Preview Issue #7: Trump Issues Warning To Pharma, Drug Pricing Debate Continues and the 21st Century Cures Bill

INO Health & Biotech Stock Guide

Preview Issue #7 - December 29, 2016

BIOTECH, HEALTH & PHARMA NEWS

President-elect Donald Trump has thrown cold water on the recently volatile healthcare cohort as he voiced concerns on rising drug prices. The Trump rally continues to power on as the S&P 500, Nasdaq and Dow Jones continue to break all-time highs on what seems like a daily occurrence. Since Trump voiced his concerns over drug pricing the rally has largely left healthcare related stocks (pharmaceutical companies, pharmacies and wholesalers) behind the overall rise in the broader markets as of recent. The entire cohort has seen significant gains as traders viewed a republican controlled government in positive light with regard to this sector. However after recent comments from Donald Trump regarding the drug pricing debate much of these gains have been relegated to the pre-Trump rally levels. This optimistic perspective has faded after Donald Trump stated “I’m going to bring down drug prices” and “I don’t like what has happened with drug prices”. The iShares NASDAQ Biotechnology Index (Ticker: IBB) has been on a rollercoaster since the day just prior to the presidential election posting a broad range of movement from ~$247 to $293 or a 46-point swing (19% move). Investors were factoring-in a healthcare-friendly government in terms of scrutiny on the merger and acquisition front, deregulation, potential restructuring of the Affordable Care Act and a move favorable tax and repatriation rates throughout the industry. This sentiment has taken a breather to the time being.

WHAT'S NEXT

Recently, the federal government passed a major piece of legislation that bodes well for the industry. This legislative passage of the 21st Century Cures bill is a preverbal commitment by the government that they stand behind the efforts of industry and government in curing and treating diseases. The 21st Century Cures bill cleared the House and Senate and is aimed at easing FDA drug and device approvals and includes funds for NIH, cancer moonshot and a precision medicine initiative. This bill should provide an industry-friendly regulatory backdrop for drug and medical device companies moving into the near future. This bill provides $6.3 billion that supporters say will spur medical innovation, speed access to new drugs, expand access to mental health treatment and battle the opioid epidemic in America. The bill had widespread bipartisan support, including the backing of the Obama administration. Critics of the bill contend that it provides huge handouts to the biotech and pharmaceutical industries. Taken together, this bill in concert with a perceived pro-industry government coming to fruition should provide a tailwind for companies in this space.

INDUSTRY OUTLOOK

The drug pricing debate is clearing not going away anytime soon and will likely persist into the new administration. Donald Trump has made that clear during his interview with Time Magazine for his Person of the Year award. Pharmaceutical executives seem to have taken note of this and are attempting to get out in front of the issue. Brent Saunders (CEO of Allergan) has lead the charge in this movement. He vowed to limit drug price increases to single-digit percentages once a year. This seems to be working to some extent with Novo Nordisk falling in-line with a similar commitment. “We hear from more and more people living with diabetes about the challenges they face affording healthcare, including the medicines we make,” Jakob Riis, Novo Nordisk's U.S. president. “This has become a responsibility that needs to be shared among all those involved in healthcare and we’re going to do our part.” If drug companies self-regulate and get this drug pricing issue behind them along with the absence of political uncertainty may continue to provide a much needed lift to the sector.

FEATURED STOCK / ETF - Rite Aid (RAD)

Rite Aid - RAD

ABOUT THE EDITOR - Noah Kiedrowski

I am biotechnology professional with a diverse scientific background and detailed knowledge in many therapeutic areas such as monoclonal antibodies, immunotherapies and antivirals. I have a personal interest in finance, investing, trading and global markets. My analysis is focused on stocks and exchange traded funds (ETFs) while exploring niche opportunities such as derivative trading via options. This newsletter is intended to provide investors with the latest developments and trends regarding the overall healthcare sector with a biotechnology emphasis. I'll be highlighting sector trends, merger and acquisition activity, noteworthy current events, political developments and drug approvals. My focus will be centered on well-established mid-cap and large-cap companies as well as utilizing appropriate ETFs as proxies for sector trends. This is a bi-monthly newsletter service that reflects my own opinions and analyses. This newsletter is not intended to be a recommendation to buy or sell any stock or ETF mentioned. I am not a professional financial advisor or tax professional, rather an individual investor who analyzes investment strategies and disseminates my analyses. I encourage all investors to conduct their own research and due diligence prior to investing.

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This bi-monthly newsletter service reflects the opinions and analyses of INO Contributor, Noah Kiedrowski. This newsletter is not intended to be a recommendation to buy or sell any stock or ETF mentioned. Kiedrowski is not a professional financial advisor or tax professional, rather an individual investor who analyzes investment strategies and disseminates his own analyses. All traders and investors should conduct their own research and due diligence prior to investing.

