4.2%), Incyte (3.7%), Mylan (3.5%), Vertex (3.4%) and Illumina (3.2%).

iShares U.S. Healthcare ETF (NYSEMKT: IYH) was last seen down 1.9% at $140.64 and the volume of 45,000 shares as of 11:30 a.m. was barely one-third of a day’s average trading volume. This ETF has more than $1.7 billion in assets. Its top holdings: Johnson & Johnson (11.1%), Pfizer (7.0%), Merck (6.1%), UnitedHealth (5.5%), Amgen (4.0%), AbbVie (3.6%), Medtronic (3.6%), Gilead (3.5%), BMS (3.4%) and Celgene (3.3%).

SPDR S&P Biotech ETF (NYSEMKT: XBI) was down 4.7% at $61.37, and the volume of 8 million shares as of 11:30 a.m. was already more than a day’s worth. This biotech ETF has over $2.8 billion in net assets. It is quite different in that it has many lesser followed or smaller biotech names in it, and the top 10 holdings each have less than a total 4% weight and nothing lower than a 2.4% weighting. Those 10 top holdings were as follows: Ionis, Tesaro, Exelixis, Incyte, Bluebird Bio, Sarepta, United Therapeutics, Celgene, Ultragenyx and Ariad.

SPDR S&P Pharmaceuticals ETF (NYSEMKT: XPH) was last seen down 3.1% at $38.09, and the 345,000 shares traded as of 11:30 a.m. Wednesday was already over 150% of a day’s average total trading volume. It has $487 million in assets, and the top 10 holdings have nothing less than a 4.5% weighting and nothing over a 6% weighting, as follows: Horizon Pharma, BMS, Zoetis, Merck, Perrigo, Johnson & Johnson, Pfizer, Medicines Co., Mylan and Jazz.

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