Biotech investors stay on sidelines as US election looms
Main U.S. stock indexes up early
Technology leads S&P 500 sector gains; real estate down the most
Euro STOXX 600 index up ~0.9%; ECB cuts rates 25 bps
Dollar, gold, crude gain; bitcoin dips
U.S. 10-Year Treasury yield rises to ~4.09%
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BIOTECH INVESTORS STAY ON SIDELINES AS US ELECTION LOOMS
Investors in the biotech market appear to be waitingwith bated breath on a U.S.election outcome before taking concentrated positions or unwinding defensive hedges, according to a BMO Capital Markets note.
With Q3 earnings for most biotech companies only weeks away, it feels like the calm before the storm.
The Nasdaq biotech index .NBI has risen about 11% for the year to date, while the broader Nasdaq Composite .IXIC is up about 22.3% since Dec. 31, as the funding-reliant sector came under pressure from high interest rates.
While biotech funds continue to show outflows in 2024, meaningful rate cuts could serve as a catalyst for more investments, BMO analysts wrote in the note.
For now, there is lesser clarity on the potential impact of how rate cuts would lead to outsized investment into the biotech sector. The analysts expect to get better clarity on this over the coming months.
In the near term, a victory by U.S. Republican presidential candidate Donald Trump would be perceived as marginally better for the sector, the analysts said.
However, BMO says biotech companies and drugmakers may be increasingly moving out of the crosshairs of lawmakers after recent testimony from Novo Nordisk's NOVO.N NOVOb.CO chief executive.
In late September, Novo CEO Lars Jorgensen faced U.S. Congress scrutiny over weight-loss drug pricing.
"Following this hearing, we have gotten the sense that Congress is meaningfully refocusing on PBM reform as the next congressional target for healthcare."
Going into Q3 earnings for the biotech companies, obesity remains a key theme for the sector in 2024 and beyond, with companies like Merck MRK.N eager to enter the obesity drug market, already dominated by Novo Nordisk NOVOb.CO and Eli Lilly LLY.N.
(Sruthi Narasimha Chari and Manas Mishra)
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