Pharmaceutical and biotechnology shares soared on Wednesday as Republican Donald Trump's U.S. presidential election calmed fears of tough action on drug pricing that has pressured the sector for more than a year.
Hospital shares tumbled as a Republican sweep raised prospects for a rollback of the Affordable Care Act, which expanded the number of patients in government health plans.
Fears of a win by Hillary Clinton and Democrats gaining power in Congress has clouded the outlook for biotech and pharma shares and contributed to general underperformance for the U.S. healthcare sector this year.
On Wednesday, the stocks also were fueled by the apparent defeat of a Californian ballot proposal aimed at reining in rising prices for prescription drugs.
Clinton "not being in the White House removes the notion of some sort of price controls off the table," said Tony Butler, an analyst at Guggenheim Securities in New York. "From the perspective of pharmaceutical, biotechnology, generic (drug) stocks, (the election) went about as well as could be expected."
Shares of drugmaker Pfizer rose 5.2 percent and biotech Celgene jumped 6.7 percent, while specialty drugmaker Mallinckrodt surged 7.8 percent.
European drug stocks also gained, with Switzerland's Roche and France's Sanofi both rising more than 4 percent.
The Nasdaq Biotechnology index advanced 6.3 percent and was on track for its biggest single-day gain in about five years.
Biotech and pharmaceutical investors have been on edge since September 2015, when Clinton tweeted about specialty drug "price gouging." Over that time, Nasdaq-listed biotech shares had lost more than one-fourth of their value through Tuesday.
Trump has said less on the topic but suggested support for importation of cheaper drugs and advocated increased scrutiny over drug price increases and a bigger role for negotiating down the cost of medicines.
Marie Owens-Thomsen, chief economist at Indosuez Wealth Management, believes the idea that he is the good-news candidate for the pharmaceuticals industry is "a bit of a simplistic view."
Shares of hospital chains Tenet Healthcare and HCA Holdings tumbled 27 percent and 15.6 percent, respectively, while health insurer Centene, which specializes in the government's Medicaid health program that was expanded under the healthcare law, dropped 18 percent.
"We see extreme risk of ACA repeal/replace, loss of the Medicaid expansion, a primary driver of results for both hospitals and health plans," Mizuho Securities analyst Sheryl Skolnick said in a research note. (Additional reporting by John Miller in Zurich and Annabella Pultz Nielsen in Copenhagen; Editing by Pravin Char and Jeffrey Benkoe)