Biotech stocks skidded again Tuesday as "chaos" reigned at the Food and Drug Administration with reports of mass firings, including the departure of another high-profile official.
Media reports suggest Peter Stein, who heads up the Center for Drug Evaluation and Research's Office of New Drugs, is on administrative leave after declining a reassignment.
Stein's reported departure is part of an effort to reduce headcount at agencies under the Department of Health and Human Services. The FDA is expected to lose 3,500 positions. On Monday, biotech stocks took a beating after Peter Marks, director of the Center for Biologics Evaluation and Research, announced his resignation. Marks cited a conflict with Health Secretary Robert F. Kennedy Jr. over vaccines. Kennedy is a well-known vaccine skeptic.
"Unlike CBER head Peter Marks, who was associated with Covid-19 vaccine approvals and many believed RFK Jr., Stein has not been known particularly for any politically charged views/actions — suggesting that mass cuts are being implemented without regard for any particular policy, continuity, senior level or ability," RBC Capital Markets analyst Brian Abrahams said in a report describing what he termed the "chaos."
The SPDR S&P Biotech exchange-traded fund slipped 3.7% to 78.14. Investor's Business Daily's Medical-Biomed/Biotech industry group saw a 3.5% dive following a 2.2% tumble on Monday.
Biotech Stocks Face An Expected Slowdown
Initial reports suggested the layoffs wouldn't impact divisions that review drug applications. But that no longer appears to be the case with changes across the cell and gene therapy units as well as cancer drug reviewers, Abrahams said.
Dr. Marty Makary, incoming FDA commissioner, is generally well-respected and has the opportunity to reshape the agency. But, at best, new drug reviews and engagement with pharma companies will slow, he added. It will take months and years to train new personnel.
Notably, some reports suggest Makary was already confirmed. The FDA website doesn't reflect that change, however.
These changes will be "detrimental for the sector overall," Abrahams said. Further, "The approach the new regime will take towards innovation is unknown. Recent downside in the group already reflects many potential headwinds, and we are inclined to believe the dust will settle at some point, but the regulatory news remains troubling."
Biotech stocks have fallen more than 24% since Election Day, as of Tuesday's close.
Tariffs Loom Large Over Medical Industry
Meanwhile, the specter of tariffs continued to loom over the entire industry. President Donald Trump is expected to announce further tariffs on Wednesday.
Reuters reported early Tuesday the pharma industry is lobbying Trump for phased tariffs to reduce the sting from the changes and to allow time to shift manufacturing. Already, Big Pharma stalwarts Eli Lilly, Pfizer and Merck have announced plans to ramp manufacturing efforts in the U.S. to navigate looming tariffs.
"While this strategic shift supports supply chain resilience, it may also elevate production costs and drug prices — raising concerns around affordability as emerging markets pursue regulatory reforms to boost access to biosimilars and biologics," GlobalData analyst Adam Bradbury said in a report.
Analysts have mixed opinions on how tariffs could impact drugmakers.
Evercore ISI analyst Umer Raffat says tariffs could backfire. Companies could hike the prices of their drugs. But that would heighten scrutiny on drug prices in the U.S. which are notoriously higher than the prices paid in other countries, he said in a report.
He also noted Medicare and Medicaid might not allow for price increases.
"But sticker shock may amplify the push towards MFN (a most favored nations pricing policy) with the Trump administration," he said.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
