Donald Trump’s presidency is a real nitro boost for the future of the biotech sector in the U.S., and it’s a massive boost to all industries.
While democratic nominee Hillary Clinton took an anti-biotech stance since the beginning of her deeply-flawed presidential campaign, Trump’s win was a welcome relief to investors who were worried about another four years of anti-business rhetoric, attacks, high taxes, and damaging and flawed regulatory practices – specifically increased price controls under a possible Clinton administration. The U.S. is already struggling with a central bank that prints money like there are no repercussions to its actions.
See how the mid-2016 recover of biotech stocks has gained pace ever since the election results came out on Nov. 8th, 2016.
A lot of biotech investors sold off their stocks in anticipation of a Clinton presidency.
Now that Trump has won the White House, it’s a magnificent time for investors to re-evaluate their association with this high-growth sector and several other high-priority sectors that are set to erupt to the upside. Let’s take a closer look at what a Trump administration means for the biotech industry.
Trump was a lot more supportive of the biotech industry than Clinton.
He was consistent in his support of Medicare re-importation and negotiation, but has largely maintained silence on the issue of drug pricing. When governments impose price controls on business, the free market suffers, as is the case of Cuba.
The Baby Boomers are now retiring in droves, and new babies are being conceived daily – companies that are lined up to cater for healthcare needs will see tremendous inflows of cash.
However, hope comes in the form of Trump’s pro-business stance. This means he is going to be less of a headwind or a detriment on the biotech industry’s profits. What this indicates is that biotech stocks are set to perform better under Trump’s leadership than anticipated.
Notice what industry analysts predict in terms of biotech industry growth until 2020.
One of the most significant policy positions of Trump’s campaign trail was the repealing of Obamacare. If he keeps his word on the dismantling the Affordable Care Act (or Unaffordable Care Act), which has already begun, it will have major repercussions on biotech stocks.
For starters, Obamacare used to levy burdensome taxes on the drug industry (and everything else), and this drastically lowered profitability, which means fewer drugs for terrible diseases are pursued.
The Branded Prescription Drug Fee especially levied a tax on drug manufacturers that was equivalent to their market share. Trump will be blasting all these regulations out of the park.
A specific tax target is established on an annual basis, and this needs to be collected from the drug industry. In 2017, this target is set to cross the $4 billion mark, up from $3 billion last year.
So, a biotech company with a 15% market share in the sales of branded drugs would have to spit out $600 million the following year in taxes due to this fee. The repeal of Obamacare under Trump would not only do away with this fee, but the bottom line of the biotech sector would benefit immensely. Taxes like this make no sense; this is what kills jobs and stifles innovation.
Instead of draconian taxes, these newly-profitable companies would be able to bid for Small-Cap Cutting-Edgers, making Portfolio Wealth Global members the clear winners.
Our 2016 picks are already up big double-digits, but in 2017, we are already building a Watch List of high-potential stocks from biotechnology, nanotechnology, marijuana, natural resources, and high-tech patents.
Biotech stocks that have consistently performed well are poised to reap the maximum benefits. Some examples are shown in the bar graph below. We will soon publish our highest-ranked picks from the sector.
Expected Tax Plan
The tax plan suggested by Trump means to cut down the business tax rate from 35% to 15%. This would signal that the tax burden on profit-generating, large-cap biotechnology firms will certainly drop significantly.
Moreover, Trump has indicated a one-time discount on the taxes owed by corporations that repatriate cash held abroad.
Under the plans made by Trump, large-cap stocks in the biotech industry that have cash overseas have the potential to “bring in” as much money as they can, while paying only a 10% tax on it. Theoretically, this money may be used for buying back stocks that boost income per share, drug research, acquisitions and mergers, and dividends.
The truth is that the biotech industry is all but certain to undergo a stellar upheaval while Trump formalizes America’s healthcare system, which has been eradicated by Obamacare. However, all signs point to the fact that his election will be bullish for biotech stock investors, specifically those who focus on small-cap biotechnology stocks.