Biotech stocks will need to brace for political "games" Wednesday as the Senate meets to potentially confirm Robert F. Kennedy Jr. as Secretary of the Department of Health and Human Services.
Kennedy's confirmation is far from a sure thing. In fact, it's one of the more polarizing nominations President Donald Trump has made to his cabinet.
The first hearing will take place Wednesday. But only the Finance Committee will vote on whether to send the nomination to the full Senate. There are 53 Republicans in the 100-seat Senate.
Before his election, Trump said he would let Kennedy, also known as RFK Jr., "go wild" on health care.
Kennedy is a well-known vaccine skeptic who has spoken out against the use of antiobesity medications, instead favoring diet and exercise to treat the obesity epidemic. If confirmed, he will head up the agency in control of the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Centers for Medicare and Medicaid Services.
"Tomorrow is an important day," Jane Lucas, a former White House staffer during Trump's first term and now a partner at law firm Alston & Bird, told Investor's Business Daily. "While he has had a lot of private meetings with members where they have asked questions, tomorrow is really the first opportunity for him to be on public record answering some of those questions."
RFK Jr. Hearings: What To Watch
Barrett Thornhill, a partner at public affairs advocacy firm Forbes Tate Partners, expects RFK Jr. to clinch the job.
"I am less than 100% (sure), though," Thornhill said during a recent call hosted by Evercore ISI. "There's wiggle room mainly because we're seeing a bit more questions come out as he's had senator meetings and staff meetings over the past few weeks."
Wednesday will be instrumental in whether Kennedy's confirmation goes to the full Senate. Thornhill says it will be key to watch John Thune, R-S.D.; Bill Cassidy, R-La.; James Lankford, R-Okla.; and Thom Tillis, R-N.D. Cassidy, a doctor, has advocated for vaccines, while Lankford is a well-known pro-life advocate.
"I think you should watch what they ask about and if they're softballs or hardballs," Thornhill said.
Lucas, of Alston & Bird, expects women's health to be on the agenda as well as questions about RFK Jr.'s own personal interests and projects. The federal freeze on spending, unveiled in a memo early Tuesday, will also undoubtedly come up in senators' questioning.
Generally, members of the same party will give the nominee's team a heads up on their questions, she said. But the opposing party — in this case, Democrats — will probably take the chance to issue some tough questions or "gotcha moments."
Thornhill, of Forbes Tate Partners, expects Democrats to zero in on Kennedy's stances on abortion and vaccines, his private business dealings and "touchier" areas like HIV and drug pricing.
"I think Democrats will be smart and try to bait him into giving more left-leaning answers back," he said. "Then Republicans will be in a harder bind to support him once he gets to the floor. That's definitely one of the games that will be played."
Biotech Stocks Feel The Unease
The Senate hearings will undoubtedly have an impact on biotech stocks. Shares have mostly trended down since Trump's election in November.
"Given the new administration, the potential appointment of RFK Jr. as head of HHS has introduced a lot of uncertainty around my group," J.P. Morgan analyst Chris Schott said during the recent J.P. Morgan Health Care Conference. "Ultimately, these changes are going to be likely more targeted than anything broad based, and will take time to move forward."
CFRA analyst Sel Hardy cut her price target on Merck stock to 100 from 106 on Tuesday ahead of the hearings. Merck is a notable vaccine maker, alongside other big names, including Pfizer, Moderna and GSK.
"We expect key discussions during the hearings to be around vaccines, drug pricing and obesity drugs," she said in a report. "We also expect some questions on potential efforts to tackle the increasing number of bird flu cases in the U.S."
Notable Opposition To RFK Jr.
Though a number of company executives have said they're ready to play ball with Trump and his administration, not everyone is on board. Former FDA Commissioner Scott Gottlieb has spoken out against RFK Jr.'s appointment.
"I've been very clear he shouldn't be health secretary," Gottlieb said this month at an event hosted by news site Endpoints. "I have a lot of concerns about the positions he's taken."
The Taxpayers Protection Alliance cautioned Tuesday that Kennedy could use march-in rights to seize intellectual property from pharmaceutical companies. IP is the lifeblood of the pharmaceutical industry.
David Williams, TPA president, says Kennedy could force his own health views on the American people. He said confirming RFK Jr. would "wreak havoc on taxpayers and consumers, as well as the health industry of the United States."
"Americans have had enough of Washington bureaucrats telling them what they can and cannot consume," he said in a written statement. "It is not the role of the federal government to police the diet of the American people – nor has it ever been. While some choices are better than others, Americans are free to weigh the risks for themselves."
He added: "Further, RFK Jr's pseudoscience regarding vaccines puts millions of children at risk."
Follow Allison Gatlin on X/Twitter at @IBD_AGatlin.
