Stock markets are not happy with Trump’s pick of Robert F. Kennedy Jr. to lead HHS. The SPDR Biotech ETF (XBI) lost 11.85% of its value in the last week. It traded at a low not seen since Japan’s “Black Monday” on August 5, 2024.
The move creates substantial uncertainties for the vaccine market. In 2025 and beyond, biotech investors should expect big pharma firms to face delays in vaccine approvals. Naturally, approvals for new drugs may potentially slow, too.
Last week, Pfizer (PFE) dropped by over 7%. Regeneron (REGN) continued to decline, losing 8.64%, despite having minimal exposure to the vaccine market. Investors are still punishing REGN stock for reporting weak revenue from Eylea drug sales.
AstraZeneca (AZN), J&J (JNJ), and Proctor & Gamble (PG) did not move by much. Conversely, Merck (MRK) and BioNTech SE (BNTX) declined.
Investors are potentially overreacting. However, valuations are on the high side, which decreases the attractiveness of investing in the XBI ETF.
Investors should wait until early 2025 before re-initiating a position in biotech and drug manufacturers. If stocks continue to decline, long-term investors have a better entry point and a bigger margin of safety.
The U.S. healthcare system requires drug companies to continue to innovate. Expect the government to give firms flexibility in developing new drugs.
