The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), which tracks the Nasdaq Biotechnology Index, and rival biotechnology exchange traded funds have been hindered by presidential politics this year.
That is old news. Just look at IBB’s recent price action. The largest biotechnology ETF is residing at its highest levels since January. Investors who are closely watching the presidential race will want to keep an eye on Democratic nominee Hillary Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.
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IBB is heavily allocated to the largest biotech names. For example, Amgen (NasdaqGS: AMGN), Gilead Sciences (NasdaqGS: GILD) and Celgene (NasdaqGS: CELG) combine for about a quarter of IBB’s weight.
Last month, Democratic presidential nominee, Hillary Clinton, put the spotlight on Mylan (NasdaqGS: MYL) EpiPen prices, triggering a selloff in biotech exchange traded funds and reminding investors of political risks in an election season.
IBB’s surge “comes on the heels of two major recent acquisitions by Allergan in the biotech field. The Ireland-based company announced its $1.7 billion deal with Tobira Therapeutics on Tuesday, and made news last week after acquiring Vitae Pharmaceuticals in a $639 million all-cash deal. Other stocks rose amid speculation of more takeovers this week. Clovis Oncology finished up 2.7 percent and Eli Lilly also closed up about half a percent after rumors that Eli may buy the cancer treatment company,” reports CNBC.
Clinton and GOP hopeful Donald Trump support the right for the government to negotiate Medicare drug costs. Additionally, Clinton has previously stated she would tackle “price gouging” from drugmakers if she is elected.
Related: Healthcare ETFs Ready to Rally
On Thursday, IBB “hit a high of $300.29 Thursday, and closed at $300.08, just below the $302.40 level hit in January. The previously elusive $300 mark has been a level of resistance for the ETF, which tested that level twice in August before trading lower,” according to CNBC.
The overall pharmaceutical industry has also taken a greater interest in so-called orphan drugs due to their strong protection, which helps support reliable pricing power, especially as the industry faces questions over high pricing over primary care products.
For more information on the biotech sector, visit our biotechnology category.
iShares Nasdaq Biotechnology ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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