The Trump administration's policies remain shrouded in fog. Can the US biopharmaceutical industry reverse its decline by 2025?

After facing a decline in investor returns last year, the biopharmaceutical industry is hoping to reverse the trend by 2025, but is still cautious about the policy focus of President-elect Donald Trump on issues such as drug pricing reform and vaccines. With the introduction of the 2022 Inflation Reduction Act by the Biden administration, the pharmaceutical industry is undergoing its biggest regulatory overhaul in decades, as this act for the first time allows the federal government's Medicare program to negotiate prices for the most expensive prescription drugs. "Nothing kills investment more than uncertainty. The Inflation Reduction Act brings a lot of uncertainty to this industry," said Steve Ubl, head of the industry lobbying group PhRMA, at a healthcare conference hosted by J.P. Morgan this week in San Francisco. PhRMA hopes the new government will focus less on attacking the industry's "ecosystem" and instead focus on reducing inefficiencies to lower costs for patients. Last August, the prices for the first batch of 10 drugs subject to Medicare price negotiations were announced, showing that after discounts and rebates, these prices were roughly in line with existing prices. The list for the next batch of 15 drugs to undergo price negotiations should be finalized by February 1st and could be announced this week, although the final list may change after Trump's inauguration on January 20th. Last year, the Nasdaq Biotechnology Index fell by 3%, while the S&P 500 benchmark index rose by 23%, and the Nasdaq Composite index for tech stocks like Yunji, Inc. Sponsored ADR Class A jumped by nearly 29%. The NYSE Arca Pharmaceutical Index rose by 1%. While obesity drug manufacturers Novo Nordisk A/S Sponsored ADR Class B (NVO.US) and Eli Lilly (LLY.US) saw their stock prices reach new highs last year, there were differences. Lilly's stock price rose by 31% at the end of 2024, while Novo Nordisk A/S Sponsored ADR Class B fell by 9% due to disappointing results from a next-generation weight loss drug trial. Roel Van den Akker, head of pharmaceutical transactions at PwC, said, "Growth in the entire industry is not evenly distributed, there are winners and losers." Investors are evaluating how pharmaceutical companies will deal with upcoming patent expirations. Patent Expirations Morgan Stanley estimates that by the end of this decade, patents corresponding to around $175 billion in revenue for large US biopharmaceutical companies (35% of total revenue) will expire. To offset this revenue, pharmaceutical companies need to launch new products, either from their own research and development or by acquiring companies with promising assets, but such deals significantly declined last year. Data from IQVIA Holdings Inc's Human Data Science Institute shows that as of November, total mergers and acquisitions in the life sciences sector were around $80 billion, less than half of the total in 2023. No deals over $5 billion were completed last year. The market expects the next chair of the Federal Trade Commission to be more favorable towards pushing through deals than Lina Khan, which is a positive factor for pharmaceutical companies. On Monday, a series of deals were announced, including Johnson & Johnson's $14.6 billion acquisition. Trump nominated current Commissioner Andrew Ferguson to replace Khan. However, investors are not enthused about some of Trump's other key appointments for the next government. "Bobby Kennedy's views on vaccines will certainly affect some large pharmaceutical companies," said Beth Nessel, partner at Fuld, when referring to Bobby Kennedy, Trump's nominee to head the Department of Health and Human Services, who has been openly skeptical about vaccines. "I think the goal is also going to be seeking consensus. Keeping Americans healthy is our common goal," said Biogen (BIIB.US) CEO Chris Viehbacher in an interview during the conference. Pharmaceutical executives trying to wield influence Albert Bourla, CEO of Pfizer Inc. (PFE.US), emphasized the industry's uncertainty in interactions with investors at the conference but said on Monday that he will work to exert influence on the industry environment. "Some people think that for our industry, the risks outweigh the opportunities. Others, including myself, think the opportunities outweigh the risks. I think we'll have to wait and see," he said. Joaquin Duato, CEO of Johnson & Johnson, told investors, "It's hard for me to predict what will happen." He also added that they will work to push policies on innovation and drug accessibility to the Trump administration. Investors are paying attention to the impact of government policies on drug prices, including any changes to the Inflation Reduction Act that may affect the speed at which individual drugs enter Medicare price negotiations. Priya Chandran, head of the biopharmaceutical industry at Boston Consulting Group, said these changes are difficult to achieve because they are already written into law. She said, "There's unlikely to be any major changes in the first year." Nessel of Fuld said there were reports that Trump held a "warm and friendly" dinner with pharmaceutical executives in Florida last December, which has brought some optimism. However, she said, "Trump and Bobby Kennedy's past general statements on drug pricing suggest that the upcoming Trump administration is unlikely to be helpful to the industry."