Preview Issue #6: Favorable Healthcare Political Backdrop and Eli Lilly Disappoints

INO Health & Biotech Stock Guide

Preview Issue #6 - December 13th, 2016

BIOTECH, HEALTH & PHARMA NEWS

The Political backdrop changed in ways virtually no survey had predicted and come 2017 the United Sates will inaugurate Donald Trump as the new president. As a sense of certainty took a few hours to digest as the presidential news flowed into the markets, essentially uprooting the pricing-in of a Clinton victory, pre-market trading was volatile with the Dow dropping over 700 points. This paradoxical presidential outcome quickly brought the Dow back to breakeven and ended the day up ~300 points. This post Trump victory has continued to rally the markets with what is now being coined as the “Trump Rally” as the Dow has broken all-time highs to power past the 19,000 benchmark. This rally has disproportionally benefited healthcare related stocks ranging from pharmaceutical companies to pharmacies and the wholesalers in-between. Continue reading "Preview Issue #6: Favorable Healthcare Political Backdrop and Eli Lilly Disappoints"

Preview Issue #5 - The Political Seesaw, Proposition 61 Defeated and Notable Earnings

INO Health & Biotech Stock Guide

Preview Issue #5 - November 10th, 2016

BIOTECH, HEALTH & PHARMA NEWS

THE POLITICAL SEESAW

Political uncertainty has roiled the markets as of late with initial predictions pricing-in a Clinton victory. As election night unfolded and a Trump victory was evident, the markets responded negatively in pre-market trading with the Dow dropping over 700 points. Upon the realization that Trump was in fact the president-elect, the markets bounced back and the Dow ended the day up ~300 points. In particular, healthcare related stocks from pharmaceutical companies to pharmacies and the wholesalers in-between all notched significant gains as traders viewed a republican controlled government in positive light with regard to this sector. The iShares NASDAQ Biotechnology Index (Ticker IBB) registered a $25 per share or 9% gain on the election news. It appears that investors are factoring-in a healthcare-friendly government that will be in contrast to the likes of Hillary Clinton and Bernie Sanders with regard to mergers and acquisitions and governmental regulations throughout the industry.

Continue reading "Preview Issue #5 - The Political Seesaw, Proposition 61 Defeated and Notable Earnings"

Preview Issue #4 - Mylan Capitulates, M&A Activity Heats Up and the Negative Political Backdrop

INO Health & Biotech Stock Guide

Preview Issue #3 - October 13th, 2016

BIOTECH, HEALTH & PHARMA NEWS

Mylan has been a whipping post as of late over its aggressive pricing increases regarding its EpiPen which uses an auto-injection of epinephrine to treat severe allergic reactions in primarily school age children. As a result, Mylan has ostensibly capitulated in the face of public and governmental scrutiny regarding its EpiPen pricing with implementing plans to offer a generic version and a $465 million settlement with the U.S. department of Justice to appease the public and improve its company image. The relentless congressional grilling on Capitol Hill and public backlash against Mylan and its CEO looks to have spurred the company into offering a generic and cheaper version of its EpiPen as well as providing more EpiPen via its access programs. However, congressional leaders continue to criticize Mylan over its alleged misrepresentation of profits and under paying Medicare in rebates. Congressional leaders stated that Mylan was dishonest when it incorrectly applied a statutory U.S. tax rate on its EpiPen revenue. The company is technically based ex-U.S. and thus pays a lower tax rate. Furthermore, the company has been accused of misclassifying the EpiPen to game the Medicaid Drug Rebate Program. Mylan has been reportedly paying a 13% rebate that is reserved for generics while the brand name EpiPen should be at a minimum of a 21% rebate rate. Congressional leaders have vowed to recoup the difference over the past five years Medicaid has spent on EpiPens (total Medicaid spending from 2011 through 2015 was reported to be $960 million for the EpiPen). To this end, Mylan just settled a $465 million lawsuit regarding this egregious misclassification under the Medicaid Drug Rebate Program. This negative publicity along with continuous political attacks has been a major overhang impacting biotech stocks. This public and contentious battle with government officials and the general public doesn’t bode well for the entire healthcare cohort. With ongoing presidential debates and political posturing still occurring, this will likely continue to be a source of volatility. Buying opportunities may present themselves throughout the sector due to extraneous political rhetoric regarding the drug pricing debate and the entire drug supply chain dynamics.

WHAT'S NEXT

Continue reading "Preview Issue #4 - Mylan Capitulates, M&A Activity Heats Up and the Negative Political Backdrop"

Preview Issue #3 - Pharma Acquisitions Change The Game

INO Health & Biotech Stock Guide

Preview Issue #3 - Sept 28th, 2016

BIOTECH, HEALTH & PHARMA NEWS

Myan’s CEO is grilled by congressional leaders on Capitol Hill, Allergan (NYSE:AGN) and Johnson & Johnson (NYSE:JNJ) step up merger and acquisition activity and the presidential debates are underway. Mylan has dominated the pharma news headlines recently over its aggressive pricing increases regarding its EpiPen which uses an auto-injection of epinephrine to treat severe allergic reactions, particularly deadly in school age children. Since Mylan acquired the product in 2007, and the “list” price increased from $100 in 2008 to its current “list” price of ~$600. Elijah Cummings Continue reading "Preview Issue #3 - Pharma Acquisitions Change The Game"