So much for the Trump Bump to biotech.
Local life science stocks, which soared 14 percent in the week following the presidential election, have sunk considerably from their peak last month.
Although biotech stocks had fallen for three of the past four weeks, the industry took a major blow last Wednesday when President-elect Donald Trump said he would “bring down drug prices.”
In a cover article for Time Magazine, which named Trump as Person of the Year, he said, “I don’t like what has happened with drug prices. I’m going to bring down drug prices.”
Biotech stocks tumbled. The Nasdaq Biotechnology Index (a composite of public biotech and pharmaceutical companies listed on the Nasdaq stock market) dropped 4 percent, bringing the index down 10 percent from its peak on Nov. 9. Local biotech stocks fell an additional 2.3 percent on the news.
The statement from Trump — and the subsequent drop in stock prices — is surprising considering the speculation that followed the presidential election, which surmised that a Trump presidency would be good for biotech (or at least better than Hillary Clinton).
Industry leaders identified a few key areas in which biotech and pharma would benefit from a Trump presidency: the potential full repeal of the Medical Device Tax, removal of the Branded Prescription Drug Fee, and a less regulatory climate at the U.S. Food and Drug Administration, to name a few.
Trump had also been quiet on the issue of drug pricing, while Hillary Clinton made her stance very clear. Many assumed that meant Trump would be friendlier to the pharmaceutical industry.
Uncertainty Persists
Bill Gunderson, a longtime trader and financial analyst, said biotech stocks were suffering post-election even before Trump’s drug pricing statement.
“Technology and biotechnology stocks are getting left behind since the election,” said Gunderson, president and CEO of wealth management firm Gunderson Capital Management Inc.
Uncertainty about what will happen to the Affordable Care Act (Obamacare) continues to cast a cloud over the industry, making investors hesitant to take the risk.
Gunderson, who’s been an expert on biotech stocks for decades, said other industries are taking the limelight since Trump won the election. And they aren’t nearly as sexy as tech and pharma.
“It’s the industries like cement and steel that people are buying into,” Gunderson said. “Companies that build roads, equipment, and cranes, for example. It’s kind of weird, but that’s a major trend right now.”
Gunderson said he believes money is funneling out of technology and biotech and into infrastructure, banking, and finance.
“Interest rates have gone up considerably, and that’s good for banks and the financial industry,” Gunderson said. “These guys will benefit more directly from Trump than the biotech industry.”
The last time he saw interest like this in infrastructure, banking, and finance was around 2004 or 2005, Gunderson said.
Molecular Assemblies
In happier life science news, a small startup making synthetic DNA has landed $2.3 million in an upsized seed round.
Investors in the round include Agilent Technologies, Cavendish Impact Capital Fund, and Keshif Ventures, among others.
The company, called Molecular Assemblies Inc., is developing a new way to create DNA that the company believes better mimics nature.
Synthetic DNA has become an important tool in fields such as vaccine development, gene therapy, and molecular engineering, but creating DNA is a flawed and still immature technology today.
“New methods of writing genetic code are desperately needed if we are to realize the promise of the next generation of genomics, from industrial synthetic biology to personalized DNA-based therapies and diagnostics,” said Kirk Wright, co-manager of Cavendish Impact Capital Fund. “We believe (Molecular Assemblies’) enzymatic approach to synthesizing DNA represents a dramatic change in how DNA will be made in the future and consequently our ability to accelerate new applications of genomics.”
Today’s method of chemical DNA synthesis is incapable of producing high quality, gene length DNA that is cost effective and scalable, Molecular Assemblies stated in a news release. The old method also relies on harsh chemicals that both damage the DNA and produce high volumes of toxic waste.
The San Diego company believes its approach overcomes these challenges.
“Completing this seed round enables us to invest even more into expanding our team and advancing the development of our enzymatic DNA synthesis technology,” said Michael J. Kamdar, president and CEO of Molecular Assemblies. “We are particularly pleased with the high caliber of investors we are attracting to the company, a testament to the growing need for a new approach to DNA synthesis and our unique ability to potentially meet these needs in multiple markets.”
