4:21 PM
 | 
Nov 08, 2018
 |  BC Extra  |  Financial News

Buysiders brush off midterms

Although drug pricing reform is one of the few bipartisan issues that a divided Congress might be able to agree upon, key biotech and pharma indexes have largely shrugged off the midterm results in a sign that it’s business as usual for biopharma investors.

After rising 1-3% on Wednesday, biotech indexes gave back some of their initial gains. Since Tuesday's close, the NASDAQ Biotechnology Index (NBI), SPDR S&P Biotech ETF (XBI) and the BioCentury 100 have added 1%, and the NYSE Arca Biotechnology Index (BTK) is unchanged.

The NYSE Arca Pharmaceutical Index (DRG) has continued to rise, and finished Thursday up 2% from Tuesday's close.

Since Tuesday, the Dow Jones Industrial Average, Standard & Poor's 500 Index and NASDAQ Composite have gained 2%.

In public statements following the election, President Donald Trump, Senate Majority Leader Mitch McConnell (R-Ky.), and House Minority Leader Rep. Nancy Pelosi (D-Calif.) identified reducing drug prices as an area of common ground (see "Midterms Make Grassley Senate Gatekeeper for Pharma Bills").

"The gridlock concept definitely does not apply to this topic," said Loncar Fund's Brad Loncar. "Maybe it is seen as an incremental positive that Democrats didn't win both sides. It's fair to say without being political that Democrats would be more punitive and more apt to hurt the entire industry."

Omega Funds' Otello Stampacchia said the market reaction reflects investors' belief that "a divided Congress will ensure some rationality in the legislative process, making sure no clearly controversial legislation passes."

International Biotechnology Trust's Ailsa Craig is more skeptical of Congress' ability to work together on drug pricing. "What I think stands in the way is the fact that Democrats are very emotional about Trump and this may stop them from cooperating to get policies through," she said.

Loncar and Craig said the election results will not affect their investment behavior. "Little has materialized in the past so why would it be different now? I think investors are reassuring themselves with that question," Craig said.

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