According to Fortune “the stock market was up on Thursday, but you wouldn’t know it if you were a health care investor. Pharmaceutical and biotech stocks were pummeled, diverging from the broader market for the first time in recent days.The weird part: There was no relevant news or obvious reason for the slump”. No obvious reasons?????
Investors and analysts can’t always see the trees through the forest. There are a lot of reasons why pharma stocks took a beating including..
1ne: The UK decides to go with price on comparative drugs opening the door for lower cost medications.
2wo: Lilly reports higher profits due to higher prices on diabetes drugs are already causing push-back from patients and insurers.
3hree: Pharmaceuticals companies should brace for tough scrutiny on drug pricing ahead of the US presidential election, but new medicines will be rewarded if they are good enough, according to Roche’s chief executive.
4our: Hillary Clinton and Bernie Sanders, the leading Democratic presidential contenders, have been vying to take the toughest stance against big pharma as the high cost of drugs in the US has risen up the political agenda.
5ive: M&A partners are drying up.
6ix: Insurers are flexing their muscle when it comes to pricing of new drugs.
7even: Massachusetts Attorney General Maura Healey, opening a new front in the push to boost access to life-saving drugs, has warned the country’s biggest biotech company that it faces possible legal action unless it lowers the price of two popular hepatitis C medicines. In a letter to Gilead Sciences Inc., made public Wednesday, the attorney general wrote that the high price of the company’s Sovaldi drug, $84,000 for a full 12-week course of treatment, and its Harvoni regimen, at $94,500, “may constitute an unfair trade practice in violation of Massachusetts law” because they are too expensive for many patients.
What does this all mean? It means that the strategy of price increases, high prices for new drugs and buying or merging with other Biopharma companies is at best a short term strategy that is not sustainable. Smart investors understand this and they want something from pharma that they haven’t been able to do…innovate.