President Trump’s election victory last November gave stock markets an almost instant shot in the arm. Lower taxes and fewer burdensome regulations were welcomed by both businesses and households. However, some companies and industries weren’t convinced that Trump’s policies would be good for business. Pharmaceutical stocks are one example.
Trump made a bad impression with the pharma industry in January when he accused it of “getting away with murder.” This week, however, the president signaled his stance might be softening: sources close to the administration told the New York Times that Trump is preparing to sign an executive order covering prices and regulations in the drug industry.
According to reports, the order is “industry friendly.” Rather than attempting to control prices, the order would ease the regulatory burden. In particular, the government would streamline procedures for approving new drugs and procedures and fight harder to protect US drug patents overseas.
The order could also promote “value-based agreements”, a pricing model popular with the drug industry. Value-based agreements mean that what insurers pay for drugs would depend on how effective they are.
President Trump’s executive order on pharma is still confidential, so we’re relying on anonymous statements from sources near the White House. However, reports indicate he could sign the order during the next few weeks.
The Pharma Stocks You Should Buy Now
The most tantalizing bit of the executive order is the part about easing procedures for approving new drugs. Failure to gain approval for new drugs is a big reason for pharmaceuticals’ volatility on stock markets. This week, stock markets started to take notice. The Nasdaq Biotech Index, which is viewed as a barometer for the pharma industry, gained nearly 9% from June 16 to June 22.
Here are a few pharmaceutical stocks to buy this month.
Enanta Pharmaceuticals, Inc. (ENTA) has performed well over the past four years. It has had a tricky relationship with President Trump, however. ENTA’s price climbed from $22.32 on November 3 to $33.14 on November 16. However, it started to drop in January—around the same time Trump said he wanted to crack down on high drug prices.
News of the industry-friendly executive order have given ENTA a boost. It gained 5%–up to $36.5—between the close of June 20 and midday on June 22.
Gilead Sciences (GILD) specializes in producing Hepatitis C medication. GILD has struggled on the stock markets over the past year, falling from $86.09 on July 25 to $64.57 by February 9.
However, it has been shooting upward this week—it gained 6.5% in just over 24 hours over Wednesday and Thursday. Most analysts think Gilead has nowhere to go but up after losing a lot of value last year. Also, its drugs—Harvoni, Sovaldi, and Epclusa—are unmatched on the market.
Pfizer (PFE) is a blue blood in the pharma industry. Despite the big reputation, PFE is not overvalued—it currently trades at $34.28 on the NYSE. It has also had a difficult 12 months, falling as low as $29 in the days leading up to last year’s presidential election.
Pfizer offers a diverse range of drugs, and it will become more diverse due to the company’s acquisition of Hospira, Anacor Pharmaceuticals, and Medivation. This week showed a taste of more to come: PFE’s stock price rose by 3%.
What the Executive Order Doesn’t Mean
It’s important not to get irrational with your exuberance about pharma stocks. The executive order hasn’t been fully drafted yet, and it will still be a few weeks before President Trump signs it. What’s more, it’s just an order, not a bill, so it’s limited in the effect it can have on the industry.
However, the news this week should have us all excited about pharma stocks. Trump has made his agenda clear: he wants less regulation of the pharma industry, not more. Investors hope this executive order is just the beginning of an industry-friendly approach by the White House.