It would stand to reason that the demise of the Patient Protection and Affordable Care Act would pressure the value of health care stocks, but that’s not the case with two biotech majors, Amgen and Illumina, according to a report from The Motley Fool. Shares of both companies have surged since the November presidential election.

While drug-makers in general applaud President Trump’s appointment of industry-friendly Dr. Scott Gottlieb as the next FDA commissioner, Amgen in particular stands to gain from Gottlieb’s stance on accelerating and simplifying the approval process for biosimilars and complex generics, columnist Cory Renauer notes.

Earlier this year, the FDA greenlighted Amgen’s biosimilar version of the world’s best-selling drug, Humira (adalimumab, AbbVie)––and more products are coming down the pipeline. Amgen also has biosimilar candidates that reference Avastin (bevacizumab, Genentech); Remicade (infliximab, Janssen Biotech); Rituxan (rituximab, Biogen/Genentech); and Herceptin (trastuzumab, Genentech) in late-stage clinical trials. Combined, these four branded drugs generated more than $26 billion in sales last year.

Because of their complexity, biosimilars generally command prices of approximately 70% of the branded versions they reference, Renauer says. Therefore, any FDA policy changes that speed Amgen’s products to the U.S. market could significantly boost the company’s bottom line.

Illumina, Inc., a leading manufacturer of DNA-sequencing equipment, is another biotech company that has been doing well since the election. The company’s shares soared after it unveiled a cost-reducing technological breakthrough that makes whole human genome sequencing so cheap, it could spark another exponential rise in demand, according to Renauer.

Although Illumina’s good fortune has little to do with the Trump administration’s health care policies, the possibility of sweeping tax reform has helped. Last year, the company reported a profit of approximately $428 million, after setting aside $133 million for Uncle Sam. Amgen also has approximately $750 million in cash stored overseas. If President Trump can deliver on his promises to lower the U.S. corporate tax rate and allow companies to repatriate their international cash balances without incurring a huge bill from Washington, it would do wonders for the company’s bottom line, Renauer predicts.

Source: Motley Fool; March 19, 2017.

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