Health Stocks Slide as Trump Picks Industry Skeptic Kennedy
(Bloomberg) -- Health stocks slumped on Friday as Wall Street weighed the impact that prominent vaccine skeptic Robert F. Kennedy Jr. could have on the industry after President-elect Donald Trump nominated him to lead the nation’s health and medical research agencies.
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Late Thursday, Trump said he’s tapping Kennedy to run the Department of Health and Human Services, and play a big role to ensure Americans are protected from harmful pharmaceutical products, among other things.
Shares of health-care companies in the US fell, with the S&P 500 Health Care Index dropping 1.9% to its lowest level since May.
Kennedy’s selection “could have far-reaching and difficult-to-project implications for the biotechnology sector, adding a considerable layer of uncertainty and challenging investability,” according to Brian Abrahams, an analyst at RBC Capital Markets.
Vaccines
Companies that make immunizations bore the brunt of the losses, with Moderna Inc. and Pfizer Inc. closing down 7.3% and 4.7%, respectively, adding to declines seen on Thursday.
London-listed GSK Plc and France’s Sanofi SA also saw declines, with Deutsche Bank analyst Emmanuel Papadakis cutting his rating on the former to hold from buy following the news.
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Kennedy has espoused a number of unorthodox views on public health, most notably questioning the safety and efficacy of vaccines — statements which challenge guidance from the mainstream medical community.
His skepticism about immunization “could negatively impact vaccine perception in the US and not only lead to lower demand and sales but could potentially cause outbreaks if vaccinations are not consistent over the next four years,” according to Jefferies analyst Michael Yee.
Biopharma
Large drugmakers saw their shares drop after Trump, in a post on X, said that “the industrial food complex and drug companies” had engaged in “deception, misinformation, and disinformation.”
In the US, Eli Lilly & Co., Bristol Myers Squibb Co., Merck & Co., AbbVie Inc. and Amgen Inc. all fell on Friday. Likewise, US-exposed European health companies dropped with Novo Nordisk A/S falling 5.4% and Roche Holding AG down 2.2% while more than 80% of the stocks in the Stoxx 600 Health Care Index retreated.
Shares of biotechnology companies also tumbled with the SPDR S&P Biotech ETF (XBI) dropping 5.3%, the most since June 2022.
As head of HHS, Kennedy would lead a sprawling federal department that encompasses more than 100 programs supporting medicine, public health and social services, including the Centers for Disease Control and Prevention, Centers for Medicare and Medicaid Services and the Food and Drug Administration.
His comments about overhauling the FDA, including cutting headcount or funding, could also alter the drug regulatory path for some companies, according to Jefferies’ Yee.
However, JPMorgan analyst Chris Schott said it could take some time for Kennedy to enact major policy changes.
Medical Technology
Because Kennedy’s recent policy ideas are not focused on medtech, this could result in the sector “being relatively well positioned within health care,” according to Wells Fargo analyst Larry Biegelsen.
Still, while Kennedy’s current policy ideas do not directly impact medical devices, “they may indirectly or they could in the future,” Biegelsen said. For instance, Kennedy’s concerns about vaccines may lead to a reduction in immunization rates, which would likely hurt device companies that make syringes used to administer shots.
Shares of medical technology companies inched up on Friday with the iShares U.S. Medical Devices ETF (IHI) — a gauge of the medical technology sector — rising about 0.2%.
Psychedelics
While many sectors in health care saw declines, companies involved in psychedelic-related therapies notched gains. ATAI Life Sciences NV, Cybin Inc., Compass Pathways Plc and GH Research PLC all closed the day higher.
Kennedy has long been critical of the FDA’s hesitancy to approve the drugs as an “aggressive suppression.” His appointment has positive implications for the space, according to Jefferies analyst Andrew Tsai.
“RFK Jr. seems positively inclined and sounds motivated to help foster psychedelic drug development,” Tsai wrote in a note to clients earlier this week. “Perhaps the administration could work out new programs with the FDA that ultimately benefit sponsors, as long as psychedelics continue to show positive safety/efficacy.”
--With assistance from Gregory Korte and Stephanie Lai.
(Updates with closing prices throughout.)
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