What Passage Of The 21st Century Cures Act Means For Biotech Stocks

Congressional Republicans and Democrats joined forces on Thursday to pass the 21st Century Cures Act, a comprehensive piece of healthcare legislation that provides funding for researching some of America’s biggest health concerns.

Senate Vote 94–5

The legislation passed a Senate vote 94–5, with opposition from only a handful of Democrats, including Sen. Elizabeth Warren and former presidential candidate Sen. Bernie Sanders. Warren expressed concerns with how much the legislation would benefit pharmaceutical companies.

Details

In fact, the 21st Century Cures Act stands to benefit people with mental illnesses, patients with chronic diseases, pregnant women, children with diabetes, people with opioid addictions, children who are bullied and people who are terminally ill. And of course, it will also benefit hospitals and biomedical researchers.

Shares of Egalet Corp EGLT jumped 5.5 percent Thursday on market speculation that the 21st Century Cures Act could have a meaningful impact on companies developing products incorporating opioid abuse deterrents.

The act includes $4.8 billion of National Institute of Health (NIH) funding for four “innovative projects,” including cancer research, brain research, the Precision Medicine Initiative (PMI) and regenerative medicine.

Commentary

According to Wells Fargo analyst Tim Evans, biotech investors shouldn’t expect a major impact from the funds, although large tools companies Illumina, Inc. ILMN and Thermo Fisher Scientific Inc. TMO will likely get a combined 5 percent of the annual NIH budget.

“Applying that same percentage to the incremental funding would result in only about $50 million (on average) of revenue per year across the entire Tools sector, flowing disproportionately to ILMN and TMO,” Evans explained.

He noted, however, that while it may take years for the impact of the legislation to become clear, Wells Fargo sees the funding as modestly beneficial across the biotech sector.

The iShares NASDAQ Biotechnology Index (ETF) IBB opened Thursday’s session down 0.2 percent.