After months of long, hard debate, the votes are in and Donald Trump will become the next president of the United States. The result is one that few had predicted, including the markets.

The outcome of this election has been closely watched by professionals within the biopharma industry. Hotly debated topics such as drug pricing and centralization of US healthcare have had a massive impact on the industry. For the past year, US biotech markets have remained stagnant and the IPO market slowed dramatically vs 2015 pending the outcome of the presidential election. While the outcome was one that was unanticipated, there is now a greater degree of certainty regarding many key issues facing the biopharma industry.

Trump’s win provides some relief around concerns of restrictions on drug pricing in the US. Despite comments around Medicare negotiating drug prices and importing from Canada, Trump did not make this as central of a message of his campaign compared to Clinton’s “War on Pharma”. While the topic will certainly remain a hotly debated issue likely in the first 100 days of the Trump Presidency, it is unlikely that specific reforms will be put in place to curb drugs prices. On top of the presidential election, California’s Proposition 61, which proposed a requirement of state agencies to pay no more than the US Department of Veterans Affairs (VA) for prescription drugs, failed to get voter approval after considerable industry lobbying. While political pressure against drug prices has subsided for now, the issue will remain top of mind within the industry and the American psyche as we anticipate drug prices to be an item of active management for payors as they continue focusing on value based medicine.

Trump’s victory also signals relief around pressure for further centralization of US healthcare. While the implications for the Affordable Care Act (ACA) are somewhat nebulous, it is safe to say that further efforts to centralize the US healthcare system toward a single payor will likely be reversed towards a more market-based approach. While the implications of the ACA on biopharma can be hotly debated among industry professionals, Trump’s victory likely provides biopharma companies more flexibility in the coming years and prevents further regulation and restrictions that may encumber drug development and commercialization.

Response to a Trump victory has been marked by expected volatility. The public and the stock markets had anticipated a Clinton victory and are now rapidly adjusting to the unexpected outcome. While key index futures initially showed the magnitude of this unanticipated outcome, markets opened the day after the election in positive territory with major indices all up ~1%. Biotech indices surged following the outcome of the election with the NASDAQ Biotech Index up almost 9%. Public biotech markets have been sluggish all year and, while they remain in negative territory YTD, the outcome of the election has provided a positive boost to the market. The general signal that no further restrictions and regulations will be placed on the biopharma industry has provided a greater sense of certainty under Trump than it has for other industries. Whether this sense of certainty will be a catalyst for further performance of biotech markets and a thawing of the IPO markets is yet to be seen but it is likely positive news for biopharma companies both public and private.

Locust Walk does not take an official position on political campaigns but is highly supportive of the continued growth of the industry to improve the length and quality of life for patients around the world. Regardless of who you preferred, let’s hope that this change in America leads to better industry conditions with more available capital to finance life science innovation.