Biotech stocks edged higher early Wednesday on hopes for more innovation and dealmaking after Donald Trump clinched his second presidency in a victory over Kamala Harris.
The Associated Press projected his win early Wednesday, with Trump sitting at 277 electoral votes and Harris at 224. Trump also secured the popular vote in a surprise shift from 2016 and 2020 when his Democratic opponents came out ahead.
Now, investors are closely watching Trump's next steps when it comes to health care following Election 2024.
"We view the Trump win as mixed for large-cap biopharma since it creates potential uncertainty regarding Food and Drug Administration independence but positive for small- and midcap biopharma mergers and acquisitions prospects since Federal Trade Commission would likely be more accommodating," Leerink Partners analyst David Risinger said in a report.
The SPDR S&P Biotech ETF rose 1.8% to 102.44. That puts the exchange-traded fund within striking distance of a breakout. Shares are nearing a buy point at 103.53 out of a flat base, according to MarketSurge.
Biotech Stocks: FDA, HHS Changes
A big question now is who Trump plans to put in key positions. Nominations for the Health and Human Services secretary and the FDA commissioner lie ahead after Election 2024.
Trump recently said he would let Robert F. Kennedy Jr. "go wild on health."
"RFK has been known as an anti-vaccine activist who is at odds with current FDA leadership," Risinger said. "RFK openly said that the FDA staff should be prepared to 'preserve your records' and 'pack your bags,' which indicates that he wants dramatic change in the FDA leadership."
For biotech stocks to outperform under Trump 2.0, he will need to select leaders who "support biopharma innovation" by engaging with companies and delivering on drug review promises. It's also important to "maintain public trust in FDA."
More Acquisitions?
Meanwhile, M&A activity could get another spur under a Republican-led FTC, Risinger said. It's important to note, dealmaking hit its stride over the last few years, though it has slowed somewhat in 2024.
Lina Khan's role at the FTC will likely be under scrutiny. Khan is the FTC's commissioner.
"Recall that Lina Khan has challenged biopharma industry M&A, even smaller ones that she calls 'serious acquisition strategies,' " Risinger said. "She also advocated for increasing pharmaceutical market competition and scrutiny of pharmaceutical patents."
Similarly, Wedbush analyst Daniel Ives says if Trump ousts Khan from the FTC it "would be a huge positive for Big Tech."
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
