Janus portfolio manager sees more biotech gains on Trump

November 16, 2016 1:54 PM EST

A man uses an umbrella to guard against snowfall as he walks past the Nasdaq MarketSite in Times Square, Midtown New York March 20, 2015. REUTERS/Adrees Latif

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By Caroline Humer and Lewis Krauskopf

NEW YORK (Reuters) - Biotech stocks still have room to rise after the election of Donald Trump as U.S. president, which removed threats of drug price controls that had pushed shares to historically cheap levels this year, a top portfolio manager for Janus said on Wednesday.

The Nasdaq Biotechnology index <.NBI> has climbed 11 percent since the election, but still remains down 14 percent for 2016.

Given the deregulation of healthcare signaled by Donald Trump, who was elected last week in a surprise victory, that is not enough, according to Janus Global Life Sciences co-portfolio manager Ethan Lovell.

The election, including Republicans retaining control of Congress, has removed the threat of Hillary Clinton's agenda on drug pricing.

If Trump follows through on promises to overturn the current administration's executive orders, it will lessen regulations, Lovell said.

"Whether you like Trump or not, that is fantastic news for what has become a very, very burdened industry in healthcare,” he said.

Lovell expects Trump to start working on turning back the Affordable Care Act as soon as he takes office in January.

In a significant example of a potential benefit for biotech and pharmaceutical companies, he expects Trump to strike the authority of the U.S. Department of Health and Human Services to impose spending controls on Medicare under certain circumstances.

President Barack Obama's signature healthcare law includes a clause to review and clamp down on Medicare spending either through the creation of an oversight board or by giving the Secretary of Health and Human Services direct power to do so. Many investors had expected that clause to be triggered in 2017 based on the pace of Medicare spending increases reported earlier this year.

Drug companies that have been holding back on price increases because of the current regulatory environment may well have more room to implement price increases in the second half of next year, he said.

Among companies that he said were facing the overhang of drug pricing regulation through the Medicare program and whose shares could rise are Celgene Corp (NASDAQ: CELG), little changed this year, and Regeneron (NASDAQ: REGN), off 22 percent in 2016.

Also, the ability for companies to set prices on their new drugs more freely in a deregulated environment as well as raise prices at least modestly could make dealmaking more viable than under Clinton, he said.

(Reporting by Caroline Humer and Lewis Krauskopf; Editing by Chizu Nomiyama)



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